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[2016] ZASCA 74
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Cochrane Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd and Another (227/2015) [2016] ZASCA 74; [2016] 3 All SA 345 (SCA); 2016 (6) SA 1 (SCA); 2016 BIP 189 (SCA) (27 May 2016)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 227/2015
In
the matter between:
COCHRANE
STEEL PRODUCTS (PTY) LTD
APPELLANT
and
M-SYSTEMS
GROUP (PTY)
LTD
FIRST RESPONDENT
ROLOTI BELEGGINGS
(PTY) LTD
SECOND RESPONDENT
Neutral
citation:
Cochrane
Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd
(227/2015)
[2016] ZASCA 74
(27 May 2016)
Bench:
Ponnan,
Mbha, Zondi and Mathopo JJA and Fourie AJA
Heard:
19
May 2016
Delivered:
27
May 2016
Summary:
Intellectual
property – use of the trademark CLEARVU as a keyword in the
Google AdWords system – does not constitute
unlawful
competition or passing off.
ORDER
On
appeal from
:
Gauteng
Local Division of the High Court, Johannesburg (Nicholls J sitting as
court of first instance):
The
appeal is dismissed with costs.
JUDGMENT
Ponnan
JA (Mbha, Zondi and Mathopo JJA and Fourie AJA concurring):
[1]
The parties, who operate, inter alia, in the security fencing
industry, are rival traders. During October 2013 the appellant,
Cochrane Steel Products (Pty) Ltd (Cochrane), sought to interdict and
restrain the respondent, M-Systems Group (Pty) Ltd (M-Systems),
from
using ‘the mark CLEARVU (or any mark confusingly similar
thereto, including the marks CLEAR VU and CLEAR-VU) in relation
to
Google AdWords advertising.’ Roloti Beleggings (Pty) Ltd was
subsequently joined as the second respondent to the proceedings.
[1]
[2]
On 29 October 2014 the Gauteng Local Division, Johannesburg (per
Nicholls J) dismissed the application with costs, but granted
leave
to the appellant to appeal to this court.
[3]
During 2008, so asserts the appellant, it invented security fencing
‘comprising high density, high tensile mesh’
and
conceived and adopted the brand name CLEARVU for the product.
Although there are pending applications for registration that
were
filed by the appellant in 2010, CLEARVU is yet to be registered as a
trade mark in terms of
Trade Marks Act 194 of 1993
. The appellant
accordingly relies on what is described as a common law trade mark
(
Capital
Estate and General Agencies (Pty) Ltd & others v Holiday Inns Inc
& others
1977
(2) SA 916
(A) at 925H).
[2]
Accordingly, the relief sought was based not on any statutory
infringement, but in the common law. For, as Nicholas AJA observed
in
Schultz
v Butt
1986
(3) SA 667
(A) at 683J-684A:
‘
The
fact that in a particular case there is no protection by way of
patent, copyright or registered design, does not license
a
trader to carry on his business in unfair competition with his
rivals’.
[4]
The activities which have given rise to these proceedings concern the
display on the internet of M-Systems’ advertisements
in
response to the entry into the Google search engine by internet users
of search terms consisting of or comprising the word ‘CLEARVU’
or minor variants of it. Google operates an internet search engine
and provides a number of other services on the internet. Google’s
primary source of revenue is advertising. The principal way in which
it provides advertising is by means of a service called Google
AdWords, in terms of which Google offers advertisers the facility to
match a keyword to a user’s search query so as to trigger
an
advertisement in various different ways, and which
allows
advertisers to display their advertisements in the Google content
network, through either a cost-per-click or cost-per-view
scheme
.
The operation of the Google AdWords service is described in detail by
Arnold J in
Interflora
Inc v Marks and Spencer Plc
[2009] EWHC 1095
(Ch) (
Chancery
Division Interflora judgment
).
According to Kitchin LJ (on appeal from Arnold J) in
Interflora
Inc v Marks and Spencer Plc
[2014]
EWCA Civ 1403
(
Court
of Appeal Interflora judgment
)
paras 14-17):
‘
14.
. . . In broad outline, this service works in the following way. A
user of the Google search engine
who has carried out a search is
presented with a search engine results page or SERP which usually
contains three elements. The
first is the search box which contains
the search term, a word or phrase typed in by the user. The second
contains links to websites
which appear to the Google search engine
to correspond to the search term. These are known as the “natural”
or “organic”
results of the search and are usually
displayed in order of relevance. The third comprises links, referred
to as “sponsored
links”, to websites which are displayed
because the operators of those websites have paid for them to appear.
They are, in
effect, advertisements and are usually displayed in one
or more parts of the SERP, namely in a shaded box in the upper part
of
the page (above the natural search results), in a panel on the
right hand side of the page (to the right of the natural search
results), or in a panel at the bottom of the page (under the natural
search results). Over the years the labelling of these sponsored
links has varied, but they have generally been headed with the words
“Sponsored Links” or “Ads” or variations
of
them.
15.
A Sponsored link appears when a user enters one or more particular
words in to the search
engine through the search box. These words,
known as “keywords”, are secured by the advertiser in
return for a fee.
This is called “purchasing” or “bidding
on” the keyword. The sponsored link contains three elements.
The
first is an underlined heading which functions as a hyper-link to
the advertiser’s website. This may or may not contain the
keyword. The second is a short commercial message or advertisement
which, once again, may or may not contain the keyword. The second
is
a short commercial message or advertisement which, once again, may or
may not contain the keyword. The third is the Uniform
Resource
Locator or URL of the advertiser’s website.
16.
The fee paid by the advertiser is calculated on the basis of the
number of times users click
on the hyper-link to the advertiser’s
website (a process known as “click through”) subject to a
maximum daily
limit which the advertiser has specified. A number of
different advertisers may bid for the same keywords, and, if they do,
the
order in which their adverts are displayed will depend upon
various factors including the maximum daily sum, often referred to as
the “maximum price per click”, that each is prepared to
pay.
17.
The search term entered by a user of the Google search engine and the
keyword selected by
the advertiser do not have to be identical for
the sponsored link to appear on the SERP. One reason for this is that
advertisers
have the ability to choose different match types in
relation to each keyword, and these match types govern the
circumstances in
which the sponsored links associated with those
keywords will appear. For example, “exact match” requires
the search
term to be identical to the keyword; “phrase match”
requires the search term to contain the same words as the keyword
in
the same order, but it may include additional words before or after
the keyword; and “broad match” simply requires
the search
term to correspond to variations of the keyword, such as plurals. By
2008 Google had also introduced a development of
broad matching known
as “advanced broad matching” which causes the sponsored
link to appear if the Google search engine
deems the keyword relevant
to the search term. So, by way of illustration, a search for the term
“flowers” might be
deemed to match the keyword
“florists”.
’
[5]
The appellant’s contention is that ‘this is a form of
unlawful competition; alternatively on the facts a passing
off
occurs’. It may be convenient to first consider the alternative
cause of action based upon passing off. Passing off is
a species of
wrongful competition in trade or business. According to Rabie JA
(
Capital Estate
(above) at 929C-E):
‘
The
wrong known as passing off consists in a representation by one person
that his business (or merchandise, as the case may be)
is that of
another, or that it is associated with that of another, and, in order
to determine whether a representation amounts
to a passing-off, one
enquires whether there is a reasonable likelihood that members of the
public may be confused into believing
that the business of the one
is, or is connected with, that of another.’
As
Corbett CJ put it in
Williams t/a Jenifer Williams &
Associates & another v Life Line Southern Transvaal
[1996]
ZASCA 46
;
1996 (3) SA 408
(A) at 418D-F:
‘
In
its classic form it usually consists in A representing, either
expressly or impliedly (but almost invariably by the latter means),
that the goods or services marketed by him emanate in the course of
business from B or that there is an association between such
goods or
services and the business conducted by B. Such conduct is treated by
our law as being wrongful because it results, or
is calculated to
result, in the improper filching of another’s trade and/or in
an improper infringement of his goodwill and/or
in causing injury to
another’s reputation. Such a representation may be made
impliedly by A adopting a trade name or a get-up
or mark for his
goods which so resembles B’s name or get-up or that A’s
goods or services emanate from B or that there
is the association
between them referred to above. Thus, in order to succeed in a
passing off action based upon an implied representation
it is
generally incumbent upon the plaintiff to establish,
inter
alia
:
firstly, that the name, get-up or mark used by him has become
distinctive of his goods or services, in the sense that the public
associate the name, get-up or mark with the goods or services
marketed by him (this is often referred to as the acquisition of
reputation); and, secondly, that the name, get-up or mark used by the
defendant is such or is so used as to cause the public to
be confused
or deceived in the manner described above.’
[6]
Not having any registered right in the name CLEARVU, it was for the
appellant to show that the name has acquired such a reputation
in
relation to its business that it may be said to have become
distinctive thereof (
Capital
Estate
(above)
at 925H). Whilst I am willing to accept in the appellant’s
favour that it succeeded in establishing a reputation in
the name
CLEARVU, I entertain some doubt as to whether it established the
second leg of its cause of action, namely that the respondents’
conduct caused, or was calculated to cause, the public to be confused
or deceived. Whether there is a reasonable likelihood of
such
confusion arising is, of course, a question of fact which will have
to be determined in the light of the circumstances of
each case.
[7]
There are a number decisions in comparable foreign jurisdictions
dealing with the question of whether or not the bidding by
one trader
on another’s trade mark as a keyword in Google’s AdWords
service is lawful. In
Cosmetic Warriors Ltd v Amazon.co.uk Ltd &
another
[2014] EWHC 181
(Ch), the claimants, owners of a famous
mark called Lush, made three classes of claim against the online
shopping retailer, Amazon.
The first two classes of claim
concerned internet advertising and are as a result of Amazon having
bid on certain keywords, in
particular ones including the word
‘lush’, within the Google AdWords service so as to
trigger a sponsored link advertisement
on the Google search engine
results page whenever a consumer types ‘lush’ into the
search box. The court held (para
45-48):
‘
45.
In argument, Mr Bloch lumped this class of infringements with the
first class and contended that
it was clear that the average consumer
would expect the sponsored link to be of goods which were identified
from the search term
entered by the consumer. I do not accept this
argument. It fails to recognise that consumers are familiar with
sponsored ads and
are used to seeing such ads from competing
suppliers.
46.
Moreover, the evidence establishes that Lush users are brand
conscious and have made great
efforts to build up a reputation in the
Lush name. In my judgment average consumers would expect an
advertisement for Lush products
to include some reference to the Lush
mark, some indicia which would distinguish that ad from the ads of
others which he might
expect to see on the results page of a Google
search.
47.
In [the
Chancery Division Interflora judgment
] Arnold J held
there to be infringement although the offending ad made reference
only to “M & S Flowers Online”
and not to
“Interflora”. But that was, in part, because Interflora
represents a network of flower shops and the court
was not satisfied
that the average consumer would appreciate that Marks & Spencer
were not members of that network. So I think
that case is different
on the facts from the one before me.
48.
It will be recalled that in the example pleaded and referred to in
paragraphs 9 and 10 above,
there was an ad for a third party as well
as one for Amazon. In my judgment the presence of such other ads
makes the position even
clearer. The average consumer could not
reasonably fail to appreciate that the Amazon ad was just another ad
from a supplier offering
similar products to those requested by the
internet searcher. My conclusion on this part of the case does not,
however, depend
on the presence of this other ad.’
[8]
The Court of Appeal in France,
[3]
the German Federal Supreme Court
[4]
and the Barcelona Commercial Court
[5]
have all separately determined that the use by one competitor of
another’s trade mark does not constitute trade mark
infringement.
In
Network
Automation Inc v Advanced Systems Concepts Inc
638
F.3d 1137
(9th Cir 2011) the United States Court of Appeals for the
Ninth Circuit stated (para12):
‘
The
nature of the goods and the type of consumer is highly relevant to
determining the likelihood of confusion in the keyword advertising
context. A sophisticated consumer of business software exercising a
high degree of care is more likely to understand the mechanics
of
Internet search engines and the nature of sponsored links, whereas an
un-savvy consumer exercising less care is more likely
to be confused.
The district court determined that this factor weighed in Systems’
favour because “there is generally
a low degree of care
exercised by Internet consumers.” However, the degree of care
analysis cannot begin and end at the marketing
channel. We still must
consider the nature and cost of the goods, and whether “the
products being sold are marketed primarily
to expert buyers.”
Brookfield
174 F.3d at 1060.
In
Brookfield
, the websites were visited by both sophisticated
entertainment industry professionals and amateur film fans, which
supported the
conclusion that at least some of the consumers were
likely to exercise a low degree of care.
Id
. at 1056. In
Playboy
, the relevant consumer was looking for cheap,
interchangeable adult-oriented material, which similarly led to our
court’s
finding that the consumers at issue would exercise a
low degree of care. 354 F.3d at 1026. In both cases, we looked beyond
the
medium itself and to the nature of the particular goods and the
relevant consumers.
We
have recently acknowledged that the default degree of consumer care
is becoming more heightened as the novelty of the Internet
evaporates
and online commerce becomes commonplace. In
Toyota Motor Sales v
Tabari
610 F.3d 1171
(9th Cir 2010), we vacated a preliminary
injunction that prohibited a pair of automobile brokers from using
Toyota’s “Lexus”
mark in their domain names.
We determined that it was unlikely that a reasonably prudent consumer
would be confused into
believing that a domain name that included a
product name would necessarily have a formal affiliation with the
maker of the product,
as “[c]onsumers who use the internet for
shopping are generally quite sophisticated about such matters.”
Id
. at 1178. The
Tabari
panel reasoned,
[I]n
the age of FIOS, cable modems, DSL and T1 lines, reasonable, prudent
and experienced internet consumers are accustomed to such
exploration
by trial and error. They skip from site to site, ready to hit the
back button whenever they’re not satisfied
with a site’s
contents. They fully expect to find some sites that aren’t what
they imagine based on a glance at the
domain name or search engine
summary. Outside the special case of . . . domains that actively
claim affiliation with the trademark
holder, consumers don’t
form any firm expectations about the sponsorship of a website until
they’ve seen the landing
page – if then.
We
further explained that we expect consumers searching for expensive
products online to be even more sophisticated.
Id
.
at 1176 (“Unreasonable, imprudent and inexperienced
web-shoppers are not relevant.”).’
[9]
The Court of Appeals for the Tenth Circuit (
1-800 Contacts Inc v
Lens.com Inc
722 F.3d 1229
(10th Cir 2013)) endorsed the
correctness of
Network Automation Inc
in holding:
‘
Perhaps
in the abstract, one who searches for a particular business with a
strong mark and sees an entry on the results page will
naturally
infer that the entry is for that business. But that inference is an
unnatural one when the entry is clearly labelled
as an advertisement
and clearly identifies the source, which has a name quite different
from the business being searched for. It
is for this reason that the
Ninth Circuit considered “the labelling and appearance of the
advertisements and the surrounding
context on the screen displaying
the results page” to be a critical factor in finding no
likelihood of confusion in a case
in which the alleged infringer used
a competitor’s mark as a keyword.
Network
Automation v Advanced System Concepts
638
F.3d 1137
, 1154 (9th Cir 2011).’
[10]
In
Vancouver Community College v Vancouver Career College
(Burnaby) Inc
2015 BCSC 1470
(CanLII), the Supreme Court of
British Columbia was called upon to decide whether the use by one
trader of another’s trade
mark as a Google AdWords keyword
amounted to passing off. The court held (para 183):
‘
The
authorities on passing off provide that it is the “first
impression” of the searcher at which the potential for
confusion arises which may lead to liability. In my opinion, the
“first impression” cannot arise on a Google AdWords
search at an earlier time than when the searcher reaches a website.
When a searcher reaches the website of the defendant in the
present
proceeding it is clearly identified as the defendant’s website.
As was said by Frankel JA in
Insurance
Corporation of British Columbia v Stainton Ventures Ltd
the
“relevant consumer” will “understand that it is
necessary to view a website to determine whose site it is”.
In
my opinion that is the point during a search when the relevant first
impression is made.’
[11]
Although the findings for the most part in
Intercity Group (NZ)
Ltd v Nakedbus NZ Ltd
[2014] NZHC 124
, relate to visual use by
Nakedbus of its competitor’s trade mark (Inter City) in its
Google advertisement and on its website,
which was found to
constitute passing off and trade mark infringement, the court in
considering the second cause of action, stated
(para 229):
‘
Nakedbus
did not infringe ICG’s trade mark “INTERCITY” when
it purchased the key words “inter city”
and variations
thereof via Google AdWords. That second cause of action fails because
the requirement of “likely to be taken
as used as a trade mark”
in
s 89(2)
has not been proven. Nakedbus’ purchase of the
keywords while involving use of the trade mark “INTERCITY”,
would
not be likely to be taken as use as a trade mark by consumers.
Those consumers would have no or little knowledge of how the Nakedbus
advertisement came to appear in response to their attempt to access
the ICG website. They were not shown to be aware of the purchase
by
Nakedbus of the keywords.’
The
High Court of New Zealand therefore dismissed the keyword advertising
claim on the basis that consumers would not have assumed
that
Nakedbus was using the Intercity trade mark as a trade mark.
[12]
The critical question to be answered in a keyword bidding case is
whether the Google advertisement which appears in response
to the
search using the keyword does not enable normally informed and
reasonably observant internet users, or enables them only
with
difficulty, to ascertain whether the goods or services referred to in
the Google advertisement originate from the proprietor
of the trade
mark (whose mark has been used as a keyword) or an undertaking
economically connected to it or, on the contrary, originate
from a
third party.
[6]
Put differently, the question is whether the advertisement itself
gives rise to the likelihood of confusion; and not whether or
not the
bidding by one competitor on the trade mark of another is itself
unlawful.
[13]
I appreciate that the foreign law in this field must be approached
with caution because it may be influenced by domestic and
supranational legislation and other policy considerations (
Gordon
Lloyd Page & Associates v Rivera & another
[2000]
ZASCA 33
;
2001 (1) SA 88
(SCA) at 95A), but it may nonetheless be
persuasive, if not decisive, if decided by applying the same
principles to the same or
similar facts (
Adidas
AG & another v Pepkor Retail Limited
[2013]
ZASCA 3
(28 February 2013) para 18). It is important to
reiterate that the law of passing off is not designed to grant
monopolies
(
Blue
Lion Manufacturing (Pty) Ltd v National Brands Ltd
[2001] ZASCA 62
;
2001 (3) SA 884
(SCA) para 4).
[14]
The facts here are strikingly similar to the second class of
complaints in
Cosmetic
Warriors
(above)
.
Having searched for Clearvu in one form or another, the consumer is
confronted (on such limited evidence as is before us) with
advertisements for a multiplicity of suppliers.
[7]
The natural search results are also not limited to goods and services
provided by the appellant.
[8]
No
reasonable consumer will consider, even momentarily, having searched
for Clearvu (or some derivative of it), that every result
obtained
relates to the appellant’s products or services. Consumers will
assume, as all internet users do, that they will
have to separate the
wheat from the chaff in deciding which hyperlinks appearing as a
result of their search should be clicked.
[9]
That presumably will cause irritation and perhaps even
annoyance but it does provide the consumer with alternatives thereby
fostering competition. Sorting the wheat from the chaff insofar as
Google advertisements are concerned is by no means difficult.
The
advertisements are clearly marked as such and appear in different
areas of the screen. What is more is that advertisements
are clearly
distinguished from the natural search results. That cannot be lost on
the average consumer, who would immediately notice
that these are
advertisements rather than the natural results of their search. Thus
if the advertisement contains no reference
to the appellant the
consumer ought reasonably to conclude that the result is not related
to the appellant or its products or services.
But even if the
consumer went one step further and clicked on M-Systems’
website its branding would have left the consumer
in no reasonable
doubt as to the identity of the trader whose services were on offer.
[15]
Insofar as momentary confusion is concerned (see
Orange
Brand Services v Account Works Software
[2013]
ZASCA 158
(22 November 2013) para 16), both the US and Canadian
courts have rejected this as a possibility. The Canadian decision
(
Vancouver
Community College
)
found that most consumers will form no first impression at all as
regards the source of the search results generated by Google
until
they reach the webpage to which those results refer. In dealing with
what has been described as ‘initial-interest confusion’
[10]
in the US, the court in
1-800
Contacts Inc
(above)
held that it would be unnatural for a consumer who searches for a
business with a strong mark to infer that an entry that
is clearly
labelled as an advertisement and clearly identifies the source, which
has a name quite different from the business being
searched for, that
it is for that particular business. It is thus unsurprising that the
appellant has been unable to adduce any
evidence of actual confusion.
And, in the absence of satisfactory evidence as to actual confusion
(
Pioneer
Foods (Pty) Limited v Bothaville Milling (Pty) Limited
[2014] ZASCA 6
paras 23 and 26), I do not think that the appellant
had proved its likelihood (see
Truck
and Car Co Ltd v Kar-N-Truck Auctions
1954 (4) SA 552
(A) at 558).
[16]
I shall now turn to consider the appellant’s primary
contention, which, as I have said, is based on the general principles
of unlawful competition. The argument advanced is that the
respondent’s use of the appellant’s trade name as a
Google
keyword offends against the
boni
mores
because it amounts to an improper filching of the appellant’s
skill and labour and thereby constitutes unlawful competition.
According to Corbett J, ‘[i]t is well established that our
common law recognises every person’s “right”
–
“liberty” would, perhaps, be a more correct term –
to carry on his trade without wrongful interference
from others,
including competitors’ (
Dun
and Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape)
(Pty) Ltd
1968 (1) SA 209
(C) at 216). As a general rule, every person is
entitled freely to carry on his trade or business in competition with
his rivals.
But the competition must remain within lawful bounds. If
it is carried on wrongfully, in the sense that it involves a
wrongful interference
with another’s rights as a trader,
that constitutes an
injuria
for which the Aquilian action lies if it has directly resulted in
loss. (See
Schultz
v Butt
at
678G).
[17]
Indeed, as pointed out in
Schultz
v Butt
at
678H-I:
‘
In
order to succeed in an action based on unfair competition, the
plaintiff must establish all the requisites of Aquilian liability,
including proof that the defendant has committed a wrongful act. In
such a case, the unlawfulness which is a requisite of Aquilian
liability may fall into a category of clearly recognized illegality,
as in the illustrations given by CORBETT J in
Dun
and Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape)
(Pty) Ltd
1968
(1) SA 209
(C)
at
216F-H, namely trading in contravention of an express statutory
prohibition; the making of fraudulent misrepresentations
by the rival
trader as to his own business; the passing off by a rival trader of
his goods or business as being that of his competitor;
the
publication by the rival trader of injurious falsehoods concerning
his competitor's business; and the employment of physical
assaults
and intimidation designed to prevent a competitor from pursuing his
trade. But it is not limited to unlawfulness of that
kind’.
[18]
No one can claim an absolute right to the exercise of his or her
trade, profession or calling, for, competition often brings
about
interference in one way or another about which rivals cannot
legitimately complain (
Matthews
v Young
1922 AD 492
at 507). All that a person can, therefore, claim is the
right to exercise his calling without unlawful interference from
others.
As Corbett J pointed out (
Dun
and Bradstreet
at 216E)
‘[o]ne of the “rights” comprehended in the general
right to carry on a trade is the right to attract
custom. Competition
by a rival trader necessarily involves an interference with the
exercise of this right in that it results,
to some degree, in the
diversion of such custom to the rival trader’. Thus, the main
difficulty in this branch of the law
is to determine the dividing
line between lawful and unlawful interference with the trade of
another.
[19]
In this case the claim of the appellant which is presently in issue
relates to a competitive act which does not fall within
any of
the above-mentioned examples or categories of unlawful
competition alluded to by Corbett J. In
Gründlingh &
others v Phumelela Gaming and Leisure Ltd
[2005] ZASCA 62
;
[2005]
4 All SA 1
(SCA) paras 40 and 41, the majority (per Farlam et
Conradie JJA) held:
‘
The
test for the unlawfulness of a competitive action is essentially
public policy and the legal convictions of the community.
The
latter concept ordinarily includes not only right-thinking members of
the community who might be expected to hold a view on
the particular
topic but also, as Van Dijkhorst J said in
Lorimar
Productions Inc and Others v Sterling Clothing Manufacturers (Pty)
Ltd; Lorimar Productions Inc and Others v OK Hyperama
Ltd and Others;
Lorimar Productions Inc and Others v Dallas Restaurant
1981
(3) SA 1129
(T)
at
1153A, those involved in the industry, “(t)he business ethics
of that section of the community where the norm is
to be applied”.
Apart from these considerations there are elements like
“
an
inherent sense of fairplay and honesty; the importance of a free
market and strong competition in our economic system; the question
whether the parties concerned are competitors; conventions with other
countries, like the Convention of Paris”. (At 1153B-C).
While
legislative provisions are obviously expressions of policy they may
(and we think they do here) give expression to the community's
legal
convictions.
The Convention of
Paris for the Protection of Industrial Property defines unfair
competition as “any act of competition contrary
to honest
practices in industrial or commercial matters”. The theme of
honest practices raised in
Lorimar
had been explored by Corbett J in
Dun
&
Bradstreet
(Pty) Ltd v SA Merchants Combined Credit Bureau (Cape) (Pty) Ltd
1968
(1) SA 209
(C)
A and taken up in
Schultz
v Butt
1986
(3) SA 667
(A)
where Nicholas AJA agreed with Corbett J that “(f)airness and
honesty are themselves somewhat vague and elastic terms”
(at
679A-B) but that they are nonetheless valuable concepts; and that
while they are “relevant criteria in deciding whether
competition is unfair, they are not the only criteria . . . questions
of public policy may be important in a particular case.
. .”
(at 679E). He added that Van der Merwe and Olivier
Die
Onregmatige Daad in die Suid-Afrikaanse Reg
5th ed at 58 note 95 “rightly emphasise” that “die
regsgevoel van die gemeenskap” opgevat moet word
as die
regsgevoel van die gemeenskap se regsbeleidmakers, soos Wetgewer en
Regter (at 679D-E).’
[20]
Once again it may be useful, as a starting point, to call in aid the
Interflora
decisions.
Interflora operates a network of flower shops, all of which trade
under their own branding and trade marks. This gives
rise to certain
unique considerations insofar as keyword bidding is concerned which
clearly influenced the outcome of the trial
court decision, which was
overturned on appeal and remitted for reconsideration by the Appeal
Court. That the
Interflora
cases are distinguishable on their facts from other keyword cases is
made clear in
Cosmetics
Warriors
.
Although distinguishable on the facts, the decision of the Court of
Appeal provides an extensive analysis of the general principles
which
are applied in Europe, and therefore the United Kingdom, to the
determination of whether or not keyword bidding on a competitor’s
trade mark is lawful or not.
[21]
According to the
Court
of Appeal Interflora judgment
(para
98) ‘internet advertising using keywords which are identical to
trade marks is not an inherently objectionable practice.
On the
contrary, its aim is, in general, to offer to internet users
alternatives to the goods or services of trade mark proprietors
and
it is not the purpose of trade marks to protect their proprietors
from fair competition’.
[11]
The Court of Appeal in
Interflora
accepted
that the use of another’s trade mark as a keyword in the Google
AdWords service does not adversely affect the advertising
function of
that mark,
[12]
notwithstanding that that use might have repercussions for the use of
the mark in advertising by the trade mark proprietor.
[13]
The fact that the use of the other trader’s trade name or trade
mark as a keyword means that the proprietor of the trade
mark might
have to pay a higher price-per-click than its competitor if it wished
to ensure that its advertisement appeared before
that of the
competitor is not a sufficient basis for concluding that the trade
mark’s advertising function is adversely affected.
This is
because the use of a competitor’s trade name or trade mark as a
keyword does not have the effect of denying the proprietor
of that
trade mark the opportunity of using its mark effectively to inform
and win over consumers (as an advertising tool).
[14]
[22]
The determination of whether or not an advertiser acts in accordance
with honest practices in commercial matters and fairly
in relation to
the legitimate interest of another trade mark proprietor depends upon
whether or not consumers would understand
the advertiser’s
Google advertisement to establish a link between the third party’s
goods and those of the trade mark
proprietor, and of the extent to
which the third party ought to have been aware of that. If the trade
mark proprietor establishes
the likelihood of this link (i.e.
confusion) then the advertiser will be held to have acted dishonestly
or unfairly.
[15]
The
Cosmetic
Warriors
decision makes plain that there is no likelihood of confusion or
deception which arises in circumstances where an advertiser, without
more, uses another trader’s trade name only as a keyword.
[23]
The decisions of the Court of Appeal in France and the Barcelona
Commercial Court referred to earlier also found that the practice
did
not constitute unfair competition. They found in this regard that in
the absence of confusion or deception there is nothing
unlawful in
the practice, which was in fact generally pro-competitive.
[16]
[24]
Although couched in the language of unlawful competition, the
appellant’s complaint, reduced to its essentials, is that
the
respondents have appropriated its trade name for a particular purpose
(keyword bidding) and for their own benefit. However,
the use by one
trader of the unregistered trade mark or trade name of another is not
unlawful under the common law except to the
extent that that use
gives rise to passing off.
[17]
We have not been referred to any South African decision in which an
applicant was afforded protection against the use of its unregistered
trade mark in the absence of dishonest or wrongful conduct on the
part of its rival. Quite the contrary, our courts have generally
declined to come to the aid of an applicant complaining that a rival
trader has used its trade name for its own commercial purposes
unless
that applicant can establish that the rival trader is using its trade
mark or trade name in a manner likely to deceive or
confuse members
of the public.
[18]
As it was put in
Payen
Components SA Ltd v Bovic CC & others
[1995]
ZASCA 57
;
1995 (4) SA 441
(A) at 453G-H: ‘In my opinion a Court
should be wary of allowing the sharp outlines of these two
established branches of
the law of unlawful competition [copyright
and passing-off], evolved through long experience, to be fudged by
allowing a vague
penumbra around the outline. Unlawful competition
should not be added as a ragbag and often forlorn final alternative
to every
trade mark, copyright, design or passing off action. In most
such cases it is one of the established categories or nothing.’
[25]
It follows that the attempt by the appellant to ground a cause of
action based on unlawful competition in these circumstances
is ill
conceived. For, ‘imitation is the lifeblood of competition’
and ‘the bare imitation of another’s
product, without
more is permitted’ (
Schultz
v Butt
quoting from
American
Safety Table Co Inc v Schreiber
[1959] USCA2 446
;
269 F.2d 255
(2nd Cir 1959)).
[19]
And, as it was put in
Moroka
Swallows Football Club v The Bird Football Club
1987 (2) SA 511
(W) at 531:
‘
Provided
that he does not commit the delicts of defamation or passing off or
offend against any specific statutory prohibition,
there is no reason
why an entrepreneur should not take the benefit of such advantage as
he may be able to gain in the marketing
of his goods and services by
associating them with names that have become famous’.
Indeed,
the appellant effectively calls upon this court to allow what Schutz
JA described as an illegitimate ‘ersatz passing
off with
requirements . . . less exacting than those required by the common
law’ (
Blue
Lion Manufacturing
(above)
para 1). Schutz JA added: ‘Some of the restraints that the
common law places on the passing-off action (the one relevant
to this
case is the need to prove the likelihood of deception and confusion)
are important in preventing the creation of impermissible
monopolies’
.
[26]
It follows that the appeal must fail and in the result it is
accordingly dismissed with costs.
_________________
V M Ponnan
Judge
of Appeal
APPEARANCES:
For
Appellant:
O Solmon SC (with him M Freed)
Instructed
by:
Rademeyer
Attorneys, Johannesburg
Honey
Attorneys, Bloemfontein
For
Respondents:
G Marriott
Instructed
by:
Adams
& Adams, Johannesburg
Webbers,
Bloemfontein
[1]
The joinder was in response to an
allegation by Mr Timotheus Meintjies, the deponent to the answering
affidavit filed on behalf
of
Cochrane,
that the appellant had cited a
company that does not exist.
It
is accepted that any order of court will be satisfied jointly by
both respondents.
[2]
In order to establish such a mark, an
applicant has to show that the mark has acquired such a reputation
in relation to the applicant’s
business that it may be said to
have become distinctive thereof. See
Capital
Estate and General Agencies (Pty) Ltd v Holiday Inns Inc
1977
(2) SA 916
(A) at 925H. See also
Policansky
Bros Ltd v L & H Policansky
1935
AD 89
at 97, where Wessels CJ held the following in relation to a
claim of passing off: ‘It is an action in tort and the tort
consists of a representation by the defendant that his business or
his goods, or both, are those of the plaintiff. The Roman-Dutch
law
was well acquainted with the general principle that a person cannot,
by imitating the name, marks or devices of another who
had acquired
a reputation for his goods, filch the former’s trade
(Ned.
Advies Boek,
vol. 1, adv.
68, p. 161). This class of tort had not reached, by the end of the
eighteenth century, the importance that it has
today.’
[3]
Cobrason v Google Inc, Google
France & Home Ciné Solutions
(Paris
Court of Appeals, May 11, 2011) discussed by Jean-François
Bretonniére & Thomas Defaux in ‘Sponsored
links:
Has the Supreme Court finally ended the debate on keywords?’
World Trade Review
Legal updates, 2 April 2013, where it was stated: ‘It is now
well established by the French courts that Google’s
sponsored
links are identified by consumers as advertisements and, therefore,
do not create a risk of confusion by their mere
appearance. In order
to qualify as unfair competition, an advertisement needs to go much
further, for example by making an explicit
reference to the name of
the competitor in order to create confusion for the average
consumer.’
[4]
In two cases:
Most-Pralinen
(German Federal Supreme Court of Justice case number I ZR 217/10, 13
December 2012) and
Fleurop
(German Federal Supreme Court of Justice case number I ZR 53/12, 27
June 2013) discussed by Florian Schwab in ‘Supreme
Court
confirms case law on keywords advertising’ of 1 March 2013 and
Annna Mattes in ‘Federal Supreme Court follows
Interflora
in keyword case’ of 4 April 2014 in the
World
Trade Review
Legal updates
respectively, as follows:
‘
The
decision clearly puts an end to the approach followed by certain
German appeal courts whereby keyword advertising was held
to
constitute use as a trademark which might give rise to a likelihood
of confusion. The court’s opinion was well-founded
and
anchored in the real world, as internet users should be able to
distinguish search results from sponsored links, but the
court’s
approach also allows search engines to continue generating revenue
by selling keywords’
And
in respect of the latter, the following is stated:
‘
The
decision is the latest in a series of cases in which the Federal
Supreme Court has had to rule on the issue of the liability
of
purchasers of keywords for trademark infringement. This decision –
concluding that infringement had occurred –
may appear
surprising at first glance, in view of the fact that the Supreme
Court has so far consistently ruled that there was
no trademark
infringement in such cases, because keyword advertising does not
infringe the origin function of a trademark if
the advertisement is
visually separated from the natural search results and does not make
any reference either to the trademark
owner or the products marketed
under that trademark.
With
this decision, the Federal Supreme Court followed the decision of
the High Court of England and Wales in
Interflora v Marks and
Spencer
([2013] EWHC 1291 [Ch]), incorporating the guidelines
laid down by the ECJ in
Interflora
(C-323/09); the facts of
the German
Fleurop
case corresponded in all essential aspects
to the English
Interflora
case.
However,
the present decision does not appear to constitute a new approach to
keyword advertising, but rather fits into well-established
case law:
the court itself emphasized that, in principle, keyword advertising
does not amount to trademark infringement, and
repeatedly
highlighted the exceptional and specific nature of this case.’
[5]
In
Fotoprix
SA v Vistaprint España SL
(Barcelona Commercial Court Number 2, 29 July 2014)
discussed
by Maite Ferrándiz
in
‘Court rules on use of third-party trademarks as AdWords’
World Trade Review
Legal update of 30 October 2014 who
stated:
‘
In
particular, the court considered, in accordance with the judgment of
the Court of Justice of the European Union in Google France
(Joined
Cases C-236/08 and C-238/08, March 23 2010), that the use of AdWords
which coincide with third-party registered trademarks
does not, in
itself, constitute trademark infringement, when, as in this case,
the advertisement enables the user to determine
the origin of the
products or services being advertised, and such use does not
undermine the advertising function of the trademark.’
[6]
Die BergSpechte
Outdoor Reisen und Alpinschule Edi Koblmüller GmbH v Günther
Guni and trekking.at Reisen GmbH
[2010]
ETMR 33
(Court of Justice of the European Union) para 35. See also
Justin Pila & Paul Torremans
European
Intellectual Property Law
(2016) at 415, discussion on AdWords
.
[7]
Including (depending on the search
and the time that the search is conducted) advertisements for firms
called (or identified as)
C-Thru fencing, Transparent Burglar Bars,
Anti Climb Wall Spikes, Clayton Security, Razorspike.co.za, the
Yellow Pages, mfbwalling.co.za,
madeinchina.com, hmeonline.com,
securityinsteel.co.za, neospace.co.za, securomesh.co.za and
steelpallisade.co.za.
[8]
Thus, betafence.co.za is a natural
first page search result for Clearvu fencing, while Vicor fencing is
a natural first page search
result for Clear-Vu.
[9]
In
Premier
Trading Co Ltd & another v Sporttopia (Pty) Ltd
[1999]
ZASCA 48
;
2000 (3) SA 259
(SCA) at 273B Nienaber JA stated: ‘The
enquiry must be directed at the potential end customers [of roller
skates]. Judging
by the promotional material adduced by the
appellant in support of its case, the end customers would most
likely be teenagers
or their parents. Teenagers, when it comes to
this sort of product, are notoriously discerning and discriminating
purchasers
. . .’
[10]
Initial-interest confusion has been
described as a ‘bait and switch’ tactic that ‘occurs
when a consumer is
in search of the plaintiff’s product is
lured to the product of a competitor’.
[11]
See
also
para 104.
[12]
Paragraph 38 and 78, the latter with
reference to Joined Cases C-236/08 to C-238/08
Google
France SARL v Louis Vuitton Malletier SA
[2010]
ECR 1-0000
(
Google France
).
[13]
Paragraph 97, with reference to the
ECJ decision in the same matter – Case C-323/09
Interflora
(CJEU).
[14]
Paragraph
s
5
7
–
59
of the ECJ decision quoted
in para 97 of
Interflora
.
[15]
Paragraph 87, with reference to Case
C-558/08
Portakabin v
Primakabin
[2010] ECR
I-6963.
[16]
The decisions in all of these cases
appear to be consistent with those of the UK Court of Appeal
decision in
Interflora
.
[17]
Phillip Morris Inc & another v
Marlboro Shirt Co SA Ltd & another
1991
(2) SA 720
(A) 743F-H.
[18]
Blue Lion Manufacturing (Pty) Ltd
v National Brand Ltd
[2001] ZASCA 62
;
2001 (3) SA 884
(SCA) para 1;
Payen
Components SA ltd v Bovic CC & others
[1995] ZASCA 57
;
1995 (4) SA 441
(A) at 453G;
Phillip
Morris Inc v Marlboro Shirt Co SA Ltd
(above)
at 743F-H;
Moroka Swallows
Football Club v The Bird Football Club
1987 (2) SA 511
(W) at 531;
Union
Wine v Edward Snell
1990
(2) SA 189
(C); and
Lorimar
Productions Inc v Sterling Clothing Manufactures (Pty) Ltd
1981
3 SA 1129 (T).
[19]
In
Schultz
v Butt
at 683 Nicholas AJA
stated:
‘
In
the American case of
American
Safety Table Co Inc v Schreiber
[1959] USCA2 446
;
(1959) 269 F.2d 255
it was said at 271-272:
“
...
(At) first glance it might seem intolerable that one manufacturer
should be allowed to sponge on another by pirating the product
of
years of invention and development without licence or recompense and
reap the fruits sown by another. Morally and ethically
such
practices strike a discordant note. It cuts across the grain of
justice to permit an intruder to profit not only by the
efforts of
another but at his expense as well.”
However,
this initial response to the problem was curbed in deference to the
greater public good:
“
For
imitation is the life blood of competition. It is the unimpeded
availability of substantially equivalent units that permits
the
normal operation of supply and demand to yield the fair price
society must pay for a given commodity... Unless such duplication
is
permitted, competition may be unduly curtailed with the possible
resultant development of undesirable monopolistic conditions.
The
Congress, realizing such possibilities, has therefore confined and
limited the rewards of originality to those situations
and
circumstances comprehended by our patent, copyright, and trademark
laws. When these statutory frameworks are inapplicable,
originality
per se
remains unprotected and often unrewarded. For these reasons and with
these limitations the bare imitation of another's product,
without
more, is permissible. And this is true regardless of the fact that
the Courts have little sympathy for a wilful imitator.”’