The United States Patent and Trademark Office, Trademark Trial and Appeal Board (the “Board”) recently dismissed Luxco, Inc.’s (“Luxco”) opposition to registration of the mark TEQUILA (in standard character format) by an official Mexican regulator as a certification mark for “distilled spirits, namely, spirits distilled from the blue tequilana weber variety of agave plant.” Luxco, Inc. v. Consejo Regulador del Tequila, A.C., Opposition No. 91190827 (January 23, 2017) [precedential]. As a result, Mexico’s “Consejo Regulador del Tequila A.C.” (meaning Tequila Regulatory Council, hereinafter “CRT”) can register the word TEQUILA as a certification mark and control its use.

Certification Marks and Geographic Indications

A “certification mark” is any word, name, symbol, etc., used by a person other than its owner, to certify regional or other origin, material, mode of manufacture, quality, accuracy, or other characteristics of such person’s goods or services or that the work or labor on the goods or services was performed by members of a union or other organization. 15 U.S.C. §§ 1054, 1127. As expressly stated in the statute, geographic indications can serve as certification marks. Geographical indications are words or images which identify a good as originating in a country or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographic origin. “Champagne” is such a geographical indication; “Darjeeling” is another.

Just like trademarks, certification marks must be properly controlled to be considered strong and protectable. If the geographic certification mark is a term that is widely used by third parties for different sorts of goods, the mark will lose its strength. Thus, the owner/certifier has an affirmative duty to monitor the use of the mark and to verify that the goods meet the standards for use of the mark.

Background

Since 1958, Luxco has imported and bottled alcoholic beverages, including tequila and distilled spirit specialties containing tequila. Luxco does not distill its own spirits. Rather, Luxco imports its tequila from a distiller in Mexico and rebottles it and sells it in the United States under the brands “El Mayor,” “Exotico,” and “Juarez.” Luxco’s imported tequila is certified by CRT as authentic tequila.

CRT is a civil association accredited and approved by the Mexican government to certify the authenticity and general standards of tequila, particularly that they are produced in certain locations in the state of Jalisco and surrounding states. In 2003, CRT filed an application to register TEQUILA as a certification mark for “spirits distilled from the blue tequilana weber variety of agave plant.” Luxco brought an opposition against CRT’s application, claiming that the word TEQUILA is generic for a variety of liquor. Luxco also alleged that (i) CRT failed to exercise legitimate control of third party use of the word, and (ii) CRT’s application contained fraudulent statements.

Standing

CRT asserted that Luxco lacked standing to bring the opposition because, pursuant to U.S. law, Luxco is prohibited from using the term “tequila” unless CRT has certified the product. Therefore, CRT argued, its registration of TEQUILA as a certification mark would not change the commercial environment with respect to Luxco’s labeling or marketing of its tequila.

The Board disagreed. To prove its standing to oppose registration of an allegedly generic term, a party need only show that it is engaged in the manufacture of the same goods as those listed in the application. Luxco met this burden. Additionally, CRT’s registration of TEQUILA as a certification mark would add a new layer of protection for the word, and some additional complications for Luxco in its labeling, marketing, and sale of its tequila. Therefore, Luxco had standing to oppose CRT’s registration of TEQUILA as a certification mark.

Genericness

Although Luxco had standing to bring the opposition, the Board found that it failed to meet its burden of proving that the term “tequila” is generic. There is a two-part test to determine whether a designation is generic. First, what is the genus of goods at issue? Second, does the relevant public understand that term to refer to the genus of goods?

The Board found the genus of goods to be those identified in the application, and the relevant consumers to be the purchasers of those goods. The question, then, was whether these relevant consumers perceive the term “tequila” as an indicator of geographic origin or as merely the name of a certain type of liquor. The public’s perception is the primary consideration in determining genericness.

The record reflected that the U.S. Department of Treasury, Tobacco Tax and Trade Bureau (“TTB”) classifies tequila as a distinctive product of Mexico and prohibits the labeling of bottles as tequila if the product is not manufactured in Mexico in compliance with Mexican laws. Therefore, although those in the trade are presumptively aware of that classification, that does not establish how purchasers perceive the term.

The Board then reviewed dictionary definitions for tequila, encyclopedia and website references, expert reports, advertising and bottle labels for tequila, and consumer survey results, observing that “a term that identifies a category of spirit would not be generic if it also serves to identify geographic origin (i.e., a type of spirit from Mexico).” The evidence mostly suggested that tequila is associated with Mexico. Significantly, survey evidence offered by CRT revealed that 55.4 percent of the respondents (purchasers of tequila), believed that tequila is made in Mexico. Finally, there was little evidence in the record that tequila is made anywhere other than Mexico. Thus, because Luxco failed to meet its burden to prove genericness by a preponderance of the evidence, the Board dismissed this count of the opposition.

Control

Luxco also claimed that CRT cannot exercise control over the term “tequila” in the United States because the TTB has authority over the use of word “tequila” in the United States. The Board pointed out, however, that the TTB has no authority to make determinations as to trademark registrability, and the TTB’s labeling requirements are irrelevant to the USPTO’s trademark determinations.

The Board also rejected Luxco’s argument that the Mexican government, and not Applicant CRT, owns the term “tequila.” The CRT is the duly authorized agent of the Mexican government to verify compliance with its official Mexican standard for tequila. The Board easily concluded that CRT is exercising legitimate control, and that it is the owner of the certification mark for purposes of registration in the United States.

Fraud

Finally, Luxco argued that CRT made misleading statements to the Trademark Examining Attorney to persuade the Examining Attorney that the term “tequila” has special status as an “appellation of origin” under U.S. trademark law. The Board, however, found that the Examining Attorney was not misled and, in any case, was provided with the authorities upon which CRT was relying in asserting that tequila is recognized as a distinctive product of Mexico. Moreover, the evidence suggested that CRT had a reasonable belief in the correctness of its position rather than an intent to deceive the USPTO.

Luxco also claimed that CRT committed fraud by falsely stating that practically “100% of the tequila product sold in the world comes from a certified producer and certified brand.” The Board, however, found “not one iota of evidence” to support the claim that this statement was false or intended to deceive the USPTO.

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CRT correctly pointed out that there is almost no practical difference in the commercial reality of labeling, marketing and selling tequila under the new certification mark. Luxco had been selling CRT-certified tequila. Moreover, under penalty of cancellation, CRT may not discriminately refuse to certify any party who maintains the standards and conditions which the mark certifies. 15 U.S.C. § 1064(5)(d). As a result, this ruling does not significantly affect the sale of tequila in the United States.