Second Circuit reignites US company's rights in COHIBA mark

In Empresa Cubana del Tabaco v Culbro Corp, the US Court of Appeals for the Second Circuit has overturned an earlier ruling and has refused to allow a Cuban company to enforce rights in the mark COHIBA for cigars. The court ruled that even if the company had proved that it had rights in the mark pursuant to the doctrine of famous marks, the regulations implementing the US embargo against Cuba barred its claims.

Empresa Cubana del Tabaco, known as Cubatabaco, applied to register COHIBA in Cuba in 1969. It started selling cigars outside of Cuba in 1982. However, Cubatabaco could not sell cigars in the United States because of the Cuba embargo. Culbro Corp, a US company, is the corporate parent of General Cigar. General Cigar registered the mark COHIBA in the United States in 1981 and sold COHIBA cigars in the United States from 1978 to 1987, and then again after 1992.

Cubatabaco filed suit against General Cigar, arguing that it abandoned its rights to the COHIBA mark in the United States during the gap in its use from 1987 to 1992. Cubatabaco further contended that by the time General Cigar resumed use in 1992, the Cuban COHIBA mark had become sufficiently well known in the United States to warrant protection under the famous marks doctrine. The US District Court for the Southern District of New York agreed. Even though Cubatabaco had never used or registered the mark in the United States, the district court entered judgment against General Cigar for trademark infringement under Section 43(a) of the Lanham Act, which protects unregistered marks. The district court also cancelled General Cigar's registration for the mark and enjoined General Cigar from using it. The district court dismissed other claims that Cubatabaco had asserted under international trademark treaties, the Federal Trademark Dilution Act and New York state law (see US COHIBA registrations stubbed out by Cuban company).

On appeal, the Second Circuit held that even if a foreign entity can, as a general matter, acquire trademark rights in the United States through the famous marks doctrine, Cubatabaco's acquisition of rights in the mark is barred by the US embargo of Cuba, which prohibits a Cuban company from acquiring property rights in US trademarks. The Second Circuit also rejected Cubatabaco's argument that even if the embargo bars its acquisition of the mark, it nonetheless is entitled, based on the fame of its mark, to (i) force cancellation of General Cigar's registration in the United States, and (ii) an injunction barring General Cigar's use of the mark in the United States. The court concluded that to grant this relief would entail a transfer of property rights in the COHIBA mark to Cubatabaco in violation of the embargo. Thus, the court observed that General Cigar retains the full range of property rights in the COHIBA mark in the United States, including the right to exclude or limit others seeking to use the mark in that country. Based on these holdings, the Second Circuit reversed the district court's entry of judgment in favour of Cubatabaco.

The Second Circuit noted that General Cigar had failed to argue in the district court that the embargo regulations bar Cubatabaco from acquiring rights in the COHIBA mark in the United States. Usually, this would have caused a waiver of the argument on appeal. However, the Second Circuit considered the effect of the embargo regulations on appeal because (i) their application is an issue of significant public concern (ie, the United States' national policy towards Cuba), and (ii) it involves a question of pure law.

For a background discussion of this case, see Second Circuit set to hear COHIBA arguments this week.

David S Fleming, Brinks Hofer Gilson & Lione, Chicago

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