Chinese counterfeiters have infiltrated the wine world, falsely labeling products and using fraudulent geographical indications (GIs). GIs, which function as a type of brand, are internationally protected designations of a product's origin and characteristics. Recently, United States GIs, such as Napa or Walla Walla, have appeared on bottles of wine composed of Chinese grapes. By misappropriating U.S. brands, Chinese counterfeiters deceive and confuse consumers, disadvantage legitimate businesses, and causes health concerns. Unlike other brands, GIs protect regions, rather than individual producers. This creates a particular void: no single winery can register a GI and no single winery is harmed by fraudulent use, making counterfeits difficult to prevent, detect, and address. This Comment argues that Chinese law currently provides insufficient protection for U.S. wine GIs. As a solution, it proposes a Sino-American wine registry to effectively preserve GIs and protect the affected wines, producers, consumers, and countries.Zanzig comments that
Splashy headlines around the world decry the rise of Chinese wine counterfeits. A London Telegraph headline reads, “Red Alert Over Bordeaux Wine Fraud,” while a CNN.com headline laments the “Counterfeits in the Grape Wall of China.” Meanwhile, the Australian Broadcasting Company’s article, titled “Winemakers See Red Over Bogus Bottles,” describes counterfeiters who “rebadged” Chinese wines as Australian.
With growing Chinese demand for foreign wines comes a corresponding increase in fraudulent products. For example, counterfeiters pay thousands of dollars for empty French Bordeaux bottles, only to fill them with cheap Chinese wine and sell them at inflated prices. Penfolds, an Australian wine that is popular and well recognized in China, spurred a string of knockoffs marked “Benfolds” in the same typeface as the original. Fake products bottled and packaged as “Canadian ice wine” are available on Chinese shelves, with frauds potentially comprising eighty percent of the ice wine in China. Counterfeit wines create a number of concerns. For example, their labels falsely convey a reputation, which can deceive or confuse consumers. Unfortunately, fraudulent wines are often of much lower quality and sometimes even laced with chemicals. This can lead to dilution of legitimate brands, harming their producers. Meanwhile, counterfeiters receive an unfair advantage, benefitting from the reputation they are weakening.
United States wines have not escaped the counterfeit plague. Recently, a Chinese winery attempted to register itself domestically as “Napa Valley.” Though it didn’t obtain that particular brand, it ultimately assumed the name “Valley Napa” - despite the fact that its wine consisted entirely of Chinese-grown grapes - and marketed its wine to domestic consumers. In late 2012, the Chinese government finally granted protected status to the term “Napa.” However, this protection took fourteen years of work for the Napa Valley Vintners Association, including a 2011 trade mission to China to promote and preserve the Napa name.
The Napa Valley struggle illustrates the problem with protecting geographical indications (GIs). GIs are label designations that indicate a wine’s origin and often denote certain qualities associated with that origin. A form of intellectual property (IP), GIs function as brands, preserving reputation and truth in labeling.
While brand protection benefits any product, the protection that GIs offer is especially crucial for wine. Consumers select wines based on reputation—not merely those of the wine’s producer or its ingredients, but also the reputation of the wine’s geographic region. Strong regional reputations often result in economic profit, as was the case in Walla Walla, Washington. Once a dying agricultural town, the region is now booming thanks to its wine industry. “Walla Walla has created a brand for itself,” says Richard Kinssies, a Seattle wine expert. “It worked very hard for decades to create a viable and valuable wine industry. Where there’s marketing success, someone will want to copy it. Truth in labeling protects that brand.” Due in part to Walla Walla’s brand, Washington now possesses a booming wine industry, the second largest in the U.S.
In addition to their domestic success, U.S. winemakers have set their sights on exporting their wines. China represents an enticing new market with lips that are “thirsty” for wine. In the past few years, Washington and Oregon wine sales in China have increased by an estimated eighty percent each year. China’s rising wine consumption inspired a corresponding increase in domestic wine. Some estimates found that, in the past five years, revenue from the Chinese wine industry rose at an annual rate of over twenty percent, around $7 billion.
Both countries are signatories to the Trade Related Aspects of Intellectual Property (TRIPS) Agreement, which provides international protection for GIs. The TRIPS Agreement regulates the use of geographical terms, aiming to preserve regional brands and prevent GI dilution. A diluted GI becomes “generic,” representing not a specific brand, but a type of product. This dilution is arguably happening to “Champagne.” Traditionally, the term Champagne only described wine from the Champagne region in France. To many customers worldwide, however, it now merely signifies sparkling wine. Another familiar example is the word “Kleenex”—though it is actually a registered brand, consumers now widely use the word to refer generally to any brand of facial tissue. The TRIPS Agreement aims to prevent this from happening to GIs, as well as to protect consumers and legitimate businesses.
The TRIPS Agreement itself does not protect GIs, requiring instead that member countries create domestic legislation implementing TRIPS provisions. In the European Union (EU), GIs enjoy specific protection. By contrast, the United States regulates GIs primarily under its more general national trademark law. A number of Chinese statutes offer GI protection, forming a confusing regulatory system that only one American winery has successfully navigated. Napa Valley, perhaps the U.S.’s most recognizable indication, is the first nondomestic wine GI to receive recognition in China.
Domestic implementation of the TRIPS Agreement often differs based on a country’s legal culture. For example, the EU ardently protects GIs to preserve its traditional brands and its “rich history of local and specialist agricultural production and many famous products closely linked to their place of origin.” Accordingly, its domestic laws focus specifically on GIs and protect them more stringently than other World Trade Organization (WTO) members. By contrast, the U.S. intellectual property scheme evolved to promote the spirit of innovation. U.S. protection of GIs reflects this notion, falling under trademark law, which focuses heavily on a creator or innovator. Due to China’s cultural and political climate, its IP law developed relatively recently, motivated primarily by international - rather than domestic - considerations. As a result, its GI protection is relatively young and reflects a compilation of various foreign systems.
Because of these domestic differences, GI protection can be inconsistent. In response, some countries pursue “TRIPS-plus” measures, which expand on the protection provided by the TRIPS Agreement. The EU embraced this strategy, entering several bilateral agreements with other members to achieve further protection. In the interest of providing more extensive and consistent protection, TRIPS Article 23 also calls for negotiations on a multilateral system of GI registration. However, member nations have disagreed over how the system should operate, stalling the registry’s implementation.
This Comment argues that Chinese law currently fails to sufficiently protect U.S. wine GIs. It then proposes a bilateral wine registry as a TRIPS-plus solution to effectively regulate GIs. The registry would promote dispute avoidance, as it would reflect shared attitudes about GI protection and provide mutual benefits to the U.S. and China. Finally, the registry would further the goals of the TRIPS Agreement and serve as a model for future international GI protection.
Part I of this Comment addresses international protection of GIs. Part II discusses United States GI protection, particularly in terms of wine. Part III analyzes Chinese IP law and its interaction with wine GIs. Part IV argues that the current state of Chinese law provides insufficient protection for U.S. wine GIs. Part V proposes a bilateral wine registry as a solution to Sino-American gaps in GI protection.