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WTO Issues Mixed Preliminary Ruling In 'Havana Club' Trademarks Dispute GENEVA--The World Trade Organization has issued a mixed preliminary ruling in a controversial dispute between the United States and the European Union involving a U.S. law, which denies protection for trademarks linked with businesses confiscated by the communist government in Cuba. A WTO dispute panel issued an interim report June 11 which backs the EU's claim that Section 211 (a)(2) of the Omnibus Consolidated and Emergency Supplemental Appropriations Act adopted by the U.S. Congress in 1998 is in violation of the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), according to trade sources familiar with the case. However, the panel rejected the EU's claim that two additional provisions--Section 211 (a)(1) and Section 211(b) of the Act--were also in violation of TRIPS rules, the sources said. The dispute involves not only the United States' difficult relations with Cuba but also a struggle between two of the world's leading spirits producers over control of a popular brand of rum known as "Havana Club." The complaint against Section 211 was brought by the European Union on behalf of the French spirits group Pernod Ricard, which is trying to wrestle ownership of the U.S. trademark for Havana Club from its Bermuda-based competitor, Bacardi Co. Cuban president Fidel Castro has already warned that his government might start ignoring U.S.-owned trademarks and allow the local production of famous brand products such as Coca-Cola if the United States continued to deny trademark rights for the Cuban rum in the United States. Although the ruling is only preliminary, no WTO panel to date has reversed its interim finding in the final ruling. Both the United States and the EU will have an opportunity to comment on the interim report before a final ruling is issued by the panel to the two parties in July. Both sides will also have the right to appeal the ruling once it is circulated to other WTO members and made public. Section 211 sets out the principle that the granting of protection to a trademark should not be given if it is the same or substantially similar to a trademark used in connection with a confiscated business or asset without the consent of the original owner. The legislation is specifically designed to protect trademarks belonging to businesses confiscated by the Cuban government after the 1959 communist revolution. Section 211 (a)(2), the provision which the panel found was in violation of TRIPS rules, concerns the assertion before U.S. courts of rights on a registration for a trademark, trade name or commercial name used in connection with a confiscated business or asset. Under this provision, U.S. courts are prohibited from recognizing, enforcing or validating the The EU raised several claims against Section 211 (a)(2) under the TRIPS Agreement. First, the EU argued that the provision violated Articles 2.1 and 16.1 of TRIPS obliging WTO members to provide protection for trademarks, trade names or commercial names, as well as Article 42 requiring that WTO members make available to right holders civil juridical procedures concerning the enforcement of any intellectual property right covered by the agreement. The EU also argued that Section 211 (a)(2) violated Articles 2.1 and 3.1 in respect to the obligation of WTO members to provide treatment to nationals of other member countries no less favorable than that granted to home nationals, as well as Article 4 requiring that any advantage granted to nationals of one WTO member country be granted to nationals of all other WTO members immediately and unconditionally. Section 211 (a)(1) concerns transactions or payments for a trademark registration or renewal. The provision limits the right to register or renew a trademark, trade name or commercial name used in connection with a confiscated business or asset unless express consent is given by the original owner or the bona fide successor-in-interest to the registration/renewal. Section 211 (b) concerns the assertion before U.S. courts of treaty rights for trademarks, trade names or commercial names used in connection with a confiscated business or asset. The provision states that U.S. courts shall not recognize, enforce or validate the assertion of such treaty rights unless the original owner or the bona fide successor-in-interest expressly consents to such an assertion. The EU argued that Section 211(a)(1) violated Article 2.1 of TRIPS, while Section 211 (b) violated Articles 2.1, 3.1, 4, 16.1 and 42 of TRIPS. Section 211 was tacked on to the 1998 budget bill by the U.S. Congress after lobbying by Bacardi, which bought the rights from the exiled Arechabala family to use the Havana Club name for its rum on the U.S. market. The Arechabala family owned the distillery producing Havana Club, but the distillery was seized by the Cuban government in 1960. Bacardi's Claim Challenged Pernod Ricard has challenged Bacardi's claim to the trademark on the grounds that the Arechabala family abandoned the Havana Club trademark by failing to renew its U.S. registration in 1973. Pernod Ricard acquired worldwide rights for the name from the Cuban government when it set up Havana Club Holdings, a joint venture with a state-owned Cuban firm in 1993. The Havana Club trademark was registered with the U.S. Patent and Trademark Office in 1976 by a Cuban company which later transferred ownership of the trademark to the joint venture. Pernod is responsible for distributing the rum produced by its joint venture partner and currently sells 1.4 million cases of the rum annually (it is prohibited from selling the rum on the U.S. market). The company insists that nothing in its agreement involves property expropriated from either U.S. nationals or citizens of Cuba and that the rum is distilled at plants built by the Cuban government some years after the 1959 revolution. Bacardi disputes Pernod's claim that the Arechabala family abandoned the Havana Club trademark, noting that the family could not meet then-existing requirements under U.S. trademark law to be in a position to use the mark because of financial difficulties following the seizure of its Cuban assets. Bacardi also notes that Pernod approached the Arechabala family in late 1993-early 1994 with an offer to buy the rights to the Havana Club trademark, a recognition by the French firm that the family still had legitimate claims to the trademark. In February 2000, the U.S. Court of Appeals for the Second Circuit upheld Bacardi's right to use the name, upholding a 1999 lower court ruling finding that Havana Club Holding had no right to use the Havana Club brand in the United States. The courts reasoned that Pernod's efforts to protect the Havana Club brand in the United States violated provisions of Section 211. The U.S. Supreme Court declined to review the appeals court decision the following October after Pernod filed a petition for review. In its arguments to the WTO panel, the United States said the core issue in the Havana Club dispute "is whether the TRIPS Agreement requires the United States to recognize and enforce trademarks used in connection with assets that have been confiscated i.e. expropriated without compensation from their rightful owners. It does not...Indeed, this is a principle that has been widely recognized throughout the world, and in particular, by many WTO members." "In numerous judicial decisions spanning the past century, courts throughout the world and specifically in the United States and the EU have found similarly under their laws that foreign confiscatory decrees should be denied recognition in the forum States because they are repugnant to the nation's basic principles with respect to private property rights," the United States added. But critics argue that the manner in which Section 211 was adopted seriously undermines U.S. moral claims on the issue. In a May 24 statement, the Alexis de Tocqueville Institution, a Washington-based think tank that is a strong defender of intellectual property rights, called on the U.S. Congress to repeal Section 211 which it said "violates U.S. agreements with the World Trade Organization and severely diminishes the credibility that the U.S. has amassed in the area of intellectual property rights." "Section 211 was never discussed anywhere," said ADTI president Kenneth Brown. "It was never considered in legislative committee, in conference committee or on the floor of either Houses of Congress. This seemingly minor provision in what was an enormous, all-purpose spending bill threatens to damage the United States' reputation as a champion of intellectual property rights." Noting that Bacardi is a major donor to U.S. political campaigns and campaign committees, Brown said at "the very least, the appearance has been given that some members of Congress usurped the rights of the judiciary in order to satisfy their special interest contributors." OLE Object: Picture (Metafile) By Daniel Pruzin
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