Texas lawmaker's bill would benefit Bacardi

U.S. Rep. Lamar Smith picks up trademark issue dropped after outcry over contributions

29 Apr 2004 // WASHINGTON -- The long, strange tale of Bacardi USA's fight against Cuba -- featuring backroom deals, deep-pocket campaign donations and the global clash of communism and capitalism -- has taken another turn, with U.S. Rep. Lamar Smith entering the fray.

Smith, R-San Antonio, filed a bill Wednesday to alter U.S. trademark rules to benefit Bacardi, the marketer of Bacardi rum, Dewar's scotch and other recognizable labels.

The legislation is similar to a sharply criticized provision that was quietly slipped into the defense appropriations bill last October by House Majority Leader Tom DeLay, R-Sugar Land. After it was revealed that DeLay political committees had received $40,000 from Bacardi, the resulting outcry didn't stop until the provision was stripped out.

Smith, however, sees his bill as more of a slap at Cuban leader Fidel Castro, whose government confiscated a rum-making company in 1960, setting off a chain of events that continues today.

"I don't like to see Castro, or other companies, enrich themselves at the expense of legitimate companies that were seized during Castro's communist revolution," Smith said. "All that does is reward illegitimate, illegal behavior."

Smith has the added advantage of having received no political contributions from Bacardi, but that matters little to Citizens for Responsibility and Ethics in Washington, an activist group that criticized the DeLay provision and found little to like about Smith's version.

"You've got to wonder why something that helps one company, to the detriment of (others), would go forward," said Melanie Sloan, director of the government-accountability group.

Sloan's answer: money.

Bacardi has contributed about $650,000 to congressional members of both parties since 1997, including $20,000 to Texans for a Republican Majority, a DeLay-sponsored political action committee under investigation for allegedly using corporate money in the 2002 Texas elections in violation of state law.

"This is a bad policy," Sloan said. "The more people hear about it, the more appalled they are."

Bacardi's troubles center around "Havana Club," a celebrated rum label that is the subject of an international trademark dispute.

Havana Club was the signature rum of the Arechabala family business, founded in Cuba in 1878. Jose Arechabala S.A. trademarked the name in the United States in 1935 and enjoyed 25 years of sales abroad, until the company was taken over by Cuban soldiers one year after Castro came to power in 1959.

The Arechabala family fled Cuba, hoping some day to resurrect Havana Club rum. But their U.S. trademark expired in 1973, and despite the U.S. trade embargo against Cuba, a Cuban government-owned company called CubaExport applied for, and received, the U.S. trademark for Havana Club.

CubaExport found an international partner in Pernod Ricard, a French conglomerate, in 1993 and began selling Havana Club around the globe.

Bacardi USA entered the picture in 1994. The Miami-based company, working with the Arechabalas, filed for a U.S. trademark on Havana Club and began producing Havana Club for sale in the United States. Bacardi later bought the Arechabalas' rights to the label.

Lawsuits followed, with Bacardi winning a string of court cases that stripped CubaExport of the Havana Club trademark.

But it's the way Bacardi won that has raised questions.

CubaExport's claims were dismissed by a federal court based on Section 211 of U.S. trademark law, a provision quietly inserted into a massive 1998 spending bill by former U.S. Sen. Connie Mack, R-Fla. -- a tactic similar to what DeLay would try five years later.

Section 211 barred the United States from registering trademarks associated with property that had been seized by governments without compensation.

Smith's bill, like DeLay's ill-fated provision, would amend Section 211 to answer complaints by the World Trade Organization, which ruled that Section 211 violated copyright treaty obligations. The bill is designed to meet the WTO's objections while continuing to protect Bacardi, critics contend.

"The legislation is important because it will show Americans won't tolerate confiscation without compensation," said Patricia Neal, Bacardi USA spokeswoman.

But several major U.S. companies are working to repeal Section 211 -- including DuPont, General Motors, Eastman Kodak and Halliburton -- based on fears that Castro will retaliate by canceling their trademarks in Cuba.

"We believe that's a red herring," Neal said. "Cuba has sought out foreign investment since the collapse of Soviet subsidies in the 1990s. . . . Confiscating anyone else's trademark would isolate them even more economically than they already are today."

Smith, whose district includes western Travis and Hays counties, is chairman of the House Courts, Internet and Intellectual Property Subcommittee, which will hold a hearing on the bill in the next few weeks, he said.

The bill has 32 co-sponsors, including Reps. John Carter, R-Round Rock, and Henry Bonilla, R-San Antonio.