SOUTH AFRICA: CIGARETTE BRAND OWNERS OCEANS APART?

SOUTH AFRICA: CIGARETTE BRAND OWNERS OCEANS APART?

By Afro Leo   Wednesday, March 17, 2021   No comments:

Cape Horn is a rugged headland that lies at the southernmost point of Terra de Fuego, an archipelago at the very tip of South America. It is notoriously difficult to navigate, with unpredictable weather, high seas, strong winds and turbulent conditions. It is where the Atlantic and Pacific oceans meet and it took a Dutchman Jacob Le Maire to first circumnavigate this cape in 1616. Fast forward 400 odd years and we have a case report of a South African judge navigating the turbulent waters of a trade mark dispute between a licensor and its former licensee involving the brands PACIFIC and ATLANTIC for cigarettes. Can these trade marks mix in the marketplace, was the essential question.

Judge Hughes of the Gauteng Division of the High Court was called upon to decide whether Carnilinx (PTY) Ltd, a former licensee of Open Horizon Ltd’s PACIFIC trade marks (whose license had been terminated for selling counterfeit PACIFIC BLUE cigarettes!), was infringing those trade marks through the use of the mark ATLANTIC. Illustrations of the marks in use are helpfully inserted in the judgment.

The application was launched claiming infringement under Section 34(1)(a) of the South Africa Trade Marks Act 194 of 1994. This section is the identical/similar mark, identical goods infringement provision. It was trite that the goods, namely the sale of cigarettes, were identical and so what lay before the court was to decide whether the use of ATLANTIC infringed one of more of the PACIFIC trade marks owned by Open Horizon. Although there are a number of trade marks to consider, the essential question was whether ATLANTIC was a similar mark to PACIFIC.  Not surprisingly, Judge Hughes, in a well-reasoned judgment, decided that they were not, noting in the process that a number of trade marks co-exit in the marketplace and on the register with “ocean/sea/water” type themes.

The interesting aspect of this case is not so much the decision – few would argue that the marks are too similar (except of course if this was your former licensee who had built up trading goodwill using your brand only to switch it to something arguably similar after selling counterfeit products of your own brand) – but the lessons for licensors.

 In the decision, there is reference to a standard clause in a license agreement requiring the licensee not to impair any right, title and interest in the intellectual property:

 ‘Title to the Intellectual Property

5 1 The Licensee agrees that all right, title and internet in and to the Intellectual Property vests in the Proprietor and that it shall have no claim in and to the Intellectual Property.

5.2 The Licensee may not during or after termination or cancellation of this agreement:

5.2.1 dispute the validity or enforceability of these rights or the Patents;

5.2.2 do anything that contests; or

5.2.2 in any way impairs, any part of that right and title and interest of any of the intellectual property rights which may be the subject of this Agreement and will not direct or assist any other person to do so.’

Now knowing the outcome, the question is how this clause could have been strengthened to avoid such a situation. The good about this clause is that it contemplates that it would survive the termination of the agreement but it would have been better (for the licensor) had it also prohibited the use of marks that contained, for example, “ocean-like connotations” and made it clearer that it did survive termination of the agreement. Hindsight is an exact science but it does illustrate that care should be taken when considering standard clauses and adapting them to one’s brand. Too often short thrift is given to these clauses by licensors.

The second lesson of this case lies in the attempt by Open Horizon to introduce a claim for unlawful competition at the very last moment. The argument is contained in para 41 of the decision:

‘Bearing in mind the history of this matter and the fact that the Respondent was previously licensed by the Applicant and its predecessor-in-title, STIP, there can be no doubt that the only plausible explanation is that the Respondent deliberately adopted its confusingly similar ATLANTIC marks and get-ups in order to imitate the Applicant's successful PACIFIC range of products, thereby obtaining a springboard advantage and taking unfair advantage of the Applicant's fruits and labours. The Respondent is also unlawfully interfering with the Applicant's exclusive rights in its PACIFIC trade marks and PACIFIC get-ups.’   

This argument was not determined by the judge because it was relied on only after pleadings had closed but, in my opinion, is a stronger argument than S34(1)(a) trade mark infringement, especially as the optics do favour the licensor. However, it would have likely required considerably stronger papers to have had any chance of being successful (it is not a slam dunk by an means) and hence would have been more costly to bring. It is telling that the judge simply dismissed it on grounds that it was out of time and did not express a finding on the merits of it at all. This can signal that there is something in the argument.

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“I SEE A BOAT ON A RIVER” - THE COPYING OF VEHICULAR SHAPES

“I SEE A BOAT ON A RIVER” - THE COPYING OF VEHICULAR SHAPES

By Afro Leo   Monday, June 04, 2018   No comments:

Prof Wim Alberts' pen has been at work. This time its nib is directed at the shapes of vehicles. Have you ever had anyone ask you whether you could start a toy business based on model cars, or create a car kit business, or how to describe a prize in a competition which is a car, or use models of famous cars in an amusement park for kids, or use a toy car in a promotional campaign for your business? This article will assist you understand some of the legal aspects as applied in South Africa, insofar as the shape of the car is concerned. Click here for more. 

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Appeal Court Decision in Africa's First Adword Case Provides Clarity

Appeal Court Decision in Africa's First Adword Case Provides Clarity

By Afro Leo   Friday, May 27, 2016   No comments:

News just in from Bloemfontein is that M-Systems successfully defended the appeal by Cochrane Steel creating clarity that keyword bidding on a competitor's trade mark (on its own) is not passing off or unlawful competition in South Africa. The case will make it difficult to run an infringement suit on the same facts. It brings South Africa in line with worldwide jurisprudence on this issue, is Africa's first case on keyword use and will benefit Google's Adword program and other search engines. The appeal was dismissed with costs.

The history of the saga between market leader Cochrane Steel against new entrant M-Systems in respect of the keyword CLEARVU is outlined in this post here. The decision, handed down in just over a week from hearing, can be obtained here. Breaking news of Google's developments on their Adword service for mobile devices and native advertising is located here.

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DOVETAILING - other lessons from the DOVE campaign

DOVETAILING - other lessons from the DOVE campaign

By Darren Olivier   Tuesday, August 06, 2013   No comments:

The advert below featured on Linkedin today together with an article entitled "Dove uses Photoshop Trojan Horse to shame potential body-shamers". It is the story of Dove's viral message in its "real beauty" campaign but it is also a reminder of how a trade mark is able to have economic value that is independent of its traditional origin function, why trade mark laws need to have effective provisions to protect this value of the trade mark and also, whether manipulation of adverts is contrary to Advertising Standards Authority ("ASA") codes, or should be.

The advert cleverly and even ironically illustrates how brands are now so much more than a name identifying the origin of a product or service. In this example DOVE represents a cause that is communicated in a very clever way. For those that identify with the cause (just about everyone who feels inadequate paging through a magazine, I would imagine) will now (hopes DOVE) identify just as powerfully with the DOVE brand. The fact that DOVE is a beauty brand makes the communication very powerful and perhaps ironic too; historically DOVE itself must have been guilty of a touch up or two, or at least its owners have.

From a trade mark law perspective, it highlights the so-called dilution provisions of trade mark laws. These are the provisions that enable a trade mark symbolising a brand to be protected against unfair advantage and detriment, absent confusion. For example, a canny marketer could use the DOVE trade mark in relation to unrelated goods, say cars (avoiding confusion), but still take advantage of the cause ("real beauty") now represented by trade mark, and hence the advertising goodwill in the mark. Similarly, if the mark DOVE was bid on as a keyword for a breast cancer product, then potentially such use could affect the economic value of the brand, DOVE.

In some instances it is necessary to show some form of economic loss (interpreted by many to be lost sales) to prevail in a case using the dilution provisions or under unlawful competition. The campaign demonstrates the potential for the economic loss to be simply, the recognition that harm could be caused to the advertising or investment function of the brand which takes a considerable amount of time and money to develop. Once a brand represents a worthy cause, diversification and licensing become infinitely easier, thereby increasing the value of the brand.

The ASA code in South Africa protects against misuse of general advertising goodwill and against imitation (absent confusion) and so provides a form of protection too. The advert also reminds me of an article penned by a colleague of mine. Here Kelly Thompson (Adams & Adams) considers the manipulation of advertising images in food and beauty publications, and whether they are contrary to the ASA code as being misleading. Worth a read.

You can view the DOVE advert by clicking below. If you are viewing this on email, please go to www.afro-ip.net.

 

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Insuring against disparagement? - Santam v Dial Direct

Insuring against disparagement? - Santam v Dial Direct

By Darren Olivier   Wednesday, September 07, 2011   No comments:

Cluver Markotter's Jeremy Speres has very kindly sent through this thought provoking guest post, with interesting questions over the recent Santam V Dial Direct TV ad dispute:

"It’s not very often that we South Africans get treated to a spat of robust comparative advertising, let alone one that ends up in court, which is why local IP practitioners will be licking their lips at the recent dispute between insurers Santam and Dial Direct.


Beginning May 2011, Santam began airing their “Real McCoy” TV ad (available here and here) featuring the Oscar winning Sir Ben Kinglsey strolling down Noordhoek beach in a grey suit, lamenting the inequities of some insurance policies (because, naturally, this is what Sir Ben Kingsley concerns himself with when strolling along the beach). The advert then ends with Santam’s “Insurance good and proper” tagline.

In response, Dial Direct, as part of its “Yada Yada” talking hands campaign (that may be responsible for a recent surge in self-immolation), aired a brilliant parody (available here) featuring a man dressed in a similar suit strolling along a similar looking stretch of beach. Only this time, the man’s head is replaced with a talking hand that repeatedly blurts out “yada yada”.

Dial Direct, no doubt anticipating Santam’s displeasure, rather cunningly began airing the parody over the weekend of 2 July 2011. Santam, clearly not amused, fired off the usual salvos alleging copyright infringement and unlawful competition. Dial Direct refused to relent and Santam proceeded to obtain an urgent interim interdict in the Western Cape High Court requiring Dial Direct to remove the ad from circulation pending the return date for the final hearing (the founding papers can be downloaded here).

Now what’s particularly interesting here is that there was no reproduction (whether mechanical, digital or otherwise) of the actual footage of the Santam ad – Dial Direct filmed an entirely new ad. So it seems that Santam may be claiming copyright over an idea, and not the material expression of the idea (being the footage itself). Apart from claiming that the parody ad reproduces the Santam ad, Santam also claims that it is an adaptation which, in respect of cinematographic films, is not defined in the Copyright Act.


In terms of copyright law then, this case raises all sorts of rather tricky points surrounding the idea/expression divide; the definition of “adaptation”; whether Dial Direct could squeeze its ad into one of the rather limited exceptions provided in the Copyright Act and whether the right to freedom of expression should temper copyright law in the face of parody (think Laugh It Off). I can do no better than to refer readers to Andrew Rens’s (previously of the Shuttleworth Foundation and Creative Commons, currently pursuing an SJD at Duke University) excellent blog on these issues and more, available here. For a great analysis of the applicability of the ASA code to this matter, see Delene Bertasso’s piece here .


Regarding the unlawful competition angle, Santam appears to be relying on disparagement as the cause of action. This is a recognised form of unlawful competition in South Africa (see ch 11 of Van Heerden-Neethling’s Unlawful Competition) requiring, amongst others, proof that damage in the form of lost custom is probable. What isn’t clear is the extent to which our courts will be prepared to assume that damage is probable where all that is clear from the papers is that the material in question is disparaging and that many people will be exposed to it. Our courts have been willing to assume that damage will follow in passing off cases where the two elements of reputation and deception have been proved – perhaps our courts will follow the same route in relation to disparagement?

One can’t help but get the feeling that there may have been a third way for Santam that may or may not have yielded more productive results. Perhaps, with all the creative talent we have in this country, all those billable hours could have been spent on devising a tasteful retort? The South African public tends to respond well to that sort of thing – remember BMW’s brilliant “Beat the Bends” come back? (see here). No doubt the Streisand effect is about to kick in, hopefully thanks (or not) to this post!"



One wonders too what the basis of a claim by Sir Ben Kingsley might be either contractually against Santam or against Dial Direct. Is this the same as Zapiro's parodies of another bald gent we all know? Does Sir Ben also have a claim under unlawful competition for disparagement to his own brand or perhaps one based on defamation? Is it his reputation or that of Santam's that is at stake or both? Sir Ben is clearly recognisable and the concept of the advert revolves around him and look-a-likes. His involvement also endorses the Santam policies. Indeed the difficulty in getting Ben to sign up for the add is (rather prophetically) explained here:
 
“You also have to keep in mind that these people are brands in their own right and won’t do anything they don’t like or that’s puts them in bad light. We were very lucky with Sir Ben...".
 
This may explain the action taken by Santam but one cannot help feel too, that Jeremy has a point: what would you do if you were Santam or Ben for that matter?

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Franchise halaal - almost. The Wrap It Up decision

Franchise halaal - almost. The Wrap It Up decision

By Darren Olivier   Wednesday, May 12, 2010   No comments:

The facts of this latest case from downtown Durban, South Africa, are an example of what happens when it all goes wrong in a franchise relationship and exposes some of the risks in what the Franchise Association of SA describe on their home page as "one of the most successful business formats". It also gives us a clue to what you cannot do when relying on intellectual property rights eg you cannot sue for infringement if the registered trade mark has lapsed. Elementary, you may say, well...

The "Wrap It Up" halaal fast food franchise decision was ultimately decided on principles relating to passing off and that incredibly versatile and sometimes vacuous amoeba - unlawful competition.

When one does not have a full set of papers it is difficult to comment on the application of the law to facts but in this case it seems that the goodwill was found in the business represented by the trade marks, without proof of reputation but because it was "generated by their intellectual property" and with, apparently, none of the normal evidence to support this (see paras 33-36 and 42). At this juncture the case looked like one where principles of passing off would be applied. Not so it seems.

The Applicants’ case was then summarised by the Judge "that the Respondents intentionally misrepresented that they had a right to deal with Second Applicant’s intellectual property for their benefit". At para 51 it was then held that the Applicants had failed to show such intentional misrepresentation and hence that he could not find "unlawful competition". Since fraudulent intent is not part of the law of passing off it is not clear whether the Judge is distinguishing between the two legal heads ie unlawful competition and passing off or whether his finding turned on "misrepresentation".

The literal translation of the Arabic word "Halal" is "lawful" which almost transpired to be accurate in this case; the Applicants were not entirely unsuccessful as they became entitled to certain documents and information that had been withheld. Costs were accordingly shared.

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SA: gas containers - latest unlawful competition case

SA: gas containers - latest unlawful competition case

By Darren Olivier   Wednesday, July 16, 2008   No comments:

South Africa's latest reported unlawful competition case was handed down last month in the High Court as Totalgaz Southern Africa v Solgas (Pty) Ltd and Another; Easigas (Pty) Ltd v Solgas (Pty) Ltd and Another (22007/2006; 2006/23048) [2008] ZAGPHC 170 .

This was an appeal concerning commercial activities around the business of steel pressurised liquid petroleum gas (“LPG”) cylinders bearing certain identification marks. It is an interesting decision because it involves a defence based on custom and illustrates the difference between passing off (by omission) and unlawful competition which tend to be used interchangeably, sometimes in error. It is also a timely decision as South Africa is in its winter months and has recently endured a period of unreliable electricity supply, raising the demand for safely supplied LPG in cylinders.

The appellants (Totagaz & Easigas) contended that they, together with the other major wholesale suppliers of LPG, sell LPG through the “cylinder market” where they supply their products in a manner which allows them to retain ownership of their cylinders. The practice is that when a supplier or distributor receives in exchange for LPG filled cylinders, cylinders belonging to another supplier it returns them to that supplier, receiving in exchange such cylinders as that other supplier may have belonging to him. Then, if a number of empty cylinders exchanged do not match, the recipient of the greater number will pay the current deposit price on the empty cylinders received which exceed those delivered by it.

The appellants as owners of their cylinders contended that they are entitled to prohibit the respondents (Solgas and another) from using their cylinders and to their return. The appellants relied on Section 10(2) of the Practice of the South African Bureau of Standards 019 of 2001 Code which deals with “persons competent to fill containers” requiring permission of the owner of the container/cylinder which had not been given.

The respondent asserted that the trade usage or custom negates any claim that the appellants may have to ownership of the cylinders. In the alternative, the respondents contended that if the appellants retained ownership of their cylinders, the appellants’ claim to ownership may be refuted by reason of the usage, circumstances and manner in which customers come into possession of the cylinders. The respondent also claimed that the appellants and all suppliers have “tacitly and/or impliedly, if not expressly, consented to them ... filling its cylinders when requested to do so by customers in possession thereof and to return such filled cylinder to the customer”.

In upholding the appeal, the court held that the custom or trade practice that the respondent claims to exist has simply not been established by evidence. In particular the practice which the second respondent claims in his affidavit exists, has not been "uniformly observed, is not reasonable, and is definitely not certain". Consequently, the contention that the appellant’s true motive is to prevent lawful competition was simply incorrect. The Court also upheld the express permission requirement under the Code, which had not been granted in this case.

The case contains a useful summary of the law pertaining to custom and unlawful competition in South Africa. (Darren Olivier, Bowman Gilfillan)

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25ft copy cats and the eroding influence of Schultz v B...

25ft copy cats and the eroding influence of Schultz v B...

By Darren Olivier   Monday, June 23, 2008   No comments:

The waning influence of the 1986 case of Schultz v Butt seems clear from the latest High Court decision in Van der Merwe and Another v Els and Another (3279/08) [2008] ZAWCHC 31 (4 June 2008). For the uninitiated the Schultz V Butt cases involved copying of a hull of a catamaran, which was held to be unlawful. The cases arguably gave some form of recognition to a remedy of unlawful competition for copying of three dimensional utilitarian objects (in those cases the hull of a catamaran). In the present case counsel for the applicant relied heavily on Schultz v Butt in trying to show that his client's 25ft catamaran hull had been unlawfully copied by the respondent. The judge referring to observations by Dean (Handbook of South African Copyright Law), Justice Plewman (Premier Hangers v Polyoak (PTY) Ltd) and the S15(3A) amendment to the Copyright Act (see earlier posting here) concluded that the Schultz v Butt remedy "is of very limited scope":

"The inference seems irresistible, as submitted by counsel for the respondents, that the legal landscape has changed quite considerably since Schultz v Butt was decided more than twenty years ago. After all, how can the boni mores denounce as unlawful conduct that is specifically authorised by the legislature in s 15(3A) of the Copyright Act?"

In addition the judge distinguished the present case on grounds that the applicants had spent significantly less time developing the boat, than did Mr Butt; that the boat design had been protected by patents until 2003 which were now in the public domain; and the applicant's partnership had never produced the 25 foot boats on a commercially sustainable basis and that the application was not directed protecting existing goodwill but at preventing a competitor from trading.

In dismissing the application, he endorses Dean: "The unfairness and wrongfulness in the Schultz case in fact lies in the undue benefit which Schultz made of the expertise, effort and financial outlay of Butt and it is this principle which ought to apply in the area of the copying of three-dimensional technological objects."

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De Beers in Price Fixing Settlement

De Beers in Price Fixing Settlement

By Darren Olivier   Tuesday, January 15, 2008   No comments:

According to iafrica.com , South African headquartered world diamond giant De Beers is to pay $295m in a class action settlement after it was accused of unlawfully monopolising the supply of diamonds, conspiring to fix diamond prices and issuing false and misleading advertising in the United States. De Beers, who coined the slogan "Diamonds are Forever" and own 70% of the diamond mines in Africa according to Wikipedia , have denied any wrongdoing in setting up a fund to pay the settlement. The class action lawsuits were brought against De Beers by Consumers, Resellers and Direct Purchasers in the United States (whose particulars are described in more detail by the Diamond Class Action Settlement website) .

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