Saturday 26 April 2014

Jeremy Speres

South Africa: Three new trade mark judgements

After being punished by a gorgeous yet savage Two Oceans Trail Run, I was hoping that a read of the three High Court trade mark judgements discussed below would take my mind off my aching limbs.  The first did just that, the second was moderately interesting and the last made Bastard Hill seem rather pleasant in comparison!     

Presto produces cellular confinement systems used for soil stabilisation and erosion control.  In the 90s, Presto licensed certain patents, know-how and its GEOWEB trade mark to PRS.  The parties ultimately fell out, proceedings were instituted and settlement was reached in 2001.  The settlement expressly repealed most of the original licence and provided a new, altered licence to PRS for a limited period.  Unfortunately, the settlement did not expressly retain the acknowledgement of Presto’s proprietorship of the mark nor the provisions forbidding PRS from adopting or registering the mark other than in terms of the licence.

After expiration of the settlement licence, PRS filed an application for the mark in SA.  Presto then sought revocation of the registration on the basis that PRS had no bone fide claim to proprietorship (s 10(3)) and that its application was made mala fide (s 10(7)).

The court found that implicit in the settlement licence was an acknowledgement of Presto’s proprietorship of the mark.  The court also adopted a wide interpretation of mala fides and accepted that bad faith in relation to claims of proprietorship does not necessarily involve breach of a legal obligation (in this case, a contractual obligation).  Accordingly, even though the express provisions acknowledging Presto’s proprietorship of the mark terminated upon settlement, the court still found that reliance on that state of affairs fell short of “the ethical standards of acceptable commercial behaviour.”  

Importantly, the judgement highlights the flexible nature of objections based on lack of bona fide proprietorship and mala fides, emphasising morality and ethics (things that perhaps us trade mark lawyers aren’t too bothered by!).  It also emphasises the need for clearly drafted settlement agreements – implicit terms are notoriously difficult to prove and one is left with the feeling that this dispute might not have arisen if the settlement agreement contained express proprietorship provisions.

Aloe Vera owns trade mark registrations for an eagle device in classes 5 and 32 and has established a reputation in the device in respect of its health and wellbeing products.  Taisho applied to register its own eagle device in the same classes.  Aloe Vera opposed Taisho’s applications on the basis of a likelihood of confusion or deception arising from Aloe Vera’s reputation (s 10(12)) and its prior registrations (s 10(14)).

The court cited two contentious aspects of the recent Foschini v Coetzee judgement with approval.  Firstly, the court favoured the approach of using the classification system as the starting point for assessments of similarity.  Secondly, and perhaps most contentiously, the court cited the comments in Foschini regarding the need to limit monopolies in light of a general policy against anti-completive practices.  In Foschini, that approach was used to limit the goods/services scope of Foschini’s monopoly.  In this case however, the court used the same reasoning to limit Aloe Vera’s monopoly in respect of the similarity of the marks.  The court found that Aloe Vera cannot claim a monopoly in respect of an eagle irrespective of the manner in which it is depicted.  Having regard to the dissimilarities between the devices viewed as wholes, the court dismissed the opposition. 

This case emphasises the difficulty in proceeding on the basis of conceptual similarity alone and is in line with the reasoning of the Registrar in the Sun International v La Chemise Lacoste case, also incidentally involving a depiction of an animal, where it was reiterated that “trade marks do not create monopolies in relation to concepts or ideas” (cited in La Chemise Lacoste v Rong Tai Trading).  It is also noteworthy that the anti-monopoly sentiment first expressed in Foschini has now spread to another court, albeit in the same division.

This judgement had me scratching my head a fair bit.  Luckily I’m not the only one; one learned commentator, who shall remain anonymous, mentioned that the judgement seems “confused and confusing on more than one level.”  Many thanks to Adv. Mark Seale (who acted for the applicant and is not the anonymous commentator!) for very kindly sharing his heads (here and here) and the notice of application for leave to appeal, which is to be heard in May.

The applicant claimed that the respondent was infringing its registration for INFINITY in respect of tyres and wheels.  The respondent relied on the section 36 “prior use” defence but also counter-claimed for expungement of the mark on the basis of, amongst others, section 10(3).

The court apparently disregarded the express wording of section 36 in allowing the defence.  Section 36 requires the party raising the defence to show use predating the date of first use or the application date of the registered mark, whichever is earlier.  Having apparently accepted that the applicant began using the mark before the respondent, the court strangely went on to hold: “Nothing turns on the date Applicant commenced using the trade mark…as it bases its claim squarely on the registration…”

Regarding the counter-application for expungement, the court adopted a rather harsh interpretation of what constitutes “sharp practice” vitiating a bona fide claim to proprietorship.  The court found that simply because the applicant had applied to register the mark two weeks after discussions with the respondent, had delayed enforcing the mark and had only filed its application sometime after it began using the mark, the applicant’s conduct approached “sharp practice”.

Finally and most interestingly, the court considered the tricky question of whether a distributor, licensee or some other party besides the source of the goods/services can claim proprietorship of the mark (See Wilkhof Trade Mark Licensing at p 154 onwards for a full, fascinating discussion).  The court found that in order for an applicant to have a bona fide claim to proprietorship, it must intend to use the mark in respect of its own goods.  Given that the applicant in this case imported its goods (as opposed to manufacturing them itself), it was found to lack such intention and its registration fell to be expunged accordingly.  In support of this stance, the court relied on the definition of “trade mark” in section 2(1).  This despite the authors of Webster & Page writing that “It is clearly arguable that as the distinguishing function is given more weight in the 1993 Act, it should be possible for a distributor in the absence of a person claiming greater title to the mark to register such mark as his trade mark. Such an interpretation would give full meaning to the words “any other person” in the definition.”

What makes this aspect of the judgement so interesting is that typically the manufacturer or the original source of the goods/services would be the one claiming that the trade mark applicant (usually an errant distributor or licensee) lacked bona fide proprietorship.  Interestingly in this case, a third party succeeded in raising this ground.  Watch this space for a report on the appeal judgment!

Jeremy Speres

Jeremy Speres

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