Havana Club rum dispute isn’t over yet

Posted on Tuesday, 07.31.12

Havana Club rum dispute isn't over yet

The litigation between Bacardi and Cuba over the use of the Havana Club
trademark in the U.S. market is over, but Cuba is still trying to hold
on to the name.
By MIMI WHITEFIELD
mwhitefield@MiamiHerald.com

It seemed like it was last call on Bacardi's nearly two-decade fight
with French spirits maker Pernod Ricard and Cuba over the use of the
Havana Club rum trademark in the American market a few months ago when
the U.S. Supreme Court declined to intervene in the trademark clash.

While the litigation is over, Cubaexport, Pernod Ricard's Cuban partner
in the distribution of the island's most iconic rum, is still trying to
hold on to the right to the Havana Club name in the U.S. market.

Bacardi has won a string of U.S. court victories against Cubaexport, the
latest the Supreme Court's May 14 decision against reviewing the case,
setting the stage for the U.S. Patent and Trademark Office to cancel
Cuba's right to the U.S. trademark.

But Cubaexport's attorneys have filed a petition with the trademark
office, saying the trademark registration can't be revoked and remains
"frozen while the embargo of Cuba is in place.''

Cubaexport "can go back and take one more bite of the apple,'' says
Patrick Ross, a spokesman for the USPTO. But when the trademark office
makes its determination, "this is their last shot as far we're
concerned,'' he said.

The case began in 1994 when Bacardi applied for a U.S. trademark for
Havana Club rum after it purchased rights to the brand from the
Arechabalas, a family who made rum in Cuba and sold Havana Club in the
United States as far back as the 1930s.

The only problem: After the Arechabala family went into exile, their
registration lapsed in 1973. Cubaexport jumped on it, successfully
registering the Havana Club mark in 1976, and suing when Bacardi tried
to register it nearly two decades later.

Bacardi and Havana Club were both top rum brands in Cuba at the time of
the 1959 revolution and the Castro government expropriated the holdings
of both the Bacardi and Arechabala families.

Who owns the trademark in the United States might seem like something of
a moot point since the U.S. embargo precludes the sale of Cuban-made rum
here.

But this rum war is all about the future and rum dominance when there is
no longer an embargo.

To that end, Pernod held a conference call on the day of the Supreme
Court decision to announce a new trademark, Havanista, had already been
registered. Havanista, Pernod said, is a premium Cuban rum that would be
launched exclusively for the U.S. market after the embargo is lifted.

"Listening to a conference call about the launch of a product that
doesn't look like it's being launched any time soon was a bit weird,''
noted Olly Wehring, the editor of the just-drinks blog.

While the name may be new, the labels on the prototype Havanista
bottles, with their red circle rimmed in gold and the little figure of
Giraldilla — symbol of Havana, mimic Havana Club labels. Cuban-made
Havana Club that is.

The distinction is important because Bacardi has been selling a rum,
made in Puerto Rico from the Arechabala family recipe under the Havana
Club name in Florida since 2006 and plans to expand sales nationwide
soon, said Patricia M. Neal, a spokeswoman for Bacardi U.S.A.

In the United States, Neal points out, common law "ownership rights are
secured through use" and are separate from a trademark registration.
"Bacardi owns the U.S. rights to the brand based on use and as a
successor to the original owners,'' she said.

Cubaexport's attorneys don't see it that way. "Bacardi shouldn't be
allowed to try to expropriate that mark by selling tiny quantities of
Puerto Rican rum under a deceptive name,'' said David H. Bernstein, a
partner at the New York law firm Debevoise & Plimpton.

Paris-based Pernod, which formed a joint venture with a Cuban rum
company in 1993 to market Havana Club, now distributes the brand in more
than 120 countries and has survived international challenges from
Bacardi over use of the name. This year it expects to sell 4 million
9-liter cases of Havana Club. The brand also is sold in Cuba.

Neal said she expects the USPTO will formally cancel Cubaexport's
trademark "in due course,'' allowing Bacardi's own application for the
Havana Club mark to go forward.

But Bernstein said in a June letter to the USPTO that Cubaexport's
registration couldn't be canceled or declared expired because it would
be a transfer of property in which a Cuban national has an interest —
and that would be a violation of the embargo.

"The Havana Club trademark is an asset just like any other," Bernstein
said in an interview.

The embargo prohibits most financial transactions with Cuba unless they
are licensed by the U.S. Treasury's Office of Foreign Assets Control.

"Cubaexport's registration remains frozen in its previously existing
state — neither renewed nor canceled nor expired — for the duration of
the U.S. embargo of Cuba in the absence of an applicable general or
specific license from OFAC,'' Bernstein wrote.

That reasoning is similar to the rationale employed by OFAC when it
declined to issue a license to Cubaexport in 2006 so it could pay $500
to renew the Havana Club trademark. Because the trademark office
couldn't accept the payment in the absence of a license, Cubaexport's
registration was declared "cancelled/expired.'' That set the stage for
Cubaexport's last lawsuit.

After consulting with the State Department, OFAC said giving Cubaexport
a license "would be inconsistent with U.S. policy.'' Complicating
matters was Section 211, which was attached to a 1998 federal spending
bill and prohibits any trademark actions or payments in connection with
a confiscated business or assets.

Cubaexport challenged OFAC's determination in federal court in
Washington, D.C., and lost. It also lost on appeal, setting up a
potential Supreme Court showdown.

Now the dispute is back in the trademark office's court.

If the trademark is canceled, Cuba has threatened to retaliate against
U.S. trademarks that are registered on the island. For decades,
representatives of U.S. companies have trekked to Cuba or hired Cuban
law firms to make sure registrations for marks such as McDonald's Golden
Arches and Pepsi are current. Cuba says U.S. companies have some 6,000
registrations on file.

"The disrespectful attitude of the United States in depriving the
legitimate holders of the Havana Club trademark may put in risk the
trademark rights and patents of U.S. nationals in our country,'' said
Maria de los Ángeles Sánchez, director of Cuba's Office of Patent
Rights, in a statement.

"Cuba reserves the right, like any sovereign country, to act at the
appropriate time,'' she said.

"It is a possibility that Cuba could retaliate and it always has been,
but that is not their style,'' said Kirby Jones, who has made a career
of legally taking U.S. companies and politicians on trips to Cuba.

If Cuba wanted to make good on the retaliation threat, it could have
done so in 2006 when it lost a U.S. trademark case over Cohiba cigars,
he pointed out. But it didn't.

In 2001, former President Fidel Castro even said in a speech that
instructions had been given to the Cuban rum industry to begin producing
Bacardi. Nothing seemed to come of it.

Still, Jones recalled an incident at a Havana reception Castro was
hosting for a visiting U.S. delegation during a heated moment of the
Havana Club dispute. "The waiters began pushing out carts full of
bottles and crystal glasses,'' he said. When the bottles were lifted up,
he saw the Bacardi label.

"It was a joke,'' Jones said. "Having done that, it [the retaliation]
never happened.''

Registering the Havanista trademark was something of an insurance policy
to make sure Pernod will be able to distribute a premium Cuban rum in
the U.S. market some day.

"With Havanista, if the embargo is lifted, we will be happy to bring the
unique quality and taste of Cuban rum to U.S. consumers,'' said Jérôme
Cottin-Bizonne, chief executive of Havana Club International, a
joint-venture between Pernod Ricard and Corporación Cuba Ron.

Pernod Ricard said it has no plans to develop the Havanista brand
anywhere except in the United States. "Havanista is dedicated to future
use, and in the U.S. only,'' the spirits company said.

http://www.miamiherald.com/2012/07/20/v-fullstory/2923729/havana-club-rum-dispute-isnt-over.html