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The Wine Law Blog featured by the European Union’s Center for Wine Origins

1 Sep

I am currently the Center for Wine Origins’ “Spotlight Blogger”, and they are featuring my piece on the current WTO negotiations for an international registry of geographical indications for wine.

Wine Origins is a campaign funded by the European Union, France, and Portugal, to promote the importance of wine locations and protect the integrity of wine regions by assuring accurate labeling.  The link to the feature is above.

Thanks to the Center for Wine Origins for this great honor!

Image credit to Dan / FreeDigitalPhotos.net

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A Growing Realm of Intellectual Property in Wines and Spirits: Geographical Indications

22 Jun

A geographical indication (GI) is the name of a place or region within a country that serves a primary identifying function for a product originating from that location.  A primary example of a GI is the term Bordeaux, which refers to red wine from the Bordeaux region of France.   A GI may be present when the name of the location drives consumer recognition of the quality, reputation, or other characteristic of the product.  Typically these regions keep strict standards and police how products baring the name are produced and manufactured.  The same name used on products without these same standards can dilute its significance or  value in the marketplace.

The United States currently protects GI’s under the construct of the system for registering trademarks.  The system allows nationals and foreigners alike to apply to protect terms through the United States Patent and Trademark Office (USPTO).  Examples of domestic GI’s that are protected are terms such as Florida Oranges or Napa Valley Wines, while foreign marks such as Cognac and Darjeeling are equally protected.  There is no individual GI registry in the U.S., so one would search for a GI through the registry for trademarks.  Also, a GI can be registered as a certification mark, where the owner of the mark allows third parties to use the term if they meet the standards or qualifications for the product.  Some GI’s are also protected outside of the intellectual property regime and under the common law (case law).

France has implemented a strong domestic GI system, known as the appellation d’origine contrôlée, which has been existence since the early 20th century that protects over 500 wine and spirits GI’s.  A system in which geographical indications and registration of appellations are congruent is practical and more easily understood, while the US system tends to confuse some because of the division between GI’s as trademarks and appellations as American Viticulture Areas (AVA).

The World Trade Organization (WTO) has held wines and spirits as a special class of GI’s due to the uniqueness of a wine depending on the climate, soil, and other geographical considerations of a particular region.  Due to this the WTO believes wine and spirits garner increased protection, from which a special system for the registry and notification of wine and spirits GI’s has been in development.  

A system for the multilateral notification and registry of geographical indications for wines and spirits has been in the works since 1997, when Article 23.4 of the TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights) was agreed to by WTO member states.  The purpose of the system would be to facilitate the protection of GI’s on an international scale.  In 2001 the Doha Declaration once again affirmed this mandate.  In the years since, there has been a tug-of-war on how to implement the system between two factions, one lead by the European Community (EC), India, China, and others (the Draft Modalities proposal) and another by the U.S., Chile, Argentina, New Zealand, and Australia, among others (the Joint Proposal).  Another proposal by Hong Kong seeks a middle ground between the two.  The key distinction is to what extent notification and registry of a geographical indication will bind members that agree to be part of the system to act, and also how the registry will affect third parties that do not wish to be a part of the system or stand to gain no benefit from the system (essentially those that do not have a wine and/or spirits industry).  Other contentious issues involve the costs of such a system, special treatment for developing or least-developed countries, and whether member states should have the ability to make reservations or exceptions to the agreement.

The Draft Modalities is more rigid and includes more obligations than the Joint Proposal, which is unsurprising because Europe has the most to gain from an international GI system.  Terms synonymous with the concept of GI’s such as Port, Champagne, and Bordeaux are just a few of the many GI’s that originate from Europe.  The Draft Modalities seeks to amend Article 23.4 of TRIPS, the provision which required a system of notification and registry of GI’s for wines to be created in the first place.  They seek to create additional elements to the system which they believe are necessary for its effectiveness: binding legal effects on all members, a rebuttable presumption in favor of registered GI’s, and the ability of members to make reservations to the agreement (if a particular GI term is  deemed generic or not within the definition of a GI to the member state’s IP administrative body).  They assert that the Joint Proposal is too weak to be successful.

The Joint Proposal is a less rigorous system which seeks to stay in line with the text of the TRIPS agreement.  Membership to the system would be voluntary, and those that did join would be required to consult the registry when making decisions regarding GI protection in their own country.  Those states that are not members would have access to the system and be encouraged to use it, but would not be required to.  They contend the Draft Modalities proposal is unfair because it would force member states that have nothing to gain from a GI system for wines and spirits to bear the economic and administrative burden of it.

Both sides bolster their arguments using treaties pivotal to international law.  The problem is international law is a fluid concept that is very much up to the interpretation of language and intent, and where many contradictions arise between the multitude of instruments and international or regional bodies that are in existence.  For example, the Vienna Convention on the Law of Treaties was created by the UN to dictate how treaties are negotiated for between states.  A fundamental provision of that document states that a treaty cannot impose obligations on third party states without its consent.  The Joint Proposal asserts that due to this provision, a system such as the EC’s which would legally obligate all WTO members to opt into the GI system for wine and spirits goes against this principle of international law.  On the other hand, the Draft Modalities contingency argues that the definition of a multilateral agreement used in practice by the WTO obligates all members to be a part of the system. 

The International Trademark Association (INTA), a highly regarded international organization which has promoted the protection of intellectual property worldwide for 125 years, recently published an opinion on the current status of negotiations.  INTA believes the GI registry should be similar to current international instruments which facilitate patent and trademark protection.  While INTA doesn’t explicitly side with the Joint Proposal, the opinion makes clear that they do not agree with a system that binds all members, and seek a system which respects the territoriality of administering intellectual property protection.  They believe the system should put the decision of whether to protect a GI into the member state’s hands, but which would also allow decisions to be challenged in the national courts of that member state.  The reason intellectual property protection is administered on the national level is because different terms have different meanings depending on where you are.  A potential GI may be deemed generic or have already been trademarked in a particular member state, which would impact that states ability to protect the particular GI.

It will be difficult for the Draft Modalities contingency to overcome apprehension to the strict system they wish to impose that would force the registry on member states.  In a report by the former TRIPS Chairman in November 2009, he conveyed this same apprehension. 

While U.S. wine producers may question the need for an international system of registry when there is already a functioning domestic GI protection scheme in place, the real benefit may come down the road.  At some point emerging wine producing nations such as China, India, Chile, and New Zealand may look to sponge off of the success of AVA’s such as Napa or Sonoma, just as American wineries did with European appellations such as Champagne, Port, and Bordeaux.   American wine producers need to make it clear to these nations that AVA designations must be respected, which the international registry would help accomplish.  While the American delegation understands this, they also do not want to concede too much leverage to the EC, whose proposed GI’s may be generic or trademarked in the U.S.  The two butted heads in 2005 when the WTO ruled in favor of  the U.S. on a long standing complaint against the EC for insufficiently protecting U.S. trademark owners and discriminating against non-EC products.

The WTO recently held another special session on the issue on June 10th.  Once again, “the stumbling block”, described by current Chairman of TRIPS, Ambassador Darlington Mwape of Zambia, was the legal effects/consequences of registering and participating in the system.  Both sides have shown willingness to further progress in the negotiations though, so hopefully a consensus will be achieved soon.  The Hong Kong proposal may be a converging point, which seeks to impose binding effects on members more so than the Joint Proposal, but not as restrictive as the Draft Modalities faction.  In any case, a registry such as this would impact winemakers throughout the world and should be followed closely by those in the wine industry here in the U.S.

Image credit to Dan / FreeDigitalPhotos.net

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The Emerging Asian Wine Market

2 Jun

There is a new frontier to be explored by U.S. wine producers, one where wine consumption is growing exponentially.  The combination of an expanding middle class and increased interest in wine has turned Asia, particularly India and China, into a lucrative new marketplace for those wishing to grow their wine business.  The Chinese palette is shifting from grain wines to more healthy grape wines, while Indians, who in the past drank primarily whiskey and beer, are increasingly gravitating towards wine as well.  While protectionist regimes in both countries have created trade barriers for those exporting wine to them, such as exorbitant excise taxes and complicated sales and distribution chains, the sheer growth of these markets and the gradual liberalization of wine policies in these countries illustrates their true potential.

The joint population of these two countries equals around 2.5 billion people, a little over one-third of the world’s inhabitants, which makes India and China massively untapped markets for wine consumption.  As these countries continue to improve their infrastructure, international business prowess, and level of education, they will undoubtedly challenge the United States’ position as the preeminent world power.  With all this growth comes an increased per capita spending power, an ideal scenario for the promotion and sale of wine.  The potential for growth can be seen by looking at per capita wine consumption.  In 2008, the U.S. consumed 9.8 liters per capita, while China consumed 1.08 per capita, and, astoundingly, only .01 liters per capita in India.  As the living standards in these countries continue to grow and disposable income becomes more readily available, wine has the potential to be a staple alcoholic beverage of choice for Indians and Chinese, just as it has become for many Americans.

India is the 10th largest growth nation for wine, and within Asia expected to be the biggest growth market, with annual consumption expected to double from 2009 to 2013.  Ten years ago India only had three vineyards, today it has 69.  The highest level of wine consumption is in the cities of Mumbai and New Delhi, bustling metropolitans comparable to New York and Los Angeles.  Other major cities such as Bangalore and Kolkata are seeing increased wine consumption as well.  A softening of traditionally negative views of alcohol by many Indians (the icon of Indian independence from the British, Mahatma Gandhi, was a teetotaler), combined with higher levels of disposable income and glamorization of wine culture by Bollywood, are all factors making India a prime candidate for increased wine consumption, and thus wine exportation from the U.S.

China is the 8th largest wine consumer in the world, and  consumption is predicted to increase by 32% from 2009 to 2013.  The high end wine market is succeeding in China, where uncorking a $1000+ bottle of wine is sign of generosity and culture, and becoming a typical way wealthy Chinese close business deals.  Wines of the opposite end of the spectrum, sold for a few dollars each, are also very popular.  The next step is to promote the sales of mid-level wines to consumers wishing to drink quality wines but not those of excessive prices.  Once this is accomplished China will truly be a wine consuming behemoth.

Both nations realize this enormous potential, and have enacted protectionist policies to benefit those producing wine within their borders.  India and China have both only become members of the World Trade Organization within the last 15 years.  As WTO members both are bound to certain caps on tariff rates, but still manage to circumvent these limits through additional taxes on top of the agreed upon tariffs.

For example, the state of Maharastra, home to Mumbai, charged a 200% excise tax on any imported wine, while local wine producers are exempted from the tax.  In India, a $10 bottle of wine here in the States may end up costing three or four times more, which combined with the low exchange rate for the Rupee makes purchasing imported wine costly and impractical.  All this taken into consideration, pressure from the WTO  in unison with globalization and an increased demand for quality imported wines will eventually erode these barriers.  Also, while customarily wine has not been allowed to be sold in groceries stores and malls in India, some states have liberalized policies to allow for wine to be sold at these retailers.  This could very positively impact a wine market in which most wine sales currently occur in restaurants and hotels.

China imposes a 50% tax on imported wine, also making it less likely for imported wines to be sold.  Further, the French have come to dominate the imported wine market by convincing the Chinese over the last few decades that their wine is of higher quality.  In 2008, the U.S. only made up 5% of China’s wine import market, while France held 46% of it.  Australian and New Zealand producers also have a distinct geographical advantage in exporting to both China and India because of their relatively closer distance.  Nonetheless, California wines are making progress as the Napa brand grows in recognition.  The Wine Institute has recently begun a campaign to educate Chinese wine drinkers on the high quality and exceptional terroir of California wines.

California has a great amount to gain from these new markets.  Of the total amount of wine exported from the U.S. around the world, 95% come from the Golden State.  California is also home to the most prestigious American Viticultural Area, the Napa Valley.  It would be advantageous for a state currently in dire economic circumstances to promote its strongest industry in the burgeoning markets of India and China.  The potential for wine sales in these countries is boundless, and U.S. winemakers would be wise in being forward thinking and innovative in exporting wine to this new and unique market.

Image credit to Arvind Balaraman / FreeDigitalPhotos.net

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