Bacardi's victory in the Havana Club trademark fight could spell trouble for many other U.S. businesses

Posted on Sun, Aug. 20, 2006

Trouble with trademarks
Bacardi's victory in the Havana Club trademark fight could spell trouble
for many other U.S. businesses
BY MATTHEW HAGGMAN
mhaggman@MiamiHerald.com

In 1918 the Aunt Jemima trademark was registered in Cuba, and even after
Fidel Castro seized power in 1959, a steady stream of U.S. companies
from Ace Hardware to United Airlines has continued to register their
trademarks in the island nation.

Despite the decades-long U.S. economic embargo that precludes most trade
with Cuba, more than 400 U.S. companies have registered in excess of
5,000 trademarks -- everything from McDonald's Golden Arches to Nike's
famed Swoosh and Pepsi. And until recently, Cuba had no problem
registering and renewing trademarks in the United States.

Now some fear the recent U.S. refusal to renew the Havana Club rum
trademark claimed by a Cuban joint venture and Bacardi's launch of
Havana Club -- a brand it also claims -- has placed the delicate balance
of respecting other nations' trademarks in jeopardy. The recent
developments also raise the possibility of Cuban retaliation, experts say.

Bacardi's fight with Cubaexport, a Cuban company that partnered with
French liquor giant Pernod Ricard in 1993 to sell the rum around the
world, has been simmering in U.S. courts, Congress and in the World
Trade Organization for a decade. But the United States' recent decision
to invalidate Cubaexport's Havana Club trademark registration really
fanned the flames.

''Our government has done a real injustice that will come back to bite a
lot of other companies,'' said William A. Reinsch, president of the
National Foreign Trade Council. The council, which is based in
Washington, represents corporate members such as Microsoft, Wal-Mart,
Caterpillar and General Motors.

BRAND PROTECTION

But Patricia Neal, a Bacardi spokeswoman, rejected the notion that the
rum company's efforts endanger other companies' trademarks in Cuba.

''All companies would fight to protect their brand,'' she said.

On August 3 the U.S. Patent and Trademark Office said the Havana Club
trademark would be ''canceled/expired'' -- although Cubaexport had filed
its renewal application correctly with a $500 fee and on time.

The Patent Office refused to accept the renewal after J. Robert McBrien,
the acting director of the Office of Foreign Assets Control, wrote the
office had received guidance from the U.S. State Department ``informing
us that it would be inconsistent with U.S. policy.''

That decision stems from a provision called Section 211 that was
inserted in a 1998 budget bill. Sometimes called the ''Bacardi Bill,''
Section 211 has been criticized as a measure solely aimed at benefiting
the rum giant.

Now the recent Havana Club denial has raised concerns that Cuba could
return the favor by canceling U.S. trademark registrations based on the
communist nation's own ''policy'' considerations.

Cuba could, for instance, cancel the trademarks for Levi's jeans or
Heinz ketchup and sell its version in island stores. Those products
could filter into other markets, too, harming U.S. companies that have
long sought to keep fakes off store shelves abroad, said the National
Foreign Trade Council.

Such a scenario could force U.S. companies to spend millions defending
trademarks in many different countries and make the Cuba market ever
more difficult to enter if it ultimately transitions into a market
economy. And some think that day may be sooner rather than later due to
leader Fidel Castro's shaky health.

'Some day Cuba could say, `The heck with it, we will not honor any of
these [U.S.] registrations, because you guys are not honoring ours,' ''
said Jesus Sanchelima, a Miami lawyer who has represented U.S. companies
in trademark cases in Cuba.

Cuba has threatened retaliation before.

In 2001, in a heated moment during Cuba's long-standing dispute with
Bacardi, Castro said he had given instructions to the Cuban rum industry
to begin producing Bacardi. And he threatened that other U.S. brand
names could be in jeopardy. ``Here we can produce Palmolive, any
toothpaste.''

There's no evidence that he made good on that threat but Cuba did
briefly produce its own Bacardi rum after the revolution.

''This decision [on the Havana Club renewal] invites retaliation by
Cuba,'' said Reinsch. ``We have been assuming that they were waiting to
see the outcome of this case before doing anything. Now that there is an
outcome, they will probably come to a decision.''

Neal dismissed that notion, saying, ``It is an old story that has never
been acted upon and is a red herring.''

During the 1990s there was a flurry of U.S. trademark registrations in
Cuba. Among them: Playboy, Bud, Huggies, The Home Depot, Pizza Hut,
Kmart, McDonald's, Tommy Hilfiger, Old Spice, Hawaiian Tropic, Starbucks
Coffee, Healthy Choice, Radisson and Visa, according to the U.S.-Cuba
Trade and Economic Council.

U.S. companies often sent their own representatives to register
trademarks during the 1980s. But in recent years, they have hired Cuban
law firms to go to the Oficina Cubana de la Propiedad Industrial in
Havana to register and defend any misuse of corporate emblems.

Some now fear the decision could set a precedent that other countries
can use to cancel trademarks or play politics with intellectual property
law. Arab countries, for instance, could cancel trademarks for companies
friendly to Israel or Pakistan could do the same with marks owned by
companies working in India, said Reinsch.

''Basically, [the United States] let politics trump trademark policy,''
he said. ``They took care of one company at the expense of a lot of
others.''

WHO OWNS HAVANA CLUB?

Although Bacardi, which has its U.S. headquarters in Miami, has claimed
some victories in the fight over Havana Club, who actually owns the
brand still hasn't been decided in a U.S. court.

In 1959, when Castro took power, Bacardi and Havana Club were both top
rums in Cuba and both were nationalized. While Bacardi continued its
business abroad, the owners of Havana Club, the Arechabala family,
didn't restart their operations after going into exile in Spain.

''They had no financial means to do so because all of their assets and
rum-making facilities were confiscated in Cuba,'' Bacardi's Neal said.

Meanwhile, the Cuban government started making Havana Club and selling
it in communist Eastern Europe and the Soviet Union.

In 1973 the Arechabala family allowed the U.S. trademark for Havana Club
to lapse. Three years later, the Cuban government jumped in and
registered the U.S. trademark for the famous rum brand.

Then in 1993, the Cubaexport/Pernod Ricard joint venture started
marketing the rum around the world, excluding the United States. The
joint venture now distributes Havana Club in around 80 countries.

As the joint venture's sales grew steadily, Bacardi launched its
campaign to claim the Havana Club brand in the United States. Throughout
the trademark battle Bacardi has enlisted political heavyweights such as
former U.S. Sen. Connie Mack and Florida Gov. Jeb Bush to press its case.

In 1997 Bacardi paid the Arechabalas for the right to Havana Club. ''We
purchased it from the rightful owners,'' Neal said.

After Bacardi U.S.A. launched Havana Club in the South Florida market
some two weeks ago, Pernod Ricard and Cubaexport filed a lawsuit in U.S.
District Court in Delaware to keep Bacardi from selling the rum.

For the time being, there are two Havana Clubs -- one distilled in
Puerto Rico by Bacardi and sold in the United States and another made in
Cuba and distributed around the world.

Robert Orr, Pernod Ricard's U.S. spokesman, said the joint venture also
intends to appeal the patent office decision, and he contends a
trademark is not formally canceled until the appeals process runs its
course.

Sanchelima, the Miami trademark lawyer, said he doesn't think any
trademark retaliation on the part of Cuba is imminent.

But perhaps increasing the chances of such a move, say some lawyers, is
the fact that Cuba lost another high-profile U.S. trademark case in
February.

In that case Cubatabaco, a Cuban government-owned tobacco company,
argued that even though it had not registered the trademark for Cohiba
cigars in the United States, its name was sufficiently famous that New
York-based General Cigar shouldn't be allowed to use it.

Yet the U.S. 2nd Circuit Court of Appeals rejected that argument, saying
Cubatabaco couldn't acquire such publicity rights while the economic
embargo was in effect.

Now there are two Cohiba cigars -- the version made in Cuba and another
one rolled in the Dominican Republic and distributed by General Cigar.

The Cohiba and Havana Club decisions are ''two big hits in rapid
succession,'' said Miami attorney Jorge Espinosa. ``Assuming [Cuba]
refocuses from [Castro's] health issues, every one of these is something
that adds possibility to retaliation.''

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