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Guest Commentary: Trademark Wars Precede Embargo’s End

12 May 2011

[Editors’ Note: The following was written by Mark McGinty, author of The Cigar Maker. His work has appeared in Cigar City Magazine, Maybourne Magazine, and La Gaceta. You can contact him at mmcginty_32@yahoo.com.]

Cuba’s one and only cigar company, known in the industry as Habanos, was created in 1994 to oversee the distribution of all Cuban cigar brands. Cohiba, Partagas, Montecristo, and H. Upmann all belong to Habanos. And due to strong brand names that are synonymous with Cuban cigars, Habanos did not suffer the same degree of economic setbacks that other industries faced during the recession of 2008. Cigar sales declined but remained a relatively affordable product that consumers continued to purchase. While the market for $25,000 watches or $200,000 automobiles fell considerably, folks still felt comfortable spending $20 on a stick, even if they were a bit stressed economically.

The biggest question facing the Cuban cigar industry is the future of the U.S. embargo. What happens if and when the embargo is lifted?

Cuba is already preparing for that day. Knowing that the U.S. is the largest cigar market in the world, Habanos has been working behind the scenes to position itself for entry into the market. It is a very complicated process, and one that is riddled with legal challenges over trademarks and brand names. Frank Herrera, an intellectual property attorney out of South Florida and an expert on trademark issues in the cigar industry, has been defending American cigar interests against Habanos for nearly a decade. “Habanos has been opposing all trademarks for any U.S. brands that may smell like a Cuban brand. Why? Because they plan to operate in the U.S. and they want their brands protected,” he said.

Take Cohiba, a popular Cuban label that started in 1968 as a private brand exclusively supplied to Fidel Castro and top members of his party. In 1978, General Cigar registered the name in the U.S. and has been selling a Dominican version of the cigar ever since. There are now two versions of Cohiba: the original Cuban version, and the Dominican version, which is available in the U.S. Cuba retains the rights to the name in Cuba and in all other countries, but the question of who owns Cohiba in America was disputed for years. Most recently, in July of 2010, the U.S. Court of Appeals ruled in General Cigar’s favor, upholding a previous ruling that they are the rightful owner of the Cohiba name in the U.S.

A current legal battle that Herrera feels will be hotly contested, and one that is a bit unique in that it involves a brand that started in the U.S., not Cuba, is the name Guantanamera. Both countries produce a cigar by that name, but the U.S. version predates the Cuban. The Cuban version, a machine-rolled cigar, is a huge seller with over 40,000,000 units produced per year. Easy to see why Habanos would want to sell Guantanamera in the U.S. If the embargo were lifted, it would be one of their best sellers. But does Habanos have a right to the name? Herrera says no, and feels that Habanos may either have to purchase the brand name from the American company, or else not sell the Cuban Guantanamera in the U.S. market, at least not under that name.

At the heart of the issue, from the American perspective, is the question of whether Cuba has a standing to pick these legal fights in the first place. “How can Cuba oppose or seek to cancel a U.S. trademark application, when Cuba is not allowed to offer goods and service in the U.S. because of the embargo?” asks Herrera, outlining the argument with a simple rhetorical question.

Courts have already decided that Habanos does have the right to fight these trademark wars. But can they file infringement action against an American company, even though they have no product for sale in the U.S. market? That issue is still pending, along with many others.

Like the case against Havana International, a Tampa-based company. Are they infringing on Habanos for using the phrase “made from Cuban-seed tobacco” on their packaging? Is a Michigan cigar shop called La Casa de La Habana illegally using a name that Habanos feels is too similar to their worldwide franchised shops, which are called La Casa del Habano? What about the word “Havana,” which Missouri-based Xikar used on one of their cigar lighters called the “Havana Collection” and ended up being sued by Habanos?

Then there was that case against Tatuaje, an American boutique cigar company that used the fleur-de-lis design on their labels (a design that dates back to the year 493 AD, has been used in countless design motifs, and was used as an emblem of French mobility as far back as the 12th Century). Was Tatuaje infringing by using this symbol? Altadis USA thought so, and sued them for infringement.

When asked about the strategy and logic behind these trademarks lawsuits, Simon Evans, group press officer of Imperial Tobacco, the parent company that owns half of Habanos, said, “Quite simply, Habanos has a duty to manage and defend the Habanos and Havana denomination of origin.”

But Herrera has litigated these cased more than anyone else and feels he knows exactly what Habanos is doing. “They pick fights, and have obtained a lot of default judgments from firms who don’t have the means to defend themselves.”

Some say so what? This big business, a highly competitive industry, and the Cuban-Spanish tobacco conglomerate is merely using shrewd corporate tactics to satisfy their bottom line. Don’t they have every right to protect their brands? There’s good irony here, in that a communist state-run monopoly relies on free market forces to excel. The legal battles are capitalism at its best, or at its worst, depending on how you look at it.

Not all Cuban brand names are in dispute. H. Upmann and Montecristo live entirely under Imperial Tobacco’s corporate umbrella, which includes Altadis USA, so ownership of those brands is relatively uncomplicated. If the Cuban Upmann were to be sold in the U.S., its parent company already owns the rights to the name. It’s safe, though not technically in Cuban hands.

There’s no doubt that if the trade embargo is lifted, millions of Cuban cigars will be purchased in the U.S. by the most seasoned smoker to every Tom and Jerry curious about this newly available, once-forbidden, and exotic product.

But it will take a significant political tide for the embargo to disappear. At this point, no U.S. president has been willing to cede the powerful South Florida Cuban-American voting bloc to the other party. But as new generations of Cuban-Americans reach voting age, with 21st century concerns and no firsthand experience of the struggles their parents and grandparents faced in Cuba, will they be more willing to open relations with Cuba?

The Hispanic population of Florida is already showing signs of moving beyond their staunch closed-door stance against the island, and as the Cuban exile population ages and eventually evolves into a younger generation of Cuban-Americans who simply see things differently, this trend could continue.

How these branding and legal battles will be decided, no one can predict. But when Habanos begins to compete officially in the U.S. market, the cigar industry will become even more interesting, and more complicated than it already is.

Mark McGinty

photo credit: Stogie Guys

Drew Estate

5 Responses to “Guest Commentary: Trademark Wars Precede Embargo’s End”

  1. Ashburn Dave Thursday, May 12, 2011 at 8:33 am #

    I'm sure the legal reality is far more complicated than I can comprehend, but I don't like the idea that the embargo can nullify a trademark claim. I don't see how this is much different than China and other countries pirating American software at an institutional level because they just don't feel like honoring our copyright laws.

  2. Cigar Law Thursday, May 12, 2011 at 9:17 am #

    Trademark law is territorial in nature and requires that a mark be used in commerce affixed to a good or in connection with the advertising of a service. There are some Int'l agreements that allow for some rights to be obtained in US without use, but those rights are limited. Copyright law provides protection the moment an author (painter, etc..) creates and original work fixed in a tangible medium. Copyright law is subject to the Berne Convention. Thus, you are correct. Moreover, comparing copyright claims to trademark claims is like comparing a machine made cigar to a super premium cigar. Different animals.

  3. Cigar Law Thursday, May 12, 2011 at 9:18 am #

    You are correct. It is complicated.

  4. Mike Thursday, May 12, 2011 at 10:52 am #

    Even if the embargo were lifted tomorrow — and it will likely be a long time — trademark disputes like this would keep Cuban Partagas from appearing next to the Domincan version long sold in the US for years.

    Families who registered and made Cuban brands had them nationalized by the Cuban govt w/o compensation. No Florida politician would ever vote to lift an embargo, even a failed one, without tackling these issues.

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