Bacardi’s ‘Havana Club’ Rum Name Not False Advertising, Appeals Court Says

Pernod Ricard SA, the world’s second- biggest liquor maker, lost an appeals court ruling in its 17- year battle with Bacardi Ltd. over the right to use the name “Havana Club” on rum in the U.S. market.

The U.S. Court of Appeals in Philadelphia ruled today that a lower-court judge was correct in saying that consumers wouldn’t be confused into thinking Bacardi’s Havana Club rum was made in Cuba because the label states it was made in Puerto Rico.

“No reasonable interpretation of the label as a whole could lead to the conclusion that it is false or misleading,” U.S. Circuit Judge Kent Jordan said in an opinion that affirms the 2010 ruling by the U.S. District Court in Wilmington, Delaware.

“We’re certainly disappointed with the decision,” David Bernstein, a lawyer representing Pernod Ricard, said in a telephone interview. “If there’s any basis for an appeal, we’ll consider it.”

Pernod has been fighting with Bacardi over rights to the name in the U.S. since 1994, when Bacardi applied for a U.S. trademark for Havana Club. That application was suspended by the U.S. Patent and Trademark Office pending the results of litigation, Bernstein said. Pernod, based in Paris, sells Havana Club throughout the world, except in the U.S.

Trademark Eligibility

“Our conclusion in this case says nothing of whether the words ‘Havana Club’ are eligible for registration as a trademark,” Jordan said in the opinion today.

Pernod argued in its appeal that U.S. District Judge Sue Robinson “refused even to consider” the results of a Pernod- commissioned survey showing that about 20 percent of U.S. rum consumers were misled or confused by Bacardi’s Havana Rum bottle.

In today’s opinion, the judge said, “Survey evidence has no helpful part to play on the question of what the label communicates regarding geographic origin.”

“The court seems to be substituting its own view over that of consumers,” Bernstein, who is with Debevoise & Plimpton LLP, said of the decision.

Bacardi, based in Pembroke, Bermuda, argued that the survey was “fatally flawed” and that the front of its liquor bottle clearly states “Puerto Rican rum.” It also said in court papers that Havana as a brand name is “nothing more than puffery” and not a geographic indicator.

1963 Trade Embargo

“Bacardi applauds the appelate court’s decision which reaffirms that Bacardi has accurately portrayed both the geographic origin and Cuban heritage of our Havana Club rum,” Patricia Neal, a spokeswoman for Bacardi USA, said in an e-mailed statement.

Cuban trademarks have importance in anticipation of an end to the 1963 embargo by the U.S. that blocks most trade between the countries. Cuban-made rum can’t be legally sold in the U.S.

The Havana Club trademark was first used in the 1930s by Cuba’s Arechabala family, whose distilling company was confiscated by Fidel Castro’s revolutionary government. After the trademark owned by the Arechabalas lapsed, the state-owned Cubaexport registered it in the U.S. in 1976 and assigned it to the Pernod joint venture in 1993.

In 1998, Congress passed legislation making trademarks confiscated by the Cuban government unenforceable in the U.S. The law has been applied only to the Havana Club mark.

Havana Club Rights

The U.S. Court of Appeals for the D.C. Circuit in Washington upheld that law in March. Ruling against Pernod, it said the U.S. Treasury has the right to refuse to allow a Cuban state-owned group to renew its U.S. trademark for Havana Club. Pernod sells Havana Club throughout the world, except in the U.S., under that 1993 venture with Cubaexport.

Bacardi bought rights to the Havana Club name from the Arechabala family. The company distills rum in that name in Puerto Rico according to the recipe of Jose Arechabala, court papers state. The rum has been available in the U.S. since 2006 only in Florida.

U.S. consumers bought about 17 percent of the world’s rum, second only to India’s 29 percent, according to the London-based industry research firm International Wine and Spirit Research.

Pernod turned Cuba-made Havana Club into the world’s fourth-most-popular brand of standard rum, selling about 3.5 million cases a year, up from 400,000 cases sold in 1993, according to the research report.

Lawsuit in Spain

Without access to the U.S. market, Pernod’s Havana Club had 5 percent of the world’s rum sales, according to the report. In the U.S., Bacardi’s brands led the rum market with about 40 percent of sales, according to court papers.

In Spain, Bacardi sued Pernod in 1999, claiming it was the rightful owner of the Havana Club trademark.

Two Spanish courts ruled that the joint venture with Pernod was the proper owner because the Arechabala family had neglected its rights, both in allowing its trademark to expire and waiting too long to challenge ownership. Spain’s Supreme Court ruled in Pernod’s favor in February, saying Bacardi had no claim to the Havana Club name in that country.

Pernod Ricard fell 2.64 cents, or 4 percent, to 64.2 euros in Paris trading. Bacardi’s shares don’t trade publicly.

London-based Diageo Plc is the world’s largest distiller.

The appeal is Pernod Ricard USA LLC v. Bacardi USA Inc., 10-2354, 3rd U.S. Circuit Court of Appeals (Philadelphia). The Delaware case is Pernod Ricard USA LLC v. Bacardi USA Inc., 06- cv-505, U.S. District Court, District of Delaware (Wilmington).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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