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, Defendant.

MEMORANDUM OPINION

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

(collectively “Bacardi”) initiated this action against Empresa

Cubana Exportadora de Alimentos y Productos Varios d/b/a

Cubaexport (“Cubaexport”) over a trademark dispute. Cubaexport

now brings a counterclaim against Bacardi under section 32 of

the Trademark Act of 1946 (“Lanham Act”),

,

seeking injunctive relief for Bacardi’s alleged infringement of

Cubaexport’s registered HAVANA CLUB & Design trademark,

. See Cubaexport’s Countercl. and

Answer to First Am. Compl. (“Countercl.”), ECF No. 154 ¶ 11.

Pending before the Court is Bacardi’s Motion to Dismiss

Cubaexport’s Counterclaim. See Pls.’ Mot. to Dismiss Def.’s

1 Countercl. (“Pls.’ MTD”), ECF No. 156 at 1. 1

Upon careful consideration of the motion, opposition, reply

thereto, the applicable law, and the entire record herein, the

Court GRANTS Bacardi’s Motion to Dismiss Cubaexport’s

Counterclaim, see ECF No. 156.

I. Background 2

The Court assumes the facts alleged in Cubaexport’s

Counterclaim to be true for the purposes of the Motion to

Dismiss and construes them in Cubaexport’s favor. See Baird v.

Gotbaum,

, 169 n.2 (D.C. Cir. 2015) (“Reviewing a

motion to dismiss, [w]e accept [her] factual allegations . . .

as true and we draw all inferences in her favor.” (internal

quotation marks omitted)); Comm. on Ways & Means, U.S. House of

Representatives v. U.S. Dep’t of the Treasury,

(D.C. Cir. 2022) (applying standard to counterclaims).

A. Factual Background

In the 1950s, José Arechabala S.A. (“JASA”), a Cuban

company, registered three HAVANA CLUB trademarks at the U.S.

1 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. 2 The Court limits this Background to the facts and procedural

history relevant to the current motion. A more detailed history of the case can be found in the Court’s previous opinion addressing Defendants’ Motion to Dismiss and Motion for Partial Summary Judgment. See Mem. Op. (“Def.’s MTD Op.”), ECF No. 146 at 2-11. 2 Patent and Trademark Office. Countercl., ECF No. 154 ¶¶ 13, 15.

In 1960, JASA’s property in Cuba was nationalized following the

Cuban Revolution. Id. ¶ 16. However, JASA’s U.S. trademarks were

not expropriated but were either expired or cancelled because of

JASA’s former owners’ failure to renew or otherwise maintain the

marks. Id. ¶¶ 18-20.

In 1965, the Cuban Ministry of Foreign Commerce established

Cubaexport, a Cuban state-owned foreign trade corporation. Id.

¶ 25. In 1974, Cubaexport submitted an application to the U.S.

Patent and Trademark Office to register the HAVANA CLUB

trademark, since JASA’s trademarks expired the year prior. See

id. ¶¶ 24, 27. On January 27, 1976, the U.S. Patent and

Trademark Office issued the registration to Cubaexport with

.

. Although Cubaexport may

not sell its product in the United States due to the existing

embargo against Cuba, see

; Cubaexport’s HAVANA CLUB rum

has been branded, marketed, and sold in other parts of the world

for the last 30 years,

.

In 1995, Bacardi began selling Bahamian rum in the United

States using the HAVANA CLUB name.

. However, Bacardi’s

application for registration of the mark was denied by the U.S.

Patent and Trademark Office in March of that year, in part

because the “proposed trademark conflicted with the existing

trademark registration that had been issued to Cubaexport.”

3 ¶ 47. Bacardi filed a petition with the Trademark Trial and

Appeal Board (“TTAB”) to cancel Cubaexport’s existing

registration.

. That petition was stayed while

Cubaexport’s assignee Havana Club Holding S.A. (“HCH”) pursued a

trademark infringement suit against Bacardi in New York federal

court. See

; Def.’s MTD Op., ECF No. 146 at 9-10 (“The

proceeding before the TTAB was stayed pending the Galleon

litigation, but resumed in 2003.”). After the conclusion of the

New York litigation, the TTAB granted summary judgment denying

Bacardi’s petition to cancel Cubaexport’s trademark registration

for the HAVANA CLUB mark. See Countercl., ECF No. 154 ¶ 61.

In 2006, Cubaexport’s trademark registration was due for

renewal.

. The U.S. Treasury Department’s Office of

Foreign Assets Control (“OFAC”) notified Cubaexport that due to

legislation passed in 1998, Cubaexport would need to apply for a

specific license to renew its trademark registration. See

. That July, OFAC denied Cubaexport’s application for a

specific license based on the Department of State’s position

that “it would be inconsistent with U.S. policy to issue a

specific license authorizing transactions related to the renewal

of the HAVANA CLUB trademark.”

Cubaexport filed suit in the

District of Columbia challenging OFAC’s decision and the

constitutionality of the statute which required Cubaexport to

obtain a specific license.

; see also Empresa Cubana

4 Exportadora de Alimentos y Productos Varios v. U.S. Dep’t of

Treasury (“Cubaexport I”),

(D.D.C. 2009). The

district court entered summary judgment in favor of OFAC, in

part because the issuance or refusal of a specific license was a

matter of OFAC’s discretion. Cubaexport I,

. The Court of Appeals for the District of Columbia Circuit

(“D.C. Circuit”) affirmed. See Empresa Cubana Exportadora de

Alimentos y Productos Varios v. U.S. Dep’t of Treasury

(“Cubaexport II”),

(D.C. Cir. 2011).

In 2015, Cubaexport filed a new application for a specific

license with OFAC, asking for reconsideration of its previous

decision based on shifts in U.S. foreign policy. See Countercl.,

ECF No. 154 ¶¶ 69-71. Cubaexport sought both a retroactive

renewal of the mark from the 2006 denial, and a renewal for the

upcoming 10-year period starting in 2016. Id. ¶ 71. OFAC granted

Cubaexport a specific license on January 11, 2016, “authorizing

all transactions necessary for the 2006 and 2016 renewals of

Cubaexport’s trademark registration.” Id. ¶ 73. After the U.S.

Patent and Trademark Office received a copy of the specific

license, it accepted the 2006 and 2016 renewals for Cubaexport’s

HAVANA CLUB mark. Id. ¶ 74.

B. Procedural Background

Bacardi initiated this suit in 2004 to challenge the TTAB’s

grant of summary judgment to Cubaexport. See Compl., ECF No. 1

5 ¶ 1. In 2007, this Court stayed the proceeding while Cubaexport

pursued an appeal of the Patent and Trademark Office’s

determination that Cubaexport’s rights in the HAVANA CLUB mark

would be cancelled or expired based on Cubaexport’s inability to

renew the mark because of OFAC’s denial of a specific license.

See Mem. Op., ECF No. 72 at 1-5. In 2016, after Cubaexport

received the specific licenses from OFAC, authorizing it to

renew its rights in the HAVANA CLUB mark, the parties moved to

lift the stay. See Joint Mot. and Status Report of All Parties

Regarding Lifting of the Stay, Amendment of the Compl.,

Scheduling, and Protection of Confidential Information Obtained

in Disc., ECF No. 112 at 1. In March 2016, this Court granted

the parties’ motion and lifted the stay. See Order, ECF No. 116

at 1.

Bacardi then filed its Amended Complaint, again seeking

review of the TTAB’s grant of summary judgment. See First Am.

Compl., ECF No. 114 ¶ 1. The following month, Cubaexport filed a

Motion to Dismiss and Motion for Partial Summary Judgment. See

Defs.’ Mot. to Dismiss the First Am. Compl., ECF No. 122; Defs.’

Mot. for Partial Summ. J., ECF No. 124. In March 2023, this

Court granted in part and denied in part Cubaexport’s Motion to

Dismiss and denied its Motion for Partial Summary Judgment. See

Order, ECF No. 145.

In April 2023, Cubaexport filed its answer and the

6 counterclaim at issue, alleging trademark infringement under the

Lanham Act. See Countercl., ECF No. 154 ¶ 11. The following

month, Bacardi filed its Motion to Dismiss Cubaexport’s

Counterclaim. See Pls.’ MTD, ECF No. 156. Cubaexport filed its

response in opposition, see Notice of Errata to Def.’s Mem. of

P. & A. in Opp’n to Pl.’s Mot. to Dismiss Def.’s Countercl.

(“Def.’s Opp’n”), ECF No. 159; 3 and Bacardi filed its reply,

Pls.’ Reply Mem. of P. & A. in Further Supp. of Mot. to Dismiss

Def.’s Countercl., ECF No. 158. Bacardi’s motion is now ripe and

ready for adjudication.

II. Legal Standards

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

“When a plaintiff moves to dismiss a defendant’s

counterclaims for failure to state a claim under Federal Rule of

Civil Procedure 12(b)(6), the Court applies the same standards

that it does when evaluating a motion to dismiss a plaintiff’s

complaint on the same grounds.” Adirondack Transit Lines, Inc.

v. Greyhound Lines, Inc., No. 22-1662,

, at *3

(D.D.C. Jan. 17, 2023); see also Wharf, Inc. v. District of

Columbia,

(D.D.C. 2017) (“The same

3 Cubaexport originally filed a memorandum in opposition, see Def.’s Mem. of P. & A. in Opp’n to Pl.’s Mot. to Dismiss Def.’s Countercl., ECF No. 157; but later notified the Court of an error in the original memorandum and submitted a corrected document, see Def.’s Opp’n, ECF No. 159. The Court accepts and will only reference Cubaexport’s corrected brief in opposition. 7 standards govern a motion to dismiss with respect to an opposing

party’s counterclaims.”).

A motion to dismiss pursuant to Federal Rule of Civil

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

Browning v. Clinton,

(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 Atl. Corp. v. Twombly,

(2007) (internal quotation marks omitted). While

detailed factual allegations are not required, a complaint “must

contain sufficient factual matter . . . to ‘state a claim to

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

(2009) (quoting Twombly,

).

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.,

(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.,

(D.C. Cir. 1994).

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

supported by mere conclusory statements" are not sufficient to

8 state a claim. Iqbal,

. The plaintiff must “‘give

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

grounds upon which it rests.’” Erickson v. Pardus,

(2007) (quoting Twombly,

).

III. Analysis

Bacardi argues that Cubaexport’s counterclaim for trademark

infringement should be dismissed on two grounds. First, Bacardi

argues that Cubaexport is barred by statute from enforcing any

rights it may have in the HAVANA CLUB mark. See Pls.’ MTD, ECF

No. 156 at 13. Second, Bacardi argues that even if Cubaexport’s

claim is not statutorily barred, it must be dismissed because

“it is impossible for Cubaexport to establish a likelihood of

confusion among consumers due to the Cuban embargo.” Id. at 19.

The Court agrees with Bacardi on its first ground—that

Cubaexport’s counterclaim is barred by statute.

A. The Embargo and Section 211

In 1963, the United States imposed a total embargo on trade

between the United States and Cuba under the Trading with the

Enemy Act,

et. seq, implemented by the Cuban

Asset Control Regulations (“CACR”), 31 C.F.R. pt. 515. When

originally enacted, the CACR permitted transactions related to

the registration and renewal of trademarks in the United States

under general licenses, and also authorized the Treasury

Department’s Office of Foreign Assets Control (“OFAC”) to grant

9 specific licenses in individual cases. See

,

6982-85 (July 9, 1963); see also Cubaexport II,

(“Under the regulations, exceptions may be specifically

authorized by the Secretary of the Treasury . . . . Such

exceptions may take two forms: A so-called ‘general license’ is

a general exception written into the Treasury regulations

themselves. A ‘specific license’ is an exception made by the

Department of the Treasury for a specific applicant.” (internal

quotation marks and citations omitted)).

However, in 1998, Congress passed Section 211 of the

Omnibus Consolidated and Emergency Supplemental Appropriations

Act (“Section 211”),

,

,

2681-88, which curtailed the previous exceptions for trademarks.

Specifically, Section 211 states:

(a)(1) 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.

(2) No U.S. court shall recognize, enforce or otherwise validate any assertion of rights by a designated national based on common law rights or registration obtained under such section 515.527 of such a confiscated mark, trade name or commercial name.

10 The referenced regulation,

, was updated

to reflect Section 211, and now states that “[t]ransactions

related to the registration and renewal in the United States

Patent and Trademark Office or the United States Copyright

Office of patents, trademarks, and copyrights in which the

Government of Cuba or a Cuban national has an interest are

authorized.” 31. C.F.R. § 515.527(a)(1). However:

[n]o transaction or payment is authorized or approved . . . with respect to a mark, trade name, or commercial name that is the same or substantially similar to a mark, trade name, or commercial name that was used in connection with a business or assets 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.

Id. § 515.527(a)(2).

B. Application to Cubaexport

Bacardi argues that the “plain terms of the statute” bar

Cubaexport’s Counterclaim because the HAVANA CLUB trademark is a

confiscated mark, 4 which was registered under the then-existing

general license from section 515.527. See Pls.’ MTD, ECF No. 156

4 In the appeal for Cubaexport’s litigation against OFAC, the D.C. Circuit held that the HAVANA CLUB mark was a “mark[] used in connection with a business or assets that were ‘confiscated.’” Cubaexport II,

n.2. Although Cubaexport’s Counterclaim alleges that its HAVANA CLUB mark was obtained after the expiration of JASA’s mark, see Countercl., ECF No. 154 ¶¶ 18-20; it does not argue—on this motion—that the HAVANA CLUB mark is not connected to a “business or assets that were confiscated.” 11 at 13-14. Cubaexport resists this conclusion and argues that

Section 211 does not apply to its counterclaim because “[t]he

rights that Cubaexport asserts in its Counterclaim . . . are

based on its 2016 trademark renewal, which was not obtained

under Section 515.527.” Def.’s Opp’n, ECF No. 159-2 at 20. The

Court agrees with Bacardi.

Section 211 has two distinct components relevant to

Cubaexport’s HAVANA CLUB mark. Section 211(a)(1) bars

registrations and renewals of trademarks that were “used in

connection with a business or assets that were confiscated.”

§ 211(a)(1), 112 Stat. at 2681-88. This is the provision that

stripped the CACR of general licenses and required Cubaexport to

apply for a specific license from OFAC to renew its rights

related to the mark. See Cubaexport II,

(“Thus, because of the 1998 Act and its reference to

, Cubaexport’s trademark no longer fit within the

regulatory exception for trademarks that had existed since 1963.

. . . As a result of the 1998 Act, Cubaexport was prohibited

from renewing its HAVANA CLUB trademark when it tried to do so

in 2006.”). As Cubaexport alleges, it applied for and received a

specific license for renewal of the HAVANA CLUB mark from OFAC

in 2016. See Countercl., ECF No. 154 ¶¶ 71, 73.

Cubaexport argues that this specific license takes it out

of the purview of Section 211 altogether. But the second

12 applicable provision of Section 211, Section 211(a)(2), is not

focused on the ability of Cubaexport to register or renew its

existing rights, but rather addresses the court’s power to

“recognize, enforce or otherwise validate” those alleged rights.

§ 211(a)(2), 112 Stat. at 2681-88. Under the plain terms of

Section 211(a)(2), courts cannot enforce any rights from

“registration obtained under . . . section 515.527 of . . . a

confiscated mark.” Id. It does not carve out any exceptions for

marks that were renewed under a different provision. Rather, the

statute only bars certain mark holders from enforcing their

rights in the mark based on how that mark was registered. In

Cubaexport’s Counterclaim, it asserts that it “obtained its

original registration [for the HAVANA CLUB mark] in 1976” under

the then-existing “general license in Section 515.527.”

Countercl., ECF No. 154 ¶ 75. Thus, the plain language of

Section 211(a)(2) covers Cubaexport’s rights in the HAVANA CLUB

mark.

Cubaexport resists the plain language of the statute and

argues that “[r]enewal of a trademark grants new rights distinct

from the rights under original registration” and that Cubaexport

is seeking to vindicate those rights with “forward-looking

injunctive relief.” Def.’s Opp’n, ECF No. 159-2 at 22. For

support, Cubaexport cites the district court decision in its

litigation against OFAC and the D.C. Circuit’s opinion on appeal

13 in that case. However, Cubaexport distorts the analysis of both

opinions. First, as Cubaexport notes, in the OFAC litigation,

the district court observed that “[t]his Court has already

stated that there is a fundamental difference between a license

to defend existing property rights . . . and one to acquire

additional rights,” citing the court’s prior opinion on the

issue. Cubaexport I,

. That opinion made

the distinction in the context of defending an “already-acquired

property right in [the] existing HAVANA CLUB registration”

against an attempt to “renew the HAVANA CLUB mark and to thus

extend its rights in the mark for another ten years.” Empresa

Cubana Exportadora de Alimentos y Productos Varios v. U.S. Dep’t

of Treasury,

(D.D.C. 2007). Thus, the

district court was not asserting that a trademark renewal

automatically triggers “new rights distinct from the rights

under the original registration,” but rather was asserting that

renewal provides “additional rights” in the form of an

“extension” of the existing rights, which were acquired at the

time of the original registration. See id.; Cubaexport I,

.

Second, Cubaexport claims that the D.C. Circuit’s opinion

on appeal from the OFAC case stated that “Section 211 only

required a specific license for the acquisition of new rights,

which were distinct from any rights existing under the original

14 registration.” Def.’s Opp’n, ECF No. 159-2 at 23 (citing

Cubaexport II,

). Again, Cubaexport distorts the

Court’s analysis. The D.C. Circuit only stated that Cubaexport

did not “acquire[] a vested right to renewal of the HAVANA CLUB

trademark when it first registered the mark in 1976.” Cubaexport

II,

. It went on to analyze the applicable

regulations at the time Cubaexport “first registered its mark in

1976” and determined that the exception “allowing trademark

registrations and renewals” could be amended, modified, or

revoked at any time.

The Court never addressed, much less

held, that a specific license would give “new rights, which were

distinct from any rights existing under the original

registration.” All it concluded was that “[b]y its plain terms,

[Section 211] bar[red] both new registrations and renewals of

marks (such as Cubaexport’s) that were first registered before

1998.”

.

To further support its claim, Cubaexport asserts that

“[f]ederal courts have consistently treated references to

trademark ‘registration’ as including ‘renewal.’” Def.’s Opp’n,

ECF No. 159-2 at 23. However, Cubaexport’s support for this

proposition is a line of cases interpreting

(3),

the provision of the Lanham Act that allows a “registration” to

be cancelled when it was “obtained fraudulently.” See

at 23-

24. In Torres v. Cantine Torresella S.r.l.,

(Fed.

15 Cir. 1986), the Court of Appeals for the Federal Circuit

(“Federal Circuit”) held that the term “‘registration was

obtained fraudulently’” includes “when an applicant knowingly

makes false, material representations of fact in connection with

his application” in both registrations and renewals of

trademarks.

. The Federal Circuit specified that the

“obligation to refrain from knowingly making false, material

statements applies with equal force to renewal applications,”

quoting the “requirements for renewal of a registration” at the

time.

Thus, Torres clarifies that in the specific context of

an attempt to cancel an existing trademark based on whether its

“registration was obtained fraudulently,” the analysis includes

whether a “renewal” was obtained fraudulently based on the

specific obligations trademark holders must fulfill to renew

their marks. This conclusion does not support the broader

proposition that federal courts “have consistently treated”

registration and renewal interchangeably.

Further undercutting Cubaexport’s position, several other

provisions of the Lanham Act treat registration and renewal as

distinct acts. First, under

, “Renewal of

Registration,” the Lanham Act states that “each registration may

be renewed for periods of 10 years at the end of each successive

10-year period following the date of registration.”

(a). Second, under

, “Cancellation of

16 Registration,” the Lanham Act provides that a “petition to

cancel a registration of a mark” may be filed “within five years

from the date of registration of the mark.”

(1).

Thus, the Court does not agree with Cubaexport that

“registration” can be understood to include “renewal” in

“references to trademark” litigation and statutes. Rather, the

Court concludes that registration and renewal are most commonly

understood as distinct acts and registration can be understood

to include renewal only in specific circumstances. Cubaexport

fails to convince the Court that such circumstances exist in

this case.

Finally, Cubaexport argues that Bacardi’s interpretation of

Section 211(a)(2) “also makes no sense as a matter of policy”

because the interpretation “creates arbitrary distinctions and

unreasonable results.” Def.’s Opp’n, ECF No. 159-2 at 25.

Specifically, Cubaexport argues that because it obtained its

original registration under 515.527, under Bacardi’s

interpretation, it will be “permanently subject” to Section 211,

regardless of any specific licenses OFAC grants.

Cubaexport

argues that this interpretation “would create arbitrary and

irrational distinctions between OFAC specific licenses issued at

the time of initial registration and those issued at the time of

renewal, relegating the latter to second-class status” and

“undermin[ing] the apparent intent of Section 211 . . . to

17 preserve the Executive’s authority to grant or refuse specific

licenses for registrations and renewals of trademarks.”

Cubaexport’s argument conflates the two distinct provisions

in Section 211. The first provision—Section 211(a)(1)—prohibits

renewals and registrations of marks without a specific license

from OFAC. See § 211(a)(1), 112 Stat. at 2681-88. As Cubaexport

alleged, it was able to circumvent this provision by obtaining a

specific license by OFAC for renewal of its HAVANA CLUB mark.

See Countercl., ECF No. 154 ¶¶ 71, 73. However, that renewal

does not affect Cubaexport’s rights under the second provision—

Section 211(a)(2)—which bars courts from enforcing rights based

on Cubaexport’s original registration. See § 211(a)(2), 112

Stat. at 2681-88. Cubaexport’s claim that following the plain

terms of the statute would nullify the “Executive’s authority to

grant or refuse specific licenses for registrations and renewals

of trademarks” is incorrect. OFAC granted Cubaexport a specific

license—allowing it to renew its trademark. And Cubaexport used

that specific license to renew its mark. See Countercl., ECF No.

154 ¶ 74 (“After receiving a copy of the specific license, the

Commissioner of Trademarks . . . granted Cubaexport’s Petition

. . . and accepted the 2006 and 2016 renewals and the associated

fee payments.”). However, OFAC’s action did not alter or amend

Cubaexport’s original registration—which, as the Counterclaim

alleges, was obtained under Section 515.527. See Countercl., ECF

18 No. 154 ¶ 75.

Because the Court agrees with Bacardi that Section

211(a)(2) bars Cubaexport’s counterclaim, the Court need not

also determine whether Cubaexport’s counterclaim should be

dismissed for failing to adequately allege likelihood of

confusion among consumers as a matter of law.

IV. Conclusion

For the foregoing reasons, the Court GRANTS Plaintiffs’

Motion to Dismiss Defendant’s Counterclaim, ECF No. 156. An

appropriate Order accompanies this Memorandum Opinion.

SO ORDERED.

Signed: Emmet G. Sullivan United States District Judge October 15, 2024

19