Articles

Battles Over Geographic Indications Continue

Masahiro Noda

Feta cheese. Florida oranges. Tuscany olive. Many popular agricultural, natural, or manufactured products consumers find on supermarket shelves consist of or contain the names of the geographic places in which they originate. Such geographic origin designations, usually known as “geographic indications” (“GIs”), are signs used to indicate the regional origin of particular goods or services. They can convey to consumers some of the important or desirable characteristics of the goods or services that are attributable to their geographic origin. GIs are considered valuable business interests because of the latent value associated in identifying products with the quality and reputation of a particular geographic region.

In recent months, regulations and laws surrounding the protection of GIs have been the subject of controversy both internationally and domestically, in light of the disputes over the BUDWEISER trademark in Europe and the NAPA trademark within the United States.

WTO Paves Way For American BUDWEISER To Become King Of Beers In Europe

There is very little international consensus on the appropriate framework of protection for GIs. While GIs are discussed in and in principle protected under the World Trade Organization (“WTO”) Agreement on Trade-Related Aspects of International Property Rights (“TRIPS”), as a practical matter the text of the TRIPS Agreement only sets forth the minimum standards of protection that WTO members must provide for GIs, and does not purport to provide a uniform system of protection or rights enforcement.

In the absence of international consensus among the WTO Members, including the U.S. and countries in the European Union (“EU”), various countries are divided over the protection that must be afforded to intellectual property rights in GIs under TRIPS. The U.S., in particular, has been troubled by a recently-imposed European Union regulation that provided stronger protection for GIs of EU members, but denied the same level of protection for U.S. GIs.

Last year, the U.S. raised a challenge to these policies in the WTO, alleging that the EU was trying to undermine valuable intellectual property rights by treating GIs solely as trade interests and ignoring intellectual property principles. The U.S. argued that the EU countries had failed to comply with the TRIPS Agreement, in which protections for U.S. trademark owners who use and/or register marks in good faith, in the instance that a trademark happens to conflict with a GI, is provided. The TRIPS Agreement also specified that a trademark that has been used or registered in good faith in one jurisdiction cannot be preempted by a later-established GI that conflicts with the trademark.

The U.S. took a major step toward overcoming the EU’s unfavorable treatment of non-EU GI products when a recent decision by the WTO concluded that the EU’s GI policy discriminated against U.S. producers. The WTO panel found that the EU regulatory system prohibiting non-EU companies from using words in connection with their products that even “evoke” the name of a registered GI, unless they are one of the authorized users of the GI, is inconsistent with the TRIPS Agreement. The WTO sided with the U.S. in ruling that protecting GIs need not and should not harm the rights of trademark owners. The panel allowed for the “co-existence” of a GI with a similar and pre-existing product trademark. The panel also ruled that the EU’s GI regulatory system could only protect GI names as registered, but could not extend to translations of the indication, signs, or other forms of indication, unless they were specifically entered into the register.

This decision was especially important to U.S. brewer Anheuser-Busch, which owns the trademarks BUDWEISER and BUD in many EU member states. Anheuser-Busch has been engaged in a lengthy legal battle with the Czech brewer Budjejovicky Budvar to secure trademark protection for its “BUDWEISER” brand of beer in Europe. Anheuser-Busch has produced beer in the United States under the BUDWEISER trademark since 1876, nineteen years before Budjejovicky Budvar was established in 1895.

However, the BUDWEISER and BUD trademarks are subject to termination in various Member States of the European Communities because the EU maintains that BUDWEISER and BUD are GIs for beer from the Czech Republic (the Czech town of Ceske Budejovice translates into the German word “Budweis”). Budjejovicky Budvar has sought to use its registration of “Budjovické pivo” as a GI to justify its use of the Budweiser name as a trademark.

The recent WTO ruling offers precedent for non-EU based companies to seek cessation of confusing uses of translations or linguistic variations of GIs. This decision by the WTO halts Budjejovicky Budvar’s efforts to rely on its GI registration of “Bud jovické pivo” to justify its use of the Budweiser name. Going forward, a trademark used or registered in good faith in one jurisdiction can no longer be preempted by a later-established GI that conflicts with the trademark. However, European GIs are still protected as registered. Indeed, this WTO decision should shape a new framework of GI protection in Europe, and could advance the interests of both the U.S. trademark owners and European GI registrants.

California Sours On Misdescriptive Uses Of The NAPA Name

As the U.S. is challenging the EU regulation of U.S. GIs and trademark rights overseas under the TRIPS Agreement, its own GI laws have been under substantial scrutiny in a legal battle involving Napa Valley wine. The TRIPS Agreement requires WTO Members to provide the legal means for a party to prevent the use of GIs for wines and spirits that do not originate in the place indicated by the GI, even if the public would not be deceived by its use. U.S. federal beverage labeling regulations require that any wine label bearing the name of a specific region must be made from grapes of which at least 75 percent are from that region.1 However, under a grandfather clause, if the “regional” mark was in use before July 7, 1986 and if the front label discloses the true source of the grapes used to make the wine, the mark is exempt from such requirements.2 In the case of Bronco Wine Co. v. Jolly,3 involving the use of the “NAPA” trademark, Bronco Wine Co. (“Bronco”) had purchased three brand names containing the name Napa or a regional appellation within the Napa Valley (e.g., Rutherford) and used them on wines that did not contain grapes from the Napa Valley. Based on federal law, Bronco was allowed to use brand names misdescriptively as long as the true source of the constituent grapes was shown on the label, e.g., Napa Creek North Coast Zinfandel, because the mark was in use before 1986 and the front label disclosed the true source of the grape.

However, the California Legislature closed the grandfather clause’s “loophole” in the federal law by passing a state law in 2000 requiring that wine sold with “Napa” on the label must in all cases be made from at least 75 percent Napa County-grown grapes.4 Bronco commenced a suit challenging the validity of the California law, but in August 2004, the California Supreme Court upheld California’s right to prevent consumer deception and to require that wines with geographic brand names be made with grapes from the same region. This month, the U.S. Supreme Court declined to review the California state court ruling.5

The Supreme Court’s declining review was a setback for Bronco, which had invested heavily in its litigation efforts to preserve its ability to sell lower-cost, Napa-branded wines that do not contain grapes from Napa Valley. The Supreme Court’s decision not to intervene seems to reinforce legal support for state-based regulation of wine GIs. However, the California Court of Appeal in Sacramento is scheduled to hear arguments this month on the remaining issues in Bronco’s challenge, including whether the state labeling law usurps Bronco’s free speech rights or represents an illegal bar to interstate commerce.

It is clear overall, though, that the U.S. and the state of California (and other states) recognize and are becoming more protective of the economic value of GIs for prestige consumer products such as wines, just as members of the EU have been for many years. Regardless of the final outcome in the California Court of Appeal review of Bronco, new federal regulations conforming to the TRIPS Agreement and providing more-detailed and effective EU-style protection for GIs relating to wines (and other premium food and beverage or consumer products) seem reasonably likely to be proposed, and perhaps passed, based on growing awareness of the need to prevent abusive, deceptive, or dilutive use of GIs in advertising and as misleading trademarks.

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127 CFR § 4.39(i)(1).
2Id.
3See Bronco Wine Co. v. Jolly, 33 Cal.4th 943, 95 P.3d 422, 17 Cal. Rptr.3d 180, 4 Cal. Daily Op. Serv. 7075, 2004 Daily Journal D.A.R. 9587 (Cal. Aug 05, 2004) (NO. S113136), rehearing denied (Oct. 13, 2004), as modified (Oct 13, 2004) (finding that the California law properly supplemented parallel federal regulation).
4Calif. Bus. & Prof. Code § 25241.
5Bronco Wine Co. v. Jolly, 2005 WL 80675, 73 USLW 3449 (Mar 21, 2005) (NO. 04-945).

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