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Posted June 18, 2003 by publisher in Cuba-US Trade

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By Patrick Michael Rucker | [url=http://www.FT.com]http://www.FT.com[/url]

The worldwide dispute over rum hit Washington on Tuesday as the US Congress considered a bill that would bring a longstanding trademark dispute between Pernod Ricard, the spirits company, and its rival Bacardi to a federal court.

At stake is control of the Havana Club brand name, a foothold in the potentially lucrative US market for Cuban rum and worldwide trademark protocols.

Tuesday’s bipartisan measure would repeal an obscure, Bacardi-backed passage of a 1998 appropriations bill, Section 211, that halted a pending trial to award the Havana Club trademark and send the dispute back to federal court.

Like so many disputes involving Cuba and the US, the issue is deeply rooted in Fidel Castro’s socialist revolution and his nationalisation drive of 1961.

When the island’s rum distilleries were seized, Bacardi, then Cuba’s leading rum producer, moved its headquarters to the Bahamas, while Jose Arechabala SA, manufacturer of the struggling Havana Club brand, quit the business and Jose Arechabala returned to Spain.

As the Havana Club trademarks lapsed in the few foreign countries in which they were registered, the Castro government renewed them until November 1993. With the trademark renewed and consolidated in the US and registered by Cuba in over 60 other countries, Pernod Ricard and the Cuban government began a joint venture, Havana Club Holdings, to market the brand worldwide.

Bacardi responded by importing its Havana Club brand rum into the US and paying the Arechabala family $1.25m for their claimed interest in the trade name that they say was stolen by the Cuban government.

Pernod Ricard sued Bacardi for brand infringement, but before a New York federal court could give its decision, Bacardi-allies in Congress slipped Section 211 into a 4,000-page appropriations bill and took the dispute out of federal jurisdiction.

Since its passage, Section 211 has caused grumbling among free-trade advocates. While the law restricts foreign companies from using trademarks allegedly confiscated by the Castro government, a loophole allows American firms to use such trademarks.

The World Trade Organisation ruled the law discriminatory against non-US business and has given a deadline of June 30th to correct the legislation. A repeal, as proposed on Tuesday would also bring the United States into WTO compliance.

“The WTO deadline drives the train on this,” said Bill Reinsch, president of the National Foreign Trade Council, a Washington-based lobby group for free trade.

“There are key congressman who want to put us back in compliance, to strengthen our trade credentials, and repealing Section 211 is the simplest, cleanest fix. It removes an obstacle in the US free-trade agenda.”

“We expect a similar bill to be introduced in the senate soon,” said a senior Democratic congressional aide. “It has good bipartisan support.” The legislation would also head off a potential trademark duel with Cuba itself. While the United States and Cuba have had rocky trade and political relations, the two nations are bound to honour each other’s trademarks as signatories to the 1931 Inter-American Convention on Trademarks.

If Cuba determines that its Havana Club trademark has been compromised in the United States, it could retaliate by ignoring the 5,000 US trademarks registered in Cuba, such as McDonald’s, Coca-Cola, Calvin Klein, Gillette and Heinz.

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