Con­fused and di­luted in SA

Some trade­mark laws ap­pear to be out of step with the rest of the world

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - MAN­ISHA BUGWANDEEN-DOORASAMY

THE trade­mark laws of the world are, by and large, har­monised — or at least well on their way to be­com­ing so. In an era where com­pa­nies op­er­ate in a global vil­lage, a multi­na­tional should ide­ally get the same pro­tec­tion for its brand in all the coun­tries where it op­er­ates.

It is for this rea­son that South African trade­mark law of­fers the same sort of pro­tec­tion to trade­mark own­ers that many other coun­tries of­fer. First, it of­fers pro­tec­tion against con­sumer con­fu­sion, in other words a sit­u­a­tion where the trade­mark owner finds that a com­peti­tor has a sim­i­lar trade­mark, and con­sumers are con­fused about who the prod­ucts come from.

Sec­ond, it of­fers pro­tec­tion against what is loosely re­ferred to as “di­lu­tion”. What this means is that the owner of a trade­mark that is well known will have re­course if it finds that a third party (not nec­es­sar­ily a com­peti­tor) has a sim­i­lar trade­mark in cir­cum­stances where, even though there is no con­sumer con­fu­sion, other detri­men­tal things hap­pen. For ex­am­ple, an ero­sion of the dis­tinc­tive­ness of the well­known trade­mark (re­ferred also to as “blur­ring”), or a tar­nish­ing of the rep­u­ta­tion of the well-known trade­mark.

It is the sec­ond form of pro­tec­tion that con­cerns us here. A re­cent US Trade­mark Of­fice de­ci­sion in­volv­ing Chanel shows how it can work. A Cana­dian in­di­vid­ual ap­plied to reg­is­ter the trade­mark Chanel for real es­tate devel­op­ment ser­vices. Chanel op­posed the ap­pli­ca­tion, claim­ing it had reg­is­tra­tions and rights in re­spect of a wide range of goods in­clud­ing per­fumes, jew­ellery, hand­bags, sun­glasses and re­tail ser­vices; and Chanel claimed that the real es­tate trade­mark would blur its well-known trade­mark.

Chanel filed a lot of ev­i­dence in sup­port of its op­po­si­tion. The com­pany was founded by Coco Chanel, the brand has been around for at least 90 years

Many be­lieve that in SA trade­mark di­lu­tion is dead in the wa­ter

(the fa­mous lit­tle black dress goes all the way back to 1926), and it’s ex­tremely well known in the US. It showed that the com­pany mon­i­tors things very closely and that it’s made a con­certed ef­fort to en­sure that it has ex­clu­siv­ity in the name Chanel in all prod­uct ar­eas.

It also showed that the Cana­dian has made a habit of us­ing fa­mous names like Givenchy, Cartier, Ver­sace and Dior for units in his build­ings.

The tri­bunal made the point that dis­tinc­tive­ness and fame are not the same thing, that fame is hard to prove, and that to suc­ceed the trade­mark owner must show that if “the gen­eral pub­lic en­coun­ters the mark in al­most any con­text, it as­so­ciates the term, at least ini­tially, with the mark owner”. It em­pha­sised that in di­lu­tion cases a com­pany does not need to prove con­fu­sion, com­pe­ti­tion or ac­tual eco­nomic in­jury — what it does need to es­tab­lish is an as­so­ci­a­tion that “im­pairs the dis­tinc­tive­ness of the fa­mous mark”. It said that courts will con­sider var­i­ous is­sues in cases like this, in­clud­ing the de­gree of in­her­ent dis­tinc­tive­ness of the trade­mark, and the ex­tent to which it is used ex­clu­sively by the owner. It held that Chanel is a house­hold name in the US, and it held that there was di­lu­tion be­cause a sub­stan­tial num­ber of peo­ple see­ing Chanel in re­la­tion to real es­tate would be re­minded of the fashion trade­mark, even if they didn’t be­lieve there was a con­nec­tion.

It was a bit like a UK case where Ford op­posed an ap­pli­ca­tion to reg­is­ter a trade­mark com­pris­ing the word “Fraud” in a logo form re­mark­ably sim­i­lar to the Ford logo. The op­po­si­tion was based on di­lu­tion and the hear­ing of­fi­cer made very short work of it. He ac­cepted that Ford had the nec­es­sary rep­u­ta­tion. He had no prob­lem with the ar­gu­ment that the pub­lic would make a link be­tween the two brands, even if they weren’t con­fused, and he ac­cepted that, be­cause the word ‘“fraud” has neg­a­tive con­no­ta­tions, the Ford trade­mark would be tar­nished.

Again, nice and easy. But don’t ex­pect the same in SA. That’s be­cause in the fa­mous tar­nish­ing case of SAB v Laugh-It-Off (in­volv­ing satir­i­cal tshirts), the Con­sti­tu­tional Court in­tro­duced a fur­ther re­quire­ment — the need to prove a like­li­hood of eco­nomic loss. This was some­thing SAB was un­able to do be­cause there was no proof that the t-shirt had af­fected the sales of Black La­bel beer in any way. And it’s some­thing that few com­pa­nies will be able to do. It’s led to a sit­u­a­tion where many be­lieve that in SA trade­mark di­lu­tion is dead in the wa­ter. Cer­tainly re­tired judge and IP ex­pert Louis Harms has voiced these con­cerns.

So, in SA we don’t pro­vide the pro­tec­tion against di­lu­tion that many other coun­tries do. But on top of that, it’s also ar­guable that we no longer pro­vide the same level of pro­tec­tion against con­fu­sion that other coun­tries do.

The prob­lem very sim­ply is this: in cases where the like­li­hood of con­fu­sion is raised, our courts seem to be in­ter­pret­ing trade­mark rights in an in­creas­ingly re­stric­tive way. We’ve had one case where, to the sur­prise of many, the Supreme Court of Ap­peal found that an in­her­ently strong trade­mark, Zon­quas­drift, could co-ex­ist for wine and wine grapes, be­cause wine and wine grapes are not sim­i­lar goods.

The court ap­plied tests that deal with things like the com­po­si­tion of the goods and the trade chan­nels through which they’re sold. We’ve had another case where a court held that the trade­mark Due South could co-ex­ist for var­i­ous goods be­cause the goods fell into dif­fer­ent classes of the clas­si­fi­ca­tion sys­tem, seem­ingly sug­gest­ing that the clas­si­fi­ca­tion sys­tem pretty much de­ter­mines the is­sue. In the Due South case the court also cited com­pe­ti­tion law as a rea­son for a re­stric­tive in­ter­pre­ta­tion of trade­mark rights. It’s a topic in its own right.

It’s quite pos­si­ble that the Chanel and Ford cases would have been de­ter­mined dif­fer­ently in SA. Which sug­gests that, in an era of in­creas­ing har­mon­i­sa­tion, SA is act­ing in a way that’s a bit un­har­mo­nious.

Pic­ture: THINKSTOCK

BLUR­RING THE LINES In the Chanel case the tri­bunal noted that in di­lu­tion cases a com­pany does not need to prove con­fu­sion, com­pe­ti­tion or ac­tual eco­nomic in­jury — what it does need to es­tab­lish is an as­so­ci­a­tion that ‘im­pairs the dis­tinc­tive­ness of the fa­mous mark’

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