Forget the vineyard, start an urban winery!

Think you need to own a vineyard to start a winery? Think again; the urban winery is on the rise. Winemakers from New York to Seattle are locating their winemaking facilities in the city rather than the traditional rural setting near the winery's vineyards.

Amateur winemakers are taking risks and making award winning wines without having to also maintain a farm. Urban wineries are located in downtown areas, in warehouses, and industrial parks. They often have tasting rooms and retail shops attached. And, they are miles from the farms that produce the grapes. Winemakers rent space in the city, rather than the paying high prices for land in wine country. This new crop of vintners is learning that you don’t need to spend millions on a plot of land, and take the risk of crop failure, to make good wine.

Grapes can be trucked in from regional vineyards, or even from around the country. The urban winery can then crush, ferment, and cellar the wine at their facility in the city. Or, the juice can be processed at a co-op close to the vineyards, and then finished in the city. Winemakers can choose grape varieties, select different appellations, and make the same production decisions for blending, bottling, and labeling as any other winery. And, the wine is just as good as wine made near the vineyards.


Urban wineries benefit the wine consumer as well. Most consumers don’t care where the grapes were crushed, fermented, or aged into wine. Now, connoisseurs can simply walk to a winery rather than traveling miles to the nearest vineyards. The experience in the urban winery is the same as in the tasting room of a vineyard located winery. The consumer can still experience the wine and purchase bottles directly from the source.

There are, of course, local limitations to starting an urban winery: zoning, building, and health codes could make it harder to operate a winery in any given location. Turning a profit may take a while, but many self-taught winemakers are taking the risk and doing what they love.

Happy New Year!

Protected Names

Filing for trademark protection is not the only way manufacturers have found to protect their products. A more recent phenomenon is the protection of region specific names. The trend gained world-wide momentum after France won its fight to not allow sparkling wine to be called “Champagne” unless is was actually produced in the Champagne region. Now, even for beer, cheese, and other products famous to certain regions, there are limits on what producers outside of those regions may call their products. So, what are some protected names?

Beer

India Pale Ale is a generic name that may be used by any producer without the need to modify the name. The following names, however, may not: Dortmund & Dortmunder, Vienna, Wien, Wiener, Bavarian, Munich, Munchner, and Salvator, among others.

These names may only be used for beer produced in that specific region. Producers outside of those regions must modify their beer name with the word “type,” or in the US, “American.” Interestingly, Pilsen (including Pilsener and Pilsner) is a distinctive regional name that is protected, but, US producers may use the names Pilsen or Pilsner on their beer without further modification, as long as the beer actually conforms to that type. Perhaps when the treaties and lists were being compiled, there was so much pilsner beer produced in the US, manufacturers here got a pass to use the name.

Distilled Spirits

Scotch, Highlands, or similar names can only be used on whiskies produced in Scotland. The Cognac and Armagnac names may only be used on brandy made in those regions, otherwise it’s just a brandy. Danziger Goldwasser is a protected name, as are Ojen (an anise flavored beverage made in a specific town in Andalusia) and Swedish punch. Again, if a producer outside of the specific region wishes to make the spirit, it must modify the name with the word “type,” or, in the US, “American.” Bourbon is also a protected moniker: only whisky producers in the US can use the name.

Wine

The system of protecting geographic names in the wine industry is even more complicated. There are geographic names that have become generic (Vermouth and Sake, for example). There are semi-generic names, which may be used by producers from other regions, as long as the origin of the wine is clear (for example, Burgundy, Chablis, Chianti, Sauterne, and Tokay). Finally, there are the protected names: Bordeaux, Graves, Chateau Margaux, Lafite, Pommard, Rhone, Rudesheimer, Forster, Schloss Johannisberger, and Lacryma Christi, among others.

Note that the lists above are not inclusive, and merely provide examples of protected names.

Many protected names are for higher-end products, or products with a long history from one region. “Feta,” for example is now a protected regional designated name. I wonder if the trend will continue to grow to other products: chickens or livestock, glass wear, shoes, cosmetics.

The Trouble with Interns

Many small breweries and wineries are often approached by enthusiastic and energetic individuals proposing to volunteer their time to gain valuable experience in the industry. It seems like a win-win situation, but like many win-win situations, this one has a catch in the form of the U.S. Department of Labor (DOL).

The DOL recently announced its investment of another $55 million into federal enforcement efforts towards the misclassification of workers. Independent contractors are at the center of these enforcement efforts, but so are the unpaid interns that many small breweries and wineries depend on. The DOL takes the view that unpaid interns violate minimum wage laws.

It’s one thing to enter into a temporary relationship with an employee: you know what the costs are. It can be a huge hit, however, to your business when a former intern makes a claim for back wages, perhaps accompanied by allegations of willful violations of federal or state laws, long after the intern relationship has ended. The win-win situation suddenly becomes more costly than hiring a part time employee.

Federal law requires that every employee be paid at least the minimum wage for every hour worked, and overtime for hours in excess of 40 hours per week, unless a specific exclusion applies. The Fair Labor Standards Act (FLSA) is broadly interpreted to cover as many workers as possible. And, the employer bears the burden of proving that there is an exception to the minimum wage and overtime requirements.

In the case of an unpaid volunteer, the employer must prove that the worker is properly classified as a "trainee" (as opposed to an "employee" who must receive minimum wage compensation for the time spent in the volunteer position). The rules for unpaid interns are less strict for non-profit groups like charities. California and some other states require that interns receive college credit as a condition of being unpaid. But federal regulators say that receiving college credit does not necessarily free companies from paying interns, especially when the internship involves little training and mainly benefits the employer.

So, what is a “trainee?” The DOL has published a six-point guideline for determining if the worker is properly classified as unpaid. The employer must satisfy, by a preponderance of credible evidence, all the criteria set forth in the guidelines.

The six criteria are:

1. the internship, even though it includes actual operation of the employer’s facilities, is similar to training provided in an educational environment;

2. the internship experience is for the benefit of the intern;

3. the intern doesn’t displace regular employees but works under the close supervision of existing staff;

4. the employer derives no immediate advantage from the activities of the intern, and on occasion, its operations may actually be impeded;

5. the intern isn’t necessarily entitled to a job at the conclusion of the internship; and

6. the employer and the intern understand that the intern isn’t entitled to wages for time spent in the internship.

If all six criteria are met, an employment relationship does not exist, and the federal minimum wage and overtime requirements do not apply to the intern. The internship must be largely a benevolent contribution to the intern, and requires significant supervision in an educational capacity. To comply with the DOL's criteria, you may actually find yourself spending more time and money in the close supervision of the intern than you would if no intern were present at all.

If an unpaid internship is still offered to an individual, there are precautionary steps you can take to protect yourself from a claim for back wages, or an allegation of misclassification. You should remove all terminology from written intern policies that blurs the distinction between interns and employees (for example, an employer should not state that it is “hiring” an intern or refer to an “apprentice,” a “trial period,” or a “working interview”); before the intern starts volunteering, ask him to sign and date a statement acknowledging his understanding that there is no guarantee of a job at the end of the internship and no expectation of wages or any compensation that could be construed as wages; and tie expense reimbursements, if any, to specific expenses with receipts to show there were bona fide expenses incurred by the intern that were, in fact, reimbursed; and work closely with your worker’s compensation insurance to ensure that the intern is not classified as an employee.

Simply stated, when it comes to accepting a proposal of an unpaid internship, the employer bears all the risk. Make sure you take all the steps you can to prevent a claim for back wages or misclassification of a worker in the future.

Protecting Your Brand

Naming a business or a product is usually one of the more fun parts of a startup. It might be time consuming, but when you come up with the perfect name for your product (one which will set it apart from the rest), it’s way more satisfying than filing incorporation paperwork.

Once you have that name, it’s important to protect it; to make sure no one else uses it.

The first step in protecting your name is to make sure no one else is using it - to protect your business from an expensive trademark suit by another company. You’ll want to conduct a full search to make sure no one else is using the name, in your industry, or any other related industries. We’ve seen trademark issues in the alcohol industry cause some minor and some major havoc for the businesses involved.

Do a google search of your name. Check the trademark filings with the US Patent and Trademark Office. Check your Secretary of State's trade name registry, as well as the state registries for the states in which you plan to sell your product. Conducting as full a search as you can will save you from being sued for infringement by someone who was using the name, or a similar name, first.

You can also pay for a service to perform the search for you. While these services are often expensive, they are fairly comprehensive and will provide peace of mind that no one else is using your name.

The next step in protecting your brand and product is to register your trademark with the US PTO and your state and local registries. Registration gives you the exclusive rights to use your name without interference and confusion by use of anyone else, and to sue for damages if anyone else does use your name.

This protection is quite beneficial when building a brand. While you may not want to pay the significant fees to register each product name, you should register your brand name, as well as any product names that are gaining in popularity.

Social Media Marketing

As alcohol advertisers are hampered by regulation, they become more creative: sponsoring events and utilizing various online techniques to market their brands. Online games, quizzes, videos, screen-savers, and customized music are increasingly being used by advertisers.

Digital advertising not only appears on the supplier’s website, but also on many social networking sites. On Facebook, for example, advertisers can sponsor games, groups, fan pages, videos, applications, events, and more. The idea is that the marketing will go viral as users pass along the information to their friends.

This, of course, has lead to concern over youth exposure to this type of marketing, and its impact on underaged drinking. The Center for Digital Democracy has already called for investigative action by the Federal Trade Commission and state authorities into the adequacy of the industries’ advertising codes.

Recall that most alcohol marketing is self regulated. Industry groups have come up with standards for advertising that industry members must comply with. Age verification is required by these codes, and can be found on most alcohol company websites. Based on FTC reports, the codes require companies to use tools to prevent minors from back clicking and changing their birth year, as well as requiring advertisers to ensure that their website does not appeal to minors.

Age verification will likely become a larger issue for alcohol advertisers on social networking sites, even if the ad is targeted to people over 21. How are advertisers supposed to stop content from age restricted sites from being rebroadcast by visitors? The real question is: should advertisers be legally responsible for rebroadcasting of its advertising materials by someone else.? We think not.

Social media marketing will be an interesting area to watch. Will the FTC or state governments step in and require advertisers to make additional controls for advertising on social media sites?

Gluten Free Beer: Adding Another Layer of Regulation

Understanding which laws apply to any particular alcoholic beverage is like peeling back the layers of an onion: there always seem to be more layers, and you may end up in uncontrollable tears. The labeling laws which apply to gluten free beers are just one example of more and more layers and different governmental entities trying to figure out who’s in charge.

There are several layers of governmental agencies already involved, one way or another, in beer labeling and advertising. The Alcohol Tobacco Tax and Trade Bureau (TTB) regulates the labeling and advertising of malt beverages by enforcing the Federal Alcohol Administration Act (FAA Act). The Federal Trade Commission regulates the alcohol industry by enforcing the Federal Trade Commission Act, which prevents acts, statements, or images that may confuse consumers or be deceptive.

Now, for beer that is not a malt beverage, there is another level of federal regulation. TTB Ruling 2008-3 explains that some fermented beverages are “beer” for excise tax purposes, but do not qualify as “malt beverages” subject to the TTB's jurisdiction under the FAA Act. This category of non-malt-beverage beers are fermented beverages brewed from a malt substitute, such as sorghum or corn.

So, the Federal Drug Administration (FDA) (which is usually uninvolved with the regulation of alcoholic beverages) is responsible for labels for products that are beer (and subject to TTB regulation in other matters), but not malt beverages under the FAA Act.

To clear things up in the only way governmental agencies know how, the FDA has issued labeling guidance for the tricky category of beers that are not malt beverages. The FDA guidelines generally require that food products under its jurisdiction be truthfully and informatively labeled in accordance with the Federal Food, Drug, and Cosmetic Act, the Fair Packaging and Labeling Act, and the myriad of FDA regulations. For more information on the FDA’s labeling rules for beer that is not a malt beverage, see the agency’s guidance.