Applicant’s Prior Use of PARLAY for Wine Was Not Unlawful Despite Lack of COLA Approval, Says TTAB

In this Section 2(d) priority contest involving the identical marks PARLAY for wine, Opposer Churchill Cellars claimed that it was entitled to priority because Applicant Brian Graham, although he used the mark first, did not obtain COLA certification for his label until after Churchill secured COLA certification and used its mark. In short, Churchill claimed that Graham’s prior use was illegal. Churchill Cellars, Inc. v. Brian Graham, Opposition No. 91193930 (October 19, 2012) [not precedential].

The regulations of the Department of Treasury Alcohol and Tobacco Tax and Trade Bureau (“TTB”) require approval of a wine’s label prior to sale of the wine: the certificate of label approval, or COLA. Opposer Churchill contended that Graham’s non-compliance with the TTB rules was a material, per se violation of the TTB regulations. Therefore, Churchill maintained, Graham’s use of his mark prior to Churchill’s first use date was not lawful and did not result in the creation of trademark rights.

The Board reviewed its precedents regarding lawful use, observing that the “illegal use doctrine” is narrowly applied. Generally, the Board’s approach is “to hold a use in commerce unlawful only when the issue of compliance has previously been determined (with a finding of noncompliance) by a court or government agency having competent jurisdiction under the statute involved, or where there has been a per se violation of a statute regulating the sale of a party's goods."

Opposer Churchill did not provide any evidence of a prior determination of illegality. It appeared, however, that Applicant Graham “may have been in technical violation of the applicable TTB regulation for a short time, although it is undisputed that it is now in compliance.”

Churchill argued that Graham’s noncompliance was material, because the “purpose of this requirement is to ensure that wine makers properly inform consumers about the wine’s brand, geographic origin, grape type, age and any other relevant information.” The Board, however, found no evidence in the record that Graham’s wine labels were in any way deceptive or failed to provide any information relevant to his wine.

The labels submitted by applicant were ultimately approved by the TTB and there is no evidence that they were found to be deceptive or deficient in any respect. As a result, there is no evidence that applicant’s asserted non-compliance with the applicable TTB regulation is material and should result in denying registration of its mark. Certainly there is no evidence that applicant’s submission of its wine label for approval a few months after commencing use of its mark "was so tainted that, as a matter of law, it could create no trademark rights." General Mills, 24 USPQ2d at 1274.

Finally, the Board noted the “draconian and potentially disproportionate result” of denying trademark rights to a party on the ground of noncompliance, here over three and one-half years after the asserted noncompliance.

And so the Board dismissed the opposition.

TTABlog comment: Do you think this decision will be appealed?

Text Copyright John L. Welch 2012.