CSC news: Trading shots over famed Havana Club rum

Trading shots over famed Havana Club rum

Campaign News | Sunday, 8 October 2006

From the Chıcago Trıbune newspaper

Cuba says only its label is the real thing, but U.S. patent ruling lets Bacardi pour its version into the States

By Gary Marx

Tribune foreign correspondent

Published October 8, 2006

SANTA CRUZ DEL NORTE, Cuba -- Long after rum-swigging pirates terrorized the Caribbean, a different tale of alleged piracy is entangling two nations, two powerhouse liquor companies and a pair of families that fled Cuba after the 1959 revolution.

The treasure in the dispute is rights to the label of Havana Club, a rum famed for its smooth sipping pleasure that is produced at a distillery in this coastal town. Its sales have soared during the last decade even though the U.S. trade embargo against Cuba prevented rum connoisseurs from enjoying it on American soil.

Now a new rum with the same name has begun appearing on liquor store shelves and in upscale bars and eateries in the U.S. But it's not from Cuba.

In August, the U.S. Patent and Trademark Office refused to renew the Havana Club trademark held by a Cuban government company that has partnered with the French liquor giant Pernod Ricard to produce and sell Havana Club everywhere but the U.S.

That decision has allowed Bacardi Ltd., one of the world's largest liquor companies, to begin marketing its own brand of Havana Club, which so far is being sold only in Florida.

Cuban officials say the patent office ruling is an illegal attempt by U.S. authorities to steal a brand long associated with this Caribbean nation.

"Florida consumers are being tricked," Cuban Vice Foreign Minister Bruno Rodriguez said. "It's a real white-collar theft."

In addition to appealing the patent office ruling, Pernod Ricard has filed suit in U.S. federal court in an attempt to force Bacardi to pull its version of Havana Club from the shelves.

"Bacardi owns the rights to Havana Club, and Bacardi will vigorously defend its rights to Havana Club," said John Gomez, vice president and group marketing director for Bacardi.

Deceptive practice?

The lawsuit alleges Bacardi is deceiving Americans into believing the product is Cuban when, in fact, it is made in Puerto Rico. Bacardi counters that the silver-and-black label adorning its new brand clearly states it is "Puerto Rican Rum."

The battle illustrates the wide-ranging nature of U.S. economic sanctions against Cuba. The patent office ruling came after the U.S. State Department advised the agency that renewing Cuba's trademark would be "inconsistent with U.S. policy," according to a letter sent by U.S. authorities to Pernod Ricard.

"The Bush administration has been very clear that denying resources to the Castro government will lead to political change in Cuba, although most evidence points to the contrary," said Daniel Erikson, director of Caribbean programs at the Inter-American Dialogue, a Washington policy group.

"Havana Club is extremely important symbolically to Cuba," he said. "It's on par with cigars as one of Cuba's most recognized exports."

Rum, which is made from sugar cane, is a staple here--sipped straight up or used to make mojitos, daiquiris or other cocktails. Rum is even offered to the deities in Santeria.

It was Facundo Bacardi who founded Cuba's first modern distillery in 1862 and pioneered techniques for producing what now is Cuba's famous light-bodied rum. Sixteen years later, a Basque immigrant named Jose Arechabala built a rum distillery with a distinctive, English-looking clock tower in the coastal town of Cardenas.

Havana Club is born

The Arechabala clan introduced Havana Club in 1935 and continued production until Fidel Castro's troops seized the distillery in 1960. Ramon Arechabala, 70, Jose's great-grandson and a sales manager, recalled that when Cuban forces first occupied the facility, a commander told him: "I'm going to put a bullet in your head unless you get out of here."

Arechabala said he was briefly jailed and then fled Cuba, eventually settling in South Florida.

Unlike the Bacardis, who rebuilt their rum empire from their new headquarters in Bermuda, Arechabala's extended family never had the money to return to the business, he said.

But Erich Ramos, a guide at the Havana Club museum in Havana, said the Arechabala distillery was bankrupt at the time of nationalization.

The Arechabalas allowed their Havana Club trademark in the U.S. to lapse in 1973, and the Cuban government quickly registered it.

Soon after, Cuba began producing Havana Club for the Cuban market and for export to the former Soviet Union and Eastern Bloc. They used the newly expanded Santa Cruz distillery, which dates to 1919 and once supplied bootleg alcohol to Al Capone and other gangsters, residents say.

It was only after Pernod Ricard signed a partnership agreement with Cuba in 1993 that Havana Club sales took off, mainly in Europe, Canada and Mexico.

While Bacardi said initial sales of its rival Havana Club rum are brisk, Pernod Ricard and Cuba stand to lose little in the short term because U.S. trade sanctions prohibit them from selling their brand in America. But the long-term financial stakes are huge if U.S. sanctions are lifted.

The U.S. represents 40 percent of the world rum market. Bacardi dominated U.S. rum sales long before its limited rollout of Havana Club.

"They are very afraid that we can come in one day in the States and compete with them," said Philippe Coutin, a Pernod Ricard executive who until recently headed the company's Cuba operations.

Coutin said the trademark ruling was but one skirmish in a dispute that will be "very, very long."

`2 very different rums'

Rum lovers also may have a say in whose product comes out on top. Edward Hamilton, a Chicago-based spirits expert who has written four books on rum, said he did a taste test of the two brands of Havana Club last week.

Hamilton described Pernod Ricard's Havana Club rum that is aged three years as "light and dry and with slight citrus flavor." Bacardi's brand, he said, has a "viscous quality with a vanilla finish."

"They are two very different rums," he said. "I'd prefer to drink the Cuban one."

Still, Ramon Arechabala said he is "as happy as I could be" that Bacardi is producing Havana Club rum for American consumers.

Arechabala said his family sold the original recipe of Havana Club to Bacardi for an undisclosed sum and he now has realized a dream of being able to "sit in my back yard [in Miami] and sip Havana Club."

"It tastes like the one we used to make, even better," he said.

But residents of Santa Cruz del Norte say the essence of rum-making is more sublime than passing on a recipe.

Angel Ribot, a town historian who spent 20 years working at the local distillery, said Santa Cruz's unique climate--the temperature, the sea breeze, the humidity and the quality of the soil--contributes to Havana Club's special flavor.

"There is no place else where these conditions are exactly the same as here," said Ribot. "The rum Bacardi called Havana Club might be good, but it's not our Havana Club. Ours is the best in the world."

http://www.chicagotribune.com/business/chi-0610080353oct08,0,2421106.story?coll=chi-business-hed

Many companies expect retaliation after US refuses to renew trademark for rum enterprise

From The Sacramento Bee newspaper, California

MIAMI - In 1918 the Aunt Jemima trademark was registered in Cuba, and even after Fidel Castro seized power in 1959, a steady stream of U.S. companies from Ace Hardware to United Airlines continued to register their trademarks in the island nation.

Despite the decades-long U.S. economic embargo that precludes most trade with Cuba, more than 400 U.S. companies have registered in excess of 5,000 trademarks -- everything from McDonald's Golden Arches to Nike's famed Swoosh and Pepsi. And until recently, Cuba had no problem registering and renewing trademarks in the United States.

Now some fear the recent U.S. refusal to renew the Havana Club rum trademark claimed by a Cuban joint venture and Bacardi's launch of Havana Club -- a brand it also claims -- has placed the delicate balance of respecting other nations' trademarks in jeopardy. The recent developments also raise the possibility of Cuban retaliation, experts say.

Bacardi's fight with Cubaexport, a Cuban company that partnered with French liquor giant Pernod Ricard in 1993 to sell the rum around the world, has been simmering in U.S. courts, Congress and in the World Trade Organization for a decade. But the United States' recent decision to invalidate Cubaexport's Havana Club trademark registration really fanned the flames.

For the time being, there are two Havana Clubs -- one distilled in Puerto Rico by Bacardi and sold in the United States and another made in Cuba and distributed around the world.

"Our government has done a real injustice that will come back to bite a lot of other companies," said William Reinsch, president of the National Foreign Trade Council. The council, which is based in Washington, represents corporate members such as Microsoft, Wal-Mart, Caterpillar and General Motors.

But Patricia Neal, a Bacardi spokeswoman, rejected the notion that the rum company's efforts endanger other companies' trademarks in Cuba.

"All companies would fight to protect their brand," she said.

On Aug. 3 the U.S. Patent and Trademark Office said the Havana Club trademark would be "canceled/expired," although Cubaexport had filed its renewal application correctly with a $500 fee and on time.

The Patent Office refused to accept the renewal after J. Robert McBrien, the acting director of the Office of Foreign Assets Control, wrote the office had received guidance from the U.S. State Department "informing us that it would be inconsistent with U.S. policy." That decision stems from a provision called Section 211 that was inserted in a 1998 budget bill. Sometimes called the "Bacardi Bill," Section 211 has been criticized as a measure solely aimed at benefiting the rum giant.

Now the recent Havana Club denial has raised concerns that Cuba could return the favor by canceling U.S. trademark registrations based on the communist nation's own "policy" considerations.

Cuba could, for instance, cancel the trademarks for Levi's jeans or Heinz ketchup and sell its version in island stores. Those products could filter into other markets, too, harming U.S. companies that have long sought to keep fakes off store shelves abroad, said the National Foreign Trade Council.

Such a scenario could force U.S. companies to spend millions defending trademarks in many different countries and make the Cuba market ever more difficult to enter if it ultimately transitions into a market economy.

"Some day Cuba could say, 'The heck with it, we will not honor any of these (U.S.) registrations, because you guys are not honoring ours,"' said Jesus Sanchelima, a Miami lawyer who has represented U.S. firms in trademark cases in Cuba.

The 1990s had a flurry of U.S. trademark registrations in Cuba. Among them: Playboy, Bud, Huggies, The Home Depot, Pizza Hut, Kmart, McDonald's, Tommy Hilfiger, Old Spice, Hawaiian Tropic, Starbucks Coffee and Healthy Choice, according to the U.S.-Cuba Trade and Economic Council.

U.S. companies often sent their own representatives to register trademarks during the 1980s. But in recent years, they have hired Cuban law firms to go to the Oficina Cubana de la Propiedad Industrial in Havana to register and defend against misuse of corporate emblems.

Some now fear the decision could set a precedent that other countries can use to cancel trademarks or play politics with intellectual property law.

"Basically, (the United States) let politics trump trademark policy," Reinsch said. "They took care of one company at the expense of a lot of others."

http://www.sacbee.com/content/business/story/14317282p-15234865c.html

Pernod files against Bacardi over Havana Club sales

Bacardi launches Havana Club brand in US

BY GABRIEL MOLINA of Granma Internaitonal Review

ONE week alter Bacardi began to sell Havana Club rum in Florida, Pernod Ricard has filed another suit to prevent the company selling the product in U.S. stores.

The lawsuit, filed before the Federal Court of Delaware on Tuesday by the Pernod Ricard subsidiary in the United States, is in response to maneuvers by the George W. Bush government to favor Bacardi, a firm charged with buying Congress members and officials to achieve its aims.

The Pernod-Ricard lawsuit alleged that Bacardi Ltd is deceiving consumers by making them think that its Havana Club rum is made in Cuba. It accuses Bacardi of violating the Lanham Act, and also maintains that the company does not have rights to the use of the Havana Club trademark in the United States, according to an article in the Nuevo Herald daily.

"They are implying that this is a Cuban product, despite the fact that they know that it isn’t," stated Mark Orr, vice president of U.S. Affairs for Pernod Ricard. "An informed consumer will expect Havana Club to be made in Cuba, from Cuban sugar cane."

Patricia Neal, Bacardi spokesperson, refuted the Pernod representative and said that "the company intends to maintain its trademark."

Neal is taking refuge behind the decision of the discredited George W. Bush administration that allows Bacardi to use the famous Havana Club trademark in the United States. The maneuver coincided with an ex-official from the government being accused of having illegally accepted funds from that powerful company of Cuban origin.

Citizens for Responsibility and Ethics in Washington (CREW), a U.S. political corruption watchdog group, filed a complaint with the Federal Elections Commission (FEC) on August 7 against Bush’s former housing secretary and current Senator, Cuban-American Mel Martínez, of having illegally accepted more than $60,000 from the Bacardi beverage and rum company, which controls a good share of the world market for alcoholic beverages, for his 2004 Senate election campaign.

CREW fights against corruption in the U.S. government via creative litigation. It has recently stood out for exposing a corruption network in the U.S. Congress, created by Jack Abramoff, whose connections led to the resignation of Tom DeLay, majority leader in the House of Representatives and an ally of Cuban-American legislators who were also affected by the scandal.

The watchdog group is accusing Bacardi of violating FEC regulations by soliciting contributions from a list of the corporation’s distributors for Martínez’ Senate campaign, and for using corporate funds to pay for food and beverages at a May 11, 2004 campaign event.

The complaint says that employees of at least three of Bacardi’s distributors - Hunton & Williams, Chesapeake Enterprises and the MWW Group - made contributions to Martínez’ Senate campaign, responding to an appeal by the company.

Bacardi has already admitted to the FEC that it broke the law by using corporate funds to pay for an election campaign event, and was fined $750 for "failing to report in a timely manner on campaign contributions."

The CREW group said that Martínez violated election law by failing to identify the employer of Bacardi executives, including Eduardo Sardiña, chief executive officer of Bacardi USA, and Frederick Wilson, general counsel to Bacardi USA, who together contributed $5,000 to the Senate campaign. Likewise, CREW demanded that the FEC carry out an investigation and audit of Martínez’ 2003-2004 campaign for the Senate.

Melanie Sloan, CREW executive director, noted that the situation was "an archetypal example of how special interests use corporate money to buy influence in Washington."

In an apparent coincidence, the complaint was filed 24 hours before the Wall Street Journal published an article August 8 saying that Bacardi was about to re-launch the Havana Club rum brand in the U.S. market.

The U.S. Treasury Department cleared the way for Bacardi by denying the necessary license to renew trademark rights with the U.S. Patent and Trademark office to Havana Club International, a joint enterprise between French company Pernod Ricard and Cuban enterprise Havana Rum and Liquors. Havana Club International (HCI) distributes Havana Club rum all over the world except in the United States, where, in spite of owning the rights to the trademark since 1974, sale of the rum is prohibited by the U.S. blockade against Cuba - known in the United States as the embargo.

The long history of disregard for brand and patent laws came to a peak in 1996 when Bacardi introduced onto the U.S. market a rum called Havana Club produced in the Bahamas. Havana Club International filed a lawsuit, given that Cuba has owned the rights to the brand since 1974, transferred to HCI.

However, an April 13, 1999 ruling by Judge Shira Scheindling of a New York district court threw out the lawsuit, and Havana Club Holding (HCH) decided to appeal.

Scheindling’s ruling was based on Section 211 of the Budget Law approved by the U.S. Congress a few months earlier, in October 1998, described by analysts as a legislative move to benefit Bacardi.

The Cuban/French company decided to appeal to the Patents Office. At the request of the vice president of Bacardi, Jorge Rodríguez Márquez, Governor Jeb Bush James Rogan, president of the Office.

But although HCI won the appeal, the pressure continued and the Treasury Department maneuver to deny the license to prolong the right, allowed the Office to declare it extinguished. The Bush government’s decision this month is over and above the law.

Mel Martínez, who was Secretary of Housing and Urban Development at the time, together with fellow Cuban-American Congress members Ileana Ros-Lehtinen and the Díaz-Balart brothers, financed by Bacardi, were the architects of that legal freak (Section 211), which has been criticized by business organizations like the National Foreign Trade Council (NFTC). Bill Reinshi, its president, warned that there are currently more than 5,000 U.S. trademarks in Cuba vulnerable to being infringement, thanks to that private interest legislation. The business sector is concerned about the future of trademark rights being infringed on, with incalculable consequences.

Bacardi rum could even be produced in Cuba if this mockery of the Trademarks and Patents Act becomes generalized.

http://www.granma.cu/ingles/2006/agosto/vier18/35pernod.html

US Senator accused of illegal complicity with Bacardi company

BY GABRIEL MOLINA of Granma International Review

THE decision by the discredited government of George W. Bush allowing the Bacardi company in the United States to take over the well-known Havana Club rum brand comes at the same time as accusations that the administration’s former housing secretary illegally accepted funds from that powerful company, owned by Cuban-born businessmen.

Melanie Sloan, CREW executive director, noted that the situation was "an archetypal example of how special interests use corporate money to buy influence in Washington."

However, an April 13, 1999 ruling by Judge Shira Scheindling of a New York district court threw out the lawsuit, and Havana Club Holding (HCH) decided to appeal.

Scheindling’s ruling was based on Section 211 of the Budget Law approved by the U.S. Congress a few months earlier, in October 1998, described by analysts as a legislative move to benefit Bacardi.

The Cuban/French company decided to appeal to the Patents Office. At the request of the vice president of Bacardi, Jorge Rodríguez Márquez, Governor Jeb Bush James Rogan, president of the Office.

Bacardi rum could even be produced in Cuba if this mockery of the Trademarks and Patents Act becomes generalized.

http://www.granma.cu/ingles/2006/agosto/juev17/34bacardi.html

Miami Herald: Pernod Ricard battles Bacardi over rum rights

Liquor giant Pernod Ricard is suing Bacardi to get its Havana Club rum off the market, claiming the firm doesn't have rights to sell in the United States and misleads consumers.

BY ELAINE WALKER

ewalker@MiamiHerald.com

Just a week after Bacardi started selling Havana Club rum in Florida, Pernod Ricard is going to court to get the product off the shelves.

The suit filed Tuesday by the U.S. subsidiary of Pernod Ricard in U.S. District Court in Delaware is just the latest salvo in a decade-long fight between the two liquor giants over who owns the rights to the brand in the United States. The Paris-based Pernod Ricard already sells its own version of Havana Club in Cuba and around the world, as part of a joint venture with the Cuban government.

Pernod Ricard's suit alleges that Bacardi U.S.A., which is headquartered in Miami but was incorporated in Delaware, is misleading consumers into believing its Havana Club rum is made in Cuba. The suit, which charges Bacardi with violating the Lanham Act, also claims the company doesn't have the rights to use the Havana Club trademark in the United States.

MADE IN CUBA

"They're implying that this is a Cuban product, even though they know it's not," said Mark Orr, vice president of North American affairs for Pernod Ricard. ``A discerning consumer expects Havana Club rum to be made in Cuba from Cuban sugar cane."

But Bacardi spokeswoman Patricia Neal says the allegations are "inaccurate" and the company intends to ``stand behind its brand."

"Nowhere on the packaging does it claim that [Havana Club rum] is made in Cuba," Neal said, noting the bottle clearly says Puerto Rican rum. ``Rum is a product that doesn't have a geographic designation, like champagne, scotch or bourbon, which by law must be produced in a specific region. Rum can be made in a variety of different ways and places."

Pernod Ricard's lawsuit comes just two weeks after the U.S. Patent and Trademark Office deemed the current registration on the Havana Club trademark "canceled/expired." The trademark has been held by Cubaexport, a Cuban government company that has a joint venture with Pernod Ricard to sell Havana Club in Cuba and around the world, but not in the U.S. due to the trade embargo. Pernod Ricard has said it intends to appeal.

Bacardi has a U.S. trademark registration application pending for the Havana Club brand, which the company bought from the Arechabala family, who created the rum brand in 1935. Fidel Castro's government seized the family's plant and trademark on Jan. 1, 1960.

Legal experts say one of the keys in the litigation will come down to whether the court decides the use of the Havana Club name on Bacardi's product is "false and misleading" or just "mis-descriptive." There are plenty of products with names that have nothing to do with where they are from, even Malibu Rum, owned by Pernod Ricard.

LABEL DESIGN

Miami trademark attorney John Cyril Malloy III says the design of Bacardi's Havana Club bottles suggests the company was expecting such a challenge. Just under the Havana Club name on the front of Bacardi's bottles, it says "brand" in small letters, followed by "Puerto Rican Rum" in large letters.

"That label seems very deliberately designed to guide consumer impressions in a lawful direction," Malloy said. "The word brand signifies that this is nothing but the name of a product. Pernod Ricard argues Bacardi's sales of Havana Club rum in the U.S. will cut into its sales of other white spirits, such as Malibu rum and Stolichnaya vodka. The company is asking the court for three times the value of Bacardi U.S.A.'s profits and the damages Pernod Ricard suffered in lost revenue. Pernod also wants Bacardi to publish advertising to dispel the ``false and deceptive" impressions created about the brand.

http://www.miami.com/mld/miamiherald/15291260.htm

Bacardi rejects what it calls 'inaccurate allegations' over Havana Club brand

PARIS 16 August - Privately-owned drinks group Bacardi said it will 'vigorously defend' its rights to market rum under the Havana Club brand, in response to legal threats based on 'inaccurate allegations' by France's Pernod Ricard, which uses the name outside the US.

On August 9, Pernod Ricard said it will sue over the refusal of its application to renew the registration of the Havana Club rum trademark in the US and will sue any group that markets non-Cuban rum under that name in the US.

The rum, which Pernod has produced in a joint venture with Cuban group Cuba Ron since 1994, has not been sold in the US due to the trade embargo.

Bacardi, which re-launched the Havana Club brand in the US on August 8, said it 'reaffirms its ownership of the brand' and said its packaging does not mislead consumers, as the front of the bottle 'clearly states' that its Havana Club is made in Puerto Rico.

'The company will vigorously defend its position in the wake of inaccurate allegations in a lawsuit filed by Pernod Ricard,' Bacardi said in a statement.

On Aug 3, the US Patent and Trademark office told Cuba, which has controlled the brand since 1960 following the revolution, that its Havana Club trademark registration is 'cancelled/expired', making it difficult for Cuba to claim any rights to the trademark in the US.

Cuba obtained the US trademark in 1974 when the brand's original owners let the US trademark lapse.

But Bacardi said this took place to a legal 'loophole' and insists it owns the rights after it bought the brand from the original owners.

Pernod said on August 9 it is 'confident of its defence of the rights to brand and will appeal' to the relevant Court against the rejection of the application to renew the US trade mark registration and against any use of the Havana Club trademark for any rum which is not Cuban.'

http://www.forbes.com/business/feeds/afx/2006/08/16/afx2952908.html

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