Wednesday, March 30, 2011

Pernod Ricard Loses Appeals Court Ruling in Bacardi 'Havana Club Fight

Pernod Ricard Loses Appeals Court Ruling in Bacardi 'Havana Club Fight
By Susan Decker - Mar 29, 2011 11:19 PM GMT+0200

Pernod Ricard SA, the world's second-biggest liquor maker, lost a U.S.
court ruling in its decades-long battle with Bacardi Ltd. over the right
to use the name Havana Club on rum in the American market.

The U.S. Court of Appeals in Washington ruled today that the U.S.
Treasury Department's Office of Foreign Assets Control was correct when
it refused to let a Cuban state-owned group renew its U.S. trademark on
the Havana Club name because of a 1998 law that barred renewal of
certain Cuban trademarks.

Pernod Ricard sells Havana Club throughout the world except in the U.S.
under a 1993 venture with Cuba's state-owned Cubaexport. It has been
fighting with Bacardi over rights to the name in the U.S. since 1994,
when Bacardi applied for a U.S. trademark on Havana Club. The U.S.
Patent and Trademark Office rejected Bacardi's request in part because
of Cubaexport already had a trademark.

At stake is Pernod's future use of an historic brand name in the world's
second-largest market for rum should the U.S. embargo on Cuban goods be
lifted. U.S. consumers buy about 17 percent of the world's rum, second
only to India's 29 percent, according to the London-based industry
research firm International Wine and Spirit Research.

"We will appeal," Ian Fitzsimons, Pernod's general counsel, said in a
telephone interview. "We're encouraged that it was only a decision by a
2-1 majority. We were particularly encouraged by the dissenting opinion."
Cuban Trademarks

Cuban trademarks have been registered in the U.S. in anticipation of an
end to the embargo, and for the same reason U.S. companies regularly
register trademarks in Cuba even as the 1963 U.S. embargo blocks most
trade between the countries.

The Havana Club trademark was first used by the Arechabala family in
Cuba, which lost its distilling company in 1960 when it was nationalized
by Fidel Castro's revolutionary government. After the trademarks owned
by the Arechabalas lapsed, Cubaexport registered the trademark in the
U.S. in 1976 and assigned it to a Pernod joint venture in 1993.

In 1998, Congress passed legislation making trademarks confiscated by
the Cuban government unenforceable in the U.S. The law, known as Section
211, has been applied only to the Havana Club mark. The World Trade
Organization has said since 2001 that the law violated international
treaties and demanded that it be changed.

Each company claims to have the legal rights to the Havana Club name and
to make the "real" Havana Club rum. Pernod says its rum is made in Cuba
using traditional methods.
Family Rights

Bacardi, which traces its roots to 1862 in Cuba and bought rights to the
name from the Arechabala family, contends that it relies on the recipe
of Jose Arechabala, the original maker of Havana Club, according to
court papers.

Bacardi, based in Hamilton, Bermuda, said it was "thrilled" with the

"With this ruling, the United States reaffirms the traditional principle
that confiscation of trademarks in one country has no effect on
another," Patricia Neal, a spokeswoman for Bacardi, said in an e-mailed
statement. "Cuban confiscation of trademarks without compensation to the
original owners does not extend to U.S. trademarks."
Standard Rum

Pernod, based in Paris, has turned Havana Club into the world's
fourth-most popular brand of standard rum, selling about 3.5 million
cases a year, up from 400,000 cases sold in 1993, according to the
International Wine and Spirit Research report.

Without access to the U.S. market, Pernod's Havana Club has 5 percent of
the world's rum market, compared with 35 percent for Bacardi's eponymous
rum, about 16 percent for Diageo Plc's Captain Morgan and 6.9 percent
for closely held Brugal Co.'s namesake spirit, according to the report.
Bacardi's Havana Club, available since 2006 only in Florida, doesn't
sell enough to register on the firm's ranking.

After its 1994 bid to register the Havana Club name failed, Bacardi sued
in 1999 in Spain, claiming it was the rightful owner of the Havana Club

Two Spanish courts ruled that the joint venture with Pernod is the
proper owner because the Arechebala family neglected its rights, both in
allowing its trademark to expire and waiting too long to challenge
ownership. The Spanish Supreme Court in February sided with Pernod.
Assets Control

Bacardi has had more luck in the U.S. The decision today upholds a trial
judge's ruling that the Office of Foreign Assets Control acted within
the scope of the 1998 Section 211 law blocking Cubaexport's application
to renew the trademark on Havana Club.

Still pending is an appeal in a case in which a federal judge in
Wilmington, Delaware, rejected Pernod's claim that Bacardi was
misleading consumers into thinking its rum was made in Havana. The fact
that it is made in Puerto Rico is clearly marked, the judge said.

The OFAC case is Empresa Cubana Exportadora v. Department of Treasury,
09-5196, U.S. Court of Appeals for the D.C. Circuit (Washington). The
lower court case is Empresa Cubana Exportadora de Alimentos y Productos
Varios v. U.S. Department of Treasury, 06cv1692, U.S. District Court for
the District of Columbia.

The 3rd Circuit case is Pernod Ricard USA LLC v. Bacardi USA Inc.,
10-2354, 3rd U.S. Circuit Court of Appeals (Philadelphia). The Delaware
case is Pernod Ricard USA LLC v. Bacardi USA Inc., 06-cv-505, U.S.
District Court for the District of Delaware (Wilmington).

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