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08.15.2013  
 

Protecting Your Wine--And Your Winery's Reputation

Wines & Vines and Napa Valley Vintners host first Wine Anti-Counterfeiting Seminar

 
by Kate Lavin
 
 
penfolds
 
David Pearson of Opus One Winery discusses Shala One, the Thai wine label that bears a comedic resemblance to the Napa Valley collaboration between Robert Mondavi and Baron Philippe de Rothschild.
Napa, Calif.—When it comes to tracking down fake bottles of alcoholic beverages, David Gooder says the challenge is like pulling weeds in a garden. Turn your attention to one corner, the chairman of the International Federation of Spirits Producers (IFSP) contends, and more interlopers will spring up behind you.

Gooder was one of several speakers featured at the first Wine Anti-Counterfeiting Seminar (WACS) that Wines & Vines and the Napa Valley Vintners hosted at the Silverado Resort & Spa in Napa on Wednesday. And while he told the audience of 108 attendees that the job of tracing fakes is never-ending, that doesn’t mean companies should ever stop protecting their brands.

According to Gooder, who also serves as managing director and chief trademark counsel for Jack Daniels Properties/Brown-Forman Corp., the spirits industry has been fighting counterfeiting for about 15 years. Many kinds of fraud take place in the beverage industry, he says, from on-premise substitution (a customer orders—and pays for—a glass of one brand and is presented with another, cheaper version), to refilling (a genuine bottle is refilled with another product and then resealed) to all-out fakes.

“Refilling is far and away the biggest issue,” adds Gooder, who theorizes that copycats opt into counterfeiting alcoholic drinks because it’s profitable and not complicated. But for a winery with a brand to protect, every counterfeit bottle represents potential erosion of confidence in that label. “We’ve seen entire brands literally tank in a country,” Gooder says. “The Rothschild example is a good one: More Lafite sells in China than is produced in France.”
penfolds
 
Australian wine brand Penfolds (left) is among those targeted by counterfeiters in China, where a retailer was found selling Panfaids (right).
The French paradox
Until recently wine counterfeiters in China and elsewhere targeted first-growth Bordeaux with an almost singular focus, but as the international marketplace has opened up, so has the business of wine fraud.

Scott Gerien, who heads the Intellectual Property Department at Napa-based law firm Dickenson Peatman & Fogarty, points to the example of wines selling in China emblazoned “Panfaids” with the same red script used by Australian winery Penfolds. Meanwhile, the front label on a bottle found in a Beijing supermarket proclaims “Valley Napa,” while the back label explains the wine inside is produced in northwest China.

COFCO, the largest state-owned food company in China, registered the designation “Nava Valley” for wine, though historically the place’s name (Penglai) bears no resemblance to the phrase. Gerien’s legal team challenged the registration but was unsuccessful.

The need for protection prompted the Napa Valley Vintners to ask Gerien to register the Napa Valley appellation as a geographical indicator with the AQSIQ, the Chinese agency charged with accreditation, import inspection and food safety.

‘Defensively register your mark’
For individual wineries looking to protect their names, Gerien says companies don’t have to be exporting wine to China in order to register for a trademark there. “You can defensively register your mark,” he says.

Gerien encourages clients looking to enter the Chinese market in the next three years to apply for protection now, before trademark poachers register their brands first. “Who ever gets to the trademark office first will get to protect the rights,” Gerien says.“If you’re selling wine in the Chinese market and you don’t have a trademark registered there, you’re not protected.”

In fact, if someone registers your brand before you do, that person can sue you for selling your own wine. This process is employed by Chinese wine distributors to hold U.S. wineries captive; by owning the trademark for a wine brand, distributors are able to ensure that all of the brand’s distribution in China happens through them or not at all.

Wineries that already hold a registered trademark in the United States are eligible to apply for international trademark registration through the Madrid Protocol (China is among the member countries). The caveats, Gerien says, are that the cost makes it worthwhile only for wineries looking for brand protection in three or more member countries, and the Chinese Special Administrative Regions of Hong Kong and Macau are not included.

Outsmarting the counterfeiters
According to Marietta Bartoletti, senior economic/commercial officer for the U.S. Department of State, 75% of counterfeits come from China. “I do believe the Chinese government wants to get away from being known as the counterfeit capital,” Bertoletti says. “If you know that a certain wine is not available there, and you see it, you could report it right away.”

For David Pearson, CEO of Opus One Winery and one of the speakers at WACS, the fight against counterfeiters has been not so much against exact duplicates but “near misses.” A restaurant and wine bar in Thailand called Shala One offers a house wine with a label undeniably similar to the one used by Opus One, which has been using the label design since the 1980s. Both feature blue profiles printed on white paper and feature signatures underneath, although comically, the profile that adorns Shala One’s label appears more like Alfred E. Neuman from Mad magazine than it does Robert Mondavi or Baron Philippe de Rothschild.

The problem with such cases, Pearson says, is that inaccuracies on copycat labels make a trademark infringement claim difficult to litigate. “We can’t trademark a silhouette, we can’t trademark a squiggly line and we can’t trademark a signature,” says Pearson, who adds that when such imitations arise he consults a trademark attorney and weighs the possibility of winning vs. the money that would be spent bringing the case to court. Often, he says, a strongly worded letter encouraging a label makeover proves sufficient.

Of course sending such a letter requires tracking down the party responsible for producing the wine, and according to Pearson copycats make the ownership structure intentionally difficult to navigate.

Using technology
For brands with costly wines like Opus One, ensuring that bottles end up in consumers’ hands unadulterated is something worth an investment. The winery uses anti-counterfeiting technology as both a visible way to communicate the bottle’s authenticity to consumers (the back label contains a chip as well as a QR code that can be scanned with a smartphone) as well as a vehicle to track bottles after they leave the winery. Every time a bottle is scanned, the location is relayed to a server at Opus One.

“We can track a bottle from winery to destination as long as it’s being scanned. We know it passed through distributors, négoçiants,” Pearson says. If the final owner scans the bottle with an Internet-enabled device, Opus One winemaker Michael Silacci appears on video discussing the vintage of the newly purchased wine.

“We get to connect instantly with the consumer, to a person who wants to talk to us,” Pearson says.

Playing it close to the chest
Opus One employs other anti-counterfeiting protection technologies, but Maureen Downey, founder of private wine collection management firm Chai Consulting, emphasizes the value in keeping such details secret. “When you disseminate information about what you are doing,” she says, “you’re just giving (counterfeiters) a road map.”

Having spent a career uncovering counterfeit bottles from high-end wine collections and verifying the provenance of legitimate wines, Downey says, “Anything you can do to make sure that capsules don’t get re-used is great.” Many French wine exporters have been campaigning for restaurants to break the bottles after use so they cannot be refilled.

She also advocated the use of layered technologies that combine low-tech solutions such as unique glass and keeping track of wine lots with high-tech tools.

According to Erik Harvey, project manager at Napa-based iProof, “You have to think about the cost (of anti-counterfeiting technology) and the reduction of actual risk that you have.”

Most of the exhibitors in attendance agreed that solutions can range from 2 cents to 30 cents per bottle, plus additional expense for the software and data storage. And simply packaging with anti-counterfeit technology isn’t enough, Downey says. Ask customers and members of the distribution channel to be part of the solution. According to Philippe Mathevon of Advanced Track & Trace, “You really need to encourage the consumer to scan the code.”

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