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Faced with complaints from a French-Cuban company fighting to market its rum in the United States, the European Union agreed June 9 to challenge a 1998 U.S. law EU officials charge violates global trade accords. The move followed a February federal circuit court decision barring the company — a joint venture between Pernod Ricard S.A. and the Cuban government — from pursuing an injunction for unfair competition against Bahamas-based Bacardi and the Arechabala family, the original owner of the “Havana Club” trademark for rum. ( Havana Club Holding S.A. v. Galleon S.A., 203 F.3d 116 (2d Cir.) pet. for cert. filed U.S., No. 99-1957, 6/1/00). According to news reports and various sources, the roots of the conflict stretch back to before the Cuban revolution, when Jose Arechabala S.A., a Cuban corporation, brewed up Havana Club rum for export to the United States. In 1960, Fidel Castro seized power and expropriated the company’s assets. Three years later, the United States slapped an embargo on Cuban imports, although Havana Club rum continued to be produced and sold in countries other than the United States by a Cuban state enterprise known as Cubaexport. Cubaexport registered the “Havana Club” mark in Cuba in 1974 and in the United States in 1976. In recent years, Cubaexport teamed with France’s Pernod Ricard to form Havana Club Holdings S.A., which was eventually assigned the trademark, but was barred by the embargo from marketing its product here. In the mid-1990s, Bacardi, a Cuban company that escaped Castro’s regime, bought the Arechabala family’s rights to the “Havana Club” mark, filed to register the mark in the United States, and began selling limited quantities of Havana Club rum. In December 1996, Pernod challenged Bacardi’s right to the trademark in the United States, claiming that the Cuban government assigned the mark to HCH, which was now the rightful owner, and that Bacardi was infringing its mark. However, Pernod’s argument failed when the U.S. Court of Appeals for the Second Circuit affirmed a lower court decision that: (1) the attempted assignment of the trademark to Pernod was invalid because the mark had been confiscated without payment of compensation to the Arechabalas; and (2) the 1998 passage of Section 211(b) of the Omnibus Consolidated and Emergency Supplemental Appropriations Act prevented U.S. courts from recognizing or validating any assertion of treaty rights under the Lanham Act for a trade name used in connection with a business confiscated by Castro unless the trade name’s original owner approved the use. Following the legal rout, Pernod launched a two-pronged attempt to break into the U.S. rum market. First, it lobbied the European Union to take up its cause. When two rounds of U.S./EU talks aimed at settling the spat failed, European countries opted to lodge a formal World Trade Organization complaint charging that Section 211 violates the Trade Related Aspects of Intellectual Property Rights Agreement. Pernod has two problems with Section 211, Pernod spokesman Mark Traphagen, of Powell Goldstein Frazer & Murphy LLP, said June 16. First, parties to accords such as TRIPS must treat nationals of other parties “at least as well as you treat your own citizens.” There is also a “most favored nation obligation” under which TRIPS members must treat everyone, with the exception of each nation’s own nationals, at a certain minimum level. These issues become important in the IP arena, Traphagen said, because the “whole point of TRIPS and other treaties is to create a floor below which a country cannot go” in order to prevent discrimination against another nation’s IP. Bacardi disagreed, saying in a June 20 statement that, “A decision to challenge [Section] 211 would reflect total disregard for the rights of original intellectual property owners once their rights have been illegally confiscated.” Moreover, the spokesperson said, the company was “not aware that any official decision had been made by the EU to file the alleged complaint.” The EU is “moving ahead with a panel request to the WTO on Section 211, and [is] likely to request it at the next meeting of the dispute settlement body” in July, EU trade advisor Charlotte Hebebrand said. But while the request is based on the case, she said, it is more broadly “about our perception that the U.S. isn’t fulfilling its TRIPS observations.” Although the United States can challenge an adverse ruling by the WTO dispute resolution panel, Hebebrand said, if the EU is ultimately victorious, the United States must either repeal or amend Section 211 to bring it in line with TRIPS or compensate the EU by lowering tariffs. If the United States does neither, the EU could retaliate by raising its tariffs on U.S. imports. Citing the fact that the EU request has not yet been filed, a U.S. Trade Representative spokesperson declined to comment on the matter. Also this month, Pernod asked the U.S. Supreme Court to review the Second Circuit’s ruling. The company wants the high court to answer three questions: � Did the appeals court ignore “the fundamental principle” that laws should not be interpreted to abrogate treaty rights absent clear congressional intent by holding that an “ambiguous statute” and regulations “that have long preserved [IP] rights” denied Pernod’s rights under the General Inter-American Convention for Trade Mark and Commercial Protection?; � Did the court err in creating a per se rule that no company subject to a U.S. trade embargo has standing to complain of false designations of origin, a result “contrary to U.S. treaty obligations and the Lanham Act’s goal of protecting U.S. consumers?”; and � Was the court wrong to apply retroactively a 1998 law to Pernod’s 1993 acquisition of U.S. IP rights, stripping them of the ability to enforce those rights?

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