Impact / August 15, 2004
By Larry Luxner
WASHINGTON — A battle to control the trademark of Cuba's famous Havana Club rum brand has taken a new twist on Capitol Hill, with two groups of lawmakers pushing differing proposals aimed at settling a dispute with the World Trade Organization.
Republican Senators Pete Domenici of New Mexico and Lamar Smith of Texas are sponsoring legislation favored by the Bush administration that would modify Section 211, a controversial law that prevents Cuba from protecting its Havana Club brand in the United States.
Havana Club is a premium rum marketed around the world by Havana Club Holdings (HCH), a 50-50 venture between the Cuban government and French liquor giant Pernod Ricard. Last year, HCH shipped 1.92 million nine-liter cases of Havana Club rum, up from 1.73 million cases in 2002.
Demand is particularly high in Italy, Spain and elsewhere in Western Europe, though because of the U.S. embargo against Cuba, not a drop of Havana Club may be sold in the United States.
HCH’s annual revenues exceed $100 million, with profits of around $20 million. Half of that goes to Pernod Ricard, according for just over 1% of the French conglomerate’s annual revenues of 750 million euros.
Section 211 was promoted by rum giant Bacardi, which tried to market its own Havana Club brand of rum in the United States but was prevented from doing so by an HCH lawsuit.
The WTO has determined that Section 211 runs afoul of international law by stripping trademark protection from Cuban products that were confiscated by the Castro regime. According to the WTO, singling out Cuba violates TRIPS, the global intellectual property protection treaty. The WTO has given Congress until the end of 2004 to bring the U.S. back into compliance or face trade sanctions.
The Domenici and Smith proposals would provide a “technical correction” to Section 211, which was part of a huge 1998 omnibus spending bill. To address the WTO’s complaint, the lawmakers’ bills would extend the prohibition on recognizing trademarks linked to confiscations to Americans and other foreign nationals.
Yet Mark Orr, vice-president of North American affairs at Pernod Ricard USA, says his company opposes the Domenici and Smith bills because they leave Section 211 on the books as part of U.S. law.
"From the standpoint of the joint venture, it denies us the opportunity to protect our trademark rights in the U.S. court system. It prevents the Patent and Trademark Office from renewing the Havana Club trademark as it normally would, and it sets some extremely dangerious precedents for U.S. trademark policy."
He adds: "Instead of making Section 211 Cuba-specific, they're taking out all the implicit references to Cubans so it would apply to everyone, but more importantly to U.S. nationals. In essence, they're taking a bad law and making it worse."
Meanwhile, Sen. Larry Craig (R-ID) and Rep. Jeff Flake (R-AZ) have introduced a competing bill that would repeal Section 211 altogether. The National Foreign Trade Council is 100% behind that approach, says NFTC President Bill Reinsch.
“NFTC’s 300 member companies support full repeal of Section 211 as embodied in S. 2002, the U.S. Cuba Trademark Protection Act,” said Reinsch. “Quite simply, it’s the only way to ensure compliance with all U.S. trade and treaty obligations and protect the interests of the more than 400 U.S. companies currently holding 5,000 trademarks in Cuba.”
Both the Domenici-Smith and Craig-Flake bills received a Jul. 13 airing at a Senate Judiciary subcommittee hearing. At that hearing, Craig argued that Section 211 protects Bermuda-based Bacardi at the expense of U.S. companies which may lose their trademark rights in Cuba if Castro follows through with a threat to retaliate in kind.
“Section 211 does nothing for U.S.-based companies,” Craig said. “That’s why U.S. companies are saying ‘protect us.’”
Craig also argued that the Arechabala family, which produced Havana Club rum in Cuba from 1878 to 1960, had abandoned its trademark in the United States years before a Cuban state company registered the mark with the U.S. Patent and Trademark Office.
Sen. Patrick Leahy (D-VT) also criticized the measure, saying it was “snuck into an appropriations bill under the radar of most members of the Senate.”
Leahy also said he had objected to an attempt to slip a correction of Section 211 into a defense appropriations bill last fall.
Despite political hostilities spanning four decades, both the United States and Cuba — in a rare act of cooperation — have respected each other’s intellectual property rights by honoring trademarks for nearly 75 years. Yet all indications are that the Bush administration will probably win this fight.
Indeed, Sen. Lindsay Graham (R-SC) and other supporters of Section 211 say the law must be kept on the books in order to punish the Castro government.