No horsing around: A precedent-setting judgment.

Nov 2, 2022 | News

No horsing around: A precedent-setting judgment.

For over 40 years, two POLO brands have co-existed on the South African retail market: POLO by Ralph Lauren, an international brand by an American designer retailing perfume and cosmetic products, and LA Group (Pty) Ltd, a South African company which acquired rights to POLO trademarks in South Africa and has been marketing clothing items thereunder. By mutual agreement, both parties conducted business accordingly. However, many consumers in South Africa could argue that they were unaware that there had been two different brands. This is not surprising given the fact that both brands have used almost identical trademarks in respect of the same market, which only had the distinguishing feature of the direction of the pony faces on their respective logos.

Section 10(13) of the Trademarks Act 93 of 1994 forbids the registration of a mark, ‘’which, as a result of the manner it has been used, would be likely to cause deception or confusion…’’.    In 2018, LA Group, pursued an application for the relief of trademark infringement against Stable Brands, a South African licensee of the US Polo Association, amongst others in the Pretoria High Court. In a counter application, Stable Brands argued for the cancelation of LA Group’s 46 trademark registrations.  LA Group withdrew their application, however Stable Brands persisted with their counterclaim insofar as LA Group’s trademark registrations were wrongly made and/or wrongly remaining on the trademark register.   They argued how South African consumers may not know which POLO brand they are purchasing since the average South African may not even be aware that there are two different brands as well as the fact that the word mark ”POLO” and the logo used are not distinctive and would likely cause confusion. The High Court agreed and held that the trademark registrations must be cancelled. The grounds for cancellation included, that the marks were not capable of distinguishing, that they are descriptive and lack distinctiveness, non-use for five years or longer and registration without a genuine intention to use coupled with non-use and the likelihood of confusion or deception.

However, that judgment has since been overturned by the SCA on appeal in the case of LA Group (Pty) Ltd v Stable Brands (Pty) Ltd and another [2022] 2 All SA 678 (SCA). The parties again went head-to-head with the SCA concluding that:

‘’The high court erred in its construction of section 10(13) of the Act. It did not consider the appellant’s ‘manner of use’ of its own trademarks. Instead, it compared the appellant’s trademarks to those of Ralph Lauren and determined the likelihood of deception and confusion….’’

It further held that:

‘’Consumers who buy items of clothing in South Africa bearing the mark POLO, or the device of a left facing pony, are buying goods of the appellant. It matters not that they think that they are buying from a well-known US fashion house. The badge of origin function of a trademark is fulfilled provided that all items bearing that badge come from the same source. The same applies to consumers buying cosmetics or perfume bearing the Ralph Lauren trademarks: they are buying the goods of Ralph Lauren. The latter’s marks distinguish its goods from those having a different source and thus the badge of origin function of the Ralph Lauren marks is fulfilled. On the facts, there is thus no potential of any confusion or deception.’’  

The decision was based on a majority of three judges, in a closely contested dispute. The practical implication is that the likelihood of confusion resulting from the coexistence with another brand and/or trademark may not actually result in such marks being cancelled.  Section 27(3) of the Act places the onus on the proprietor to prove use of the trademark or bona fide use by a third party with the licence of the proprietor. Therefore, it is still necessary that the proprietor have comprehensive acquaintance of the use of its trademarks.

In addition, although it is important to make sure that a mark is distinctive and can function as a trademark, ensuring legal protection, brand owners, when entering into agreements with another intellectual property owner, will have some leeway and don’t need to be too concerned with collaborating with another intellectual property owner. A further ground breaking implication of the SCA judgment is that a trademark will not be liable for removal from the register on the grounds of misleading use or manner of use in terms of Section 10(3) of the Act.  For those closely involved in Intellectual Property law, these grounds were the foundation of much litigation and removal of trademarks from the register.  This precedent-setting judgment is to be lauded in creating much needed clarity in terms of the understanding and application of section 10(3) of the Act.

By: Gaby Meintjes (Director at Fairbridges Wertheim and Becker Attorneys) and Kirshia Pillay (Candidate Attorney at Fairbridges Wertheim and Becker Attorneys).

No horsing around: A precedent-setting judgment.

For over 40 years, two POLO brands have co-existed on the South African retail market: POLO by Ralph Lauren, an international brand by an American designer retailing perfume and cosmetic products, and LA Group (Pty) Ltd, a South African company which acquired rights to POLO trademarks in South Africa and has been marketing clothing items thereunder. By mutual agreement, both parties conducted business accordingly. However, many consumers in South Africa could argue that they were unaware that there had been two different brands. This is not surprising given the fact that both brands have used almost identical trademarks in respect of the same market, which only had the distinguishing feature of the direction of the pony faces on their respective logos.

Section 10(13) of the Trademarks Act 93 of 1994 forbids the registration of a mark, ‘’which, as a result of the manner it has been used, would be likely to cause deception or confusion…’’.    In 2018, LA Group, pursued an application for the relief of trademark infringement against Stable Brands, a South African licensee of the US Polo Association, amongst others in the Pretoria High Court. In a counter application, Stable Brands argued for the cancelation of LA Group’s 46 trademark registrations.  LA Group withdrew their application, however Stable Brands persisted with their counterclaim insofar as LA Group’s trademark registrations were wrongly made and/or wrongly remaining on the trademark register.   They argued how South African consumers may not know which POLO brand they are purchasing since the average South African may not even be aware that there are two different brands as well as the fact that the word mark ”POLO” and the logo used are not distinctive and would likely cause confusion. The High Court agreed and held that the trademark registrations must be cancelled. The grounds for cancellation included, that the marks were not capable of distinguishing, that they are descriptive and lack distinctiveness, non-use for five years or longer and registration without a genuine intention to use coupled with non-use and the likelihood of confusion or deception.

However, that judgment has since been overturned by the SCA on appeal in the case of LA Group (Pty) Ltd v Stable Brands (Pty) Ltd and another [2022] 2 All SA 678 (SCA). The parties again went head-to-head with the SCA concluding that:

‘’The high court erred in its construction of section 10(13) of the Act. It did not consider the appellant’s ‘manner of use’ of its own trademarks. Instead, it compared the appellant’s trademarks to those of Ralph Lauren and determined the likelihood of deception and confusion….’’

It further held that:

‘’Consumers who buy items of clothing in South Africa bearing the mark POLO, or the device of a left facing pony, are buying goods of the appellant. It matters not that they think that they are buying from a well-known US fashion house. The badge of origin function of a trademark is fulfilled provided that all items bearing that badge come from the same source. The same applies to consumers buying cosmetics or perfume bearing the Ralph Lauren trademarks: they are buying the goods of Ralph Lauren. The latter’s marks distinguish its goods from those having a different source and thus the badge of origin function of the Ralph Lauren marks is fulfilled. On the facts, there is thus no potential of any confusion or deception.’’  

The decision was based on a majority of three judges, in a closely contested dispute. The practical implication is that the likelihood of confusion resulting from the coexistence with another brand and/or trademark may not actually result in such marks being cancelled.  Section 27(3) of the Act places the onus on the proprietor to prove use of the trademark or bona fide use by a third party with the licence of the proprietor. Therefore, it is still necessary that the proprietor have comprehensive acquaintance of the use of its trademarks.

In addition, although it is important to make sure that a mark is distinctive and can function as a trademark, ensuring legal protection, brand owners, when entering into agreements with another intellectual property owner, will have some leeway and don’t need to be too concerned with collaborating with another intellectual property owner. A further ground breaking implication of the SCA judgment is that a trademark will not be liable for removal from the register on the grounds of misleading use or manner of use in terms of Section 10(3) of the Act.  For those closely involved in Intellectual Property law, these grounds were the foundation of much litigation and removal of trademarks from the register.  This precedent-setting judgment is to be lauded in creating much needed clarity in terms of the understanding and application of section 10(3) of the Act.

By: Gaby Meintjes (Director at Fairbridges Wertheim and Becker Attorneys) and Kirshia Pillay (Candidate Attorney at Fairbridges Wertheim and Becker Attorneys).