[Senate Hearing 108-919]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 108-919

AN EXAMINATION OF SECTION 211 OF THE OMNIBUS APPROPRIATIONS ACT OF 1998

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 13, 2004

                               __________

                          Serial No. J-108-88

                               __________

         Printed for the use of the Committee on the Judiciary



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                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman
CHARLES E. GRASSLEY, Iowa            PATRICK J. LEAHY, Vermont
ARLEN SPECTER, Pennsylvania          EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona                     JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama               DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina    RUSSELL D. FEINGOLD, Wisconsin
LARRY E. CRAIG, Idaho                CHARLES E. SCHUMER, New York
SAXBY CHAMBLISS, Georgia             RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas                   JOHN EDWARDS, North Carolina
             Bruce Artim, Chief Counsel and Staff Director
      Bruce A. Cohen, Democratic Chief Counsel and Staff Director


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Craig, Hon. Larry E., a U.S. Senator from the State of Idaho.....     2
    prepared statement...........................................    58
Graham, Hon. Lindsey O., a U.S. Senator from the State of South 
  Carolina.......................................................     3
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, 
  prepared statement.............................................    92

                               WITNESSES

Arechabala, Ramon, Miami, Florida................................     8
Germain, Kenneth B., Adjunct Professor of Law, University of 
  Cincinnati, Cincinnati, Ohio...................................     9
Lehman, Bruce A., former Assistant Secretary of Commerce and 
  Commissioner of Patents and Trademarks, Washington, D.C........    11
Marzulla, Nancie G., President, Defenders of Property Rights, 
  Washington, D.C................................................     4
Nelson, Hon. Bill, a U.S. Senator from the State of Florida......     1
Reinsch, William R., President, National Foreign Trade Council, 
  Washington, D.C................................................     5

                         QUESTIONS AND ANSWERS

Responses of Kenneth B. Germain to questions submitted by Senator 
  Leahy..........................................................    23
Responses of Bruce Lehman to questions submitted by Senator Leahy    31
Responses of Nancie G. Marzulla to questions submitted by Senator 
  Leahy..........................................................    36
Responses of William A. Reinsch to questions submitted by Senator 
  Leahy..........................................................    38

                       SUBMISSIONS FOR THE RECORD

Arechabala, Ramon, Miami, Florida, statements....................    45
Baucus, Hon. Max, a U.S. Senator from the State of Montana, 
  statement and attachment.......................................    52
Coalition for Property Rights, Doug Doudney, President, Orlando, 
  Florida, statement.............................................    56
Dinan, Donald R., Hall, Estill, Hardwick, Gable, Golden & Nelson, 
  Washington, D.C., letter.......................................    63
Florida Crystals Corporation, Parks Shackelford, Vice President, 
  Palm Beach, Florida, letter....................................    66
Germain, Kenneth B., Adjunct Professor of Law, University of 
  Cincinnati, Cincinnati, Ohio, prepared statement...............    67
Golden, William R., Jr., Kelley Drye & Warren LLP, New York, New 
  York, letter...................................................    78
The Hill, Jack Kemp, April 29, 2004, article.....................    91
Lehman, Bruce A., former Assistant Secretary of Commerce and 
  Commissioner of Patents and Trademarks, Washington, D.C., 
  statements and letter..........................................    94
Marzulla, Nancie G., President, Defenders of Property Rights, 
  Washington, D.C., statement....................................   103
New York Sun, Mark Falcoff, article..............................   109
Reinsch, William R., President, National Foreign Trade Council, 
  Washington, D.C................................................   110
Suchlicki, Jaime, Professor, University of Miami, Coral Gables, 
  Florida, letter................................................   120
sunherald.com, James E. Rogan, June 9, 2004, article.............   121
Trinidad, Diego, Trinidad U.S.A. Corporation, Miami, Florida, 
  letter.........................................................   122
United States Business and Industry Council, Washington, D.C.....   124
Veroneau, John K., General Counsel, Executive Office of the 
  President, Office of the Trade Representative, Washington, 
  D.C., letter...................................................   125




 
AN EXAMINATION OF SECTION 211 OF THE OMNIBUS APPROPRIATIONS ACT OF 1998

                              ----------                              


                         TUESDAY, JULY 13, 2004

                              United States Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:03 p.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Lindsey 
Graham, presiding.
    Present: Senators Graham, Kyl, Craig, and Leahy.
    Senator Graham. The hearing will come to order. Thank you 
all for coming and attending today, and if it is okay with you, 
Senator Nelson, I will just delay my opening statement and 
allow you to make any remarks you would like and introduce 
anyone you would like. So with great pleasure, I recognize 
Senator Bill Nelson from Florida.

STATEMENT OF HON. BILL NELSON, A U.S. SENATOR FROM THE STATE OF 
                            FLORIDA

    Senator Nelson. Thank you, Mr. Chairman. And I see I have 5 
minutes, but I will make it very quick.
    Senator Graham. You can run over if you like.
    Senator Nelson. I will just get right to the point on the 
question of Section 211 and trying to make the fix that has 
been necessitated as a result of groups on the international 
stage having made certain interpretations.
    The fix is basically so that if Castro had confiscated a 
trademark, that confiscated trademark would not be allowed to 
be used and sold in the United States. And that is the bottom 
line. And, of course, what we have is a series of personal 
experiences that will be told to the Committee where that has 
occurred. It is going to my pleasure--and it will be up to you 
as to the order that folks proceed, but at your pleasure, Mr. 
Chairman, Mr. Ramon Arechabala from Miami is going to tell you 
the personal and very sad story about when he and his family 
were forced to leave Cuba in 1960 and how they were forced to 
leave everything that his family had built over the years 
because they confiscated and claimed ownership of his family's 
business.
    Unfortunately, there are too many of those sad kind of 
tales, and now there are those who want to profit from that by 
taking those confiscated trademarks and using them in the sale 
of items in the United States. And I am here to tell you that 
this Senator, representing a lot of constituents who have, in 
fact, had their property confiscated, this is a property rights 
issue, Mr. Chairman. This technical fix that we need to make in 
Section 211 ought to be done. That is my position.
    Now, Senator Craig and I have a different position with 
regard to the embargo of Cuba. He is in favor of lifting the 
embargo. I am not. But that is not what this is. This is a 
property rights issue of confiscating property and who is the 
rightful owner of that property, in this case trademarks.
    So that is what I am here to speak on, and I thank you for 
letting me come and make my statement.
    Senator Graham. Thank you very much, Senator Nelson.
    Senator Nelson. I am going to enter, if you do not mind, a 
series of letters from various Florida interests, in addition 
to Mr. Arechabala and his testimony. If I may enter this into 
the record, I sure would be appreciative.
    Senator Graham. Absolutely, without objection.
    Senator Nelson. Thank you, Mr. Chairman.
    Senator Graham. Thank you, Senator Nelson.
    Senator Craig, would you like to make a statement at this 
time?

STATEMENT OF HON. LARRY E. CRAIG, A U.S. SENATOR FROM THE STATE 
                            OF IDAHO

    Senator Craig. I will make it briefly because I want to 
hear from those who are giving testimony.
    Bill, before you leave the room, Senator, I must tell you I 
totally agree with you. This is a property rights issue. It is 
nothing to do with lifting embargoes, and that is what we are 
here to discern.
    I voted for S. 211. I was here at the time of the 
happening, and I heard one side of the story. I have now 
reviewed international law and a failure to file a trademark 
and the trademark to expire and somebody else filing for it. 
And I do believe there is a legitimate argument to be made on a 
property rights issue. And that is what I hope we can hear from 
today.
    I totally agree with you and the passion you expressed 
about confiscation of property by Fidel Castro. That, in my 
opinion, is no longer the issue here. Clearly, he confiscated 
the physical properties of Havana Club. But the property right 
trademark resided in this country, not in Cuba. It was 
registered here. And it appears that the ability to re-register 
that with a $25 check did not happen. And years after that 
failure, the Cuban Government picked it up, some 3 or 4 years 
later.
    So our question is: How do we resolve this issue and still 
protect the hundreds of U.S.-based companies that have a 
legitimate concern about their trademark? Do we tweak this? And 
if we do, are we in compliance with WTO, or as my legislation 
does, simply abolishes 211? Because it now appears that I have 
fully examined the issue after having once voted for it. Some 
Senators find themselves in those positions over time when they 
look at the whole scope of the history, the issue and the law, 
to determine that my vote might have been ill-cast and that the 
legitimate position is the responsibility of going forth with 
refiling and keeping your trademarks current, and when they 
lapse they become anyone else's property who wishes to pick 
them up. And, in fact, can you then reclaim legitimacy to a 
property right that you lost by what appears to be a legitimate 
failure to act and a property right gained by someone else?
    It is a property rights issue, and I am not sure whether we 
can clearly demonstrate that all today. But hopefully with our 
witnesses and with testimony, we can move ourselves toward 
determining whether we can tweak 211 or, in fact, eliminate it 
altogether.
    Thank you.

 STATEMENT OF HON. LINDSEY O. GRAHAM, A U.S. SENATOR FROM THE 
                    STATE OF SOUTH CAROLINA

    Senator Graham. Thank you, Senator Craig.
    Ladies and gentlemen, I would like to welcome you to an 
examination of Section 211--that is a good lead-in--of the 
Omnibus Appropriations Act of 1998. Today, we will examine the 
complex issues surrounding Cuban trademarks and their continued 
viability in the United States and international commerce.
    As most of you know, Congress enacted Section 211 of the 
Omnibus Appropriations Act of 1998 to effectively prohibit 
Cuban nationals or their successors in interest from protecting 
certain trademarks or trade names in the United States. Under 
Section 211, unless the original owners have expressly 
consented, the United States Patent and Trademark Office is 
prohibited from accepting or renewing the registration of a 
trademark, trade name, or commercial name confiscated by Fidel 
Castro's regime during or after the 1959 revolution. U.S. 
courts are also prohibited from considering or enforcing claims 
involving such trademarks.
    Section 211 was challenged by the European Community and 
the WTO as being inconsistent with U.S. obligations under WTO 
agreements. A WTO panel issued a decision finding that Section 
211 was inconsistent with certain WTO requirements in some 
respects, but was either not consistent in other respects or 
not proven to be inconsistent in other respects by the European 
Community. I think that is what Senator Craig was trying to 
tell us.
    The European Community appealed the panel's ruling, and the 
appellate body issued a decision which reversed the lower 
panel's ruling in some respects. Essentially, the appellate 
body held that certain sections of Section 211 concerning court 
recognition or enforcement of trademark rights were 
inconsistent with U.S. responsibilities regarding the national 
treatment of trademarks and other commercial registry 
information, which brings us to where we are today.
    There are currently two different approaches to bringing 
the laws into compliance. Senator Craig has described one. 
Senator Nelson has described the other. And with that said, I 
would like to introduce our panelists now, and I will try not 
to butcher your names.
    Ms. Nancie Marzulla, please come forward. She is the 
president of Defenders of Property Rights, a national public 
interest legal foundation based here in D.C.
    Mr. William Reinsch--come forward, William--is the 
president of the National Foreign Trade Council based here in 
D.C.
    Mr. Arechabala--did I say it right, sir? Okay. Come 
forward. Thank you, sir. I think you have already been 
introduced.
    And Mr. Kenneth Germain and Mr. Bruce Lehman.
    Thank you all for coming and giving your time to the 
Committee, and if it is okay with Senator Craig, we will try to 
do 5-minute statements to the Committee, and we will start with 
Ms. Marzulla and work our way--oh, I am sorry. I have got to 
swear you in. Would you please stand up and raise your right 
hand? Do you solemnly swear that the testimony you are about to 
give to the Committee is the truth, the whole truth, and 
nothing but the truth, so help you God?
    Ms. Marzulla. I do.
    Mr. Reinsch. I do.
    Mr. Arechabala. I do.
    Mr. Germain. I do.
    Mr. Lehman. I do.
    Senator Graham. Please take a seat.
    Now, with that being done, we will start with Ms. Marzulla.

   TESTIMONY OF NANCIE G. MARZULLA, PRESIDENT, DEFENDERS OF 
               PROPERTY RIGHTS, WASHINGTON, D.C.

    Ms. Marzulla. Well, thank you very much. It's my pleasure 
to be here, and I am going to speak generally to the issue of 
the proposed technical correction to Section 211 of the 1998 
Omnibus Appropriations Act. And from our perspective, these 
corrections, while they are small and very technical, are 
crucial because they give tangible expressions to this 
country's unwavering support of individual rights and liberty 
or property rights. And, therefore, to the extent that there's 
any question in anyone's mind as to which side Congress should 
err on, obviously it should be in support of property rights.
    I'm here testifying as president of Defenders of Property 
Rights on behalf of the public interest. And Defenders was 
founded in 1991, and we actively work to protect individual 
rights in the form of tangible and intangible property in the 
courts, in the marketplace of ideas, and, of course, here in 
Congress.
    And I'm especially pleased to be here testifying once again 
before the Senate Judiciary in support of the legislative 
proposal which, in our mind, will strengthen and enhance 
property rights protection. I have two points to make.
    First, S. 2373, which will amend Section 211 to comply with 
the World Trade Organization's ruling, will forbid, as we heard 
earlier, recognition in the United States of trademarks 
unlawfully seized by Cuban officials. And that proposal is 
supported by a long and rich body of law. Federal courts have 
emphatically supported the notion that our courts will not give 
extraterritorial effect to a confiscatory decree of a foreign 
state against its own citizens. Federal courts have refused to 
join in partnership with foreign tyrants who seize property 
``actuated by coercion and fear of political reprisals.''
    There's a wonderful case out of the Second Circuit in which 
the Federal court reviewed the taking of a trademark following 
the communist takeover of Hungary, in which a company was 
nationalized. And the Second Circuit said Hungary could not 
give its decree extraterritorial effect and thereby emasculate 
the public policy of the United States against confiscation.
    Likewise, Judge Wisdom of the Fifth Circuit in a case 
involving, again, Cuban seizure of trademarks associated with a 
brewery, said, ``We hold that it is our duty to assess, as a 
matter of Federal law, the compatibility with the laws and 
policies of this country of depriving the original owners of 
the Malta Cristal trademark of that property without 
compensating them for it. We conclude that such a deprivation 
without compensation would violate bedrock principles of this 
forum, embodied in the Fifth Amendment to the Constitution.''
    My second point is that although Federal courts have 
refused to recognize the validity of trademarks unlawfully 
seized in foreign countries, Section 211 is still needed. This 
is because--and we have seen this repeatedly--that reliance on 
litigation in Federal courts as the sole means to protect one's 
property rights is unsatisfactory. It places an unfair burden 
on the property owner. Litigation to protect one's property 
right is slow, arduous, and extremely expensive.
    Take, for example, the Fifth Circuit decision I just 
mentioned, the case I quoted from Judge Wisdom. In that case, 
the original owner of the trademark was forced to litigate for 
over a decade to protect his rights in this country. He 
eventually prevailed, but it took over a decade to accomplish 
this. He went up to the Fifth Circuit over three times 
litigating procedural issues and technical defenses, all in an 
effort to protect his property rights.
    Likewise, I might underscore for this Committee that the 
same is true for property owners today who seek compensation 
for the unlawful taking of their property rights by their own 
government.
    Congress needs, this Committee needs to step up to the 
plate, enact laws that clearly direct Federal agencies--here it 
is the Trademark Office--to protect property rights and to 
protect the constitutional rights of our citizens.
    Thank you.
    [The prepared statement of Ms. Marzulla appears as a 
submission for the record.]
    Senator Graham. Mr. Reinsch?

 TESTIMONY OF WILLIAM R. REINSCH, PRESIDENT, NATIONAL FOREIGN 
                TRADE COUNCIL, WASHINGTON, D.C.

    Mr. Reinsch. Yes, thank you, Mr. Chairman. It is a pleasure 
to be here. I would like to ask, in addition to my full written 
statement, if I could also insert a letter that a number of our 
members have written on this subject.
    Senator Graham. Without objection.
    Mr. Reinsch. And one of a number of law review articles 
critical to Section 211. Not the whole book, Mr. Chairman.
    Senator Graham. Without objection.
    Mr. Reinsch. Thank you for the opportunity to be here. I am 
here on behalf of the National Foreign Trade Council 
representing 300 American companies who work and trade 
globally. Today, you are going to hear a story about the Havana 
Club trademark, and it is going to be a sad one, as Senator 
Nelson said, and it is going to tug at our emotions.
    My task is to try to take you beyond the politics and the 
emotion that surround this dispute between two companies and 
suggest that there are more fundamental issues that affect all 
of us here, both in the United States and around the globe. 
Those are: How do we protect the interests of thousands of 
American trademarks currently registered in Cuba? How do we 
ensure that the U.S. complies with all of its international 
obligations? And most importantly for this Committee, how do we 
ensure that our U.S. court system has the full authority to 
settle trademark disputes?
    That is why the NFTC supports S. 2002. It is the only way 
both to comply with WTO rules and to protect the interests of 
the more than 400 U.S. companies holding 5,000 trademarks in 
Cuba. In supporting S. 2002, which is Senator Craig's bill, I 
want to make clear that the NFTC does not take a position on 
the specific trademark dispute that underlies this issue. We 
believe it should be left to the courts and PTO to decide 
trademark disputes, and S. 2002, if enacted, would do precisely 
that, in contrast to the alternative proposal.
    The Committee is no doubt familiar with the history of 
Section 211. Previously, both Senators have alluded to it, and 
I will not repeat it here. We believe that only full repeat of 
Section 211 will address both the WTO violation that is at 
issue as well as remove any pretext for the Castro regime to 
retaliate against American companies because of our breach of 
obligations under the General Inter-American Convention for 
Trademarks and Commercial Protection. S. 2002 would also ensure 
continued U.S. leadership on intellectual property issues 
through the establishment of heightened standards, while 
bringing the U.S. into compliance with all existing treaty 
obligations.
    S. 2373, in contrast, for the benefit of a single company, 
asks the Congress to make it more difficult for U.S. companies 
to enforce their trademarks and trade names, to keep U.S. 
companies exposed to the risk of retaliation, and to continue 
putting U.S. law at cross-purposes with longstanding principles 
of U.S. trademark law and important intellectual property and 
trade policy objectives.
    The key point of our argument is that Section 211 violates 
the Inter-American Convention because it denies trademark 
registration and renewal on grounds other than those permitted 
by Article 3 and because it also violates Articles 8, 9, 18, 
29, and 30, and my written statement has a more detailed 
description of those problems.
    In the face of those violations of the Convention, 
customary international law permits a party to suspend the 
operation of the agreement in whole or in part. U.S. Federal 
courts have recognized the Inter-American Convention as 
governing trademarks and trade name relations between the U.S. 
and Cuba. Its suspension will result in great uncertainty 
regarding the legal status of U.S. company trademarks in Cuba 
and, we believe, retaliation. Castro and his officials have on 
several occasions threatened to retaliate against the trademark 
rights of U.S. companies in Cuba. Whether he will do so is 
anyone's guess. But given our members' experience in South 
Africa and our country's experience with Cuba over the past 40 
years, we are reluctant to bet that Castro will simply choose 
to be nice to American companies. Indeed, why should we even 
consider taking that risk?
    The South Africa case is instructive. During the U.S. 
embargo there, U.S. companies were prohibited from paying the 
fees necessary to file trademark applications. When the embargo 
ended, a number of companies, including Burger King, Toys R Us, 
7-Eleven, and Victoria's Secret, among others, discovered that 
their trademarks had been appropriated by unauthorized persons. 
Recovering the rights to their trademarks necessitated lengthy 
and expensive litigation and attempts to encourage the South 
African Government to amend its law.
    Had we maintained consistent and predictable IP relations 
with South Africa during the embargo, which is what we are 
proposing to do with S. 2002 with respect to Cuba, it would 
have saved many companies a lot of money and a lot of time and 
a lot of loss of good will.
    The current administration's Commission for Assistance to a 
Free Cuba has recognized exactly this problem, Mr. Chairman. In 
its May 6th report, the Commission recommended, ``The U.S. 
Government should encourage a Cuban transition government to 
provide assurances that it will continue to uphold its 
obligations under intellectual property agreements. Doing so 
early in the process would be an incentive to foreign 
investment and thereby facilitate Cuba's move to a free-market 
economy.''
    ``In the area of trademarks and patents, the U.S. 
Government should be prepared to assist a free Cuba to develop 
a modern trademark and patent registration mechanism and 
appropriate legal protections.''
    S. 2002 would do precisely that, and, Mr. Chairman, my full 
statement contains a description of the various provisions of 
the bill that would meet that standard.
    Finally, with respect to the larger point of U.S. 
intellectual property leadership, let me simply say the United 
States has long been a leader in securing intellectual property 
rights globally, in part because we have the most to lose if 
they are poorly protected. Section 211, in effect, we believe, 
tells the world that it is okay to limit trademark protection 
in certain obviously political circumstances. There are no 
doubt a lot of other countries who would welcome that message 
and would be happy to use it as an excuse to remove trademarks 
in situations that are politically important to them. That is 
not a message that we should be sending.
    Instead, I would urge the Committee to demonstrate its 
bedrock interest in secure protection of intellectual property 
rights by ensuring the rule of law here at home and keeping 
inviolate access by all parties to a fair hearing in our 
courts.
    To conclude, Mr. Chairman, I would argue that the Committee 
has two clear choices before it: You can support S. 2373, which 
advances the commercial interests of a single Bermuda-based 
company, or you can support S. 2002, which will repeal Section 
211 and will protect the interests of thousands of American 
trademarks registered in Cuba, will restore the full authority 
of the U.S. court system to settle trademark disputes--which is 
where we believe it belongs--will bring the U.S. into 
compliance with all of its international treaty obligations, 
not only the WTO, and will, finally, preserve the U.S. 
leadership in the global protection of property rights.
    Thank you.
    [The prepared statement of Mr. Reinsch appears as a 
submission for the record.]
    Senator Graham. Mr. Arechabala?

         TESTIMONY OF RAMON ARECHABALA, MIAMI, FLORIDA

    Mr. Arechabala. Mr. Chairman, good afternoon. My name is 
Ramon Arechabala. I am here today to testify in support of 
Senate bill 2373.
    My great-grandfather, Jose Arechabala, was the founder of 
my company in Cuba in 1878, which made Arechabala and Havana 
Club rum. Castro, on December 31, 1959, at gunpoint, took all 
my assets and threw us out of the company and removed us from 
being able to go to work at the company. After a little while, 
I was doing some work in Havana, and every single time I was 
successful, he cut me down and took over. Finally, he threw me 
into jail, and I was released from jail on two conditions. He 
told me, ``You do not belong to this society. Either you get 
the hell out of this country, or you are going to stay in jail 
with some cause that we will find for you.''
    So I left with my wife and my son for Spain. After I was in 
Spain for a little while, I came to Miami. I became an American 
citizen, and I have lived in Miami since 1967.
    My cousin, who was a lawyer of the company, was thrown in 
jail in Cuba, and he is still in Cuba right now, and he was the 
corporate lawyer of the company, and he was the one that knew 
all about the assets and all about the registration of 
trademarks and about the whole thing.
    I attempted to raise money to make Havana Club rum in this 
country again, but I was unable to do it. I tried joint 
ventures. I went all over the place, and there was no way to do 
it. I even went to see Orfilio Pelaez at Bacardi in Nassau, 
Bahamas, and I told him about what I needed, and he says, 
``Well, let me think about it. I will let you know. I will get 
back to you.'' A little while later, he did not get back to me, 
and I learned that he had got sick and he had died.
    So I tried some other joint ventures with some people from 
Santa Domingo, but they told me, ``Ramon, no dice. We do not 
have enough money for that.''
    I talked to a lawyer in Miami, and he told me--I asked him, 
``Can I renew the registration of Havana Club rum in the United 
States?'' He said, ``No way, unless you make the rum, you 
cannot register the brand.'' I said, ``Okay, forget it.'' I was 
not going to deceive the country saying, yes, I want to 
register the mark because I am making rum. It was not true.
    So I went back to Bacardi and talked to Juan Prado, and I 
told him what the situation was, and he helped me out. At the 
time I found out before then that Pernod-Ricard--I read it in 
the paper--had signed a deal with Fidel Castro. I wrote a 
letter to Mr. Patrick Ricard and stated to him that Rum Havana 
Club belonged to my family, only to my family and myself, and 
we had never sold it to the Cuban Government, that he was doing 
something illegal from my point of view. No matter what, some 
days later, he made an offer to my family in Spain to buy the 
rights to distribute Havana Club rum all over the world. But it 
was ridiculously low, so they turned it down.
    When I was talking to Juan Prado, I told him, ``Look, Juan, 
what we need is to make Havana Club rum in Miami, to promote it 
and sell it in the United States.'' And he says, ``Well, let me 
see what we can do about this.'' Finally, we made an agreement, 
and we hopefully would try to make some rum pretty soon. But 
the reason that--what happened to my family was wrong. We 
wanted to keep selling Havana Club rum, but we were prevented 
from doing so because of this confiscation of the distillery, 
this robbery of my distillery, my business in Cuba. Castro's 
wrong to me and my family continues today because the Cuban/
Pernod venture continues to trade off Havana Club's reputation 
with a product that can never be the same Havana Club rum that 
we used to make. The government stole my assets, my family 
heritage, and much of my children's future. Section 211 
prevents that wrong from spreading into the United States, and 
its protection should not be denied because of the veiled 
threats made by Pernod on behalf of its partner, Cuba. Section 
211 will protect my rights and the rights of other Cubans that 
are in the same situation.
    [The prepared statement of Mr. Arechabala appears as a 
submission for the record.]
    Senator Graham. Thank you, sir. Thank you very much.
    Mr. Germain?

  TESTIMONY OF KENNETH B. GERMAIN, ADJUNCT PROFESSOR OF LAW, 
           UNIVERSITY OF CINCINNATI, CINCINNATI, OHIO

    Mr. Germain. Mr. Chairman and members of the Committee, my 
name is Kenneth Germain. I live in Cincinnati, Ohio, and I am a 
partner in the law firm of Thompson Hine LLP and an adjunct 
professor at the University of Cincinnati College of Law. Thank 
you for the invitation to testify today at this hearing on 
Section 211. I have submitted a written statement and exhibits 
and ask that these be made part of the record.
    Since my first appearance before this Committee some 20 
years ago, when I testified on the Trademark Clarification Act, 
my practice has focused on all aspects of trademark rights and 
on fair competition. I publish and speak extensively, having 
been invited on more than a dozen occasions to speak to the 
U.S. Patent and Trademark Office and to the administrative law 
judges of the Trademark Trial and Appeal Board. I also have 
served in an expert witness capacity in civil cases involving a 
wide variety of trademark and unfair competition issues. My 
qualifications and honors are further detailed in my resume, 
which is attached as Exhibit 1 to my written statement.
    Very recently, I was retained by Collier Shannon Scott, 
PLLC, on behalf of Pernod-Ricard to serve in a neutral 
capacity, according to my typical practice as an expert witness 
in court cases. Aside from my usual compensation for work of 
this type, which is not dependent in any way upon the outcome 
of the controversy, neither my law firm nor I have any other 
financial interest in this matter. I have never previously been 
retained by Collier Shannon Scott, PLLC, Pernod-Ricard, or any 
other company that, to my knowledge, has taken a position on 
Section 211.
    I have listened attentively to the other presentations 
given today. I find myself moved by the injustices of the Cuban 
confiscation and concerned about some of the continuing 
international consequences and complexities. Although I am not 
here today to comment on the merits of the Havana Club 
trademark case now pending in the courts, I am very concerned 
about the anomalous effects of Section 211 on established 
policies and doctrines of U.S. trademark law pertaining to 
trademark abandonment. I have concluded that U.S. courts should 
not be foreclosed from assessing and applying the full range of 
U.S. trademark law, policies, and doctrines relating to 
abandonment. Therefore, I believe that Congress should repeal 
Section 211, which S. 2002 would do. I also believe that 
Congress should not enact S. 2373 because it would leave 
Section 211 in place, albeit in amended form. Let me explain 
why.
    Under U.S. trademark law, marks can be abandoned. An 
abandoned mark no longer enjoys either substantive or 
procedural rights because, by definition, it is no longer a 
mark. Therefore, an abandoned mark is available for adoption 
and use by anyone else and for any purpose, even for use on the 
identical goods in connection with which it previously was used 
by the abandoning party.
    Courts considering abandonment typically take into account 
a wide range of factors which can include the intent of the 
purported owner and its acts and omissions with respect to the 
mark, as well as recognition of the mark by consumers in the 
marketplace. The effect of Section 211, as interpreted by the 
Second Circuit in its 2000 Havana Club case was and is to oust 
abandonment in the specific context of U.S. rights purportedly 
held by Cuban entities from the normal critical role it has 
long played in U.S. trademark law. The Second Circuit reached 
this result by vaulting the term ``was used,'' found in Section 
211, over pre-existing and normal understandings of the term 
``is used,'' as found in various places in American trademark 
law.
    Section 211 is inconsistent with the central requirement of 
bona fide commercial use for trademark protection. 
Specifically, Section 211 precludes courts from considering 
whether a mark has been abandoned and thus no longer is 
eligible to be asserted to prevent third parties from acquiring 
rights in the mark. This gives rise to the anomaly of Section 
211--deadwood marks interfering with the otherwise lawful 
adoption and use of similar or identical marks by others. 
Moreover, Section 211 runs counter to the longstanding 
trademark policy of permitting the courts to consider wide-
ranging facts and circumstances in determining which party has 
superior rights to a mark.
    Repealing Section 211, as S. 2002 would do, would return to 
the courts the full authority to consider trademark abandonment 
in all disputes in which the issue arises. Because doing so 
would be consistent with longstanding U.S. trademark law and 
related policy, I support repeal of Section 211. On the other 
hand, I oppose S. 2373 because, by leaving Section 211 in 
place, albeit in amended form, S. 2373 would not return this 
authority to the courts.
    In closing, I would like to make clear that repeal of 
Section 211 would not decide the question of who owns any 
particular mark, including the Havana Club mark at issue in the 
Federal courts. Rather, repeal of Section 211 simply would 
enable the courts to consider the full range of legal and 
factual issues typically considered in determining which party 
has superior rights to a mark.
    Thank you for the opportunity to talk with you today. I 
would be happy to take any questions you may have about my 
testimony.
    [The prepared statement of Mr. Germain appears as a 
submission for the record.]
    Senator Graham. Thank you.
    Mr. Lehman?

  TESTIMONY OF BRUCE A. LEHMAN, FORMER ASSISTANT SECRETARY OF 
     COMMERCE AND COMMISSIONER OF PATENTS AND TRADEMARKS, 
                        WASHINGTON, D.C.

    Mr. Lehman. Thank you very much, Mr. Chairman, Members of 
the Committee. Thank you for the invitation to appear here 
today. I am Bruce Lehman, and I have been before this Committee 
on many occasions in an official capacity when I was actually 
serving in the same administration as Mr. Reinsch. But this is 
the second time that I have been actually asked to appear as a 
private citizen. The first was several years ago, actually 
before I went into my last round in Government, when Senator 
DeConcini was Chairman of the Intellectual Property 
Subcommittee and asked me to offer testimony somewhat like this 
as an expert on an issue involving legislative patent term 
extensions.
    The views that I am expressing today are my own. They do 
not necessarily reflect those of any other member of the board 
of directors or any other person associated with the 
International Intellectual Property Institute, of which I am 
chairman. The institute does not take positions on legislation. 
Further, I am not being and have not been compensated by any 
party for this testimony, nor am I representing any party in 
interest as an attorney or lobbyist or, for that matter, as an 
expert witness in a case, in this case or a related case.
    Now, during my tenure as President Clinton's Commissioner 
of Patents and Trademarks from 1993 through 1998, I was often 
the U.S. Government's point person on international 
negotiations on intellectual property rights. The United 
States' negotiating position always was clear--and this carried 
through all the administration in modern times that I am 
familiar with--that piracy and confiscation of intellectual 
property rights should be outlawed. And, indeed, that was the 
great accomplishment of the TRIPs Agreement, which was probably 
the greatest accomplishment of my life to be involved in 
negotiating that treaty. And so I believe to the core of my 
soul that intellectual property rights need to be respected, 
and it is very much in the interest of the United States.
    Now, we are dealing here with a situation, of course, in 
which the mark involved, the Havana Club mark, originally was 
confiscated; it was taken without compensation by the Cuban 
Government. And then we have a whole lot of litigation and 
various activities that have followed that, and you have heard 
something about that. But the point that I would like to make 
to you here first is why are we sitting here today.
    Well, we are sitting here because we have a WTO decision in 
a case brought by the European Union that challenged whether or 
not Section 211 of the Appropriations Act of 1998 was 
consistent with the TRIPs Agreement.
    Now, the interesting thing to me about the WTO decision 
was, for the most part--and, by the way, that is a 100-page-
plus decision; I do not know if you have read it--that the WTO 
appellate body did not disagree or find in noncompliance the 
fundamental thrust of Section 211. They really did not take 
exception to the policy of Section 211, which was to give non-
recognition to these confiscated marks.
    The WTO decision very narrowly suggested that the flaw in 
Section 211 was that it violated the principle of national 
treatment because non-Cuban nationals were treated differently 
under Section 211 than Cuban nationals. And that is an 
understandable thing, by the way, because if you read Section 
211, it incorporates or references back to our embargo law and 
regulations, and they are obviously addressed to Cuba. So it 
was just really a drafting mistake.
    Now, if we do not pass any legislation to correct this, the 
U.S. will be in violation of the TRIPs Agreement and there will 
be retaliation. So Congress must act to correct this. But, 
clearly, the best way to act to correct it will be to make the 
very modest changes that are proposed in the Domenici bill, 
which really go to this National treatment issue. It is as 
simple as that.
    Now, I have looked at the other bill, and I would want to, 
you know, indicate my respect for Senator Craig. But I really 
think that if that is the route that Congress wants to go, we 
have a very serious problem because I think that it is rife 
with many difficulties and, indeed, might even in itself 
violate the TRIPs Agreement.
    Just one aspect, for example, of that bill that I am very 
troubled by is that it requires that we would create a registry 
of well-known marks in the United States that would have to be 
submitted in Cuba. Now, you know, this is an issue that came up 
in the negotiation of the TRIPs Agreement and has come up 
since, because the TRIPs Agreement, one of the nice things 
about it is that it grants rights to well-known marks that we 
did not have before. And many countries, many developing 
countries particularly, have wanted us to say which marks are 
well-known marks, we have to have a registry. And we have 
generally resisted that because we want that to be determined 
on a case-by-case basis. So that is just one example of the 
flaws--and I could go into others--in Section 211.
    So I really think, Mr. Chairman, that we really need to 
focus on why we are here. It is that we have a problem with the 
WTO panel decision that has to be corrected. The bill before 
you, Senator Domenici's bill, corrects that. The other 
approaches would, I think, just get us into a lot more trouble.
    [The prepared statement of Mr. Lehman appears as a 
submission for the record.]
    Senator Graham. Thank you very much. Thank you all for your 
testimony.
    Senator Kyl, would you like to make a statement at all?
    Senator Kyl. No, Mr. Chairman. I came here to learn.
    Senator Graham. Okay. Well, so did I.
    Our Ranking Member, Senator Leahy, would you like to make a 
statement or would you want to lead off in questions?
    Senator Leahy. I will insert a statement, Mr. Chairman, and 
basically in that statement, I want to make sure that we are 
handling this issue carefully. The Section 211 provision we are 
examining did not go through the normal process. Usually, if 
things go through the normal process, it may look slow at 
first, but they come out better and you do not have to keep 
going back to them. This provision was put in an appropriations 
bill under the radar. Most of us never got to see it. And I am 
afraid of what it might do, especially after WTO found that it 
violated the Agreement on Trade-Related Aspects of Intellectual 
Property Rights, it may have even further problems. That is why 
I objected when even more wanted to be done, I think it was the 
defense appropriations bill. So I am glad you are doing this. I 
am glad we are having a full hearing. If I am unable to stay, I 
will put my questions in the record because I do not see any 
provision moving until we have had a chance to actually get a 
lot of questions answered. And then we may well have 
legislation that should move.
    Senator Graham. We will introduce your statement, without 
objection.
    [The prepared statement of Senator Leahy appears as a 
submission for the record.]
    Senator Graham. Would you like to ask any questions now?
    Senator Leahy. Well, Mr. Chairman, did you want to inquire?
    Senator Graham. I will defer to you.
    Senator Leahy. Well, I appreciate that. I appreciate that 
very much.
    My first question would be for Ms. Marzulla. In today's 
edition of The Hill, your husband, who is also, as you know 
better than anybody else, general counsel to Defenders of 
Property Rights, stated that your organization has no knowledge 
of whom this bill helps or hurts. Would your opinion that you 
have already stated of S. 2373 change if it turned out from 
study of this that U.S. trademarks in Cuba are put at risk? I 
believe there are about 5,000 U.S. trademarks in Cuba. Would 
your opinion change at all if it turned out that was the case?
    Ms. Marzulla. Well, thank you, Senator Leahy. I have not 
read--I guess there was an article that was published this 
morning. I have not read it, so I do not know what it says. 
Based on your statement as to what he allegedly said, I guess 
that we are not aware of who the bill either protects or who it 
is designed to protect--
    Senator Leahy. But my question was--let's assume that it 
was a statement given by anybody.
    Ms. Marzulla. Okay.
    Senator Leahy. Would that statement be a valid one if it 
turned out that 5,000 U.S. trademarks in Cuba were put at risk?
    Ms. Marzulla. Well, let me clarify, Senator, what our 
support is of this bill and what it means when I say we support 
this proposal.
    I have read the portion of the WTO's decision regarding 
Section 211, and I understand what this proposal is designed to 
do, which is a very narrow, technical fix for a provision which 
purports to codify a principle which is well established in 
Federal law, and that principle is that Federal courts will not 
enforce the validity of a trademark that is in the United 
States that was confiscated by a tyrant abroad.
    So to the extent that you are suggesting that a tyrant in 
Cuba, Castro, is going to retaliate against American companies 
if we enforce our constitutional principles here, I would say 
that would be horrible, that would be terrible, it would be 
unfortunate. But we in this country must stand firm on the 
constitutional underpinnings upon which this country was 
founded.
    Senator Leahy. Have we had any situations where a 
confiscated U.S. trademark was upheld by the courts prior to 
the passage of Section 211?
    Ms. Marzulla. I do not know the answer to that question.
    Senator Leahy. I was not able to find any. That is why I 
asked the question.
    Ms. Marzulla. Are you saying are there cases before this 
decision?
    Senator Leahy. Yes.
    Ms. Marzulla. I am sorry. I misunderstood your question. 
There are cases throughout the century in which courts have 
upheld the validity of trademarks--or, excuse me, have not 
upheld the validity of trademarks that were confiscated 
elsewhere.
    Senator Leahy. I am asking if you can think of any where 
they were upheld. In other words, you have a confiscated U.S. 
trademark. Are there any situations that you are aware of prior 
to Section 211 where that was upheld, that trademark was upheld 
by a U.S. court?
    Ms. Marzulla. Yes. There are district courts that have 
upheld them. They have been reversed on appeal. Now, if there 
are district courts that have not been reversed on appeal, I do 
not know. I have not done that exhaustive of a survey.
    Senator Leahy. So the appellate law, which, of course, 
would then control all the district courts within that circuit, 
has not upheld them?
    Ms. Marzulla. Correct, but I will underscore the fact that 
I have not done an exhaustive survey of every decision.
    Senator Leahy. I just could not find any, and so I just 
wanted to know if you have more expertise in this than I have. 
And as I said, I could not find any, but I just wanted to 
check.
    Mr. Reinsch, you say that Section 211 in S. 2373 violates 
the IAC and puts U.S. trademarks in danger of retaliatory 
action by Cuba. Some have said such a claim is inaccurate, that 
S. 2373 has been extensively vetted within the administration. 
Is the administration wrong to conclude S. 2373 would comply 
with the Inter-American Convention, in your opinion?
    Mr. Reinsch. My understanding is that they have not 
concluded that, Senator Leahy. I know in my conversations with 
the administration, they have indicated that both bills would 
adequately deal with the WTO problem. Obviously repeal deals 
with it. And they have taken the position that S. 2373 would 
deal with the WTO problem.
    I am not aware that the administration has made a statement 
about compliance with the Inter-American Convention.
    Senator Leahy. Mr. Chairman, I will just submit for the 
record one of the questions I will submit for everybody: Would 
a simple repeal of Section 211 solve the problem of WTO 
sanctions and potential violations of IAC? And does S. 2372 
solve the WTO problem? I would be delighted to have your 
answers because, like everybody else, I figure I am wrestling 
with this issue.
    Thank you.
    Senator Graham. Without objection, that question will be 
submitted, and everyone will have a chance to answer it.
    Senator Leahy. Thank you for the courtesy.
    Senator Graham. Senator Craig?
    Senator Craig. Mr. Chairman, thank you very much.
    In the process of all of this, probably Ramon Arechabala 
and I are the non-attorneys in the room and know less about 
this issue than most of you who have at least held yourselves 
out to be experts in the field, and we trust and respect that. 
But because I, like Senator Leahy, once voted one way--did you 
vote for 211, do you recall, Pat?
    Senator Leahy. I did.
    Senator Craig. He did. I did. And as I began to examine the 
issue, it is very difficult for those of us who vote one way to 
look at something and decide maybe we voted wrong and ought to 
look at it a different way. And I have tried to do that to 
understand the issue.
    So, Nancie, what I would like to do, and Bill and Ramon and 
Kenneth and Bruce, is walk us through a timeline of events. 
That is how I think I can better understand this issue. And 
please feel free to interject as it relates to my 
misinterpretation or misunderstanding of this issue.
    I also, in the art of full disclosure, will tell you that 
Nancie and her husband's Defenders of Property Rights group, I 
have served as an adviser to, have worked very closely with 
them in the past, and as someone who is a staunch defender of 
property rights, I do not take second place to that. I probably 
do not take second place to the anger and the emotion of a 
dictator and revolution and a confiscation of private property, 
as I am sure my colleagues both to my right and left do and 
agree with me on.
    So what I would like to do to try to understand this--and, 
again, we are talking about fine-tuning versus repealing and 
what best fits the protection of property rights, not only 
universally, but I have to be a bit parochial and say U.S. 
company property rights in compliance with the WTO and other 
international trade organizations and/or conventions.
    It is 1959, and Castro takes over Cuba under a revolution, 
and Mr. Arechabala has just expressed that by December 31 of 
1959--
    Mr. Arechabala. That is correct, sir.
    Senator Craig. --he was kicked out of his company, thrown 
out, taken over by a communist government. That is 1959. In 
1960, officially, the Cuban Government takes over Havana Club.
    In 1973, 14 years later, the Arechabala family fails to 
renew claim to Havana Club trademark with the U.S. Patent and 
Trademark Office, as required, and that is a letter of intent 
and a $25 check to re-register. That did not occur, 14 years 
later. To our knowledge, Castro had not tried at that time to 
lay claim or any time during that 14-year period to the 
trademark. He had confiscated the property, the production 
unit, but he had not gone after the trademark. He had 
confiscated the property, the production unit, but he had not 
gone after the trademark. In fact, it was not until 17 years 
later, 3 years after the abandonment--and that is what it has 
to be called because that is what is called inside the system 
and legally. In 1976, the Havana Club trademark registered with 
the Patent and Trademark Office by Cuba Export, a Cuban state 
enterprise, 17 years after the taking of the property, does 
Cuba go after the trademark that had been abandoned and claims 
it. And then part of the rest of it is history, but in 1993, 
you have got a French company who develops a relationship with 
the Cuban enterprise, works its way down through it, and then 
you have got the Bacardi family attempting to market the U.S. 
rum made in Bahamas under the Havana Club label. And then it 
gets into the courts, and while it is in the court, the 
Senators from Florida introduce 211 into an appropriation bill, 
and I vote for it. And that stopped the court action at that 
time because the Congress has spoken specifically and only to 
this entity. To our knowledge, it had no impact on any other 
U.S. company. In fact, this was not even a U.S. company. 
Bacardi is registered in the Bahamas. We are not dealing with a 
U.S. company here. To our knowledge, S. 211 does nothing for 
any U.S.-based company.
    Now, if I am wrong, please feel free to interject when I 
have finalized here. To our knowledge today, we are speaking of 
an entity, not U.S. companies. In fact, that is why U.S. 
companies are coming out and saying, wait a moment, here, 
protect us, make sure we are in compliance so that our 
trademarks and rights are protected. And, of course, I think 
you, Mr. Lehman, mentioned that in 1990, 2000, a U.S. district 
court judge rules that Section 211 prevents her ruling in the 
French and Havana Club joint venture, and Bacardi wins the 
lawsuit in that instance. And you were mentioning how the law 
was tweaked with ``was used'' versus ``is used.''
    Am I right in my assumption that obviously a dastardly deed 
was done to this family? No question about it. Confiscation of 
property in revolution. But I also am told and my research 
reflects--and here I get a little critical of your family, 
sir--its failure to honor and register and keep current 
trademarks. I am told that Havana Club, the trademark 
registrations for Havana Club in Spain and the Dominican 
Republic were allowed to expire in 1955. That is 5 years before 
the Cuban Government nationalized the company in Cuba. There 
was an appearance of a failure to do due diligence all the way 
through here, and now we have 14 years after the confiscation 
of property an abandonment, and 17 years later the non-entity, 
if you will, the new entity coming in and registering and 
claiming the trademark. In other words, here, Nancie, we are 
talking property rights. And while none of us here will agree 
that Fidel Castro should have done what he did and all of us 
are angered, and for 40 years we have been angered by the fact 
that he confiscated or stole property under the name of a Cuban 
communist government, the record demonstrates to me that he did 
not come after the property rights that we control or claim on 
behalf of a company until well after they were abandoned and, 
therefore, it appears legitimately claimed them with a $25 
check.
    Where am I wrong in that timeline and scenario as it 
relates to what this is and what it is not? I knew what it was 
told to me to be when I voted for 211. What I have read and 
researched is the rest of the story. Am I accurate or am I 
inaccurate? Kenneth?
    Mr. Germain. Thank you, Senator.
    Senator Craig. Turn your mike on if you would, please.
    Mr. Germain. Thank you, Senator. I do not think you are 
wrong, and I also do not think that the focus should be on the 
failure of the Arechabala family to file a document and pay a 
small U.S. PTO fee, although that was a significant non-action.
    Senator Craig. But doesn't that determine abandonment 
versus non-abandonment?
    Mr. Germain. It does determine whether the registration was 
abandoned, and, clearly, the registration was abandoned. It 
could have been continued on the basis of excusable non-use in 
the United States with a proper declaration and the payment of 
the appropriate fee, which was not very much.
    But the more important thing from my perspective is: Was 
there truly a mark in the United States, a Havana Club mark, at 
that time? And I answer that question in the negative. The 
reason for that is that trademark law fundamentally is common 
law. At bottom, it is based on use in a marketplace.
    Now, they had been using this mark in the marketplace, in 
the United States marketplace, before the confiscation 
occurred. Then it stopped. Now, when a mark no longer is in 
use, you lose it, especially if it goes on that way for many 
years such that the marketplace probably forgets that that mark 
is a mark, was a mark. It is not anymore.
    So what happened here is for many years this family allowed 
its registrations in various countries to lapse, made few, if 
any, efforts to bring this mark back into existence in the 
United States--
    Senator Craig. We did hear by Mr. Arechabala's testimony 
that there was an effort personally on his part to get 
something going again.
    Mr. Germain. Right, but the law of trademark use does not 
recognize back-door, back-seat, back-room efforts, deals that 
do not happen, that do not occur in the marketplace. It only 
recognizes what really happens in the marketplace. And after 
that registration lapsed, then the other company came forward 
and filed a perfectly legitimate application using Section 44 
of the Lanham Act, not based on U.S. use but based on 
registrations elsewhere, received the registration; and 
although it could not sell Havana Club rum in the United States 
either, when it came time for that registration to have what we 
call the 6-year affidavit filed, it filed it on the basis of 
excusable non-use. It did things right. It did the most it 
could do to create a trademark or trademark rights in the 
United States at that time.
    Senator Craig. Okay. Mr. Lehman?
    Mr. Lehman. Senator, you asked about the timeline, and you 
specifically referred--I think a lot of your concerns went back 
to the 1976 registration by Cuba Export of the Havana Club mark 
in the U.S. PTO.
    Senator Craig. Well, my first concern was: Was there a 
legitimacy of the argument of abandonment of the mark?
    Mr. Lehman. Yes, there is a legitimacy of the argument of 
abandonment.
    Senator Craig. Then you talked about the need to 
demonstrate its activity and all of that in a market.
    Mr. Lehman. It is very clear that there was a problem with 
abandonment of the original Havana Club mark. But I think that 
you have to look at the circumstances there. I think the 
secretary of the company was in jail for 10 years under Mr. 
Castro. It was kind of hard to carry out some of the business 
activities. But I think the real issue here--I want to say 
something about the PTO here. The PTO did indeed register this 
mark in 1976 for Cuba Export. But when the PTO registers marks, 
it does not look into things like is the mark a confiscated 
mark, does it violate the embargo regulations, and so on and so 
forth. All it looks at is really the question of whether the 
trademark standards have been met. In other words, is this a 
mark that is not confusingly similar with another mark and so 
on and so forth? It does not make any judgments about the 
veracity of the ownership of the mark. And that is really what 
is at issue here.
    Senator Craig. Is it required to?
    Mr. Lehman. No, it is not. But that is--it is not, and that 
is really what is at issue here, and that is really what the 
policy of Section 211 was. Now, you know, maybe there is--
    Senator Craig. Well, let me ask this, then, Mr. Lehman: Is 
it important that they determine whether the mark is currently 
registered and/or abandoned before they would issue it to 
someone else? Did they have to do due diligence there?
    Mr. Lehman. Well, obviously, had the original Arechabala 
mark still been in effect, then they would not have been able 
to give the mark to Cuba Export, absolutely. The point is they 
did give it to Cuba Export, and the policy of Section 211 that 
we are dealing with is: Should Cuba Export or any Cuban company 
have a mark or be able to transfer the rights to a mark that 
was confiscated? And that is the policy of Section 211, and I 
happen personally to agree very strongly with that policy 
because that is the very central policy of U.S. intellectual 
property trade diplomacy for the last 20 years, and it is 
embodied in the TRIPs Agreement.
    I want to just say a word here about--because it goes to 
this very question. Mr. Reinsch said we are here for one 
company. That is not true. There are two companies involved. 
There is Pernod-Ricard and there is Bacardi. Pernod-Ricard 
derives its rights from a Cuban confiscation, from a Cuban 
company, which, as we just heard Mr. Germain said, cannot even 
sell or use the mark in this country because we have a public 
policy against permitting them to do so. And so are we to let 
Pernod-Ricard do so?
    Now, the WTO looked at this. They looked at that policy, 
the very policy that I just described, and they said that 
policy is TRIPs-consistent. The only problem with Section 211, 
the only problem is that it treats Cuban nationals different 
from non-Cuban nationals, and that is the correction that is 
made in the legislation before you.
    Were you to adopt the position that Senator DeConcini 
just--I mean Senator Leahy. Sorry, I am still back in the old 
days--that Senator Leahy just enunciated and, that is, repeal 
Section 211, I am afraid you would send a terrible message to 
the TRIPs Council, to WTO, to everybody else, that, you know, a 
policy which they had approved of we are all of a sudden 
abandoning, and we are saying that it is okay to trade in 
confiscated stolen marks.
    Senator Craig. Well, Mr. Chairman, you have been very 
lenient with time here. Let me only comment. I appreciate the 
passion that Mr. Lehman brings 38 years after the fact, 14 
years, 17 years after the fact. Now, there has to be a period 
of time of reasonableness here. You know, my passion and yours 
would be the same and is the same as it relates to confiscated 
properties, especially if the confiscating government comes 
immediately after the mark or attempts to immediately justify 
it. They clearly waited until it was well expired before they 
moved.
    Now, my point is, I guess, can I draw the same passion at 
that point? Does there need to be a consistency? Or are we, by 
repealing 211, denying the very thing that Nancie spoke of 
earlier, that we go after tyrants, we do not recognize tyrants. 
Now we are 38 years later, and the question is at hand. That is 
what we have got to deal with here.
    Thank you, Mr. Chairman. Anyone else who wishes to comment, 
I will reserve my time and come back to them.
    Senator Graham. Thank you. I am going to have to leave at 
about quarter after, and it is probably to be continued.
    Senator Craig, your knowledge of this far exceeds mine. It 
has nothing to do with going to law school. You obviously have 
done your homework. And I am a very novice lawyer when it comes 
to trademark law, so I have been trying to listen to this, and 
I have a bias, obviously. I am not a big fan of Fidel Castro. 
That is a bias. But I do respect the rule of law.
    It seems to me that the equities of the situation, you 
know, we are having a mini-trial about what abandonment is. The 
best place to probably have a trial is in court, not here. I 
think that is what you are trying to tell us.
    Mr. Reinsch. Exactly, Mr. Chairman.
    Senator Graham. However, from a public policy point of 
view, there is an equitable scenario that has to be dealt with. 
Basically, does Fidel Castro deserve protection of the rule of 
law after he originally created a scenario where he could care 
less about the law? Because basically he is deriving benefit 
from the abandonment law, and the way that this all came about 
is that he took your property by the force of a gun. And I do 
not know as a judge how I would rule on that, but as a 
policymaker, I have a very hard time looking at the law of 
abandonment in this case as you would in any other case, simply 
because what got the Arechabala family into the situation was 
somebody who took the law into their own hands.
    My question to you, Mr. Reinsch, is: For 6 years, Section 
211 was the law of the land here. Did Mr. Castro during that 6 
years ever use it to retaliate against an American company?
    Mr. Reinsch. He has not yet. He has threatened to do so 
personally, as I recall on at least one occasion, and some 
other of his minions have done so on other occasions. Our 
belief is that he is waiting for the outcome of this issue. It 
has been apparent, as you probably know, Mr. Chairman, that 
when the WTO made its decision, it has regularly provided for 
6-month periods for us to comply, and it has regularly extended 
those periods for the last several years. Each time there is a 
little debate at the WTO over the extension. It has been 
apparent each time that the Cuban Government is watching this 
process very closely and has been--
    Senator Graham. Do you agree with the statement that Mr. 
Lehman made that the WTO and their ruling upheld the concept 
that it is lawful to not let a country or regime benefit from 
seizing property legally?
    Mr. Reinsch. Well, I have looked at the ruling. I am also 
not a lawyer, I should say to Senator Craig, so I am at a 
disadvantage vis-a-vis Bruce. My interpretation of the ruling 
has been to look at it from the other point of view. What they 
found was that we were in violation of the most fundamental WTO 
principle, which is the principle of national treatment. What 
they found was that we were discriminating against different 
classes of people.
    Senator Graham. Right, but he has given a reason for that.
    Mr. Germain, you represent the French company--what is the 
name of the company?
    Mr. Germain. I do not represent that company. Pernod-
Ricard.
    Senator Graham. Okay, I am sorry. I thought you did. Did 
you testify on their behalf? Did I miss something there?
    Mr. Germain. Yes, there is a difference, Senator.
    Senator Graham. Okay, truly a difference. I am not saying 
you--
    Mr. Germain. Yes. I am testifying as an expert witness--
    Senator Graham. I do not want to even associate you with a 
company if you are not. And it is okay to testify. I am a 
lawyer. I like people who give testimony. That is a good thing.
    Did the company try to buy anything from Mr. Arechabala?
    Mr. Germain. I understand at one point from what he said 
that Pernod-Ricard did approach him and his company and tried 
to buy some rights.
    Senator Graham. What rights were they trying to buy, if he 
had none?
    Mr. Germain. Oh, it is not that unusual for a company that 
wants to have a trademark and have it free and clear and 
without problems to seek to buy whatever rights might possibly 
exist somewhere.
    Senator Graham. Do you know how much they were going to pay 
for those rights?
    Mr. Germain. No, I do not.
    Senator Graham. Okay. Mr. Lehman, do you stand by your 
statement that the WTO's ruling upholds the concept that it is 
legal to make sure a regime does not benefit from confiscating 
trademarks?
    Mr. Lehman. The WTO ruling is that the U.S. policy in that 
regard is consistent with the TRIPs Agreement, and Mr. Reinsch 
himself pointed out that the only defect in Section 211 is its 
different treatment of different nationals. It is a very 
technical, very narrow thing, and that is what is addressed in 
the legislation before you.
    Senator Graham. Now to the issue of abandonment.
    Mr. Reinsch. May I say something about that, Mr. Chairman?
    Senator Graham. Yes, you may.
    Mr. Reinsch. I would just encourage you to go back to 
something else I said. I think the real issue here is not how 
to solve the WTO problem. The real issue is how to solve the 
Inter-American Convention problem. The concern that my members 
have is retaliation pursuant to the Inter-American Convention. 
Either bill will solve the WTO--
    Senator Graham. By Castro.
    Mr. Reinsch. Yes.
    Senator Graham. Okay. What is your opinion of the 
abandonment argument here?
    Mr. Lehman. I think that the abandonment issue is virtually 
irrelevant to this, Mr. Chairman. The way I think you should 
look at it is--and I think, by the way, Mr. Reinsch did us a 
big favor by talking about companies. Let's face it. There are 
two companies involved here. In a sense, this is almost like a 
litigation that is taking place before Congress--Bacardi and 
Pernod-Ricard. And the issue here is what is the chain of title 
for the rights that they assert, and I think it is 
unquestionable that the chain of title that Pernod-Ricard 
asserts is a defective chain of title because it goes back to 
the confiscation.
    Senator Graham. Well, that was the equitable argument I was 
making, the unclean hands argument, that you cannot assert at a 
later point in time a legal right when you start in motion 
events that were based on illegal activity. I do not know if 
that is part of trademark law, but that is certainly part of 
equitable law.
    Mr. Lehman. We are dealing with a statute that Congress 
passed.
    Senator Graham. Right.
    Mr. Lehman. And that statute, as I indicated, was 
consistent with longstanding U.S. policy regarding how 
intellectual property rights should be treated, a policy 
against confiscation, compulsory licensing, et cetera. And so I 
am sort of mystified at what the problem is to some degree. 
That is, the policy was very legitimate. It was approved by the 
WTO. We have a very minor defect in the way that was carried 
out that has been brought to our attention by the appellate 
panel at the WTO. And we have legislation to correct it.
    Senator Graham. Well, with all due respect, what Senator 
Craig is saying, the problem is that many years later under the 
rule of law that exists of how you register and continue a 
trademark, nothing was done, and the Cuban Government legally--
or the Cuban entity in question legally under our laws came in 
and took up the trademark. And--
    Mr. Lehman. Well, I would respectfully disagree with that 
assertion, Mr. Chairman.
    Senator Graham. Why?
    Mr. Lehman. That went back to the 1976 registration and all 
of the activities that happened at the U.S. PTO. There are 
really two separate issues here.
    There is, one, the question of whether or not the 
Arechabalas, because they did not engage in certain filings at 
the U.S. PTO, abandoned their rights to the mark. That is an 
open question.
    The other is the way in which Pernod-Ricard gets its 
rights, which go originally back to the filings in the U.S. 
PTO, the original filing in 1976 from Cuba Export, an entity of 
the Cuban Government, which, under our law, could not actually 
exercise the right here.
    And the point I want to make very strongly is that the U.S. 
PTO, when it makes these registrations, and even more recently 
in the TTAB decision on the same case, does not really go into 
those issues. It simply is--if this were filed by anybody, does 
this trademark--does this mark meet the test of trademark-
ability?
    Senator Graham. I have got you.
    Anything else, Senator Craig? Then I will have to go.
    Senator Craig. Mr. Chairman, I have to go, too. I guess 
2373 modifies 211, but it keeps the courthouse door locked. So 
this trial that is now underway at this moment in the Judiciary 
Committee cannot go forward. And there are legitimate arguments 
out there. There are opinions. There are, if you will, 
judgments made by all of you. My legislation, S. 2002, unlocks 
the courthouse door and allows a legitimate legal pursuit of 
rights to go forward under law. I will agree S. 211 is the law 
of the land today, and you heard Senator Leahy speak to how it 
got there. I do not question its illegitimacy. I am going to 
work as hard as I can to defend the right of a company in my 
State when I am told, let me put it this way, half of the 
story. The question is: Is it the whole story and is it the 
right story? I would suggest that we open the courthouse door.
    My legislation does that, Mr. Chairman.
    Senator Graham. Thank you, Senator Craig.
    We will hold open for a week any comments or statements 
that would like to be introduced into the record. And to 
conclude this matter--I am sure we will hear more about it--Mr. 
Arechabala, I am very sorry that your family went through the 
experience that it did. And what I will look at as a Senator is 
not only the rule of law aspects here about whether or not Cuba 
filed after you abandoned and whether or not I think the 
abandonment claim is appropriate, but the equitable nature of 
what is going on here. I do not believe it would be good public 
policy to have in any scenario a dictatorship at any time, 
anywhere, anyhow, benefit from stealing someone's property 
unless the equities would require that result.
    Thank you all.
    [Whereupon, at 3:16 p.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]

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