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Federal Programs With Unexpected Impact On Alcoholic Beverage Industry

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When businesses dealing in alcoholic beverages think of federal regulation, the Alcohol and Tobacco Tax and Trade Bureau or Food and Drug Administration spring to mind. But two federal programs, which have no explicit link to alcoholic beverages, have a direct impact on the industry. This article explores how a U.S. Department of Homeland Security (“DHS”) anti-terrorism program and a U.S. Patent and Trademark Office (“USPTO”) program may affect alcoholic beverage businesses.

WINERIES, DISTILLERIES AND BREWERIES MUST HELP FIGHT TERRORISTS

In 2006, Congress authorized the Chemical Facility Anti-Terrorism Standards (“CFATS”) program.  CFATS is intended to identify and regulate facilities that possess specified chemicals that in certain quantities and defined concentrations are thought to present a high risk of use by a terrorist. The chemicals identified are called chemicals of interest (“COI”). The quantity that raises a COI to a threat level is known as its screening threshold quantity (“STQ”). There are also standards of concentration for each COI.

The list of COIs is fairly broad. Consequently, although most people would not think of breweries or wineries as storehouses of dangerous chemicals, federal regulators do. Because of the need for refrigerants and cleaning agents, breweries often possess anhydrous ammonia, hydrogen peroxide, chlorine, propane and chlorine dioxide. Wineries often store anhydrous sulfur dioxide, hydrogen peroxide, propane, anhydrous ammonia, chlorine and ammonia in concentrations of 20% or more. A full list of COI with screening thresholds described below can be found at Appendix A to Part 27 – DHS Chemicals of Interest (cisa.gov).

If a facility possesses one or more COIs at or above the STQ and specified concentration, that facility must register with the CFATS program through DHS’ Chemical Security Assessment Tool at https://csat-registration.dhs.gov. DHS is responsible for using this information to assess the overall risk of the facility.  Facilities that DHS assesses as “high risk” must submit a security plan tailored to the risks associated with the particular COI(s) stored at the facility.

Failure to comply with the CFATS program requirements may result in civil penalties, which range from $1,000 to $10,000 per day. CFATS Penalty Policy is available at https://www.dhs.gov/cfats-penalty-policy. For additional information about the CFATS program and its requirements, email DFATS@hq.dhas.gov or visit https://www.cisa.gov/chemical-security.

TRADEMARK EXPUNGEMENT AND RE-EXAMINATION RULES

The hospitality industry is very litigious when it comes to trademarks. Anyone seeking to start a new business should conduct a trademark search before settling on a name. In the past, if a name had already been trademarked, it was very difficult to overcome the presumption that the mark belonged to the registrant, even if it appeared that the mark was not in use. A trademark owner (i.e., the trademark registrant) is required to prove the trademark is being used at six years after the trademark’s registration, at ten years after the registration, and then every ten years thereafter. With such long gaps in between, it may take years before a trademark is deemed not in use. This can be burdensome for a person wishing to register a trademark similar to an existing one, even though that existing one may no longer be used or may only be partially in use.

Pursuant to the Trademark Modernization Act of 2020, the USPTO has created two procedures to address this problem.

The first is an expungement proceeding. To initiate removing a trademark that has never been used in U.S. commerce from the Trademark Register, any party may request the cancellation of some or all of the goods or services registered for use in connection with that trademark. The request must be made between three and ten years after the registration. However, until December 27, 2023 the application can be made against any registration that is at least three years old.

The second available procedure is a re-examination proceeding. Through this process, a person may request cancelation of some or all of the goods or services in a trademark registration where the trademark was not in use in U.S. commerce with those particular goods or services as of a certain date. To determine the relevant date, the USPTO will look to the following:

  • When the underlying application was initially filed based on use of the trademark in commerce, the relevant date will be the filing date of the application.
  • When the underlying application was filed on an intent-to-use basis, the relevant date is the later of (i) the date that an amendment to allege use was filed or (ii) the date that the deadline to file a statement of use expired.

Either of these two proceedings must be requested within five years after a mark’s registration. Any goods or services cancelled in either proceeding will no longer be covered by the trademark registration.

            Whether an alcoholic beverage business is applying for a new mark or has an existing one it needs to protect, these new proceedings present additional opportunities and challenges. Businesses seeking to register new marks will find a cheaper alternative to contesting existing marks, and those with existing marks may suddenly find themselves needing to defend their rights to their intellectual property.

This article is not intended to give specific legal advice.  Before taking any action, the reader should consult with an attorney familiar with the relevant facts and circumstances.

Written by

Keven Danow

Founding and Senior Partner
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