Restricting Trademark Rights of Cubans: WTO Decision and Congressional Response
CRS Report for Congress
Restricting Trademark Rights of Cubans:
WTO Decision and Congressional Response
Margaret Mikyung Lee
Legislative Attorney
American Law Division
Summary
The Dispute Settlement Body (DSB) of the World Trade Organization (WTO) has
ruled against certain restrictions on the trademark rights of Cubans imposed under § 211
of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1998.
Congress has responded with several proposals to comply with the ruling, some focused
on repeal of § 211 as part of broader proposed amendments to Cuban trade sanctions,
others on repeal coupled with alternative methods of ensuring Cuba’s protection of
trademark rights of Americans. This report will be updated as legislative activity occurs
or other events warrant.
Background
Congress enacted § 211 of the Omnibus Appropriations Act of 19981 effectively to
prohibit Cuban nationals or their non-Cuban successors in interest from protecting certain
trademarks or trade names in the United States.2 Congress did so partly as a result of a
dispute between two claimants to the “Havana Club” trademark for a brand of rum, one
of whom (Bacardi & Company, Ltd.) was a successor to the interest of the original
trademark owner (José Arechabala, S.A.), who at one point apparently abandoned the
trademark, and the other (Havana Club Holding, S.A.) a successor/partner to the interest
of the Cuban Government in the expropriated trademark.3 Under § 211, unless the
original owners have expressly consented, the U.S. Patent and Trademark Office is
prohibited from accepting or renewing the registration of a trademark, trade name or
commercial name by, and U.S. courts are prohibited from considering or enforcing the
trademark claims of, Cuban nationals (or their successors in interest) who acquired the
1 P.L. 105-277, § 212, 112 Stat. 2681, 2681-88 (1998).
2 H.Rept. 105-485, at 174-175 (1999).
3 Peter H. Stone, Louis Jacobson, Shawn Zeller, K Street for April 28, 2001: Latest Rum War
Saga, 33 National Journal (April 28, 2001); Misha Gregory Macaw, Note: The New Rum War:
Havana Club as a Threat to the U.S. Interest in International Trademark Harmonization, 18 B.U.
Int’l L.J. 291 (2000).
Congressional Research Service ˜ The Library of Congress
trademark or trade name from the Cuban Government, where the trademark or trade name
had been used in connection with property confiscated on or after January 1, 1959,
without compensation to the original owners. This provision was challenged by the
European Community in the World Trade Organization as being inconsistent with U.S.
obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS Agreement). Federal courts have held that § 211 and related Cuban-embargo
provisions bar infringement suits by successors-in-interest to a Cuban corporation.4
A DSB panel issued a decision finding that § 211 was inconsistent with the TRIPS
Agreement in some respects, but was either not inconsistent in other respects or not
proven to be inconsistent in other respects by the European Community.5 The European
Community appealed the panel ruling and the Appellate Body issued a decision which
reversed the lower panel’s ruling in some respects6; the rulings and recommendations
were formally adopted by the DSB on February 1, 2002.7 Essentially, the Appellate Body
held that subsections 211(a)(2) and 211(b), concerning court recognition or enforcement
of trademark rights, were inconsistent with the national treatment requirements of the
TRIPS Agreement and the Paris Convention (1967)8 (parts of which were incorporated
by reference into the TRIPS Agreement) and with the most-favored-nation requirement
of the TRIPS Agreement.
Under Articles 21 and 22 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU), a WTO Member whose measure is found to be
inconsistent with WTO obligations must inform the DSB of its intentions with regard to
implementation of the rulings and recommendations of the DSB. The implementation is
to take place within a “reasonable period of time.” Although the complaining WTO
Member may be granted compensation and suspension of concessions or other obligations
if compliance does not take place within a reasonable period of time, such compensation
and suspension are intended to be temporary and the respondent Member is expected to
bring inconsistent measures into compliance with WTO obligations. Initially, the United
States and the European Community agreed that a reasonable period of time for the
United States to amend § 211 to be consistent with WTO obligations would expire on
December 31, 2002, or the date of adjournment of the 107th Congress, whichever was
later, but not later than January 3, 2003.9 Subsequently, the two parties to the dispute
agreed three times to extend the final deadline, most recently to December 31, 2004.10
4 Havana Club Holding, S.A. v. Galleon, S.A., 203 F.3d 116 (2d Cir. 2000); cert. denied by
Havana Club Holding, S.A. v. Bacardi & Co., 531 U.S. 918 (2000).
5 WTO Dispute Settlement Panel, United States – Section 211 Omnibus Appropriations Act of
6 WTO Dispute Settlement Appellate Body, § 211 Case, WT/DS176/AB/R (Jan. 2, 2002).
7 WTO Dispute Settlement Appellate Body, § 211 Case, WT/DS176/9 (Feb. 6, 2002).
8 The Stockholm Act (Convention revising the Paris Convention of March, 20, 1883, as revised,
for the Protection of Industrial Property), July 14, 1967, 21 U.S.T. 1583, 24 U.S.T. 2140.
9 WTO Dispute Settlement Appellate Body, § 211 Case, WT/DS176/10 (April 5, 2002).
10 WTO Dispute Settlement Appellate Body, § 211 Case, WT/DS176/14 (Dec. 24, 2003).
The United States continues to submit status reports to the DSB, noting that the
Administration has been consulting with the 108th Congress.11
Ruling of the DSB Appellate Body
The Appellate Body noted that the European Community was challenging
subsections 211(a) and (b) on their face, and not as applied. This meant the Appellate
Body did not specifically concern itself with whether the U.S. decision in the Havana
Club case was consistent with the TRIPS Agreement. The Appellate Body further noted
that neither the Cuban Foreign Assets Control (CFAC) regulations nor the Trading with
the Enemy Act, under which the regulations were promulgated, was at issue.
Paragraph 211(a)(1) prohibits the approval or authorization under 31 C.F.R. §
515.527 (the CFAC regulation concerning transactions related to the registration and
renewal of intellectual property with the relevant U.S. agencies) of any payment or
transaction with respect to a trademark, trade name or commercial name that is the same
as or substantially similar to those used in connection with assets which have been
confiscated (defined in the CFAC regulations as expropriation by the Cuban Government
without compensation) unless the original owner or the owner’s successor-in-interest has
expressly consented. Although the European Community challenged this paragraph as
inconsistent with various articles of the TRIPS Agreement, ultimately the DSB ruled that
this was not inconsistent, holding, inter alia, that the United States was not obligated to
accept the registration of a trademark which did not satisfy the substantive registration
requirements of U.S. law (in this case, that the registrant be the rightful owner under U.S.
law) although the trademark was already registered in another Member of the WTO or the
Paris Union (Paris Convention organization).
Paragraph 211(a)(2) prohibits U.S. courts from recognizing, enforcing or otherwise
validating any assertion of rights by a “designated national” based on U.S. common-law
trademark rights or on U.S. trademark registration of a confiscated trademark, trade name,
or commercial name. Subsection 211(b) prohibits U.S. courts from recognizing,
enforcing or otherwise validating any assertion of treaty rights by a “designated national”
or its successor-in-interest for a U.S. trademark, trade name, or commercial name that is
the same as or substantially similar to those used in connection with assets which have
been confiscated, unless the original owner or the owner’s successor-in-interest has
expressly consented. The term “designated national” is defined in subsection 211(d) by
reference to the CFAC regulations as including Cuba, Cuban nationals (including
corporations controlled by the Cuban Government), and additionally, a foreign national
who is a successor-in-interest to a designated national.
The Appellate Body of the DSB analyzed the meaning of paragraph 211(a)(2) and
subsection 211(b) with regard to trademarks separately from the meaning of these
provisions in the context of trade names because the lower panel had ruled that trade
names were not covered under the TRIPS Agreement and thus WTO Members had no
obligation to protect trade names. The Appellate Body of the DSB ruled that with regard
to original owners of U.S. trademarks, paragraph 211(a)(2) and subsection 211(b) are
inconsistent with the national treatment requirements in the TRIPS Agreement and the
11 WTO Dispute Settlement Appellate Body, § 211 Case, WT/DS176/11/Add.16 (Feb. 6, 2004).
Paris Convention. National treatment means that a WTO Member must extend to owners
of U.S. trademarks who are nationals of other WTO Members the same protections and
remedies available to U.S. owners of U.S. trademarks. By making a distinction between
the abilities of U.S. owners and Cuban owners of U.S. trademarks to protect their
trademarks in U.S. courts, paragraph 211(a)(2) and subsection 211(b) violated the national
treatment obligation.
This conclusion was based upon hypothetical circumstances posed by the European
Community, substantially as follows. A U.S. national acquires rights in the U.S. to
“Trademark A.” A separate entity acquires separate rights to the same, or a substantially
similar, trademark in Cuba. The Cuban rights are subsequently confiscated. Under
paragraph 211(a)(2) and subsection 211(b), the ability of the U.S. national owner of
“Trademark A” to assert its U.S. rights in U.S. courts is not affected by this confiscation.
By contrast, suppose a Cuban national had originally acquired the U.S. rights to
“Trademark A” and a separate entity had acquired the separate Cuban rights to the same,
or substantially similar, trademark in Cuba. Upon confiscation of the Cuban right in
Cuba, the original Cuban owner of the U.S. rights to “Trademark A’ becomes subject to
the enforcement restrictions of paragraph 211(a)(2) and subsection 211(b) because the
Cuban owner is a “designated national”: the ability of the original Cuban owner of the
U.S. rights to enforce them in U.S. courts depends upon the consent of the successor-in-
interest to the separate, confiscated Cuban rights. In this situation, the U.S. owner clearly
receives better treatment than would the Cuban owner.
The Appellate Body of the DSB ruled that with regard to successors-in-interest to
the original owners of trademarks, paragraph 211(a)(2) is inconsistent with the national
treatment requirements in the TRIPS Agreement and the Paris Convention. Paragraph
211(a)(2) discriminates between the rights of a U.S. successor-in-interest, who is not
included in the definition of a designated national, and a foreign successor-in-interest,
who is included in the definition of a designated national. The United States argued that,
in practice, a U.S. national would never be granted a license to become a successor-in-
interest under the CFAC regulations and therefore there was no discrimination under
paragraph 211(a)(2). But the European Community argued, and the Appellate Body
agreed, that although a would-be U.S. successor-in-interest may be barred under the
CFAC regulations alone, a would-be foreign successor-in-interest faced two hurdles to
asserting rights – the CFAC licensing regulations and paragraph 211(a).
With regard to successors-in-interest to original owners of trademarks, subsection
211(b) was found not to be inconsistent with the national treatment provisions of the
TRIPS Agreement and the Paris Convention, because subsection 211(b) limits the
enforceability of trademark treaty rights of a designated national or its successor-in-
interest, who might be either a U.S. or a foreign national. Therefore, there is no
discrimination between U.S. and foreign successors-in-interest that would be inconsistent
with WTO obligations.
The Appellate Body of the DSB ruled that with regard to original owners of
trademarks, paragraph 211(a)(2) and subsection 211(b) are inconsistent with the most-
favored-nation requirements in the TRIPS Agreement. Most-favored-nation treatment
effectively means that a WTO Member must extend to nationals of all other WTO
Members any protections or rights that it extends to nationals of any WTO Member, so
there is no discrimination among other WTO Members (regional trade agreements/groups
such as the North American Free Trade Agreement or the European Community are a
special circumstance within the WTO). Although all foreign successors-in-interest are
at an equal disadvantage under paragraph 211(a)(2) and subsection 211(b), only Cuban
original owners are at a disadvantage compared with the nationals of all other WTO
Members. The scenario described above concerning two pre-confiscation original owners
of U.S. trademarks operates to illustrate the violation of the most-favored-nation
requirement. Under that scenario, the non-Cuban foreign original owner of a U.S.
trademark similar to a Cuban trademark for a confiscated business or assets would be able
to assert its rights in U.S. courts, while a Cuban original owner would not.
The Appellate Body of the DSB disagreed with the lower panel’s ruling with regard
to the protection of trade names, ruling that trade names were covered under the TRIPS
Agreement and therefore WTO Members were obligated to extend protections to trade
names under the TRIPS Agreement. Under the same rationale described above for
trademarks, with regard to original owners of trade names, paragraph 211(a)(2) and
subsection 211(b) were found to be inconsistent with the national treatment requirements
in the TRIPS Agreement and the Paris Convention. Similarly, with regard to successors-
in-interest to owners of trade names, 211(a)(2) was found to be inconsistent with the
national treatment requirements in the TRIPS Agreement and the Paris Convention, but
subsection 211(b) was not. Finally, with regard to trade names, paragraph 211(a)(2) and
subsection 211(b) were found to be inconsistent with the most-favored-nation provision
of the TRIPS Agreement.
Proposed Legislation and Recent Developments
Six bills in the 108th Congress would bring the United States into compliance with
the ruling of the Appellate Body. Some of these bills have compliance as the major focus.
Others would include compliance as part of a broader rollback in Cuban sanctions. H.R.
188 (the Cuba Reconciliation Act), H.R. 1698, and S. 403 (the United States-Cuba Trade
Act of 2003), would lift the trade embargo on Cuba by, among other things, repealing §
211. H.R. 3422 (the Bridges to the Cuban People Act of 2003) would ease the trade
embargo on Cuba for certain purposes, such as export of food and medicine, and would
repeal § 211 as part of its scheme to engage Cuba. H.R. 2494 and S. 2002 (both named
the United States-Cuba Trademark Protection Act of 2003) seek to improve and promote
compliance with international intellectual property obligations relating to Cuba by
repealing § 211 and by further providing for amendments to current laws and regulations
to implement the holdings of the Appellate Body. They would authorize assignment and
enforcement of trademarks, trade names, or domain names in which a Cuban national has
an interest; clarify that the Trademark Act of 1946 (popularly known as the Lanham Act,
at 15 U.S.C. §§ 1051 et. seq.) applies to Cuban nationals to the extent necessary to give
effect to their rights under treaties or reciprocity relating to trade or commercial names
or repression of unfair competition; clarify that a manufacturer or distributor of spirits
outside the United States who uses a mark or geographical indication for such spirits shall
be considered damaged by a mark or geographical indication used by a competitor which
deceptively indicates a place of origin other than the actual origin of the spirits; and
authorize U.S. courts to recognize and enforce the rights of a Cuban national in a
trademark or trade name based on common law or the Trademark Act of 1946. In order
to ensure that trademarks owned by U.S. nationals will be adequately protected in Cuba,
H.R. 2494 and S. 2002 provide for a registry of trademarks owned by U.S. nationals and
registered in or submitted for registration in Cuba on or after January 1, 1959. The
President will direct the Secretary of State to negotiate with Cuba to assure that it will
comply with international intellectual property agreements.
It has been reported that House and Senate conferees considered including
amendments to § 211 in H.R. 1588, the National Defense Authorization Act for Fiscal
Year 2004, which became P.L. 108-136, however, no such amendment was included.12
Reportedly, Bacardi circulated a proposal to delete all references to “designated national”
and its definition and to apply § 211 only to those who knew or had reason to know that
a trademark was confiscated, but opponents of § 211 argued that any action less than a
complete repeal would leave the United States open to further challenge by Cuba under
the Inter-American Convention for Trademark and Commercial Protection.13
Both the European Union and Cuba have expressed concern about the lack of
progress in U.S. compliance with the DSB’s recommendations at regular meetings of the
DSB.14 The European Union asked in particular for clarification concerning the U.S.
position on abandoned trademarks or trade names, noting that despite representations by
the United States to the DSB panel that § 211 does not apply to abandoned trademarks,
the U.S. courts have held otherwise, since the trademark “Havana Club” had apparently
been abandoned upon the failure of the original owner to pay the required maintenance
fee in 1973. The European Union has repeatedly asserted that the panel had relied on
non-application to abandoned trademarks in reaching the conclusion that certain clauses
of § 211 were consistent with the TRIPS. At the meeting on May 7, 2003, the United
States replied that the panel decision did not relate to the issue of abandonment and that
no U.S. court decision had been issued since the “Havana Club” litigation and the DBS
panel decision. Although the Trademark Trial and Appeal Board is an administrative
panel and not a U.S. court, in a recent non-precedential decision, the Board ruled against
Havana Club Holding (HCH) partly because the Federal appellate court in the previous
litigation had ruled that HCH was not the owner of the U.S. trademark for “Havana Club,”
since the assignment from Cubaexport, the Cuban owner since 1960, was barred by the
Cuban embargo.15 However, in another non-precedential decision of the Board, it
dismissed Bacardi’s cancellation petition claiming that Cubaexport is not the rightful
owner, finding it to be a political question concerning the legitimacy of the Cuban
government.16 Therefore, arguably it remains unclear what effect repeal of § 211 would
have beyond allowing litigation concerning disputed Cuban/U.S. trademarks to reach the
substantive merits of the case.
12 House, Senate Conferees Consider Changes to Section 211 Trademark Law, Inside U.S. Trade,
October 3, 2003.
13 Id.
14 See, e.g., WTO Dispute Settlement Appellate Body, Minutes of Meeting, WT/DSB/M/157
(Dec. 18, 2003), WT/DSB/M/145 (May 7, 2003); WT/DSB/M/142 (March 6, 2003).
15 Havana Club Holding S.A. v. Jimmy Buffett, Opposition No. 91116754, 2003 TTAB LEXIS
16 Galleon, S.A. v. Havana Club Holding, S.A., Cancellation No. 92024108, 2004 TTAB LEXIS