Provincial wine labelling laws trump the right to use a trademark: case comment

A recent Ontario Superior Court decision highlights the interplay between registered trademark rights and provincial wine labelling laws.

In Royal DeMaria Wines Co. Ltd. v Lieutenant Governor in Council, the applicant was an Ontario-based producer of icewine and a member of the Vintners Quality Alliance Ontario (VQA Ontario). VQA Ontario terminated Royal DeMaria’s membership and revoked its prior approval of two previously approved icewines, preventing the winery from selling out its inventory of the wines that referred to “icewine” on the labels. Royal DeMaria had a registered trademark that included the text “Canada’s Icewine Specialists,” which it could no longer use after VQA Ontario’s decision.

VQA Ontario establishes protected terms, sets quality standards and conditions respecting the use of those terms, and governs applications for approval for using these terms.

For an Ontario producer to label its wine as a VQA Ontario wine, it must meet certain requirements. In addition to geographical requirements for the grapes used, VQA Ontario requires a taste test for wines pursuant to its authority under s. 5 of the Vintners Quality Alliance Act, (the Act) such that not only must a wine be without defects or flaws, but also that “the wine is representative of quality wines of the stated category.” In other words, unlike in British Columbia, the tasting panel can deny a producer the right to advertise its wine as a VQA Ontario wine if the panel concludes it is not representative, which includes style and typicity.

VQA Ontario also implemented rules regarding labelling varietals, vintage years, geographic indications, and other protected terms, including “icewine.”

VQA Ontario terminated Royal DeMaria’s membership after it failed to obtain VQA Ontario approval for any of its wines submitted over an 18-month period. Once its membership was terminated, Royal DeMaria was given a year to sell its remaining icewine inventory labelled as such.

Winery challenges VQA’s powers

The winery, however, continued to sell this inventory after the grace period had expired, was prosecuted and subsequently acquitted on the basis that VQA Ontario had no authority to revoke the approval of pre-approved wines because of a lapsed membership. Subsequently, VQA Ontario passed a new regulation allowing it to do just that, and revoked the approval of the applicant’s two previously approved icewines. As a result of this, Royal DeMaria Wines brought an application seeking declarations that:

• The taste-test rule was outside the authority granted to VQA Ontario;
• The 18-month membership lapse rule was outside the authority granted to VQA Ontario;
• The rule allowing VQA Ontario to revoke the approval of previously approved wines was outside the authority granted to VQA Ontario; and
• The rules restricting the use of terms such as “icewine” conflict with federal legislation, namely, the Trade-marks Act, and therefore, are inoperable.

The Ontario Superior Court of Justice dismissed the applicant’s claim in its entirety and upheld all the impugned VQA Ontario rules. Specifically, with reference to the rule restricting using certain terms on labels, the court held that both the Act and the Trade-marks Act have consumer protection purposes that are consistent and compatible with each other. The Act furthers the consumer protection purpose of the Trade-marks Act by ensuring that when wine manufacturers use certain terms that are also subject to provincial regulation, they are meeting quality standards. This complements, rather than frustrates, the purpose of the federal legislation.

The court concluded that accomplishing the Trade-marks Act’s purposes does not require that the trademark owner have the right to use the trademark in any context without any constraint. The court noted a British Columbia decision that reached the same result when provincial tobacco advertising restrictions prevented Benson & Hedges from using certain registered trademarks. Ultimately the court concluded the Trade-marks Act does not grant any positive right to use a trademark at all, let alone in contravention of provincial legislation.

The author would like to thank Robert Hanson, articling student, for his help in preparing this IP monitor.