Blow for Pernod Ricard in HAVANA CLUB Case

United States of America
In a lengthy dispute between Pernod Ricard USA LLC and Bacardi USA Inc over who controls the HAVANA CLUB mark for rum, a US judge has held that Bacardi has the right to use the mark for rum in the United States, and that its Havana Club labels are neither false nor misleading (April 6 2010).

The Arechabala family first developed Havana Club rum in Cuba and exported it to the United States. After the Cuban government seized the family’s assets and the United States imposed the Cuban embargo, Cubaexport (a Cuban entity) registered the HAVANA CLUB mark in the United States in 1976, and later assigned and licensed the mark to entities formed by Pernod and a Cuban company to export Cuban-made rum, except in the United States. 

In 1995, Bacardi began selling Havana Club rum in the United States. Pernod’s entities filed suit in 1996 to enjoin Bacardi from using the mark. In 1997 Bacardi purchased the rights to the HAVANA CLUB mark and rum assets still owned by the Arechabala family. On appeal in 2000, the US Court of Appeal for the Second Circuit concluded that:
  • the embargo barred the assignment and licence to Pernod’s entities;
  • US courts could not enforce the entities’ rights in the mark; and
  • the entities lacked standing to bring their claims against Bacardi. 
Pernod filed the present action in 2006, alleging that Bacardi:
  • had no right to use the HAVANA CLUB mark for rum in the United States; and
  • falsely misrepresented the geographic origin of its rum. 
Bacardi’s Havana Club rum, which is produced in Puerto Rico, is the only HAVANA CLUB-branded rum sold in the United States. It is Cuban-style rum with Cuban heritage. Bacardi’s bottle label states that “Havana Club rum is a premium rum distilled and crafted in Puerto Rico using the original Arechabala family recipe” that was “[d]eveloped in Cuba circa 1930”. Bacardi maintains that it has the right to advertise such heritage truthfully, even though its rum is produced in Puerto Rico.

The court was presented with a unique issue - namely, what constitutes a misrepresentation of geographic origin under §43(a)(1)(B) (more specifically, whether 'geographic origin' is more akin to the rum’s 'source of production' or to its Cuban 'heritage'). Pernod focused on Bacardi’s Puerto Rican production locale to assert a misrepresentation of geographic origin, whereas Bacardi focused on its rum’s Cuban heritage and history.

The court reviewed the definition of 'geographic origin', concluding that the focus of 'origin' in §43(a)(1)(B) is on the manufacturer or producer. Thus, geographic origin could mean the place of manufacture. However, the court also found it plausible that 'geographic origin' was broad enough to encompass some aspect of a product’s history. 

The court thus addressed both theories. Based on the statements on Bacardi bottles that Havana Club is a Puerto Rican rum and is “crafted in Puerto Rico”, the court ruled that Bacardi’s disclosure of source was truthful and not deceptive. In fact, because the statements were true on their face, the court discounted Pernod’s survey because such evidence could not prove the meaning of words or set the standard to which objectively verifiable claims are held. The court next found that Bacardi’s rum had a Cuban heritage and that depicting that heritage was not deceptive. The court held that Bacardi had a First Amendment right to portray accurately where its product was historically made.

The court ruled that, under either approach, the product’s labeling was neither false nor misleading. Accordingly, Bacardi controls the name Havana Club in the United States. 

Emily B Brown and Stephen M Schaetzel, King & Spalding LLC, Atlanta

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