Havana Club rum from Puerto Rico not false advertising

Pernod Ricard USA LLC v. Bacardi U.S.A., Inc., Case 1:06-cv-00505-SLR (D. Del. Apr. 6, 2010)

Pernod, claimant of the Havana Club mark outside the US (inside the US, the Cuban embargo has made things rather more confused), sued Bacardi for adopting the Havana Club mark for rum, currently in limited distribution but poised to grow. Trademark claims being impossible, it argued false advertising. Bacardi argued that any geographic reference was simply to Cuban “heritage,” such that it was not false to associate Havana Club rum with a “raffish, pre-revolutionary Cuban lifestyle circa 1930-1950.” This was ok because Bacardi acquired the Havana Club mark from the Arechabala family, historical proprietors of same.

Previously, the court dismissed Pernod’s false advertising claim with respect to Bacardi’s representation that it owned the Havana Club trademark, on the ground that trademark rights are not a good or service and also don’t constitute information regarding the nature, characteristics, or qualities of the rum. (Under the recent eBay decision, it can be false advertising to claim to have genuine trademarked goods to sell, but presumably the court would distinguish trademark rights from trademarked goods.) But there was still the possibility of geographic deceptiveness.

Bacardi’s rum is made in Cuba, and says so on the bottle. Pernod’s survey evidence dealt with the bottle, not the ads, and the court first held that there was therefore no way to establish actual confusion with respect to print ads, commercials, or other promotional material. (Which is a bit formalistic: the ads all make it less likely that consumers would notice the origin information on the bottle by adding other enticements. But it’s not going to matter here.)

First, the court expressed skepticism that “Havana Club” made an actionable statement capable of being proven false, because it wasn’t “Made in Havana” or “Havana Rum” or the like. Relatedly, the court was uncertain whether the reference to “geographic origin” in the Lanham Act covered “heritage” as well as “source of production.” Given that 43(a)’s use of “geographic origin” covers both trademark and false advertising, and that geographic origin has an intuitive and well-established meaning of “source of production” in trademark law, I find this unlikely, though the court cited Corporacion Habanos, S.A. v. Anncas, Inc., 88 U.S.P.Q.2d 1785, 2008 WL 4409768, *6 (Sept. 26, 2008) (“a product may be found to originate from a place, even though the product is manufactured elsewhere") for the proposition that “‘geographical origin’ is broad enough to encompass some aspect of a good’s history.”

I was actually kind of shocked that the court ruled that §43(a)(1)(A) precedent wasn’t “particularly instructive” on the meaning of “geographical origin” as applied to §43(a)(1)(B). Aside from the similar goals, unified history (not even broken out into (A) and (B) until relatively recently), and statutory proximity of the two provisions, they are the same words, and I had thought it a basic canon of statutory interpretation that the same words mean the same thing throughout a statute without pretty good reason to construe them differently. The court’s discussion was a bit confusing, but I think it said that one plausible reading of the Lanham Act would be that, for (a)(1)(A) purposes, the focus should be on the manufacturer or producer, thus place of manufacture, whereas (a)(1)(B) could take heritage into account as well. But it was also plausible that history/heritage is an “idea, concept or communication” under Dastar, and thus not within the definition of “origin” for either subsection.

Anyway, under either alternative, Pernod lost. First, Bacardi’s bottle accurately provides its production label, eliminating the deceptive nature of the labeling. The court manages to cite two of my least favorite cases, Odom v. Piazza’s Seafood World and Mead Johnson v. Abbott Labs, 201 F.3d 883 (7th Cir. 2000). Odom, the court reasoned, stands for the proposition that labeling can’t be deceptive as to geographic origin where it contains a truthful disclosure of the source (I assume this holding is limited by the principle that inconspicuous disclosures, or disclosures that are not perceived by consumers, are ineffective to avoid deception, but then again given what the court says about the survey, maybe not). Here, “Puerto Rican Rum” or “crafted in Puerto Rico” is on both sides of the bottle, “rather prominently,” following the Havana Club name.

Mead Johnson stands for the proposition that an ad that is truthful on its face can’t be proven to be misleading by survey evidence. Surveys can’t determine the meaning of words. It’s not that I’m against various kinds of prophylactic rules that protect defendants against harassment, but it would be nice to see some acknowledgement that they are prophylactic and that they therefore may have costs: we have a deceptiveness doctrine because we recognize that it is possible to lie by implication, and that sometimes it’s nice to know what message consumers actually receive. I’d be a lot more fond of Mead Johnson if courts were more willing to treat trademark defendants with the same kind of concern for overreaching claims that some consumers, somewhere, might be confused about something. But Mead Johnson tosses out survey evidence while trademark doctrine is perfectly willing to find confusion without surveys.

Anyway, the court also noted that the feds approved the Havana Club label, which they wouldn’t have done if they’d found it deceptive.

If you accept the argument that geographic origin includes heritage, Bacardi also wins. Bacardi bought the Havana Club recipe from the Arechabala family, and the First Amendment “protects defendant’s ability to accurately portray where its rum was historically made.” (I will most likely turn into a supporter of this decision if courts start citing it for the proposition that the First Amendment protects the right to make descriptive and nominative uses. Sauce for the 43(a)(1)(A) goose, that’s what I want.) Though Bacardi’s rum is not formulated or produced in quite the same way as the prerevolutionary Cuban rum, it doesn’t differ “in any significant respect.”

This strikes me as a very American decision in a variety of ways, from its total resistance to the concepts underlying strong protection for geographic indications and their “auras” to its invocation of the First Amendment. It’s creative destruction in action: if Cuba can’t supply Cubanness to us because of the embargo, someone else will be allowed to do so!