Vintners Quality Alliance Ontario v. Royal DeMaria Wines Co. Ltd., 13-3002 and 14-3104
Canada is one of the world’s largest producers of icewine, a sweet dessert wine that is produced from grapes naturally frozen on the vine and picked while the air temperature is -8˚C or lower. Approximately 75% of Canadian icewine is produced in Ontario in regions such as the Niagara Peninsula. Despite that a wine may be produced from grapes naturally frozen on the vine in the Niagara Peninsula region, a vintner may not label his wine as “icewine” or use the term “Niagara Peninsula” without the approval of the Ontario wine authority, the Vintners Quality Alliance Ontario (the “VQAO”).
Royal DeMaria Wines Co. Ltd. (“Royal DeMaria”) is a winery located in Beamsville, Ontario that specializes exclusively in the production of icewine. The company slogan is “Canada’s Icewine Specialists”. Since its first vintage in 1998, Royal DeMaria’s icewines have garnered international acclaim, winning numerous prestigious awards and breaking world wine records, including 5 Citadelles du Vin Gold trophies from VinExpo, Bordeaux, France (2002), 5 consecutive Gold Medals from Chardonnay du Monde, Chaintre, France (2005–2009), 5 Gold Medals from Concours Mondial, Brussels, Belgium (2003) and 9 consecutive Double Gold Medals from Finger Lakes International Wine Competition, Rochester, New York (2000-2009). Royal DeMaria had been a member of the VQAO since 1998.
The VQAO sets quality assurance and labelling standards for Ontario wines designated as “VQA” wines under the authority of the Vintners Quality Alliance Act, 1999 (the “VQA Act”) and associated regulations. The VQA Act prohibits a wine manufacturer from using terms, descriptions and designations established by the VQAO without its approval and provides that a manufacturer may only apply for approval to use those terms if the manufacturer is a member of the VQAO.
But what happens when a manufacturer’s wines pass all quality assurance standards, the manufacturer is approved to use the terms “VQA”, “Niagara Peninsula” and “Icewine” on those wines, but the manufacturer subsequently ceases to be a member of the VQAO? Is the manufacturer prohibited from selling those previously approved wines, which have already been bottled and labelled?
The VQAO took the position that Royal Demaria’s membership in the VQAO lapsed on October 11, 2011 under the terms of a VQAO corporate bylaw that requires all members to obtain at least one VQA wine approval within any consecutive 18-month period in order to maintain membership. Despite having submitted a number of wines for approval during the relevant period, all wines failed the mandatory “taste test” imposed by the VQAO, including wines that have won international wine competitions. The VQAO advised Royal DeMaria that it would be permitted to sell VQA approved wines for a period of one year beginning on October 11, 2011, after which time it must discontinue use of all VQA terms.
On February 15, 2013, an information was laid against Royal DeMaria alleging violations of the VQA Act for using terms, descriptions and designations established by the wine authority without its approval to describe wines presented on the company website and on the labels of two bottles of wine purchased by an investigator for the VQAO – a 2002 Icewine Merlot and a 2008 Winter Harvest Riesling. Both wines had received previous approval from the VQAO. The VQAO also took the position that Royal Demaria could not use the term “icewine” in its federally registered trade-mark, which is a design mark incorporating the words “Canada’s Icewine Specialists”.
Royal DeMaria, represented by Sim IP Practice, pleaded not guilty and vigorously defended the charges against it. The thrust of the defence was that the purpose of the VQA Act and the mandate of the VQAO is to establish, monitor and enforce an appellation of origin system and to control the use of certain terms and designations associated with this system; a lapse in membership does not affect the character or method used to make any wines that were previously approved and labelled. A Notice of Constitutional Question was also delivered, asserting the paramountcy of the federal Trade-Marks Act over the VQA Act.
On June 24, 2014, the Ontario Court of Justice decided in favour of Royal DeMaria, holding that neither the corporate bylaw of the VQAO nor the VQA Act and regulations gave the VQAO the authority to effectively revoke all of Royal DeMaria’s pre-approved wines at one time on the basis of a lapsed membership. Given the ruling in favour of Royal Demaria, the Constitutional Question raised by Sim IP Practice was not addressed.
In the result, Royal DeMaria is free to sell and market its previously approved wines for what they are: “icewines” produced in the “Niagara Peninsula” region approved by the “VQA” as meeting defined quality standards. Royal DeMaria did not contest a charge that it used the term “Icevine” on its company website without VQAO approval.
This decision will affect the future application of the VQAO corporate bylaws and VQA Act and regulations, as well as the VQAO’s ability to prohibit other wineries from selling previously approved wines using designated terms.
Although not squarely raised by the case, an underlying theme was the VQAO’s mandatory taste test (which was the cause of Royal DeMaria losing it membership). In an article from the Toronto Star (the “Star”), Laurie Macdonald, Executive Director at VQAO, “acknowledges the VQA is discussing the taste test’s future”. As reported by the Star, many others, including a past member of the VQA Board of Directors, have denounced the taste test imposed by the VQAO.
Royal Demaria were represented by Patrick Cotter and Stephanie Roberts of Sim IP Practice