RESTRICTED WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOIP/C/W/139/Add.1
2 June 1999
(99-2194)
Council for Trade-Related Aspects
of Intellectual Property RightsOriginal:  English/
anglais/
inglés
COMMUNICATION FROM THE UNITED STATES
Addendum
By means of a communication from its Permanent Mission addressed to the Ambassador of
Cuba, dated 20 April 1999, the United States has supplemented the information provided earlier in
response to the Cuban delegation's request for information (see document IP/C/W/139) with the
opinion and order reproduced in the Annex.1
Conseil des aspects des droits de propriétéintellectuelle qui touchent au commerce
COMMUNICATION DES ÉTATS-UNIS
Addendum
Par communication adressée à l'Ambassadeur de Cuba et datée du 20 avril 1999, la Mission
permanente des États-Unis a transmis, pour compléter la documentation qu'elle avait fournieauparavant en réponse à la demande de renseignements de la délégation cubaine (voir le document
IP/C/W/139), le jugement (motifs et arrêt) reproduit en annexe.
1
Consejo de los Aspectos de los Derechos de Propiedad
Intelectual relacionados con el Comercio
COMUNICACIÓN DE LOS ESTADOS UNIDOS
Addendum
Mediante una comunicación de su Misión Permanente dirigida al Embajador de Cuba,
de fecha 20 de abril de 1999, los Estados Unidos han complementado la información que ya habían
facilitado en respuesta a la petición de información formulada por la delegación de Cuba (véase eldocumento IP/C/W/139), con la opinión y la orden reproducidas en el anexo.
1
                                                     
1 In English only./En anglais seulement/En inglés solamente.IP/C/W/139/Add.1
Page 2
ANNEX
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
HAVANA CLUB HOLDING, S.A. and
HAVANA CLUB INTERNATIONAL, S.A.,
Plaintiffs
- v -
GALLEON, S.A., BACARDI-MARTINI U.S.A., INC.,
GALLO WINE DISTRIBUTORS, INC.,
G.W.D. HOLDINGS, INC. and
PREMIER WINE AND SPIRITS,
Defendants.
OPINION AND ORDER
96 Civ. 9655 (SAS)IP/C/W/139/Add.1
Page 3
   Shira A. Scheindlin, U.S.D.J.:
   At the heart of this case lies an interesting
irony: a half-Cuban company, Havana Club
International, S.A., brings an action to enjoinwhat it believes is unfair competition and to
preserve its ability to some day compete in the
United States market. Plaintiffs currently
distribute a Cuban-origin rum around the world
under the name "Havana Club," but are
prohibited from selling their liquor in the United
States because of the Cuban embargo.Defendants own Bacardi rum, the best-selling
brand of spirits in this country, and claim to be
the successors-in-interest to the rights of the
Cuban company that owned the Havana Club
rum business prior to its expropriation by theCastro government in 1960. Through this action,
plaintiffs seek to enjoin defendants from selling
rum under the name "Havana Club" in the
United States.
 I. Background
   A. The Parties   Plaintiff Havana Club International, S.A.
("HCI") is a joint stock company organized
under the laws of the Republic of Cuba, and is
domiciled and has its principal place of business
in Cuba. Plaintiff Havana Club Holding, S.A.
("HCH"), a holding company that owns the
Havana Club trademark in certain countries
outside the United States, is a corporationorganized under the laws of Luxembourg.
Plaintiffs were formed in connection with a
November 1993 agreement ("Convenio
Asociativo") between Pernod Ricard, S.A.
("Pernod Ricard"), a French Company, andHavana Rum & Liquors, S. A. ("HRL"), a Cuban
company. Pursuant to the Convenio Asociativo,
Pernod Ricard and HRL each own 50% of HCH
and, directly and through their ownership
interests in HCH, each own 50% of HCI.
   Defendant Galleon, S.A. has been merged into
defendant Bacardi and Company Limited
("Bacardi & Co."), which is organized under the
laws of Liechtenstein and is headquartered inthe Bahamas. Bacardi-Martini U.S.A. ("Bacardi-
Martini," and together with Bacardi & Co.,
"Bacardi") is incorporated in Delaware.
   B. Procedural Background   As explained in this Court's three previous
opinions in this case, plaintiffs currently have no
rights to the use of the Havana Club trademark.
See Havana Club Holding, S.A. v. Galleon,
S.A., 961 F. Supp. 498 (S.D.N.Y. 1997);
Havana Club Holding, S.A. v. Galleon, S.A.,
974 F. Supp. 302 (S.D.N.Y. 1997); Havana
Club Holding, S.A. v. Galleon, S.A., 96 Civ.
9655, 1998 WL 150983 (S.D.N.Y. March 31,
1998). A bench trial was held before this Court
on plaintiffs' remaining claims: (1) thatdefendants' sales of Havana Club rum infringe
plaintiffs' trade name in violation of Chapter III
of the General Inter-American Convention for
Trademark and Commercial Protection, 46 Stat.
2907 ("Inter-American Convention"); (2) thatdefendants' sales of Havana Club rum infringe
plaintiffs' trade name in violation of §§ 44(g)
and 44(h) of the Lanham Act, 15 U.S.C. §§
1126(g) and (h);
1 and (3) that defendants'
Havana Club rum is geographicallymisdescriptive because it leads consumers to
erroneously believe that it originates in Cuba, in
violation of § 43(a) of the Lanham Act, 15
U.S.C. § 1125(a). Plaintiffs seek no money
damages, only injunctive relief and attorney'sfees and costs. In defending against plaintiffs' §
43(a) claim, defendants assert the affirmative
defense of "unclean hands," on the basis that
plaintiffs have used ingredients of non-Cuban
origin in a significant amount of their "Cuban"
rum.
2
                                                     
1 Section 44(g) provides that "[t]rade names
or commercial names of persons described insubsection (b) of this section shall be protectedwithout the obligation of filing or registration
whether or not they form parts of marks." 15 U.S.C.
§ 1126 (g). Section 44(h) ensures that any person
whose country of origin is a party to a trademarktreaty with the United States shall be entitled to"effective protection against unfair competition."
2 Defendants have also asserted a
counterclaim against plaintiffs, which they explained
during closing statements as being limited to seeking"an injunction against...plaintiffs [from] interferingwith Bacardi's use of the Havana Club mark in theUnited States." Defendants suggested that plaintiffswere interfering with defendants' "distributorship
relations." See Tr. at 1798. Defendants' produced no
evidence at trial of this alleged interference, and
failed even to adequately explain the grounds for ornature of the relief sought. As a result, thiscounterclaim is dismissed.IP/C/W/139/Add.1
Page 4
   Following the close of plaintiffs' case,
defendants made a motion for judgment
pursuant to Fed. R. Civ. P. 52(c) on a variety of
grounds. The Court granted the motion as to
plaintiff HCH on its trade name claims, on theground that HCH is organized under the laws of
Luxembourg, which is not a party to the Inter-
American Convention. The Court deferred
ruling on the remainder of this motion until the
close of defendants' case.
   C. Factual Background   Based upon the evidence presented at the trial,
I find the following facts to be true. Since
January 1, 1994, HCI has been in the business
of exporting rum under the "Havana Club"trademark under an exclusive license from
HCH. See Joint Statement of Stipulated Facts,
Exhibit A to Joint Pretrial Order ("SF"), at ¶¶ 4-5. From 1994 through 1998, HCI sold
approximately 38,400,000 bottles of HavanaClub rum, with approximately 30% of the sales
in Cuba and the remainder exported principally
to Spain, France, Germany, Italy, Canada,
Mexico, Bolivia and Panama. See Testimony of
Noel Adrian, Managing Director of HCI
("Adrian Tr."), at 73-74.
   Pursuant to the Cuban embargo that has been
in place since 1963, U.S. law prohibits the
importation of Cuban-origin products into the
United States. See generally, Havana Club, 961
F. Supp. at 499-500. Thus, plaintiffs' Havana
Club rum has never been sold in the United
States. See Adrian Tr. at 105. U.S. visitors to
Cuba, however, are permitted to bring the rumback to the United States as accompanying
baggage. See Plaintiffs' Exhibit ("PX") 407.
Pursuant to the travel restrictions imposed by
the Office of Foreign Assets Control ("OFAC"),
the class of travelers permitted to visit Cuba
includes journalists, official government
travelers, members of internationalorganizations, persons with close relatives in
Cuba and travelers who have received special
licenses from OFAC. See id.; 31 C.F.R. §
515.560. These travelers may reenter the UnitedStates with up to $100 in Cuban-origin goodsfor personal use, with cigars and Havana Club
rum being the most popular items brought back.
See id.; Testimony of Hilda Maria Diaz ("Diaz
Tr."), travel agent, at 299-300. Commencing in1994, HCI has distributed a carrying case inwhich tourists can carry their purchases of
Havana Club rum, and since that time travelers
from the United States have been returning with
Havana Club rum in these cases. See Adrian Tr.
at 111-113; PX 150; Diaz Tr. at 293.
   Although it is currently prohibited from
selling in the United States, HCI intends to
export Cuban-origin rum to the United States as
soon as it is legally able. See Adrian Tr. at 105-
07. HCI anticipates using the same marketingstrategy it is currently following worldwide,which emphasizes the quality and the character
of Havana Club rum based mainly upon its
Cuban origin. See id. Thus, for example, the
label on its Havana Club bottles reproduces thecity of Havana and proclaims the product to be"El Ron de Cuba" ("The Rum of Cuba"). HCI's
advertising similarly stresses the product's link
to Cuba. See Adrian Tr. at 89-91.
   The original producer of Cuban rum under thetrademark "Havana Club" was Jose Arechabala,
S.A. ("JASA"), a Cuban corporation, which was
principally owned by members of the
Arechabala family. See Testimony of Ramon
Arechabala ("R. Arechabala Tr.") at 1229, 1235;Defendants' Exhibit ("DX") 583. JASA exported
Havana Club rum to the United States until
1960. See SF at ¶62. On or about January 1,
1960, however, armed forces from the Castrogovernment forcibly entered into possession and
confiscated the property and assets of JASA.
See R. Arechabala Tr. at 1231-1243. On
October 15, 1960, Cuban Law No. 890 ("Law
No. 890") was issued, expropriating for the
Cuban government the physical assets, property,
accounts and business records of JASA. See DX
573A ("Law No 890")("Nationalization is
ordered by the forced expropriation of all
industrial and commercial corporations, as well
as the factories, stores, warehouses and other
assets and rights of same and the properties of
the following natural persons or companies").3
                                                     
3 The introduction to Law No. 890 states, in
part, that "Whereas: The creative work of theRevolution, in its multiple aspects is basedfundamentally on the full economic development of
the Nation. Whereas: It is evident that this growth
cannot be attained, unless by planning the economy,and the increase and progressive streamlining ofproduction and the national control of the basicindustries of the country. Whereas: Many of the largeIP/C/W/139/Add.1
Page 5
No compensation was ever paid to JASA or its
owners by the Cuban government or any other
entity on behalf of the Cuban government for
the property and assets that were seized in 1960.
See R. Arechabala Tr. at 1236; Deposition of
Gloria Marquez Arechabala Misto at 174-176.
   From 1972 until some time in 1993, Empresa
Cubana Exportadora De Alimentos y Productos
Varios ("Cubaexport"), a Cuban state foreign
trade enterprise established by the Cuban
Ministry of Foreign Commerce, was theexclusive exporter of Havana Club rum,
primarily to the Soviet Union and Eastern
Europe. See SF at ¶¶ 64-66. In 1993,
Cubaexport reorganized its business toincorporate a foreign partner, transferring all ofthe assets associated with the Havana Club rum
business, including its Havana Club trademark,
to HRL. Pursuant to the Convenio Asociativo
entered into with Pernod Ricard, HRL
transferred these assets to HCH, which, in turn,granted an exclusive license to sell Havana Club
rum and use the Havana Club trademark to HCI.
   Sometime in 1993, either prior to Pernod
Ricard's entering into the Convenio or soonthereafter, a legal advisor to the company,
Emilio Cuatrecasas, met with members of the
Arechabala family to discuss purchasing their
waiver of any claims to the Havana Club name
that they may have had. See SF at ¶77;
Testimony of Thierry Jacquillat, president ofPernod Ricard ("Jacquillat Tr.") at 1450-1452.Ultimately, no agreement was reached between
the Arechabalas and Pernod Ricard. See
Jacquillart Tr. at 1452.
   The Arechabalas subsequently attempted to
reach an agreement with International Distillers
& Vintners Limited ("IDV"), an international
distilled spirits company, with respect to
Havana Club rum, but IDV advised the
Arechabalas in or about March 1995 that it didnot wish to enter into any such agreement. See
SF at ¶80. The Arechabalas, however, found awilling partner in Baca rdi & Co., and following
negotiations beginning in or about 1995, the
parties entered into a formal Share Purchase
                                                                              
private corporations operating in the country are far
from assuming the conduct that agrees with theobjectives and goals of the revolutionarytransformation of the national economy..."Agreement in April 1997. See PX 253, 254.
Pursuant to this agreement, Bacardi & Co.
purchased the Havana Club trademark, the
related goodwill of the business and any rum
business assets that still existed from theArechabalas. See id
.
   In 1995, Bacardi-Martini began to distribute
rum in the United States which was produced in
the Bahamas under the authority of Galleon,
Bacardi & Co.'s predeccessor-in-interest,
bearing the trademark Havana Club. Thisdistribution consisted of sixteen cases of rum
shipped to four U.S. distributors. See SF at ¶19;
PX 146. From May 1996 through August 1996,Bacardi distributed an additional 906 cases of
Havana Club rum to distributors in seven states.See PX 136, 146. Bacardi has not distributed
any Havana Club rum since 1996, pursuant toan agreement reached with plaintiffs to halt such
sales pending the outcome of this litigation.
 II. Discussion
   A. Trade Name Claims   On October 21, 1998, prior to the trial but well
into the course of this litigation, Congress
passed § 211 of the Omnibus Appropriations
Act. See Pub. Law 105-277 (1998). This new
statute limits the registration and renewal of,and the assertion of trademark and trade name
rights in, marks that were used in connection
with property confiscated by the Cubangovernment. The statute provides:
 (a)(1) Notwithstanding any other provision of
law, no transaction or payment shall be
authorized or approved pursuant to section515.527 of title 31, Code of Federal
Regulations,
4 as in effect on September 9, 1998,
with respect to a mark, trade name, or
commercial name that is the same or
substantially similar to a mark, trade name, or
                                                     
4 The Cuban Asset Control Regulations
("CACR"), 31 C.F.R. Part 515, regulate the U.S.embargo against Cuba. See Havana Club Holding v.
Galleon, 961 F. Supp. at 499-501. Section 515.527,
in particular, authorizes transactions related to theregistration and renewal of patents, trademarks andcopyrights by Cuban nationals in the United StatesPatent and Trademark Office and the United StatesCopyright Office.IP/C/W/139/Add.1
Page 6
commercial name that was used in connection
with a business or assets that were confiscated
unless the original owner of the mark, trade
name or commercial name, or the bona fide
successor-in-interest has expressly consented.
 (2) No U.S. court shall recognize, enforce or
otherwise validate any assertion of rights by a
designated national based on common law rights
or registration obtained under such section
515.527 of such a confiscated mark, trade name
or commercial name.
 (b) No U.S. court shall recognize, enforce or
otherwise validate any assertion of treaty rights
by a designated national or its successor-in-
interest under sections 44(b) or (e) of theTrademark Act of 1946 (15 U.S.C. 1126 (b) or
(e)) for a mark, trade name or commercial name
that is the same or substantially similar to a
mark, trade name, or commercial name that was
used in connection with a business or assets thatwere confiscated unless the original owner of
such mark, trade name, or commercial name, or
the bona fide successor-in-interest has expressly
consented.
5
    Defendants argue that subsection (b) of thisnew statute prevents this Court from
recognizing any trade name rights to which
plaintiffs would otherwise be entitled in the
name "Havana Club." It is well-established that
Congress may pass legislation that effectively
takes away rights to which parties werepreviously entitled by virtue of U.S. treaty
obligations. "[A]n Act of Congress ... is on a full
parity with a treaty, and ... when a statute which
is subsequent in time is inconsistent with a
treaty, the statute to the extent of the conflictrenders the treaty null." Reid v. Covert, 354
U.S. 1, 18, (1957); Whitney v. Robertson, 124U.S. 190, 193 (1888)(where a treaty and a
statute conflict, the last one in date controls);
accord, Breard v. Greene, 523 U.S. 371, 118 S.
Ct. 1352, 1355 (1998). Courts, however, will
find later legislation to have abrogated a treaty
only when Congress' intention to do so "has
been clearly expressed." Trans World Airlines,
Inc. v. Franklin Mint Corp., 466 U.S. 243, 252
(1984). Abrogation of a treaty by implicationwill only be found when the later legislation is
                                                     
5 There is no official legislative history
surrounding the enactment of § 211."in irreconcilable conflict" or the legislation
"covers the whole subject of the earlier [treaty],
and is clearly intended as a substitute." Posadas
v. National City Bank of New York, 296 U.S.
497, 503 (1936). In either case, the intention ofthe legislature must be clear. See id.
   Here, in specifying that "no U.S. court shall
recognize, enforce or otherwise validate any
assertion of treaty rights by a designated
national," Congress made clear its intention to
repeal rights in marks and trade names derivedfrom treaties where those marks and trade
names satisfy the requirements set forth in §
211. As a company owned in part by the Cuban
government, HCI clearly is a "designated
national" within the meaning of the statute.
6 See
SF at ¶41. In addition, the evidence at trial
established that on October 13, 1960, the
Revolutionary Cuban Regime confiscated the
physical assets, property and business records of
JASA, the original owner of the Havana Clubtrademark. See 31 C.F.R. § 516.336. Thus, on
its face, § 211 would appear to prevent HCIfrom asserting its trade name claims. HCI,
however, argues that for a variety of reasons §
211 does not effect the outcome in this case.
    1. Claim Asserted under the Inter-American
Convention
   HCI's first argument turns on the language of
§ 211(b) and the self-executing nature of the
Inter-American Convention. Specifically, HCIargues that § 211 does not apply to rights
derived from self-executing treaties, but rather is
only addressed to the assertion of "treaty rights
... under Sections 44(b) or (e) of the Trademark
Act" (emphasis added). HCI points out that it
has asserted a trade name infringement claim
directly under Chapter III of the Inter-American
Convention, and that the Convention grants it
the private rights to bring an action in the
United States to enjoin infringement of its tradename. Thus, HCI argues, because it has pled a
claim for protection of its trade name under
Chapter III of the Inter-American Convention,
and because this claim does not arise "under
sections 44(b) or (e) of the Trademark Act," §211 does not bar this claim.
                                                     
6 Section 211 incorporates the definitions of
"designated national" and "confiscated" set forth at31 C.F.R. 515.305 and 515.336, respectively.IP/C/W/139/Add.1
Page 7
   The Inter-American Convention, which was
adopted at a special conference held in February
1929, is a self-executing treaty, and thus it
became law in the United States without thenecessity for implementing legislation. See
Bacardi Corp. of America v. Domenech, 311U.S. 150, 161 (1940). Arti cle III, which covers
commercial or trade names, provides that a
party in any of the Contracting States may, in
accordance with the law and procedure of the
country where the proceeding is brought, applyfor and obtain an injunction against the use of
any commercial name or the cancellation of the
registration or deposit of any trade mark...by
proving: (a) that the commercial name or trade
mark, the enjoining or cancellation of which isdesired, is identical with or deceptively similar
to his commercial name already legally adopted
and previously used in any of the Contracting
States, in the manufacture, sale or production of
articles of the same class.
 General Inter-American Convention for
Trademark and Commercial Protection, Chapter
III, Article 18.
   In 1946, with the passage of the Lanham Act,
Congress attempted to correct what it perceived
as the failure of the United States to carry out its
treaty commitments to secure intellectual
property rights. See S. Rep. No. 1333, 79th
Cong., 2d Sess. 5 (1946) at 1276 ("There hasbeen no serious attempt fully to secure tonationals of countries signatory to the
conventions their trade-mark rights in this
country and to protect them against the wrongs
for which protection has been guaranteed by the
conventions....To remedy this discreditablesituation is merely an act of international good
faith"). Section 44(b) of the Act provides that
foreigners are to be entitled to the same
trademark and trade name rights, and the same
right to be free from unfair competition, towhich U.S. citizens are entitled. See 15 U.S.C. §
1125(b) ("[a]ny person whose country of origin
is a party to a convention or treaty relating to
trademarks, trade or commercial names, or the
repression of unfair competition, to which theUnited States is also a party...shall be entitled to
the benefits of this section under the conditions
expressed herein to the extent necessary to giveeffect to any provision of such convention...").
7
To the extent that the United States was a party
to any convention or treaty relating to
trademarks or trade names that was not self-
executing, the Lanham Act served as theimplementing legislation.
    HCI argues that because the Inter-American
Convention is self-executing, and because it
gives private parties the right to sue for an
injunction against an infringer, a claim brought
pursuant to the Convention is not brought"under" § 44 of the Lanham Act and is thus not
effected by § 211. This argument, however,
strains the language of § 211 and would lead to
an illogical result. Section 211 explicitly states
that no court shall recognize "treaty" rights ofdesignated nationals. The further reference in
that section to § 44(b) of the Lanham Act should
not be read to distinguish certain treaties from
others. Both the text of § 44(b) and its
legislative history indicate that the purpose ofthis section was to execute all U.S. treaty
obligations respecting trademarks and tradenames. See 15 U.S.C. § 1127 ("[t]he intent of
this chapter is to ... provide rights and remediesstipulated by treaties and conventions respectingtrade-marks, trade names, and unfair
competition entered into between the United
States and foreign nations"); S. Rep. No. 1333,
79th Cong., 2d Sess. 5 (1946) (stating that
purpose of Lanham Act was "to carry out by
statute our international commitments to the end
that American traders in foreign countries maysecure the protection to their marks to which
they are entitled").
   Section 44(b) when passed by Congress
applied -- and still today applies -- to personsfrom a country that is a party to any convention
or treaty relating to trademarks and trade names,and the act provided the framework for the
assertion of all trademark and trade name treaty
rights. Although the Lanham Act may haveserved formally as the implementing legislation
for those treaties that were not self-executing,
                                                     
7 As originally enacted, § 44(b) specifically
referenced the International Convention for the
Protection of Industrial Property (Paris Union), the
Inter-American Convention and "any otherconvention or treaty relating to trade-marks, trade orcommercial names, or the repression of unfaircompetition to which the United States is a party."IP/C/W/139/Add.1
Page 8
there is no principled or logical reason for
finding that § 211 abrogates rights derived from
those treaties that required statutory
implementation but does not have the same
effect on treaties that were self-executing.
   Thus, although plaintiffs have asserted a trade
name claim under the Inter-American
Convention, § 44 was intended to implement the
rights and remedies of the Convention and
provided the framework through which those
rights were asserted. See also Inter-American
Convention, Chap. III, Art. 18 (emphasis added)
("[a]ny manufacturer, industrialist, merchant or
agriculturist domiciled or established in any of
the Contracting States may , in accordance with
the law and procedure of the country where theproceeding is brought , apply for and obtain an
injunction against the use of" a deceptively
similar trade name or trademark). The reference
in § 211 to § 44 thus does not lead to the
conclusion that  Congress intended to abrogate"treaty" rights asserted "under" the Lanham Act,
and not those asserted "under" the Inter-
American Convention.
   Because § 211 requires that HCI obtain the
consent of the original owners of the Havana
Club business, and because they do not have
this consent, § 211 prevents HCI from asserting
its claims for trade name infringement. Section
211, however, does not prevent HCI from
asserting its false designation of origin claim.
This claim does not arise out of any ownershiprights that HCI is asserting in the Havana Club
name confiscated by the Cuban government.
Rather, it arises out of HCI's claim that as a
producer of Cuban rum, it is likely to be
damaged by defendants' allegedly falsedesignation of Cuban origin on its product.
Because § 211 does not explicitly abrogate
rights to bring an unfair competition claim, this
Court will not extend its reach to such claims.
   2. Abandonment
   HCI argues that § 211 does not require the
abrogation of treaty rights in circumstances
where the original owner of the trademark ortrade name has abandoned its rights in that
mark. According to HCI, its right to the
"Havana Club" trade name arises out of its
adoption and use of the name beginning in
1994, and that well prior to this time, JoseArechabala., S.A. had abandoned any rights it
had in the name.
   HCI's argument, however, is not supported by
the language of § 211. The statute states that adesignated national cannot assert rights in a
mark that is the same or substantially similar to
one that was "used in connection with a
[confiscated] business," a requirement that is
clearly met here. The statute does not require
continuous use or provide a defense of
abandonment.
   3. Retroactivity
   HCI argues that § 211 cannot be applied to
this case because such application wouldretroactively impair trade name rights possessed
by HCI prior to its enactment. "When a case
implicates a federal statute enacted after the
events in suit, the court's first task is to
determine whether Congress has expresslyprescribed the statute's proper reach." Landsgraf
v. USI Film Products, 511 U.S. 244, 280 (1994).
The language of § 211 is silent as to its
application to cases pending prior to its
enactment.
   The analysis, however, does not end here. In
the absence of express language as to the
statute's reach, a court must determine whether
the new statute would have retroactive effect,
i.e., whether it would impair rights a party
possessed when he acted, increase a party'sliability for past conduct, or impose new duties
with respect to transactions already completed.
If the statute would operate retroactively, our
traditional presumption teaches that it does not
govern absent clear congressional intentfavoring such a result.
 Id. This presumption against retroactivity is
rooted in considerations of fairness and
reasonable reliance and the principle thatindividuals should be able to conform their
conduct to the law.  Id. at 265, 269.
   In certain situations, however, application of a
statute passed after the events at issue may nothave an impermissibly retroactive effect. "When
the intervening statute authorizes or affects the
propriety of prospective relief, application of the
new provision is not retroactive." Id. at 273; see
also American Steel Foundries v. Tri-CityIP/C/W/139/Add.1
Page 9
Central Trades Council, 257 U.S. 184, 201
(1921)("relief by injunction operates in futuro").
As Justice Scalia explained in his concurrence in
Landsgraf, "[c]ourts traditionally withhold
requested injunctions that are not authorized by
then-current law, even if they were authorized at
the time suit commenced and at the time the
primary conduct sought to be enjoined was first
engaged in ... Since the purpose of prospective
relief is to affect the future rather than remedy
the past, the relevant time for judging its
retroactivity is the very moment at which it isordered." 511 U.S. 244, 293 (1994); Viacom
Inc. v. Ingram Enterprises, Inc., 141 F.3d 886,
888-890 (8th Cir. 1998)(application of Federal
Trademark Dilution Act to use of trademark that
began before passage of act does not renderstatute impermissibly retroactive). Thus,
because HCI seeks only future injunctive relief,
application of § 211 would not have an
impermissibly retroactive effect.
   Moreover, such application would not unfairly
upset HCI's settled expectations or unfairly
impair its investment. At the time that HCI
began its business in 1994 and to this day, it has
been aware that the embargo prevents it fromselling rum in the United States. HCI built up its
business based upon sales in other countries, not
upon any sales or reputation that it has
developed in the United States.
   4.   Separation of Powers
   HCI also argues that § 211 violates the
separation of powers doctrine because it
represents an attempt by Congress to dictate
how this Court must rule in this case. Under our
tripartite system of government, the role ofCongress is to enact laws of general
applicability, and it is for the courts to apply
those laws in determining the outcome of
particular cases. Legislation violates the
separation of powers doctrine when it"prescribes a rule of decision for courts to
follow without permitting courts to exercise
their judicial powers independently." Benjamin
v. Jacobson, 124 F.3d 162, 173 (2d Cir. 1997),
vacated on reh'g en banc, WL 188240 (2d Cir.
March 23, 1999)(citing United States v. Klein,
80 U.S. (13  Wall.) 128 (1871));  see also Axel
Johnson, Inc. v. Arthur Andersen & Co., 6 F.3d
78, 81 (2d Cir. 1993)([t]he rule of Klein
precludes Congress from usurping theadjudicative function assigned to the federal
courts under Article III").
   Although the rule of Klein prohibits Congress
from directing particular results in individual
cases, it does not prevent Congress from
"changing the law applicable to pending cases."
Axel Johnson, 6 F.3d at 81. Where "legislation
can be characterized as changing the underlyinglaw rather than as prescribing a different
outcome under the pre-existing law, it will not
violate the separation of powers principleformulated in Klein." Benjamin
, 124 F.3d at
174; Robertson v. Seattle Audubon Society , 503
U.S. 429 (1992). Moreover, the fact that the
change in the law effects only a "limited class of
cases" does not compel the conclusion that itviolates separation of powers. See Axel, 6 F.3d
at 82; Robertson, 503 U.S. at 435 n.2 (upholding
statute that specifically mentioned two pending
cases to which it was applicable).
   As in Robertson, § 211 effected a change in
the underlying law applicable to this case. The
statute establishes that Cuban nationals cannot
assert treaty rights in trademarks and trade
names if such names or marks previously wereused in connection with confiscated businesses.
The statute does not, however, "purport[ ] to
direct any particular findings of fact or
applications of law, old or new, to fact."
Robertson, 503 U.S. at 438; Axel
, 6 F.3d at 82
(finding that statute did "not directly interferewith judicial factfinding"). This Court must stilldetermine whether the facts of this case satisfy
the statutory requirements, namely whether the
statute applies to plaintiffs and whether the
name at issue was used in connection with a
confiscated business.
8
                                                     
8 HCI's final argument, that in order for §
211 to apply defendants would have to show thatJASA had a positive net value when it wasexpropriated, is not convincing. Section 211 defines"confiscated" as the expropriation of the ownership
of property "without the property having been
returned or adequate and effective compensationbeing provided." The record shows that all of JASA'sassets were taken and that it received nocompensation.IP/C/W/139/Add.1
Page 10
 II. False Designation of Origin Claim--Standing
   Plaintiffs have also brought a claim that
Bacardi's use of the "Havana Club" trademark
and the label used on the rum -- which featurean old-style sketch of Malecon, a seafront
boulevard in Havana -- constitute a false
designation of geographic origin in violation of
§ 43(a) of the Lanham Act. Plaintiffs argue that
this trademark and labelling will deceive
customers into believing that the rum is of
Cuban origin when, in fact, it is produced in theBahamas.
   Section 43(a) provides that [a]ny person who, on or in connection with any
goods or services, or any container for goods,
uses in commerce any word, term, name,
symbol, or device, or any combination thereof,
or any false designation of origin, false or
misleading description of fact, or false ormisleading representation of fact, which -- (A)
is likely to cause confusion, or to cause mistake,
or to deceive as to the affiliation, connection or
association of such person with another person,
or as to the origin, sponsorship, or approval ofhis or her goods, services or commercial
activities by another person ... shall be liable in
a civil action  by any person who believes that he
or she is likely to be damaged by such act ."
 15 U.S.C. § 1125 (emphasis added).
Defendants assert that plaintiffs lack standing topress their §43(a) claim because they cannot
satisfy the statute's requirement that they are
"likely to be damaged" by any of defendants'
actions. The thrust of their argument is that
because the CACR prevent plaintiffs fromselling any rum in the United States, plaintiffs
cannot demonstrate any likely injury resulting
from defendants' actions.
   Standing is comprised of constitutional and
prudential components.
9 See Bennett v. Spear,
520 U.S. 154, 162 (1997)(citing Warth v.
Seldin, 422 U.S. 490, 498 (1975)). The
                                                     
9 The prudential component of standing is
comprised of "judicially self-imposed limits on the
exercise of federal jurisdiction." Bennett, 520 U.S. at
162. Unlike standing requirements derived from theConstitution, they may be abrogated or modified byCongress. See id.constitutional component is derived from
Article II's requirement of a "case or
controversy." It requires that a plaintiff have
suffered an "injury in fact," that this injury be
"fairly traceable" to the actions of the defendantand that a favorable decision be able to redress
this injury.  Bennett, 520 U.S. at 162.
   Although consumers lack standing to assert
§ 43(a) claims, persons or entities that will
suffer a commercial injury as a result of
defendant's actions generally have standing. See
Berni v. International Gourmet Restaurants, 838
F.2d 642, 648 (2d Cir. 1988)("this court haslimited standing to assert a section 43 claim to a
'purely commercial class' of plaintiffs").
Although consumers do not have standing,consumer confusion is at the heart of the
purpose of the Lanham Act and is "the central
inquiry in all cases of alleged trademark
infringement and unfair competition." Springs
Mills, Inc. v. Ultracashmere House, Ltd., 724
F.2d 352, 357 (2d Cir. 1983).
   In the context of claims under § 43(a), the
Second Circuit has further refined the concept of
standing. A plaintiff need not be a directcompetitor of the party allegedly engaging in the
false designation of its products. See id. To
establish standing, however, a plaintiff must
 demonstrate a "reasonable interest to be
protected" against the advertiser's false
or misleading claims, and a "reasonablebasis" for believing that this interest is
likely to be damaged by the false or
misleading advertising. The "reasonable
basis" prong embodies a requirement
that the plaintiff show both likely injuryand a causal connection to the false
advertising.
 PDK Labs, Inc. v. Friedlander, 103 F.3d 1105,
1111 (2d Cir. 1997) (citing Ortho
Pharmaceutical Corp. v. Cosprophar, Inc., 32
F.3d 690, 694 (2d Cir. 1994)(internal citations
omitted)). This standard requires more than a
"mere subjective belief" of injury, but does not
require plaintiff to prove that it has sufferedactual monetary loss.  Johnson & Johnson v.
Carter-Wallace, Inc., 631 F.2d 186, 189 (2d Cir.
1980). Therefore, a plaintiff who can
demonstrate that it has the "potential for a
commercial or competitive injury," Berni, 838IP/C/W/139/Add.1
Page 11
F.2d at 648, or, in other words, that the false
designation of defendant's product is likely to
cause plaintiff to suffer a loss in sales, has
standing to bring a suit for injunctive relief.
Johnson & Johnson, 631 F.2d at 190.
   Where plaintiff's and defendant's products arenot directly in competition, courts in this circuit
have held that plaintiff's likelihood of injury and
causation will not be presumed but must be
demonstrated in some manner. See Ortho
Pharmaceutical, 32 F.3d at 694. This link is
generally provided by the introduction ofconsumer surveys showing that a significant
number of consumers are being misled by
defendant's falsehoods. See Johnson & Johnson,
631 F.2d at 190-191.
   Plaintiffs do not dispute that due to the
particular circumstances of this case -- namely
that they are prevented from importing their rum
into this country because of the embargo -- theirproduct does not, and cannot, currently compete
with defendant's Havana Club rum in the United
States and that they therefore have not lost any
sales here. Nor have they argued (or proved)
that their rum competes with defendants'Havana Club product anywhere outside of the
United States.
10 Plaintiffs, however, present a
variety of arguments why they nonetheless have
standing to challenge defendants' alleged false
designation of origin.
   Plaintiffs argue that they have standing to
bring a § 43(a) claim "simply by virtue of their
position as Cuban-based exporters of Cuban-
origin rum." Because plaintiffs market their rum
on the basis of it being the exclusive or primary
source of Cuban-origin rum, plaintiffs argue thatsales of "false" Cuban rum will deprive them of
their main selling point and cause them to lose
consumers looking for Cuban-origin rum. In
addition, as a related argument, plaintiffs argue
                                                     
10 The Lanham Act can reach activities
occuring outside the United States. In determiningwhen the extraterritorial application of the Act isproper, a court must look to the following factors: (1)whether defendant's conduct has a "substantial effect
on United States commerce"; (2) whether defendant
is a United States citizen; and (3) whether there is aconflict with trademark rights established underforeign law. See Fun-Damental Too, Ltd. v. Gemmy
Industries, Corp., 111 F.3d 993, 1006 (2d Cir. 1997).that Bacardi's packaging will lead consumers to
identify the "character and quality" of Bacardi's
rum with Cuban-origin rum, which could hurt
plaintiffs' reputation for quality.
   Plaintiffs also argue that the embargo is a
"temporary suspension" of their ability to sell
rum in the United States and that they are poised
to enter this market -- a natural area of
expansion for a Cuban-rum producer -- as soon
as the embargo is lifted. This fixed intent to
enter the U.S. market as soon as the law allows,they argue, is a "contemplated commercial
interest" sufficient to confer standing on them.
See PDK Labs, 103 F.3d at 1111.
   In addition, plaintiffs contend that they arelosing sales to U.S. visitors to Cuba. As
discussed above, certain Americans are
authorized to visit Cuba and to spend up to $100
per day during their stay, and plaintiffs have
presented evidence that a significant number ofthese Cuban visitors buy their Havana Club rum
while in Cuba. If defendants' Havana Club rum
is sold in the United States, they contend, these
visitors will believe that Cuban rum is available
in this country, and they will be less likely tobuy plaintiffs' rum while in Cuba.
   1. Plaintiffs' status as Cuban-origin rum
producers
   In support of their first argument, plaintiffs
point to the language of § 43(a) as it existedprior to the 1988 amendments to the Lanham
Act. This prior version of § 43(a) granted
standing to
 any person doing business in the
locality falsely indicated as that of
origin or in the region in which said
locality is situated, or ... any person who
believes that he or she is likely to be
damaged by the use of any such falsedescription.
 15 U.S.C.A. § 1125(a)(prior to amendment).
The Senate Report on the 1988 amendments
states that by changing the language regardingstanding, the Senate's intention was that
standing "should continue to be decided on a
case-by-case basis, and that the amendments ...
made to the legislation with respect to [this
issue] should not be regarded as either limitingIP/C/W/139/Add.1
Page 12
or extending applicable decisional law." Sen.
Rep. No. 100-515, 100th Cong., 2d Sess. (1988)
at 5604.
   Because the Cuban embargo presents a unique
factual circumstance, however, there is no prior
"applicable decisional law" upon which this
Court can rely. Plaintiffs have not identified --
and this Court has not found -- any § 43(a) case
prior to 1988 in which a court upheld standing
on the sole basis that the plaintiff was from the
locality falsely designated as the origin ofdefendant's product. Plaintiffs point to Scotch
Whiskey Ass'n v. Barton Distilling Co., 489
F.2d 809 (7th Cir. 1973) in support of their
argument. In that case, the court granted an
injunction sought by plaintiffs, "producers ofScotch whiskey in Scotland, marketed
throughout much of the world" against an
American defendant that shipped "Scotch
Whiskey" labels to Panama and the Canal Zone
to be used on non-Scottish whiskey. There isnothing in that court's opinion, however,
indicating that plaintiffs were not selling Scotch
Whiskey in Panama and the Canal Zone. Indeed,
it is reasonable to presume that plaintiffs were in
direct competition with defendants in thoseareas. Similarly, in the other cases cited by
plaintiffs, the falsely designated products were
sold in the same area as the plaintiff's products,
and no court found standing based solely on the
fact that the plaintiff did business in the area
falsely designated by the defendant. See Black
Hills Jewelry Manufacturing Co. v. Gold Rush,
Inc., 633 F.2d 746 (8th Cir. 1980)(falsely
designated Black Hills jewelry sold in South
Dakota); Scotch Whiskey Assoc. v.
Consolidated Distilled Products, Inc., 210
U.S.P.Q. 639 (N.D. Ill. 1981)(spurious Scottishwhiskey sold in United States).
   2. Plaintiffs' intent to enter the United States
   Plaintiffs put great emphasis on their fixed
intention to enter the U.S. market as soon as
they are legally able. This intent appears to be
genuine, and the only obstacle to plaintiffs'
entering the U.S. market is the embargo. See
Adrian Tr. at 133-34. Obviously, following such
entry, plaintiffs would be direct competitors of
defendants in the rum market.
   A party can base standing on a potential for a
future competitive injury. See Berni 838 F.2d at
648 (plaintiff must show "the potential for acommercial or competitive injury"); National
Lampoon, Inc. v. American Broadcasting Co.,
Inc., 376 F. Supp. 733, 746 (S.D.N.Y. 1974),
aff'd, 497 F.2d 1343 (2d Cir. 1974)(satirical
humor magazine had standing to sue television
network for using portion of its name where
magazine was negotiating for production of its
own special program and "[n]etwork television
[was] within plaintiff's area of natural
expansion"). It is clear, however, that such
future injury may not be too remote.
   So, for example, in PDK Labs, Inc. v.
Friedlander, 103 F.3d 1105 (2d Cir. 1997), a
weight loss products retailer brought a
declaratory judgment action against the holder
of a patent on a method for producing weightloss, seeking a declaration that the patentee
lacked standing to bring false advertising claims
against it under § 43(a). The Court held that
because the patentee lacked a product that
competed with plaintiff, it had no standing:"[patentee's] hopes of eventually obtaining FDA
approval and selling a retail weight loss product
are too remote at this stage to confer standing to
challenge [plaintiff's] advertising." Id. at 1112.
In so holding, the court expressed doubt as to
whether the patentee could ever develop such
product, given the large expenses it would first
have to incur in studies, legal expenses and
product testing. See id. at 1112 n.7; see also
Ortho Pharmaceutical, 32 F.3d at 696-97 (no
standing for a manufacturer of RETIN-A
prescription drugs to sue distributor of over-the-counter anti-aging cosmetics because the
products are not in direct competition and
plaintiff failed to provide any evidence that
consumers would see defendant's products as
substitute for plaintiff's).
   Plaintiffs' ability to enter the U.S. market is
too remote at this point to confer standing. The
embargo is, admittedly, designed to be
temporary. Despite widespread criticisms of theembargo, however, see Havana Club, 961 F.
Supp. at 498-502, it has now been in place forover thirty-five years. In addition, the recent
passage of the Cuban Liberty and Democratic
Solidarity (LIBERTAD) Act of 1996 ("CubanLiberty Act"), 22 U.S.C. §§ 6021-6091, which
codifies and strengthens the embargo, attests to
its continued viability for the foreseeable future.
Under the LIBERTAD Act, the President, upon
consultation with Congress, may "take steps toIP/C/W/139/Add.1
Page 13
remove the economic embargo of Cuba when
the President determines that a transition to a
democratic elected government in Cuba has
begun." 22 U.S.C. § 6061(14). The conditions
constituting this transition are substantial andinclude, for example, the legalization of all
political activity, 22 U.S.C. § 6065(a)(1), the
release of all political prisoners, 22 U.S.C. §
6066(a)(2), and a public commitment to the
organization of free and fair elections for a new
government, 22 U.S.C. § 6065(a)(4).
   The issue is one of remoteness. Before
plaintiffs can sell rum in this country, significant
changes must first occur in the political situation
in Cuba, in addition to executive and legislative
action in this country. Unlike in PDK, in which
the only significant obstacle to the patentee's
developing a competing product was its raising
sufficient funds, an act presumably almost
entirely within its control, the conditions
precedent to the lifting of the embargo arebeyond the control of plaintiffs and so are in a
very real sense even more remote. There is no
way for this Court to reasonably foresee when
these changes will occur, whether in the near
future or in another 35 years. At this point,because plaintiffs can sell no product in this
country and may not be so able for a significant
length of time, they suffer no impairment of
their ability to compete as a result of defendants'
actions. Any competitive injury plaintiffs will
suffer based upon their intent to enter the U.S.
market once the embargo is lifted is simply tooremote and uncertain to provide them with
standing.
   3. Present injury to plaintiffs' sales and
reputation
   Plaintiffs also argue that defendants' false
designation of Cuban origin on their rum will
impair plaintiffs' sales to United States visitors
to Cuba. At closing arguments, plaintiffs arguedthat if consumers purchased defendants' rum in
the United States under the false belief that
Cuban Havana Club rum is available here, such
consumers would be less likely to buy plaintiffs'
rum when visiting Cuba. In support of thisargument, plaintiffs offered evidence that their
product is purchased in Cuba by U.S. visitors
and brought into the United States by a large
percentage of them as accompanying baggage.
See Diaz Test. at 293-302.   Plaintiffs' argument, however, suffers fromone fatal flaw. The class of U.S. citizens
permitted to travel to Cuba is very limited,
including those with relatives in Cuba,journalists and students. Those travelers
authorized to visit Cuba, who must comply with
OFAC travel restrictions, are certainly aware of
the embargo and the fact that Cuban products
are not available in the United States. Thus, it
seems highly unlikely that those travelers
seeking genuine Cuban rum would be deterredby sales of defendants' rum in the United
States.
11
    Plaintiffs provide no further explanation of
how their reputation and sales are damaged bydefendants' alleged false designation of origin.
With no ability to sell rum in the United States
in the foreseeable future and no reasonable
expectation that U.S. travelers to Cuba, aware of
the embargo against Cuban-origin goods in thiscountry, will think that defendants' rum is made
in Cuba, there is no other basis for a showing of
a foreseeable injury.
12
The fact that plaintiffs have no standing to bringthis claim, however, does not automatically
mean that defendants' alleged false designation
of origin  - if true -- will go unremedied. Bacardi
faces direct competition from other rum
producers in this country, who, if able to show
reliance by consumers on such designation and
their own consequent loss of sales, are likely tohave standing to seek redress. There is no doubt
that plaintiffs seek a laudable capitalist goal -- to
compete fairly, to maximize their sales and
perhaps even to protect American consumers.
Their inability to do so at this time, however, isnot caused by defendants' actions, however fair
or unfair they may be, but by the executive and
legislative determination that the Cuban
                                                     
11 Plaintiffs have presented evidence based
on consumer surveys that despite the embargo, 33%of Americans think that it is legal to sell rum fromCuba in the United States and 9% do not knowwhether it is legal or illegal. Despite this evidence, it
is intuitively doubtful that these finding would apply
to U.S. travelers authorized to visit Cuba.
12 Because HCI has no standing to bring this
claim, there is no need to address defendants'"unclean hands" defense.IP/C/W/139/Add.1
Page 14
embargo continues to be a component of our
foreign policy.
 IV. Conclusion
   For the reasons set forth above, this Court
finds for defendants on all of plaintiffs' claims.
A judgment in defendants' favor shall be entered
immediately.   SO ORDERED:
   Shira A. Scheindlin
   U.S.D.J.
 DATED: New York, New York
   April 13, 1999
__________