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[2016] ZASCA 110
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Joest (Pty) Ltd v Jost GmbH and Others (319/2015, 324/2015) [2016] ZASCA 110; 2016 BIP 251 (SCA) (1 September 2016)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 319/2015 & 324/2015
In
the matter between:
JOEST
(PTY)
LTD
APPELLANT
and
JÖST
GmbH +
KG
FIRST RESPONDENT
JVT
VIBRATING EQUIPMENT (PTY) LTD
SECOND RESPONDENT
THE
REGISTRAR OF TRADE MARKS
THIRD
RESPONDENT
Neutral
Citation:
Joest
v Jöst
(319/2015
& 324/2015)
[2016] ZASCA 110
(1 September 2016)
Coram:
Navsa,
Petse, Willis, Saldulker and Swain JJA
Heard:
15
August 2016
Delivered:
1
September 2016
Summary:
Trade
marks and passing off : contested proprietorship of confusingly
similar registered trade marks : application and counter-application
for expungement of trade marks from register and consequential relief
: mark originating from first respondent, a German based
company and
holding company of a subsidiary which introduced its machines and
components into South Africa bearing the mark indicating
provenance :
years later ownership in subsidiary relinquished : commercial
relationship continuing : no acquisition of proprietorship
by former
subsidiary : licensee and not licensor : ineffective assignment of
rights not validly held.
ORDER
On
appeal from
:
The Gauteng Division of the High Court, Pretoria (Ismail J sitting as
court of first instance).
The
following order is made:
1.
The main appeal is dismissed with costs including the costs of two
counsel.
2.
The cross-appeal is upheld
with costs including the costs of two counsel.
3.
Paragraph 2.3 of the order
in the court below is amended to read as follows:
‘
2.3.
The first respondent in the counter-application is ordered to pay the
costs of the counter-application.’
4.
The order of the court below is supplemented by the inclusion of the
following
orders:
‘
2.4.
The first respondent in the counter-application is interdicted and
restrained, in terms of Section
34(1)
(a)
the Trade Marks Act 193 of 1994, by itself or through its servants or
agents, from infringing the rights of the first applicant
in the
counter-application flowing from the registration of the first
applicant in the counter-application’s registered trade
mark
nos. 2006/29062 & 63
in
classes 7 and 9 by using, in the course of trade, in relation to the
goods and services identical to the goods included in trade
mark nos.
2006/29062 & 63, the identical mark or any mark so similar
thereto as to be likely to deceive or cause confusion.
2.5
The first respondent in the counter-application is interdicted and
restrained from passing
off its goods and services as being those of
the first applicant in the counter-application or as being connected
with those of
the first applicant in the counter-application in the
course of trade, by the use of the marks: JOEST, JOST, JÖST, , ,
, ,
and related get up, or any other trade mark or get-up that is
confusingly similar to the first applicant in the
counter-application’s
and
trade
marks and get-up.
2.6
The first respondent in the counter-application is ordered to remove
the marks: JOEST, JOST,
JÖST, , , ,
and
related get up, or any confusingly or deceptively similar trade
marks, from all matter in their possession or under their control,
including all signs, labels, websites, promotional and advertising
material, packaging, stationery and other printed or electronic
matter of any nature and where the marks are inseparable or incapable
of being removed from such material to which they have been
applied,
delivering up such matter to the first and second applicants in the
counter-application’s attorneys.
2.7
It is directed that an enquiry be conducted, pursuant to
Section
34(4)
of the
Trade Marks Act 194 of 1993
, to determine the quantum of
damages suffered by the first applicant in the counter-application as
a result of the infringement
of the first applicant in the
counter-application’s trade mark, or the payment of a
reasonable royalty for the use of its
trade mark in lieu of such
damages, and that the first respondent in the counter-application pay
such damages and/or reasonable
royalty as may be found to be payable
by the first respondent in the counter-application to the first
applicant in the counter-application
in the course of such enquiry,
and that
2.8
To this end, in the event of the parties being unable to agree on the
procedure to be adopted
in such enquiry, either party may approach
this court for directions as to the procedure to be adopted, on these
same papers, duly
supplemented where necessary.’
JUDGMENT
Navsa
JA (Petse, Willis, Saldulker and Swain JJA concurring)
The
Issue
[1]
The central question in this case, is which of the parties can claim
to be the lawful proprietor of the Joest/Jöst trademark
in South
Africa. The answer to that question will be determinative of both the
appeal and the cross-appeal. The appeals are pursuant
to a decision
of the Gauteng Division of the High Court, Pretoria (Ismail J),
determining an application and counter-application
for interdictory
and associated relief in relation to the use of the mark. The court a
quo held that the first respondent is the
lawful proprietor. The
background extracted from the affidavits filed in the court below and
the reasoning and conclusions of that
court leading up to the present
appeal and cross-appeal, are set out hereafter.
The
background
[2]
The parties agree that Joest is simply the English spelling of the
German surname Jöst and that they are confusingly similar.
The
appellant, Joest (Pty) Ltd, is a South African company with its
principal place of business in Spartan, Kempton Park, Gauteng
Province. The first respondent, Jöst GmbH+Co. KG, is a German
company with its registered address in Dülmen, Germany.
I shall,
for the sake of convenience, refer to the appellant and the first
respondent in the main appeal as J and Jöst, respectively.
These
appellations will make it easier when dealing with both the main and
cross-appeals.
[3]
The second respondent, JVT Vibrating Equipment (Pty) Ltd (JVT), a
South African company with its principal place of business
in
Bedfordview, Gauteng, which was incorporated in 2012, is a subsidiary
of Jöst and a licensee, authorised to distribute
the latter’s
products in South Africa, and is in direct competition with J in this
country. The products so manufactured
and distributed in South Africa
bear the Joest/Jöst mark.
[4]
Jöst is a multinational company that has its origins when a
company was first established in Germany during 1919 by a Mr
Jöst
and a Mr Fiege. At that stage they incorporated a company called JÖST
Schwingungstechnik GmbH. Jöst and its
predecessor’s core
competencies included the design and manufacture of vibrating
machines and vibratory drive units and establishing
and designing
solutions in process engineering. Jöst operates, either directly
or through subsidiaries, in jurisdictions around
the world and its
products are applied, amongst others, in the foundry and steel
industry, the mining industry, chemical and plastics
industry and the
thermal processing of bulk material. That Jöst and its
predecessors in title have been in business for 93
years is
unchallenged. The companies through which Jöst operates in
France, Australia, the United States of America, China
and Slovakia
all, in one form or the other, bear the Joest name. Although J, in a
replying affidavit disputes the present extent
of Jöst’s
international operations and the degree of its commercial success,
the essential averments that Jöst
has an international presence
and reputation and is engaged in the industries referred to above,
are not denied and must be accepted.
It is not in dispute that Jöst
is the proprietor of various Jöst and Joest trade marks in
jurisdictions throughout the
world.
[5]
In the 1970s the shareholders of JÖST Schwingungstechnik GmbH
bought a company called Pontzen Engineering GmbH (Pontzen).
In 1984
the two entities merged under the Pontzen banner and the new company
licenced its business operations to an associated
company called Jöst
KG. Pontzen later changed its name to the first respondent’s
present designation. Thus, Jöst
came into being. The averments
by Jöst that its predecessor, in the embodiment referred to at
the beginning of this paragraph,
entered the South African market
using the Joest mark and the
logo
and that the brand was promoted under the English spelling of Jöst,
namely, Joest, is essentially unchallenged.
[6]
J’s predecessor in title, Joest Vibration Technics (South
Africa) (Pty) Ltd (Technics), was first incorporated as a South
African company in 1976 to operate Jöst’s business under
licence from Jöst. At the time of its incorporation, Technics
was a wholly owned subsidiary of Jöst. In October 1987, although
Technics changed its name to Joest Vibrations (Pty) Ltd (JV),
it
remained wholly owned by Jöst. During the period from 1976 until
1989 it is common cause that Technics and JV, whilst wholly
owned by
Jöst, imported from Jöst and manufactured machines which
they sold and distributed for use in the industries
referred to
above, under licence from Jöst using its know-how and
technology. During that period the machines all bore the
Joest mark.
[7]
Jöst’s assertion, that in 1989, because of international
pressures to disinvest from apartheid South Africa, it entered
into a
written sale of shareholding agreement, in terms of which it sold 75
per cent of its shareholding in JV to the Vogel family
that now
controls J, is not effectively contested. In terms of that agreement
the right of JV to use the Jöst mark was restricted
to certain
jurisdictions in Southern Africa. Simultaneously a manufacturing
licencing agreement was concluded between JV and Jöst.
This
agreement was updated and replaced in 1996. Jöst contended that
it is implicit in all these agreements that the products
manufactured
in terms thereof would bear the Joest mark used by Jöst. This,
of course, is challenged by J which contended
that these agreements
were merely ones in terms of which it was licenced to use Jöst’s
know-how and confidential information.
I shall, in due course, deal
with the relevant provisions of the 1989 and 1996 written agreements
and deal with the parties’
respective contentions in relation
thereto.
[8]
During November 1992 JV changed its name to Joest (Pty) Ltd, which at
that time apparently was not the same entity as J. In
1996 the
remaining 25 per cent shareholding in that company was sold to the
Vogels. The sale of shares agreements referred to in
this and the
preceding paragraph did not cater for the assignment of the
Joest/Jöst marks. Between August 1998 and July 2009
there were
shareholding changes in relation to J’s predecessors in title
which are not of any real moment.
[9]
Jöst’s assertion that at the beginning of the 1990’s
it updated its logo as follows, JOST, is not substantively
disputed.
It is also not disputed that following Jöst’s update of
this logo, J’s predecessor similarly updated
its own logo to
match. Nor is it challenged that the copyright in the logo was
assigned by its designer to Jöst. According
to the trade mark
register, Jöst is the proprietor in South Africa of the
following trade mark registrations:
(a)
no. 2006/29062 JÖST logo in class 7 in respect of
‘
Construction
machines, electricity generators; motors and engines (except for land
vehicles); machine coupling and transmission
components (except for
land vehicles); machine drives (except for land vehicles); dosing
drives and installation; hangers (parts
of machines); vibration
drives (machines); magnetic data oscillators (machines); unbalanced
mass vibration generators (machines);
directed force exciters
(machines); vibration reactors (machines); magnetic vibrators
(machines); unbalanced motors (machines);
shaft drives; machines for
conveying, sifting, classifying, dosing and/or crushing; processing
machines, resonance conveyor installations;
sliding conveyors; spiral
conveyors; feed installations; lifting and tilting apparatus
(machines); hydraulic tilting apparatus;
container handling systems;
transport devices and systems for bulk goods (machines); casting
coolers (machines); sand coolers (machines);
vibration coolers and
dryers (machines); fluidised bed coolers and dryers; dosing toughs
(machines); oscillating conveyor pipes
(machines); vibrating
screening machines; separating toughs (machines); shake-out grids
(machines); shaking tables (machines);
sand lump breakers (machines);
sieves; sorting tables (machines); classifying devices.’
(b)
no. 2006/29063 JÖST logo in class 9 in respect of
‘
Electric
and electronic equipment; apparatus for devices for controlling
and/or regulating machines and installations; controls
as well as
measuring devices, apparatus and instruments for machines and
installations; weighing devices, apparatus and instruments,
scales.’
[10]
In jurisdictions around the world Jöst has registered the
Joest/Jöst mark or applied therefor in the following forms
in
relation to machinery manufactured by it:
[1]
JOEST
JOST
[11]
Mr Dieter A Jöst, a grandchild of one of the two founding
members of Jöst, who was also a shareholder and employee
of J
and its predecessors in the years between 1972 and 2005, stated in an
affidavit in support of Jöst’s case that
it was never
intended by way of the sale of shares agreements referred to above or
the manufacturing agreement that Jöst would
divest itself of the
proprietorship of the Joest/Jöst mark.
[12]
On 29 July 2009, J in its present form, was established. J too, like
Jöst, designs and manufactures vibrating equipment
that it
supplies to the bulk material handling market, which includes the
industries supplied by Jöst. Clearly, it is the
competition
between the two that lies at the heart of the present litigation.
[13]
On 30 April 2012, the 1996 written manufacturing licencing agreement
referred to above was terminated. It is necessary to record
that
during 1996, Gunter Vogel, the chairperson and a non-executive
director of J, registered the Joest trade mark in his own name
and
during 2010 registered the logo used by Jöst in J’s name.
The mark registered during 1996 was only assigned to J
in 2012. In
terms of the trade marks register, J is the proprietor in South
Africa of the following trade mark registrations:
(i)
no. 1996/00964 JOEST in class 7 in respect of:
‘
Machines
and machine tools, including vibrating screens and feeders for use in
industry’,
(ii)
no. 2010/00726 JOEST in class 37 in respect of:
‘
Building
construction, repair, installation services’;
(iii)
no. 2010/00727 JOEST logo (colour) in class 7 in respect of:
‘
Machines
and machine tools, motors and engines (except for land vehicles);
machine coupling and transmission components (except
for land
vehicles); agricultural implements other than hand operated;
incubators for eggs’,
JOEST
(iv)
no. 2010/00728 JOEST logo (colour) in class 37 in respect of:
‘
Building
construction, repair, installation services’.
The
marks set out above are clearly confusingly similar to that used by
Jöst in jurisdictions around the world.
[14]
On 21 March 2011 discussions took place in Perth, Australia, between
representatives of J and Jöst in contemplation of
an extension
of the 1996 licence agreement. The following admitted part of the
minutes of the meeting is relevant:
‘
The
trademark which Gunter Vogel initially had registered will be
transferred to JOEST Germany. During the course of the prolongation
of the license agreement an amendment will be made specifying the
details how the licensee can make use of this trade name during
the
lifetime of the license contract.’
The
extension of the agreement did not materialise.
[15]
According to J, the licencing agreement was terminated in 2012
because it had come to the realisation that, for a number of
preceding years it had received very little in the form of useable
know-how from Jöst, particularly if regard was had to the
licencing fees. J also contended that the know-how was of limited use
in relation to South African mining conditions. J stated
that it had
over the years developed its own technology in its own name and sold
products it had developed and manufactured to
customers under the
Joest name. This, of course, is strenuously denied on behalf of Jöst,
which in substantiation supplied
copies of correspondence, plans,
diagrams and photos, that it contended demonstrated on-going
assistance and input to J where the
latter itself endeavoured to
manufacture products. Para 7.8 of J’s founding affidavit in the
main application is important.
Following on what is set out at the
beginning of this paragraph, the principal deponent on behalf of J
stated the following:
‘
In
short, the know-how licence to [J] was not really appropriate for the
peculiar conditions of the South African mining industry
and, over
the years, [J] had to develop technology of its own and manufactured
and sold JOEST products to its customers that did
not incorporate or
embody any know-how received from [Jöst]. J developed its own
range of JOEST products that became successful
in the industry and
popular amongst [J’s] customers.’
I
shall, in due course, return to the significance of this passage.
[16]
J’s attitude is that Jöst unlawfully proceeded to register
the marks referred to above on 1 December 2011 without
its knowledge
or consent. J alleged that its concern was that the JÖST trade
mark was virtually identical to its JOEST trade
mark. The affidavit
by Gunter Vogel in support of J’s case went on to state:
‘
[P]honetically,
the two marks are identical. Bearing in mind that the letter “Ö”
in German is the equivalent of
the letters “OE” in
English, JÖST and JOEST are alternative forms of the same mark.
I submit that, at the very
least, the two marks are confusingly and
deceptively similar and use of the respective marks by different
proprietors will inevitably
give rise to deception and confusion in
the marketplace. It appears from correspondence exchanged between
[J’s] attorneys
and [
Jöst’s]
attorneys (which
will be dealt with below) that [
Jöst]
agrees that the
marks JÖST and JOEST are confusingly similar and, in the
circumstances, I do not intend to deal with this aspect
in any more
detail’.
As
stated above on this latter aspect the parties are ad idem.
[17]
It is common cause that the goods covered by the parties’
respective trade marks in classes 7 and 9 overlap. J contended
that
Jöst’s trade mark registrations in classes 7 and 9 are
liable to be removed from the register of trade marks on
the basis
that they are entries wrongly made or, alternatively, entries wrongly
remaining, on the register, within the meaning
of s 24(1) of the
Trade Marks Act 194 of 1993 (the Act). In particular, these
registrations, so it was submitted, offend against,
inter alia, the
provisions of the following sections of the Act:
(a)
Section 10(3), in that Jöst has no bona fide claim to
proprietorship in relation to
the JÖST trade mark in South
Africa;
(b)
Section 10(12), in that use by Jöst, or any licensee, such as
JVT, would be likely
to deceive or cause confusion, in view of J’s
extensive reputation and goodwill in respect of its JOEST trade mark
in South
Africa;
(c)
Section 10(14), in that the mark JÖST is identical or so similar
to J’s
(earlier) registered trade mark JOEST, that use thereof
in relation to the goods in respect of which the mark has been
registered
and which are the same as or similar to the goods in
respect of which J’s JOEST trade mark is registered, would be
likely
to deceive or cause confusion;
(d)
Section 10(15), in that the mark JÖST is identical or so similar
to J’s (later)
registrations for JOEST that use thereof in
relation to the goods in respect of which it has been registered and
which are the
same as or similar to the goods and services in respect
of which J’s (later) marks are registered, would be likely to
deceive
or cause confusion.
[18]
During October 2012 J launched an application in the court below
seeking the expungement of JÖST trade mark registrations
and
sought an interdict restraining JVT from infringing its rights that
arise from its trade mark registrations referred to above
and from
passing itself off as J or being connected in the course of trade
with J by using the mark JÖST or JOEST.
[19]
A further spur to the application in the court below appears to be a
legal opinion obtained by J from a German legal expert
that as the
1996 licencing agreement was subject to the laws of the Federal
Republic of Germany and fell to be interpreted according
to those
laws, the agreement could not be interpreted as constituting a trade
mark agreement.
[20]
As is apparent from what is set out above, the application was
resisted by Jöst, which in turn launched a counter-application
in terms of which it sought the expungement of J’s trade mark
registrations referred to above and similarly sought interdictory
relief of the kind referred to above. Relief was sought against J as
well as against Gunter Vogel. Before us, however, the latter
relief
was not persisted in.
[21]
It is now necessary to have regard to the relevant provisions of the
1989 ‘Sale of Shareholding Agreement’. The
agreement was
between Gunter Vogel and two other members of the Vogel family and
Jöst (at that stage Pontzen) for the transfer
of 75 per cent of
the shareholding of the company as recorded in para 7 above. In terms
of that agreement the purchasers of the
shareholding accept that the
company (JV) was obliged to buy particular machinery and components
from Jöst, unless otherwise
agreed to in writing. The purchasers
undertook that they would ‘enter into a licence agreement with
Jöst’ and,
furthermore, were ‘restricted to carrying
on its business in the region’. The region was defined to mean
‘the
Republic of South Africa as it was constituted on 31 May
1961, Namibia, Botswana, Lesotho, Mozambique, Zambia and Zimbabwe’.
As contemplated, a manufacturing licencing agreement was
simultaneously concluded. Although neither party could locate that
agreement
it is common cause that the licence agreement concluded
between the parties on 17 June 1996 is in similar terms.
[22]
The 1996 licence agreement is, as accepted by Jöst, a
manufacturing agreement. It records that Jöst as licensor had
been manufacturing and selling articles listed therein and that J had
manufactured licenced products under a renewable know-how
licence
from the licensor since 1 January 1989, which licence expires on 31
December 1996. The agreement notes that the parties
were desirous
that the licencing arrangement be continued. It then goes on to
record that J is authorised to exploit Jöst’s
know-how in
respect of standard and non-standard products set out therein.
Furthermore, the agreement notes that the licensee shall
not grant
sub-licences, without the prior written consent of the licensor. The
territory in Southern Africa over which the licence
extended is set
out. Clause 16 of that agreement reads as follows:
‘
The
Licensee shall mark all products made by him under licence and
supplied to his customers with serial numbers. Should the Licensee
delete the name “JOEST” in its registered company name,
the Licensee shall affix to such products a label inscribed
“Manufactured under Licence of JÖST, Germany”.’
According
to Jöst, the inscription set out above was necessary because of
European Union Directive 94/9/EC, relating to equipment
and
protective systems intended for use in potentially explosive
atmospheres, which stipulates that the manufacturer of such equipment
must state its company name and other identifying marks on such
products, that the manufacturer is obliged to ensure strict quality
and other control over these goods, and that it is liable under law
for such goods. This assertion is unchallenged, save that J
contends
that it is irrelevant.
[23]
The assertions by J’s expert concerning German law and its
application to the agreements referred to above was countered
in the
answering affidavit by a legal expert in support of Jöst’s
case, who concluded that:
‘
[I]n
view of the special relationship between them, particularly the fact
that [J’s] predecessor in title was a wholly owned
subsidiary
of [Jöst], the agreements were no more than what was expected: a
technology licence agreement with the implicit
further licence to use
the JOEST trade marks on such products’.
[24]
In responding to what was said by Mr Dieter A Jöst, as is set
out in para 11 above, J, in its replying affidavit, merely
stated
that those allegations were denied insofar as they did not accord
with the assertions in its founding affidavit that the
licencing
agreement was merely one relating to know-how and technology.
Furthermore, the assertions by Mr Dieter Jöst were
sought to be
countered by J, with an affidavit by Dr Uwe Hautz who, at one stage,
was the managing director of Jöst as well
as a director of J.
According to Dr Hautz he was unaware of any trade mark licence
agreement.
[25]
In exploring the relationship between the parties, the following
uncontested facts that appear in para 53 of Jöst’s
answering affidavit, are also not without significance:
‘
Before
the termination of [J’s] licence agreement in April 2012, it
yearly imported, under its licence with [Jöst], between
€1,000,000.00 and €1,500,000.00 worth of vibrating drive
units (electromagnetic drivers) per year from [Jöst], all
of
which were clearly marked with [Jöst’s] JÖST trade
mark.’
[26]
Jöst is adamant that J is the only party that can be accused of
mala fides in relation to the registration of the Joest/Jöst
mark. It rejects the accusation on behalf of J that it proceeded to
register the marks unlawfully and in contravention of the latter’s
rights. Jöst was emphatic that J’s trade mark
registrations, set out above were effected surreptitiously and
opportunistically
and that they only came to Jöst’s
knowledge years later.
Judgment
in the court below
[27]
Ismail J, in addressing the question posed at the beginning of this
judgment, considered the provisions of the 1996 agreement
as set out
at para 22 above to be significant. At para 26 of the judgment the
learned judge stated the following:
‘
To
this end one must ask the rhetorical question why would [Jöst]
have insisted in the agreement that [J] could utilize “[Jöst’s]
mark Joest and that if the mark were deleted from the product, they
would have to bear the inscription ‘Manufactured under
License
of Jöst, Germany.’”’
[28]
In the immediately ensuing paragraphs of the judgment of the court
below the following appears:
‘
27.
Apart from the reason furnished in para [25], supra I am of the view
that it would have been financially
and commercially naïve for
the German company to allow the South African company carte blanche
usage of its name, on products
locally manufactured.
28.
I am of the view that the agreement was more than a know how
agreement, that it was a trade
mark agreement, notwithstanding it not
having been expressly stipulated in the agreement as such.’
[29]
The court below went on to make the following order:
‘
1.
The application is dismissed with costs, such costs to include the
costs of senior
counsel.
2.
The counter-application succeeds in that I make an order to the
following effect:
-
2.2
Directing
the third respondent [the Registrar of Trade Marks] to rectify the
Trade Mark register in terms of
section 24(1)
of the
Trade Marks Act,
194 of 1993
in relation to the trade mark registration number
1996/00964 JOEST in class 7 by removing it from the register.
2.3
Directing
the third respondent [the Registrar of Trade Marks] to rectify the
Trade Mark Register in terms of section 24(1) of the
Act in relation
to trade mark registration no. 2010/00726 JOEST in class 37, trade
mark registration no. 2010/00727 JOEST in class
7 and trade mark
registration no. 2010/00728 JOEST in class 37 by removing the
registration from the Register.
2.4
The
respondents in the counter-application are ordered to pay the costs
of the counter-application such costs to include the costs
of senior
counsel.’
[30]
It is against those conclusions and the resultant orders that J and
Jöst, with the leave of the court below, appeal and
cross-appeal, respectively.
[31]
The cross-appeal is concerned with the failure of the court below to
grant interdictory relief against J in relation to the
alleged
infringement of Jöst’s rights flowing from the
registration of J’s trade marks set out earlier in this
judgment, coupled with an order that the marks be removed from all
matter in J’s possession. Furthermore, the court below
did not
order that an enquiry be conducted pursuant to s 34(4) of the Act, to
determine the quantum of damages suffered by the
first applicant as a
result of the infringement of the first applicant’s trade mark,
or the payment of a reasonable royalty
for the use of its trade mark
in lieu of such damages, and that J pay such damages and/or
reasonable royalty as may be found to
be payable by it to Jöst
in the course of such enquiry. The orders sought and not granted are
set out in para 5, 6, 10 and
11 of Jöst’s notice of motion
in the counter-application in the court below.
[32]
Before us it was agreed that a decision on the proprietorship of the
Joest/Jöst mark would be determinative of both the
appeal and
the cross-appeal and would decide:
(a)
Which party’s trade mark registrations are validly on the
register and which ones
should be expunged therefrom;
(b)
Which party shall be rightfully entitled in future to make use of the
trade mark Joest/Jöst
in South Africa; and
(c)
Which party shall in future be prevented from making use of the trade
mark Joest/Jöst
in South Africa.
Submissions
before us
[33]
On behalf of J it was submitted that the court below correctly found
that the outcome of its cause of action for trade mark
infringement
and passing off depended on a proper interpretation of the 1996
agreement. However, J further submitted that the court
below erred in
finding that that agreement was a trade mark licence agreement.
Essentially it was contended on behalf of J that
the court below
ought to have found that the agreement was merely a know-how
agreement and that it was entitled to the relief it
claimed. It was
agreed between the parties that the applicable law in relation to the
1996 agreement was German law. It was submitted
on behalf of J that
the court ought to have taken into account in its favour the
shareholders agreement concluded in 1989, and
should have had regard
to the evidence tendered on behalf of J, namely, that of Dr Kador, an
independent German attorney who took
the view that the agreement
could not be interpreted as anything more than a mere know-how
licencing agreement based on the principles
of interpretation of
German law. It was contended on behalf of J that the evidence
tendered on behalf of Jöst, namely, that
of Mr Hackel concerning
the application of principles of interpretation according to German
law was not that of an independent
objective expert as he was Jöst’s
attorney.
[34]
Jöst, on the other hand, took the view that it was important to
consider the history of the relationship between the parties
and the
capacity in which J made use of the mark JOEST and that it is that
aspect that lies at the heart of the dispute between
the parties. It
was submitted on behalf of Jöst that J made use of the mark
JOEST as a licensee and not as a proprietor in
its own right and it
could therefore not be said to be the proprietor of the mark. Jöst
submitted that since the JOEST mark
has been in use in South Africa
on an extensive basis at least since 1976 by the appellant, but not
in its own name, it could not
therefore claim the reputation and
goodwill for the purposes of its claim of passing off.
[35]
According to Jöst the history set out earlier in this judgment
makes it clear that Technics, JV and J were mere licensees
authorised
to use the JOEST/JÖST mark. That this is so is further evidenced
by the provisions of the sale of shares agreements
referred to
earlier and also by the 1996 licencing agreement.
[36]
In respect of the law applicable to the interpretation of the 1996
agreement it was pointed out on behalf of Jöst that
the legal
experts on either side were at least agreed that according to German
law the interpretation of the licence agreement
would be resolved by
determining the intention of the parties, taking into account their
mutual interest and also the situation
and negotiations before the
signing of the agreement. They merely disagreed about the application
of this principle.
[37]
Jöst also contended that Mr Vogel’s initial registration
of the JOEST trade mark in his own name is destructive
of J’s
case, because it would mean that he personally owned the reputation
and goodwill. This has to be seen against his
contradictory assertion
that the reputation attached to J and its predecessors. In essence,
it was contended that the only reasonable
conclusion is that the
provisions of the licence agreement, together with the totality of
circumstances, point to J not being the
bona fide proprietor of the
mark. Jöst accuses J of being opportunistic and manipulative.
[38]
It was submitted on behalf of Jöst that the probabilities are
overwhelmingly in their favour and that business logic and
common
sense dictate that a parent company, when incorporating a local
subsidiary, will not divest itself of its trade mark and
will only
licence its ‘offspring’ to use it. It was submitted on
behalf of Jöst that, as ordered by the court
below, it was
entitled to the expungement of the trade marks registered in J’s
name, but contended that the continued use
by J of the Joest/Jöst
mark amounted to a passing off at common law and should have been
interdicted as prayed for in the
counter-application.
Conclusions
[39]
A convenient starting point is a reminder of the purpose of
conventional trade marks such as trade names and of logos. Trade
mark
law has as its subject matter trade names, symbols and signs, which
have as their object the conveyancing of information concerning
trade
origin.
[2]
At the heart of trade
mark law is truth in competition.
[3]
In
Commercial
Auto Glass (Pty) Ltd v BMW AG
[2007]
ZASCA 96
;
2007 (6) SA 637
(SCA), Harms ADP said the following (para
8):
‘
The
object of trade mark law as reflected in s 34(1)
(a)
and
(b)
[of
the Act] is to prevent commercial “speech” that is
misleading. Trade mark use that is not misleading (in the sense
of
suggesting provenance by the trade mark owner) is protected not only
constitutionally but in terms of ordinary trade mark principles.
As
Justice Holmes said [in
Prestonettes
Inc v Coty
263 US 359
(1924) at 368]:
“
When
the mark is used in a way that does not deceive the public, we see no
sanctity in the word as to prevent it from being used
to tell the
truth.”’
[40]
A fundamental problem for J is that during the time that Jöst’s
predecessors from 1976 to 1989 were wholly owned
subsidiaries, they
indisputably operated within South Africa under licence from the
parent company in Germany and that the machines
imported,
manufactured and distributed bore the Joest/Jöst mark,
indicating Jöst as house of origin. The reputation and
goodwill
undoubtedly attached to Jöst.
[41]
Before us it was accepted on behalf of J that the heart of its case
could be located in para 7.8 of its founding affidavit,
the essential
averments of which are set out in para 15 above. In terms of that
subparagraph, J is constrained to accept the truth
set out in the
first sentence of the preceding paragraph. J, however, placed great
store in the allegations that it developed and
manufactured its own
machines using its own technology alongside those that it
manufactured under licence and to which it attached
the Joest/Jöst
mark, thereby building its own reputation. In para 7.8 of its
founding affidavit J stated that ‘for quite
a number of years
prior to the termination it was [J’s] view that it had received
very little in the form of usable know-how
from [Jöst], compared
to the licence fees that it paid’. Furthermore, according to J,
the two sale of share agreements
in 1989 and 1996 and the concomitant
manufacturing agreements were integral to its submission that all
these factors taken together
lead to the conclusion that it had
acquired proprietorship in the Joest/Jöst mark. For reasons that
follow, I have great difficulty
with these submissions.
[42]
It must be understood that the wholly owned subsidiaries, during the
time period referred to above, imported, manufactured
and distributed
machines under licence from Jöst in the circumstances spelt out
in para 40. Their usage of the Joest/Jöst
mark was also clearly
in line with the usage by Jöst internationally. The sale of
share agreements referred to above and the
1996 manufacturing
agreement did not change these facts. There was therefore patently no
need for a written agreement in relation
to the use of the Joest/Jöst
mark as the subsidiaries were under the control of Jöst. Thus,
the companies from which
J claims to derive its ownership of the mark
by virtue of the sale of shares agreements were not the proprietor of
the mark. Even
on J’s version of events, as set out in para 7.8
of their founding affidavit, referred to in para 41 above, it was
using
Jöst’s know-how and technology for which it paid a
royalty up until ‘a few years prior to [2012]’. That
description is, in itself, deliberately vague but it is an indication
that the relationship that existed between Jöst and its
wholly
owned subsidiaries continued between Jöst and J, at least up
until that time. In this regard it is worth quoting from
Webster
and Page
:
‘
An
agent or distributor who merely sells, or imports and sells, goods
manufactured by another, without adding anything to the mark
or
get-up under which they are produced, does not thereby acquire any
goodwill in the name or get-up; for those symbols thereby
acquire a
reputation as indicating that the goods emanate from that particular
manufacturing provenance and not that they were
imported and/or
distributed by that particular agent.’
[4]
[43]
In terms of the 1989 sale of shares agreement, the purchaser (the
Vogels) undertook to enter into a licencing agreement with
Jöst.
The 1989 manufacturing agreement, which was in identical, or at least
very similar terms to the 1996 agreement, provided
that the
purchasers undertake to use the name of the company and/or to use the
name Jöst only in the region.
[44]
Before proceeding to an interpretation of the 1996 agreement, I
interpose to deal with the application of German law. The parties
are
rightly ad idem concerning the general method of interpretation of
contracts in German law:
‘
Generally,
under German law, any interpretation starts with the wording of the
text of the contract and the parties’ concurrent
understanding
of it. If this does not lead to a solution, the objective meaning in
the light of the circumstances and interests
of the parties is
decisive.’
[5]
This
is hardly significantly different to the applicable principles of our
law.
[6]
[45]
It is not for the respective experts to interpret the agreement but
for the court to follow the German approach to the interpretation
of
the agreement and itself to engage in the interpretation exercise.
The clauses of the sale of shares agreements and the manufacturing
licencing agreements referred to above evidences a continuation of
the past relationship between the parties. There certainly is
no
clause in any of the agreements that cater for the transfer of the
proprietary rights to the Joest/Jöst mark. I agree with
the
submission on behalf of Jöst that, if J had already owned the
rights in and to the mark, there would have been no need
to deal with
sub-licensing and certainly no reason to place a limitation on the
use of the licence by limiting it to a region.
The labelling
provision set out hereafter clearly points to the proprietorship of
the marks being maintained by Jöst. Clause
16 of the 1996
agreement reads as follows:
‘
Labelling
The
Licensee shall mark all products made by him under licence and
supplied to his customers with serial numbers. Should Licensee
delete
the name “JOEST” in its registered company name, the
Licensee shall affix to such product a label inscribed
“Manufactured
under licence of JÖST, Germany”.’
These
provisions, as held by the court below, militate against the
assertion of acquisition by J of proprietorship of the Joest/Jöst
mark.
[46]
Additionally, in deliberating the question of proprietorship of the
mark it is worth noting again what is set out in para 25
above,
namely, that during the years leading up to the termination of the
licencing agreement in 2012, J imported from
Jöst
components in an amount of up to €1 500 000 per year,
all of which clearly bore the Jöst mark. This
is to be
considered alongside the assertion by Jöst that it maintained
quality control over items which bore its mark and
that the mark was
required in line with European Union Directives. What is clear is the
house of origin of the machines and components
was identified as that
of Jöst.
[47]
The minute of the meeting held in Australia referred to in para 14
above is another factor that counts against J’s contention
that
it is the proprietor of the Joest/Jöst mark. It is apparent that
the meeting took place after it was discovered by Jöst
that Mr
Gunter Vogel had registered the mark in his name. On J’s
version, there should have been no need to undertake, as
recorded in
the minute, that the registration would be transferred to Jöst
and that J would act as licensee.
[48]
Of significance, too, is clause 19 of the 1996 agreement, which
provides:
‘
The
Licensee shall not manufacture or sell products which compete with
the “Licensed Products” during the duration of
the
Contract although it shall be permitted to manufacture and/or sell
products with a different technology.’
[49]
Returning to para 7.8 of J’s founding affidavit in the main
application, the high-water mark appears to be a postulation
of joint
ownership of the mark by virtue of the development of own technology
to which J attached the Joest/Jöst mark. However,
I fail to see
how this assists J in its quest to establish proprietorship of the
mark. It was a recognised historically well-established
distributor
of products emanating from Jöst. If it wrongly attached that
mark to its own products without the knowledge and
approval of Jöst,
far from establishing proprietorship of the mark, it could in those
circumstances be accused of passing
off its products as emanating
from Jöst
[7]
and/or of
infringing the relevant provisions of s 34 of the Act.
[50]
Perhaps an even more fundamental problem for Jöst is the fact
that the Joest/Jöst marks now claimed by J were first
registered
in the name of Mr Gunter Vogel who then had them assigned to and
registered in J’s name, purportedly in terms
of ss 39 and 40 of
the Act. Since Mr Vogel does not provide a basis for how he
was
initially entitled to the proprietorship of the mark and indeed,
since no basis exists, and furthermore since he contradictorily
stated that the reputation attached to J, it is difficult to see how
he was able to transfer the proprietorship of the marks to
J.
[8]
It is no answer to say that J was in any event the rightful
proprietor of the marks and so the subsequent registration of the
mark in its name is unassailable. The basis for the assignment of the
right was fallacious; J had not, in its dealings with the
Registrar,
laid claim to the mark in its own right or sought to have it
registered in that manner.
[51]
It also does not assist J that no royalties were paid in relation to
the use of the mark. It is clear that royalties were paid
in terms of
the manufacturing licencing agreement. It was Jöst’s
prerogative to decide a method of monetizing its reputation
and
technical know-how and it chose to do so by way of royalties relating
to the manufacture of components and machines.
[52]
For all the reasons set out above, the court below cannot be faulted
in its conclusion that Jöst is the proprietor of
the Joest/Jöst
mark. However, Jöst’s further submission is correct. J’s
actions have been manipulative and
opportunistic. Accordingly, the
court below ought, rightly, to have also granted Jöst the full
extent of the relief sought
by it as set out above, and for that
reason the cross-appeal must succeed.
[53]
The following order is made:
1.
The main appeal is dismissed with costs including the costs of two
counsel.
2.
The cross-appeal is upheld
with costs including the costs of two counsel.
3.
Paragraph 2.3 of the order
in the court below is amended to read as follows:
‘
2.3.
The first respondent in the counter-application is ordered to pay the
costs of the counter-application.’
4.
The order of the court below is supplemented by the inclusion of the
following
orders:
‘
2.4.
The first respondent in the counter-application is interdicted and
restrained, in terms of Section
34(1)
(a)
the Trade Marks Act 193 of 1994, by itself or through its servants or
agents, from infringing the rights of the first applicant
in the
counter-application flowing from the registration of the first
applicant in the counter-application’s registered trade
mark
nos. 2006/29062 & 63
JOST
in
classes 7 and 9 by using, in the course of trade, in relation to the
goods and services identical to the goods included in trade
mark nos.
2006/29062 & 63, the identical mark or any mark so similar
thereto as to be likely to deceive or cause confusion.
2.5
The first respondent in the counter-application is interdicted and
restrained from passing
off its goods and services as being those of
the first applicant in the counter-application or as being connected
with those of
the first applicant in the counter-application in the
course of trade, by the use of the marks: JOEST, JOST, JÖST,
JOST,
JOEST
,
JOEST
and related get up, or any other trade mark or get-up that is
confusingly similar to the first applicant in the
counter-application’s
JOST
and
JOEST
trade marks and get-up.
2.6
The first respondent in the counter-application is ordered to remove
the marks: JOEST, JOST,
JÖST,
JOST,
JOEST, JOEST
,
and
related get up, or any confusingly or deceptively similar trade
marks, from all matter in their possession or under their control,
including all signs, labels, websites, promotional and advertising
material, packaging, stationery and other printed or electronic
matter of any nature and where the marks are inseparable or incapable
of being removed from such material to which they have been
applied,
delivering up such matter to the first and second applicants in the
counter-application’s attorneys.
2.7
It is directed that an enquiry be conducted, pursuant to
Section
34(4)
of the
Trade Marks Act 194 of 1993
, to determine the quantum of
damages suffered by the first applicant in the counter-application as
a result of the infringement
of the first applicant in the
counter-application’s trade mark, or the payment of a
reasonable royalty for the use of its
trade mark in lieu of such
damages, and that the first respondent in the counter-application pay
such damages and/or reasonable
royalty as may be found to be payable
by the first respondent in the counter-application to the first
applicant in the counter-application
in the course of such enquiry,
and that
2.8
To this end, in the event of the parties being unable to agree on the
procedure to be adopted
in such enquiry, either party may approach
this court for directions as to the procedure to be adopted, on these
same papers, duly
supplemented where necessary.’
___________________
M S Navsa
Judge of Appeal
Appearances:
Counsel
for the Appellant:
P Ginsburg SC (with him L G Kilmartin)
Instructed
by:
Adams
& Adams, Pretoria
Honey
Attorneys, Bloemfontein
Counsel
for the First
and
Second Respondents:
R Michau SC (with him I Joubert)
Instructed
by:
D M
Kisch Inc, Johannesburg
Rossouws
Attorneys, Bloemfontein
[1]
J’s reaction
to the documentation in this regard appended to Jöst’s
answering affidavit is that it is irrelevant
and that, in any event,
much of it is in foreign languages that are not translated, and
cannot meaningfully be responded to.
Some of the documentation is
undoubtedly in languages other than English, however certificates of
registration in the United
States Patent and Trade Mark office is in
English as is a certificate of registration from the International
Bureau of the World
Intellectual Property Organisation (WIPO)
certifying that the indications in the certificate conform ‘to
the recording
made in the International Register of Marks maintained
under the Madrid Agreement and Protocol’, and are clear in
their
wording.
[2]
See the discussion
of
Société
des Produits Nestlé SA v Cadbury UK Ltd
[2013]
RPC 14
(ChD) para 20, in CE Webster and GE Morley (eds)
Webster
and Page’s South African Law of Trade Marks, Unlawful
Competition, Company Names and Trading Styles
(Service
Issue 19, November 2015), para 1.1 at 1-3.
[3]
Ibid.
[4]
See
Webster
and Page
(supra) para 15.18.1 at 15-47 and the authorities there cited.
[5]
Ulrich Magnus ‘The
Germanic tradition: application of boilerplate clauses under German
law’ in Giuditta Cordero-Moss
(ed)
Boiler
Clauses, International Commercial Contracts and the Applicable Law
(2011) at 181.
[6]
In this regard,
see
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) and the collection of
authorities there cited.
[7]
See in this regard
Capital
Estate & General Agencies (Pty) Ltd v Holiday Inns Inc &
others
1977 (2) SA 916
(A) at 929C.
[8]
In this regard,
see
Payen
Components SA Ltd v Bovic CC & others
[1995] ZASCA 57
;
1995 (4) SA 441
(A), at 447H-I, where the
nemo
dat quod non habet
principle
was applied in relation to copyright. This is the trite principle
that one cannot transfer a right that one does not
oneself have.