Pernod Ricard U.S. Llc v. Bacardi U.S.. Inc.

• Decision Date: 04 August 2011
• Docket Number: No. 10–2354.,10–2354.
• Citation: 99 U.S.P.Q.2d 1553,653 F.3d 241
• Parties: PERNOD RICARD USA, LLC, Appellantv.BACARDI U.S.A., INC.
• Court: U.S. Court of Appeals — Third Circuit

653 F.3d 241

99 U.S.P.Q.2d 1553

PERNOD RICARD USA, LLC, Appellant

v.BACARDI U.S.A., INC.

No. 10–2354.

United States Court of Appeals, Third Circuit.

Argued Feb. 9, 2011.Filed: Aug. 4, 2011.

David H. Bernstein [argued], Carl J. Micarelli, Debevoise & Plimpton, Eric R. Hubbard, Margaret C. Lu, Vincent N. Palladino, Ropes & Gray, New York, NY, Jack B. Blumenfeld, Rodger D. Smith, II, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, for Appellant.Anne S. Gaza, William J. Wade, Richards, Layton & Finger, Wilmington, DE, William R. Golden, Jr. [argued], Matthew D. Marcotte, Kelley, Drye & Warren, New York, NY, for Appellee.Richard J. Leighton, Scott M. Abeles, Keller and Heckman LLP, Washington, DC, Leyla Mujkic, Keller and Heckman LLP, San Francisco, CA, Duane L. Berlin, Lev & Berlin, P.C., Norwalk, CT, for Amicus Appellants.Before: JORDAN, GREENAWAY, JR., and WEIS, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

Pernod Ricard USA, LLC (“Pernod”) appeals the decision of the United States District Court for the District of Delaware that the label of “Havana Club” brand rum, a rum sold in the United States by Bacardi U.S.A., Inc. (“Bacardi”), is not a false advertisement of the rum's geographic origin under Section 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B). Because we agree with the District Court that no reasonable interpretation of the label as a whole could lead to the conclusion that it is false or misleading, we will affirm.

I. BackgroundA. The Original Havana Club Rum and Its Trademark

This case is the latest battle in a lengthy war between Pernod and Bacardi, two multinational distilleries, over the use of the words “Havana Club” to sell rum in the United States. Though the convoluted history of the conflict has been recounted at length elsewhere, a portion of it requires retelling. ¹

Before the start of the Cuban Revolution, the Arechabala family produced “Havana Club” brand rum in Cuba, sold it locally, and exported it for sale in the United States. In 1960, following the Communist revolution in Cuba, the Cuban government expropriated the Arechabalas' business without compensation. Three years later, the United States began to enforce a trade embargo against Cuba. The embargo, which continues to this day, generally prevents the importation of Cuban goods and is administered by the Office of Foreign Assets Control (“OFAC”). Despite the embargo, the Cuban government in 1976, through a government-owned company called “Cubaexport,” ² managed to register with the United States Patent and Trademark Office (“USPTO”) the words “Havana Club” as a trademark for use in connection with rum. In 1994, through a series of transfers, the Cuban government assigned its claimed interests in the Arechabala family's old business to a joint venture (the “JV”), of which Pernod Ricard, S.A., Pernod's parent corporation, is a member. ³ That transfer included the USPTO registration for the “Havana Club” mark, and, in 1995, OFAC specifically approved the transfer of the trademark to the JV. However, in 1997, OFAC retroactively revoked its permission for that transfer. The mark then remained registered to Cubaexport until July 2006, when the registration expired after OFAC denied permission for renewal of the mark.

B. Bacardi's Sales of Havana Club Brand Rum

In 1994, Bacardi filed a federal trademark application for use of the “Havana Club” mark on rum in the United States,⁴ and, for a short time in 1995, Bacardi imported from the Bahamas and sold in this country a nominal amount of rum labeled with that mark. Soon after those limited sales, the JV filed suit in the United States District Court for the Southern District of New York to enjoin Bacardi's use of the “Havana Club” trademark. While that action was pending, Bacardi purchased from the Arechabala family any remaining rights they might have had to the “Havana Club” mark and the related goodwill of the business, along with any rum business assets the family owned. Later, following OFAC's revocation of permission for the transfer of the “Havana Club” mark to the JV in 1997, the JV's case against Bacardi was dismissed. See Havana Club Holding, S.A. v. Galleon S.A., 203 F.3d 116, 121, 135 (2d Cir.2000).

In August 2006, just days after Cubaexport's federal trademark registration of “Havana Club” expired, Bacardi began selling rum in Florida using “Havana Club” as the brand name. The rum was distilled in Puerto Rico and was made using the Arechabala family recipe.⁵ Bacardi took three years to develop the product, due to regulatory and production requirements, and, according to a member of the Arechabala family, it turned out to be “almost identical” to the original Havana Club rum made by the family in Cuba. The bottle in which Bacardi's rum was sold appears below.

Image 1 (3.24" X 5.65") Available for Offline Print

On the front of the bottle, the phrase “Havana Club™” appears in large stylized letters, followed by the word “BRAND” in much smaller letters. Below that, in letters of prominent though slightly smaller size than those in the brand name and in a different font, the words “PUERTO RICAN RUM” appear. Beneath that, in smaller letters and different color ink, the label says “HAVANA CLUB™ RUM.” The words “Havana Club™” are also repeated several times around the neck of the bottle. The back of the bottle includes a statement in clearly legible type that reads as follows:

Havana Club™ Rum is a premium rum distilled and crafted in Puerto Rico using the original Arechabala family recipe. Developed in Cuba circa 1930, this finely crafted spirit uses black strap molasses, a slow fermentation process, five times distillation and white oak mellowing to create a velvet smoothness that is clean and round to the palate.

The words “HAVANA CLUB™ RUM” and the web address “www. havanaclubus. com” also appear on the back of the bottle above a government-mandated health warning, which is followed by a toll-free number containing the letters HAVANA and, in small print, the phrases “Produced by Havana Club, U.S.A., San Juan, P.R.” and “Havana Club is a trademark.”

C. The Instant Case

In 2006, shortly after Bacardi began its sales of the Havana Club rum made in Puerto Rico, Pernod filed this false advertising suit under Section 43(a)(1)(B) of the Lanham Act, asserting that the labeling of Bacardi's bottle, particularly the use of the words “Havana Club,” misleads consumers to believe that the rum is produced in Cuba. At the conclusion of a three-day bench trial, in which Pernod presented unrebutted survey evidence that approximately eighteen percent of consumers who looked at the Havana Club rum bottle were left thinking that the rum was made in Cuba or from Cuban ingredients,⁶ the District Court ruled in favor of Bacardi. The Court found that the Havana Club brand name reflected the Cuban heritage of the rum's recipe. According to the Court, Bacardi “has a First Amendment right to accurately portray where its product was historically made and, therefore, plaintiff cannot demonstrate that defendant's use of ‘Havana Club’ violates ... the Lanham Act.” (App. at 26.) The District Court also said that, because the “Havana Club label clearly and truthfully provides the origin of [Bacardi]'s rum, and is not deceptive” (App. at 23), there was no need “to analyze actual (or likely) consumer deception” (App. at 27). The District Court thus bypassed Pernod's survey evidence, holding that “[a] court is permitted to find, as a matter of law, that no reasonable consumer could be misled by the challenged advertising.” (App. at 23 n. 19.)

Pernod timely appealed the District Court's decision on the sole ground that the Court erroneously failed to consider the survey evidence presented by Pernod.

II. Discussion⁷

It appears that this false advertising dispute is a proxy for the real fight the parties want to have, which is over the right to the exclusive use of “Havana Club” as a trademark. Under the peculiar circumstances of the Cuban trade embargo and the attendant denial of an opportunity to register and protect “Havana Club” as a mark for rum in the United States, Pernod has turned to the false advertising provision of the Lanham Act, § 43(a)(1)(B).⁸ Section 43(a)(1)(B) provides in pertinent part:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

...

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities,

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125.

To establish a false advertising claim under the Lanham Act, a plaintiff must prove:

1) that the defendant has made false or misleading statements as to his own product [or another's]; 2) that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience; 3) that the deception is material in that it is likely to influence purchasing decisions; 4) that the advertised goods traveled in interstate commerce; and 5) that there is a likelihood of injury to the plaintiff in terms of declining sales, loss of good will, etc.

Warner–Lambert v. Breathasure, 204 F.3d 87, 91–92 (3d Cir.2000) (citing Johnson & Johnson–Merck Consumer Pharm. Co. v. Rhone–Poulenc Rorer Pharm., Inc., 19 F.3d 125, 129 (3d Cir.1994)). As to the second element, actual deception or a tendency to deceive is presumed if a plaintiff proves that an advertisement is unambiguous and literally false. Novartis Consumer Health, Inc. v. Johnson & Johnson–Merck Consumer Pharm. Co., 290 F.3d 578, 586 (3d Cir.2002). If the message conveyed...