US assailed for "piracy" of Cuban trade-marks

by Chakravarthi Raghavan

Geneva, 25 Apr -- A range of developed and developing countries supported Cuba this week at the WTO that the US was violating its TRIPS obligations through its 1998 law, withdrawing trademark protection in the US for Cuba registered trademark "Havana Club" (used to market Cuban rum), and enabling a US Cuban exile enterprise to market its products under the Havana Club trade mark.

Another issue that came up, and where too the US seemed to be isolated, relates to the issue whether the present moratorium against "non-violation" complaints should continue after 1 Jan 2000, and such complaints ruled out under the WTO, TRIPS and the Dispute Settlement Understanding and provisions. The US said that non-violation complaints should be allowed and, in the absence of a consensus to the contrary, the moratorium would expire.

The Cuban complaint of US violation came up at the TRIPS Council meeting on 21-22 April, and Cuba was supported by the EU, the Dominican Republic, Malaysia, India, Venezuela, Honduras, Haiti, Brazil, Indonesia and Egypt.

Cuba had raised this issue at the TRIPS Council meeting in December last year, and again in February this year, asking the US to explain why its law do not violate the US TRIPS obligations, as claimed by the United States.

Though it had been asked at the December 1998 meeting, for the text of the law enacted in October 1998, and reminded again at the Feb meeting, the US provided excerpts only this time.

Meanwhile, a US Court has used the US law to deny Cuban nationals the right to assert Havana Club trademarks against a Cuban exile enterprise, Bacardi Rum, which in 1994 began marketing its own rum under the Havana Club trademark to offset the competition.

The excerpts supplied by the US showed that the law, Section 211 of the US Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1998 withdrew trade mark protection in the US if the marks, trade name or commercial name is the same or substantially similar to one that was used in connection with a business or assets that were confiscated, unless the original owner or the "bona fide successor-in-interest" has given consent for its use.

"Havana Club" was a well-known name, under which Cuban rum was sold in pre-revolution Cuba by an enterprise owned by the Bacardi Company, a Cuban family that fled Cuba and went into exile in 1960.

The trade name was revived in 1993 by a joint enterprise of the principal rum producers of Cuba and the French consortium Pernord Ricard enterprise, a leading distributor around the world of alcoholic beverages, and which began marketing "Havana Club" rum, and by 1998 was selling one million cases.

The Bacardi Co which had been marketing its rum under the Bacardi trade name (with annual sales of 20 million, six million in the US), tried to offset the competition, with its own brand of Havana Club rum.

Pernord Ricard filed a suit in the US against Bacardi over the violation of the Havana Club trade name/registered trademark. But a New York US Federal Court judge ruled that Cuban nationals could not assert their trademark rights.

At the TRIPS Council, Cuba said the US explanation was inadequate and had taken too long to be delivered.

Both Cuba, and several countries who supported it, said the US action was unilateral and possibly violated the TRIPS obligations of the US.

The EU said that the US reply was inadequate and that it expected the US to remove any violation of the TRIPS Agreement.

The US however disagreed with these comments and said it was willing to respond to any further questions submitted in writing.

On the "non-violation" complaints issue, there are now two position papers before the TRIPS Council - one from Canada and another from Cuba, the Dominican Republic, Egypt, Indonesia, Malaysia and Pakistan. In effect both papers call for extension of the moratorium, due to expire at end of the year.

In GATT lanaguage, a "non-violation" complaint is a dispute under XXIII.1, but not under sub-para (a) where a complaint is over the "failure of another contracting party to carry out its obligations under this Agreement."

Under XXIII.1 (b) a dispute could also be raised on the ground of "the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement", or under XXIII.1.(c) on the ground "the existence of any other situation".

This last was put into the Havana Charter and in GATT 1947, at the instance of New Zealand which was asked what kind of a "situation" complaint it envisaged. The records show that New Zealand said it had in mind a situation of "deflation" created by a trading partner, that results in jeopardising demand and thus reduces market for imports. In the Keynesian ideology that under- pinned the Bretton Woods and Havana charter, no one found any reason to envisage probably a deliberate state-induced deflation and the New Zealand idea in putting in XXIII:1.(c) was not questioned or challenged. And no one has seriously ever raised such a complaint.

The TRIPS, in Art. 64.1, while extending the provisions of GATT Art. XXII and XXIII and the DSU, to settlement of disputes under TRIPS, in 64.2 has said that subparagraphs 1(b) and 1(c) of GATT Art XXIII shall not apply to the settlement of disputes under the Agreement for a period of five years from date of entry into force of WTO.

A secretariat note to the TRIPS Council on the "non-violation complaint" purports to give a "negotiating history" of TRIPS, based on the various alternative texts for TRIPS dispute settlement, though no such history was presented to the negotiators at the end, and approved by them.

In another context, a WTO panel (the one on the BOP complaint by the US against India) has turned down a negotiating history sought to be deduced by India on the basis of various draft texts and comparing it with the language in the final agreed text.

In the US case against India on TRIPS, the panel which was chaired by the Swiss negotiator (and perhaps drawing on the secretariat view of the negotiating history), despite the moratorium on non-violation complaints had tried to use the GATT theory of "legitimate expectations" on tariff concessions to give a finding against India. The appellate body however disagreed that the GATT legitimate expectations context could be applied to TRIPS, and set aside this finding.

At the TRIPS Council meeting, those supporting the two position papers on non-violation complaints, besides the signatories, included Hungary for CEFTA (Central European Free Trade Agreement) countries, India, Hong Kong, the Republic of Korea, Japan, New Zealand, Sri Lanka, and the Philippines.

India and Egypt wanted the "non-violation" complaint to be eliminated from any TRIPS dispute. The two position papers, simply calling for an extension of the moratorium, as a compromise to enable the Council to look at the issue more closely before deciding. Developing countries also noted that they were still in the transition period until 1 Jan 2000, when they have to conform to the TRIPS and thus they don't have enough experience on non-violation issues.

The Canadian paper, and that of the developing countries, as also interventions at the meeting, all underlined that the non- violation concept was originally designed to prevent tariff concessions being eroded by non-tariff measures. It was aimed at enabling a country being brought to dispute before GATT, if the market access expected as a result of tariff concessions did not take place because of other measures.

But TRIPS involves no market access concessions, and is an agreement providing norms to be observed by rules, and hence the meaning of a "non-violation" complaint was unclear.

Allowing non-violation complaints, several countries said, could open the door wide to unilateralism.

The EU said that if non-violation complaints are to be allowed under TRIPS, there should be some means of avoiding abuse that would allow countries to force others to adopt a higher level of intellectual property protection than required under TRIPS.

The US however said that non-violation was an important and integral part of the GATT/WTO system, and the moratorium could allow countries to "invent" legislation that would reduce intellectual property protection required under TRIPS.

The US however did not appear to have explained why such an "invented" legislation could not fall foul of the IPR protection required under TRIPS, and needs a "non-violation" complaint. The US also said that when the moratorium expired, the non-violation complaint right would automatically kick in.

However, the Philippines supported by the EU and others pointed out that while Art. 64.2 said that sub-paragraphs 1. (b) and (c) of Art XXIII shall not apply for five years, the next para says that the TRIPS Council "shall examine" the scope and modalities for complaints of the type provided under 1.(b) and 1.(c), and submit recommendations to the Ministerial Conference for approval.

The next sentence under 64.3 though, requires that any decision of the Ministerial Conference to approval such a recommendation or extend the period in 64.2 shall be made only by consensus, and the approval will be effective for all members, without any formal acceptance process.

The US could thus withhold consensus to any extension of the moratorium or defining the scope and modalities for the complaints. If this happens, developing countries are stuck with this -- one more case of their negotiators not having paid enough attention to put into language, what they were made to understand in private. (SUNS4423)

* Chakravarthi Raghavan is the Chief Editor of the South-North Development Monitor (SUNS) in which the above article first appeared.

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