203 F.3d 116 (2nd Cir. 2000), 99-7582, Havana Club Holding v Galleon S.A.

Docket Nº:Docket No. 99-7582
Citation:203 F.3d 116
Party Name:HAVANA CLUB HOLDING, S.A., HAVANA CLUB INTERNATIONAL, S.A., Plaintiffs- Counter-Defendants-Appellants, v. GALLEON S.A., BACARDI-MARTINI USA, INC., Defendants-Counter-Claimants-Appellees, GALLO WINE DISTRIBUTORS, INC., G.W.D. HOLDINGS INC., PREMIER WINE AND SPIRITS, Defendants-Appellees.
Case Date:February 04, 2000
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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203 F.3d 116 (2nd Cir. 2000)

HAVANA CLUB HOLDING, S.A., HAVANA CLUB INTERNATIONAL, S.A., Plaintiffs- Counter-Defendants-Appellants,


GALLEON S.A., BACARDI-MARTINI USA, INC., Defendants-Counter-Claimants-Appellees,


Docket No. 99-7582

United States Court of Appeals, Second Circuit

February 4, 2000

Argued: Oct. 13, 1999

Appeal from the June 28, 1999, judgment of the United States District Court for the Southern District of New York (Shira A. Scheindlin, District Judge), dismissing, after a bench trial, Lanham Act claims for trademark and trade name infringement and for false advertising. The District Court held the infringement claims barred by statutory and regulatory provisions of the Cuban embargo and rejected the false advertising claim for lack of standing, related to the embargo.


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Charles S. Sims, New York, N.Y. (Joshua J. Pollack, Jenifer Paine, Proskauer Rose LLP; Michael Krinsky, Rabinowitz, Boudin, Standard, Krinsky & Lieberman, P.C., New York, N.Y., on the brief), for plaintiffs-appellants.

William R. Golden, Jr., New York, N.Y. (Michelle M. Graham, Margaret Ferguson, Scott H. Mandel, Kelley Drye & Warren LLP, New York, N.Y., on the brief), for defendants-appellees.

(Mark Traphagen, Brett G. Kappel, David C. Quam, Marinn F. Carlson, Powell, Goldstein, Frazer & Murphy, Washington, D.C., submitted a brief for amicus curiae Organization for International Investment).

Before: WINTER, Chief Judge, NEWMAN, and SOTOMAYOR, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

This appeal, raising issues concerning the Cuban embargo, arises from a dispute between two rum producers over the rights to the "Havana Club" trademark and trade name. Havana Club Holding, S.A. ("HCH") and Havana Club International, S.A. ("HCI") appeal from the June 28, 1999, judgment of the United States District Court for the Southern District of New York (Shira A. Scheindlin, District Judge), dismissing trademark, trade name, and false advertising claims against Defendants-Appellees Bacardi & Company Ltd. and Bacardi-Martini USA, Inc. We conclude that the Cuban embargo barred assignment to HCH of the "Havana Club" trademark registered in the United States, that we are precluded by statute from enforcing whatever rights HCI might have to trade name protection under the General Inter-American Convention for Trade Mark and Commercial Protection, and that HCI lacks standing to assert its false advertising and unfair competition claims under the Lanham Act. We therefore affirm.


Plaintiff-Appellant HCI is a joint stock company organized under the laws of Cuba, with its domicile and principal place of business in Cuba. Plaintiff-Appellant HCH, a Luxembourg corporation, owns the "Havana Club" trademark in certain countries outside the United States. Defendant-Appellee Bacardi & Company is a corporation organized in Liechtenstein and headquartered in the Bahamas, and Defendant-Appellee Bacardi-Martini USA is a Delaware corporation (collectively "Bacardi"). Defendant Galleon S.A. has merged into Bacardi & Company.

Before the Cuban revolution, Jose Arechabala, S.A. ("JASA"), a Cuban corporation owned principally by members of the Arechabala family, produced "Havana Club" rum and owned the trademark "Havana Club" for use with its rum. JASA exported its rum to the United States until 1960, when the Cuban government, under the leadership of Fidel Castro, seized and expropriated JASA's assets. Neither JASA nor its owners ever received compensation

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for the seized assets from the Cuban government.

The Cuban embargo. In 1963, the United States imposed an embargo on Cuba, reflected in the Cuban Assets Control Regulations ("CACR"), as amended, 31 C.F.R. §§ 515.101-515.901 (1999), promulgated pursuant to section 5(b) of the Trading with the Enemy Act of 1917, as amended, 12 U.S.C. § 95a ("TWEA"). In 1996, Congress enacted the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act ("LIBERTAD Act"), Pub. L. No. 104-114, 110 Stat. 785 (1996), which, among other things, codified the regulations implementing the Cuban embargo, see22 U.S.C. § 6032(h). The Secretary of the Treasury has the authority to administer the Cuban embargo, which he has delegated to the Office of Foreign Assets Control ("OFAC"), see31 C.F.R. § 515.802.

The trademarks and their assignment. From 1972 to 1993, Empresa Cubana Exportadora De Alimentos y Productos Varios ("Cubaexport"), a Cuban state enterprise, exclusively exported "Havana Club" rum, primarily to Eastern Europe and the Soviet Union. Cubaexport registered the "Havana Club" trademark with Cuban authorities in 1974 under Registration No. 110,353, and with the United States Patent and Trademark Office ("USPTO") in 1976 under Registration No. 1,031,651. In 1993, Cubaexport sought to reorganize and find a foreign partner for its "Havana Club" rum business. Havana Rum & Liquors, S.A. ("HR&L"), a newly formed Cuban company, entered into a joint venture agreement with Pernod Ricard, S.A. ("Pernod"), a French company distributing liquor internationally. Under a November 1993 agreement between Pernod and HR&L, HCI and HCH were formed. In an agreement dated January 10, 1994, Cubaexport assigned trademark Registration No. 1,031,651, the United States registration for the "Havana Club" trademark, to HR&L, and in a subsequent agreement dated June 22, 1994, HR&L assigned this trademark to HCH. In 1996, HCH renewed the United States registration of the "Havana Club" mark for a term of ten years.

In April 1997, Bacardi & Co. purchased the Arechabala family's rights (if any) to the "Havana Club" trademark, the related goodwill of the business, and any rum business assets still owned by the Arechabala family.

OFAC's actions concerning the assignments. After an October 5, 1995, application to OFAC for a "specific" license authorizing the 1994 assignments of the "Havana Club" trademark from Cubaexport to HR&L, and from HR&L to HCH,1 OFAC, on November 13, 1995, issued to Cubaexport License No. C-18147, which approved the two assignments and authorized all necessary transactions incident to the assignments of the mark.

However, on April 17, 1997, after the instant lawsuit was filed in the District Court, OFAC issued a Notice of Revocation, revoking License No. C-18147. The revocation notice stated:

You are notified that, as a result of facts and circumstances that have come to the attention of this Office which were not included in the application of October 5, 1995, License No. C-18147 . . . is hereby revoked retroactive to the date of issuance. The determination to revoke License No. C-18147 is made pursuant to § 515.805 of the Cuban Assets Control Regulations, 31 C.F.R. Part 515. Any action taken under this specific license from the date of issuance until now is null and void as to matters under the

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jurisdiction of the Office of Foreign Assets Control.

The parties' sales of rum. Since 1994, HCI has exported rum under the "Havana Club" trademark under an exclusive license to that mark from HCH. From 1994 to 1998, HCI sold over 38 million bottles of "Havana Club" rum, with approximately 30 percent of the sales in Cuba--including sales to Americans traveling in Cuba--and the remainder exported principally to Spain, France, Germany, Italy, Canada, Mexico, Bolivia and Panama. Under travel regulations imposed by OFAC, the class of travelers permitted to visit Cuba may reenter the United States with up to $100 in Cuban-origin goods for personal use. Havana Club rum and cigars are the most popular items brought back.

Because of the Cuban embargo, however, HCI's "Havana Club" rum has never been sold in the United States. HCI intends to export its rum to the United States as soon as legally possible. HCI anticipates using its current marketing strategy of emphasizing the quality and character of its rum based primarily upon its Cuban origin. The label on HCI's "Havana Club" rum portrays the city of Havana and contains the phrase "El Ron de Cuba" ("The Rum of Cuba"). HCI's advertising also stresses the product's Cuban origin.

Beginning in 1995, Bacardi-Martini's predecessor-in-interest, Galleon S.A., produced rum in the Bahamas bearing the "Havana Club" name, and distributed sixteen cases of this rum in the United States. From May 1996 to August 1996, Bacardi distributed an additional 906 cases of "Havana Club" rum in the United States.

The pending lawsuit. In December 1996, HCH and HCI filed the instant action to enjoin Bacardi from using the "Havana Club" trademark, alleging violations of sections 32 and 43(a) of the Trademark Act of 1946 ("Lanham Act"), as amended, 15 U.S.C. §§ 1114, 1125(a). Among Bacardi's defenses was a claim that OFAC's specific license to HCH, authorizing the assignments of the U.S. trademark, was invalid because HCH obtained the mark by fraud. In March 1997, the District Court ruled that Bacardi lacked standing to challenge OFAC's specific license to HCH and that OFAC's decision to grant the specific license was unreviewable. SeeHavana Club Holding, S.A. v. Galleon, S.A., 961 F.Supp. 498 (S.D.N.Y. 1997) ("Havana Club I").

In August 1997, the District Court ruled that HCH had no rights to the "Havana Club" trademark because the specific license to assign the mark to HCH had been nullified by OFAC's revocation of the specific license and because the CACR's general license authority under 31 C.F.R. § 515.527(a) did not authorize the assignment. See Havana Club Holding, S.A. v. Galleon, S.A., 974 F.Supp. 302, 306-07 (S.D.N.Y. 1997) ("Havana Club II").2 After rejecting the Appellants' claim of rights to the "Havana Club" mark, the Court granted the Appellants' motion to amend their Complaint to assert rights to the "Havana...

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