Misappropriation of Foreign Trade Marks - Possible Solutions to the Problems Faced by Foreign Investors

Introduction

The foreign investor who is precluded from using his own trade mark in South Africa will be discouraged from investing in South Africa - a loss which this country can ill-afford at this critical time in our economic development.

We must, however, review the overall situation rationally before blacklisting South Africa. Having achieved the incredible political transformation which has resulted in the lifting of the anti-apartheid sanctions it would be tragic indeed if we were now to fall foul of Section 301 of the United States Trade Act and end up being categorised together with countries such as the People’s Republic of China, Bulgaria and Indonesia.

It must be noted that South Africa’s intellectual property laws, namely the Patents, Designs, Copyright and Trade Marks Acts are on a par with those of the western world. Most of the current criticism is levelled against trade marks and results from the unique factual situation resulting from the politically imposed sanctions during the apartheid era.

In rectifying, or alleviating, the problems faced by the proprietors of foreign trade marks which have been misappropriated, or are under attack by South Africans, one must be careful not to upset the basic principles of trade mark law which are to be found in the trade mark laws of most countries. The two most important principles, insofar as foreign trade marks are concerned are:

  1. The territoriality of a trade mark;
  2.  The Latin maxim qui prior est tempore potior est jure - he has a better title who was first in point of time.

With reference to the South African Trade Marks Act No. 194 of 1993, which came into force on 1 May 1995, I will consider what protection is afforded to the proprietor of a foreign trade mark who wants to do business in South Africa where another party, typically a South African company, lays claim to his trade mark.

Internationally Well-Known Trade Marks

The new Act has given considerable teeth to the proprietor of an internationally well-known trade mark. The trade marks MCDONALD’and BURGER KING undoubtedly fall under this category.

Section 10 (6) of the Trade Marks Act includes the following under the heading of unregistrable trade marks:-

"Subject to the provisions of Section 36(2), a mark which, on the date of application for registration thereof, or, where appropriate, of the priority claim in respect of the application for registration thereof, constitutes, or the essential part of which constitutes, a reproduction, imitation or translation of a trade mark which is entitled to protection under the Paris Convention as a well-known trade mark within the meaning of Section 35(1) of this Act and which is used for goods or services identical or similar to the goods or services in question"

It must be stressed that the trade mark must be well-known in South Africa. While the fact that it is well-known in other countries in the world will assist in proving that it is well- known in South Africa, as a result of things like spill-over advertising and the fact that South Africans travelling abroad would have come across the trade mark, it is essential to prove that it is well-known within the borders of this country. Furthermore, the question of timing is important and the proprietor of the foreign trade mark must establish that his trade mark was well-known in South Africa at the date of filing of the objectionable trade mark in South Africa.

The most controversial and critical aspect of this section is the fact that it is subject to the provisions of Section 36(2) which reads as follows:

"Nothing in this Act shall allow the proprietor of a trade mark entitled to protection of such trade mark under the Paris Convention as a well-known trade mark, to interfere with or restrain the use by any person of a trade mark which constitutes, or the essential parts of which constitute, a reproduction, imitation or translation of the well-known trade mark in relation to goods or services in respect of which that person or a predecessor in title of his has made continuous and bona fide use of the trade mark from a date anterior to 31 August 1991 or the date on which the trade mark of the proprietor has become entitled, in the Republic, to protection under the Paris Convention, whichever is the later, or to object (on such use being proved) to the trade mark of that person being registered in relation to those goods or services under Section 14."

The effect of this Section is to make the retrospectivity of the provisions of the new Trade Marks Act very limited and the proprietor of a foreign trade mark which was adopted in South Africa prior to 31 August 1991 will have no recourse.

The historical significance of 31 August 1991 is that this is the date on which the draft Trade Marks Bill was first published. When the Bill was first published, advising South African trade mark proprietors that foreign trade marks would be protected in the future, vigorous representations were made by various local companies. The compromise which was reached was to back-date the provisions only until 31 August 1991.

A further compromise which could be considered would be to shift the date back to 1985. This is the date when the main economic sanctions were imposed against South Africa and it would have the benefit of preventing local companies who misappropriated foreign trade marks during the sanctions era from relying on the use of the trade marks at a time when the foreign principal could not, or would not, do business in South Africa.

Foreign Trade Marks which are not Well-Known in South Africa

This is a serious problem area and there are no other trade mark laws in the world, to the best of my knowledge, which would protect such trade marks. In fact, this must be the case, as to find otherwise would be tantamount to creating a world-wide registration i.e. if the mere fact that a person has obtained trade mark rights in a country such as United States of America were to allow him to stop another party from claiming similar rights in South Africa, or any other country in the world, there would be no need for the trade mark proprietor to file registrations in any other territories.

As I have indicated above, however, we find ourselves in the unique situation where many foreign investors who would otherwise have done business in South Africa, but didn’t do so because of sanctions, are now barred from doing so because third parties misappropriated their trade marks. It is essential that we find a solution which makes the misappropriation of such trade marks during the sanctions era actionable while, at the same time, not upsetting the basic principles of trade mark law as discussed above.

The issue of the adoption of a foreign trade mark was recently dealt with by the Appellate Division, our highest court, in Victoria’s Secret Inc. - vs - Edgars Stores Limited 1994 (3) SA 739 in which Nicholas AJA stated :

"In the case of a foreign trade mark, there is no legal bar to its adoption in South Africa unless it is attended by something more."

Thus, while the default situation is that a foreign trade mark may be adopted in South Africa, the adoption can be tainted and factors which have been found to fall under the general heading of "attended by something more" include dishonesty, breach of confidence, sharp practice or the like.

I submit that the misappropriation of a foreign trade mark during the sanctions era should be added to the aforementioned list or should be found to fall under the general heading of "sharp practice". In cases under the common law of unlawful competition the question of the ethics of the business community is a factor which our courts have taken into account. In the circumstances, if one could establish, factually, that the business community as a whole views the adoption of a foreign trade mark during the sanctions era as unethical, there is no reason, in principle, why our existing trade mark laws are not sufficient to ensure that such trade mark is refused registration or, if registered, could be struck off the Register.

Non-Use Provisions

In terms of South African law a trade mark which has not been used for five years is vulnerable to expungement from the Register on the grounds of non-use. The five year period afforded by South African law is in fact longer than the period required by GATT which is three years.

The difficulty which has arisen in South Africa is that a number of trade mark proprietors, including MCDONALD’S and BURGER KING, who did not use their trade marks in South Africa because of sanctions, now find their trade marks under attack on the grounds of non-use. As they have clearly not used their trade marks in this country the only defence on which they can rely is the proviso to the Section dealing with non-use which states that, in the case of special circumstances in the trade, a trade mark will not be expunged for non-use even if it has not been used.

In a recent judgment in the case of Ronald Leslie Fivelman v Country Road Clothing (Pty) Limited (unreported judgment of the Deputy Registrar of Trade Marks dated 11 April 1995), the question of special circumstances was considered. In this case the trade mark in question was COUNTRY ROAD covering clothing which was owned by an Australian company. The Australian company had not used the trade mark in South Africa and their trade mark was attacked on the grounds of non-use.

In dealing with the defence of special circumstances raised by the Respondent, the Deputy Registrar of Trade Marks stated:-

"I am in agreement with the following statement by Mr Cullabine made on page 77 of the article (Special circumstances in the trade in South Africa) (EIPR volume 11 ... 73): "It seems that the English and South African courts will not adopt a very different approach towards achieving a balance between the legitimate interest of the trade mark proprietor while at the same time affording protection against the operation of special circumstances, and, indeed, in defining those circumstances. The circumstances must not be peculiar to an individual trader but must be circumstances in the trade. ... Reliance on special circumstances would also have to be coupled with the residual intention to continue trading in South Africa once those circumstances came to an end. Without that, no reliance on special circumstances will assist the trade mark owner. Clearly legislation, whether enacted by the South African Government or by any foreign Government, putting an end to the continued operation of the trade mark owner’s business in South Africa would constitute special circumstances in the trade."

As it turned out the Registrar found against the Australian company because included in the evidence was a statement from the Australian Government to the effect that at no stage had the Australian Government imposed an embargo on the export of clothing items from Australia to South Africa. They stated that while there were a number of trade sanctions in place these did not include textiles, clothing or footwear. Against this factual background the Registrar found that special circumstances did not exist but what is most important is the fact that the principle that sanctions can constitute special circumstances was accepted.

Conclusion

It is essential that all impediments to foreign investment be overcome - insofar as the misappropriation of foreign trade marks by South Africans poses an obstacle to investment the way must be cleared for the true trade mark proprietor. I believe that our trade mark law, as it stands, can meet the challenge but, in the meanwhile, any industry and government statements to the effect that sanctions, whether imposed by statute or voluntarily, constitute special circumstances or sharp practice, are essential to create the correct climate in which the law can operate.

Charles Webster

Spoor & Fisher

Date published: 1990/01/01
Author: Charles Webster

Tags: foreign trade marks foreign investors