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Entries in craft brewers (5)

Friday
Sep152017

Pass the Beer: Craft Brew Distribution Law in the U.S.

CalBar Certified Franchise & Distribution Law Specialist

by Barry Kurtz

818-907-3006

 

How do Americans get their stouts, ales, pilsners and porters? Beer distribution, no matter the variety, is funneled through a highly regulated three-tier system: brewers at the top, distributors take their cut in the middle, and retailers sell directly to the consumer.

This system is designed to prevent pre-prohibition style marketing tactics, in which beer makers sold directly to brewer-owned taverns and other retailers, encouraging excessive consumption. The three-tier system also generates revenues for the states, facilitates state and local control over alcoholic beverages, and establishes a bit of temperance.

State statutory and regulatory schemes establishing the three-tier system vary substantially. But states generally fall into one of two categories: license states and control states.

Beer Licensing States

There are 32 license states. Under a typical licensing scheme, brewers who brew beer in another state, but who wish to sell it in the license state, must obtain a manufacture’s license, or register with a regulatory body, in advance of signing a distribution agreement with a distributor to distribute its beer.

While the licensing systems in the license states provide accountability and an additional source of revenue for those states, they are often convoluted and difficult to figure out. Determining which licenses are needed is no easy task.

Beer Control States 

There are 18 control states. These have licensing requirements too. The difference between control states and license states is that at some point in the distribution process, control states obtain a direct interest in the revenues by taking an ownership stake as distributors or retailers of the product. These states are also known to exert greater control over the conditions of sale and promotion of alcohol within their borders.

Source: Alcohol and Tobacco Tax and Trade Bureau

Beer Cyber States 

Naturally, craft breweries are eyeing the internet as an alternative channel of distribution for their products.

Only 16 states allow brewers to distribute their products directly to retailers, with some restrictions and 16 states forbid the direct shipment of beer to their residents. States that do permit the direct shipment of beer to their residents typically require the shipper to be licensed as a brewer, distributor or retailer in its state of origin – and to obtain a direct shipper permit in each state into which the brewer wishes to sell products before shipping into these states.

Further complicating matters, shipping beer through the United States Postal Service is illegal; DHL refuses to ship beer per company policy; and Federal Express and United Parcel Service will typically only ship for properly licensed shippers (those holding a valid brewer, wholesaler, retailer license etc.), on a contract basis.

In a nutshell, while the direct shipment of beer represents a potential innovation for the beer distribution industry, the three-tier system is effectively keeping the beer industry stuck in the 1990’s.

However, beer drinking consumers are beginning to push state legislatures for change, urging them to among other things, provide craft brewers the same direct shipment rights that wine producers enjoy in a majority of the states, and reminding them that restraints on competition rarely benefit consumers.

All-in-all, one can expect that states will begin to open their craft brewers’ taps for the free-flow of beer to their constituents.

Barry Kurtz is the Chair of our Franchise & Distribution Practice Group.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Monday
Aug012016

Craft Brewers Scrap Over Catchy Names

Business LitigationFranchise, Distribution & Litigation Attorney

by Samuel C. Wolf

818-907-3218

 

The craft-beer industry is running low on names. There are more than 4,600 craft breweries in the U.S. – California leading the nation with over 500, according to the Brewer’s Association.

Microbrew Attorney

Each microbrewery generally produces many individual beers and brewers are increasingly finding themselves at odds with others across the country. The legal battles to protect beer brands and corporate names from trademark theft are increasing quickly.

The U.S. Patent & Trademark Office (USPTO) has seen at least 25,000 active registrations and applications related to beer, according to a recent article published by The Wall Street Journal.   

Microbrew: What’s in the Name Just as Important as What’s In the Bottle

Most naming disputes get resolved in quasi-judicial USPTO proceedings. Others go further.

Last fall the Brooklyn Brewery sued a tiny unknown brewery in the San Joaquin Valley called Black Ops Brewing, claiming its name violated the trademark it had for a seasonal $30 imperial stout the New York brewery produces called Brooklyn Black Ops. Several months of litigation and one preliminary injunction later, and the Fresno operation is now called Tactical Ops Brewing Inc.  

Alcohol Distribution AttorneyBeer-namers also have to consider wine and spirits trademarks. Fireball Cinnamon whiskey maker Sazerac Co. recently opposed Martha’s Vineyard-based Bad Martha Brewing Company’s attempt to trademark “Fireball Beer,” leading the Massachusetts brewery to abandon the mark. 

It’s always cheaper to obtain a trademark registration than trying to prevent competitors from passing off a brand without statutory trademark rights – and much easier to enforce registered rights than rights under any common law principle. This is because federal registration provides constructive notice of the registrant’s claims of ownership and is prima facie evidence of the validity of the registered trademark and of the registrant’s right to use the trademark in commerce nationwide.

As the beer market gets congested, new brewers must proceed cautiously to avoid run-ins. Microbrewers should: 

  • Explore registrations early.

  • Conduct trademark availability searches using the USPTO’s Trademark Electronic Search System before investing in production.

  • Conduct Internet searches to assess common law usages of the proposed mark.

  • Assess any conflicting or similar marks prior to filing for a registration or adopting the mark.

These preliminary steps can help avoid costly disputes later on.  

Samuel C. Wolf is an attorney in our Franchise & Distribution, and Business Litigation Practice Groups. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Tuesday
Mar172015

Easy to Swallow: New California Beer Legislation Benefits Craft Brewers

 

by Bryan H. Clements

 

 

 

Good news for craft brewers: California law seems to be loosening up a bit when it comes to beer.

Grrrrrrrrrrrrrrrr: 2014’s Growler Law Roars Along

Last year the state eased up on growler restrictions to allow California beer lovers to get their growlers refilled at any brewery, no matter which brewery’s label is on the container, as long as the refilling brewery puts on a new label that has been approved by the Department of Alcoholic Beverage Control (DABC) and that completely covers the old label.

A growler is a refillable beer jug or container, usually 64 ounces. Allowing Californians the right to get their growlers refilled at any brewery is great for small brewers and it keeps with California’s tradition of encouraging recycling.

This year, we had two new beer laws go into effect that loosen up restrictions on craft brewers even further, and another interesting bill is currently being considered by the legislature.

Farmers' Markets Here We Come!

Under a law that went into effect January 1st (Assembly Bill 2004), licensed craft brewers may now apply to the DABC for permits to sell packaged beer at certified farmers' markets. Vintners have enjoyed this privilege for years.

AB 2004 amended Section 23357  of the Business and Professions Code, and added Section 23399.45, to allow brewers to apply for multiple permits to sell up to 5000 gallons of their beer at multiple venues, including certified farmers’ markets or permitted community events operated adjacent to and in conjunction with the farmers’ market. Buyers must consume their purchases off property, i.e. at home, not at the farmers' markets. The permits are good for one year, but are valid for only one day per week at any single farmers' market or community event.

On February 25, 2015, AB 774 was introduced in the California Legislature. AB 774 aims to further amend the Business and Professions Code (Sections 23399.45, 24045.6 and 25607.5) to rectify another longstanding disparity between the rights of California's winemakers and small brewers—the right to conduct tasting events at farmers’ markets.

If AB 774 is passed, craft brewers could host their own, instructional beer tasting events at certified farmers’ markets – if the permitted brewer or employee of the brewer conducting the tasting is over 21, and if they do not pour more than eight ounces of beer per person per day. There are other restrictions:  i.e. the brewery must be located in the same or adjacent county as the farmers' market; the operator of the market maintains managerial control of the tasting event; the tasting event area must be cordoned off by a wall, ropes, etc.; and only one beer manufacturer may conduct a tasting at any certified farmers’ market per day.

While waiting to see if this bill passes, craft brewers can still take advantage of selling their product at these venues because of AB 2004. Contact the farmers' markets in the appropriate county for information and apply for a DABC permit. If AB 774 does become law, you may need to obtain police department approval while coordinating a tasting.

Sip and Spit: Now Law of the Land

Picture this: A presidential candidate (channeling Bill Clinton?) stands in front of a TV camera during a heated election battle and says: "While in college I sipped, but I did not swallow."

Last summer, Governor Jerry Brown signed AB 1989, which adds §25668 to the Business and Professions Code. Under Section 25668, students 18-20 years of age working towards Associate's or Bachelor’s degrees in enology or brewing at qualified universities are now permitted to taste, but not consume alcoholic beverages. The law took effect on January 1, 2015. (We're guessing that thousands of undergrads throughout California are now considering switching majors.)

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Friday
Sep122014

Beer Bills: New Laws & Legislation on Tap

Craft Beer LawyerChair, Franchise & Distribution Practice Group

 

by Barry Kurtz
818.907.3006

 

There are a number of bills and new laws that craft brewers should have on the radar – legislation that could affect operations and distribution.

Craft Brew Distribution AttorneyIn California, two of these bills became law, while one is still pending state senate approvals.

Assembly Bill 2004:  This bill could allow craft beer makers to sell brew at farmers' markets. Brewers would need to apply for a sales permit from the Department of Alcoholic Beverage Control. If passed, the bill would allow the licensee or an employee of the licensee to sell up to 5,000 gallons of beer per year at these venues.  AB 2004 was last amended in the Senate June 25th.

Assembly Bill 2203: Meant to reduce keg theft, it is now a crime to obliterate or mark out a beer manufacturer's name/labeling on metal kegs, returnable beer containers, and wood or fiber board cartons – without the manufacturer's written permission. The law was adopted August 21st.

Assembly Bill 1928:  Beer makers may not produce or offer, and sellers cannot accept or redeem, coupons for beer. This forbids giving premiums, gifts or free goods as incentives to sell or distribute alcoholic beverages. The new law was approved July 18th, and affects all beer manufacturers, distributors or wholesalers, and retailers.

Beer Distribution Lawyer

Brewing in Other States

For those making or selling beer in the rest of the country, some new laws have gone into effect:

Hawaii Senate Bill 3042: Signed by Governor Neil Abercrombie on July 3rd, this law removed a 30,000 barrel per year production limit on brew pubs. There is also a new license class for smaller craft brewers.

Delaware House Bill 299: Movie-goers in Delaware can now see their favorite blockbusters in Beer-D. The term movie theater is defined in this new law, as a facility that hosts at least 250 movies per year, and is open at least five days per week.

Rhode Island House Bill 7133: This law reduces the excise tax on all beer produced in the state.

Maryland House Bill 132: This one loosens the controlling grip of Montgomery County – the only jurisdiction in the U.S. that had absolute control of the distribution of beer, wine and liquor since 1933. But as of July 1st, properly licensed brewers whether based in or outside of Maryland, can now sell or deliver beer directly to liquor dispensaries, restaurants and retailers.

 

Barry Kurtz is a Certified Specialist in Franchise & Distribution Law (State Bar of California Board of Legal Specialization) and the Chair of our Franchise & Distribution Practice Group. Contact him via email: bkurtz@lewitthackman.com or by phone: 818.907.3006 for more information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Tuesday
Apr292014

Three Tiers for Beer – State Regulations Control Most Distribution

 

Craft Beer LawyerChair, Franchise & Distribution Practice Group

 

by Barry Kurtz
818.907.3006

 

After the Prohibition Era, the 21st Amendment granted individual states primary authority in the regulation of three aspects of the alcoholic beverage market in the United States: production, distribution and sales. Written to generate income for the states, this three tier system was also meant to promote competition and to discourage aggressive marketing tactics that might encourage consumers to overindulge.

Distributing Craft BeerBefore 1919, brewers sold their products directly to retailers and taverns where they held ownership interests, which lead to anti-competitive business practices and unscrupulous marketing.As a result, individual states established laws that vary substantially, but these generally fall into two broad categories of regulation: Licensing and Control.

 

Beer License States or "Open" States

Currently there are 32 open states – including California, Nevada and Arizona – that employ license-style regulations. Usually, a craft brewer who wishes to sell beer in a license state must obtain a manufacturer's license or register with a governing agency before executing a distribution agreement.

There are different licensing schemes for each tier and some states will require those in the beer business to apply for multiple licenses. For example, alcohol distributors may be required to buy a beer wholesaler's license in addition to licenses a distributor may already have for wine or spirits.

Because of the different types of licenses needed and the varying regulations and governing boards in each state, obtaining the right license can get very complicated, especially when selling beer in multiple states.

 

Control and "Sole Importer" States

The 18 control states – like Washington, Oregon and Utah – also require licenses. However, these states take an ownership stake as distributors or retailers – giving them a direct interest in the revenues.

Control states are also more controlling, as the name implies. There are more regulations governing the conditions of sale and marketing.

Utah and Pennsylvania fall under the control state category, but they are also sole importers. Consumers there can buy their alcohol in state-run stores only – craft brewers won't be able to sell their products in grocery, drug or big box retail stores.

 

Internet Beer Sales: Craft Brewers Win Some, Lose Some

Sixteen states forbid a producer to ship beer directly to the consumer. Some states require the shipper to have a license as a brewer, distributor or retailer.

Many states allow craft and micro-brewers to self-distribute beer if the brewery is in that state, in recognition of the fact that these producers sell much smaller quantities of beer.

Even so, shipping beer via the U.S. Postal Service remains illegal for everyone, and DHL will not handle shipments of beer at all – it's company policy. When it comes to internet sales though, craft brewers may rely on UPS and FedEx, if the brewer has a valid license, and a contract to ship beer through one of these companies.

Barry Kurtz is the Chair of our Franchise and Distribution Practice Group, which represents franchisors, franchisees, licensees and distributors. For more information, contact him via email: bkurtz@lewitthackman.com or phone: 818.907.3006.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

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