NAPA VALLEY GRAPEGROWERS BEST PRACTICES -TRADEMARKS AND VINEYARD DESIGNATION- Prepared by the Napa Valley Grapegrowers Industry Issues Committee

While not warranted for every vineyard, there are a few reasons why a landowner may opt for a vineyard designation. Such reasons include but are not limited to a given vineyard’s unique soil and/or geographic characteristics, historical relevance, reputation for quality, and other sources of differentiation. We are all familiar with some of the more famous vineyard designations such as Martha’s Vineyard, To Kalon and Monte Rosso. Vineyard designated wines may sell for premium prices and drive consumer demand. When consumers know a vineyard by name, grapes from the vineyard can sell for a premium price, and the vineyard itself may increase in value. There is danger, however, for both the winery and grower if certain relatively simple steps are not taken. Vineyard designation should be mutually beneficial to both vineyard owners and the wineries that use them.

An example will help illustrate the problem. Say I own a vineyard and generally reference it as “Vineyard X.” I sell my grapes on a handshake to Winery A. Winery A loves the wine from my grapes so much that they begin labeling their wines with the Vineyard X designation. Consider a circumstance in which years go by, and ‘Winery A – Vineyard X’ wines are consistently awarded 100 point scores. Prices go through the roof. I decide to test the market and sell my grapes (at a significant premium) to other wineries, including Winery B. I tell Winery B that they can use “Vineyard X” as a vineyard designation. Before long, Winery B and I receive a nasty letter from Winery A’s attorney, asserting that they own the rights to “Vineyard X” and neither I, nor Winery B, nor any other winery may use that trademark. In fact, Winery A has registered the trademark “Vineyard X” in its name with the United States Patent and Trademark Office (“USPTO”). In the legal business, one refers to this situation as a spaghetti bowl of problems that could have been easily avoided.

Vineyard owners may not be aware that the name of their vineyard is valuable intellectual property and can be used by the grower as a trademark. A trademark is defined as “a word, phrase, logo or other graphic symbol used by a manufacturer or seller to distinguish its product or products from those of others.” Vineyard owners can and should protect their rights to their trademarks. The first step a grower should take is to register the vineyard designated trademark with the USPTO as soon as possible. The USPTO will require that the mark already be used in commerce in order to register the trademark. A grower can accomplish this by sending the USPTO photos of a sign on the vineyard or grape bins labeled with the vineyard name, or other evidence of the vineyard name in use in by the grower in association with grape sales.

Once registered with USPTO, the grower will benefit from a nationwide presumption that the mark belongs to him. If the grower does not register the trademark with USPTO, the grower may still benefit from rights to the name, however, these rights are limited to the geography in which the trademark is used (i.e. if a grower only used the trademark in association with grape sales in Napa Valley, he would have rights to the mark only in the Napa Valley). Additionally, a grower would have to prove he

© Copyright Napa Valley Grapegrowers 2016 had these geographical rights to the trademark in a legal action, whereas a registered trademark would provide a presumption that the grower has rights in the mark. To summarize, the best bet is to register the mark with USPTO – it is cheap insurance.

After a grower ensures the rights to the trademark, the next step is to address usage of the vineyard name in all grape contracts, as it is important to have this in writing. The grower can either include a clause prohibiting a winery from using the vineyard designation, or expressly grant the winery a license to use the trademark. A trademark license can be granted within the grape contract itself, or the grower and winery can enter a separate trademark license agreement. Some sample clauses that address rights to the vineyard designation are as follows:

[If no separate TM License Agreement: Rights to Vineyard Designated Wine. Grower expressly reserves all rights related to the name "[______]" [(U.S. Trademark Registration No. ______)] (the "Grower Trademark") and does hereby grant Winery a non-exclusive, non-assignable, royalty-free license to use the Grower Trademark as a vineyard designate on wine made exclusively from the grapes sold hereunder. No other use, without the express written permission of Grower, is granted hereunder. For each vintage of wine produced from the grapes sold hereunder, Winery shall deliver Grower [one (1)] bottle of such wine for quality control purposes. If the wine does not meet Grower’s quality expectations, Grower shall have the right to revoke the license granted herein.]

[If using a separate TM License Agreement: Rights to Vineyard Designated Wine. Grower expressly reserves all rights related to the name "[______]" [(U.S. Trademark Registration No. ______)] (the "Grower Trademark") and does solely by a written licensing agreement attached hereto, grant Winery permission to use such name as a vineyard designate on wine made from the grapes sold hereunder. The parties shall execute a trademark license agreement for the use of the Grower Trademark. A form of Trademark license agreement is set forth in Exhibit [__] hereto. No other use, without the express written permission of Grower, is granted hereunder.]

Diligence is required to maintain quality control, both with regard to a trademark’s branding, as well as the final product. For example, a grower may consider specifying allowed typeface, spelling, as well as reference to a specific location on the final product label. Another issue is the quality and consistency of the wine made, which is difficult to assess and to establish practical criteria in a grape contract. However, a grower may want to set terms to allow for active and annual tasting through the wines to ensure the quality level befits the trademark—and by receiving samples of wine from the winery annually to ensure that quality is consistent--not a bad requirement! If the grower does not exercise quality control, the license could be deemed a so-called “naked license,” which could significantly weaken the grower’s rights to the trademark.

To build a brand for your vineyard, a grower may also weigh the option of selling smaller lots of grapes to multiple customers against selling one large lot to single customer. Select an option that mitigates risk, as well as affords the greatest opportunity to market the new designation as high quality— eventually driving demand!

© Copyright Napa Valley Grapegrowers 2016 Growers should consult with an attorney to discuss the best approach to protecting their rights to a vineyard designation. No one enjoys paying legal fees, but this is certainly an area in which an ounce of prevention is worth more than a pound of cure.

www.napagrowers.org To Preserve and Promote Napa Valley’s World-Class Vineyards

© Copyright Napa Valley Grapegrowers 2016