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February,
2001

TOBACCO INDUSTRY NEWS

No Jury Trial for Cohiba Trademark Claim, Says Judge
Operations of Cifuentes y Cia Moved to Dominican Republic


New York, NY - The trademark battle over the rights to the legendary Cohiba cigar name will not be tried before a jury, a Southern District of New York federal judge has ruled.

Judge Robert W. Sweet found that the claims by the Cuban government-run Cubatabaco against General Cigar Co., Inc. over the Cohiba mark are based in equity, not in law, and he rejected General Cigar's bid to have an American jury decide the matter. Additionally, he ruled that Cubatabaco is not entitled to damages since Cubatabaco has never been able to sell Cohiba cigars in the United States. Like the federal dilution claim, Sweet found Cubatabaco's New York State anti-dilution claim and the company's claim for attorney's fees and costs "equitable in nature," and not entitled to a jury trial.

The dispute over Cuba's best-known cigar brand stems from the unique, and sometimes indirect, competition between the two companies because of the Cuban trade embargo.

"The dispute may foreshadow an effort by Cubatabaco to return Cuban Cohiba to the market in the United States," Judge Sweet said. "Since Cubatabaco is an instrumentality of the government of Cuba, the right to a jury trial is both procedurally challenging and tactically significant."

The complaint filed by Cubatabaco in 1997 charged that General Cigar was exploiting the Cohiba mark. It made claims for willful trademark and trade dress infringement, similar claims under state law, as well as a claim of unfair competition. Cubatabaco asked for an order canceling two General Cigar trademark registration numbers for Cohiba in the United States, and an order directing General Cigar to disgorge its profits on a theory of unjust enrichment.

Cubatabaco has owned the Cuban trademark for the Cohiba brand since 1972, and has since registered the mark in 115 countries worldwide. A U.S. trade embargo prevented the brand from being sold here.

General Cigar obtained its first of two U.S. trademark registrations for the Cohiba mark in 1981.


Trade Act Halts Specialty Cigarette Imports

Washington, DC - When President Clinton signed the "Tariff Suspension and Trade Act of 2000," or P.L. 106-476, into law in December, no one realized that the legislation would inadvertently shut down the imports of all nearly all specialty cigarettes into the U.S. Adding technical amendments to earlier legislation banning the import of "grey market" cigarettes - those manufactured for sale in foreign markets but sold domestically and bypassing federal taxation and packaging requirements - the bill was meant to drive a final nail in grey market activity. But new labeling requirements now enacted no longer allow health warnings to be affixed by means of a sticker. Stickers have been a standard means for many foreign manufacturers, those shipping relatively small volumes of cigarettes to U.S. distributors, to comply with U.S. labeling requirements. Creating custom packaging solely for the U.S. market is considered economically unfeasible. Leading importers of specialty cigarettes including G.A. Andron, Kretek International, and Quintin USA were blindsided by the new regulations, only discovered when arriving imports were suddenly rejected at customs.

"We don't sell any more," said a frustrated Joanne Digget, vice president of G.A. Andron. "We just try to stay two steps ahead of the government." While importers wrangle with the FTC, warehouse stocks dwindle, and resumed imports could be months away.


TRADE RESTRAINT
Altadis USA Agrees to Marketing Practices Stipulation in General Suit


New York, NY - In response to the General Cigar Holdings, Inc. lawsuit against Altadis U.S.A. and Consolidated Cigar Holdings, Inc., a Federal Court has approved a stipulation, to be effective for the duration of the lawsuit, prohibiting a number of practices cited by General Cigar in its complaint.

In the stipulation, Altadis U.S.A. and Consolidated Cigar agreed: Not to tie the purchase of non-Cuban premium cigars by retailers to the future availability of Cuban premium cigars in the United States; Not to represent to retailers that they have the right to use the Partagas and Punch trademarks and designs in selling cigars in the United States should Cuban cigars become legally available for United States sale; Not to represent themselves as exclusive vendors of Cuban premium cigars nor to solicit retailers to be a part of a distribution network for such cigars.

In addition, General Cigar, Altadis U.S.A., and Consolidated Cigar agreed that they would take no retaliatory action against any retailers who provide testimony for either side in the matter. The companies further agreed that the stipulation could not be construed or argued as an admission of any kind related to the charges General Cigar has made.

General Cigar filed the lawsuit in U.S. District Court in November 2000, charging that Altadis, S.A., the world's largest producer and distributor of cigars, and its U.S. subsidiaries, Altadis U.S.A. and Consolidated Cigar Holdings, Inc., violated federal and state antitrust and fair-trading laws by, among other things, illegally conditioning the future sale of Cuban cigars to U.S. customers on the purchase of its non-Cuban cigars. The suit also charges that three defendants are violating the U.S. embargo of Cuba.


FTC Dooms Swedish Match Bid to Buy National Tobacco Company

stockholm - A month after a U.S. federal court issued a preliminary injunction barring Swedish Match AB from buying North Atlantic Trading Company's National Tobacco Co. unit, the two companies walked away from the $165 million deal.

In June 2000, the Federal Trade Commission asked the court to block the sale, saying it would violate antitrust laws by reducing competition in the loose leaf chewing tobacco market and cause prices to rise.

The deal would have boosted Swedish Match's market share to 60 percent of sales in the U.S. and give the two biggest companies 90 percent of the market. The companies had argued that consumers could switch to moist snuff, marketed by U.S. Tobacco under the Copenhagen and Skoal brand names, if the price of loose leaf grew too high. But the FTC found that many consumers wouldn't switch even if the price of loose leaf increased.

On December 14, 2000 a U.S. District Court issued a preliminary injunction preventing Swedish Match North America from acquiring the Beech Nut, Red Man, Durango, and Havana Blossom loose leaf chewing tobacco brands and certain other assets of National Tobacco Co. On December 21, the commission issued an administrative complaint alleging that the acquisition would violate sections of the FTC and Clayton Acts. The proposed transaction, originally announced in February 2000, was subsequently abandoned.


American Western Cigar Now in Control of House of Windsor, Red Lion

yoe, penn. - House of Windsor, a privately owned cigar manufacturer, has entered into a strategic alliance with American Western Cigar Co. whereby American Western now controls a majority of the stock of House of Windsor and Red Lion International. American Western Cigar began its involvement with House of Windsor in December, 2000.

House of Windsor is tobacco manufacturer with over 80 years of expertise in cigar, smoking, chewing, and pipe tobacco production. This old-line Pennsylvania factory has developed over 200 blends of premium smoking tobacco and bulk tobacco. House of Windsor is also known throughout the U.S. and Canada for its Wolf Brother Rum Crooks, Crookettes, Caribbean Rounds, Palma Throw Outs, as well as other national brands, machine made cigars, and private labels.

American Western Cigar Co., a privately owned corporation based in Cincinnati, Ohio, is a manufacturer and importer of premium hand rolled flavored cigars. It is currently promoting its new Island Collection Flavored Cigars.

The Pennsylvanian factory had been in and out of financial difficulties for several years. "Things are changing at House of Windsor," said David Berger vice president of American Western. "New management expertise is involved in the every day operation. The transition team is currently making changes in production, financing and working on a national marketing and sales program," he explained.

"We will be promoting the company's long-time expertise in pipe tobacco and we will also be introducing new brands and packaging to our distribution network" said Raphael Hebert, American Western's national sales manager.

American Western Cigar and House of Windsor will be jointly exhibiting in various trade shows in 2001, including the ITE, the RTDA, the AWMA and the NACS. For further information, please contact Raphael Hebert, American Western Cigar at (513) 662-8802.



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