05 February 2002

Cristina Garrigues

The "Havana Club" mark was for many years synonymous with Cuban white premium rum. However, in the last few years it has also been the cause of an international turmoil involving the World Trade Organisation ("WTO"), the Cuban and U.S. Governments, the European Union and two of the largest drinks multinationals: Bacardi Martini and the Pernod Ricard group.

The dispute initially arose over the rights to the "Havana Club" mark in the U.S. to which both Bacardi Martini and Pernod Ricard claimed to be entitled. In the middle of the legal battle an obscure piece of legislation, the Omnibus Appropriations Act 1998 ("OAA") and its Section 211 which deals with the trade marks, trade names and commercial names confiscated by the Cuban Government was passed. Cuba and several other governments together with the EU brought a case against the U.S. under the WTO dispute settlement process on the basis that Section 211 violated the Trade Related Aspects of Intellectual Property Rights ("TRIPS") Agreement.

Last August the WTO Appointed Panel published a report which has raised doubts over the scope and future of TRIPS.


"Havana Club" rum was brewed and sold in pre-revolution Cuba by the Arechabala family until 1960, when the distillery plant and business were expropriated by Castro's government. The family flew to exile in Miami and the marks they had registered in several countries were abandoned and eventually lapsed. In particular, the original U.S. registration for "Havana Club" lapsed in 1973.

Cuba Export, a state-owned rum producer registered the Havana Club mark in the U.S. in 1976. They held the trade mark for more than 17 years until 1993 when it entered a joint venture with the Pernod Richard group and transferred the mark to the joint venture called the Havana Club Holding ("HCH").

The Bacardi family were also Cuban rum producers who were also expropriated and went into exile but unlike the Arechabala family, the Bacardi family continued producing rum in Bermuda where they went into exile. The Bacardi sold their rum under the "Bacardi" trade mark in the U.S. and elsewhere. Following Pernod's success with the "Havana Club" brand, in April 1997 Bacardi acquired from the Arechabala family the rights to the Havana Club trade mark in the U.S., Cuba and several other countries where the mark had originally been registered before the Cuban revolution. Bacardi then launched its own line of rum, also branded "Havana Club" and it started an offensive against Pernod to gain control of the Havana Club name in the U.S., filing trade mark applications in its own name as well as cancellation proceedings against Pernod's registration.

Pernod Ricard challenged Bacardi's claim to the trade mark on the grounds that the Arechabala family abandoned the Havana Club trade mark by failing to renew its U.S. registration in 1973. They also claimed that they had acquired worldwide rights for the name from the Cuban government when it set up HCH.

Bacardi argued that the Arechabala family abandoned the Havana Club U.S. registration because they could not meet the then-existing requirements under U.S. trade mark law to use the mark because of financial difficulties following the seizure of its Cuban assets. Bacardi also noted that Pernod approached the Arechabala family in late 1993 with an offer to buy the rights to the Havana Club trade mark, a recognition by the French firm that the family still had legitimate claims to the trade mark.

Pernod responded by suing Bacardi for trade mark infringement and for misleading the public about the origin of its Bacardi's "Havana Club" rum, which was produced in the Bahamas rather than in Cuba. They also claimed that the use of the words Havana Club in their trade name Havana Club Holding, created enforceable U.S. trade mark rights.

In 1999, in the middle of the legal battle, Section 211 of the OAA was passed. This law denies protection to trade marks, trade names and commercial names that once belonged to exiled Cubans unless the original owner expressly consents. Shortly afterwards, citing Section 211, a U.S. court ruled that Bacardi could distribute rum under the Havana Club name in the U.S. and dismissed the claim that their Bahamas produced Havana Club rum was geographically misdescriptive. The Court also ruled that trade names based on foreign confiscation are not entitled to protection in the U.S.

In February 2000, the U.S. Court of Appeals for the Second Circuit upheld Bacardi's right to use the name, upholding that HCH had no right to use the Havana Club brand in the U.S. Furthermore, it held that Pernod's U.S. registration for Havana Club violated Section 211. Following Pernod's appeal the U.S. Supreme Court dismissed Pernod's infringement action and held that Pernod's Havana Club mark infringed Section 211.

Section 211 1

The 1998 Omnibus Consolidated and Emergency Supplemental Appropriation Act was an enormous all purpose spending bill which contained a minor section, Section 211 on trade marks, trade names and commercial names belonging to business confiscated by the Cuban Government after the revolution. This Act was never considered by any legislative committee of either House of Congress and was approved without debate.

Section 211 limits the right to register or renew a trade mark, 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.

It also prohibits U.S. courts from recognising or enforcing or validating the assertion of such trade marks or trade names substantially similar to those used by Cuban companies expropriated by Castro, unless the original owner or the bona fide successor-in-interest expressly consents to such an assertion.

The Complaint

Following the passing of Section 211 Cuba complained to the TRIPS Council of the WTO. After extensive lobbying by the French Pernod Ricard Group to the European Council the EU joined in with Cuba's concerns and brought the complaint before the WTO alleging that Section 211 is discriminatory and contrary to the rules of international intellectual property conventions and TRIPS in particular.

The EU started by claiming that the decision of the U.S. Courts in the legal proceeding over the trade marks rights in the Havana Club mark in the U.S. was inadequate. It then claimed that Section 211 infringed several of the U.S. obligations under the TRIPS agreement by treating foreign right holders with Cuban assets less favourably than U.S. right holders.

In particular the EU claimed that the obligation on anyone seeking to register U.S. trade marks to obtain the original owner's consent if those trade marks had previously been expropriated by the Castro government (even when the original owner had abandoned the trade marks and let the registrations lapse) was unlawful as it is discriminatory. International trade marks rules state that registration of a trade mark cannot be made conditional on the consent of a trade mark owner who has abandoned his rights.

The EU also claimed that Section 211 prohibits courts from enforcing rights of holders of trade marks that were expropriated and were now being used without the consent of the original owner. This provision clearly violates the TRIPS provisions which require WTO members to make available to right holders civil juridical procedures concerning the enforcement of any intellectual property right covered by the agreement.

The WTO Report 2

On 26 September 2000 the WTO members of the Dispute Settlement Body agreed to set up a panel to decide case DS 176 "U.S.- Section 211 Omnibus Appropriations Act of 1998. A preliminary report was given at the end of June 2001 and shortly afterwards in August the final report was published.

In this final report the WTO Panel started by considering the scope of TRIPS and pondering whether the agreement covers trade names and commercial names (with both terms considered to refer to trade names 3). The Panel held that, since trade names were not included in the list of categories set out in Sections 1 through 7 of Part II of TRIPS 4, they fell outside the scope of TRIPS. These sections deal with the following categories: trade marks, geographical indications, industrial design, patents, layout (topography) of integrated circuits and protection of undisclosed information.

The Panel did not agree with the EU claim that the WTO member in which registration is sought does not have any right to question the existence of a trade mark in the hands of an owner as defined by the laws of origin. The Panel maintained that Section 211 is a measure that regulates ownership, it does not deal with the form of the signs of which the trade mark is composed. Section 211 only denies acceptances for filing and the protection on an "as is" (telle quelle) basis to those trade marks that meet the particular conditions of the U.S. laws as to the form.

The Panel also maintained that the member state in which the trade mark registration is sought has the right to determine the conditions for the filing and registration of a trade mark according to its domestic legislation. The Panel upheld the right of the U.S. not to register trade marks confiscated by the Castro regime after the 1959 revolution, confirming that it was up to governments to decide on their trade mark registration criteria. The Panel established that WTO members states are not prevented from denying trade mark registration, so long as the grounds for denial are not inconsistent with their obligations under the Paris convention or specific provisions of TRIPS. Bearing in mind that Art 6(1) of the Paris Convention states that the conditions for filing and registering trade marks shall be determined in each country of the Union by its domestic legislation the Panel accepted that "other grounds" for denying trade marks registration under Art 15.2 of TRIPS may cover denying registration on the basis that the applicant is not the owner of the trade mark under the relevant law, in this case U.S. law. However, the Panel noted that the exercise of rights by Member States should not be abusive and should always be in accordance with the good faith principle enshrined in Art. 7 of TRIPS, accepting that Section 211 was consistent with TRIPS and the Paris Convention.

Of the 14 claims made by the EU, the Panel held that Section 211 was inconsistent with only one article of TRIPS: article 42.

Article 42 requires WTO members to make available civil judicial procedures to right holders. IP right owners are entitled to have access to judicial procedures which are effective to enforce their rights covered by the Agreement. A person who enjoys the presumption of being owner of a trade mark under U.S. law must be entitled to a level of protection of its rights that meets the U.S. obligations under TRIPS. This presumptive owner must have access to civil judicial procedures which enable him to enforce his rights until the moment that there is a determination by the court, that it is not in fact, the owner of the trade mark. The wording of Section 211 (a)(2) indicates that the right holder is effectively prevented from having the opportunity to substantiate its claim, "in certain circumstances", a right to which a right holder is clearly entitled under TRIPS.

The EU appealed certain of the legal interpretations developed by the Panel.

The Appellate Body Report

On 2 January 2002 the Appellate Body of the WTO published its decision. It reversed several findings of the WTO Panel report in particular it held that section 211 meet and international minimum standard on procedures for enforcing trade marks rights and that therefore section 211 (a)(2) is not inconsistent with Article 42 of TRIPs.

It upheld the right of WTO members to determine their own criteria for trade mark registration, including the right to refuse the registration of confiscated marks. It also upheld that section 211 breached WTO principles of non discrimination between members states by treating domestic and foreign national equally because it makes it more difficult for a Cuban national to claim the rights to a trade mark in the U.S. that it would be for an American national.


Both reports have been extensively criticised by those who consider that TRIPs Agreement should follow the developments of intellectual property rights without requiring formal amendments. Certain international norms exist for the protection of trade names but significant differences exist between the national approaches as to what constitutes a protectable trade name.

As stated in the Preamble one of the objectives of TRIPS was to reduce distortions and impediments to international trade taking into account the need to promote effective and adequate protection of IP rights. Both reports have diverged from this objective by failing to acknowledge the importance of trade names within the international trade.

Another issue which has raised eyebrows among I.P. observers is the reports' findings that TRIPs does not regulate the question of determination of ownership of I.P. rights. According to the reports TRIPs gives each member freedom to determine who the owner of a trade mark is. This narrow interpretation of TRIPS could significantly reduce the level of trade mark protection around the world by leaving each WTO member to set up the criterion to determine ownership of a trade mark, as long as it respects the procedural requirements of TRIPS.

While the reports open the way to adjudication in the courts over the U.S. rights to the Havana Club trade mark, legal proceedings cannot begin until sections 211 is repealed by the U.S. Congress. Following the publication of the Appellate Body decision the U.S. trade representative office promised to consult closely with Congress an appropriate response to the report.

Section 211 1

1. Section 211 (a)(1) Notwithstanding any other provision of law no transaction or payment shall be authorised or approved pursuant to section 515.527 of title 31, Code of Federal Regulations, as in effect on September 9, 1998 with respect to a mark, trade name, or commercial name that is the same as or substantially similar to a mark, trade name, or commercial name that was used in connection with a business or assets that were confiscated unless the original owner of the mark, trade name, or commercial name, or the bona fide successor-in-interest has expressly consented.

(2) No U.S. court shall recognise, enforce or otherwise validate any assertion of rights by a designated national based on common law rights or registration obtained under such section 515.527 of such a confiscated mark, trade name, or commercial name.
(b) No U.S. court shall recognise, enforce or otherwise validate any assertion of treaty rights by a designated national or its successor-in-interest under sections 44(b) or (e) of the Trade Mark Act of 1946 (15 U.S.C. 1126(b) or (e) for a mark, trade name, or commercial name that is the same as or substantially similar to a mark, trade name or commercial name that was used in connection with a business or assets that were confiscated unless the original owner of such mark, trade name or commercial name, or the bona fide successor-in-interest has expressly consented.
(c ) The Secretary of the Treasury shall promulgate such rules and regulations as are necessary to carry out the provisions of this section.
(d) In this section:

  1. The term "designated national" has the meaning given such terms in sections 515.305 of title 31, Code of Federal Regulations, as in effect on September 9, 1998, and includes a national of any foreign country who is a successor-in-interest to a designated national.
  2. The term "confiscated" has the meaning given such term in section 515.336 of title 31, Code of Federal Regulations, as in effect on September 9, 1998.

2. The report is available at www.wto.org

3. The Lanham Act defines trade names as any name used by a person to identify his or her business or vocation.

4. Article 1.2 of TRIPS states "For the purposes of this Agreement, the term "intellectual property" refers to all categories of intellectual property that are the subject of Sections 1 through 7 of Part II".