[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
 DOMESTIC AND INTERNATIONAL TRADEMARK IMPLICATIONS OF HAVANA CLUB AND 
         SECTION 211 OF THE OMNIBUS APPROPRIATIONS ACT OF 1999

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



                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 3, 2010

                               __________

                           Serial No. 111-69

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov



                  U.S. GOVERNMENT PRINTING OFFICE
55-221                    WASHINGTON : 2009
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001


                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
STEVE COHEN, Tennessee               STEVE KING, Iowa
HENRY C. ``HANK'' JOHNSON, Jr.,      TRENT FRANKS, Arizona
  Georgia                            LOUIE GOHMERT, Texas
PEDRO PIERLUISI, Puerto Rico         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               TED POE, Texas
JUDY CHU, California                 JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois          TOM ROONEY, Florida
TAMMY BALDWIN, Wisconsin             GREGG HARPER, Mississippi
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
[Vacant]

       Perry Apelbaum, Majority Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel


                            C O N T E N T S

                              ----------                              

                             MARCH 3, 2010

                                                                   Page

                           OPENING STATEMENTS

The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Chairman, Committee on the 
  Judiciary......................................................     1
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and acting Ranking Member, Committee on 
  the Judiciary..................................................     2
The Honorable Debbie Wasserman Schultz, a Representative in 
  Congress from the State of Florida, and Member, Committee on 
  the Judiciary..................................................     4
The Honorable Darrell E. Issa, a Representative in Congress from 
  the State of California, and Member, Committee on the Judiciary     9

                               WITNESSES

Mr. Mark Z. Orr, Vice President of North American Affairs, Pernod 
  Ricard
  Oral Testimony.................................................    10
  Prepared Statement.............................................    12
Mr. Bruce A. Lehman, former Assistant Secretary of Commerce and 
  Expert Counsel for Bacardi, USA
  Oral Testimony.................................................    17
  Prepared Statement.............................................    19
Mr. Mark T. Esper, Executive Vice President, Global Intellectual 
  Property Center, U.S. Chamber of Commerce
  Oral Testimony.................................................    25
  Prepared Statement.............................................    27
Mr. William A. Reinsch, President, National Foreign Trade Council
  Oral Testimony.................................................    32
  Prepared Statement.............................................    35
Mr. John K. Veroneau, Partner, Covington & Burling, LLP
  Oral Testimony.................................................    43
  Prepared Statement.............................................    45

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of Ramon Arechabala submitted by the Honorable 
  Debbie Wasserman Schultz, a Representative in Congress from the 
  State of Florida, and Member, Committee on the Judiciary.......     5
Letter from Jaime Suchlicki, Professor and Director, United of 
  Miami, submitted by the Honorable Bob Goodlatte, a 
  Representative in Congress from the State of Virginia, and 
  acting Ranking Member, Committee on the Judiciary..............    65


 DOMESTIC AND INTERNATIONAL TRADEMARK IMPLICATIONS OF HAVANA CLUB AND 
         SECTION 211 OF THE OMNIBUS APPROPRIATIONS ACT OF 1999

                              ----------                              


                        WEDNESDAY, MARCH 3, 2010

                          House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:26 a.m., in 
room 2141, Rayburn House Office Building, the Honorable John 
Conyers, Jr. (Chairman of the Committee) presiding.
    Present: Representatives Conyers, Watt, Wasserman Schultz, 
Quigley, Coble, Goodlatte, Issa, Jordan, and Nye.
    Staff present: (Majority) Perry Apelbaum, Staff Director 
and Chief Counsel; Christal Sheppard, Counsel; Eric Garduno, 
Counsel; (Minority) Sean McLaughlin, Chief of Staff and General 
Counsel; and Blaine Merritt, Counsel.
    Mr. Conyers. The Committee will come to order. Good 
morning.
    The hearing is on the ``Domestic and International 
Trademark Implications of Havana Club and Section 211 of the 
Omnibus Appropriations Act of 1999.'' And our purpose is to 
examine Section 211 and consider what changes, if any, should 
be made to that section.
    This is a fascinating subject that brings the Judiciary 
Committee together. It goes back into our recent history 
dealing with a number of issues back through the days of our 
former colleague, Tom DeLay, as the majority leader, the Elian 
Gonzalez case, Fidel Castro, and the special law for the 
Bacardi trademark.
    Whether or not the Congress should make trademark decisions 
or the Court there are at least two measures introduced into 
the Congress in connection with this subject. One is by 
Chairman of Ways and Means, Charles Rangel; the other is by 
Debbie Wasserman Schultz, formerly introduced previously by our 
former Member, Mr. Wexler.
    One method deals with the repeal of the law--the repeal of 
Section 211--and the other is one that attempts to modify the 
existing law. You remember that Mr. Castro sold the Bacardi 
trademark to a French company, Pernod. The World Trade 
Organization, through its international property--their court, 
in effect, held that the United States violated international 
rights.
    And so we have found to be in violation of international 
obligations from one point of view. The United States takes its 
treaty obligations, of course, seriously, and there has been 
agreement to take corrective action.
    The question that brings us here is what corrective action 
we should take. The European Union court, in effect, has held 
off taking any action on their part as they wait to determine 
what it is that we are going to do.
    So I am left with these further observations, and then I 
will yield to Bob Goodlatte. The seizure of property by Castro 
was unjust, obviously, and no one should be able to profit from 
that wrongdoing. And what we are trying to focus on is how the 
Judiciary Committee should recommend to the House how we should 
move forward.
    We have treaty obligations, and the one thing that hangs 
over all of our heads is the fact that if we don't uphold these 
obligations there could be some grave implications of what will 
happen around the world with our own trademarks if we don't 
resolve this in the effective and fair manner.
    And I welcome our witnesses. They have a great deal of 
experience. And I thank them, of course, for appearing with us 
today.
    On that note I will recognize the acting Ranking Member 
from Virginia, Bob Goodlatte.
    Mr. Goodlatte. Mr. Chairman, thank you, and I appreciate 
you calling this hearing on an obscure and rummy but important 
issue. The United States is the leader in property rights 
protections of all stripes, including intellectual property 
rights. The founders realized that the protection of private 
property rights would be crucial to building a prosperous 
country.
    It is through this lens that we are examining today the 
issues surrounding Section 211 of the 1998 Omnibus 
Appropriations Act and its effect on trademark rights. In 1960 
the communist state in Cuba formally seized numerous industrial 
facilities and assets on the island, including a rum factory 
and other property belonging to the Arechabala family.
    The Arechabalas founded their business in the late 19th 
century and marketed much of their product under the name 
Havana Club, which as registered as a U.S. trademark in 1935. 
Their business was seized at gunpoint by the Castro regime and 
its owners were forced out of the business and the country.
    Due to circumstances caused by the communist takeover of 
their business, the family didn't renew their U.S. registration 
for Havana Club in 1973 because they were not able to use the 
trademark in commerce by producing and selling rum, and thus 
the U.S. trademark became abandoned. Then the Cuban government, 
which had seized all of the family's corporate assets without 
compensating them, applied for the Havana Club trademark in the 
U.S. through a state-sponsored enterprise called Cuba Export.
    Three years later the Patent and Trademark Office granted 
the Havana Club registration to Cuba Export. In 1993 Cuba 
Export joined with Pernod Ricard, the French distillery, to 
form Havana Club Holdings for the purpose of marketing rum 
using the contested trademark. Tellingly, Pernod attempted 1 
year earlier to purchase the trademark from the Arechabalas but 
failed. Instead, the Arechabala family sold their rights to the 
Bacardi distillery in 1994.
    In 1998 Congress attempted to settle the ownership dispute 
by passing an omnibus appropriations bill that includes a 
provision commonly cited as Section 211. This statute withholds 
U.S. protection for any trademark that is identical or 
substantially similar to another trademark used in connection 
with a confiscated business or asset without the consent of the 
original owner.
    Havana Club Holding brought suit against Bacardi the 
following year and the new statute prevented any recourse in 
the U.S., as designed. The district court dismissed the claims 
against Bacardi and the Second Circuit affirmed, stating that 
Pernod had no enforceable U.S. rights to the Havana Club 
trademark.
    At the behest of Pernod, the European Union challenged the 
Section 211 before the World Trade Organization. The WTO ruled 
against Pernod on 13 claims. As a technical matter, however, 
the panel also determined that the wording of Section 211 
violated our obligations under TRIPS, the intellectual property 
component of the GATT Agreement.
    The problem is that Section 211 is directed at designated 
nationals and their successors in interest, meaning Cubans. 
TRIPS and other international obligations require U.S. law to 
treat all holders of U.S. trademarks equally. This means Cubans 
and any other non-American nationals can't have fewer rights 
than U.S. citizens even if the rationale behind the disparate 
treatment is otherwise understandable.
    The WTO ruling was issued about 8 years ago. Today we are 
examining ways to correct Section 211 to demonstrate our 
commitment to the rule of law as well as private property 
rights, including intellectual property rights.
    Another aspect of this issue, and about which there appears 
to be considerable disagreement among our witnesses today, is 
whether Section 211 and some proposed legislative fixes also 
violate the 1929 General Inter-American Convention for 
Trademark and Commercial Protection. I look forward to hearing 
more about the legal arguments surrounding compliance with that 
treaty this morning.
    Some have argued that Section 211 must be repealed 
entirely. Many U.S. businesses own trademarks in Cuba and fear 
retaliation by the Castro regime. For example, he could start 
selling the Cuban version of Coca-Cola using that company's 
trademarks.
    Others have argued that legislation like H.R. 1103, 
Representative Wexler and now, I think, Wasserman Schultz's 
bill, that narrowly conformed Section 211 to the WTO ruling by 
expanding its restrictions to nationals of all countries, 
should be enacted. Today we will hear from expert witnesses who 
will help us determine whether there is a way to maintain our 
international treaty obligations while also protecting U.S. 
trademarks in Cuba and not rewarding Castro's totalitarian 
regime for confiscating private property at gunpoint.
    Mr. Chairman, this should be one rum-good hearing today, 
and I look forward to hearing from our witnesses.
    Mr. Conyers. Very funny. I mean, thank you for your 
statement and your humor.
    The Chair recognizes Debbie Wasserman Schultz, a 
distinguished and effective Member of the Committee.
    Ms. Wasserman Schultz. Thank you so much, Mr. Chairman, and 
thank you for holding this hearing today.
    I welcome the opportunity to discuss the very important 
intellectual property principles implicated by the Havana Club 
trademark issue with this balanced panel of esteemed witnesses. 
In my view, this hearing boils down to one issue: whether our 
Nation will continue to uphold the principle that trademarks 
stolen in another country will not be recognized in the United 
States.
    And, Mr. Chairman, I thank you for recognizing that this is 
a question that boils down to theft of a stolen trademark.
    Way back in 1878 the Arechabala family established a rum 
company in Cuba. They coined the Havana Club trademark and 
registered the mark with the United States Patent and Trademark 
Office in 1935.
    In 1960 armed communist insurgents swept into power in Cuba 
and seized control of all private companies. Like a lot of 
business owners, the Arechabalas had their distillery and all 
of their property stolen from them, in their case literally at 
gunpoint.
    Mr. Chairman, I seek unanimous consent to enter into the 
record the 2004 Senate testimony of Ramon Arechabala, who 
wanted to be here today.
    Mr. Conyers. Without objection, so ordered.
    [The information referred to follows:]
                 Prepared Statement of Ramon Arechabala






                               __________

    Ms. Wasserman Schultz. Thank you.
    Sadly, Ramon passed away 2 weeks ago. He was present at the 
distillery that fateful day in 1960 when the company was taken 
by force. His memory continues to represent--represents the 
Arechabala's struggle over many decades to maintain the Havana 
Club trademark.
    Even after the confiscation Ramon continued to work at the 
distillery. He was promised compensation from the Castro regime 
but never received a penny.
    Eventually he was forced to leave the country and, like 
many Cuban nationals persecuted by the Cuban regime, found his 
way to South Florida and to Miami. It was only after he learned 
that the Cuban regime intended to sell his family's stolen 
rights to the Havana Club rights to the French company Pernod 
Ricard that he and his family turned to Bacardi for help in 
regaining the Havana Club brand.
    In 1998 Congress enacted Section 211 to protect U.S. 
trademarks and their legitimate owners from the effects of the 
confiscations decreed by the Cuban government. Congress acted 
on a relatively noncontroversial principle, that while America 
cannot impose respect for intellectual property on Communist 
dictators who seize power by force, the United States can and 
must ensure that U.S. law will never be forced to recognize 
this theft as applied to U.S. property. To be clear, Section 
211 prohibits enforcement of U.S. rights to trademarks 
confiscated by the Cuban government unless one has the consent 
of the legitimate owner.
    Furthermore, neither the Arechabala family nor any 
legitimate successor has ever consented to the assertion of 
rights to the Havana Club trademark by the joint venture 
between the Cuban government and Pernod Ricard. In fact, the 
Arechabalas refused to sell their interest in the Havana Club 
mark to Pernod Ricard in 1993 when Pernod approached them about 
purchasing that interest.
    Section 211 was challenged in the WTO by the European 
Union. The WTO appellate body resolved that challenge by 
finding in favor of the United States on all points except one. 
The appellate body made a narrow finding that because Section 
211, on its face, does not apply to U.S. nationals as well as 
Cuban nationals it is inconsistent with the national treatment 
and most favored nation principles under the TRIPS Agreement, 
as Mr. Goodlatte asserted.
    The appellate body fully supported the equitable principles 
embodied in Section 211, specifically that the United States 
need not recognize uncompensated confiscation or protect stolen 
intellectual property rights. Instead, Congress need only 
broaden its application of Section 211 to include U.S. 
nationals. This amounts to no more than a minor technical fix.
    H.R. 1103, originally introduced this session by my friend 
and Florida colleague, former Representative Robert Wexler and 
for which I substituted in as the bill's first sponsor last 
week, provides this narrow technical fix. It clarifies that 
these well-founded principles of equity in Section 211 apply to 
all parties claiming rights in confiscated Cuban trademarks 
regardless of nationality.
    H.R. 1103 will bring Section 211 into compliance with the 
WTO ruling. It will protect the original owners of confiscated 
Cuban trademarks. It will apply to all people, regardless of 
nationality. And most importantly, it will clarify that 
trademarks and trade names confiscated by the Cuban government 
will not be recognized in the United States when the assertion 
is being made by someone, like the joint venture between the 
Cuban government and Pernod Ricard, who knew or had reason to 
know that the mark was confiscated.
    Some believe the time has come to fully repeal Section 211. 
Repeal is not the answer.
    Repeal would put intellectual property at much greater 
risk. Whether we are talking about pirated movies, music, 
computer software, pharmaceuticals, or yes, even rum, we must 
never forget that our intellectual property laws are our 
engines for innovation and prosperity.
    That is why our founding fathers insisted upon including 
intellectual property rights in our Constitution, because they 
knew America could never become the world leader in technology 
we are today without it. I believe that property rights must be 
respected and that it is wrong for governments to take property 
from individuals or companies, whether nationals or foreigners, 
without payment of prompt, adequate, and effective 
compensation.
    It is hard to understand how anyone could think otherwise. 
Foreign confiscatory measures have never been given effect on 
properties situated in the United States and they must never 
be.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Conyers. Thank you very much.
    We welcome our witnesses, John Veroneau, of Covington & 
Burling; Bill Reinsch, president of the National Foreign Trade 
Council----
    Mr. Issa. I am sorry, Mr. Chairman. I was shaking yes when 
you asked.
    Mr. Conyers. Oh, I am sorry. The gentleman from California 
is recognized.
    Mr. Issa. I thank you, Mr. Chairman. I ask unanimous 
consent to have my entire opening statement put in the record--
--*
---------------------------------------------------------------------------
    *At thie time of the printing of this hearing, the Committee had 
not received the opening statement of Mr. Issa.
---------------------------------------------------------------------------
    Mr. Conyers. Without objection.
    Mr. Issa [continuing]. And briefly, I look forward to 
working with the gentlelady from Florida, having worked with 
the gentleman from Florida previously. Former Member Wexler and 
I felt that this was the narrowest fix, not necessarily a fix 
for all the problems of Cuban theft in the 1960's, and we did 
so for a reason. This is one of the few successful programs 
that has existed throughout the past.
    As you can imagine, Mr. Chairman, the assets seized in the 
1960 uprising in fact have all depreciated. They are gone. 
Tangible assets have become worth little or nothing in Cuba. 
Even the land, without investments in infrastructure, are worth 
very little--the factories. The Coca-Cola factory would be of 
no value to Coca-Cola today.
    And yet, the intellectual property that was not abandoned, 
but stolen, is in fact the one place in which the pressure for 
the Cuban government to find a reasonable way to unravel what 
in fact no longer exists in Russia, no longer exists anywhere 
in the former Soviet Union, and even does not exist in China 
today--Cuba remains virtually isolated as a country that does 
not respect the property which it seized at gunpoint which 
still has significant value to the now descendants of those it 
was taken from.
    So, Mr. Chairman, I believe that H.R. 1103 was crafted to 
do the right thing for the right reason in the right way. It is 
a minimalist fix, as Representative Wasserman Schultz said. I 
think that we will find today that some will not agree with the 
premise of withholding anything that Cuba believes that it has 
as a result of its violent takeover outside of any legitimacy 
after Castro was elected--he seized power and he seized assets.
    So, Mr. Chairman, I do believe that there are those who 
will say there is a better technical fix. I know that the 
gentlelady from Florida and myself would happily listen to it. 
But I believe that when Rob Wexler originally envisioned this 
he did so because it was the simplest, narrowest, and most 
guaranteed to succeed to restore what this Congress has already 
voted for and the people on both sides of the aisle--the vast 
majority--agree with.
    So, Mr. Chairman, I thank you, look forward to our 
witnesses, and yield back.
    Mr. Conyers. Thank you, Mr. Issa.
    Our witnesses are John Veroneau, of Covington & Burling; 
Bill Reinsch, president of the National Foreign Trade Council; 
Mr. Mark Esper, executive vice president, Global Intellectual 
Property Center at the Chamber of Commerce; Bruce Lehman, well-
known to this Committee as former counsel and works in the--a 
former assistant in the Commerce and the Trademark and Patent 
Office. And our first witness is Mark Orr, vice president of 
North American affairs for Pernod Ricard. Mr. Orr handles 
issues ranging from public policy and regulatory matters to 
trade and industry affairs.
    All your statements will be introduced into the record, and 
we welcome you all and invite Mr. Orr to begin our testimony.

          TESTIMONY OF MARK Z. ORR, VICE PRESIDENT OF 
             NORTH AMERICAN AFFAIRS, PERNOD RICARD

    Mr. Orr. Thank you very much, Mr. Chairman.
    I am Mark Orr, vice president for North American affairs 
with Pernod Ricard. I want to commend you and the Members of 
the Committee for holding this hearing.
    It is the first time this Committee or any other Committee 
of the House of Representatives has examined the merits of 
Section 211. No such opportunity was presented prior to Section 
211's enactment.
    Mr. Chairman, I have listened very carefully to the opening 
statements of Members of the Committee. You would not be 
surprised that we have a different recollection of the events 
that have been described.
    Pernod Ricard's joint venture, Havana Club Holding, sells 
Havana Club rum in more than 120 countries around the world. 
Havana Club is an authentic Cuban rum made only in Cuba from 
Cuban sugar cane, not available in the United States at the 
present time due to the U.S. embargo on Cuban products.
    We are most interested in having the opportunity to sell 
Havana Club rum in the U.S. market when the U.S. embargo 
eventually is lifted, but one of our principal competitors, our 
good friends at Bacardi, the world's leading rum company and 
the dominant rum supplier to the U.S. market, is equally 
interested in denying this opportunity to us. For the past 15 
years they have pursued a concerted strategy to gain control 
over the rights to the U.S. Havana Club trademark and eliminate 
the prospect of having to compete against genuine Havana Club 
rum in the U.S. market.
    Section 211 is and has been the lynchpin to their strategy. 
It was designed with a specific purpose of interfering in a 
pending trademark infringement suit brought by our joint 
venture against them and it stripped the Federal judge of all 
authority to decide the case under longstanding rules of 
trademark law. The effect has been to prevent our joint venture 
from using the U.S. courts to stop infringing sales of 
imitation Havana Club by our Bacardi friends on two separate 
occasions. It has also prevented our Cuban partners, who have 
owned the U.S. registration for the Havana Club trademark since 
1976, from renewing their registration for an additional 10-
year term, an otherwise very routine procedure.
    The dispute between Pernod Ricard and Bacardi over 
ownership of the Havana Club trademark in the United States is 
extremely complex, involving difficult and arcane elements of 
trademark law, but one point is very clear: Unless Congress 
repeals Section 211 it will have decided the dispute in 
Bacardi's favor and no Federal judge anywhere or at any time 
will have ruled on the merits of the two parties' competing 
claims to ownership of the Havana Club trademark in the United 
States.
    Now, Mr. Chairman, defenders of Section 211 assert that it 
is necessary to give full effect to longstanding U.S. policy 
not to recognize the uncompensated confiscation of property by 
foreign governments, yet the property at the heart of this 
dispute, the U.S. registration for the Havana Club trademark, 
is property created here in the United States--cannot be and 
never was confiscated by the Castro government. Instead, it was 
abandoned by the previous owners in 1973, a fact confirmed by 
the U.S. Patent and Trademark Office in 2004.
    Defenders also assert that it is a necessary element of 
U.S. sanctions policy. Yet, genuine Havana Club cannot be sold 
in the United States due to the embargo, and under U.S. law the 
Castro regime must cede power before the embargo can be lifted. 
So there is no benefit today from the U.S. registration to the 
Castro regime and no chance of future benefit to the Castro 
regime from sales of genuine Havana Club.
    U.S. policy with regard to confiscations has been quite 
clear for many years. The enactment of Section 211, frankly, in 
1998 was a superfluous and necessary--unnecessary addition. The 
only beneficiary was Bacardi.
    Mr. Chairman, Congress should repeal Section 211 in its 
entirety and as soon as possible. Repeal would restore the full 
authority of the courts to resolving the competing claims of 
Pernod Ricard and Bacardi to the Havana Club trademark in the 
United States. Repeal would not benefit one party over the 
other; rather, it would leave the courts free to determine 
fairly on the merits which party's claim to the mark is 
superior, just as they could have done before Section 211 was 
enacted.
    Courts have compiled a long and outstanding record of 
resolving complex disputes over trademark rights in accordance 
with longstanding rules of law and equity. We should not fear 
the result of such consideration in the present dispute.
    Mr. Chairman, thank you very much for the opportunity to 
present our views on this issue today.
    [The prepared statement of Mr. Orr follows:]
                   Prepared Statement of Mark Z. Orr











                               __________

    Mr. Conyers. Thank you.
    Our next witness is Bruce Lehman, former assistant 
secretary of commerce and director of the United States Patent 
and Trademark Office. Today he is representing Bacardi as an 
expert counsel.
    We welcome him for his many years being in and out of this 
Committee hearing room.

  TESTIMONY OF BRUCE A. LEHMAN, FORMER ASSISTANT SECRETARY OF 
          COMMERCE AND EXPERT COUNSEL FOR BACARDI, USA

    Mr. Lehman. Thank you very much, Mr. Chairman. It is very 
nice for you to invite me to be here, and I really appreciate 
it.
    I think it is an understatement to say that this matter has 
an extremely complicated history involving Treasury Department 
investigations, trademark infringement lawsuits, registration 
disputes at the USPTO and international trade disputes. And I 
have submitted a written statement that I hope brings some 
light to all of that history and will help the Committee, when 
you look at it, understand this very complicated issue.
    So in my oral statement I would like to just address some 
of the most important points. First, proponents of the repeal 
of Section 211 assert that it violates existing U.S. treaty 
commitments, particularly the 1929 Inter-American Convention 
for Trademark Protection. In fact, both the Paris Convention 
and the Inter-American treaty give signatory states a great 
deal of discretion to refuse to recognize trademarks when they 
find those trademarks either contrary to morality or public 
order or unfair competition. And I think the United States is 
very much within its rights to make that finding here as it has 
in Section 211.
    Opponents of Section 211 also argue that it exposes large 
U.S. multinational companies--I think you will hear that 
later--such as those represented by my colleague here from the 
Chamber of Commerce, to potential retaliation by the communist 
government of Cuba, and that it will disadvantage them in a 
method similar to the embargo of South Africa during the 
apartheid period. Well, Mr. Chairman, I think if there was ever 
a reasonable request of U.S. corporate citizens to forego for a 
short period of time the freedom to exploit a foreign market it 
was apartheid South Africa.
    However, the situation in apartheid South Africa was quite 
different from that of Cuba. While Cuba admirably does not 
condone state-sponsored racism, it is not a market economy. In 
apartheid South Africa loss of a trademark might have been 
given an opening to a competitor that wasn't encumbered by the 
embargo, but that competitor would not have enjoyed the 
monopoly right to substitute its products for those of the 
embargoed trademark owner.
    In contrast, trademark law is almost meaningless in Cuba 
since no one can sell anything, whether identified by a 
particular trademark or not, without the permission of the 
Cuban state. And this permission is often granted by a monopoly 
concession. Indeed that is the case here. The Cuban state has 
given a monopoly concession for international distribution to 
one company, Pernod Ricard, which because of its joint venture 
virtually has a lock on the international market for the sale 
of rum labeled as Havana Club by Cuba.
    Opponents of Section 211 argue that it would create zombie 
Cuban trademarks that would haunt the use of these trademarks 
in the future. Mr. Chairman, I think that is just not correct. 
That is based on a reading of a Second Circuit Court of Appeals 
opinion, which, by the way, affirmed the dismissal of a 
trademark suit against Bacardi and its use of Havana Club.
    Opponents of Section 211 argue that it only benefits one 
company. Well, Mr. Chairman, I think that in fact the current 
situation in Cuba, the monopoly concession granted to one 
company, benefits one company, and that is largely what this 
issue is all about here today and why U.S. policy under Section 
211 needs to be maintained.
    Finally, opponents of Section 211 argue that it abrogates 
U.S. leadership in intellectual property matters. I think the 
exact opposite is the case. The very essence of U.S. 
intellectual property policy under Administrations of both 
parties has been that the use of intellectual property rights 
without permission of the rights-holder is contrary to the 
national interest.
    Any act of Congress that would repeal legislation based on 
this principle would send a very strong message to the world 
that U.S. opposition to confiscation of patents, trademarks, 
and copyrights is country-specific. We would be broadcasting to 
the world the message made clear in statements to this 
Committee today that if you interfere with the nationalization 
of companies and the confiscation of their trademarks the U.S. 
can be held hostage by the threat that others will meet the 
same fate if a single agrieved party complains.
    Thank you, Mr. Chairman, and I am happy to answer any 
questions about this complicated matter if you wish.
    [The prepared statement of Mr. Lehman follows:]
                 Prepared Statement of Bruce A. Lehman












                               __________

    Mr. Conyers. Thank you very much, Mr. Lehman.
    Our next witness is Dr. Mark Esper, executive vice 
president of Global Intellectual Property Center at the Chamber 
of Commerce. Before joining the Chamber Mr. Esper was on 
Capitol Hill working for the Senate majority leader then, Bill 
Frist, and as Committee staff.
    Welcome back to your old digs.

 TESTIMONY OF MARK T. ESPER, EXECUTIVE VICE PRESIDENT, GLOBAL 
     INTELLECTUAL PROPERTY CENTER, U.S. CHAMBER OF COMMERCE

    Mr. Esper. Thank you, Mr. Chairman. I also worked in the 
House too, so it was a very, very good time. But thank you, and 
I want to thank the Members of the Committee.
    I appreciate the opportunity to testify today on behalf of 
the U.S. Chamber of Commerce's Global Intellectual Property 
Center. The GIPC, as we call it, and its members believe that 
strong intellectual property rights are essential to driving 
the innovation and creativity necessary to create jobs, save 
lives, advance economic growth, and generate breakthrough 
solutions.
    There is little question that America has led the 
international community in developing the laws and norms that 
have defined the global system of I.P. rights as well as 
today's rules-based global trading system, which includes the 
World Trade Organization. This system has benefited us greatly 
in many ways. In order to live up to our treaty obligations, 
honor our history of leadership when it comes to defending I.P. 
rights and the rule of law, and to protect American trademark-
holders, the Global I.P. Center recommends full repeal of 
Section 211.
    The United States is party to many multilateral and 
bilateral trade agreements that require our laws to meet 
certain standards with respect to the treatment of I.P. rights, 
regardless of whether they are owned by United States citizens 
or foreign nationals. The Global I.P. Center works hard every 
day to protect these rights because we believe it is in 
America's best interests to do so.
    Unfortunately, Section 211 has put the United States in 
violation of its international treaty obligations. The WTO has 
ruled that Section 211 violates two basic principles of the 
Trade Related Aspects of Intellectual Property Agreement: 
national treatment and most-favored nation status. The WTO has 
also noted that Section 211 invites arbitrary treatment of U.S. 
trademarks overseas.
    Section 211 also puts the United States in breach of its 
obligations under the General Inter-American Convention for 
Trademark and Commercial Protection, a reciprocal I.P. 
agreement signed in 1929 that governs trademark protection 
between the United States and Cuba to this day and which gives 
Cuba the legal opportunity to withdraw the protections it 
currently provides U.S. trademarks. The Cuban government has 
threatened in the past to retaliate against American companies 
with interests in Cuba, jeopardizing trademark protection for 
over 5,000 U.S. marks currently registered in Cuba by more than 
400 American companies.
    Few realize that the United States is the largest supplier 
of food and agricultural products to the Cuban people, with 
American companies exporting approximately $500 million in food 
and agricultural goods each year. For U.S. companies exporting 
branded foods to the Cuban people, a threat by the Cuban 
government to retaliate over this issue remains a concern. Any 
retaliation would, of course, endanger their trademarks as well 
as the status of other U.S. brand-owners' marks currently 
registered in Cuba.
    Some have proposed amending Section 211 to achieve only WTO 
compliance by applying it to both U.S. national and foreign 
trademark-holders. However, this is an incomplete solution as 
it does not solve our noncompliance with the Inter-American 
Convention because Section 211 denies trademark registration 
and renewal on grounds other than those permitted under this 
treaty.
    Finally, it is important to note that by calling for full 
repeal of Section 211 the Global I.P. Center is in no way 
taking a position on the case between the two private parties 
engaged in the Havana Club trademark dispute, nor are we 
questioning the United States foreign policy with regard to 
Cuba, and we certainly are not condoning the actions taken by 
Fidel Castro to confiscate the property of Americans and 
others.
    Rather, we are recommending, Mr. Chairman, that the United 
States abide by its international obligations and follow the 
rule of law. Repealing Section 211 and allowing U.S. courts to 
decide the merits of the Havana Club case will do this.
    In conclusion, the Chamber's Global I.P. Center recommends 
the Committee advance legislation to repeal fully Section 211. 
Doing so will ensure the United States complies with its 
various treaty obligations and will protect the trademarks and 
interests of hundreds of U.S. companies.
    Full repeal of Section 211 will also help preserve the 
global I.P. system--the global system of I.P. rights, laws, and 
norms, and America's standing in it, for which we have long 
been both a strong proponent and a major benefactor.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Esper follows:]
                  Prepared Statement of Mark T. Esper










                               __________

    Mr. Conyers. Thank you very much, Dr. Esper.
    The Committee will stand in recess briefly because Jack 
Murtha is being memorialized here on the Hill. And so we will 
resume very shortly afterward. Committee stands in recess.
    [Recess.]
    Mr. Conyers. Committee will come to order. Thank you, 
gentlemen, for your forbearance.
    We are now pleased to recognize Bill Reinsch, president of 
the National Foreign Trade Council, representing some 400 
companies on focuses--and focuses on trade policy issues, a 
member of the U.S.-China Economic and Security Review 
Commission.
    We have your testimony. You may proceed, sir.

          TESTIMONY OF WILLIAM A. REINSCH, PRESIDENT, 
                 NATIONAL FOREIGN TRADE COUNCIL

    Mr. Reinsch. Thank you, Mr. Chairman. Pleasure to be here.
    I am testifying today in support of repealing Section 211 
and against proposals such as H.R. 1103, which purports to 
address this problem in a different way, but in our view would 
only exacerbate it. Repeal of Section 211 would remedy the U.S. 
breach of obligations under the General Inter-American 
Convention for Trademarks and Commercial Protection as well as 
WTO rules and remove any pretext for the Castro regime to 
retaliate against trademarks currently registered in Cuba by 
U.S. companies.
    Repeal would ensure continued U.S. leadership on 
intellectual property issues by bringing the U.S. into 
compliance with all existing treaty obligations and by 
exemplifying high standards for intellectual property 
protection, including our commitment not to assign trademarks 
based on political criteria. It would also reaffirm that 
trademarks decisions properly are the responsibility of the 
Patent and Trademark Office and the courts.
    Section 211 was enacted solely to help one of the litigants 
in a particular dispute before the U.S. courts by preempting 
the courts' right to make a judgment. Repeal will restore this 
matter to the courts where it belongs.
    Alternatively, if the provision is maintained in law, its 
long-term impact will be to jeopardize U.S. standing in the 
global intellectual property debate and to invite retaliation 
by Cuba, which could jeopardize trademark protection for over 
5,000 U.S. trademarks currently registered in Cuba by more than 
400 American companies, many of them my members. Despite the 
nearly 50-year long embargo on trade with Cuba both countries 
have reciprocally recognized trademark and trade name rights 
since 1929 as signatories to the General Inter-American 
Convention.
    Section 211 violates that convention because it denies 
registration and renewal of trademarks on grounds other than 
those permitted by Article 3. By prohibiting U.S. courts from 
recognizing rights arising from prior use of a trademark in 
another treaty country or from determining whether an earlier 
U.S. trademark has been abandoned, Section 211 expressly 
violates Articles 8 and Article--Articles 8 and 9.
    By prohibiting U.S. courts from recognizing certain trade 
name rights Section 211 violates Article 18. And by depriving 
U.S. courts of the authority to issue injunctions and other 
equitable relief against trademark or trade name infringement 
Section 211 violates Articles 29 and 30. Because Section 211 
specifically denies U.S. courts the authority to enforce the 
treaty rights otherwise available to a party it obviates 
Article 32, which provides for national courts to resolve 
questions of interpretation.
    Let me just say also, if one accepts the interpretation of 
the public order clause articulated by Mr. Lehman, and I 
suspect also by Mr. Veroneau in a few minutes, you create an 
exception that is so large that it swallows the treaty and 
would permit governments to do virtually anything they wanted. 
We don't believe that clause is an adequate defense, in this 
case.
    Section 211, because of these violations--particularly 
because of the last one I mentioned--compels any dispute 
against the United States alleging violation of the terms of 
the Convention to be resolved through customary international 
law. Customary international law permits a party specifically 
affected by the breach to invoke it as a ground for suspending 
the operation of the agreement in whole or in part. If 
suspension of the operation of the convention were to occur it 
would result in substantial uncertainty regarding the legal 
status in Cuba of the trademarks and trade names of U.S. 
companies.
    Castro and his foreign relations officials have, on several 
occasions, threatened to withdraw the protections afforded by 
the Inter-American Convention. Withdrawing those protections 
would put in doubt the trademark and trade name rights of U.S. 
companies in Cuba.
    Should Congress fail to repeal Section 211 the United 
States will have handed the Castro regime the legal grounds for 
withdrawing these protections. Whether he would do that is 
anyone's guess.
    But given the experience of NFTC members in a comparable 
situation in South Africa we are reluctant to take that risk. 
And the issue with South Africa is not what happened while 
companies were barred there but what happened afterwards.
    It is an important precedent because it demonstrates the 
problems that result when trade embargoes inhibit reciprocal 
trademark recognition. Under the trade embargo of South Africa 
U.S. companies were prohibited from paying the fees necessary 
to either file trademark applications or maintain existing 
trademark registrations in South Africa.
    When the embargo ended and companies returned with 
internationally-recognized trademarks, including Burger King, 
Toys 'R' Us, 7-Eleven, and Victoria's Secret, they discovered 
that their trademarks in South Africa had been appropriated by 
unauthorized persons during the apartheid era. Recovering the 
rights of their trademarks necessitated a lengthy and expensive 
litigation and attempts to encourage the South African 
government to amend its laws.
    Repealing 211 would deny the Castro regime any rationale 
for retaliating against trademarks of U.S. companies and 
thereby increase the likelihood that the Cuban government will 
continue to uphold its obligations under international 
intellectual property agreements. H.R. 1103, in contrast, would 
seek to apply Section 211 to both U.S. nationals and foreign 
trademark holders. However such an amendment has significant 
drawbacks compared to repeal, the main one being that it would 
not address any of the inconsistencies of Section 211 with the 
Inter-American Convention.
    It would also lead to increased litigation and legal 
uncertainty at home, which I detail in--at some length in my 
written statement, Mr. Chairman, including the discussion of 
the zombies that Mr. Lehman referred to.
    Finally, Mr. Chairman, Section 211 and H.R. 1103 benefit 
only a single a company and promise no benefits for U.S. 
business. Rather, they will make it more difficult for U.S. 
companies to enforce their trademarks and trade names in U.S. 
courts against counterfeiters and infringers, keep U.S. 
companies exposed to the risk of legal uncertainty and 
retaliation abroad, and continue putting U.S. law to cross-
purposes with longstanding principles of intellectual property 
protection and trade policy objectives of the U.S. government 
and the business community.
    Repeal is the only action that will provide full compliance 
with all current U.S. trade obligations and deny other 
governments any rationale for retaliation. In addition, it is 
important to point out, as Mr. Orr did, repeal would not take 
sides in the underlying dispute over the Havana Club trademark 
and it would not settle that question. Rather, it would return 
that question to the Patent and Trademark Office and to the 
courts where it belongs.
    Thank you.
    [The prepared statement of Mr. Reinsch follows:]
                Prepared Statement of William A. Reinsch

















                               __________

    Mr. Conyers. Thank you, Bill Reinsch.
    And now, John Veroneau, Covington and Burling, United 
States trade rep deputy and general counsel, we welcome your 
testimony here this afternoon.

            TESTIMONY OF JOHN K. VERONEAU, PARTNER, 
                    COVINGTON & BURLING, LLP

    Mr. Veroneau. Thank you, Mr. Chairman, Mr. Goodlatte, and 
Mr. Coble.
    I think there are three issues here that continue to get 
pushed together and make this issue more complicated than it 
really is. The first issue I would submit is there is a food 
fight between some litigants and there are many court cases 
ongoing that will continue, and the issues there will be sorted 
out in the courts.
    The second issue is the substantive merits of Section 211, 
and the substantive merits of 211 I have not heard challenged. 
And the substance of 211 is that it codifies a court rule that 
has been in place since the Supreme Court ruled in 1911, and 
that rule is quite straightforward. It says we cannot stop 
foreign governments from confiscating property, but we in the 
United States have the right not to recognize that confiscation 
of U.S. property in the U.S. So 211 simply codifies, as 
Congress often does, court law in this area.
    The real issue, it seems to me, is the prerogatives of the 
Congress. When I met, Mr. Chairman, you and Mr. Goodlatte in 
the past in my capacity as general counsel and deputy USTR your 
message to me was often, ``In the WTO negotiations, in the DOHA 
negotiations don't fence me in. Don't limit the prerogatives of 
Congress to legislate.''
    That really is the issue that is at play here today. The 
question before the WTO several years ago was whether the WTO 
prohibits the Congress from legislating as it did in Section 
211. The WTO answered that question. It did not say that 
Congress cannot legislate in the way that it did with 211. It 
did say that 211 didn't go far enough. It didn't apply broadly 
to all nationals.
    And in that sense, the WTO, while it rejected 13 out of the 
14 claims that were made, it did find that national treatment 
and most-favored nation requirements were not met. Those can be 
met quite simply by amending Section 211 by making it 
applicable to all nationals.
    As general counsel I was asked by Senator Leahy in 2004 
whether, from our perspective at USTR, repeal of 211 was 
necessary to comply with that ruling, and I answered in a 
letter that it did not require repeal, that it could be amended 
and preserved. I stand by that testimony. I obviously no longer 
speak for the government, but I have heard no compelling 
arguments that that legal opinion has changed, and to my 
knowledge the USTR has not changed its position on that matter.
    Typically when the WTO rules against the U.S. we try to 
preserve the U.S. law to every extent as possible. This 
Committee is familiar with Section 337, which allows the U.S. 
to block imports that infringe U.S. patents; 337 was challenged 
in the WTO.
    The response of the Congress and the Administration at the 
time was not to repeal Section 337 but rather to make changes 
that were necessary to comply, but to go no further. My message 
on the WTO matter is simple: There is a clear path to 
compliance, and we should adopt it.
    The second argument that has emerged has been that 
Congress' ability to legislate in this space is restricted by 
the Inter-America Convention. I submit that that cannot be 
true.
    If the WTO agreements ever purported to restrain Congress' 
ability to establish ownership rules of trademark, I am certain 
that any USTR would be thrown out of the room for even 
suggesting it. The Inter-America Convention, which has been in 
play since 1929, simply has a mutual recognition of 
registration. Registration is not the same as ownership, and 
there is a public exception to the Convention.
    Congress, in 1998, chose to codify a rule that has been in 
place since 1911. That rule seems sensible, namely that we 
should not give effect in the U.S. to foreign confiscation. It 
would be remarkable, I think, for any tribunal to find that 
that is not a legitimate public interest of the United States. 
It is an interest that is shared by many other countries.
    So in conclusion, Mr. Chairman, I would say that there is 
no international treaty or trade obligation that restricts the 
ability of the Congress to codify this longstanding practice in 
the way that Congress did in 1998.
    Thank you.
    [The prepared statement of Mr. Veroneau follows:]
                 Prepared Statement of John K. Veroneau







                               __________

    Mr. Conyers. Thank you very much, all of you.
    Dr. Esper, you are the only one on this panel that isn't a 
lawyer. You don't feel isolated or uncomfortable at all up here 
this afternoon, do you?
    Mr. Esper. Well, I guess that is true. I am not a lawyer. I 
think this matter is one that comes down to the jurisprudence 
of the courts, which is why at the end of the day the position 
we have taken is that, in order to comply with our 
international trade and treaty obligations and to resolve this 
in a way that doesn't affect American businesses, the prudent 
way to go is to allow the courts to decide this; to weigh all 
the facts, all the arguments. You have heard several of those 
points of contention here amongst the witnesses at the table--
but leave it to the courts and let the courts decide, 
consistent with precedent, with the law, with our treaty 
obligations, as has been done in the past.
    Mr. Conyers. What have you heard here today with all your 
friendly legal fellow panelists that you would like to leave on 
the record or would like to tactfully correct or amend?
    Mr. Esper. Well, I think we need to take a look at the big 
picture here, and the big picture is: what is the future of 
America's credibility within the World Trade Organization and 
with the I.P. laws that undergird it and how do we want to 
approach intellectual property rights? How do we want to be 
treated--and our companies treated--vis-a-vis other nations and 
how they regard it?
    And again, I think there are some key facts in dispute. I 
know it was just mentioned that the Supreme Court made a 
decision with regard to confiscation of American property. My 
reading of the case here is that there was not a confiscation 
of property, but that the trademark was abandoned and it was 
legally reregistered by someone else; and secondly, that it was 
not American property, it was the property of foreign 
nationals.
    So to me those are two key parts--two key elements in 
dispute by all sides here that again, we should leave it to the 
courts to decide. Was the trademark owned or was it abandoned? 
What is the legal status of different parties involved? And let 
the courts decide it.
    Mr. Conyers. You sound as much like a lawyer as anybody 
else here this afternoon. I can't help but worry about what is 
going to happen to any reciprocity to our brands. If we start 
doing this I don't know how we are going to tell everybody else 
that they have got to adhere to the WTO except in our case this 
is special, we are going to legislate. We don't want to wait 
for the courts.
    Mr. Esper. Right, Mr. Chairman. That is the concern of our 
members who have trademarks not only in Cuba but other 
countries around the world.
    The Chamber is constantly involved in debate and 
negotiations as an outside party in negotiations all around the 
world where we are trying to uphold I.P. laws and norms and 
defend them. Needless to say, our I.P.--our intellectual 
property--our rights are constantly under challenge from 
countries, governments, from activists involved in this issue.
    And so it is very important to us, as the Global I.P. 
Center, to constantly fight for strong I.P. laws, to defend 
them, and to make sure that we preserve those protections for 
America's innovators, for our creators, for all those people 
out there--our workers--who are creating this ingenuity, these 
innovations that are really driving our economic growth. And 
this is just--this Section 211 is just another example of 
something that chips away at our ability to credibly make those 
arguments in multilateral FORA.
    Mr. Conyers. Well now, Mark Orr, Bob Goodlatte and Howard 
Coble are with the Chamber of Commerce. What is going on here 
this afternoon? Here more of my colleagues on this side of the 
aisle are with the Chamber. This afternoon I don't know if that 
is the case or not. And of course, Bob will have the mike in a 
minute. How do you account for that?
    Mr. Orr. Well, that is a very difficult question for me to 
respond, Mr. Chairman. I do know, however, that both Mr. 
Goodlatte and Mr. Coble have a strong respect for the judiciary 
system and a long admiration for the ability of the courts to 
resolve conflicts, issues involving intellectual property. So 
frankly, it is somewhat puzzling to me but I am sure that they 
will illuminate----
    Mr. Goodlatte. Don't let the Chairman put words in my mouth 
or yours.
    Mr. Orr. Over to you, sir. Perhaps you could enlighten me.
    Mr. Conyers. Well, you are very diplomatic this afternoon, 
Mr. Orr. I will say that.
    Mr. Reinsch, what have you heard here this morning and 
afternoon that you would like to correct, you would like to 
diplomatically take an exception to?
    Mr. Reinsch. A couple things, Mr. Chairman--thank you for 
the question. I may have misheard, but I thought I heard Mr. 
Veroneau say that there is an underlying issue between the two 
companies here, which of course is correct, but that that was 
an issue that would eventually be settled in the courts. And of 
course, I think the point of our side is that it can't be 
settled in the courts because Section 211 precludes the courts 
from addressing the issue on the merits.
    We would like to get back there to do precisely what I 
think he has recommended, which is to let the court settle it. 
The only way to get back there to allow the courts to address 
the issue on the merits is repeal.
    The other comment I would make is to pick up something that 
Dr. Esper said. I was distressed to hear Ms. Wasserman Schultz 
mention that Mr. Arechabala had passed away; I didn't know 
that. I testified with him on this same subject 6 years ago and 
had the opportunity to meet him. We didn't agree, but it was a 
real pleasure for me to meet him.
    I did sit right next to him in the hearing and listen to 
him testify that they had abandoned the trademark, that he said 
they got bad legal advice, which, you know, is an issue that 
he, I assume, took up with his lawyer at the appropriate time, 
but there wasn't any question in the Senate hearing what had 
happened, what the fact surrounding the abandonment of the 
trademark by the Arechabala family and the subsequent 
assignment of the trademark to Cuba Export was. At the end of 
the day that will be settled by the courts but I think it is 
appropriate to get that on the record.
    Beyond that, Mr. Chairman, I----
    Mr. Goodlatte. Objection, your honor. That is hearsay. 
[Laughter.]
    Mr. Reinsch. I think Dr. Esper made the larger point about 
the U.S. role in the world, as did you, better than I could, 
and I will stop at this point.
    Mr. Conyers. Bob Goodlatte, the floor is yours.
    Mr. Goodlatte. Well, thank you, Mr. Chairman. This has been 
very interesting and I think it is a quandary for the courts 
but I also think it is a quandary for us. There are certainly 
extra legal measures that have been taken in looking at the 
whole history of what happened here when this was taken at 
gunpoint from the Arechabala family.
    You know, I guess, Mr. Orr, I would like to hear from you 
how we make that family whole from the standpoint of the fact 
that yes, we can talk about what happened here in the United 
States with that trademark, but it is very clear to me that if 
the whole incident had not taken place in Cuba that that family 
would have renewed their valuable U.S. trademark and we 
wouldn't be here discussing it today.
    And the other concern I have about it, I think, relates to 
the fact that it was indeed the Cuban government that was 
allowed, notwithstanding the fact that they had seized this and 
had been the subject of an embargo in the United States because 
of exceptions in the law, been able to go ahead and grab that 
trademark in the United States under circumstances that I think 
most people looking at it objectively would say, ``Well, that 
is the last thing in the world we would have thought was a fair 
thing to have resulted for them.''
    And I know Pernod Ricard came in to this whole situation 
after that, and you are relying upon certain decisions made in 
our courts, but I would like to ask all of the witnesses, are 
there people other than the Arechabalas that Section 211 could 
help who were either forced to abandon their marks or who were 
jailed by the Cuban government, thus effectively forcing them 
to abandon their rights to their trademarks?
    Mr. Orr. Mr. Goodlatte, if I might comment on your--of 
several--there is no doubt that the Arechabala family was not 
treated appropriately in Cuba. And yes, it is true--I don't 
know if there were guns involved at the time. That seems to be, 
you know, lore that has become fact, but it makes for--what 
happened was not----
    Mr. Goodlatte. Either way, you would agree that the Cuban 
government should not have seized----
    Mr. Orr. Absolutely.
    Mr. Goodlatte [continuing]. Their business.
    Mr. Orr. Absolutely. Governments have the right to 
nationalize properties but they also have the obligation to 
provide compensation to the owners of those properties. That 
did not take place in this case.
    But there is quite a different thing here, and that is that 
the Arechabala family did maintain their trademark rights in 
the United States for another 13 years thereafter, and they 
easily could have continued to do that by simply filing a 
certificate of excusable nonuse, citing the embargo, and 
continued on to this very day to maintain those trademark 
rights here in the United States irrespective of the loss of 
their properties in Cuba. For whatever reason they didn't do 
that.
    In essence what is being asked here is to restore those 
rights that they, by their own actions took, to allow expire at 
some point far down the road, and in this particular instance 
award them to a very large competitor of ours who, quite 
frankly, can do just fine without having those rights. What 
have we accomplished here----
    Mr. Goodlatte. Let me interrupt you, and I want to give Mr. 
Lehman a chance. Do you know of any other entities of Cuban 
origin that would benefit from Section 211 or have benefited 
from Section 211 other than----
    Mr. Orr. No, sir, not to our knowledge the----
    Mr. Goodlatte. Then let me turn to Mr. Lehman and say this: 
First of all, do you know of any other entities that benefit 
from Section 211? And secondly, if not, then Section 211 seems 
to be almost in the form a private bill, even though I am sure 
it doesn't directly recognize the Arechabala family.
    But ordinarily when you have a private bill one of the 
things that this Committee looks at very closely is whether it 
was an action beyond the control of the individual receiving 
the benefit of it or is it, as Mr. Orr says, something that 
that family could have protected themselves against, even 
though obviously their circumstances were extremely adverse at 
the time, that they did not renew that. How would you respond 
to him, and do you know of anybody else who benefits from this?
    Mr. Lehman. You are asking me, Mr. Goodlatte?
    Mr. Goodlatte. Right.
    Mr. Lehman. First of all, I would state that this Section 
211 does apply to others, and----
    Mr. Goodlatte. Do you know of any others that it----
    Mr. Lehman. There have been other situations, I believe, 
where it has applied, and, you know, I have got a stack like 
this, and I will get that to you.
    Mr. Goodlatte. If you would submit that, because it would 
be----
    Mr. Lehman. But I think what is more important than that, 
and you mentioned this is like a private bill. It is not even 
remotely like a private bill.
    Mr. Goodlatte. It has been shown by counsel that the 
Trinidad U.S.A. Corporation that produces cigars and Jimmy 
Buffet, whose registered mark ``Havanas and Bananas'' was 
challenged by Havana Club Holdings as a dilution of the Havana 
Club mark, so there are others who have utilized Section 211.
    Mr. Lehman. That is what my colleagues here have just given 
me, and some of those--and those are situations and there are 
probably some others. And those can be documented and we will 
put them in the record.
    But I think I want to--my point was, that I wanted to make, 
when you said this is like a private bill, this isn't remotely 
like a private bill. First of all, as you have just 
acknowledged, other people were affected and there have been--
--
    Mr. Goodlatte. That takes----
    Mr. Lehman [continuing]. But this is precisely the kind of 
situation, in my view, that calls for congressional policy, 
because the policy is the relationship between confiscation by 
force of arms and recognition of trademarks. That is not a 
private bill; that is an overall policy----
    Mr. Goodlatte. I understand, I understand. But what do you 
say to Mr. Orr's contention that it is not about the 
confiscation, it is about the decision made in 1993--whatever 
that date was--to not seek to renew the trademark?
    Mr. Lehman. Well, first of all, Mr. Orr's company doesn't 
own the trademark, doesn't own the registration to the extent 
that there is a valid registration--and my testimony goes into 
that--to the Havana Club mark. In fact, they tried to assert 
that ownership right and were found not to have it because the 
transfer to their joint venture with the Cuban government was 
held by U.S. district court to violate an order of the Office 
of Foreign Assets Control of the Treasury Department.
    And by the way--for all this talk of litigation there has 
been one infringement lawsuit brought and one decision that has 
been made, that was appealed to the second circuit, cert denied 
at the Supreme Court, and that was the lawsuit that Mr. Orr's 
company brought against Bacardi for their use of Havana Club. 
And they lost.
    So, I would have to say I have, myself, little doubt that 
if this tortured process continues that eventually Pernod 
Ricard will probably not be found to have valid trademark 
rights in the Havana Club mark in the United States. But the 
issue here is that Congress intervened to establish an overall 
policy, and that is exactly what Section 211 was. Now, maybe--
--
    Mr. Goodlatte. I know the history of Section 211----
    Mr. Lehman. Yes.
    Mr. Goodlatte [continuing]. And how it came about. It 
didn't go through this Committee, and so this is our 
opportunity to review that.
    What recourse would Bacardi have in the U.S. courts if not 
for Section 211? Does the trademark law provide exceptions in 
special cases like this or are the rules cut and dry and if you 
don't renew your mark you lose your mark?
    Mr. Lehman. Well, first of all, there continues to be 
ongoing litigation, including ongoing litigation about 
decisions made in the Patent and Trademark Office. You know, if 
I can maybe just go back and describe a little bit about how 
this mark----
    Mr. Goodlatte. I just want an answer.
    Mr. Veroneau, would you want to take a shot at that?
    Mr. Veroneau. Yes, Mr. Goodlatte. I think it is important 
to understand that, as I said in my opening remarks, this 
principle that Section 211 embodies has been in U.S. law, 
albeit case law, since 1911. So the notion that this is a new 
limit on Cuban expropriation is simply not true. There have 
been 13 cases where Federal courts have invoked this principle 
of not recognizing, here in the United States, foreign 
confiscations. Four of those 13 involved Cuban entities.
    So what I would submit, Mr. Goodlatte, is that Section 211 
simply codifies U.S. law as it has existed since 1911. So in 
that regard, this isn't special legislation for one company; 
this is just Congress, in its--within its prerogatives--to 
codify what has been law for many a time, and there will 
unavoidably be other individuals who will benefit from this 
principle, whether it is codified by Congress or simply 
continued in the courts as it will be.
    Mr. Goodlatte. And you think that Ms. Wasserman Schultz's 
legislation would correct that as to the one WTO finding that 
went against Bacardi, or went in favor of Pernod Ricard.
    What about the discussion that several have mentioned about 
the General Inter-American Convention for Trademark and 
Commercial Protection? Would applying Section 211 restrictions 
to nationals of all countries solve those problems--the 
problems with that statute?
    Mr. Veroneau. Well, I don't believe there is an underlying 
problem and conflict with the Convention in the first place, so 
I don't think we need to even discuss how to fix a potential 
problem. The Convention very simply says that there is a mutual 
obligation to register trademarks, but the Convention does not 
in any way limit Congress' prerogatives to determine what the 
ownership standard should be in this country. That is your 
prerogative.
    And I would suggest that if the WTO encroached upon that 
you would not take a favorable view of that. I assure you the 
Convention doesn't do that, because if it did the U.S. has been 
in violation since the Supreme Court decision that was in place 
when the Convention was signed in 1929.
    So in that sense, we are talking about Section 211 but the 
U.S. law, in terms of our case law, has been in place since 
1911, and that is simply a recognition that we don't recognize 
foreign confiscations.
    Mr. Goodlatte. What do you say in response to Mr. Orr's 
complaint that this is just about somebody who could have 
renewed their trademark and simply failed to do so, it is like 
any other case, leave Cuba aside? Guy is here in the United 
States; he has got a right to apply for a renewal; he fails to 
renew and he simply doesn't do it.
    That obviously happens many times with just people who hold 
trademarks in this country. They abandon them for a variety of 
reasons. Does he have an argument?
    Mr. Veroneau. That is a factual question that the courts 
have been sorting their way through. Part of the WTO challenge 
was that Section 211 prevents the defense of abandonment. The 
WTO agreed with the United States that Section 211, on its 
face, does not prevent a defense of abandonment.
    In this particular litigation that is being discussed 
today, there was a finding by the Second Circuit that the 
abandonment defense was not permissible in the facts of that 
case, but that is not--that is very different than saying that 
Section 211, as a general principle and on its face, prevents 
the defense of abandonment. It does not, and the WTO found so.
    Mr. Lehman. Mr. Goodlatte, I would like to try to answer 
your question again, and I just wanted to point out that----
    Mr. Goodlatte. It is up to the Chairman. I have exceeded my 
time. And I know Mr. Reinsch wants to jump in here too, so----
    Mr. Lehman. There is a difference between registration and 
trademark ownership, and I would assert that the Arechabala's 
never abandoned their trademark ownership, that those rights 
have been transferred to Bacardi. Bacardi, indeed, is using 
those rights. Bacardi has registered those rights with state 
trademark offices; it has common law rights. The only issue is 
what goes on with regard to the registration.
    At the moment the registration, facially, belongs to Cuba 
Export. There is a big question--and that was a question in 
litigation--as to whether that registration has expired because 
there is a question whether or not it was renewed basically 
dishonestly by failing to permission to do so from the Treasury 
Department. And the Tresury Department denied that permission. 
The reason it did is because it found that money had changed 
hands for that registration that had gone to Cuba by Mr. Orr's 
company in violation of the embargo.
    Mr. Goodlatte. Thank you.
    Mr. Reinsch?
    Mr. Reinsch. I would like to comment on a couple things 
that Mr. Veroneau said, if I may. First, the question of 
abandonment or not is a question of fact, and the courts were 
sorting that out until Section 211 came along and took away 
their right to do so. Had Section 211 not been enacted the 
court would have ruled on that matter in 1999, I guess, or 
1998, and we wouldn't be here. So if you want to get back to 
that point, which we do, I think you have to undertake repeal.
    So now, with respect to the Inter-American Convention, 
its--Mr. Veroneau doesn't think that we are in violation, I 
think--consideration is what the Cubans think, because they are 
the ones that have to act. And the Cubans have addressed that 
issue in writing in a letter to Senator Leahy prior to the last 
hearing--or I guess it was prior to the last hearing--in which 
they made clear that they believe the United States is in 
violation of its obligations under the Inter-American 
Convention.
    There is no dispute resolution mechanism within the 
Convention. The Cubans are in a position, if they believe that 
we violated it, to take appropriate action under international 
law. They have not chosen to do anything so far, but this is 
exactly what concerns the business community, what they might 
do, and it is really a matter of their call. The fact that the 
United States government----
    Mr. Goodlatte. It seems hardly fair, though, that the guy 
with the gun is going to write the rule that says that we don't 
agree that this Convention, which has no mechanism for 
resolving itself, justifies our taking action in our country 
that could be to the detriment of--it seems like what we have 
got to do in this Committee is figure out what is fair and 
right and do that, and then defend that both with the Cubans 
and internationally.
    Mr. Reinsch. Well, with respect to fairness and rightness I 
also want to make one point about I think your initial question 
to Mr. Orr. One thing I would urge the Committee to keep in 
mind is that neither of the remedies on the table, as I 
understand them, are going to benefit the Arechabala family and 
the victims of the original injustice. To the extent that the 
Arechabala family had any rights they have given--they have 
sold those rights to Bacardi.
    So the outcome of this issue is going to benefit one or the 
other of two large companies. The Arechabalas are out of luck 
either way.
    Mr. Goodlatte. But one decision could also benefit the 
perpetrator of the original wrongful act.
    Mr. Reinsch. Well, not in--actually, no, because the 
product is embargoed and can't be sold in the United States.
    Mr. Goodlatte. Well then, the whole fight is moot unless 
somebody thinks at some point in time that embargo is going to 
get lifted----
    Mr. Reinsch. Well, exactly. But if you will refer back to 
Helms Burton and the operative U.S. law in that question, that 
is not going to happen until Castro is not there anymore and 
there has been a change of government. So the perpetrators of 
the crime, if you will, unless Congress changes--you know, 
repeals Helms Burton, which is your matter not mine--but under 
that law, you know, the embargo is not going to go away until 
he and his regime are gone, at which point it will be a 
different government and presumably, you know, the 
circumstances will change, and you will have a different view 
about this trademark, and you will have a different view about 
Cuba export.
    Mr. Goodlatte. Point taken.
    Thank you, Mr. Chairman.
    Mr. Veroneau. Mr. Chairman, could I respond to the 
retaliation point, please?
    Mr. Conyers. If Howard Coble consents, yes.
    Mr. Coble. Well, I have got a 1:15 meeting, but go ahead, 
sir, and then I will----
    Mr. Veroneau. Thank you very much, Mr. Coble. I will be 
very brief.
    First of all, a country--a member who is party to the 
Inter-American Convention--does not have the right to decide 
for itself whether there has been a violation. It must be 
determined by a tribunal, and under the Convention the 
tribunals that are authorized to reach those conclusions are 
the tribunals in the country where the alleged violation 
occurs. So I don't think we could allow a situation where we 
are permitting Cuba to determine, on its own, whether there is 
a violation. I don't believe any tribunal could find substance 
to a claim of violation.
    Secondly, if the issue here really is would you, Congress, 
forgive and forfeit its prerogatives to legislate in this space 
simply because someone else thinks there might be a violation 
and do some horrible things. I find that, number one, 
doubtful--the U.S. and Cuba, despite the embargo, continue to 
register each other's trademarks. There is great mutual 
interest despite the intense litigation among the parties 
involved in this case.
    Secondly, I don't think it is appropriate for Congress to 
relinquish its authority to legislate in a way that it 
apparently determined was sensible, namely to codify that 
foreign confiscation shouldn't be honored. You shouldn't 
relinquish that simply because some other actor might take 
unlawful steps.
    Mr. Conyers. Thanks for your forbearance, Howard.
    Mr. Coble. Thank you. I was wondering when the gentleman 
from Virginia was going to exhaust his time, but I am patient. 
I am a patient guy.
    Thank you, Mr. Chairman.
    Good to have you all with us.
    Mr. Goodlatte, the gentleman from Virginia, referred to 
this matter as obscure. Mr. Lehman referred to it as 
complicated. And they are both right--it is obscurely 
complicated.
    And we may get into some repetition here, but let me put a 
question to Mr. Veroneau and Mr. Lehman: Does it matter if the 
Arechabala legally abandoned their work given that their 
business and holdings were expropriated in 1960?
    Mr. Veroneau?
    Mr. Veroneau. Whether there was an abandonment is a 
question of fact, and I would say that the case law on this 
question is that abandonment is an equitable defense. And at 
the risk of sounding overly lawyerish, when one wants to raise 
an equitable defense, one must come with clean hands. It is 
doubtful that in a U.S. court any defense of abandonment would 
be successful if brought by anyone where the chain of ownership 
involves a party who may not have acted with clean hands. And 
in 1960 it sounds like there is agreement among all panelists 
that there was inappropriate action by the Cuban government.
    Mr. Coble. Mr. Lehman?
    Mr. Lehman. Well, first I would say that there is a 
difference--I would just reemphasize that there is a difference 
between having a trademark and registering a trademark, unlike 
patent law. Under patent law you only have a patent if the U.S. 
Patent and Trademark Office gives you one.
    That is not true with trademarks. You have a trademark 
because you are using the mark and it has come to identify the 
particular goods or services that you are offering the public. 
The U.S. Patent and Trademark Office's role is to register that 
mark.
    The Arechabalas originally registered this mark because 
they were in business, and they were using it, and everyone 
understood that it described their product. Their business was 
confiscated, and then the product went for a period of time in 
the United States where it wasn't used very much in the market.
    But the Cuban government chose, under an exception, by the 
way to the Embargo Act, chose to register that mark with title 
being in its state monopoly. And there have been a couple of 
registrations, and some of the litigation that is going on 
right now is whether or not those registrations were valid 
because of misrepresentations and fraud in those 
representations to the Patent Office.
    The fact is that whatever happens to the registrations, the 
Arechabala mark, in my view, is not abandoned, and it is not 
abandoned because they continued to try to use the mark and 
their rights were later sold to Bacardi. Now Bacardi has indeed 
revived the sale of the product in the United States. And so 
today the company that has the trademark in the United States 
by virtue of use is Bacardi.
    Now, what will happen eventually is if the Patent and 
Trademark Office decides that there is no effective 
registration, regardless of whoever is asking for it, Bacardi 
will be in a position to go to the United States Patent and 
Trademark Office and register that mark based on their use.
    Mr. Coble. Thank you, Mr. Lehman.
    And Mr. Veroneau, I think you responded to Mr. Goodlatte's 
question regarding exceptions to the law of abandonment. I 
think you addressed that, did you not? You want to do it again 
briefly?
    Mr. Veroneau. No, I am comfortable with the answer I 
provided, Mr. Coble.
    Mr. Coble. Okay.
    Mr. Veroneau. Thank you, though.
    Mr. Coble. Mr. Orr, will the repeal of Section 211 enhance 
or diminish respect for intellectual property rights, in your 
opinion?
    Mr. Orr. Congressman--excuse me--Congressman, I think it 
will enhance respect for intellectual property rights in two 
respects: because it will restore the full authority of the 
courts to sort out competing claims to intellectual rights--and 
important intellectual property rights.
    And frankly, once again, from the standpoint of the United 
States it will reestablish our leadership in encouraging others 
to promote the stronger protection of intellectual property. 
Right now we are the laughingstock of the WTO membership. In 
Geneva there isn't a month that goes by in the dispute 
settlement body in which such paradigms of intellectual 
property protection like India and China and Brazil draw 
attention to the fact that we have not complied with our 
obligations, and we have created, for narrow parochial 
purposes, an opening to protect the interests of one company 
over another.
    So yes, sir, I think repeal would certainly strengthen 
protection for intellectual property.
    Mr. Coble. Thank you, Mr. Orr.
    Let me finally bring Dr. Esper and Mr. Reinsch on this 
question: How likely is it--strike that. Different question. 
What happens, gentlemen, if we don't amend 211 or repeal it, 
and what will the WTO do, Doctor and Mr. Reinsch?
    Mr. Reinsch. In other words, if you do nothing and the 
status quo continues?
    Mr. Coble. Yes.
    Mr. Reinsch. I think in terms of international reaction--
Mr. Orr is probably in a better position to talk about what the 
WTO will do. There has been an informal truce, if you will, for 
the last several years. At some point the E.U. may run out of 
patience, and they will be in a position, as with other cases 
where a country doesn't comply, to retaliate. They will have to 
make an initial judgment about how much that would be and in 
what form and then the United States would probably object, and 
it would be a, you know, a substantial period of arguing about 
it that would result in some E.U. action against us along with 
anybody else who wanted to climb aboard the train.
    The other piece, of course, is what the Cubans might do, 
which is, I think, far more significant, potentially, in dollar 
terms because of the U.S. trademarks that are registered there 
and the fact that because of TSRA, the Trade Sanctions Reform 
Act that Congress enacted in 2000 as I recall, there is now 
beginning on the agriculture side--you know, agricultural 
branded agricultural commodities are flowing to Cuba in small 
amounts, so this is actually an issue there.
    Nobody knows what they will do. My sense is that they are 
waiting for Congress to resolve this issue before they will 
act, and so if you--once you act definitively, I think they 
will do what they think is best.
    Mr. Coble. Doctor, you want to weigh in?
    Mr. Esper. I would agree. I think the issue with the WTO 
remains as it was in 2003, that we are still in noncompliance, 
that at some point there will be pressure to move forward if 
Congress doesn't act one way or the other. I think with regard 
to the Inter-American Convention there still remains that 
uncertainty as to what could or might be done and so there 
remains uncertainty for our companies who own trademarks and 
are doing business.
    And on the third point, the larger point I think is it 
continues to erode our ability to credibly make the case on 
other I.P. cases that come before the World Intellectual 
Property Organization, the WTO, or other FORA where we are 
trying to argue that we need to both strengthen and defend I.P. 
rights.
    Mr. Coble. Well, gentlemen, I respect the private property 
rights, and I also respect the role of the courts. And I think 
you can do both without being inconsistent.
    And I appreciate you all being here.
    Thank you, Mr. Chairman. I yield back.
    Mr. Conyers. The honorable Darrell Issa?
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Orr, has your company ever sold Havana Club in the 
United States?
    Mr. Orr. No, sir. No, sir----
    Mr. Issa. So how can you have a valid mark or even an 
intent to use? How can you, in fact, file to ever own the mark 
if you neither had the ability to sell it nor did you sell it?
    Mr. Orr. Havana Club is a genuine Cuban product made only 
in Cuba as----
    Mr. Issa. No, it isn't anything in the U.S. to your 
company, is it?
    Mr. Orr. No, actually it is quite valuable for the future 
opportunity of being to sell it----
    Mr. Issa. Does the Trademark Office, Mr. Lehman--does the 
Trademark Office recognize the intent to use someday far away 
in applications?
    Mr. Lehman. No, and that is not the basis for whatever 
registration was made. Cuba Export was permitted to register 
their mark even though they weren't using it because of the 
excusable nonuse doctrine, the excuse being that there is an 
embargo and they can't----
    Mr. Issa. So the Menendez brothers' defense that they were 
orphans would have been just as valid, wouldn't it?
    Mr. Lehman. Yes----
    Mr. Issa. You seized an asset that didn't belong to your 
government; the government now has sold it to a third party 
with funds received that, in fact, no American company could 
pay. Whether there is an abandonment or not, the claim by 
Ricard that they had a right to go after it even though they 
couldn't use it, but their defense was they couldn't use it 
even though the abandonment clearly was because whether it was 
a valid abandonment or not, the abandonment was because another 
group couldn't actually use it because their assets had been 
screened.
    So I think for the Chairman, I agree: This is incredibly 
complicated--until you look at it in the same light that you 
look at the murder of the Menendez brothers' parents, and then 
suddenly it is not so hard.
    Castro stole an asset of another group of people. Your 
company, Mr. Orr, has purchased a stolen asset, and you are 
marketing it all around the world. The rest of the world is 
perfectly willing to let you do it, and you are sitting here 
today saying, why won't you let us do it, too? The rest of the 
world is complaining that you won't let us market the genuine 
Cuban brand that, in fact, was stolen from a group of 
individuals.
    Whether it was sold to Bacardi or not to me is sort of 
immaterial. They had a right to sell it to who they wanted if 
they owned it. You didn't own it, and you didn't buy it from a 
lawful owner under America's interpretation of the seizure of 
these assets. Isn't that true, Mr. Orr?
    Mr. Orr. No, it is not.
    Mr. Issa. So on what basis do you think that you have clean 
title to the underlying rights? Where do you get clean title? 
From the Cuban government, is that correct?
    Mr. Orr. Once again, the U.S. registration----
    Mr. Issa. No, no. Excuse me, Mr. Orr. One of the things 
about sitting here this long and being a coauthor of this bill 
is I get to ask the questions and expect the answer. Where do 
you think you get clean title for this asset?
    Isn't it true you got it from the Cuban government, which 
seized it in 1960, owned it, and gave you the rights to export 
their sugarcane-produced product, which is the rum, around the 
world under a name that they sold you? Isn't that where you got 
the right--your company got the right?
    Mr. Orr. No, sir.
    Mr. Issa. Where did you company get the right to sell in 
Great Britain?
    Mr. Orr. There were no existing trademark rights from the 
previous owner in any country outside of the United States----
    Mr. Issa. Okay, well let us switch this around. Where did 
you get the right to export rum from Cuba?
    Mr. Orr. We entered into a joint venture--sorry, sir--we 
entered into a joint venture with the Cuban company in----
    Mr. Issa. The Cuban company being a wholly-owned asset of 
the Cuban government, correct?
    Mr. Orr. It is a Cuban state trading entity, yes.
    Mr. Issa. Okay, so you entered into--it doesn't matter if 
you create a, quote, company. If it is 100 percent owned by the 
government you bought the right in a venture with the Cuban 
government to export Cuban product. You keep telling us--and I 
appreciate that--that Havana Club is only, quote, made from 
cane harvested in Cuba and distilled in Cuba, and then that rum 
is exported. That is the only way to get Havana Club. I 
appreciate that.
    You know, in my district they make Blue Agave, and they 
can't call it tequila. I appreciate people having these sort of 
discussions.
    But I have to get back to the question of whether this 
bill, if it seeks to do what it seeks to do, is doing it for 
the correct reason. The trademark which existed, the good will 
that existed, the past sales that existed in the United States 
prior to 1960, who did they belong to?
    Mr. Orr. Prior to 1960?
    Mr. Issa. Yes, sir.
    Mr. Orr. They belonged to the Jose Arechabala company.
    Mr. Issa. Okay. And did the owners of that company abandon 
willingly the pursuit of and the continuation of that good 
will, profit, and sales?
    Mr. Orr. Here in the United States, yes they did.
    Mr. Issa. And how did they abandon it? Did they ever 
manufacture in the U.S., or was it, in fact, only Cuban-made 
rum, which had to be made from the cane there in Cuba in order 
to be authentic?
    Mr. Orr. That is exactly why the reason that they could 
have continued to maintain their rights here in the United 
States even though it was not possible to sell a Cuban product 
here.
    Mr. Issa. So they couldn't sell the product but they could 
continue paying the Patent and Trademark Office----
    Mr. Orr. Absolutely.
    Mr. Issa [continuing]. And they could use a rather 
complicated request to the PTO to maintain their right even 
though they didn't have continuous use?
    Mr. Orr. Not a complicated request at all, Congressman. It 
is a very simple application. You pay your renewal fee, file a 
certificate of nonuse, you are good for another 10 years--20 
years at that time.
    Mr. Issa. Okay.
    Mr. Lehman, isn't it true that you can have an abandonment, 
and that abandonment can be permissible for any company as long 
as the PTO accepts that reason for abandonment? For example, 
your factor burns down and it take 4 years to rebuild--aren't 
you allowed to say that even though I did not have on sale and 
use that I had a justified reason, and therefore the 
abandonment was not a deliberate abandonment?
    Mr. Lehman. I wouldn't call that abandonment; I would call 
that excusable nonuse.
    Mr. Issa. Okay, so going back--and I realize you are an 
expert witness for the now-owner, but--isn't the fact that you 
can't source the material, you can't sell the product, you are 
literally kept from producing and selling the product that 
bears the name that your family invented and promoted--isn't 
that an acceptable nonuse?
    Mr. Lehman. Well, yes, but that--keep in mind again, that 
only relates to the registration. I would assert that the 
Arechabalas never abandoned their trademark, and continued to 
have it, and properly conveyed their rights to Bacardi. Bacardi 
is using the mark in the United States right now. They were 
sued for infringement; they won the lawsuit, so they own the 
mark.
    The only question is the registration at the USPTO and the 
status of it, which is currently in the name of Cuba export--by 
the way. There was an attempt to transfer that registration to 
HCH, the holding company half-owned by Mr. Orr's company. That 
attempt failed because the U.S. district court held it invalid. 
The Foreign Assets Control agency at the Treasury Department 
held it invalid. And the U.S. Patent and Trademark held that 
transfer invalid.
    So to the extent that there is a registration on file now--
a registration which, in my view, has a very clouded title--
that is Cuba Exports' registration. But the trademark, as it is 
used in the United States, is being used by Bacardi under a 
continuous chain of ownership from the Arechabala's rights.
    Mr. Issa. You know, I have to admit that I probably came to 
this Committee with some preconceived agenda. And, Mr. Orr, if 
that offends you I apologize.
    But what is amazing is that I have a hard time not seeing 
Raul and Fidel when you sit there, because I am looking and 
saying, ``You are, in fact, an economic legacy of this 
taking,'' and I am trying to figure out how in the world, even 
though you have gained financial benefit around the world from 
what would otherwise belong to a family that created it, 
invented it, and undeniably had it taken wrongfully, that the 
one place you don't have it you are trying to get it here. And 
I am befuddled.
    So let me ask a question to the rest of the panel--and I 
realize they are fairly diverse--but taking it completely away 
from rum and completely away from trademarks, let us just say 
that trademark--common law trademark rights are real property 
even though they are not--you can't put your fingers on them.
    If in World War II a painting were taken from somebody's 
home in occupied France, and it ended up being purchased by 
somebody who bought it from the German colonel who came home 
with it as a prize, and it was later discovered, what would--
the rest of the panel, what would you have us do as to the 
ownership of that asset? Would you have us recognize that the 
person who paid for it paid for it with money, or would be just 
as much be bound to try to have that asset returned to the 
lawful owner that it was taken from even though an intervening 
party had paid good money for it?
    I would like to go down the panel. And like I say, let us--
for a moment I have to put my hat on and say, ``You know, the 
only way I can justify intellectual property is I consider it 
real property,'' so I put it in the terms of real property. It 
is a painting taken from occupied France in World War II and 
bought by intervening parties.
    What do we do there, Doctor?
    Mr. Esper. Well, it is hard to translate into the terms the 
scenario you have put forward because it is the difference 
between real property and intellectual property, per se. And 
the scenario you portray is complicated. I mean, that is why 
the position we take is, ``Let the courts decide this, let the 
courts look at international law, let the courts look at our 
requirements, and let them decide, based on all the merits of 
the case''----
    Mr. Issa. So your first thing is, let the U.S. courts make 
a decision based on foreign courts?
    Mr. Esper. Again----
    Mr. Issa. No, seriously, let us follow up on this. When 
does the U.S. court--and this is a pretty popular discussion up 
here on the dais--when did the U.S. courts look at 
international law for purposes of fairness in the U.S.? I know 
of no valid reason, and I think the Supreme Court has been torn 
on this but they have made it pretty clear that U.S. law 
governs U.S. courts. We do not read into U.S. law foreign law 
unless we adopt it.
    Mr. Esper. No, no. To be clear, Congressman, I mean, the 
laws we are bound to by our treaty obligations. We are bound by 
our treaty obligations to do that. That is why in this case 
the--and you have heard this on the panel--the issues that--a 
key issue here that is the pivot point is whether or not the 
Arechabala family did or did not abandon its trademark. That 
decision can take us one way or the other.
    Mr. Issa. Well, no. Mr. Lehman has said it pretty well. Let 
us assume they abandoned their registration. On what basis did 
they abandon their other rights?
    Mr. Esper. Well, my understanding of simply reading it, not 
as a lawyer, as the Chairman has asserted, is that they simply 
failed to reregister, to fill out the forms, submit a check, 
and register, something they could have done. I think if you go 
back into the testimony from the Senate in 2004, Mr. 
Arechabala, who testified at the time, acknowledged as much.
    Mr. Issa. Okay, I am going to yield back here. I guess I am 
going to close by saying, you know, whether it is my old 
company's Viper trademark or any number of other products, when 
I was taught trademark law--and I was taught it one check at a 
time I had to write to attorneys as a businessman--it was very 
clear that my first use and sale gave me inherent rights, those 
common rights were in every state in which I had done business 
or sold, and that if I only sold in a couple of states I might 
only have common rights in the state.
    And the reason I went to the Federal trademark was, even if 
I was only selling in 35 states I wanted to be covered for the 
whole country because a uniform brand for my products were 
important. But I came to the Federal registration with some 
very strong common rights that I had designed, created unique 
or stylized marks, and that I brought those in saying, ``I have 
already used these in commerce or intended to use them in 
commerce.''
    So I guess my whole problem is, here, I believe, what we 
are deciding is whether or not common rights existed. And we 
are probably to a great extent saying we don't want the 
courts--and I believe the Chairman would agree that this thing 
will take it away from the courts perhaps because the issue is 
bigger than a registration or the outcome of registration 
arguments; it is about a basic common right that was taken away 
by force in 1960, has not been restored or paid for--and I 
appreciate the fact the original owners have been paid for at 
some diminished amount when they chose to sell to Bacardi 
compared to what it would have been had they continued to be 
able to make and sell their product around their world.
    So, Mr. Chairman, you have been very, very kind with your 
time. Hopefully I have been as balanced as you would expect me 
to be in this case, and I yield back.
    Mr. Conyers. Well, could I just ask this one question of 
you--and you are a past member of the Chamber of Commerce: Why 
aren't you with them this time?
    Mr. Issa. I am glad you asked me that question, Mr. 
Chairman. I believe the Chamber of Commerce, who has come to me 
over the years asking me to lift the embargo on Iran even 
though it would endanger Israel, it would endanger the United 
States, and they continue to try to produce a nuclear weapon--
it is the same Chamber whose answer always is, ``Please let our 
companies sell all over the world without any restraint.''
    No, I appreciate the Chamber does a great deal, and I was a 
board member of the San Diego chamber and an active 
participant, but at some point our obligation is to say to the 
companies who would like to sell bulldozers in Tehran or a 
myriad of products in Cuba that foreign policy, for valid 
reason, is something we have a constitutional obligation. So I 
respectfully disagree with the Chamber because I think they are 
consistent, and I would like to be consistent too.
    Mr. Conyers. Well, I am not surprise that your independence 
would be reflected even with the Chamber of Commerce or anybody 
else.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Conyers. Thank you very much.
    Mr. Reinsch, you get the last word.
    Mr. Reinsch. I get the last word. Well, I appreciate that--
not a chance---- [Laughter.]
    I think I would come back to where Dr. Esper just finished. 
There are a lot of facts here that are circling around that are 
in dispute. There are a lot of rights being asserted, I think, 
in response to what--the direction that Mr. Issa was going 
down. Once can assert one's rights but we are in a situation 
here where someone else has come in and said you don't have 
those rights, or you ought not to have those rights, and there 
has to be a process for sorting that out.
    My organization's view consistently has been the right 
place to sort those things out is first at PTO when they make a 
decision about registration, and second, in the courts. And we 
are--as with the Chamber, we don't have a position on who owns 
this trademark. We are content to go along with whatever the 
courts decide. What we are supporting is getting back to the 
courts to let them make that decision.
    My view of the litigation history of all this--and there 
has been a lot of--there have been lots of pieces of it. I have 
got a file this high back in my office and they have got files 
that are even thicker than that--it has been that in the 
instant case was there was going to be a decision made on 
precisely that question on the merits and this section came 
along and trumped that. And we would simply like to restore the 
status colante, and I think the implications of not doing that 
end up being quite significant for all the reasons that Dr. 
Esper said.
    Thank you.
    Mr. Conyers. Mr. Goodlatte?
    Mr. Goodlatte. Thank you, Mr. Chairman. Mr. Chairman, the 
only thing I would add, if I get a word beyond the last word, 
would be that I think the solution we should look for is one 
that does not give effect to--in the United States--to foreign 
confiscation. And I second what Mr. Veroneau said about that. 
How we get about doing that and who wins and who loses in this 
regard I am not completely clear.
    But I would like to, in furtherance of what the gentleman 
from California said, ask that a letter to you, Mr. Chairman, 
and to Ranking Member Smith, from Jaime Suchlicki, who is a 
professor at the University of Miami and the director of the 
Institute for Cuban American Studies and offers his opinion on 
what impact this might have in Cuba, with regard to any 
retaliation on the part of the Castro regime--I would ask that 
that be made a part of the record.
    Mr. Conyers. Without objection, so ordered.
    [The information referred to follows:]
 Letter from Jaime Suchlicki, Professor and Director, United of Miami, 
submitted by the Honorable Bob Goodlatte, a Representative in Congress 
from the State of Virginia, and acting Ranking Member, Committee on the 
                               Judiciary



                               __________
    Mr. Conyers. We thank you all very, very much.
    The Committee is adjourned.
    [Whereupon, at 1:51 p.m., the Committee was adjourned.]

                                 
