Havana Club International ("HCI"), which has a 50-50 equity split between Havana Rum & Liquors and Pernod, both through direct holdings and through holdings in HC Holding. See Perdomo Dec. P 12. Plaintiffs allege that all of the assets associated with the Havana Club trademark were transferred as part of this reorganization by Cubaexport to Havana Rum & Liquors, which then transferred them to HC Holding. Id. HC Holding then granted HCI an exclusive license to sell Havana Club rum and to use the Havana Club trademark. Id. The transfer of the trademark in the 1993 reorganization of Cubaexport's Havana Club business was governed by the CACR.
On October 5, 1995, Plaintiffs applied to OFAC for a specific license
authorizing the assignment of the Havana Club trademark, Registration No. 1,031,651, from Cubaexport to Havana Rum & Liquors, S.A. to Havana Club Holdings, S.A. See Affidavit of Margaret Ferguson ("Ferg. Aff."), attorney for Defendants, May 23, 1997, Ex. E. On November 13, 1995, OFAC issued License No. C-18147, which approved the assignment and authorized all necessary transactions incident to the assignment of the mark. Id. However, on April 17, 1997, OFAC issued a Notice of Revocation stating that "as a result of facts and circumstances that have come to the attention of this Office which were not included in the application of October 5, 1995, License No. C-18147 . . . is hereby revoked retroactive to the date of issuance." Id., Ex. G. OFAC did not further explain the grounds for the revocation but did state that any action taken under the license is null and void as to matters under its jurisdiction. See id.
OFAC enjoys considerable discretion in granting or revoking licenses, and the CACR permit OFAC to amend, modify, or revoke a license at any time, on its own initiative. See Havana Club Holding, S.A. v. Galleon S.A., 961 F. Supp. 498, 505 (S.D.N.Y. 1997). Moreover, the CACR grant OFAC the authority to take such action sua sponte. Id. Because the issuance or revocation of licenses by OFAC is committed to OFAC's discretion, OFAC's decisions are not reviewable by this Court. Id. at 503, 505. Consequently, Defendants contend that because Plaintiffs have failed to obtain a specific license and are unable to challenge OFAC's decision, Plaintiffs cannot validly transfer the United States registration of the Havana Club mark. See Memorandum of Law in Support of Defendants' Motion for Partial Summary Judgment ("Def. Mem.") at 8.
Plaintiffs advance four arguments in response to Defendants' assertion: (1) the general license for United States intellectual property, provided for in the CACR, permitted the assignment of the mark, see 31 C.F.R. § 515.527(a); (2) the Inter-American Convention requires this Court to construe the general license to authorize the assignment of the mark; (3) the Fifth Amendment of the Constitution similarly requires that the general license is sufficient to authorize the assignment; and, in the alternative, (4) the Havana Club mark is not covered by the TWEA and CACR. Each of these arguments is offered to support Plaintiffs' contention that Cubaexport effectively transferred the rights to the mark to Plaintiffs. I turn now to each of these arguments.
1. Plaintiffs' Application Under the CACR
Plaintiffs argue that although they applied for a specific license to transfer the trademark, the general license provided in the CACR is sufficient for this purpose. See Plaintiffs' Memorandum of Law in Opposition to Motion for Partial Summary Judgment ("Pl. Mem.") at 4. The CACR creates both general licenses, which permit classes or categories of transactions with Cuban nationals, see, e.g., 31 C.F.R. § 515.542 (authorizing "all transactions of common carriers incident to the receipt of mail between the United States and Cuba"), and specific licenses, which require individualized determinations and approval by OFAC. See id. § 515.801. A general license, furthermore, "is any license or authorization the terms of which are set forth [in the CACR]." 31 C.F.R. § 515.318. The general license pertaining to United States intellectual property authorizes "transactions related to the registration and renewal in the United States Patent and Trademark Office or the United States Copyright Office of patents, trademarks, and copyrights in which the Government of Cuba or a Cuban national has an interest . . . ." 31 C.F.R. § 515.527(a) (emphasis added).
By the express terms set forth in this section, the general license allows for the registration and renewal of trademarks. It does not, however, address the question of whether a registration may be assigned to an individual or corporation. Because the terms of the general license do not contain express authorization for the transfer of rights to trademarks, an individual or company seeking to assign a trademark is therefore required to obtain a specific license. A specific license "is any license or authorization issued pursuant to [the CACR] but not set forth in [the CACR]." 31 C.F.R. § 515.318.
Here, the participation of Cuban entities in a transaction involving United States property triggers the CACR. The particular transaction at issue - the assignment of the United States trademark -- is not expressly permitted by the general license governing intellectual property. Thus, because Plaintiffs seek to engage in a transaction covered by the CACR but not expressly permitted therein, Plaintiffs' transfer of the mark is only permitted by OFAC's issuance of a specific license.
Moreover, on December 19, 1996, the Director of OFAC, R. Richard Newcomb, informed Defendants' counsel that the
general license allows only for the registration and renewal of intellectual property; § 515.527 does not convey to the registrant the authority to assign the registrant's interest in a patent, trademark or copyright registered in the United States to another person. Such an assignment would require authorization by OFAC in the form of a specific license.
Ferg. Aff., Ex. F.
Because Congress has not "directly spoken to the precise question at issue," the court must sustain the Director's interpretation so long as it is "based on a permissible construction of the statute." Auer v. Robbins, 137 L. Ed. 2d 79, 117 S. Ct. 905, 909 (1997) (quoting Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. 837, 843, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984)). The Supreme Court has long recognized "that considerable weight should be accorded to an executive department's construction of a statutory scheme it is entrusted to administer." Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. at 844.
Both the express terms of the general license and my analysis of the relevant CACR provisions compel the conclusion that OFAC has properly construed the statute to preclude a transfer under the general license. Accordingly, a specific license was required for the assignment of the Havana Club trademark. Plaintiffs' use of the general license was insufficient for this purpose.
2. The Inter-American Convention
Plaintiffs next argue that the Inter-American Convention requires that the general license be construed to permit the assignment of trademarks. The Inter-American Convention, a multilateral regional trademark treaty between the United States and several Latin American nations, compels signatory nations to grant to the nationals of other signatory nations the same rights and remedies which their laws extend to their own nationals. See Inter-American Convention, ch. I, art. 1, 46 Stat. at 2912. The United States and Cuba are both signatory nations to the Convention. Treaties In Force: A List of Treaties and Other International Agreements of the United States In Force on January 1, 1996, 373 (June 1996).
Article 11 of the Inter-American Convention provides that
the transfer of the ownership of a registered or deposited mark in the country of its original registration shall be effective and shall be recognized in the other Contracting States, provided that reliable proof be furnished that such transfer has been executed and registered in accordance with the internal law of the State in which such transfer took place. Such transfer shall be recorded in accordance with the legislation of the country in which it is to be effective.
Inter-American Convention, ch. II, art. 11, 46 Stat. at 2922-2924. In the spirit of according reciprocal rights between signatory nations, Article 11 binds the United States and all other member nations
to give effect to and record upon its registry a valid transfer of a trademark that has occurred in another member nation. Accordingly, Plaintiffs argue, the transfer of a trademark in Cuba has the effect of transferring the trademark in the United States, and the United States is obligated to record this transfer on its registry. See Pl. Mem. at 6.
Plaintiffs further argue that an irreconcilable conflict between the CACR and the Inter-American Convention arises if the general license does not allow for the transfer in the United States of a transfer that was valid in Cuba. Plaintiffs correctly invoke the principle that "an act of Congress ought never to be construed to violate the law of nations if any other possible construction remains." Sale v. Haitian Centers Council, Inc., 509 U.S. 155, 160 n.35, 125 L. Ed. 2d 128, 113 S. Ct. 2549 (1992) (quoting Murray v. The Charming Betsy, 6 U.S. 64, 118, 2 L. Ed. 208 (1804)). See Pl. Mem. at 6. However, construing the Inter-American Convention as Plaintiffs suggest would circumvent the CACR's provisions regarding general and specific licenses and OFAC's unreviewable interpretation of the CACR. The issue then is whether the CACR supersedes the Inter-American Convention.
Under our constitutional system, statutes and treaties are both the supreme law of the land, and the Constitution establishes no order of precedence between them. U.S. Const. art. VI, cl. 2. The Supreme Court has "repeatedly taken the position that an Act of Congress, which must comply with the Constitution, is on a full parity with a treaty, and that when a statute which is subsequent in time is inconsistent with a treaty, the statute to the extent of conflict renders the treaty null." Reid v. Covert, 354 U.S. 1, 17, 1 L. Ed. 2d 1148, 77 S. Ct. 1222 (1957). The classic enunciation of the principle governing conflicting treaties and statutes is that in Whitney v. Robertson, 124 U.S. 190, 194, 31 L. Ed. 386, 8 S. Ct. 456 (1888):
By the Constitution a treaty is placed on the same footing, and made of like obligation, with an act of legislation. Both are declared by that instrument to be the supreme law of the land, and no superior efficacy is given to either over the other. When the two relate to the same subject, the courts will always give effect to both, if that can be done without violating the language of either; but if the two are inconsistent, the one last in date will control the other . . . .