Bacardi Corporation of America v. Domenech

• Decision Date: 09 December 1940
• Docket Number: No. 21,21
• Citation: 61 S.Ct. 219,311 U.S. 150,85 L.Ed. 98
• Parties: BACARDI CORPORATION OF AMERICA v. DOMENECH, Treasurer of Puerto Rico, et al
• Court: U.S. Supreme Court

311 U.S. 150

61 S.Ct. 219

85 L.Ed. 98

BACARDI CORPORATION OF AMERICA

v DOMENECH, Treasurer of Puerto Rico, et al.

No. 21.

Argued Oct. 22, 1940.

Decided Dec. 9, 1940.

Messrs. Edward S. Rogers, of New York City, and Preston B. Kavanagh and Karl D. Loos, both of Washington, D.C., for petitioner.

Mr. William Cattron Rigby, of Washington, D.C., for respondent Domenech, Treasurer.

Mr. David A. Buckley, Jr., of Washington, D.C., for intervenor-respondent Destileria Serralles, Inc.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

This case presents the question of the validity of legislation of Puerto Rico prohibiting the use of trade marks, brands, or trade names, on distilled spirits manufactured in Puerto Rico if the marks, brands, or names had previously been used anywhere outside Puerto Rico, unless they had been used on spirits manufactured in Puerto Rico on or before February 1, 1936, or in the case of trade marks they had been used exclusively in continental United States prior to that date.

Petitioner, Bacardi Corporation of America, brought this suit in the District Court of the United States for Puerto Rico against the Treasurer of Puerto Rico to have this legislation declared invalid and its enforcement enjoined. The complaint charged invalidity under the Fifth Amendment and the commerce clause of the Constitution of the United States, the Organic Act of Puerto Rico, 39 Stat. 151, the Federal Alcohol Administration Act, 27 U.S.C.A. §§ 201—211, and the General Inter-American Trade-Mark Convention of 1929. The Destileria Serralles, Inc., a Puerto Rican corporation, was permitted to intervene as a defendant.

The District Court held the legislation invalid and issued a permanent injunction. The Circuit Court of Appeals reversed the decree and directed the dismissal of the complaint. Sancho v. Bacardi Corporation of America, 1 Cir., 109 F.2d 57. In view of the importance of the questions, we granted certiorari. 309 U.S. 652, 60 S.Ct. 888, 84 L.Ed. 1002.

The findings of the District Court, which were not disturbed by the rulings of the Circuit Court of Appeals, show the following:

Petitioner, Bacardi Corporation of America, is a Pennsylvania corporation authorized to manufacture distilled spirits. By agreement, petitioner became entitled to manufacture and sell rum in Puerto Rico under the trade marks and labels of Compania Ron Bacardi, S.A., a Cuban corporation. For more than twenty years, save for the period during national prohibition, the Cuban corporation and its predecessors had sold rum in Puerto Rico and throughout the United States under trade marks which included the word 'Bacardi', 'Bacardi y Cia', the representation of a bat in a circular frame, and certain distinctive labels. These trade marks were duly registered in the United States Patent Office and in the Office of the Executive Secretary of Puerto Rico prior to the legislation here in question.

Bacardi rum has always been made according to definite secret processes, has been extensively advertised and enjoys an excellent reputation. Under petitioner's agreement with the Cuban corporation, all rum designated by the described trade marks and labels was to be manufactured under the supervision of representatives of the Cuban corporation and to be the same kind and quality as the rum that the latter manufactured and sold.

In March, 1936, petitioner arranged for the installation of a plant in Puerto Rico. Since March 31, 1936, petitioner has been duly licensed to do business in Puerto Rico under its laws relating to foreign corporations. Petitioner's basic permits from the Federal Alcohol Administration were amended so as to enable petitioner to operate in Puerto Rico and its labels were approved. Petitioner rented a building in Puerto Rico and spent large sums in installing its plant.

On May 15, 1936, the legislature of Puerto Rico passed Act No. 115 known as the 'Alcoholic Beverage Law' which, after providing for permits, prohibited the holder of a permit from manufacturing any distilled spirits which were 'locally or nationally known under a brand, trade name or trade-mark previously used on similar products manufactured in a foreign country, or in any other place outside Puerto Rico', with a proviso excepting brands, trade names or trade-marks used on spirits 'manufactured in Puerto Rico on February 1, 1936', and also 'any new brand, trade name or trade-mark which may in the future be used in Puerto Rico'.¹ This Act was declared to be of an experimental nature. It was repealed by Act No. 6 of June 30, 1936, which contained a similar provision and added a prohibition against exports in bulk.² That Act was to be in force until September 30, 1937. It was, however, converted into permanent legislation by the provisions of Act No. 149 of May 15, 1937, known as the 'Spirits and Alcoholic Beverages Act'.³

Declaring it to be the policy of the legislature 'to protect the renascent liquor industry of Puerto Rico from all competition by foreign capital',⁴ and Act of 1937 provided in Sections 44 and 44(b) as follows:

'Section 44.—No holder of a permit granted in accordance with the provisions of this or of any other Act shall distill, rectify, manufacture, bottle, or can any distilled spirits, rectified spirits, or alcoholic beverages on which there appears, whether on the container, label, stopper, or elsewhere, any trade mark, brand, trade name, commercial name, corporation name or any other designation, if said trade mark, brand, trade name, commercial name, corporation name, or any other designation, design, or drawing has been used previously, in whole or in part, directly or indirectly, or in any other manner, anywhere outside the Island of Puerto Rico; Provided, That this limitation shall not apply to the designations used by a distiller, rectifier, manufacturer, bottler, or canner of distilled spirits manufactured in Puerto Rico on or before February 1, 1936.'

'Section 44(b).—Distilled spirits, with the exception of ethylic alcohol, 180 proof or more, industrial alcohol, alcohol denatured according to authorized formulas, and denatured rum for industrial purposes, may be shipped or exported from Puerto Rico to foreign countries, to the continental United States, or to any of its territories or possessions, or imported into Puerto Rico, only in containers holding not more than one gallon, and each container shall bear the corresponding label containing the information prescribed by law and by the regulations of the Treasurer; * * *.'⁵

It is these sections which petitioner attacks.

Section 7 of the Act of 1937 amended the proviso of Section 44 so as to make its limitation applicable, in regard to trade marks only, to such 'as shall have been used exclusively in the continental United States * * * prior to February 1, 1936.⁶ Petitioner asserts that in the absence of this last provision, there would have been two distillers whose trade marks would be subject to the prohibition of Section 44, that is, petitioner and one other; and that Section 7 protected the other manufacturer, leaving petitioner, whose marks had been used in foreign countries and not exclusively in continental United States, the only concern affected by the prohibition. The District Court said that the Act had the appearance of being framed so as to exclude only the plaintiff and that it was difficult to conceive of 'a more glaring discrimination'. In this relation petitioner cites the critical reference in McFarland v. American Sugar Refining Company, 241 U.S. 79, 86, 36 S.Ct. 498, 501, 60 L.Ed. 899, to a statute which 'bristles with severities that touch the plaintiff alone'. The Circuit Court of Appeals while recognizing the immediate bearing of the provision as thus challenged sustained it 'as applying to all who might later engage in the business'.

That construction, however, does not touch the essential character of the discrimination which the statute seeks to effect in the use of trade marks. The statute does not deal with the admission of corporations, foreign to Puerto Rico, for the purpose of transacting business in the Island. Petitioner received its local license. Nor does the statute prohibit the manufacture of rum in Puerto Rico. That is allowed. Petitioner received permits from Puerto Rico for that manufacture as well as the basic permits from the Federal Alcohol Administration. The statutory restriction is not on doing business or manufacturing apart from the use of petitioner's trade marks and labels to designate its product. As to these trade marks and labels, the prohibition does not rest on lack of proper registration under the local law. Petitioner's trade marks have been duly registered in the United States and Puerto Rico. Nor does the prohibition of use proceed on the ground that the trade marks, as such, are invalid. The Cuban corporation which licensed petitioner to manufacture and sell Bacardi products and to use Bacardi trade marks had for many years sold its rum in Puerto Rico, although the rum was not manufactured there. There is no question of deception or unfair methods of competition. Petitioner is prohibited from the use of its trade marks, although valid and duly registered and although the product to which they are applied is otherwise lawfully made and the subject of lawful sale, solely because the marks had previously been used outside Puerto Rico and had not been used on spirits manufactured in Puerto Rico, or exclusively in continental United States, prior to February 1, 1936.

The first question thus presented is whether this discriminatory enactment conflicts with the General Inter-American Convention for Trade Mark and Commercial Protection signed at Washington on February 20, 1929.⁷

This treaty was the culmination of the efforts of many years to secure the cooperation of the American States in uniform trade mark protection. As previous Conventions had not proved satisfactory,⁸ the Sixth International...