Court Opinion

ID: 9377091
Source: CourtListenerOpinion
Date Created: 2023-03-06 21:01:05.248942+00
Date Added: 2024-06-11T17:17:11.927806
License: Public Domain

UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF COLUMBIA

BACARDI & COMPANY LIMITED,
and
BACARDI U.S.A., INC.,
                    Plaintiffs,
      v.
EMPRESA CUBANA EXPORTADORA            Case No. 1:04-cv-00519 (EGS)
DE ALIMENTOS Y PRODUCTOS
VARIOS d/b/a CUBAEXPORT,
and
HAVANA CLUB HOLDING, S.A.,
d/b/a HCH, S.A.,
                    Defendants.

                        MEMORANDUM OPINION

      Bacardi & Company Limited and Bacardi U.S.A., Incorporated

(collectively “Bacardi”), bring this action under the Trademark

Act of 1946 (“Lanham Act”), 60 Stat. 427, as amended, 15 U.S.C.

§ 1051 (1988), et seq. seeking review of the decision by the

Trademark Trial and Appeal Board (“TTAB”) of the United States

Patent and Trademark Office (“PTO”) dismissing its Supplemental

and Amended Petition to Cancel U.S. Registration No. 1,031,651

of the trademark HAVANA CLUB & DESIGN for rum in Cancellation

Proceeding No. 92024108 (the “HC Cancellation Proceeding”),

rectification of the PTO records by striking or canceling that

registration, and declaratory and injunctive relief. See

                                  1
generally Am. Compl., ECF No. 114. Defendants Empressa Cubana

Exportadora De Alimentos Y Productos Varios d/b/a Cubaexport

(“Cubaexport”) and Havana Club Holdings, S.A., d/b/a HCH, S.A.

(“HCH”) move to dismiss Bacardi’s Amended Complaint. See

generally Defs.’ Mot. to Dismiss (“MTD”), ECF No. 122.

Defendants also move for partial summary judgment based on

discovery conducted in another case, asking the Court to rule

that the entity that assigned the HAVANA CLUB mark to Bacardi

abandoned its right to the mark prior to that assignment. See

generally Defs.’ Mot. for Partial Summary J. (“MSJ”), ECF No.

124. 1

         Upon careful consideration of the motions, oppositions, and

replies thereto, and for the reasons explained below,

Defendants’ Motion to Dismiss, ECF No. 122, is GRANTED IN PART

and DENIED IN PART; and its Motion for Partial Summary Judgment,

ECF No. 124, is DENIED.

I. Background

         The Court assumes the facts alleged in the Amended

Complaint to be true for the purposes of the Motion to Dismiss

and construes them in Bacardi’s favor. See Baird v. Gotbaum, 792

F.3d 166, 169 n.2 (D.C. Cir. 2015).

1 The unredacted version of the Motion for Partial Summary
Judgment is located at ECF No. 127-1.
                                    2
  A. JASA’s Creation and Use of the HAVANA CLUB Mark

     In 1878, Jose Arechabala Aldama founded the Arechabala

family business, which included distilling rum. Am. Compl., ECF

No. 114 ¶ 22. In or around 1924, Jose Arechabala, S.A., (“JASA”)

was incorporated to carry out the family’s rum business. Id.

“JASA created, registered, and first used the trademark HAVANA

CLUB for rum in Cuba, the United States, and other countries.”

Id. ¶ 23. In 1934 and 1935, JASA obtained three Cuban

registrations for the HAVANA CLUB mark. Id. In 1935, 1936 and

1953, JASA obtained four U.S. trademark registrations. Id. The

design portion of the 1936 mark included the words “Fundada en

1878” (founded in 1878), a reference to the year in which the

Arechabala family business was first established in Cuba. Id.

     From 1934 to the end of 1959, JASA continued to export

HAVANA CLUB rum for distribution and sale in the United States.

Id. ¶ 25. It was produced using the secret Arechabala family

formula in distilleries in Cuba and Puerto Rico, id. ¶¶ 25, 27;

but by 1959 was produced only in Cuba, id. ¶ 25. HAVANA CLUB

became the second most popular Cuban rum, with Bacardi being the

most popular. Id. ¶ 41.

                                3
  B. The Cuban Government Expropriates JASA’s Assets in Cuba,
     Registers the HAVANA CLUB Mark in Cuba and the United
     States, and Sells HAVANA CLUB Rum in Certain Countries

     On or about January 1, 1960, the Cuban government seized

control of JASA’s offices and facilities by force, including the

rum distillery, and prevented members of the family who ran the

business from removing any papers or other property from their

offices. Id. ¶ 27. Two officers of the company were imprisoned

for ten years, all other executives and shareholders were

eventually forced to leave Cuba, and the Cuban government

designated an administrator to run the business. Id.

     Pursuant to Law No. 890 of October 13, 1960, the Cuban

government formally expropriated the physical assets, property,

accounts, business records, and trademarks of a large number of

Cuban businesses, including JASA. Id. ¶ 28. This law provided

that pursuant to subsequent legislation, the owners of

expropriated property would be compensated. Id. ¶ 29. However,

no such law was ever passed. Id.

     JASA was unable to continue production of HAVANA CLUB rum

due to family members, executives, and shareholders having been

exiled. Id. ¶ 32. At the present time, JASA is incorporated as a

Liechtenstein company with its principal place of business in

Switzerland. Id. ¶ 7.

     In 1965, the Cuban government established Cubaexport, a

state enterprise, and in 1966 the government purported to

                                   4
transfer to Cubaexport JASA’s HAVANA CLUB marks. Id. ¶ 30.

According to the Amended Complaint, as a Cuban government

enterprise, Cubaexport knew that the trademarks had been

expropriated from JASA under Law No. 890 without payment of any

compensation. Id. Thereafter, Cubaexport began selling rum it

called HAVANA CLUB that was made in the distillery that had been

confiscated from JASA. Id. However, the rum was not made using

the Arechabala family secret formula, nor with the permission of

the Arechabalas. Id. ¶¶ 46, 49.

     Cubaexport was barred from selling its HAVANA CLUB rum in

the United States because in 1963, the United States imposed a

total embargo on trade between the United States and Cuba under

the Trading with the Enemy Act, implemented by the Cuban Asset

Control Regulations (“CACR”). Id. ¶ 33; 50 U.S.C. App. § 1 et.

seq. 31 C.F.R. Part 515.

     In 1973, JASA’s existing U.S. registrations with the PTO

expired. Am. Compl., ECF No. 114 ¶ 42. Thereafter, Cubaexport,

on June 12, 1974, applied to the PTO to register a mark

consisting of a label design with the words HAVANA CLUB. Id.

Cubaexport’s application was based on a new Cuban registration

dated February 12, 1974 that it had obtained. Id. The mark

Cubaexport sought to register in the United States displays the

Spanish legend “Fundada en 1878,” which Cubaexport intentionally

copied from the 1936 JASA registration. Id. ¶ 44. On January 27,

                                  5
1976, the PTO issued to Cubaexport U.S. Reg. No. 1,031,651 for

the HAVANA CLUB & DESIGN mark. Id. ¶ 48. Due to the embargo,

however, Cubaexport has never sold rum in the United States

under the HAVANA CLUB & DESIGN mark. Id. ¶ 52.

  C. The Cuba-Pernod Ricard Joint Venture and OFAC Licenses

     In the early 1990s, the Cuban government entered into joint

ventures with foreign investors in an effort to obtain hard

currency. Id. ¶ 55. To that end, Pernod Ricard, S.A. (“Pernod”),

a French company that distributes alcohol internationally,

entered into negotiations with Cuba to exploit the HAVANA CLUB

mark worldwide. Id. The Cuban government organized Havana Rum &

Liquors, S.A., (“HRL”) a Cuban company controlled by the Cuban

government to act as Cuba’s representative in the joint venture.

Id. ¶ 56. On October 29, 1993, Cubaexport transferred to HRL its

entire HAVANA CLUB rum business, including the goodwill

associated with the HAVANA CLUB mark, and purported to transfer

the U.S. registration. Id. Cubaexport then left the rum

business. Id.

     Pernod and HRL agreed to create HCH, owned equally by

Pernod and HRL, to advertise, distribute, and sell HAVANA CLUB

rum from Cuba worldwide and which would hold title to the

registrations of the HAVANA CLUB trademark. Id. ¶ 57. To that

end, HRL transferred to HCH all of HRL’s rights in the HAVANA

CLUB trademark for rum outside Cuba, together with the goodwill

                                6
of the business. Id. ¶ 58. This transfer purported to include

Cubaexport’s U.S. registration.

     However, the CACR prohibited the purported transfers of the

U.S. registration without a specific license from the Office of

Foreign Assets Control (“OFAC”). 31 C.F.R. § 515.201(b).

Cubaexport, HRL, and HCH entered into the transaction without

seeking such a license. Am. Compl., ECF No 114 ¶ 65. Thereafter,

the Arechabala family brought a cancellation proceeding in the

PTO, which forced Cubaexport to disclose the purported

transfers. Id. ¶ 66. On October 5, 1995, Cubaexport, HRL, and

HCH applied for an OFAC license to retroactively authorize the

assignments of the HAVANA CLUB registration. Id. ¶ 80. OFAC

granted the license, but cautioned that its approval was based

on the representations made in the application, and that it

could be retroactively invalidated. Id. ¶ 81. Thereafter, HCH

filed an application for renewal, and on January 27, 1996, the

PTO issued a Certificate of Renewal for the U.S. HAVANA CLUB

Registration in the name of HCH. Id.

  D. The Arechabala Family-Bacardi Agreement

     In the mid-1990s, the Arechabala family reached an

agreement with Bacardi that would allow for the sale of genuine

HAVANA CLUB rum in the United States. Id. ¶¶ 72-75. The

agreement, reached in principle in 1995 and finalized in 1997,

transferred to Bacardi all right, title, and interest in and to

                                  7
the HAVANA CLUB mark worldwide as well as related assets. Id. In

1995, under an interim understanding with the Arechabalas,

Bacardi produced HAVANA CLUB rum in the Bahamas and sold it

under the HAVANA CLUB mark in interstate commerce in the United

States. Id. ¶ 76. Bacardi shipped HAVANA CLUB rum initially to

distributors in New York, Illinois, California, and Florida; and

in 1996 expanded sales to wholesalers in other selected markets

across the United States. Id. ¶ 77.

    E. The Galleon Litigation and OFAC Revocation

      In December 1996, HCH and its distributor sued Bacardi 2 for

alleged infringement of the HAVANA CLUB mark and trade name.

Havana Club Holding, S.A, v. Galleon S.A., 96 Civ. 9655

(S.D.N.Y. Dec. 24, 1996); Am. Compl. ¶ 83. Bacardi

counterclaimed for cancellation of HCH’s HAVANA CLUB

registration in the United States. Compl. ¶ 83. Shortly after

the Galleon litigation commenced, OFAC, on April 17, 1997,

revoked Cubaexport’s license authorizing the transfer of the

mark and related registration to HCH, citing “facts and

circumstances that have come to the attention of this Office

that were not included in the application.” Id. ¶ 85. OFAC

2 The Defendants in the Galleon litigation are Galleon S.A.,
Bacardi–Martini USA, Inc., Gallo Wine Distributors, Inc., G.W.D.
Holdings, Inc and Premier Wine and Spirits. For ease of
reference, the Court will refer to the Defendants as “Bacardi.”
                                 8
specified that the withdrawal was “retroactive to the date of

issuance” of the license. Id.

     In light of OFAC’s action, the Galleon court concluded that

the purported transfers violated the CACR, and that HCH “ha[d]

no rights to the HAVANA CLUB trademark.” Havana Club Holding,

S.A. v. Galleon S.A. (“Galleon II”), 974 F. Supp. 302, 311

(S.D.N.Y. 1997). The Galleon court entered a partial judgment,

ruling, among other things, that “the attempted assignment of

[the] HAVANA CLUB mark and the related U.S. Registration [to

HCH] were invalid and of no force and effect and void ab

initio.” Havana Club Holding, 96 Civ. 9655, Dkt. No. 63 at ¶ 4

(S.D.N.Y. Oct. 20, 1997) (“Partial Judgment”) (attached as Ex. 2

to the Declaration of Michael C. Lynch (“Lynch Decl.”), ECF No.

132-2)). Because Cubaexport was not a party to the Galleon

litigation and had an interest in the cancellation of the

registration in that proceeding, the court denied that relief,

while preserving Bacardi’s ability to challenge Cubaexport’s

claimed rights in the registration. Galleon II, 974 F. Supp. at

311–12; Partial Judgment, ECF No. 132-2 ¶ 10.

  F. The PTO Proceedings and Cubaexport’s Renewal of the Mark in
     2006

     Bacardi first asked the PTO to cancel Cubaexport’s HAVANA

CLUB U.S. registration in 1995. Am. Compl., ECF No. 114 ¶ 79.

The proceeding before the TTAB was stayed pending the Galleon

                                9
litigation, but resumed in 2003. Id. On January 29, 2004, the

TTAB issued a nonprecedential decision denying Bacardi’s motion

for summary judgment and sua sponte dismissed Bacardi’s

counterclaims for cancellation. Galleon S.A. et al. v. Havana

Club Holding, S.A. et al., Cancellation No. 92024108, 2004 WL

199225 (T.T.A.B. 2004) (“TTAB Decision”) (attached as Ex. A to

MTD), ECF No. 122-2.

     In 2006, Cubaexport’s registration was again due to expire.

Am. Compl., ECF No. 114 ¶ 107. On or about December 14, 2005,

Cubaexport, through its outside counsel, attempted to renew the

U.S. registration, but the renewal application was rejected on

July 20, 2006 because the fee had not been paid. Id. ¶ 113. By

law, the PTO could not accept payment from Cubaexport unless

Cubaexport obtained a specific license from OFAC to pay the

renewal fee. On July 28, 2006, OFAC denied Cubaexport’s request

for a specific license to pay the registration renewal fee,

explaining that the State Department had determined that

permitting the renewal transactions would be “inconsistent with

U.S. policy.” Id. ¶ 114.

     The Post Registration Examiner subsequently confirmed that

Cubaexport’s renewal finding “cannot be accepted,” and that “the

registration will be cancelled/expired.” Id. ¶ 115. Cubaexport

then filed a petition to the Director of the PTO challenging

this action. Id. ¶ 116.

                               10
     On November 10, 2015, Cubaexport submitted another

application to OFAC for a specific license to pay the renewal

fee, and this license was granted on January 11, 2016. Id. ¶

122–23. The PTO then granted Cubaexport’s petition and

treated the registration as renewed. Id. ¶ 123.

  G. Procedural Background

     Defendants move to dismiss the Amended Complaint for

failure to state a claim, see MTD, ECF No. 122; and for partial

summary judgment, see MSJ, ECF No. 124. Bacardi opposes both

motions. See MTD Opp’n, ECF No. 129; MSJ Opp’n, ECF No. 130.

Defendants have replied to both oppositions. See MTD Reply, ECF

No. 136; MSJ Reply, ECF No. 137. Both motions are ripe and ready

for the Court’s adjudication.

II. Legal Standards

     A. Rule 12(b)(6) Motion to Dismiss

     A motion to dismiss pursuant to Federal Rule of Civil

Procedure 12(b)(6) tests the legal sufficiency of a complaint.

Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). A

complaint must contain “a short and plain statement of the claim

showing that the pleader is entitled to relief, in order to give

the defendant fair notice of what the ... claim is and the

grounds upon which it rests.” Bell At. Corp. v. Twombly, 550

U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). While

detailed factual allegations are not required, a complaint must

                                11
contain “sufficient factual matter ... to state a claim to

relief that is plausible on its face.” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

     When ruling on a Rule 12(b)(6) motion, the Court “may

consider only the facts alleged in the complaint, any documents

either attached to or incorporated in the complaint and matters

of which we may take judicial notice.” EEOC v. St. Francis

Xavier Parochial Sch., 117 F. 3d 621, 624 (D.C. Cir. 1997). In

so doing, the court must give the plaintiff the “benefit of all

inferences that can be derived from the facts alleged.” Kowal v.

MCI Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994).

"Threadbare recitals of the elements of a cause of action,

supported by mere conclusory statements" are not sufficient to

state a claim. Iqbal, 556 U.S. at 678. The plaintiff must “give

the defendant fair notice of what the . . . claim is and the

grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89,

93 (2007) (quoting Twombly, 550 U.S. at 555) (internal quotation

marks omitted).

     B. Summary Judgment

     Pursuant to Federal Rule of Civil Procedure 56, summary

judgment should be granted “if the movant shows that there is no

genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a)

Waterhouse v. District of Columbia, 298 F.3d 989, 991 (D.C. Cir.

                               12
2002). The moving party must identify “those portions of the

pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, which

it believes demonstrate the absence of a genuine issue of

material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986) (internal quotation marks omitted). To defeat summary

judgment, the nonmoving party must demonstrate that there is a

genuine issue of material fact. Id. at 324. A material fact is

one that is capable of affecting the outcome of the

litigation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986). A genuine dispute is one where “the evidence is such

that a reasonable jury could return a verdict for the nonmoving

party.” Id. Further, in the summary judgment analysis “[t]he

evidence of the non-movant is to be believed, and all

justifiable inferences are to be drawn in his favor.” Id. at

255.

III. Analysis

       In the Amended Complaint, Bacardi seeks two forms of

relief. 3 See generally, Am. Compl., ECF No. 114. In Count One,

Bacardi seeks an order directing the PTO to cancel Cubaexport’s

3 Because Defendants have conceded that they have not claimed any
state law rights in the HAVANA CLUB mark, Bacardi does not
object to the dismissal of Count IV. MTD Opp’n ECF No. 129 at 49
n.16. Accordingly, Count IV of the Amended Complaint is
DISMISSED.
                                 13
registration or to rectify the register on a variety of grounds.

Id. at 42–52. In Counts Two and Three, Barcardi seek declaratory

judgments against HCH and Cubaexport. Id. at 52–54. Cubaexport

has moved to dismiss all counts, see generally MTD, ECF No. 122;

and moves for partial summary judgment on the issue of whether

JASA abandoned the mark, see generally ECF No. 127-1. The Court

first discusses the Counts alleged against HCH, and then

proceeds to the Counts against Cubaexport.

     A. HCH Is Not a Proper Defendant to Bacardi’s Declaratory
        Claims

     Cubaexport argues that HCH is not a proper defendant to any

of Bacardi’s claims because: (1) only Cubaexport, the

registration owner, is a proper defendant to a suit to cancel

Cubaexport’s registration; (2) all of Bacardi’s claims against

HCH are barred by res judicata; and (3) there is no live

controversy between Bacardi and HCH that would support a

declaratory judgment. See Defs.’ MTD, ECF No. 122 at 20-26. 4

Bacardi responds that “[i]n light of Defendants’ concession that

HCH has no right in the HAVANA CLUB registration, and their

apparent agreement that HCH does not need to be a party in order

to grant Plaintiffs complete relief on Count I, [they] have no

objection to dismissing Count I as to HCH only.” MTD Opp’n, ECF

4 When citing to filings throughout this Memorandum Opinion, the
Court cites to the ECF header page number and not the original
page number of the filed document.
                                14
No. 129 at 41 n.16. Accordingly, Bacardi’s claim for

cancellation based on fraud in obtaining and renewing the U.S.

Registration in 1996 by HCH, see Am. Compl., ECF No. 114 ¶¶ 157-

161; is DISMISSED.

     Bacardi insists, however, that HCH is a proper defendant

for their declaratory claims. Id. at 40. In Count II, Bacardi

seeks a declaration that, as against HCH, Bacardi owns rights in

the HAVANA CLUB mark, and in Count III that Bacardi’s use of the

trademark does not infringe any of HCH’s federal rights. See Am.

Compl., ECF No. 114 at 52–54.

     The Declaratory Judgment Act provides that “in a case of

actual controversy within its jurisdiction … any court of the

United States … may declare the rights and other legal relations

of any interested party seeking such declaration, whether or not

further relief is or could be sought.” 28 U.S.C. § 2201(a). To

satisfy Article III’s case-or-controversy requirement, “the

dispute [must] be ‘definite and concrete, touching the legal

relations of parties having adverse legal interests’; and [] be

‘real and substantial’ and ‘admi[t] of specific relief through a

decree of a conclusive character, as distinguished from an

opinion advising what the law would be upon a hypothetical state

of facts.’” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118,

127 (2007) (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S.

227, 240-241 (1937)). “Basically, the question in each case is

                                15
whether the facts alleged, under all the circumstances, show

that there is a substantial controversy, between parties having

adverse legal interests, of sufficient immediacy and reality to

warrant the issuance of a declaratory judgment.” Maryland

Casualty Co. v. Pacific Coal & Oil Co, 312 U.S. 270, 273 (1941).

     Bacardi argues that its declaratory judgment claims are

viable pursuant to the MedImmune all-the-circumstances standard

because Cubaexport admits that it intends to transfer its

purposed trademark rights to HCH once U.S. law allows, and

Bacardi points to the fact that HCH is currently working to

effect such changes in the law. See MTD Opp’n, ECF No. 129 at

40-41. Defendants respond—and the Court agrees—that the

MedImmune standard “is not so flexible as to authorize a

declaratory judgment on the effect of a hypothetical transaction

that has not occurred and may never occur.” MTD Reply, ECF No.

136 at 11. Furthermore, HCH concedes that it is not the owner of

the mark. Id. at 12. To render a decision on HCH’s rights when

the parties agree that those rights are non-existent would

require the Court to render “an opinion advising what the law

would be upon a hypothetical state of facts.” Aetna Life Ins.

Co., 300 U.S. at 241. This the Court cannot do. Accordingly, all

Counts against HCH are DISMISSED, without prejudice. 5

5 Because the Court agrees that HCH is not a proper defendant to
the declaratory claims, the Court need not reach Cubaexport’s
                                16
     B. Rectification of the Register/Cancellation of
        Registration Claims

     In Count I, Bacardi seeks rectification of the

register/cancellation of the register on five grounds: (1)

Cubaexport’s fraud in obtaining and maintaining the

registrations; (2) Cubaexport’s abandonment of the mark; (3)

Cubaexport’s misrepresentation of goods; (4) Cubaexport’s

failure to file the mandatory renewal application and

declaration in 1996; and (5) Cubaexport’s failure to pay the

mandatory renewal fee in 2006. Cubaexport seeks to dismiss each

claim for failure to state a claim pursuant to Rule 12(b)(6).

For the reasons explained below, the Court DENIES Cubaexport’s

motion as to the fraud, misrepresentation of goods, and

expiration of the registration in 1996 and 2006 claims. The

Court GRANTS Cubaexport’s motion as to whether Cubaexport

abandoned the mark.

          1. Legal Standard for Cancellation of
             Registration/Rectification of the Register

     The Lanham Act provides in relevant part as follows:

          In any action involving a registered mark the
          court may determine the right to registration,
          order the cancelation of registrations, in
          whole   or    in   part,   restore    canceled
          registrations, and otherwise rectify the
          register with respect to the registrations of
          any party to the action. Decrees and orders
          shall be certified by the Court to the

alternative argument that Bacardi’s claims against HCH are
barred by res judicata.
                               17
          Director, who shall make appropriate entry
          upon the records of the [PTO], and shall be
          controlled thereby.

15 U.S.C. § 1119.

     A party seeking cancellation of a trademark that has been

registered for more than five years, 6 which is known as an

“incontestable” trademark, is strictly limited to one of the

grounds enumerated under 15 U.S.C. § 1064. See Park ‘N Fly Inc.

v. Dollar Park and Fly, Inc. 469 U.S. 189, 195 (1985). Id.

Relevant to the claims in this case, the enumerated grounds for

cancellation in such cases include: (1) if the registration has

been abandoned; (2) if the registration was obtained

fraudulently; or (3) if the registered mark misrepresents the

source of the goods or the services. 15 U.S.C. § 1064(3); see

also Park ‘N Fly Inc., 469 U.S. at 195 (“[S]ection [1064] allows

cancellation of an incontestable mark at any time if it has been

abandoned, if it is being used to misrepresent the source of

goods or services in connection with which it is used, or if it

was obtained fraudulently or contrary to” certain other

provisions.).

6 There is no dispute that the HAVANA CLUB trademark has been
registered for well over five years.
                                18
             2. Bacardi Has Adequately Alleged Cancellation Based
                on Fraud

     Cubaexport argues that the allegations fail to establish

that Cubaexport’s 1976 U.S. Registration was fraudulently

obtained. See MTD, ECF No. 122 at 26. Bacardi responds that it

has stated a valid claim of cancellation for fraud based on

Cubaexport’s representations in its 1974 application that

resulted in the 1976 U.S. Registration. See MTD Opp’n, ECF No.

129 at 22.

     To state a prima facie case of fraud in trademark

registration, Bacardi must allege: “(1) the challenged statement

is a false representation regarding a material fact, (2) the

person making the representation knew that the representation

was false (‘scienter’), (3) an intent to deceive the USPTO, (4)

reasonable reliance on the misrepresentation, [and] (5) damage

proximately resulting from such reliance.” McCarthy on

Trademarks and Unfair Competition § 31.61 (5th ed.)

     “[S]ubjective intent to deceive by the signer [of the oath

or declaration] is a crucial element of fraud in procuring or

maintaining a trademark registration.” Id. (citing In re Bose

Corp., 580 F.3d 1240, 1246 (Fed. Cir. 2009) (citation omitted)).

Consequently, while a statement to the PTO can be false, a

finding of fraud requires that the false statement be uttered

with an intent to mislead the PTO: unless an applicant’s

                                19
misstatements represented a “conscious effort to obtain for his

business a registration to which he knows it was not entitled,”

there is no fraud. In re Bose Corp., 580 F.3d at 1246 (quoting

Metro Traffic Control, Inc. v. Shadow Network Inc., 104 F.3d

336, 341 (Fed. Cir. 1997).

     Bacardi argues that Cubaexport knowingly misrepresented

that it owned the HAVANA CLUB mark because its application

contained two material knowing misstatements: (1) “Cubaexport

represented that it believed it owned the U.S. HAVANA CLUB mark,

despite knowing that its only claim to the mark was based on a

confiscation in Cuba that could not be recognized or given

effect in the [United States].” MTD Opp’n, ECF No. 129 at 22

(citing Am. Compl. ¶¶ 42, 14); and (2) “Cubaexport represented

that it knew of no one else with a right to use the mark,

despite knowing that JASA had longstanding trademark rights that

it had not abandoned,” id. (citing Am. Compl., ECF No. 114 ¶¶

42, 45, 149).

     With regard to the first statement, Bacardi argues that

Cubaexport claimed in 1974 to be the owner of the mark, but

because that claim to ownership was based on the Cuban

revolutionary government’s expropriation of JASA’s rum business

and its assets, it knew that its claim to ownership could have

no effect in the United States because of the latter’s

longstanding policy of not giving effect to a foreign

                               20
government’s expropriation of property. Id. at 23 (citing

cases). Because of ample precedent codifying the non-recognition

policy, Bacardi argues that Cubaexport was aware that if the

fact of the expropriation was disclosed, the registration would

not have been accepted. Id. Bacardi points out that it has

alleged that Cubaexport waited for JASA’s U.S. registration to

expire before it sought its own U.S. registration and that it

did not use the already-existing Cuban registration that had

been confiscated from JASA, but instead obtained a new Cuban

registration. Id. at 24. Bacardi concludes that these

allegations support the logical inference that “Cubaexport knew

that an application betraying the link to JASA and the

expropriation would be denied. These specific allegations amply

demonstrate Cubaexport’s intent to deceive the PTO.” Id. at 24

(citing Bose, 580 F.3d at 1244 (Fed. Cir. 2009) (“[I]ntent must

often be inferred from the circumstances and related statement

made.”) (quoting First Int'l Servs. Corp. v. Chuckles, Inc., 5

U.S.P.Q.2d 1628, 1988 WL 252292, at *10 (T.T.A.B. 1988)).

     The Court concludes that Bacardi’s allegations are

sufficient to state a claim because the facts Bacardi alleges

amount to a “conscious effort to obtain for [its] business a

registration to which [it] know it was not entitled.” In re Bose

Corp., 580 F.3d at 1246 (quoting Metro Traffic Control, Inc. v.

Shadow Network Inc., 104 F.3d 336, 341 (Fed. Cir. 1997). Bacardi

                               21
alleges that Cubaexport made a false statement—that it believed

it owned the U.S. HAVANA CLUB mark—with the intent of obtaining

a registration to which it knew it was not entitled because it

knew that its claim to the mark would not be recognized if it

disclosed the expropriation to the PTO. Bacardi further alleges

that this is why Cubaexport did not use the already-existing

Cuban registration for the HAVANA CLUB mark, which had been

confiscated from JASA, as the basis for its U.S. application,

but rather obtained a new Cuban registration and used that as

the basis for the application. Bacardi’s allegation is a

reasonable inference.

     Cubaexport argues that these allegations are insufficient

to show fraud because “Bacardi must plead facts showing that

Cubaexport had no basis for a claim of ownership in 1974 and

knew it had no basis for such a claim.” MTD Reply, ECF No. 136

at 22. However, the cases Cubaexport cites do not support its

argument. In In re Bose, the Federal Circuit held that “a

trademark is obtained fraudulently under the Lanham Act only if

the applicant or registrant knowingly makes a false, material

representation with the intent to deceive the PTO.” 580 F.3d at

1245. And in General Healthcare Ltd. v. Qashat, the Court of

Appeals for the First Circuit affirmed the district court’s

finding that the party against whom a fraud claim was alleged

                               22
“reasonably believed that he was simply appropriating an

abandoned mark.” 364 F.3d 332, 338 (1st Cir. 2004).

     For the reasons explained above, the Court is unpersuaded

by Cubaexport’s argument that Bacardi’s allegations are

conclusory. Rather, the facts Bacardi alleges amount to a

“conscious effort to obtain for [its] business a registration to

which [it] know it was not entitled.” In re Bose Corp., 580 F.3d

at 1246. The allegations are anything but conclusory and are

sufficient to state a claim for fraud as they contain

“sufficient factual matter ... to state a claim to relief that

is plausible on its face.” Iqbal, 556 U.S. at 678 (quotation and

citation omitted). 7

     With regard to the second statement—that “Cubaexport

represented that it knew of no one else with a right to use the

mark, despite knowing that JASA had longstanding trademark

rights that it had not abandoned”—Cubaexport makes two

arguments. See MTD Reply, ECF No. 136 at 23-26.

     First, Cubaexport argues that it had reasonable grounds to

believe in 1974 that JASA had abandoned its U.S. mark and that

“Bacardi must plead facts showing that Cubaexport had actual

7 The Court rejects Cubaexport’s argument that Bacardi’s fraud
claim is merely an attempt to plead around the five-year
statutory time limit on cancellation petitions based on
conflicts between a registration and prior trademark rights. See
MTD Reply, ECF No. 136 at 22-23. As explained above, Bacardi has
stated a claim for cancellation based on fraud.
                               23
knowledge that there was no reasonable doubt that JASA retained

trademark rights.” MTD Reply, ECF No. 136 at 23. Cubaexport

further argues that to avoid dismissal, Bacardi must plead facts

showing that (1) “JASA’s former owners actually had plans to

resume us of their trademark in 1974 when Cubaexport filed its

application”; and (2) “Cubaexport export actually knew of those

plans.” Id.

     However, at this juncture, Bacardi need only allege an

intent to deceive. In re Bose Corp., 580 F.3d at 1246. Bacardi

alleges that Cubaexport made a false statement—that “Cubaexport

represented that it knew of no one else with a right to use the

mark, despite knowing that JASA had longstanding trademark

rights that it had not abandoned.” MTD Opp’n, ECF No. 129 at 22

(citing Am. Compl., ECF No. 114 ¶¶ 42, 45, 149). In support,

Bacardi alleges that: (1) Cubaexport, a state-owned entity, knew

that the Cuban government had expropriated JASA and therefore

knew that JASA did not voluntarily discontinue the use of the

mark, Am. Compl., ECF No. 114 ¶¶ 27-32; and (2) JASA and its

shareholders were determined to resume production and sale of

HAVANA Club rum either as a result of the restitution of their

confiscated assets in Cuba or through a partnership, id. (citing

Am. Compl., ECF No. 114 ¶ 32). It is reasonable to infer from

these alleged facts that Cubaexport had no reason to believe

that JASA had abandoned the mark and every reason to believe

                               24
that JASA would resume use of the mark once, in view of the

expropriation, it was able to do so.

     At this juncture, Cubaexport’s Act of State 8 doctrine

argument is beside the point because the argument is based on

the assumption that JASA abandoned its U.S. mark. See MTD Reply,

ECF No. 136 at 24 (“Bacardi overlooks that, assuming JASA

abandoned its U.S. trademark, the mark entered the public

domain, and anyone could have registered the same or similar

trademark”). However, as explained below, see infra Section

III.C; Cubaexport is not entitled to summary judgment on the

issue of whether JASA abandoned the HAVANA CLUB mark.

     For these reasons, Cubaexport’s Motion to Dismiss as to the

cancellation based on fraud claims against is DENIED.

            3. Bacardi Fails to State a Claim For Cancellation
               Based on Cubaexport’s Abandonment of the Mark 9

     Bacardi alleges that Cubaexport abandoned the U.S. HAVANA

CLUB mark and the registration it obtained in 1976 because

Cubaexport has never used the mark in interstate commerce in the

United States or foreign commerce. Am. Compl., ECF No. 114 ¶

163. Bacardi further alleges that since 1993, Cubaexport has

8 The Act of State doctrine requires courts to recognize acts of
foreign government that nationalize property located within
their own borders. See F. Palicio y Compañía, S.A. v. Brush, 256
F. Supp. 481 (S.D.N.Y. 1966).
9 Abandonment is an enumerated ground for cancellation at any

time. See 15 U.S.C. § 1064.
                                25
held “bare title” to the mark, but has never been ready or able

to export HAVANA CLUB rum to the United States or anywhere else.

Id. ¶ 166.

                  a. The Court Rejects Bacardi’s Argument That
                     There Is a Time Limit On Excusable Non-Use

     Cubaexport argues that Bacardi fails to state an

abandonment claim on the grounds its non-use of the mark is

excusable because there is no time limit on excusable non-use.

MTD, ECF No. 122 at 44-45. Bacardi responds that “[w]hile the

[e]embargo may have been an excusable ground for a period of

nonuse, a trademark cannot lie dormant indefinitely.” MTD Opp’n,

ECF No. 129 at 35 (citing McCarthy § 29:11 (“While use as a mark

in the United States is not required to obtain a registration

under § 44   . . . , use is required within a reasonable time or

the protection is subject to cancellation for abandonment.”)).

     Although Bacardi is correct that a trademark can be

abandoned if it is not used for an extended period of time, it

fails to address the issue of excusable nonuse. “Nonuse may be

considered excusable where the owner of the registration is

willing and able to continue use of the mark in commerce, but is

unable to do so due to a trade embargo.” Altadis U.S.A. Inc.,

No. 91218161, 2016 WL 3566152, at *16 n.22 (T.T.A.B. June 9,

2016)(quoting The Trademark Manual of Examining Procedure

(“TMEP”) § 1064.11). Cubaexport is unable to use the mark

                                26
because of the embargo. Under this circumstance, nonuse may be

excusable and the trademark is not considered abandoned. See

TMEP § 1064.11. Bacardi points to no authority to support its

argument that in light of the embargo, which it does not dispute

will end eventually, there is a reasonable time limit on

excusable non-use. Accordingly, this argument fails.

                 b. The Court Rejects Bacardi’s Constitutional
                    Argument

     Bacardi argues that the Lanham Act poses constitutional

concerns if it is interpreted to apply to trademarks that are

unused for an indefinite period of time because the reasonable

nexus between Congress’s power to regulate trademarks in foreign

or interstate commerce that the Constitution demands would not

be present. See MTD Opp’n, ECF No. 129 at 35. Bacardi therefore

urges the Court to create a time limitation on the excused non-

use provisions of the Lanham Act to avoid this constitutional

problem. Id. Bacardi further urges the Court to construe Section

44 narrowly because Congress could not have intended for a

foreign registrant to obtain U.S. registrations for an

indefinite period of time without engaging in economic activity

in the United States. Id. at 36.

     Bacardi points to no authority to support its arguments in

this context. While “[t]he [constitutional] power to regulate

commerce presupposes the existence of commercial activity to be

                               27
regulated.” Nat’l Fed. of Indep. Bus. v. Sebelius, 132 S. Ct.

2566, 2586 (2012) (Roberts, C.J.); the Lanham Act allows foreign

registrants to obtain a U.S. registration based on the

applicant’s bona fide intention to use the mark in commerce,

without requiring prior use in commerce, 15 U.S.C. § 1126(e).

Here, Cubaexport is prevented from using the mark in commerce

due to the embargo and that non-use is excused. Accordingly,

Bacardi’s argument fails.

                 c. The Court Rejects Bacardi’s Assignment in
                    Gross Arguments 10

     Cubaexport argues that Bacardi’s assignment in gross claim

fails because Bacardi has conceded that the mark was never

assigned, and because it was not associated with underlying

goodwill. MTD Reply, ECF No. 136 at 30. Bacardi responds that

Cubaexport abandoned its right to the mark as follows: It has

alleged that Cubaexport has entirely left the rum business and

conveyed to HRL all the assets related to HAVANA CLUB rum,

including the good will associated with the trademark. MTD

10Cubaexport states that Bacardi does not assert this theory in
the Amended Complaint. MTD Reply, ECF No. 136 at 30. In Count I
of the Amended Complaint, Bacardi seeks Rectification of
Register/Cancellation of Registration based on a number
theories, including abandonment. See Am. Compl., ECF No. 114 at
42, 49. As part of the abandonment theory, Bacardi alleges that
Cubaexport has held “bare title” to the U.S. HAVANA CLUB
registration since 1993. Id. ¶ 166. Accordingly, the Court will
consider the assignment in gross argument.

                               28
Opp’n, ECF No. 129 at 33. It has pointed out that the conveyance

did not effect an assignment of the registration itself, which

the Galleon judgment confirmed. Id. As a result, Bacardi argues

that since 1993, Cubaexport has held bare title to the HAVANA

CLUB mark, without any ability to produce or sell rum in the

United States or elsewhere. Id. (citing Am. Compl., ECF No. 114

¶ 166. Bacardi argues that “[t]his is a classic assignment in

gross that results in abandonment of the trademark.” Id.

      Bacardi’s assignment in gross argument was rejected by the

District Court in Galleon and by the TTAB. Galleon II, 974 F.

Supp. 302 at 312 n.9; see also TABB Opinion, ECF No. 122-2 at

53–54. In Galleon, the District Court stated:

           Defendants   additionally    argue   that  the
           separation   of    the  trademark    from  the
           appurtenant business, the hard assets in Cuba,
           resulted in an assignment in gross. See Def.
           Mem. at 15. As a general matter, Defendants
           are correct in asserting that such a situation
           may lead to an assignment in gross. However,
           the principle is inapplicable to the unique
           circumstances of this matter. Cubaexport and
           Plaintiffs never had assets in the United
           States. While the Havana Club trademark may be
           recognizable by U.S. consumers, the embargo
           has prevented Plaintiffs and Cubaexport from
           importing,     distributing,     selling,   or
           maintaining any assets in this country. Thus,
           it was impossible for the Plaintiffs and
           Cubaexport to have separated the mark from the
           business assets when no assets existed in the
           United States.

Id.

                                29
     A trademark has no economic value on its own, but rather is

intertwined with “good will,” which “signifies the favorable

reputation of a business, product or service.” McCarthy § 18:2.

“There are no rights in a trademark apart from the business with

which the mark has been associated; they are inseparable.”

Marshak v. Green, 746 F.2d 927, 929 (2d Cir. 1984). “Thus, if

there is a dissociation or separation of the business from the

mark, there is nothing left for the mark to signify and hence

it loses its inherent function and is abandoned,” and a

corresponding registration is cancelled. Otis Elevator Co. v.

Echlin Mfg. Co., 187 U.S.P.Q. 310, 1975 WL 21258, at *4

(T.T.A.B. 1975); see also Gen. Cigar Co. v. G.D.M. Inc., 988 F.

Supp. 647, 659 (S.D.N.Y. 1997) (“[A]bandonment may be found

where a mark has been assigned in gross.”).

     Here, however, there is no dispute that, because of the

embargo, Cubaexport may not import, distribute, sell, or

maintain any assets in the United States. Therefore, as the

Galleon court observed, it “was impossible for the Plaintiffs

[there, HCH] and Cubaexport to have separated the mark from the

business assets when no assets existed in the United States.”

Galleon II, 974 F. Supp. at 312 n.9. The TTAB also agreed with

the District Court that the principle of assignment in gross

does not apply this case because there were no business assets

to separate from the trademark. TABB Opinion, ECF No. 122-2 at

                               30
53–54.

     This Court also agrees. The rationale underlying the

assignment in gross rule is that “[u]se of the mark by the

assignee in connection with a different goodwill and different

product would result in a fraud on the purchasing public who

reasonably assume that the mark signifies the same thing,

whether used by one person or another.” Marshak, 746 F.2d at

929. This is why courts determine whether an assignment in gross

occurs using a “substantial similarity test,” which focuses on

whether the assignee is making a product that is substantially

similar to that of the assignor such that a consumer would not

be confused by the mark. Id. at 930 (“The courts have upheld

such assignments if they find that the assignee is producing a

product or performing a service substantially similar to that of

the assignor and that the customers would not be deceived or

harmed.”).

     The rationale underlying the assignment in gross rule

confirms the Galleon court and the TTAB’s conclusion that it is

inapplicable to this case. Because the embargo prevents

Cubaexport from selling or distributing rum in the United

States, there is no risk of consumer confusion. Additionally,

this Court would be unable to determine if any product was

substantially similar, because there is currently no product

sold in the United States by Cubaexport. Accordingly, the

                               31
assignment in gross theory is inapplicable to the circumstances

in this case. See Old Charter Distillery Co. v. Ooms, 73 F.

Supp. 539, 541-42 (D.D.C 1947)(stating invalid assignment in

gross of a whiskey trademark during Prohibition did not result

in abandonment, where the assignor validly assigned the mark to

a different entity and nonuse of the mark remained excusable).

     For these reasons, Cubaexport’s Motion to Dismiss is

GRANTED as to Bacardi’s abandonment claim against Cubaexport.

             4. Bacardi Has Stated A Claim for Cancellation Based
                on Misrepresentation of Source

     The Lanham Act permits a registration to be canceled at any

time “if the registered mark is being used by, or with the

permission of, the registrant so as to misrepresent the source

of the goods or services on or in connection with which the mark

is used.” 15 U.S.C. § 1064(3).

     To state a § 14(3) claim, Bacardi must allege that

Cubaexport

          engaged   in   a   “deliberate   and    blatant
          misrepresentation   of   source   wherein   the
          registration is merely a vehicle for the
          misuse rather than evidence of even a
          colorable ownership claim[, and where the mark
          is intentionally displayed in such a manner as
          to facilitate passing off the goods as those
          of another].” Global Maschinen GmbH v. Global
          Banking Sys., Inc., 227 U.S.P.Q. 862, 863 n.
          3, (T.T.A.B. 1985). In other words, this
          cancellation statute requires proof of a
          “blatant, aggressive misuse of a registered
          mark ... in order to trade upon the renown and
          reputation” of the party seeking cancellation.

                                 32
          McDonnell Douglas Corp. v. National Data
          Corp., 228 U.S.P.Q. 45, 46 (T.T.A.B.1985); see
          also 2 McCarthy § 20.15[6] (a cancellation
          claim under § 14(3) “requires a pleading that
          registrant deliberately sought to pass off its
          goods as those of petitioner. Willful use of
          a   confusingly    similar    mark   is    not
          sufficient.”).

SunAmerica Corp. v. Sun Life Assur. Co. of Canada, 890 F. Supp.

1559, 1581 (N.D. Ga. 1994).

     Cubaexport argues that Bacardi fails to state a mis-

representation of source claim on numerous grounds. Cubaexport

first points out that in this case, the TTAB rejected the

misrepresentation of source of goods argument, holding that

“even a merely colorable claim of a right to use a trademark is

enough to defeat a claim for cancellation based on

misrepresentation of source.” MTD, ECF No. 122 at 46. Bacardi

responds that “even if Cubaexport had a colorable claim to

ownership, it had no colorable claim to carry on a legacy dating

back to 1878” seeking to pass off its new rum as being made with

the Arechabala family recipe. MTD Opp’n, ECF No. 129 at 31-32.

Cubaexport responds to this argument in a footnote, suggesting

that the Court need not reach it, because: (1) Cubaexport had a

reasonable basis to think that JASA had abandoned its U.S.

trademark rights; and (2) “Cubaexport also had, at a minimum, a

reasonable basis to believe the words ‘Fundada en 1878’ are

accurate, because in Cuba, the enterprise that distills HAVANA

                               33
CLUB rum was and is the legal successor to JASA’s business by

reason of the 1960 expropriation decree.” MTD Reply, ECF No. 136

at 33 n. 14.

     As an initial matter, Cubaexport’s representation of the

holding of the TTAB is inaccurate. The TTAB did not reject

Bacardi’s misrepresentation of source argument on the merits.

Rather, the TTAB cited the “colorable claim of ownership”

standard, but its conclusion that Bacardi had not stated a claim

of misrepresentation of source was based on entirely different

reasoning: “Petitioner’s claim is premised on the assumption

that Cubaexport is not the true and legitimate owner of the

HAVANA CLUB mark, which can only be regarded as a political

question based on the premise that the Cuban government is not

legitimate. Obviously, we, as a tribunal within the U.S.

Department of Commerce, do not have the authority to answer that

question.” TTAB Decision, ECF No. 122-2 at 56-57. Furthermore,

whether or not Cubaexport had a reasonable basis to think that

JASA had abandoned its U.S. trademark rights is a disputed

factual matter. See infra Section III.C. Finally, Bacardi has

alleged that Cubaexport does not have the Arechabala family

recipe, an allegation that the Court accepts as true for the

purposes of the Motion to Dismiss.

     The Court concludes that Bacardi has stated a claim here.

First, the use of the “Fundada en 1878” legend constitutes

                               34
“blatant, aggressive misuse of a registered mark ... in order to

trade upon the renown and reputation of the party seeking

cancellation” because, making all inferences in Bacardi’s favor,

Cubaexport, by using the “Fundada en 1878” legend, is trading on

the “renown and reputation” of the Arechabala family recipe.

Furthermore, Cubaexport’s reliance on SunAmerica Corp. is

misplaced because there, following a bench trial, the Court

found that there was no evidence that the defendant there sought

to pass off its products of those of the plaintiff. 890 F. Supp.

at 1581. Here, Bacardi has alleged just that.

     Second, Cubaexport argues that the claim should be

dismissed because, as Bacardi alleges in the Amended Complaint,

Cubaexport’s mark is not currently being used to sell good in

the United States. MTD, ECF No. 122 at 46. Bacardi responds that

Cubaexport’s registration reflects how it intends to use the

mark and that inaction should not be able to both be overlooked

for purposes of abandonment and also serve as a defense to

misrepresentation of source. MTD Opp’n, ECF No. 129 at 32.

     Cubaexport has cited no authority that would compel

dismissal of the claim in view of the fact that Cubaexport’s

non-use of the mark is attributable to the embargo. As alleged

in the Amended Complaint, Cubaexport applied to the PTO under 15

U.S.C. § 1126. Am. Compl., ECF No. 114 ¶ 42. Accordingly,

Cubaexport was not required to have used the mark in commerce in

                               35
the United States prior to applying, but it was required to

attest that it had a bona fide intention to use the mark in

commerce. 15 U.S.C. § 1126(e). Based on its application,

therefore, Cubaexport intended to use the mark in commerce in

the United States. However, it has been prevented from doing so

due to unusual circumstances beyond its control. Accordingly,

Cubaexport’s non-use is not fatal to Bacardi’s claim. Cf. Cuban

Cigar Brands N.V. v. Upmann Int’l Inc., 457 F. Supp. 1090, 1100

n.43 (S.D.N.Y. 1978). Cubaexport has provided no authority that

would require the Court to construe the Lanham Act to require

Bacardi wait until the embargo is lifted and Cubaexport or its

successor uses the mark to seek cancellation based on

misrepresentation of source of goods.

      Third, Cubaexport argues that Bacardi concedes that the

alleged use of the mark in advertisements are intended to build

brand recognition in the United States for the rum sold by HCI

in other countries and not to trade on any existing brand

recognition of Bacardi’s product. See MTD, ECF No. 122 at 46-47.

Bacardi responds—and the Court agrees—that “[a]dvertising to

reach new customers while drawing on good will that already

exists is not an either/or proposition   . . . [and t]here is

nothing inconsistent in the [amended] complaint’s allegation

that Defendants did both. MTD Opp’n, ECF No. 129 at 33.

                               36
     Fourth, and finally, Cubaexport argues that Bacardi pleads

no facts to suggest that the U.S. mark is being used to

misrepresent HCI’s goods as Bacardi’s. See MTD, ECF No. 122 at

47. But as Bacardi responds, the Amended Complaint alleges just

that. See Am. Compl., ECF No. 114 ¶¶ 169-174. Furthermore,

“Bacardi can honestly claim to continue the Arechabala family

legacy dating back to 1878, including its use of the secret

family formula for making genuine Havana Club rum.” MTD Opp’n,

ECF No. 129 at 33.

     For all these reasons, Cubaexport’s Motion to Dismiss as to

the misrepresentation of source claim is DENIED.

            5. Cancellation/Rectification of the Register Claims

     Bacardi’s remaining claims are that the U.S. HAVANA CLUB &

Design registration must be stricken because it expired when:

(1) Cubaexport did not file the mandatory renewal application

and declaration in 1996, Am. Compl, ECF No. 114 at 42-43; and

(2) Cubaexport did not file the mandatory renewal fee in 2006,

id. at 43-44.

                a. The Court Denies the Motion to Dismiss as to
                   Whether the Registration Expired in 1996

     Cubaexport argues that this claim should be dismissed on

the grounds that: (1) “wrong party renewal” is not a ground

listed in the Lanham Act for cancelling a trademark that has

been registered for more than five years, Defs.’ MTD, ECF No.

                                37
122 at 37 (citing 15 U.S.C. § 1064(3)); and (2) the fact that

the 1996 renewal submitted by HCH rather than Cubaexport is not

a basis for cancellation because HCH was the proper party to

submit the 1996 renewal, id. 34-37. 11

     With regard to the first argument, Cubaexport argues that

the claim should be dismissed because “wrong party renewal” is

not a basis to cancel a trademark that has been registered for

over five years because it is not an enumerated ground in 15

U.S.C. § 1064(3). Defs.’ MTD, ECF No. 122 at 37; Defs.’ Reply

ECF No. 136 at 12–15. Cubaexport argues that it is undisputed

that when a trademark is more than five years old, cancellation

is limited to fraud, abandonment, misrepresentation of origin,

and a few other specifically listed grounds not at issue in this

case. Id. at 12. Therefore, Cubaexport argues, any claim that a

11Cubaexport also argues that this claim is barred by issue
preclusion based on the Galleon court’s denial of Bacardi’s
counterclaim in which it sought to cancel the registration.
Defs.’ MTD, ECF No. 122 at 36-37. However, the Galleon court
denied the cancellation claim without reaching the merits
because Cubaexport, which it found to be a necessary party to
the cancellation issue, was not before the court. Galleon II,
974 F. Supp. at 311-312. The Partial Judgment issued in the case
specifically provided that “nothing herein shall prevent the
defendants or others from contesting those rights or contending
that said rights were lost as a result of acts or omissions by
Cubaexport.” Galleon Partial Judgment, ECF No. 132-2 ¶ 10.
Accordingly, this Court rejects Cubaexport’s issue preclusion
argument. Additionally, since Bacardi has consented to the
dismissal of the Count I claims against HCH, the Court need not
address Cubaexport’s argument that the 1996 registration was not
fraudulently obtained. MTD, ECF No. 122 at 38-40; MTD Reply, ECF
No. 136 at 26-27.
                                38
trademark should be cancelled because the wrong party renewed

the trademark is not available for the HAVANA CLUB registration.

Id.

      Cubaexport (and HCH) made the same argument before the

TTAB. See TTAB Decision, ECF No. 122-2 at 36. In rejecting that

argument, the TTAB stated that “because petitioners base their

summary judgment motion on the District Court’s orders, we give

petitioners benefit of any doubt and construe the motion as

being based on a District Court order directed to the validity

of the registration, and not based on the ‘improper renewal of a

registration.’ Thus, we have considered the merits of

petitioner’s summary judgment motion.” TTAB Decision, ECF No.

122-2 at 36. Here, Bacardi seeks review of the TTAB decision.

See Am. Compl. ECF No. 114 ¶ 1. Just as the TTAB reached the

merits of the arguments regarding the validity of the

registration, so will this Court reach the merits in reviewing

the TTAB’s decision. See El Paso Nat. Gas Co v. United States,

632 F.3d 1272, 1276 (D.C. Cir. 2001)(noting “the strong

presumption that Congress intends judicial review of

administrative action”).

      With regard to the second argument, Cubaexport explains

why, in its view, the TTAB was correct to hold that “HCH was the

registrant of record at the time that the renewal request was

filed and therefor was a proper party to submit the

                                39
application.” Defs.’ MTD, ECF No. 122 at 35-37; Defs.’ Reply,

ECF No. 136 at 15-18. However, in this proceeding, Bacardi seeks

judicial review of that decision. Accordingly, this issue is not

ripe for decision and Bacardi is entitled during subsequent

proceedings to explain why, in its view, the TTAB decision was

erroneous. It would be premature to make that determination at

this juncture.

     For these reasons, Cubaexport’s Motion to Dismiss as to the

cancellation/rectification of the register claims based on the

1996 renewal is DENIED without prejudice.

                 b. The Court Denies the Motion to Dismiss as to
                    Whether the Registration Expired in 2006

     Cubaexport argues that Bacardi’s claim that the U.S. HAVANA

CLUB & Design registration must be stricken because it expired

when Cubaexport did not file the mandatory renewal fee in 2006

should be dismissed because, even if the PTO erred by processing

the renewal, that is not an enumerated ground in the Lanham Act

for challenging an incontestable trademark registration. MTD,

ECF No. 122 at 40-44. If Cubaexport’s registration expired in

1996, then the question of whether it expired in 2006 would be

moot. Since the Court has denied Cubaexport’s Motion to Dismiss

as to the 1996 registration, the Court declines to reach this

issue at this juncture and DENIES without prejudice Cubaexport’s

Motion to Dismiss as to the 2006 registration. Cubaexport may

                                 40
raise this issue in subsequent proceedings.

     C. The Court Denies the Motion to Dismiss as to Bacardi’s
        Claims for Declaratory Relief Against Cubaexport

     Bacardi’s remaining claims for declaratory relief are for:

(1) a declaration of Bacardi’s common law rights in the HAVANA

CLUB mark, see Am. Compl., ECF No. 114 ¶¶ 175-80; and (2) a

declaration of non-violation of federal trademark laws, see id.

¶¶ 181-85. Cubaexport argues that Bacardi’s allegations of

superior rights in the HAVANA CLUB mark fail because Bacardi

fails to show that its alleged rights have priority over

Cubaexport’s. MTD, ECF No. 122 at 47. In support, Cubaexport

first argues that JASA abandoned any rights it had arising from

the use of the mark in the United States long before it

purportedly assigned those rights to Bacardi in 1997. However,

Cubaexport is not entitled to summary judgment on the issue of

whether JASA abandoned the mark. See supra Section III.D. For

this reason, the Court DENIES the Motion to Dismiss as to the

Declaratory claims against Cubaexport. The Court need not reach

Cubaexport’s second argument—that based on the allegations in

the Amended Complaint, any common law rights Bacardi has

obtained through use of the mark are junior to those of

Cubaexport because Cubaexport had priority from at least

February 12, 1974, the date of Cubaexport’s Cuban registration—

at this juncture. Cubaexport may raise this argument in

                               41
subsequent proceedings.

     D. Defendants are Not Entitled to Summary Judgment on the
        Issue of Whether JASA Abandoned the Mark

     Defendants move for partial summary judgment on the issue

of whether JASA, at the time it allegedly transferred its rights

to Bacardi in 1997, had any U.S. trademark rights in the HAVANA

CLUB name. See generally Defs.’ Mot. for Partial Summ. J.

(“MSJ”), ECF No. 127-1. Based on the discovery conducted in

Galleon and trial testimony in that case, Defendants contend

that the parties have conducted full discovery on the issue, and

the undisputed evidence demonstrates that as a matter of law,

JASA abandoned all U.S. rights in their HAVANA CLUB marks by

1973 at the latest. Id. A central issue in Galleon was whether

JASA had abandoned its U.S. rights in the Havana Club mark. The

parties took discovery on the issue and there was testimony on

the issue at trial. However, the Galleon court never ruled on

the issue because of the 1997 OFAC decision rescinding the

authorization it had earlier granted allowing Cubaexport to

transfer the mark. As a result, the Galleon court held that

because of OFAC’s action, the ownership of the mark reverted to

Cubaexport and so HCH lacked standing to maintain a claim for

infringement of the registered trademark. Galleon II, 974 F.

Supp at 312.

                               42
     Under the Lanham Act, a mark is abandoned “[1] [w]hen its

use has been discontinued with [2] intent not to resume such

use.” 15 U.S.C. § 1127. “Intent not to resume may be inferred

from circumstances,” and “[n]onuse for 3 consecutive years shall

be prima facie evidence of abandonment.” Id. However, “[a] prima

facie showing of abandonment may be rebutted with evidence

excusing the nonuse or demonstrating an intent to resume use.”

Specht v. Google, 747 F.3d 929, 934 (7th Cir. 2014). “A mark

owner’s reason for suspending use of a mark is relevant to

abandonment analysis only as circumstantial evidence shedding

possible light on his intent to resume future use within a

reasonable period of time.” ITC Ltd v. Punchgini, Inc., 482 F.3d

135, 151 n.10. (2d Cir. 2007).

     If “a registrant's nonuse is excusable, the registrant has

overcome the presumption that its nonuse was coupled with an

“intent not to resume use” . . . . Imperial Tobacco, Ltd. v.

Philip Morris, Inc., 899 F.2d 1575, 1581 (Fed. Cir. 1990). “To

prove excusable nonuse, the registrant must produce evidence

showing that, under his particular circumstances, his activities

are those that a reasonable businessman, who had a bona fide

intent to use the mark in United States commerce, would have

taken.” Rivard v. Linville, 133 F.3d 1446, 1449 (Fed. Cir.

1998). Courts have found such “excusable non-use ‘where there is

a temporary, forced withdrawal from the market due to causes

                                 43
such as war, import problems, or some other involuntary

action.’” Emmpresa Cubana Del Tabaco v. Culbro Corp., 213 F.R.D.

151, 157 (S.D.N.Y. 2003)(citing cases); see also Cuban Cigar

Brands N.V., 457 F. Supp. at 1101, 199 U.S.P.Q. at 202 (“the

fact that plaintiff was intervened by the Cuban Government and

thus prevented from exporting (its goods) to this country until

recently does not constitute an abandonment of the mark”).

     Because abandonment is essentially a forfeiture, “it is

incumbent upon the person alleging it to prove by clear and

convincing evidence that the right claimed has been

relinquished.” Mathy v. Republic Metalware Co., 35 App. D.C.

151, 156 (D.C. Cir. 1910). “The question of abandonment must be

decided by the facts in each particular case; but a mark will

never be held abandoned, unless a clear intention to do so

appears.” Id. “‘Questions of intent, which involve intangible

factors including witness credibility, are matters for

consideration of the fact finder after a full trial.’” Flynn v.

Fischer Tile & Marble, Inc., 246 F. Supp. 2d 48, 55-56 (D.D.C.

2003 (quoting Prochaska v. Marcoux, 632 F.2d 848, 851 (10th Cir.

1980)).

     Cubaexport argues that it is entitled to summary judgment

because there is no genuine dispute of material fact that JASA

abandoned its rights in the HAVANA CLUB mark before it allegedly

transferred any rights to Bacardi. MSJ, ECF No. 127-1 at 8. For

                               44
the reasons explained below, the Court the Court concludes that

a fact-finder could reasonably find that JASA’s efforts to

resume use were reasonable under the circumstances.

               1. The Expiration of the Registrations, the
                  Galleon Trial Testimony, and JASA’s Activities
                  From 1960 to 1968

     Cubaexport argues that the expiration of the U.S.

registrations by 1973 coupled with Jose Arechabala’s statement

that he “was not interested” in renewing JASA’s trademark

registrations for HAVANA CLUB result in it being undisputed that

“JASA made a deliberate, voluntary decision to abandon” its U.S

registrations. Id. at 20 (citing Ramon Arechabala’s Trial

Testimony). Cubaexport disputes that JASA’s non-use was

excusable, arguing that JASA’s activities were not those of a

reasonable businessperson because JASA failed to: (1) pay the

minimal fee to maintain the registration; and (2) object to

Cubaexport’s registration of the mark. Id. at 21.

     As an initial matter, “[a] failure to renew a registration

or other loss of a registration should not be confused with

‘abandonment’ of the mark itself.” McCarthy § 20:57.

Furthermore, Cubaexport failed to provide the full context of

the trial testimony. The full context is as follows:

          Q:   Now, isn’t is true, Mr. Arechabala, that
               sometime after you came to the United
               States you had a conversation with your
               Uncle   Jose   Maria  Arechabala   about
               renewing the company’s registration of

                               45
                 the Havana Club trademark in the United
                 States?
          A:     That is correct, yes, sir.
          Q:     Isn’t it correct that he told you he was
                 not    interested    in    renewing   the
                 registration?
          A:     That is correct, because we were going
                 back to Cuba at any moment and – that was
                 our hope, at least.
          THE   COURT:      Well, can we break that down?
                            Did your uncle tell you he was
                            not interested in renewing the
                            registration?
          THE   WITNESS:    He told me we could not do
                            anything right now with it
                            because let’s wait because we
                            might be going to Cuba at any
                            moment.
          THE   COURT:      When was this? When did your
                            uncle say this?
          THE   WITNESS:    When I talked to him back in
                            1974.
          THE   COURT:     He said that back in ’74?
          THE   WITNESS:    Yes, we were planning to go
                            back to Cuba real quick. They
                            are very optimistic, you know?
                            But that’s the way it is.

ECF No. 132-1, Trial Tr. Vol. 9, 1282: 3-25.

     Cubaexport fails to respond meaningfully to the full

context of Jose Arechabala’s statement, see generally MSJ Reply,

ECF No. 137; arguing that “the involuntary loss of JASA’s Cuban

assets in 1960 does not excuse nearly a decade of inactivity

from 1960 to 1968,” id. at 17. Cubaexport, citing the caselaw

upon which Bacardi relies, argues that even if it is true that

“JASA’s hands were tied because reconstituting a full-scale

distilling operation in the United States was beyond JASA’s

means” this “in no way prevented JASA from making efforts to

                                 46
resume use of the mark that would have been sufficient to avoid

abandonment.” Id. at 18.

     “The question of abandonment must be decided by the facts

in each particular case . . . .” Mathy, 35 App. D.C. at 156.

Here, the facts include that “[o]n December 31, 1959, armed

soldiers of the Cuban government seized the JASA distillery and

all of its books, records, and other assets by force.” Pls.’

Response to Defs.’ Statement of Material Facts (“SOMF”), ECF No.

131 ¶ 8. In the days following the seizure, certain members of

the Arechabala family “were ordered to continue working but were

searched daily to ensure no records or documents were removed

from the facility.” Id. During this time, Arechabala family

members were jailed or threatened with jail, eventually choosing

to flee Cuba. Id. The company’s lawyer was jailed for ten years.

Id. JASA was never compensated for the seized assets and its

owners and leadership were “scattered around the globe.” Id.

These facts demonstrate the adversity JASA faced in the years

following the expropriation with regard to resuming use of the

mark.

     Cubaexport argues that Bacardi needs to show that JASA made

“continuous efforts to resume use” during the 1960 to 1968 time

period. MSJ Reply, ECF No. 137 at 18 (citing Seidelmann Yachts,

Inc. v. Pace Yacht Corp., Civ. No. JH-87-3490, 1989 WL 214497 at

*2, * 7 (D.Md. Apr. 26, 1989). However, the correct standard is

                               47
that “to rebut a presumption of abandonment on a motion for

summary judgment, the mark owner must come forward with evidence

‘with respect to … what outside events occurred from which an

intent to resume during the nonuse period may be reasonably

inferred.’” ITC Ltd., 482 F.3d at 150 (quoting Imperial Tobacco

Ltd., 899 F.2d at 1581). Furthermore, Seidelmann Yachts, Inc. is

easily distinguishable. There, the mark owner had left the boat

business after a Chapter 11 bankruptcy filing and “continuously

sought to sell the mark at all times” for a specific period of

time. 1989 WL 214497 at *2, * 7. Here, of course, JASA’s assets

were expropriated, it was never compensated, and it initially

anticipated a quick return to Cuba to begin manufacturing and

selling HAVANA CLUB rum.

     Drawing all justifiable inferences in Bacardi’s favor, as

the Court must at this juncture, Jose Arechabala stated that he

“was not interested” in renewing JASA’s trademark registrations

for HAVANA CLUB because they were unable to produce rum at that

time—"we could not do anything right now.” And JASA believed,

based on flawed legal advice they had been given, that they

could not renew the registration for that reason:

          Q:   Mr. Arechabala, was it your understanding
               that to renew the trademark you had to be
               currently selling rum under the Havana
               Club name?

          A:   Yes, but how would you renew your
               trademark if you cannot produce the rum?

                               48
               Then you are doing something wrong
               against the law. Because in order to
               renew your trademark, you have to be able
               to make the rum, the sell the run, and to
               distribute the rum. So I could not, I
               mean,   register  the   trademark   again
               because I didn’t have the facilities for
               doing that.

     Id. 1284:2-11.

     Whether or not JASA intended to resume use depends in part

on the credibility of this testimony, which is a “matter[] for

consideration of the fact finder after a full trial.” Flynn, 246

F. Supp. 2d at 55-56.

               2. JASA’s Activities From 1969 to 1993

     Cubaexport argues that JASA’s activities from 1969 to early

1974 are insufficient to establish an intent to resume use. MSJ

Reply, ECF No. 137 at 19. It further argues that “Bacardi does

not even attempt to show intent to resume use during the

nineteen-year period from 1974 to 1993,” arguing that “Bacardi

is [] obliged to come forward with some evidence from [the

nineteen year] period of time that JASA intended to resume use.”

MSJ Reply, ECF No. 137 at 12.

     Again, the correct standard is that “to rebut a presumption

of abandonment on a motion for summary judgment, the mark owner

must come forward with evidence ‘with respect to … what outside

events occurred from which an intent to resume during the nonuse

period may be reasonably inferred.’” ITC Ltd., 482 F.3d at 150

                                49
(quoting Imperial Tobacco Ltd., 899 F.2d at 1581). Otherwise

put, “[t]he registrant must put forth evidence with respect to

what activities it engaged in during the non-use period or what

outside events occurred from which an intent to resume use

during the nonuse period may reasonably be inferred.” Imperial

Tobacco Ltd., 899 F.2d at 1581. Bacardi has done just that—

pointing to both “a special circumstance excusing the non-use—

the expropriation and resulting adversity JASA faced—as well as

ample evidence that the Arechabalas intended to resume making

and selling HAVANA CLUB rum.” MSJ Opp’n, ECF No. 130 at 15.

     Making all inferences in Bacardi’s favor, as the Court must

at this juncture, JASA’s intent to resume use during the non-use

period may be reasonably inferred based on the fact that all of

JASA’s assets had been seized, its owners and family members

exiled and scattered worldwide, and it lacked the facilities and

assets to resume production, combined with JASA’s efforts in the

early 1970s to try produce HAVANA CLUB rum and exploring

potential joint ventures to exploit the trademark. See Ramon

Arechabala Dep., ECF No. 132-4 at 67:25-68:3 (testifying that he

“was trying to get the rum to being produced in the United

States but it was too expensive and I didn’t have the money to

go ahead and do it”); Id. at 113:13-15 (testifying that he “had

been trying for several years to make Rum HAVANA CLUB in the

United States but [] didn’t have the cash flow needed for that

                               50
purpose”); Id. at 68:8-70:23 (recounting that JASA submitted a

proposal for a joint venture to Gulf & Western, but it was not

interested); Id. at 98:11-100:24 (describing potential for joint

venture with Bacardi). JASA rejected an offer to pursue a

venture in the Dominican Republic because that venture would

have involved the expropriation of a distillery by a General in

that company, which JASA was uninterested in participating in.

Id. at 89:2-15. And JASA eventually reached an agreement with

Bacardi to exploit the use of the mark.

     Even if Bacardi points to no evidence of JASA’s efforts

from 1974 to 1993; a fact-finder could determine that JASA’s

attempts to resume use were reasonable under the circumstances.

Cf. Cuban Cigar Brands N.V., 457 F. Supp. at 1101 (S.D.N.Y.

1978) (owner did not abandon its mark when the expropriation of

the company prevented it from exporting cigars to the United

States for fifteen years)aff’d sub nom, Cuban Cigar Brands N.V.

v. Upmann Int’l, Inc. 607 F.2d 995 (2d Cir. 1979). This issue

was not resolved in Cubaexport’s favor in the Galleon

litigation; rather, testimony was provided but the Court did not

issue findings of fact.

     For all these reasons, and in view of the high bar facing

Cubaexport, the Court DENIES Cubaexport’s Motion for Partial

Summary Judgment on the issue of whether JASA abandoned the

                               51
mark. 12

IV. Conclusion

      For the foregoing reasons, the Court GRANTS IN PART and

DENIES IN PART Defendants’ Motion to Dismiss, ECF No. 122; and

DENIES Defendants’ Partial Motion for Summary Judgment, ECF No.

124. An appropriate Order accompanies this Memorandum Opinion.

      SO ORDERED.

Signed:    Emmet G. Sullivan
           United States District Judge
           March 6, 2023

12Bacardi argues that Cubaexport’s motion is procedurally
improper because it “attempt[s] to dispose of an allegation
rather than the underlying claim.” MSJ Opp’n, ECF No. 130 at 20.
The Court need not reach this argument since it has denied the
motion for partial summary judgment. Cubaexport further argues
that no reasonable fact-finder could conclude that Cubaexport
committed fraud. MSJ Reply, ECF No. 137 at 23-27. In view of the
Court’s denial of Cubaexport’s Motion for Partial Summary
Judgment and denial of Cubaexport’s Motion to Dismiss as to the
cancellation based on fraud claim, the Court need not reach this
argument at this time.
                                 52