Tag Archives: Trade Mark

Intent to use, or to abuse? Improper trade mark management

Articles imagesThe facts and circumstances the Supreme Court of Appeal (SCA) was seized with in Etraction (Pty) Ltd v Tyrecor (Pty) Ltd 2015 ZASCA 78 (28 May 2015), are an object lesson for trade mark proprietors, in how not to manage their affairs.

It was common cause that the Appellant, Etraction (Pty) Limited (“Etraction”), had adopted the mark INFINITY in 1995 for its motor vehicle wheel rim products and had established a business and reputation in wheel rim products under that mark.  Until 2008, it had however taken no steps to register this trade mark in respect of wheel rims, or any other related products, although it had registered other trade marks for products it dealt in.

In the interim, in 2006 the Respondent Tyrecor (Pty) Limited’s predecessor in business Falck, commenced importing and selling tyres bearing the INFINITY mark.  This mark had been used internationally by the Al Dobowi Group, following a launch of its INFINITY tyres in Germany in that year.  The Respondent Tyrecor (Pty) Ltd, in which the Al Debowi Group is an indirect shareholder, succeeded in 2008 to the Falck business of importation and distribution of INFINITY tyres.

The Court found that the evidence showed that there was awareness, from the year 2006, of the sale of INFINITY tyres in South Africa – and that the Appellant Etraction was aware of this inter alia because it was an exhibitor, together with the then importer and distributor Falck, at the Tyre Expo Africa 2006 exhibition where the latter was promoting its INFINITY tyres.

Etraction took no steps in 2006 or thereafter to object to Falck’s importation and distribution of tyres under the INFINITY trade mark. Had Etraction objected to Falck’s use in 2006, the objection may then have been warranted. It had a reputation in the mark INFINITY in respect of motor vehicle wheel rims, and might then with some justification have contended that use on tyres would be likely to be associated with the Etraction wheel rim business.

Instead, Etraction sat idly by while Falck from 2006 onwards, and Tyrecor from 2008 onwards, increased distribution and advertising of INFINITY tyres.  Moreover, the Appellants appear on the basis of the following facts cited in the SCA judgement, progressively to have acquiesced in the Respondent Tyrecor obtaining vested rights in its business of promoting and distributing tyres under the INFINITY mark :

  • On 17 and 18 March 2008 Tyrecor addressed e-mails to Etraction offering to supply it with INFINITY tyres. The e-mails enclosed photographs of the tyres that Tyrecor was offering to supply and set out the prices at which it was offering the tyres. On 26 March 2008, Tyrecor sent an e-mail recording a meeting its representative had with the Appellants representative.  It read as follows:

    “I would once again like to thank you for affording me the time to meet with both of you today to introduce our products. We are very proud of the INFINITY brand and believe that we will be able to add value to your organization.
    I sincerely hope that we can establish a beneficial relationship in the near future. Please do not hesitate to contact me should you require any additional information”.
  • Within three weeks after that meeting Etraction applied for registration of the mark INFINITY in relation not only to wheel rims for vehicles, but also to tyres.  It had not, however, conveyed to Tyrecor either at the aforesaid March 2008 meeting, or when shortly thereafter filing its application to register the mark INFINITY that it objected to Tyrecor using the mark.  Nor did it give any notice of its application to Tyrecor until it had secured registration of the mark, which occurred on 19 May 2011.  During the three years between the date of its application and registration, Tyrecor continued to trade and built up its business in the sale of INIFINITY tyres without any inkling that Etraction objected thereto, or that it intended itself to enter the market for tyres under that brand name.  In 2011, Tyrecor’s turnover from this trade exceeded R100 million.

On the basis of these facts and the Appellant’s evidently supine and acquiescing conduct, the SCA confirmed the partial expungement by the Court a quo of the Appellants registration no. 2008/08612, removing “tyres” from the specification, and in so doing upheld the dismissal of Appellant’s claim for infringement by Tyrecor. The basis in law for this finding, which involved a consideration of the meaning of bona fides for two separate and distinct purposes, was as follows:

Trade Mark infringement and the defence of “prior use”

Etraction, on securing registration in May 2011 of its INFINITY mark in class 12 covering both wheel rims and tyres, instituted infringement proceedings against Tyrecor.

Tyrecor raised a defence under Section 36(1) of the Trade Marks Act.  This section precludes a trade mark proprietor from interfering or restraining a third party from using the same (or confusingly similar mark), if that third party had made continuous and bona fide use of the mark in question from a date prior to the registrant’s first use of the mark, or prior to its registration thereof, whichever was the earlier.

The SCA held on the facts summarized above that Tyrecor (initially through its predecessor in business Falck and thereafter itself since 2008) had enjoyed continuous and bona fide use of the INFINITY mark in respect of tyres from a date prior to Etraction’s application (i.e. in 2008) to register the mark in respect of inter alia tyres, and thus that the provisions of Section 36(1) applied.

Etraction’s contention that Tyrecor did not have rights arising from its distribution of INFINITY tyres (i.e. in that it was itself not the manufacturer that had applied the mark to the tyres, and was thus not the proprietor of the mark), was dismissed on the basis that Tyrecor had established user rights in its business in the distribution and promotion of INFINITY tyres – and more specifically that its interest in a business in goods under that mark, was a protectable interest for purposes of Section 36(1).

Intent to use, or to abuse?

The second context in which the meaning of bona fides was considered on appeal, was in relation to Etraction’s own intention to use the INFINITY mark in respect of tyres. On the facts, the court found that Etraction had never had any bona fide intention to use the mark INFINITY on tyres, holding in this connection that its conduct in obtaining a registration covering tyres was for an ulterior purpose, and that it was carried out surreptiously. It accordingly confirmed that its registration was liable partially to be expunged by the removal of tyres from its specification.

The judgment canvasses in detail Etraction’s failure in 2006, when it learnt of Falck’s commencement of the distribution of INFINITY tyres, to object to that distribution – and the adverse inferences to be drawn from that failure to object. This finding begs the question:  had Etraction objected to Falck commencing distribution of INFINITY branded tyres in 2006, would continued use have been “bona fide” use of the INFINITY mark for purposes of a defence under Section 36(1)?

The SCA in making its finding on the issue of Etraction’s bona fides, cited with approval the judgment in Rembrandt Fabrikante en Handelaars (Edms) Bpk v Gulf Oil Corporation [1], wherein it was held that:

“…an ulterior purpose, unassociated with a genuine intention of pursuing the object for which the Act allows the registration of a trade mark and protects its use, cannot pass as a bona fide user”;

and also the judgment of Harms JA in AM Moolla Group Ltd v The Gap Inc [2], wherein it is stated:

“For present purposes, it suffices to say that “bona fide” user means a user by the proprietor of his registered trade mark in connection with the particular goods in respect of which it is registered with the object or intention primarily of protecting, facilitating, and furthering his trading in such goods, and not for some other, ulterior object”.

Similarly, the court referred to the European Court of Justice case of Ansul, where it was stated that: “When assessing whether use of the trade mark is genuine, regard must be had to all the facts and circumstances relevant to establishing whether the commercial exploitation of the mark is real…”.

Conclusion

The essence of a trade mark is its capacity to distinguish one trader’s goods and services, from those of competing traders.  This fundamental characteristic is the basis of the well-known dictum in Kinetex Africa (Pty) Ltd v Coverite (Pty) Ltd 1967(3) SA 307(10) , citing Kerr On Injunctions – “the life of a trade mark depends on the promptitude with which it is vindicated”.

The facts in the Etraction/Tyrecor matter illustrate what occurs when rights in a trade mark are not promptly vindicated – and that failure to assert rights as soon as third party conduct impinges upon them, allows such third parties to acquire vested rights.  It shows further that obtaining a trade mark registration, while simultaneously acquiescing in the establishment of competing third party rights, will be of no avail, and will be regarded by our Courts as sharp practice.

[1] 1963 (3) SA 341 (A) at 351 C-F

[2] (123/2004) [2005] ZASCA 72; [2005] 4 All SA 245 (SCA) at para 42

For more information, please contact:

Zama ButheleziZAMA BUTHELEZI
Attorney
Department: Trade Mark
Tel: +27 11 324 3027
Email: zamab@kisch-ip.com

Author: Zama Buthelezi

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

Fumex: A case of trade mark indifference

A4blThe recent decision in the case of Howden Africa v CFW Industries has attracted considerable interest. In this case a registration for the trade mark Fumex Fans was cancelled for non-use, despite the fact that evidence of use over the relevant five-year period was submitted.

Much of the comment has related to the finding that the use that was shown to have taken place was non-trade mark use, and therefore insufficient – a brochure that had been submitted showed that the trade mark owner sold a whole range of fans which were generally identified by way of descriptive words, including one fan that was identified as follows:

Smoke Venting Fans

(Fumex)

The judge said that it was ‘ambiguous whether the word “Fumex” in brackets below the description of the smoke venting fan conveys to the reader of the brochure the fact that  “Fumex” is in fact a trade mark or merely intended to be descriptive of a particular type of smoke venting machine.’ 

This is obviously an interesting issue, especially as our courts emphasise the fact that a trade mark’s main function is to indicate origin, which means that any use that does not suggest a trade connection between the goods and the owner of the mark is not trade mark use. Although this usually comes up in the context of infringement – for example where a company defends an infringement action by claiming that it is simply using the trade mark in a descriptive way – it has now also come up in the context of non-use cancellation proceedings.

We think that an equally interesting aspect of the Howden case is the fact it suggests considerable indifference on the part of the trade mark owner.  For starters, it shows indifference to branding principles, with very little thought having gone into how the mark Fumex Fans should be used. It’s basic branding practice to put the trade mark in front of the descriptive wording. It’s unheard of to put the trade mark in brackets, which almost suggests that ‘fumex’ is another appropriate descriptive term.  And if you do have a mark that has the potential to be descriptive – Fumex could be seen as a combination of ‘fume’ and ‘extractor’ – you should probably take extra care, for example by using it in a form like this: ‘Fumex brand smoke venting fans’. In the same way that you see use of the expression ‘Kleenex brand tissues’.

Second, the case shows indifference to internal brand differentiation and record-keeping. Apart from the brochure, it seems that the owner of the trade mark filed no other evidence to show use of the trade mark Fumex Fans.  This suggests that the trade mark owner was unable to differentiate between sales of its Fumex Fans product and its other products.  This is a mistake that no company that takes it trade marks seriously would make.

Finally, the case shows considerable indifference to cancellation proceedings. South African courts have, over the years, been surprisingly generous to trade mark owners in non-use cancellation proceedings, bending over backwards to preserve registrations.  There was a case of Kmart, where the court held that proof of advertising in publications that appeared in South Africa as part of a ‘strategy to promote international business’ was sufficient, even though there had been no actual sales.  In the more recent case of The Gap Inc v Salt of the Earth Creations, the Supreme Court of Appeal was satisfied with evidence that there had been serious negotiations over the five-year period between the US company that owned the mark and a South African company that wanted to be appointed as the local distributor of Gap products. The court said this of the US company’s activities in South Africa: ‘It may well have been on a more modest scale relative to its activities elsewhere in the world, but it surpasses the fairly low threshold set by the authorities.’

Yet despite this low threshold, South African courts are also becoming more demanding as regards the nature of the evidence that needs to be submitted.  Cancellation proceedings are odd, because the party seeking cancellation needs to prove a negative – non-use of a trade mark. It is, however, recognised that the party seeking cancellation only needs to make out a basic case, and that the onus then shifts to the trade mark owner to disprove the claim of non-use.  The courts do expect the trade mark owner to take this onus seriously. In the recent case of New Balance v Dajee the Supreme Court of Appeal cancelled a registration despite the fact that evidence of use had been filed, because it found the evidence to be unconvincing – a loosely-worded and ambiguous affidavit, no supporting documentation like invoices, and a few undated photos. The court in this case said that it expects the trade mark owner to be forthcoming on the issue of use because it has ‘comprehensive and peculiar knowledge’ of the matter in issue.

The message is clear – you need to take your trade marks seriously.  You need to use them properly and you need to keep proper records of your use. And if you are ever faced with non-use cancellation proceedings, you need to take those very seriously indeed!

For more information please contact:

Nola BondNOLA BOND
Head of Trade Mark Department and Director
Department: Trade Mark
Tel: +27 11 324 3000
Email: nolab@dmkisch.com

China: Time to serve SA wine

A3blA recent article in Business Report entitled ‘Charming Chinese wine buyers’ discussed the exciting opportunities that exist for South African winemakers in China. It told how the Chinese wine market is growing at a rapid pace, with the Chinese having overtaken the French as the biggest drinkers of red wine.

It told how South Africa is well poised to prosper in China, despite the fact that business is still quite small at the moment – China is South Africa’s 10th biggest export market for wine, and South Africa has a mere 2% of the Chinese market (compared to the 45% that France has).  One reason for optimism is the new Chinese focus on price and quality rather than status.

Another reason for optimism is the fact that in South Africa the wine industry is closely linked to the buoyant tourism industry, with ‘wine tourism’ being the new big thing.  An industry spokesman is quoted in the article as saying that ‘people are seeing Cape Town as the new San Francisco and Stellenbosch as the new Napa.’ Once again, China looms large – China is now the fourth largest source of tourists to South Africa after the UK, Germany and America.  And how’s this for an anecdote to whet the appetite – a while back a party of 45 Chinese tourists stopped at the La Motte wine estate and blew a cool R1.5 million on wine!

So what does this mean from a trade mark perspective? Well it certainly means that South African winemakers (and indeed South African companies of all descriptions) should be looking at protecting their trade marks in China. Even if export plans are still at an early stage – the registration process can take between 18 and 24 months. And before you file an application for registration you should, of course, do a trade mark search to make sure the trade mark is in fact available.

China has long been regarded as a somewhat difficult country when it comes to trade mark protection. Time was when China had a reputation as a place where the foreign company seeking to do business there would all too often find that its trade mark had been hijacked by a local – sometimes even the company’s local distributor-  but was available for purchase at an exorbitant price. That, mercifully, seems to be in the past. Another issue that the foreign company has to grapple with is the treatment of local adaptations or translations of the trade mark. Does it use and register adaptations? What are the consequences if it doesn’t? It’s an area that needs to be considered carefully and where advice should be sought.

The good news is that China is no longer as daunting as it once was. For starters, the Chinese authorities now take trade marks, and other forms of intellectual property, far more seriously than they once did.  Which is no surprise – more trade mark applications are filed in China than any other country in the world, with the figure being in the order of some 1, 8 million per year. And Chinese companies register huge numbers of patents and trade marks abroad, being actively encouraged to do so by the Chinese government as part of its export drive.

The other big news is that Chinese trade mark law changed quite significantly in May 2014. The most eye-catching change was the new emphasis on good faith, no doubt a response to the negative perceptions that had been created by the hijacking of foreign trade marks. As a result of the change, all trade mark applications must now be filed in good faith. There are remedies in terms of opposition and cancellation procedures where applications are filed in bad faith. There are penalties for trade mark attorneys who act in trade mark applications that are filed in bad faith.  And there is provision for additional damages to be awarded in cases of trade mark infringement where it can be shown that the infringement was not innocent.

Another change is that time limits have been introduced, with authorities now being required to examine trade mark applications within a period of nine months. The Chinese have also followed certain recent developments in the West, for example by specifically allowing for sound marks to be registered.

A very welcome development has been the introduction of multi-class filing.  What this means is that, instead of having to file a separate application for every class of goods or services for which it wants protection, the trade mark owner can cover as many classes of goods or services as it wants in a single trade mark application.  Covering multiple classes in a single application is invariably cheaper than filing separate applications in those classes.

This is particularly important for South African winemakers who, as the Business Report article suggests, are often involved in tourism services too.  Any winemaker who offers accommodation and restaurant services should certainly be protecting their trade mark beyond class 33 (the wine class). Not just in its export markets like China, but at home too!

Readers who want more information on trade mark protection in China can contact:

Lisa

LISA MCILWAINE-HILL
Director
Department: Head of International Trade Mark
Tel: +27 (0)11 324 3066
Email: lisam@dmkisch.com

What’s the difference between ALTO and ALTUS?

Plenty, if you’re a wine maker.

Stellenbosch wine estate, Dombeya, was recently threatened with legal action by Distell Group Limited for using the name ALTUS on the label of one of its red wines.  Distell took exception to the name, based on its ALTO Wine Estate range of wines, and argued that use of the name ALTUS constituted trade mark infringement.

Although Dombeya was of the opinion that it would have been able to successfully defend a trade mark infringement suit, it maintains it made a business decision to rather change the name, from ALTUS to FENIX, as the cost of litigation is extremely high and generally only 40% of costs can be recovered.

What this matter does highlight is the importance of conducting a pre-filing search of the Trade Marks Register, to ascertain whether your proposed trade mark, whether a word mark and/or a device mark, conflicts with other marks in the relevant class of interest (as well as all conflicting or related classes).

For more information, please contact:

ANDREW PAPADOPOULOS
Director
Department: Trade Mark
Tel: +27 11 324 3012
Email: andrewp@dmkisch.com

Author: Andrew Papadopoulos