DC Circuit denies Cuban trademark renewal

United States of America
In Empresa Cubano Exportadora de Alimentos y Productos Varios v United States Dep’t of Treasury (Case 09-5196, March 29 2011), in a 2-1 decision, the US Court of Appeals for the District of Columbia Circuit has affirmed a judgment rejecting the renewal of the registered mark HAVANA CLUB by Cubaexport, a company owned by the Cuban government.

The case surrounded the Cuban Assets Control Regulations, originally issued in 1963 and modified in 1998, which prohibit most transactions between US and Cuban persons. The 1963 regulations contain an exception allowing Cuban-affiliated entities to register and renew US trademarks and a warning that any exception could be amended, modified or revoked at any time. Pursuant to the exception, Cubaexport registered HAVANA CLUB for the sale of rum in 1976. In 1998 Congress modified the exception to bar registrations and renewals of certain trademarks, including the HAVANA CLUB mark. In 2006, when the mark came due for renewal, the Office of Foreign Assets Control (OFAC) prohibited Cubaexport from renewing its mark. Cubaexport sued the OFAC, contending that the 1998 act violated due process and that OFAC’s decision was arbitrary and capricious. The district court granted summary judgment to the government. Cubaexport appealed.

On appeal, Cubaexport first invoked the presumption of retroactivity, arguing that the 1998 act barred only new trademark registrations, not renewal of previously registered marks, such as HAVANA CLUB. Under this presumption, a statute is not interpreted to be retroactive if:
  • the statute does not clearly specify its temporal scope; and
  • applying the statute retroactively would affect a party’s “vested rights”.
Cubaexport argued that it had acquired a vested right to renewal upon registration of the mark in 1976. The Court of Appeals disagreed because the exception under which Cubaexport registered the HAVANA CLUB mark contained the express warning that amendment, modification or revocation could occur at any time. Therefore, Cubaexport had not obtained a vested right to perpetual renewal. The court based its conclusion on its own precedent and that of the Supreme Court, ruled that the presumption of retroactivity did not apply, and interpreted the 1998 act according to its plain meaning (ie, that the act bars both new registrations and renewals).

Cubaexport next argued that, if the 1998 act barred renewal of previously registered marks, then it violated the due process doctrine. The court disagreed. Instead, the court pointed out that no fundamental right was involved here and, therefore, a deferential due process test was appropriate. So long as the legislation was justified by a rational legislative purpose, that test was satisfied. The court found that the 1998 act was “rationally related to the legitimate government goal of isolating Cuba’s Communist government and hastening a transition to democracy in Cuba” (Slip Op at 13). It said that any unfairness that may result from applying the 1998 act to renewals was eliminated based on the regulations’ express warning. After considering all of Cubaexport’s arguments and finding them without merit, the Court of Appeals affirmed the district court’s rejection of renewal of the HAVANA CLUB mark.

The dissent by Senior Judge Silberman criticised the majority opinion as doctrinally unsound and found fault with the court’s rejection of Cubaexport’s retroactivity argument. Judge Silberman argued that the majority misinterpreted “vested rights” to be something more than substantive rights, and that Cubaexport clearly had a substantive right in its registered mark. He found persuasive Cubaexport’s argument that, under US trademark law, a holder’s right to a trademark, once acquired, is perpetual unless the mark is abandoned. The renewal right, according to Judge Silberman, conferred no new right but merely acknowledged existing rights. He would thus have remanded the case because, in his view, the OFAC had misconceived the act.
Stephen Schaetzel and Suzanne Johnson, King & Spalding LLP, Atlanta

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