In an apparent first for South African trade mark law, the Western Cape High Court has considered whether the remedy of damages or a reasonable royalty for trade mark infringement requires the claimant to prove fault in the form of negligence or intention. The judgement can be found here.
I won’t bore you with the complete factual matrix
which is far too complicated for a post-long-weekend Monday morning. Suffice it to say Terespolsky, of Col'Cacchio fame, owned the trade mark MORITURI in respect of pizzerias and opened a pizzeria in
Claremont in the 90s called “Morituri by Col’Cacchio”. He sold that business with the terms permitting the purchaser to use
the name Morituri only in respect of the Claremont premises. Terespolsky seems to have a habit of naming
his restaurants irreverently - Col’Cacchio apparently means “up yours” and
Morituri “those about to die”. The fare
served at these establishments is however anything but irreverent – my unshakeable
belief is that Morituri in Claremont
serves the best pizza in Cape Town (which pretty much makes it the best pizza
in the country).
The defendants, unaware of the terms of the sale, purchased
the Claremont business and proceeded to open Morituri branches in Stellenbosch
and Lakeside, prompting trade mark infringement proceedings by
Terespolsky. The defendants admitted the
infringement and consented to interdictory relief, but opposed payment of a
reasonable royalty (one of the remedies afforded to trade mark owners in the Act). Terespolsky argued that once infringement has
been established, a right to damages/reasonable royalty followed as a matter of
course, i.e strict liability without fault.
The defendants in turn argued that because section 34(3) of the Act
states that the court “may” grant such relief, as opposed to “shall”, the court
has a discretion whether to order payment of damages/reasonable royalty.
Although the court wasn't called upon to address the
question of whether damages require fault, the court gave support
to the view expressed in Webster
& Page that ordinary delictual
principles should apply and that fault is required, given the rule of interpretation
that a statute does not alter the common law beyond its clear terms. Notably, the court found that
damages flowing from use occurring between publication and registration of a mark do not require fault but are discretionary, given that our common law
would not recognise a claim in respect of that period.
The court was, however, called upon to consider
whether a reasonable royalty requires fault. The court found that because a claim for a
reasonable royalty does not exist at common law, ordinary
delictual principles do not apply and the word “may” in the Act should be given
its ordinary meaning. In other words,
the remedy of a reasonable royalty does not require fault and the court has a
discretion to decide whether it is just and equitable to grant the remedy. The court declined to order the remedy in respect
of the Lakeside pizzeria on the basis of triviality, but
did order an enquiry to quantify the royalty in
respect of the Stellenbosch business.
There does appear to be a contrary view on this, from none other than the authors of Webster & Page (at para 12.56). Given that payment of a reasonable royalty is
stated to be “in lieu of" damages in the Act, the authors hold that the same
principles applicable to payment of damages (i.e. fault based liability) should
be applicable to payment of a reasonable royalty.
Given
the already significant difficulties faced by claimants in proving damages, the
court's comments (albeit obiter) that fault needs to be shown could make claiming damages less
attractive. Whether the court's finding that an equitable discretion
applies to a reasonable royalty claim will make that remedy more or less
attractive will probably depend on the facts.
One thing is clear though, it does introduce an element of uncertainty given the nature of discretion.
