United States: A Tale Of Trade And Trademarks: General Cigar Co., Inc. v. Empresa Cubana Del Tabaco

Last Updated: July 22 2015
Article by Shrutih V. Tewarie

The United States has taken several recent steps towards normalizing its ties with Cuba and, just yesterday, the two countries re-opened embassies in each other's capitals for the first time since 1961.  Despite these developments, one thing that remains largely unchanged for now is the Cuban embargo.  Enforced by the Department of Treasury's Office of Foreign Assets Control (OFAC), the Cuban embargo, as codified in the Cuban Assets Control Regulations, 31 CFR Part 15 (CACR), still prohibits most transactions between persons subject to US jurisdiction and Cuba.  Highlighting the uncertainties of navigating the requirements of the Cuban embargo against the current political backdrop is General Cigar Co., Inc. v. Empresa Cubana Del Tabaco, a dispute over what are arguably Cuba's most iconic exports: cigars.

The Dispute

The word "Cohiba" derives from an indigenous Caribbean word for tobacco. General Cigar, an American company, manufactures and distributes cigars using the COHIBA mark. General Cigar owns two trademark registrations for the COHIBA mark in the United States.  Empresa Cubana d/b/a Cubatabaco ("Cubatabaco"), a Cuban company, also manufactures and distributes cigars using the same COHIBA mark.  Under the CACR, Cubatabaco is prohibited from selling its cigars in the United States.  Specifically, the CACR generally prohibits both the importation of products of Cuban origin, and the "transfer of property rights . . . to a Cuban entity by a person subject to the jurisdiction of the United States."

However, the CACR is subject to certain exceptions, called "general licenses."  Of significance here, 31 CFR § 515.527 allows Cuban entities to engage in transactions "related to the registration and renewal" of trademarks before the USPTO.   Using this general license, in 1997, Cubatabaco filed an application with the USPTO to register its COHIBA mark for cigars and related goods.  Cubatabaco based its trademark application on its registration of the same mark in Cuba.  When the USPTO denied Cubatabaco's application because of General Cigar's prior registrations for the same mark, Cubatabaco filed a petition to cancel General Cigar's registrations with the Trademark Trial and Appeal Board (TTAB).  Cubatabaco also asked and received permission from OFAC to commence a federal lawsuit against General Cigar. Cubatabaco filed suit in the Southern District of New York, alleging trademark infringement, seeking to cancel General Cigar's registration and requesting an injunction against General Cigar's use of the COHIBA mark in the United States.

Proceedings in the Second Circuit

After the District Court ruled for Cubatabaco on its infringement claim, the Second Circuit reversed.  The Second Circuit found that because "property" as defined under the CACR specifically includes trademarks, any acquisition by Cubatabaco of the COHIBA trademark would constitute a transfer of property rights in violation of the CACR.  The Second Circuit also rejected Cubatabaco's argument that it was entitled to obtain an injunction preventing General Cigar from using the mark in the United States, finding that this would also entail a prohibited transfer.

Following the Second Circuit's decision, the TTAB dismissed Cubatabaco's petition for cancellation without reaching its merits, holding that Cubatabaco lacked standing to purse the matter further in light of the "binding, federal court judgment" from the Second Circuit.

Proceedings in the Federal Circuit

But the story did not end there.  After the dismissal by the TTAB, Cubatabaco appealed to the Court of Appeals for the Federal Circuit.  In a turn of events, the Federal Circuit vacated the TTAB's decision, holding that the TTAB had erred in holding that the judgment from the Second Circuit barred any further litigation of Cubatabaco's claims.  In the Federal Circuit's view, the Second Circuit had never addressed whether Cubatabaco could seek cancellation of General Cigar's registrations before the TTAB. The Federal Circuit found that Cubatabaco was indeed authorized to seek such relief pursuant to 31 CFR § 515.527's general license allowing transactions "related to the registration and renewal" of trademarks.  Further, the Federal Circuit also stated that, if Cubatabaco was successful in cancelling General Cigar's registrations, Cubatabaco could then register its COHIBA mark with the USPTO.

Following the Federal Circuit's decision, General Cigar filed a petition for certiorari with the Supreme Court.  Despite General Cigar's arguments that the Federal Circuit's decision raised issues of national importance regarding the proper interpretation of the CACR, earlier this year the Supreme Court refused to hear the case, letting the Federal Circuit have the last word in this long-standing litigation.  Cubatabaco recently requested a resumption of the TTAB proceedings.

Implications and Unanswered Questions

The Supreme Court's silence on the issues raised by this case leaves a host of questions unanswered.  Is the Federal Circuit's opinion merely an application of the general license contained in 31 CFR § 515.527, or are its implications broader? What is the relationship between  this decision and the famous marks doctrine under Article 6bis of the Paris Convention, about which the different Courts of Appeals have very different approaches. Further, was the Federal Circuit's interpretation of the CACR the right one in light the recent shift in U.S. policy towards normalizing relations with Cuba, or should courts construe the CACR narrowly in light of OFAC's warning that "most transactions between the United States, or persons subject to U.S. jurisdiction, and Cuba continue to be prohibited" even following President Obama's announcement in December of last year? As the U.S. attempts to restore its diplomatic ties with Cuba, finding an answer to these questions will become increasingly important.

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