Congress Mulls Next Step in Long-Running Bacardi Trademark Battle

When it comes to trademark disputes, few can rival the fierce battle over the rights to Havana Club rum.

The latest chapter in the long-running saga, which has its roots in pre-Revolutionary Cuba, came Wednesday before the House Judiciary Committee. The topic: how to reconcile a U.S. law that effectively ended the case with a World Trade Organization ruling that it violates the Trade Related Aspects of Intellectual Property Rights, or TRIPS.

On one side is Bacardi, the world’s biggest rum producer. On the other is Pernod Ricard, which sold $10 billion worth of alcohol last year.

“On its surface this matter appears to be about U.S. compliance with the TRIPS Agreement,” testified Bruce Lehman, expert counsel for Bacardi and former head of the U.S. Patent & Trademark Office. “However under the surface, it involves much more.”

The law at issue, known as Section 211, bars U.S. courts from enforcing trademarks or trade names used in connection with businesses confiscated by the Castro regime unless the original owner expressly consents.

“The United States does not need to protect stolen intellectual property rights,” said Rep. Debbie Wasserman Schultz, D-Fla.

Pernod Ricard currently sells Havana Club rum in 120 countries — but not the United States. The rum is made in Cuba via a joint venture with the Cuban government, which in 1960 seized the Havana Club distillery and assets from its original owners, the Arechabala family, who fled to Miami.

In 1973, the family, no longer in the rum business, let the U.S. trademark registration for Havana Club lapse. It was scooped up by the Cuban government, which registered it with the U.S. Patent and Trademark Office in 1976.

Eighteen years later, the exiled Arechabala family joined forces with Bacardi to try to regain the family’s trademark rights both in the United States and around the world, and produce their rum once again.

The inevitable collision came in 1996, after Bacardi started selling its version of Havana Club in the United States (the trade embargo prohibits Pernod from selling Cuban rum here, though it hopes to do so in the future should the embargo end).

The Pernod Ricard/Cuba joint venture sued Bacardi in U.S. District Court in the Southern District of New York, claiming trademark and trade name infringement. But before the court could rule on the merits of the case, Bacardi quietly lobbied to have Section 211 inserted into the massive FY 1999 omnibus appropriations bill.

As a result, the judge dismissed Pernod Ricard’s suit, since the new law barred courts from recognizing Cuban-origin marks obtained without the original owner’s approval.

But the matter wasn’t over. Pernod Ricard, which is based in France, asked the European Union to file a complaint with the World Trade Organization.

In 2002, the WTO found Section 211 “was inconsistent with the fundamental WTO principles of non-discrimination and national treatment,” said Mark Orr, Pernod’s vice president for North American Affairs, in written testimony. The law also breaches the Inter-American Convention on the Protection of Trademarks and Commercial Property, he said.

Now, Congress is finally moving to comply with the WTO decision. “There has been agreement to take corrective action,” said Judiciary Committee chairman John Conyers, D-Mich. “The question that brings us here today is what action to take. The seizure of property by Castro was unjust obviously, and no one should be able to profit from that wrongdoing… But one thing hangs over our head. If we don’t uphold our obligations, there could be some grave implications around the world of what could happen to our trademarks.”

Both Rep. Wasserman Schultz and Darrell Issa, R-Cal., urged Congress to adopt a narrow, technical fix that would clarify that the law doesn’t only bar Cuban owners of Cuban-origin trademarks from asserting rights to confiscated marks, but applies to U.S. citizens and nationals of other countries as well.

But Mark Esper, executive vice president of the U.S. Chamber of Commerce’s Global Intellectual Property Center favored outright repeal of the law, which he said is necessary to comply with the Inter-American Convention.

If Congress lets Section 211 stand with only a minor change, he said, it “invites arbitrary treatment of U.S. trademarks overseas,” noting that 400 U.S. companies own 5,000 trademarks in Cuba.

“The threat of retaliation is a concern,” Esper said. “We are in no way taking a position on the case between the two private parties, and we certainly are not condoning the actions taken by Fidel Castro… We should repeal Section 211 and allow U.S. courts to decide the merits of the Havana Club case.”

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