As US-Cuba Ties Evolve, Havana Club Dispute Draws Renewed WTO Scrutiny

4 February 2016

The long-running dispute over the Havana Club rum trademark has drawn renewed WTO scrutiny in recent weeks, in the wake of a US government agency decision on the subject in January.

Last month, the US Patent and Trademark Office announced that it would be granting Cubaexport – a state-owned Cuban company – a specific license allowing it to renew in the US its trademark registration for Havana Club, marking a significant change in policy.

Pernod Ricard, the French company which partners with Cubaexport to help market and distribute Cuban-produced Havana Club rum in the rest of the world, confirmed that the latter company had applied for and received the license in the US until 27 January, and has since applied for this to be renewed through 2026.

Bacardi, for its part, has openly lambasted the US Patent and Trademark Office’s decision, calling it contrary to domestic law. On Tuesday, the spirits giant submitted to the US Treasury Department a Freedom of Information Act (FOIA) requesting that the reasons behind the decision be made public.

Prolonged dispute

Section 211 of the US Omnibus Appropriation Act, enacted in late 1998, prohibits the registration or renewal of trademarks in cases involving the seizure of businesses or assets by the Cuban government, unless the trademark’s original owner agrees.

In practice, this meant that Cubaexport has not been permitted in recent years to renew its Havana Club trademark registration in the US, with the registration instead being given to Bacardi. The latter company is headquartered in Bermuda and makes rum for US distribution in Puerto Rico. Bacardi bought the trademark from the Arechabala family, the rum’s original creators and exporters.

However, the Arechabala family’s trademark in the US lapsed decades ago, after the family fled the country in the wake of the Cuban revolution, with its facilities and assets having previously been seized. Subsequently, in the 1970s, Cubaexport registered the Havana Club trademark in several countries, including with the US in 1976 – with the renewal later denied in light of the 1998 law.

The result has been a famously heated disagreement between the spirits producers involved, as well as the countries affected, including several protracted legal battles on the subject.

A WTO dispute (DS176) was lodged in 1999 by what was then the European Communities, now the EU, given the implications for a European company with a base in Cuba. In early 2002, the Appellate Body ruled that Section 211 was in violation of multilateral trade rules, particularly those relating to intellectual property rights.

The controversial agreement between US President Barack Obama and Cuban President Raúl Castro in July 2015 to re-establish diplomatic ties has allowed for the loosening of some trade and travel restrictions between the two countries, located just 90 miles apart. However, some restrictions – such as the 1961 United States embargo on Cuba – are part of US law and would require congressional approval.

In other words, the US Patent and Trademark Office’s decision is not expected to have any actual effect until the embargo is lifted. When and if that takes place, given the politically sensitive nature of the topic in the United States, remains to be seen.

Questions in Geneva

Over the years, the US has drawn criticism from several WTO members for not taking the necessary steps to address the Appellate Body ruling, which was issued 14 years ago. Many countries have particularly taken issue with the potential negative systemic implications of one of the world’s largest traders not abiding by a dispute settlement ruling’s terms. (See Bridges Weekly, 3 October 2012)

The Washington agency decision came up during a meeting last week of the WTO’s Dispute Settlement Body (DSB) in Geneva, with the US including in its regular status report on the dispute a brief description of the changes.

These steps “resolving a longstanding issue of concern to the European Union and others,” the US said.

The EU and Cuba, for their part, both welcomed the US agency’s decision as a constructive move forward, while also noting that they will not view the matter as being resolved until Section 211 is repealed, sources confirmed.

However, the EU and Cuba differed on whether the US should still be required to provide monthly status updates to the DSB. The EU reportedly said that such updates are no longer necessary, while noting that the 28-nation bloc still reserves all of its rights on the subject – a suggestion that Cuba disagreed with, citing the importance of monitoring the US’ efforts toward compliance until a resolution is reached.

Various other WTO members also suggested keeping the item on the DSB agenda – as well as repealing the US law in question – with Cuba ultimately requesting to maintain the reports as an agenda item until resolved.

ICTSD reporting; “Pernod and Bacardi Back in Rum Trademark War,” THE SPIRITS BUSINESS, 18 January 2016; “Cuba prevails in Havana Club rum dispute with Bacardi,” MIAMI HERALD, 15 January 2016; “What happened when? The history of Havana Club,” JUST-DRINKS, 18 August 2006: “Pernod Ricard goes on the offensive after Supreme Court blow,” WORLD TRADEMARK REVIEW, 15 May 2012.

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