Bacardi has scored a technical knockout in its trademark fight with Pernod Ricard over the right to sell its Havana Club rum in the United States.
The U.S. Supreme Court on Monday refused to hear Pernod’s appeal of a lower court ruling that its claim to the Havana Club brand was not valid in the United States because it concerns a trademark used by a business that was nationalized by the Cuban government.
The refusal by the top court to take up the case, which has no effect on the Havana Club trademark in other countries, adds to a cocktail of court opinions stretching from the U.S. to Spain in the Havana Club legal spat.
Pernod said it won’t pursue further appeals against the ruling, which has cost “several million dollars.”
The Supreme Court case is Empresa Cubana v. Department of the Treasury, 11-945, U.S. Supreme Court.
Pernod, the France-based wine and spirits giant, has been marketing its Havana Club rum through a partnership with Cuba’s state-run rum monopoly since 1993.
Competitor Bacardi, based in Bermuda, uses the Havana Club name in the U.S. for rum produced in Puerto Rico.
The Pernod venture with Cuba still retains rights over the Havana Club brand in the 120 markets worldwide that it sells to. And the company keeps swinging, saying Monday it has already registered a new brand name for the U.S. market, Havanista, in anticipation that the U.S. will one day lift its decades-old embargo on Cuban imports.
Even without the U.S. market — 40 percent of world rum drinkers — Pernod's Havana Club has seen its annual sales soar 13 percent to 3.5 million cases around the world. It now accounts for 5 percent of the world’s rum market, taking the fifth spot among leading rum brands.
Bacardi’s more than 200 brands and labels sell 20 million cases in 150 countries every year. Bacardi rum holds an unrivaled 35 percent of the global market, according to the International Wine and Spirit Research report.
Diageo’s Captain Morgan brand, which is at the center of a heated rum war between Puerto Rico and the U.S. Virgin Islands, has carved out a roughly 16 percent share of the global rum market. The Dominican Republic’s Brugal is in the fourth spot with a nearly 7 percent market share.
Years of legal wrangling over Havana Club brand
Pernod has jousted with Bacardi for years over the label, alleging deceptive advertising of the non-Cuban rum.
Pernod had turned to the U.S. Supreme Court last year after the U.S. District Court of Appeals in Washington upheld a move by the U.S. Treasury Department to block the Cuban government-owned venture from renewing the Havana Club trademark. The federal agency’s Office of Foreign Assets Control had cited a 1998 federal law that prevents the registration or renewal of U.S. trademarks tied to companies nationalized by the Cuban government.
The legal dispute between Pernod and Bacardi over the Havana Club label dates back years and is rooted in the Cuban revolution.
So far, the U.S. courts have sided with Bacardi based on the abovementioned 1998 federal law.
The Spanish courts, meanwhile, have sided with Pernod Ricard, the world’s second-biggest liquor maker behind Diageo.
In a ruling in February 2011, the Supreme Court of Spain confirmed ownership of the Havana Club trademark in Spain by a Pernod Ricard joint venture. That was the third time the Spanish courts rejected Bacardi’s challenge to the joint venture’s rights over the trademark. The joint venture’s ownership was previously recognized by the Spanish lower court in 2005 and then again on appeal by the Provincial Court of Madrid in 2007.
In 2010, Bacardi USA Inc. won a key round in its legal battle with Pernod over sales of the Havana Club rum brand in the United States when a federal judge in Delaware rejected Pernod’s claims that Bacardi’s use of the Havana Club label is misleading because the rum is not made in Cuba. The judge ruled that Bacardi’s product says it is made in Puerto Rico and is derived from a 1920s-era Cuban recipe.
Spain and the U.S. have been the top two markets for the Havana Club brand and the main fronts of the legal battles between Pernod and Bacardi. Bacardi acquired the U.S. trademark in 1994 from the Arechabala family, its original owners. The Cuban government expropriated the Havana Club name from the Arechabala family after the 1959 revolution on the Caribbean island.
Bacardi claims that the move by the Cuban government was illegal, and it released Havana Club in the U.S. in 2006. Unlike the rum sold by Pernod, Bacardi’s rum is made in its plant in Cataño, outside the Puerto Rican capital of San Juan.
Cuba says it registered the Havana Club trademark in the U.S. in 1976 after the Arechabalas let their claim on it expire. It has sold the rum internationally since 1993 in a joint partnership with Pernod that excludes exports to the U.S. because of a longstanding trade embargo.
Cuban trademarks have been registered in the U.S. in anticipation of an end to the embargo, and for the same reason U.S. companies regularly register trademarks in Cuba even as the 1963 U.S. embargo blocks most trade between the countries.
What’s in a name?
The true argument is over who can claim to produce authentic Cuban rum — especially if the country opens up to global commerce.
Bacardi, a family-owned spirits conglomerate founded in Santiago, Cuba, in 1862, pioneered the light, dry smoothness Cuban rum is now famous for, devising a charcoal-filter system and aging in oak barrels for added sweetness.
But the Bacardís joined the fiercely anti-Castro exile community in Miami after Fidel Castro nationalized the company in 1960. Havana Club, like all Bacardi rums, is made in Puerto Rico — and says so on the bottle.
Cuba and Pernod spent $70 million to rehabilitate a Havana Club distillery specializing in darker añejo rum in San José de Las Lajas.