[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.]