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Empresa Cubana Exportadora De Alimentos Y Productos Varios v. United States Dep't of Treasury

September 27, 2007


The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge.


This matter comes before the court on defendants' motion to dismiss, or in the alternative, for summary judgment [5], and plaintiff's cross-motion for partial summary judgment [18]. The Court has considered defendants' motion [5], plaintiff's opposition thereto [17], defendants' reply [22], plaintiff's motion [18], defendants' opposition thereto [23], plaintiff's reply [25], the entire record herein, and the applicable law. For the reasons set forth below, defendants' motion is GRANTED in part and DENIED in part; plaintiff's motion is DENIED; and this matter is hereby REMANDED to the Department of Treasury for the purpose described below.


Plaintiff Empresa Cubana Exportadora de Alimentos y Productos Varios ("Cubaexport") is a Cuban state-owned enterprise headquartered in Havana, Cuba. (Pl.'s Compl. 3.) The Cuban Ministry of Foreign Commerce chartered Cubaexport in 1965 "for the purpose of exporting food and other products." (Id.) In 1974, Cubaexport adopted the HAVANA CLUB trademark and registered it in Cuba for use in connection with rum. (Id.) Two years later, it applied to register the mark in the United States, based on its existing Cuban registration, and the United States Patent and Trademark Office ("PTO") issued Registration No. 1,031,651 on January 27, 1976. (Id. at 3-4.) This registration lies at the heart of the present dispute.

The United States' trade embargo against Cuba, implemented in the Cuban Asset Control Regulations ("CACR"), 31 C.F.R. part 515, precludes Cubaexport from actually using the HAVANA CLUB mark in the U.S., on rum or on any other product. (Id. at 4.) The Office of Foreign Assets Control ("OFAC"), a division of the United States Department of Treasury ("Treasury"), administers the CACR. (Id. at 3.) Both Treasury and OFAC are defendants in this suit, as are Henry M. Paulson, Jr., Secretary of the Treasury, and Adam J. Szubin, Director of OFAC, both in their official capacities. (Id.)

In its complaint, Cubaexport lodges multiple claims against these defendants under the United States Constitution's Fifth Amendment and the Administrative Procedure Act and seeks declaratory and injunctive relief. Before describing the events on which these claims rest, however, the Court must outline several relevant statutes and regulations that give context to the present dispute.

1. Statutory and Regulatory Framework

In pertinent part, the Trading With the Enemy Act ("TWEA"), 50 U.S.C. App. §§ 1-44, authorizes the President to impose and administer trade embargoes during wartime. 50 U.S.C. App. § 5(b) (2007). The President has delegated this authority to the Secretary of the Treasury, who has in turn delegated it to OFAC. Regan v. Wald, 468 U.S. 222, 227 n.2 (1984). In 1963, when TWEA also applied to peacetime emergencies, President Kennedy adopted the CACR "to deal with the peacetime emergency created by Cuban attempts to destabilize governments throughout Latin America." Id. at 226. Congress later removed peacetime emergencies from TWEA's scope but permitted the President to maintain existing embargoes, including the embargo against Cuba. Id. at 228-29.

Generally, the CACR prohibit transactions between U.S. nationals and the Cuban government or Cuban nationals unless authorized by the Secretary of the Treasury. See 31 C.F.R. §§ 515.201, 515.305, 515.309 (2007). The Secretary, through OFAC, authorizes such transactions in two ways. See id. § 515.501. General licenses, codified in 31 C.F.R. part 515, subpart E, broadly authorize entire classes of transactions. See 31 C.F.R. §§ 501.801, 515.317 (2007). When no general license applies, "[a]ny person having an interest in a transaction or proposed transaction may file an application [with OFAC] for a [specific] license." Id. § 515.801(b)(2). The applicable regulation does not dictate how OFAC should review such applications. See id. § 515.801(b)(4). It provides only that "denial of a license does not preclude the reopening of an application or the filing of a further application," and that an applicant or other interested party "may at any time request explanation of the reasons for a denial by correspondence or personal interview." Id.

Prior to 1998, the CACR included a general license for trademark registration and renewal by Cuban nationals: "Transactions related to the registration and renewal in the United States Patent and Trademark Office . . . of . . . trademarks . . . in which the Government of Cuba or a Cuban national has an interest are authorized." 31 C.F.R. § 515.527(a) (1996). On October 21, 1998, however, in an otherwise unrelated omnibus appropriations bill, Congress exempted a defined class of transactions from that general license. Omnibus Consolidation and Emergency Supplemental Appropriations Act, Pub. L. No. 105-277, § 211, 112 Stat. 2681 (1998). The operative provision, Section 211, states

Notwithstanding any other provision of law, no transaction or payment shall be authorized or approved pursuant to [the general license] with respect 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. § 211(a). Thus, a Cuban national who wished to renew a trademark registration was now required to seek a specific license from OFAC if: 1) the mark had been used in connection with property expropriated by the Cuban government; and 2) the mark's original owner or bona fide successor-in-interest had neither consented nor received compensation.*fn1 See id.; 31 C.F.R. § 515.336 (2007) (defining "confiscated").

Congress directed the Secretary of the Treasury - and through him, OFAC - to promulgate regulations implementing this exception to the general license. § 211(c), 112 Stat. at 2681-88. Accordingly, OFAC amended 31 C.F.R. section 515.527, retaining the general license as part (a)(1) and adding part (a)(2), which reads:

` No transaction or payment is authorized or approved pursuant to [the general license] 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.

31 C.F.R. § 515.527(a)(2) (2007). OFAC did not, however, establish any procedure for determining whether part (a)(1) or part (a)(2) applies to a given mark, and indeed, nothing in Section 211 or the CACR expressly invests OFAC with authority to make this determination. See generally § 211, 112 Stat. at 2681-88; 31 C.F.R. part 515.

2. Related Proceedings

On October 29, 1993, Cubaexport transferred its rights in the HAVANA CLUB mark to Havana Club Holdings, Ltd. ("HCH"). (Pl.'s Compl. 5.) HCH renewed the registration in January 1996 for a ten-year term ending on July 27, 2006. (Pl.'s Compl. Exs. 5, 6.)

Thereafter, HCH filed a complaint alleging trademark infringement against Bacardi-Martini, U.S.A. and its affiliates ("Bacardi") in the United States District Court for the Southern District of New York. (Pl.'s Compl. 5.) That court determined the CACR barred Cubaexport's attempted transfer of rights in the HAVANA CLUB registration to HCH, that Cubaexport still owned the registration, and that HCH therefore lacked standing to prosecute the infringement action. (Id.) See also Havana Club Holding, S.A. v. Galleon S.A., 974 F. Supp. 302, 306-11 (S.D.N.Y. 1997). Ultimately concluding HCH lacked any rights in the HAVANA CLUB mark, the court entered judgment for Bacardi. 62 F. Supp. 2d 1085 (S.D.N.Y. 1999). On appeal, the Second Circuit affirmed, 203 F.3d 116 (2d Cir. 2000), and the U.S. Supreme Court denied HCH's petition for certiorari, 531 U.S. 918 (2000).*fn2

Meanwhile, Bacardi had instituted a cancellation proceeding against HCH before the PTO's Trademark Trial and Appeal Board ("TTAB"). (Pl.'s Compl. 6.) It now claimed that because HCH, not Cubaexport, had renewed the mark's registration, the renewal must be ineffective. (Id.) The TTAB joined Cubaexport as a defendant and ultimately dismissed Bacardi's cancellation petition on January 29, 2004, concluding that the renewed registration was valid. (Id. at 6-7.) Bacardi appealed this decision, and its appeal remains pending before another court in this district. (Id. at 7.) See also Bacardi & Co., Ltd. v. Empresa Cubana Exportadora de Alimentos y Productos Varios, No. 04-00519, Order Maintaining Stay [74] (D.D.C. July 25, 2007) (Sullivan, J.).

Cubaexport retained the law firm Fish & Neave to represent it in the cancellation proceeding. (Pl.'s Compl. 10.) On application to OFAC, Fish & Neave received specific licenses enabling it to receive payment for its legal services and permitting its attorneys to travel to Cuba in connection with the representation. (Id.) In early 2005, Ropes & Gray LLP merged with Fish & Neave and sought to renew its legal and travel licenses. (A.R. 85-88, 99-100.) OFAC issued both licenses, which were valid through March 31, 2006. (Id. at 85-88.)

The legal license, CU-74488, reads: "Pursuant to an application dated January 26, 2005, the following transactions are hereby licensed: SEE REVERSE." (Id. at 85.) On the reverse side, the license states: "All transactions are authorized to enable the Licensee, in connection with the legal representation of [Cubaexport] and [HCH] in legal proceedings in the United States related to the HAVANA CLUB trademark, as described in the application, to receive payment for such services . . . from Cuban nationals." (Id. at 86 (emphasis added).) The cited application, a letter from Ropes & Gray to OFAC, refers to "a complaint [] currently pending in the U.S. District Court for the District of Columbia against our clients Cubaexport and [HCH]" and describes a then-pending motion in that case. (Id. at 89.)

3. Cubaexport's Attempted Renewal

a. Cubaexport's Application to the PTO

On December 13, 2005, Ropes & Gray applied to renew Cubaexport's HAVANA CLUB registration on its client's behalf. (Id. at 61-66.) In his cover letter to the PTO, attorney Vincent Palladino explained as follows: "Payment of the filing fee is being made pursuant to License No. CU 74488 issued by [OFAC] on March 4, 2005 . . . in order to maintain the status quo by maintaining Registration No. 1,031,651 until a decision regarding cancellation of the registration can be rendered in ongoing litigation . . . ." (Id. at 61.) Palladino's letter then described the ongoing proceeding in this district, before Judge Sullivan. (Id. at 61-64.)

Palladino also offered the following rationale for "maintain[ing] the status quo":

[N]o final unappealable decision [on Bacardi's cancellation petition] will be rendered before [Cubaexport's registration] must be renewed.

If [that registration] is not maintained, the Court will be denied an opportunity to reach a reasoned decision as to whether the registration should be cancelled, as Bacardi claims, or whether the Board correctly dismissed the Cancellation Petition, as Cubaexport contends. That will, moreover, deprive Cubaexport of the representation Ropes & Gray has been authorized to provide . . . .

That outcome would be and would be perceived to be unfair . . . Effectively overruling the Board Decision while it is on appeal to the Court by declining to maintain the status quo would be inappropriate. On the other hand, if the registration is maintained . . . the Court remains free to decide whether the Board Decision should be affirmed or reversed.

Paying the renewal fee will not dictate the outcome . . . but failing to pay it might. (Id. at 63-64.) Palladino submitted a letter to OFAC containing nearly identical language, also on December 13, 2005. (Id. at 58-60.) On February 27, 2006, approximately one month prior to its March 31 expiration date, Ropes & Gray applied to renew License No. CU-74488. (Id. at 56-57.

b. OFAC's Letter of April 6, 2006

OFAC responded to the first of these two letters on April 6, 2006. (See id. at 54-55.) Barbara Hemerslee, then OFAC's acting director, declared that License No. CU-74488 - which, by that point, had officially expired - "does not authorize Ropes & Gray LLP to pay a filing fee to the [PTO] for renewal of [Cubaexport's registration]." (Id. at 54.) Quoting the license's language in full, Hemerslee noted that its authorization extended only to transactions connected with the legal representation described in Ropes & Gray's January 26, 2005 application, which referred only to the pending district court proceeding. (Id.) She described renewal as "a ...

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