GENEVA--The World Trade Organization ruled in favor of the European Union on Monday in a dispute with the United States over a long-running legal battle between alcoholic beverage giants Bacardi and Pernod Ricard.
The 142-nation WTO, which oversees global trade rules, sided with EU objections to a U.S. law, known as Section 211, which denies protection for trademarks linked to businesses confiscated by the Cuban government since the 1959 communist takeover.
Bermuda-based Bacardi has used the 1998 Section 211 law in its strategy to wrestle and keep control of U.S. rights to the "Havana Club" rum trademark away from Havana Club Holding, a joint venture between French firm Pernod Ricard and the Cuban government.
The panel said Section 211 violates WTO rules protecting intellectual property. It said the law prevents parties from accessing U.S. courts to settle a trademark dispute, thereby stripping WTO members of rights set out under the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights, known as TRIPS.
While welcoming the ruling, the European Commission, which represents the 15-member EU in trade matters, said it will appeal part of decision because the WTO panel concluded that "trade names are not covered by the TRIPS discipline and that TRIPS doesn't regulate the question of the determination of the ownership of intellectual property rights."
"This very narrow interpretation of TRIPS could significantly reduce the level of trademark protection around the world by leaving each WTO member complete freedom on determining who is the owner of trademark as long as it respects the procedural requirements of TRIPS," the Commission said.
But the Commission said the WTO decision paves the way for Pernod Ricard to take up the case in the U.S. courts.
Section 211 bars U.S. courts from recognizing or enforcing trademarks or trade names substantially similar to those used in connection with Cuban businesses or assets confiscated by Castro, unless the original owner has given consent. The law was attached as an appropriations rider to a 1999 omnibus spending bill in late 1998, after intense lobbying by Bacardi.
The Havana Club trademark was confiscated by the Cuban revolutionary government in 1960 from its original owners, Jose Arechabala S.A. The Arechabala family continued to own the U.S. registration of the Havana Club trade name through 1973, when they allowed ownership to expire.
The Cuban-owned company that took over the Arechabala family's property in 1960 applied for the rights to the name in the United States and took possession in 1976.
In 1993, Pernod Ricard and the Cuban-owned company formed a joint-venture, Havana Club Holding, to combine Pernod's distribution network with the Cuban company's rights to the Havana Club name and sell this brand of rum in all parts of the world except the U.S. _ where sales are prohibited by the U.S. embargo against all Cuban imports.
Still, Pernod Ricard wanted to hold onto U.S. registration of the Havana Club name in case the embargo is ever lifted.
While adversaries in almost every realm, the United States and Cuba have agreed to recognize each other's intellectual property rights under the Inter-American Trademark Convention. In 1994, Bacardi tried to register the Havana Club mark in the United States, but failed because of Havana Club Holding owned it.
In 1996, Bacardi began anyway to sell Havana Club rum, distilled outside of Cuba, prompting Havana Club Holding to file a lawsuit.
In 1997, Bacardi reached an agreement with the Arechabala family to pay them for the rights to the name, and argued that they are the rightful owners of the name. Havana Club Holding disagreed, citing its own U.S. registration, and the dispute continued through the courts.
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