I have removed the original appendices, which contained the legislation before the 109th Congress, however it is available via the Thomas site below.  A few additional links that may help you with the information in this paper:

• The Library of Congress (Thomas)

• An Overview of the Cuban Assets Control Regulations

• The World Trade Organization

• World Intellectual Property Organization

• Paris Convention

• TRIPS (Agreement on Trade-Related Aspects of Intellectual Property)

If you are researching a similar topic, please drop me an email, as I'd enjoy a discussion on such.  The usual caveat:  Although I believe all information within this essay to be correct, I am not providing legal advice, and would urge anyone seeking such to contact their local bar office for a listing of qualified attorneys.  Thank you.

I.  Introduction.

II.  History of the Cuban Trade Embargo.

III.  Omnibus Consolidated & Emergency Supplemental Appropriations Act of 1999.

   A.  Omnibus Act §211(a)(1) - Consent

   B.  Omnibus Act §211(a)(2) – Judicial enforcement of registration rights foreclosed.

   C.  Omnibus Act §211(b) – Judicial consideration of treaty rights foreclosed.

IV.  The “HAVANA CLUB” Case.

V.  The European Community Complaint and WTO Response.

   A.  Art. 6quinquies of the Paris Convention – Telle-Quelle Provision.

   B.  Art. 15 of TRIPS – Protectable Subject Matter

   C.  Art. 16 of TRIPS – Rights Conferred.

   D.  Art. 42 of TRIPS – Fair and Equitable Procedures.

   E.  Art. 2(1) of the Paris Convention and Art. 3.1 of TRIPS – National Treatment

   F.  Art. 4 of TRIPS – Most-Favored-Nation Treatment

   G.  Art. 8 of the Paris Convention.

   H.  Summary of WTO Decision – Issues to be Addressed by Legislature.

VI.  Unsuccessful Legislation of the 108^th Congress.

   A.  Testimony before the U.S. Senate Committee on the Judiciary.

   B.  H.R. 4225 / S. 2373 – Untitled Technical Corrections Bill

   C.  H.R. 2494 / S. 2002 – “United States-Cuba Trademark Protection Act of 2003”

VII.  Pending Legislation of the 109^th Congress

   A.  H.R. 1689 / S. 691 – Untitled Technical Corrections Bill

   B.  H.R. 3372 - “United States Trademark Defense Act of 2005

   C.  S. 1604 – “Judicial Powers Restoration Act of 2005”

VIII.  Conclusion.

 I.  Introduction

            The focus of the analysis below will be how the United States’ domestic legislation aimed at isolating Cuba economically has created conflicts with certain intellectual property treaties and obligations, and will conclude with a review of the bills presently before Congress meant to resolve these conflicts.  Although this paper is not a review on the merits of the Cuban Trade Embargo per se, as many writings on the multifaceted issues of the embargo are already in existence and are readily available via a quick search on the Internet, it will be necessary at some points to consider the policy aims of the enacting legislation.

Despite the embargo, the U.S. does have obligations under treaties shared with Cuba through the General Inter-American Convention for Trademarks and Commercial Protection (“IAC”),[1] the Paris Convention,[2] and via the Agreement on Trade-Related Aspects of International Property (“TRIPS”).[3]  The former, although noted in a key case below and the testimony affecting legislation before the 108^th Congress, was not as much a focal point of the decision of the World Trade Organization (“WTO”) as the latter two noted agreements. 

            Although the embargo has been in place for over four decades, it was a relatively recent piece of legislation and its effect within a Second Circuit decision that inspired the complaint filed by the European Community.  As a result, the WTO became involved and, although finding in favor of the United States on most issues in a panel and appellate ruling, likewise determined that the legislation was in contradiction to two key elements of the Paris Convention and TRIPS.

            To be discussed in much further detail below, there are presently four bills before Congress (two of which share identical text and which have been introduced to both houses) that seek to amend U.S. law to gain compliance with international treaty obligations yet with the aim of continuing the trade embargo.  As with legislation that failed in the 108^th Congress, the bills prompt for either a complete repeal of the offending law or a revision to such to maintain judicial restraint while achieving compliance with the WTO decision.

These bills certainly do not have the attention of the Patent Reform legislation, highlighted via the presently-threatened BlackBerry shutdown, or of the Trademark Dilution Act, brought to focus with “Victor’s Little Secret.”  Indeed, the delay in remedying an almost-four-year-old WTO decision may leave the impression that there really isn’t a problem at all.  Realistically, the European Community has received a favorable WTO ruling against the United States, and only a notice of understanding and continued extension allowances have forestalled the possibility of sanctions and the lifting of reciprocal trademark protections.[4]

The United States can not continue to rely upon this relaxed approach.  The bills before the 109^th Congress, despite their differences in approach, both appear to satisfy the inconsistencies noted by the WTO, and arguably comply with the IAC as well.  The primary difference is how much they will modify existing law, and it is this variance that is leading to complete inaction.  These components will be explored below.

II.  History of the Cuban Trade Embargo

            The Cuban government, under the leadership of Fidel Castro, began the seizure of private assets in an effort to create a Communist regime in 1959.  In response, the United States imposed an embargo via the Cuban Assets Control Regulations (“CACR”),[5] issued pursuant to the Trading with the Enemy Act of 1917 (“TWEA”).[6]  The regulations enacting the embargo were codified via the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act (“LIBERTAD Act”)[7] in 1996. 

Authority to administer the embargo has been delegated to the Office of Foreign Assets Control (“OFAC”) by the Secretary of the Treasury.[8]  As such, the OFAC may issue general or specific licenses regarding Cuban asset transfers, the latter of which was applicable in the case of the “HAVANA CLUB” trademark assignment to be discussed below.  Whereas a general license covers such activities as humanitarian donations, journalistic travel, and official U.S. business, a specific license requires a review by the OFAC to assure compliance with the embargo.[9]  The purpose of such a review is consistent with the U.S. desire to “isolate the Cuban government economically and deprive it of U.S. dollars”[10]

            As noted in the introduction above, however, the embargo must still operate in an environment where treaties still afford certain protections to property, intellectual and otherwise.  Although the embargo itself has been adjudged legally acceptable, even if morally condemned in some venues, its policy goals do not support open abrogation of the U.S. treaty obligations without effect from the world community.

III.  Omnibus Consolidated & Emergency Supplemental Appropriations Act of 1999[11]

            In October 1998, the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (“Omnibus Act”) was passed containing verbiage, captured in Section 211, affecting the Cuban embargo.  Evidence of Congressional considerations implementing this section is absent from any committee reports, however legislation before the 109^th Congress references lobbying efforts on behalf of the Bacardi Company.[12]  These efforts occurred in the midst of a trademark action regarding the “HAVANA CLUB” mark, entangling the legislative efforts with a particular fact pattern and ultimately deciding the underlying case.  Although temporally incorrect, it is helpful to understand the elements of the resulting Omnibus Act before delving into the specific litigation before the Second Circuit.

There are three primary elements of this Act, which in aggregate have two key effects.  The first is the imposition of a consent requirement on those asserting rights in marks or trade names that are the same or substantially close to that used with confiscated assets.  The second mandate is the removal of these situations from judicial oversight, the element cited in the HAVANA CLUB case that ultimately restricted the Second Circuit from making a ruling based upon the equities of the case.  

            Key to the WTO’s analysis against the European Community’s complaint are several definitional aspects of §211.  Before embarking on an analysis of the WTO decision, it is necessary to establish these primary elements of each subsection of the Omnibus Act. 

            Following the central ambition of the Cuban Embargo, §211(a)(1) contained the requirement that the original owner, or bona fide successor-in-interest, of a confiscated mark of trade name consent to further activity on such, as follows:

“Notwithstanding any other provision of law, no transaction or payment shall be authorized or approved pursuant to section 515.527 of title 31, Code of Federal Regulations, as in effect on September 9, 1998, with respect to a mark, trade name, or commercial name that is the same as or substantially similar to a mark, trade name, or 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.”[13]  

The above language is now captured in similar form at 31 C.F.R. §515.527(a)(2)[14] as a result of this legislation.  Subsection (a)(1) of this same regulation, effective in October 1995 and now restricted by the above, had permitted the registration and renewal of trademarks and other intellectual property.[15]

            The important elements of this subsection arise at its extremes, as it is here that the absolute prohibition meets the permissive exception.    By prohibiting “payments,“ a requirement for most USPTO procedural actions, and covering that verbiage with a like prohibition on “transactions,” this element by itself arguably forecloses the ability to register an identical or substantially similar mark.  This prohibition is mitigated only by exception where express consent is tendered from the original owner or bona fide successor-in-interest. 

            The policy ambitions are evident within this subsection, as the plain language clearly separates the confiscating entity from the bona fide owner.   Although an honorable intent to protect private assets may be read from this requirement, locating the rightful owner may present a substantial obstacle, as the longevity of the embargo itself has placed over four decades atop the chain of title.  

            Again, the “HAVANA CLUB” case has not yet been formally introduced, but it should be noted that the above language benefited Bacardi once effective, as it sought out the original owner to purchase any residual rights.  Jumping forward in the discussion momentarily, it bears mention that, at the time of the “HAVANA CLUB” assignment in 1994, §515.527 was not effective, and the Appellate Court found that it could not be employed retroactively to authorize the assignment.[16]

B.  Omnibus Act §211(a)(2) – Judicial enforcement of registration rights foreclosed

Subsection 211(a)(2) contains the first of two restrictions on the judiciary, but limits its application to a defined class.  The text reads as follows:

 “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.”[17]

On its face, the directive is applicable only to a “designated national,” a term defined by reference to 31 C.F.R. §515.305,[18] which in turn states that “[T]he term designated national shall mean Cuba and any national thereof including any person who is a specially designated national.”[19]

            Substituting the definition into the text itself, it is evident that this subsection was structured to treat Cuba and its nationals differently.  Without knowledge of the specific treaties noted in the introduction, this segregation of a single country may raise the suspicions of even those with a basic foundation in international law.  This, indeed, was a primary issue in the Appellate Decision to be highlighted below.

            Less evident for the above is the actual degree of the prohibition established herein.  As will be noted, the European Communities argued that this section removed all judicial consideration, however a more complete reading illustrates that the prohibition applies only after it is established that the asserting party fits within the defined class.

            More evident, but worthy of note, is that the subsection applies to rights asserted on the basis of common law or registration, a distinction made evident in context of the next subsection.

C.  Omnibus Act §211(b) – Judicial consideration of treaty rights foreclosed

            §44 of the Lanham Act allows for international conventions wherein foreign-registered marks may find recognition in the United States.[20]  §211(b) of the Omnibus Act limits the ability of U.S. courts to utilize §44 via the following language:

“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 the Trademark Act of 1946 (15 U.S.C. 1126 (b) or (e)) for a mark, trade name, or commercial name that is the same as or substantially similar to a mark, trade name, or commercial name that was used in connection with a business or assets that were confiscated unless the original owner of such mark, trade name, or commercial name, or the bona fide successor-in-interest has expressly consented.”[21]

As seen above, what appears at first blush to be an absolute prohibition is actually conditioned by language thereafter, and may look like a combination of the §211 elements already discussed.  Given the parity, it is not necessary to again note the difficulties of procuring consent, nor the question of magnitude as regards the prohibition.

            There are two primary differences, however.  Foremost, this subsection restricts judicial consideration of treaty rights, in contrast to §211(a)(2) which looked at domestic registration and common law rights.  Of no lesser importance is the additional language that expands the defined class to include successors-in-interest, a textual variance that effectively applies the judicial restriction to anyone succeeding a designated national, opening the class and inviting consideration of the original owner separately from the successor-in-interest.  This difference was called out by the WTO, and will be explored below.

IV.  The “HAVANA CLUB” Case

            As noted above, the Omnibus Act, and specifically the §211 inclusion therein, occurred in the midst of litigation that had already started regarding the “HAVANA CLUB” mark.  This is not a commentary on that case per se, and as such will not attempt to brief every argument presented therein.  As the litigation embodies, however, the precipitating factual circumstances that lead to the inclusion of §211 within the Omnibus Act, it has obvious utility in exploring the merits of that section.  Likewise, it provided the Dispute Settlement Body, and ultimately the Appellate Body, of the World Trade Association an actual example of U.S. judicial application.

Jose Arechabala, S.A. (“JASA”) owned the trademark “HAVANA CLUB” in connection with the production and sale of rum, which it exported to the United States until 1960.  In that year, the Cuban government seized, without compensation, all of JASA’s assets.  The state-owned Empresa Cubana Exportadora de Alimentos y Productos Varios (“Cubaexport”) utilized the “HAVANA CLUB” trademark in the export of rum between 1972 and 1993, shipping primarily to the Soviet Union and Eastern Europe.  The mark was registered in Cuba in 1974 and with the USPTO in 1976, the latter in order to secure rights in the instance that the embargo was lifted.

            In 1993, Havana Rum & Liquors, S.A. (“HR & L”), a Cuban company formed out of a reorganization of Cubanaexport, entered into a joint venture with Pernod Ricard, S.A. (“Pernod”), a French company, to distribute liquor internationally.  Havana Club Holding, S.A. (“HCH”) was created as a holder of the trademark right, and Havana Club International, S.A. (“HCI”) was granted an exclusive distribution license.  To effect this relationship, Cubaexport assigned the United States trademark to HR & L in January 1994, which in turn transferred the mark to HCH in June 1994.  HCH renewed the mark in 1996 for the ten-year period.  In October 1995, Cubaexport applied to OFAC for the specific license necessary to authorize the assignments above, which issued in November of that year.

            Eighteen months later, in April 1997, Bacardi & Co. (“Bacardi”) purchased any remaining rights in the “HAVANA CLUB” trademark, as well as goodwill and business assets still owned by the Arechabala family.  This action was premised upon their predecessor-in-interest, Galleon S.A., utilizing a similar “HAVANA CLUB” name in connection with rum produced in the Bahamas and distributed in part to the United States.

            HCH and HCI filed suit against Bacardi in December 1996, seeking to enjoin Bacardi’s continued use of the mark.  Bacardi offered as a defense that the OFAC specific license was invalid because of fraudulent procurement, however the District Court in March 1997 found that Bacardi did not have standing to challenge that license.[22]  In April 1997, OFAC retroactively revoked the specific license, and as the general license authority did not provide for authorization, the trademark transfer was voided.  The District Court then ruled in August 1997 that HCH had no rights to the mark by virtue of the OFAC nullification, however the U.S. registration still resided in Cubaexport’s ownership.[23]

            The District Court granted a motion by HCH to amend the complaint to assert rights to the “HAVANA CLUB” trade name under Lanham Act §44(g)[24] and §44(h),[25] as well as Chapter III of the IAC.[26]   Procedurally, several counter-claims were dismissed in a subsequent action,[27] before the parties arrived at the fourth instance before the court. 

            The District Court found that HCH, as a Luxembourg corporation, was not eligible to claim trade name protection under the IAC, as Luxembourg was not a party to that treaty.[28]  The Court also ruled that §211(b) of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999[29] prevented judicial enforcement of any trade name rights that HCI might assert.  In its third primary ruling, the Court also found that HCI lacked standing for its §43(a) claim, finding that the trade embargo foreclosed commercial injury given HCI’s inability to sell rum in the United States.[30]

            In pertinent part, the Appellate Court affirmed that §211 foreclosed judicial intervention in the dispute.  Relative to the IAC claim, the Court cited from Cook v. United States, 288 U.S. 102, 120, 53 S.Ct. 305 (1933), stating that a “treaty will not be deemed to have been abrogated or modified by a later statute unless such purpose on the part of Congress has been clearly expressed.”[31]  The Appellate Court found that, with respect to the embargo against Cuba, Congress was quite clear.[32]

Certiorari was denied in late 2000.[33]  As a result, remedy turned to the WTO pursuant to a complaint filed by the European Community in July 1999.[34]

V.  The European Community Complaint and WTO Response

            The European Community complaint formally initiated consideration by the WTO Dispute Settlement Body.  It summarized the issue as follows:

“Section 211 United States Omnibus Appropriations Act was signed into law on 21 October 1998. As a consequence, the registration or renewal in the United States of a trademark previously abandoned by a trademark owner whose business and assets have been confiscated under Cuban law is no longer permitted. It also sets forth that no United States Court shall recognize or enforce any assertion of such rights.

The European Communities and their member States consider that Section 211 United States Omnibus Appropriations Act is not in conformity with the United States of America's obligations under the TRIPS Agreement, notably its Article 2 in conjunction with the Paris Convention, Article 3, Article 4, Articles 15 to 21, Article 41, Article 42 and Article 62.”[35]

The function of the complaint was to request consultations with the United States with regard to Omnibus Act §211, and expressly reserves the right to pursue alternate causes of action.

            The Panel Decision was released in 2001,[36] with the Appellate Decision following in February 2002.[37]  To be discussed in much greater detail below, the Appellate Decision found inconsistencies with TRIPS as regarded national treatment and most favored nation status.  The U.S. legislative response followed, but has not yet been fruitful in altering or repealing §211.  In July 2005, the WTO issued a communication outlining an understanding between the European Community and the United States, which essentially reserved to the former any rights it may have while acknowledging that the U.S. Congress was attempting to remedy the highlighted §211 issues.[38]  In its latest iteration of November 18, 2005, the U.S. has filed a status report, concisely stating,

“Several legislative proposals relating to Section 211 that would implement the DSB's recommendations and rulings in this dispute have been introduced in the current Congress, both in the US Senate and the US House of Representatives.

The United States Administration is working with the US Congress with respect to appropriate statutory measures that would resolve this matter.”[39]

To fully understand the legislative response, it is helpful to review the conclusions reached by the WTO Appellate Body, and the primary arguments made by the interested parties.  Following the structure utilized by the WTO Appellate Body, the primary arguments will be framed against the relevant treaty obligation alleged to be infringed.    

A.  Art. 6quinquies of the Paris Convention – Telle-Quelle Provision

            Cited below in relevant part, Article 6quinquies of the Paris Convention was created to provide a means to allow a mark registered in one country to be registered in other Members of the Paris Convention “as-is.”  This section reads:

 “Every trademark duly registered in the country of origin shall be accepted for filing and protected as is in the other countries of the Union, subject to the reservations indicated in this Article. Such countries may, before proceeding to final registration, require the production of a certificate of registration in the country of origin, issued by the competent authority. No authentication shall be required for this certificate.”[40]

The policy interest of this section is to provide a means for mark holders to register such in different Member States without the need to recast the mark to conform with different national laws.  This policy is integrated into TRIPS and the WTO agreement by operation of TRIPS Article 2.1, which requires compliance with specific elements of the Paris Convention, regardless of membership in the Paris Union.[41]

Arguments of the European Community and United States:

            The critical disparity in the arguments of the European Community and the United States regarded the extent of the “as-is” application.  The former argued the provision necessarily involved all aspects of a trademark registration, and that the requirement of express consent prior to registration violates this “as-is” acceptance of the mark.  The United States countered that Article 6quinquies requires “as-is” recognition of the form of the trademark only, and that §211(a)(1) is therefore not inconsistent as a provision that does not address this form.

Panel Report:

            The Panel, finding the Argument presented by the United States persuasive at least in part, summarized its ruling as follows:

“The ordinary meaning of the term "as is" and read in its context and as confirmed by the negotiating history indicates that Article 6quinquies A(1) addresses the form of the trademark; that is, those trademarks duly registered in one country, even when they do not comply with the provisions of domestic law of a Member concerning the permissible form of trademarks, have nevertheless to be accepted for filing and protection in another country.”[42]

In support of this ruling, the Panel likewise found that, because a requirement of use is a permissible condition for registration, the European Community stance was not a logical interpretation of authority.

Appellate Decision:

            Although affirming the Panel’s conclusion and finding no inconsistency between Article 6quinquies and §211(a)(1), the Appellate Body further analyzed the issue in light of Article 6(1) of the Paris Convention, which states that “[t]he conditions for the filing and registration of trademarks shall be determined in each country of the Union by its domestic legislation.”[43]  Referring to this latter article as stating the “general rule,” the Appellate Body found that an applicant may pursue a registration under Article 6(1) or Article 6quinquies, with the latter granting rights that may be in excess of a Members national law.[44] 

            Alternatively, the Appellate Body reviewed the exceptions contained in Article 6quinquies (B), which read upon only the form of a trademark,[45] and to the text of the Final Protocol of the Paris Convention, which limited the language that was to become the subject Article to an exception on the form alone.[46]

            The Appellate Body thus found that §211(a)(1) was not inconsistent with Article 6quinquies of the Paris Convention.

B.  Art. 15 of TRIPS – Protectable Subject Matter

            Article 15.1 of TRIPS, addressing “protectable subject matter,” allows a broad range of signs and elements to qualify as trademarks.[47]  Article 15.2 contains clarifying language, stating that “Paragraph 1 shall not be understood to prevent a Member from denying registration of a trademark on other grounds, provided that they do not derogate from the provisions of the Paris Convention (1967).”[48]

Arguments of the European Community and United States:

            The European Community made a broad argument that because §211(a)(1) prohibits the registration of marks that are protectable under TRIPS Article 15.1, it is therefore inconsistent.  The United States countered that §211(a)(1) does not seek to redefine “protectable subject matter,” and via alternate argument, that paragraph 2 of the Article would permit denial on other grounds.[49]

Panel Report:

            The Panel focused on the United States’ alternate argument, finding that Article 15.2 would include “a measure that denies trademark registration on the basis that the applicant is not the owner under national, in this case, US law and Section 211(a)(1) is a measure that deals with the ownership of trademarks used in connection with confiscated assets.”[50]

Appellate Decision:

            As the parties essentially renewed the arguments made before the Panel, the Appellate Body likewise revisited the primary argument made by the European Community.  In a well-articulated ruling, it stated:

“Thus, in our view, the European Communities sees an obligation in Article 15.1 that is not there. Identifying certain signs that are capable of registration and imposing on WTO Members an obligation to make those signs eligible for registration in their domestic legislation is not the same as imposing on those Members an obligation to register automatically each and every sign or combination of signs that are capable of and eligible for registration under Article 15.1. This Article describes which trademarks are ‘capable of registration.’ It does not say that all trademarks that are capable of registration ‘shall be registered.’”[51]

The Appellate Body likewise found parity with the reasoning employed by the Panel in its decision, and shored up its determination via reference to other provisions within TRIPS that would be rendered of little or contrary utility if the European Community’s argument were accepted as valid.[52]

§211(a)(1) was thereby ruled to be “not inconsistent” with TRIPS Article 15.

In pertinent part, Article 16.1 of TRIPS grants an exclusive right to the owner of a trademark, with the contest in this circumstance focused on the “owner” definition.  The provision reads:

“The owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner’s consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion.“[53]

Although not specifically stated, the “exclusive right to prevent” certainly anticipates judicial action, which prompted the European Community contest.

Arguments of the European Community and United States:

            The European Community argues in this instance that the owner of a mark must be the same as the holder of a registration.[54]  They thereby allege that §211(a)(2) and §211(b) may act to bar an owner of a mark access to the judicial system.  The European Community attempted as well to make a rather tenuous argument that the relationship between the trademark and goods within the text of Article 16.1 should make the “owner” the entity presently engaged in the activity employing this relationship.

In contrast, the United States maintains that TRIPS does not prescribe a solitary means of ownership, and cites the final sentence of TRIPS Article 16.1, which states, “The rights described above shall not prejudice any existing prior rights, nor shall they affect the possibility of Members making rights available on the basis of use.”[55]

Panel Report:

            Highlighting that no provision in TRIPS define a specific means of defining ownership, the Panel noted that “it is necessary to have recourse to the national law of the Members.”[56]  With regard to both §211(a)(2) and §211(b), the Panel found that the evidence presented was insufficient to demonstrate that these provisions would be utilized to bar an entity for judicial intervention.[57]

Appellate Decision:

            Allowing that neither the Paris Convention or TRIPS contains a provision that definitively determines ownership,[58] the Appellate Body further disputed the European Community contention regarding equivalence of registration with ownership.  The Body stated:

“Here, again, the European Communities appears to us to overlook the necessary legal distinction between a trademark system in which ownership is based on registration and a trademark system in which ownership is based on use. As we have noted more than once, United States law confers exclusive trademark rights, not on the basis of registration, but on the basis of use. There is nothing in Article 16.1 that compels the United States to base the protection of exclusive rights on registration.”[59]

In an opinion more definitive than that offered by the Panel, the Appellate Body thus found that neither §211(a)(2) or §211(b) were inconsistent with TRIPS Article 16.

D.  Art. 42 of TRIPS – Fair and Equitable Procedures

            In simple terms, Article 42 of TRIPS seeks to ensure that all right holders have the ability to seek judicial enforcement.  This provision states in relevant part that “[m]embers shall make available to right holders civil judicial procedures concerning the enforcement of any intellectual property right covered by this Agreement. […]  All parties to such procedures shall be duly entitled to substantiate their claims and to present all relevant evidence.”[60]

Arguments of the European Community and United States:

            The European Community argument centered upon the express language of “[n]o U.S. court shall recognize, enforce or otherwise validate any assertion of rights” as included in both §211(a)(2) and §211(b).  The United States claimed that “Section 211(a)(2) constitutes substantive rules governing ownership of trademark rights and it does not affect the availability of judicial procedures to any party asserting a right to a trademark,”[61] and applied a similar argument to §211(b).

Panel Report:

            The Panel found that “[w]hile Section 211(a)(2) would not appear to prevent a right holder from initiating civil judicial procedures, its wording indicates that the right holder is not entitled to effective procedures as the court is ab initio not permitted to recognize its assertion of rights if the conditions of Section 211(a)(2) are met.”[62]  It therefore found that §211(a)(2) violates TRIPS Art. 42.  It was unable to extend the same analysis to §211(b).[63]

Appellate Decision:

            The Appellate Body renewed the analysis by finding that “make available” in Article 42 has the meaning of allowing “access” to civil judicial proceedings,[64] and recognizing that “no Member’s national system of civil judicial procedures will be identical to that of another Member.”[65]  It summarizes this leg of its analysis by stating that “the rights which Article 42 obliges Members to make available to right holders are procedural in nature.”[66]

            In contrast to the procedural elements of Article 42, the Appellate Body found that §211 presented law regarding the substance of ownership, and determined that “[t]here is nothing in the procedural obligations of Article 42 that prevents a Member, in such a situation, from legislating whether or not its courts must examine each and every requirement of substantive law at issue before making a ruling.”[67]  Applying this logic to both §211(a)(2) and §211(b), the decision reversed the Panel on the former, finding it consistent with Article 42, and substantiated the latter.

            Discussed at some length in the Appellate Decision, the obligation of national treatment dates from the genesis of the Paris Convention in 1883, and was incorporated into the WTO Agreement as a consequence of the Uruguay Round in 1967.[68]  As a result of the latter action, WTO Members are obligated even where they are not members of the Paris Union.  The language of Article 2(1) reads as follows:

“Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; all without prejudice to the rights specially provided for by this Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon nationals are complied with.”[69]

The intended effect of this language is, of course, to provide parity to mark owners without reference to their nationality.

The TRIPS Agreement likewise contains verbiage demanding national treatment, likewise attached to the protection of intellectual property.  This provision reads:

“Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of intellectual property, subject to the exceptions already provided in, respectively, the Paris Convention (1967), the Berne Convention (1971), the Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits.”[70]

The footnote to this section highlights that the term protection includes “matters affecting the availability, acquisition, scope, maintenance and enforcement of intellectual property rights as well as those matters affecting the use of intellectual property rights specifically addressed in this Agreement.”[71]

Arguments of the European Community and United States:

            The European Community split its claim into two separate examples to illustrate that a designated national would receive different treatment than a United States national.  The United States responded to each allegation separately.

As regarded successors-in-interest, the European Community argued that because “designated national” is defined to include “a national of any foreign country who is a successor-in-interest to a designated national,”[72] it is feasible that a U.S. national could procure rights through an OFAC specific license in a procedure not available to a non-U.S. national.  The United States countered that 31 C.F.R. 515.201 prevents United States nationals from becoming a successor-in-interest without a specific OFAC license, and that such a license had never been issued in reference to confiscated assets.[73]

The European Community submitted that an original owner of a United States trademark similar to one used in connection with confiscated assets is disadvantaged where one is a national of Cuba versus the national of the United States, as the latter would not be obliged to procure consent.  The United States countered that original owners are in a position to grant consent to themselves, and alternatively based on the implementation timing of §515.527.

Panel Report:

            In ruling on the §211(a)(2) contest as regarded successors-in-interest, the Panel was influenced by the general United States policy, finding that, “where discretionary authority is vested in the executive branch of a WTO member, it cannot be assumed that that Member will exercise that authority in violation of its obligations under any of the covered agreements.”[74]  The Panel therefore found the §211(a)(2) was not inconsistent with the national treatment doctrine.

            The  European Community made a similar argument as to §211(b), however the Panel cited the differing verbiage therein that applied the prohibition to “any assertion of treaty rights by a designated national or its successor-in-interest.”[75]  Because the provision applied to all successors-in-interest, the Panel found no inconsistency with the nationality principle.

            Unlike the articulated reasons in the analysis pertaining to successors-in-interest, the Panel simply stated that §211 was not inconsistent as to original owners.

Appellate Decision:

            In the appeal of the Panel’s ruling on §211(a)(2), the European Community emphasized that a plain reading indicated that whereas both United States and designated nationals would be subjected to an OFAC hearing, only the latter would face the additional hurdle of procuring express consent at the peril of otherwise not having its rights recognized.  The Appellate Body therefore reversed the Panel and found §211(a)(2) to be inconsistent with national treatment.  It did agree with the Panel’s reasoning as to the consistency of §211(b).

            The Appellate Body took exception to the primary U.S. argument, stating that “the United States erroneously assumes in its argument on this issue that the Cuban original owner of the United States trademark is necessarily the same person as the original owner of the same or substantially similar Cuban trademark used in connection with a business or assets that were confiscated.”[76]  Likewise, it determined that the §515.527 was flawed because although correct as to registrations, the United States did not consider its application to trademark renewals.  Finally, the Body again addressed the substance of an additional procedural hurdle required of a Cuban national residing in a country other than the United States, as the automatic unblocking under CACR §515.505(a)(2) available to a U.S. resident is not applicable to non-Cuban residents without an administrative step, and is not available to a Cuban resident at all.

            The Appellate Decision concluded with a finding that §211 was inconsistent with the nationality principle.

F.  Art. 4 of TRIPS – Most-Favored-Nation Treatment

In relevant part, TRIPS Article 4 reads, “[w]ith regard to the protection of intellectual property, any advantage, favor, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members.”[77]  This provision has no parallel in the Paris Convention, but rather was included in TRIPS to acknowledge its place in establishing an environment respecting intellectual property rights.  In the its decision, the Appellate body stated, “[a]s a cornerstone of the world trading system, the most-favoured-nation obligation must be accorded the same significance with respect to intellectual property rights under the TRIPS Agreement that it had long been accorded with respect to goods in trade under the GATT.  It is, in a word, fundamental.”[78]

Arguments of the European Community and United States:

            The European Community finds a discriminatory intent in §211(a)(2) by virtue of the inclusion of “designated national” and the reference to 31 C.F.R. 515.527, defining that the term “shall mean Cuba and any national thereof including any person who is a specially designated national.”[79]  Per the European Community, the statue would permit the denial of protection to Cuban nationals while permitting protection to other non-U.S. nationals, in violation of Article 4.   As §211(b) uses the term “designated national” in a similar context, the European Community’s challenge is based on like grounds of creating disparate treatment between Cuban and other nationals.

            The argument arising from the United States focuses primarily on a policy of not recognizing intellectual property rights arising from a confiscation of property.[80]  Although the definition of “designated national” certainly calls out Cuba, the United States took the position that “it does not matter that the rights associated with the confiscated assets are transferred by the confiscating entity to a Cuban, European or US national because US courts will not recognize those assertions of rights as regards trademarks in the United States.”[81]  As with the European Community complaint, the United States applied the arguments to both §211(a)(2) and §211(b).

Panel Report:

            The Panel framed its inquiry as follows:  “we will consider whether Section 211(a)(2) accords any advantage, favour, privilege or immunity that is accorded to certain foreign nationals while such advantage, favour, privilege or immunity is being denied to Cuban nationals.”[82]  The Panel concluded that §211(a)(2), and §211(b) via the same logic, didn’t limit application to a specific nationality and didn’t differ between the original owners and sucessors-in-interest, focusing instead on the statute’s restriction on confiscated marks and trade names.

Appellate Decision:

            The Appellate Body noted that the European Community did not present arguments contesting the successor-in-interest results in the Panel decision, and thus limited the appellate review to original owners.[83]

            The European Community presented a situation, summarized at paragraph 306 of the Appellate Decision, wherein all other factual elements are equal, the nationality of one original owner would subject him to §211(a)(2) and (b).[84]  The United rebutted this example with a generalized policy statement, and rests on the same arguments presented in its argument focused on national treatment. 

            The Appellate Body, finding the prima facie case presented by the European Community was sufficient to establish discriminatory effect, reversed the Panel Decision and determined that both §211(a)(2) and §211(b) were inconsistent with TRIPS Article 4.

G.  Art. 8 of the Paris Convention

            Quite simply, Article 8 of the Paris Convention states,  “[a] trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark.”[85]  In a deceptive showing of solidarity, the United States and European Community agreed that TRIPS includes protection for trade names, and that the Panel’s conclusion in the opposite was incorrect.[86]

Panel Report:

            The Panel determined that trade names are not a covered intellectual property under the TRIPS agreement, finding:

“[W]e conclude that the categories of intellectual property covered by the TRIPS Agreement are those referred to in Article 1.2.  Article 8 of the Paris Convention (1967) is relevant as part of the TRIPS Agreement to the extent that it may affect the protection of the categories of intellectual property covered by the Agreement.  As trade names are not a category of intellectual property covered by the TRIPS Agreement, Members do not have obligations under the TRIPS Agreement to provide protection to trade names.”[87]

The Panel did address TRIPS Art. 2.1 which incorporates Art. 8 of the Paris Convention by reference,[88] but interpreted its language as allowing TRIPS the superior definition.

Appellate Decision:

On review, the Appellate Body found that the Panel’s interpretation was flawed, and stated that “[t]o adopt the Panel’s approach would be to deprive Article 8 of the Paris Convention (1967), as incorporated into the TRIPS Agreement by virtue of Article 2.1 of that Agreement, of any and all meaning and effect.”[89]  It therefore found an obligation for WTO Members to provide protection to trade names under TRIPS.[90]

            In lieu of restating the positions under the aforementioned arguments, the Appellate Body found that §211(a)(2) and §211(b) did not, on their face, distinguish between trade names and trademarks, and in light of other factual determinations, placed trade names in parity with the decisions affecting trademarks.[91]

H.  Summary of WTO Decision – Issues to be Addressed by Legislature

VI.  Unsuccessful Legislation of the 108^th Congress

            As previously noted, the legislative response could take essentially one of two options in addressing the WTO opinion:  completely repeal §211 or modify it to comply with the national treatment and most favored nation elements that the WTO Appellate Body found to be violated.  A third option of non-action is available, but such would endanger the rights of U.S. mark holders by virtue of a lifting of protections in other TRIPS countries.  Within the two viable alternatives for legislative solution, the resulting bill verbiage has concentrated largely upon the WTO opinion.

            Although the introduced legislative remedies have certainly focused on WTO compliance, the IAC treaty requires consideration as well.  In the hearings held in July 2004, the IAC was alternately held as a justification for the complete repeal of §211 by some and was offered as a non-issue by others.  As noted above, Article 3(3) states that “[r]egistration or deposit may be refused or cancelled of marks [w]hich offend public morals or which may be contrary to public order.”[92]  For that testimony that addressed the IAC, the above Article was utilized as an exception to the IAC’s other mandates, citing that the confiscation of property was contrary to public order and morals.  Alternate viewpoints did not read the confiscation into the words of Article 3(3).[93]

A.  Testimony before the U.S. Senate Committee on the Judiciary[94]

            In July 2004, the Senate Judiciary Committee held hearings to explore the arguments for and against Omnibus Act §211.  Although reference is made to the bills noted below as before the 108^th Congress, the statements made by the witnesses certainly have probative value in understanding the issues under present consideration in the 109^th Congress.

            Thematically, those in favor of modifying §211, and therefore against the complete repeal of that section, argue on the basis of policy, characterized well in the following statement made by Ms. Nancie Marzulla:

“In our view, there is no justification for repealing Section 211, as the proponents of S. 2002 would do. That is not required by the WTO ruling, which emphatically upheld the principle that a state is entitled to establish ownership rules, such as Section 211, to determine who is or is not the legitimate owner of a trademark in its own territory. Nor is it justified by any policy that is consistent with our core values and long-standing principles of our law. Repealing Section 211 would violate those values and principles and send an unmistakable signal to tyrants around that the United States has lowered its guard and is prepared to extend to U.S. property the effects of foreign confiscatory decrees.”[95]

The modification is defended within Ms. Marzulla’s testimony via her rationale that the Lanham Act didn’t contemplate the loss of trademark rights as a result of confiscation in a foreign country, but does not directly address why a judicial solution to such would be unsatisfactory.[96]

            The contrary position is succinctly summarized in the conclusion reached by Professor Kenneth Germaine, stating, “U.S. Courts should not be foreclosed (by legislative enactment, specifically Section 211) from assessing and applying the full range of U.S. Trademark Law policies and doctrines relating to abandonment.”[97]  Within this testimony, Professor Germaine specifically cites to the HAVANA CLUB mark, as well as the fact that Bacardi did not avail itself of available mechanisms to assure that the mark did not fall to abandonment.[98]

            Senator Leahy, in his opening remarks to the hearings, first acknowledged the means by which §211 came into being, as an hidden element of an appropriations bill.  He then offered the following guidance: