Tuesday, 8 September 2009

SCA decision on generic marks - (a) Lotto?

Yesterday the Supreme Court of Appeal handed down its judgment in the Lotto case. The five judge appeal bench, after entertaining argument from Ginsberg SC and Salmon SC (for Online Lottery Services (Pty) Ltd (“Online”) - appellants) and Bowman SC and Du Plessis (for National Lotteries Board (the “Board”) and Uthingo Management (Pty) Ltd (“Uthingo”) – respondents), upheld the appeal in all substantive respects. Although one would have welcomed a more precise and accurate decision (which in places is just wrong) from such a powerful bench, the case illustrates that the South African test for distinctiveness remains somewhat different to the European test and also, that a registration certificate is simply a first glance proof of right, even after substantial use of the mark.

The contested mark is LOTTO. The respondent had successfully shown infringement and passing off through use of the name LOTTOFUN in connection with the sale of sale of tickets for the national lottery by the appellant. The appellant had unsuccessfully claimed for the cancellation of the Board’s mark on the basis that it wrongly remains and was an entry wrongly made on the register because it is not used as a trade mark and has not been used as one. [The decision is somewhat ambiguous on the actual reasoning of the grounds of the cancellation claim (see paras 10 v 12 v 35 of the decision, and the comments below).]

The expungement/cancellation claim

The court stressed the general principles that “use” on its own does not mean that a mark is distinctive and furthermore that a single user of a generic name as a trade mark does not mean that a name is a trade mark. In addition, it held that expert opinion on the meaning of dictionary definitions is not necessary, as dictionaries generally speak for themselves.

The court held at para 32 that the word LOTTO “was alive in South African language usage at the time of the registration in 1991 and had been for many years” and “the concept of lotto as a genus of games of chance which embraces a variety of species was clear”. Consequently, “the registering party simply appropriated to itself a word already in general circulation which possessed an ascertainable generic and descriptive meaning over which it could have no monopoly and which should have been open to use by all competitive undertakings in the gaming industry.” (See comment on this finding below).

At para 35 the judges made a finding that there had been no use of the mark in relation the part of the specification which covered "services for or in connection with financial services" which consequently left the registration liable to be cancelled on the basis of non use.

Passing off

Establishing passing off when a mark has been ruled to be generic is understandably difficult, and so it proved to be in this case. Paras 54 sets out the findings of fact and para 55 the finding that no passing off could be shown. The judge made the curious comment in para 55 that “the learned judge should have concluded the deception or confusion which is an essential element of the delict of passing off had not been shown”. The comment is plainly wrong because actual deception or confusion is not an essential element of passing off – it is only necessary to show a likelihood of deception or confusion.

The judge went on to consider whether applicant had contravened the Lotteries Act which is not relevant to this blog.

Comment: (Right - a full bench decision)

It would have been helpful for SCA to have been more precise and there are a number of ambiquities. Under S70(1) of the 1993 Act the validity of an original entry of a trade mark needs to be determined under the laws in force at the date of such entry. In this case the contested registration(s) was/were applied for under the 1963 Act (which was replaced by the 1993 Act) yet there is no argument under the 1963 Act despite the Judge finding at para 36 that the marks “were wrongly placed on the register” and “[the meaning of lotto] was alive in South African language usage at the time of the registration in 1991 and had been for many years” The order only directs the Registry to rectify the register on the ground that the entries wrongly remain on the register indicating that arguments relating to “wrongly made” were not necessary, and so too the finding in para 36. Odd but perhaps I am missing something.

There is a difference between generic (the only practicable name or description of a good or service) and descriptive words (words which can become trade marks). It would have been preferable for the Court simply to have used “generic” in the sentence “possessed an ascertainable generic and descriptive meaning” because “and descriptive” is then redundant. By using “and descriptive” the judgement could be expressing the notion that the word is also a descriptive term over which “it could have no monopoly”, ie contemplating a separate category of words that cannot be registered. If that is correct (and there are provisions in the Act which allow for a separate category) then how do the findings interface with how the case was pleaded under Section 10 and Section 9 – for example, para 13 only refers to S10(2)(a) and not Section 10(2)(b) or does the judge mean that all descriptive words are not capable of distinguishing under Section 10(2)(a)? Surely not.

The phrase “should have been open to use” used in the judgement, and the concept of “availability” has been ruled to be irrelevant under the equivalent European test (see ECJ decision here). It does not appear that Counsel for the respondent sought to argue this point. A case that would also have helpful to the appellant is the ECJ decision known as the DOUBLEMINT decision which establishes the principle that “a sign must…be refused registration…if at least one of its possible meanings designates a characteristic of the goods or services concerned”. ECJ decisions are persuasive because of the close correlation between the European Harmonisation Directive on Trade Marks, and the RSA Trade Marks Act 1993.

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