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Cuba sues Bacardi over Havana Club trademark
Impact International / June 15, 1997

By Larry Luxner

WASHINGTON -- In what must seem the ultimate, bitter irony for members of Miami's Cuban exile community, the Castro government is suing Bacardi-Martini USA in a U.S. court over ownership of the "Havana Club" trademark -- only two years after the Helms-Burton Act was passed in an attempt to tighten the legal and economic noose around Cuba's Communist regime.

"The lawsuit pits one of the most prominent names in the exile community against the Cuban state," points out CubaNews, a monthly newsletter published by The Miami Herald. "The surprise is that the private comapny is cast as the defendant, and the Cuban government is the plaintiff. To add to the irony, it appears that the government headed by Fidel Castro finds itself seeking the protection of American courts against what it deems an unfair trade practice on the part of exiles whose property Cuba confiscated nearly 40 years ago!"

The two sides are battling over the rights to sell Havana Club rum in the United States, its most potentially lucrative market. According to documents filed Dec. 23, 1996, with the U.S. District Court in New York, state agency Cubaexport and its 50-50 joint-venture partner, French liquor giant Pernod-Ricard S.A., are trying to stop Bacardi from continuing to sell its own version of Havana Club, which it began producing in 1995 through Galleon S.A., its Bahamas subsidiary.

The documents claim that despite Washington's 35-year-old trade embargo against Cuba, the Cuban-French venture has U.S. trademark rights to the rum based on its 21 consecutive years of Havana Club registration in the United States. The partners intend "to sell Havana Club rum in the United States as soon as it is legally possible to do so," say court papers.

"The rum symbolized by the Havana Club trademark has been the same identical rum since it was first exported from Cuba in 1973," says the lawsuit. "It has been manufactured in the same facilities, by the same workforce, using ingredients from the same sources, and according to the same standards, for this entire period."

That's ridiculous, say Bacardi officials in a counter-action. "The formula used to make ersatz Havana Club rum by Cubaexport was materially different from the formula used by the original producers of Havana Club rum. This formula was changed surreptitiously in a manner calculated to deceive purchasers of Havana Club rum as to the changed nature of the product."

Bacardi, which traces its roots to 1862, claims that Havana Club International -- as the Cuban-French venture is known -- uses its expropriated rum distillery in Santiago de Cuba to produce Havana Club. Yet Noel Adrian, managing director of Havana Club International, denies that, saying the famous rum is produced in two distilleries in Santa Clara and Santa Cruz built in the 1970s and 1980s. He adds that Pernod-Ricard markets, but doesn't produce, Havana Club rum.

Last year, the venture exported 700,000 cases of rum and expects to hit one million cases in 1997, in markets ranging from Argentina and Canada to Sweden and half a dozen former Soviet republics. In fact -- like much-prized Cuban cigars -- Cuban-distilled Havana Club is available pretty much everywhere except in the United States. Adrian recently told Dow Jones that "Bacardi is worried about the incredible growth we've accomplished in our market worldwide, and that's what started this case. It seems they are also optimistic of a lifting of the American embargo."

In addition to trademark infringement, the Cubans also argue that Bacardi's use of the name Havana Club in and of itself constitutes a deception because it suggests the drink is of Cuban origin, when in fact it's distilled in the Bahamas.

Ultimately, reports CubaNews, "claims of which rum is the genuine article may be less important than more arcane issues such as the registration of trademarks and the legal pedigree of the various entities involved in the case."

José Arechabala S.A., who first distilled Havana Club back in 1878 in the Cuban town of Cárdenas, registered the Havana Club trademark in the United States in 1936. In April 1997 -- after years of delicate negotiations with the Arechabala family -- Bacardi finally won U.S. rights to Havana Club. Bacardi claims that Cubaexport committed fraud when it applied to transfer the license from sole Cuban government ownership to the joint venture with Pernod-Ricard by not recognizing Arechabala's ownership rights. Last month, the U.S. Treasury Department's Office of Foreign Assets Control, which enforces the anti-Cuba embargo, agreed with Bacardi and revoked Cuba's trademark license approval. A Bacardi lawyer says because of Treasury's action, the company is asking for dismissal of Cuba's trademark infringement claim.

Says Adolfo Comas Bacardi, a former company stockholder based in Puerto Rico: "I believe this is more than a business decision. This is an emotional decision based on the fact that we don't want Fidel Castro trading things that he does not own."

One thing both sides would love to see is an end to U.S.-Cuban hostilities. Bacardi says it's "confident that it will succeed in the lawsuit" and will continue to take the necessary steps to protect its rights to Havana Club from competitors.

"Bacardi has a bona fide intent to produce rum in the future in a democratic Cuba," says a company statement. "When the President of the United States certifies that a democratic government has been re-established in Cuba, such that the U.S. trade embargo is lifted, the petitioners intend once again to produce rum in Cuba, the land where Bacardi's rum business began."

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