Cuba, Rum and Geographical Indications

It is not uncommon in cases relating to trademarks and similar rights for history to be discussed, and the Specialized Section in Enterprise Matters of the Milan Court happened to deal with the recent history of Cuba, along with one of its typical products: rum.

Havana Club International, the well-known manufacturer of the spirits of the same name, and its Italian distributor, had in fact sued the producer and distributor of the competing rum “Matusalem” before the Milan court, claiming a breach of the rules on geographical indications and unfair competition and seeking injunction and damages. The Matusalem rum is produced entirely in the Dominican Republic, however the defendants made extensive use, on the bottles, packaging and in advertising campaigns, of the expression “Spirit of Cuba” or “Espiritu de Cuba” and of other references to Cuba.

For the plaintiffs, it was a case of the use of signs and communications capable of misleading consumers as to the geographical origin of the product, in breach of Article 30 of the Italian Intellectual Property Code and of the Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods. The plaintiffs contended that the defendants had sought, by deceiving consumers, to take advantage of the credit that Cuban rum had acquired with the Italian public.

For the defendants, it was nothing more than the legitimate claim of their heritage. The Matusalem was, in fact, originally produced in Cuba according to a unique method used by the historic distillery Camp & Brothers, and in the early 1900s  it had become one of the most famous rums of the island. After the 1959 revolution however, the owners of the distillery had been forced into exile and the company had been confiscated by the Castro regime. The owners had thus transferred the production of Matusalem according to the original formula first to Puerto Rico and then to the Dominican Republic. References to Cuba on labels and in advertising thus expressed, according to the defendants, pride in their roots; moreover, these references were always accompanied by the indication that the liquor was produced in the Dominican Republic.

The Milan Court, however, took the view that the specific use of the term “Cuba” by the defendants did indeed constitute an infringement of the rules on the indication of source, falsely suggesting to the public that the source of Matusalem rum was Cuba.

The Court reasoned that:

• Rules on geographical indications are aimed at safeguarding both specific qualities of the relevant products and their evocative potential, so that it is sufficient for a good to not originate from the indicated area to be infringing, regardless of its equivalent, or even higher, quality;

• In this regard, although rum is not an exclusive product of the island of Cuba, the reference to Cuba in connection with this specific good carries with it at once emotional suggestions and the quality of the product itself; this was, in the Court’s view, the result of the combination of natural and human factors (the quality of the Cuban sugar cane, the experience of “roneros” (rum masters), the particular aging techniques) and of the intensive advertising campaigns of the plaintiffs, which also contributed to the social trend of cocktails based on Cuban rum, conveying the image of a sensual and exotic Caribbean island; in any event, according to a survey produced by the plaintiffs, for a significant proportion of Italian consumers the origin of a rum from Cuba was a quality relevant to purchase choices;

• That being said, the conduct of the defendants was “univocally aimed” at suggesting to consumers that the place of origin of Matusalem rum was Cuba, for the purpose of mass-accreditation of the product; the Court found that the expression “Espiritu de Cuba” / “The Spirit of Cuba” (also used in the promotional campaign in conjunction with images of the island) was particularly deceiving — in this respect, it is interesting to note that, while the plaintiffs insisted that it had to be understood as “alcohol of Cuba”, and the defendants as “soul of Cuba”, the Court considered the expression to be ambivalent, and because of that it carried the concept of a bond of origin with Cuba, claiming to represent its deepest essence;

• With regard to other uses of the word “Cuba” on the labels and bottles, the defendants had given it a graphically and dimensionally disproportionate relevance, placing it at the centre of the bottleneck and further highlighting it with a ring, causing it to be the only reference perceptible by the consumer; even the expression ” formula original de Cuba”, in itself truthful, ended up conveying the false meaning of the place of actual production by presenting the word “Cuba” in the most apparent and attractive colours (gold) and, above all, sized out of proportion to the rest of the text.

The Court therefore enjoined the defendants from using the expression “Espiritu de Cuba” both in the promotional campaign and on the glass or the packaging of the bottle, and the use of the term “Cuba” with a disproportionate “dimensional and graphic relevance”.

The damages were set by the Court as a lump sum based on the one available data, the gross margin made by the defendants on all types of rum sold (even those unrelated to the subject-matter of the proceedings). The rules on damages compensation, in fact, allow for the taking into account of profits made by the infringer.

However, the Court deemed it necessary to take into account the undoubted high quality of the rum of the defendants, superior to the plaintiffs’ for aging, and, therefore, for marketing price. “In the face of goods non-substitutable for quality and price range, it is more than likely that the evocative potential conveyed by the use of the geographical indication in dispute have only partially contributed to determining the choices of consumers who bought Matusalem, contributing therefore non-exclusively, and indeed only to a minor extent, to its establishment on the market“. The Court also considered that the information available was not only gross data, but also aggregated data relating in part to products that were not relevant to the lawsuit.

On this basis, the Court awarded damages to the plaintiffs in the amount of 15% of the sum stated as the total gross margin of the defendants.