Sunday 9 October 2011

Darren Olivier

RSA: Amarula decision on unfair advantage

The latest trade mark related High Court case from South Africa finds unfair advantage and a likelihood of confusion based on the use of a descriptive term.

The facts are relatively straightforward. The case is between Southern Liqueur Company ("SLC"), owner of the IP in Amarula cream liqueur, and a competitor product Black Horse Marula cream liqueur ("Competitor"). SLC claims that Competitor infringes (on the basis of likelihood of confusion and unfair advantage) its registered trade mark 84/2496 AMARULA covering goods including liqueurs and is passing off.  The relevant products (as close as Afro Leo could find to those attached to the judgement) are depicted from the left in diagrams 1. and 2. below. Diagram 3 represents a further product sold by Competitor. Click on each Diagram to enlarge.

Competitor counterclaimed that the registered AMARULA trade mark should be cancelled or failing that endorsed with a disclaimer or admission because the mark consists of the word "marula" which is descriptive of the flavour or contents of the liqueur (being a fruit of the Marula tree). The notoriety in the AMARULA trade mark was not denied by Competitor and Judge Goliath reasoned that the mark's reputation had saved the mark from cancellation because it had "acquired distinctiveness through extensive use". This must be correct. 

SLC rather astutely offered the following endorsement against the registration:

"Registration of this mark shall not debar others from the bona fide descriptive use in the ordinary course of trade of the word 'Marula'."

There is a subtle difference between this endorsement and the typical wording of a  disclaimer; this wording does no more than iterate one of the limitations to the rights of a trade mark.

The arguments are summarised in paras 6-12 of the judgement. In short, the Judge felt that the main question for determination was whether the use of MARULA in the diagrams was bona descriptive use of the term MARULA. If so, the claims would not have succeeded. The relevance of diagram 3 is explained because the the Judge felt that an intimate comparison of the two Competitor labels was required to establish good faith, or not (see para 24).

"[25] A critical evaluation of the two labels clearly demonstrates inconsistent use of the principle trade mark "Black Horse". It is evident that there is a dilution [really, how exactly?] of the trade name on the Marula product due to the indistinct print of the trade mark, the deliberate adjustment of the principal trade mark by reducing font size, and the removal of the horse figure. Clearly the Dark Horse trademark should be used in conjunction with the horse figure in order for the public to recognise and associate its product with a particular trade origin as illustrated in its strawberry product. [this cannot be correct]"

The Judge has conflated the issues here too. Instead of first analyzing whether infringement had taken place and then considering the limitations, he has taken a short cut to the question of good faith descriptive use concluding that there is infringement, essentially because the descriptive term is used in a manner that is more prominent than the principle trade mark and inconsistent vis a vis other products in Competitor's stable and in the marketplace.

The Judge appears to make a mistake in quoting Harms that "Use will not be bona fide, however, if the user does not unequivocally make it clear that his goods are not connected in the course of trade with the proprietor of the trade mark [that is being used ie the identical trade mark, which MARULA (a descriptive term) is not]. It follows that bona fide use in sec 34(2)(c) means honest use of a trade mark, without the intention to deceive anybody and while unequivocally making it clear that the goods are not connected in the course of trade with the proprietor of the trade mark." at para 26 citing Harms in Commercial Auto Glass v BMW.

At para 28 "...The flavour variant of respondent's Marula product is reflected in such a position on its labels that the principal trademark becomes irrelevant and invisible [MARULA is dominant but the principle trade mark is visible to consumers of liqueurs (the nature of the consumer does not appear to have been considered)]. There are several ways to draw to the attention of the consumer that the product's flavour is "Marula". Respondent chose to do so by using the word "Marula" in red bold capital letters and bold gold capital letters which bore a deceptive resemblance to applicant's trade name [for infringement or passing off purposes?]. The only distinctive feature [how can it be the "only distinctive feature" if it is an inherently descriptive term?] on the Marula product that is given prominence on the main, neck and back labels is the word "Marula" Furthermore, by reducing the size of the Marula label, in comparison with its strawberry label [is this not also because the word "strawberry is just longer?], the respondent effectively gave more prominence to the word "Marula" on the Marula product. This fact, coupled with the eye catching red and gold bold lettering, leads one to conclude that respondent intended to align its product with that of the applicant's [using an ordinary descriptive term].

In finding on all claims including unfair advantage infringement Goliath held that "The parties have similar products with a general African theme [which is not uncommon for African drinks]. I am satisfied that there is a reasonable likelihood that members of the public may be confused into believing that there is some trade connection between the goods of the parties [disagree, bring to mind SLD's mark perhaps but confuse based on a descriptive term?]. The difference in the shapes or sizes of the bottles and labels are not sufficient to overcome the general visual impression of similarity. The nature of the confusion or deception is likely to divert business away from the applicant, which could result in a loss of its market share [typical of a passing off conclusion but no apparent evidence]. It was clearly established that "Amarula" is a well-known brand in South Africa. The applicant has established itself as a market leader with its award winning "Amarula Cream Liqueur" and presently holds a dominant share in the overall Marula Cream Liqueur market [but this does not mean that they should retain it through exclusivity over its description] . Its reputation was created at enormous advertising costs. Consequently, respondent's conduct is likely to take unfair advantage of the distinctive character and reputation of the "Amarula" mark in a manner that is unfair. [a link to AMARULA yes perhaps but even if that link is intentional is it unfair if this advantage is based on the use of a descriptive term? Can it be an advantage if it is based on a descriptive term? Apparently so.]" 

Afro Leo hopes this decision is/was taken on appeal but wonders who will adjudicate it, as Harms retires shortly.

Darren Olivier

Darren Olivier

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