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[2015] ZASCA 78
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Etraction (Pty) Ltd v Tyrecor (Pty) Ltd (28/5/2015) [2015] ZASCA 78; 2015 BIP 253 (SCA) (28 May 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 20185/2014
In
the matter between:
ETRACTION
(PTY)
LTD
.................................................................................................
APPELLANT
and
TYRECOR
(PTY)
LTD
..................................................................................................
RESPONDENT
Neutral
Citation:
Etraction (Pty) Ltd v
Tyrecor (Pty) Ltd
(20185/2014)
2015
ZASCA 78
(28 May 2015)
Coram:
MPATI P, BRAND, WALLIS and SALDULKER JJA and MAYAT
AJA
Heard
:
20 May 2015
Delivered
:
28 May 2015
Summary:
Trade mark – infringement by use of
identical mark – defence of prior bona fide use –
s 36(1)
of the
Trade Marks Act 194 of 1993
– requirement of continuous
and bona fide use – requirements for – partial
expungement of registered mark in
terms of
s 27(1)
of the Act –
purpose of registration to damage existing user’s trade not to
trade oneself – no bona fide intention
to use as a mark in
respect of the goods in question.
ORDER
On
appeal from:
Western Cape Division of
the High Court (Salie-Samuels AJ, sitting as court of first
instance):
1
Save for paragraph 2 of this order the appeal is dismissed with
costs, such costs to include those consequent upon the employment
of
two counsel where two counsel were employed.
2
The order granted in respect of the counter-application is amended to
read as follows:
‘
The
counter application succeeds with costs and the Registrar is directed
in terms of
section 24(1)
of the
Trade Marks Act, to
expunge the word
‘tires’ from the Applicant’s trade mark
registration and to amend the registration to read ‘
Vehicle
components and Accessories: wheels and rims, but not including
tyres’.
JUDGMENT
Wallis
JA (Mpati P, Brand and Saldulker JJA and Mayat AJA concurring)
[1]
The
Appellant, Etraction (Pty) Ltd (Etraction), conducts business as a
trader in wheels, tyres and related products. It is the registered
proprietor under the Trade Marks Act 194 of 1993 (the Act) of the
trade mark INFINITY, registration number 2008/08612, in class
12 in
respect of ‘vehicle components and accessories; wheels,
tires,
[1]
rims’, dated 15
April 2008. The respondent, Tyrecor (Pty) Ltd is one of its
competitors. It imports into South Africa and
sells tyres under the
name ‘Infinity’. The present appeal arises out of
proceedings brought by Etraction to interdict
Tyrecor from doing so.
The application for an interdict before Salie-Samuels AJ was
unsuccessful and a counter-application by Tyrecor
for the expungement
from the registered mark of the reference to ‘tires’
succeeded. This appeal is with her leave.
[2]
Tyrecor has been importing and selling
tyres in South Africa under the brand name Infinity since at least
2009. The evidence in
regard to the precise date when it commenced
this business in its own right is inconclusive. It was registered
with SARS as an
importer of tyres on 26 March 2008, but the
earliest invoice reflecting the importation of tyres by Tyrecor was
dated 22 February
2009. Prior to that date another entity, Falck
Trading (Pty) Ltd (formerly known as Tyrecor Holdings (Pty) Ltd, and
referred to
hereafter as Falck), had, since 2006, imported and sold
in South Africa tyres bearing the Infinity mark. It made significant
purchases
of tyres in October 2008, which suggests that Tyrecor had
not by that stage commenced importing and selling tyres. For present
purposes therefore it is safer and favourable to the appellant to
accept early 2009 as the date from which Tyrecor commenced business
operations. I proceed on the basis that prior to that date Falck was
the party importing and selling tyres in South Africa under
the mark
Infinity.
[3]
Section
34(1)
(a)
of the Act provides that a registered mark is infringed by the
unauthorised use of an identical mark in the course of trade in
relation to goods or services in respect of which the mark is
registered. Etraction’s trade mark, INFINITY, was
registered
with effect from 15 April 2008. Having accepted that
Tyrecor’s business activities commenced in early 2009, it
follows that
those activities have always infringed the registered
mark, because they involved the use, in the course of trade and
without authorisation,
of an identical mark
[2]
in relation to tyres, which were goods in respect of which the mark
was registered. The outcome of the litigation therefore depended
primarily upon the validity of the registration of the mark in
respect of tyres, which was attacked under s 27(1) of the Act,
and a defence of continuous and bona fide prior usage by Falck, as
Tyrecor’s predecessor in title, that Tyrecor invoked in
terms
of s 36(1) of the Act. These two defences were inextricably
linked and dependent upon the particular facts of the case.
It is
therefore appropriate at the outset to deal with the facts.
The
facts
[4]
Etraction
claimed that it had used the mark INFINITY consistently since 1995.
In considering this claim it is necessary to draw
a distinction
between tyres, and the rims to which they are fitted to constitute
the wheels of motor vehicles.
[3]
In the context of motor vehicles, wheels, consisting of both rims and
tyres, are necessary for the vehicle to operate, but the
rims and
tyres may be sold either separately or together. Vehicles come
equipped with both, but there is a market for people to
replace those
originally attached to their vehicles with different rims, or
different tyres, or both, either for the sake of appearance
or
because they are perceived to enhance the vehicle’s
performance. People who purchase new rims for their vehicles will
usually, but not inevitably, also purchase new tyres. When they
purchase both together as a single unit this is referred to, in
the
jargon of the trade, as purchasing a ‘combo’.
[5]
Etraction says that it started to use the
mark INFINITY on rims in 1995. Annexed to the founding affidavit were
extracts from catalogues
for 1996/7, 2000, 2001 and 2005/6, all
showing various rims bearing the mark either alone or in combination
with something else,
for example, INFINITY II, INFINITY COBRA and
INFINITY BRAVA. The form that the mark took in each instance was a
central decal on
which was printed the word INFINITY placed in the
hub of the rim.
[6]
In
none of these examples was the mark INFINITY affixed to tyres, nor
did Etraction claim that it had ever used the mark on tyres
as
opposed to rims. Instead it highlighted the fact that in one of the
advertisements for a ‘combo’ the rim bore the
mark
INFINITY on which basis it alleged that the mark had been used in
relation to ‘combos’. It said that this had
been a common
feature of its trade over the years and this trade had been very
successful. Insofar as that was intended to suggest
use of the mark
INFINITY in relation to tyres the claim was negated by the fact that
in the same advertisement for the ‘combo’
the tyre bore a
separate mark of MRW (an acronym for Malas Racing Wheels
[4]
),
another registered mark of which Etraction is the registered owner.
[7]
Apart from the brochures annexed to the
founding affidavit Tyrecor annexed to its answering affidavit
extracts from a trade magazine
for the tyre industry, entitled
Southern Africa Treads
,
which contained advertisements by Etraction. These were primarily
advertisements for tyres, not rims, and in none of them was
the mark
INFINITY used in relation to tyres or mentioned at all, although the
MRW mark appears on depictions of tyres and is referred
to in the
text of the advertisements. Various other marks not apparently owned
by Etraction were used on other tyres appearing
in these
advertisements.
[8]
In summary therefore there was no evidence
at all that Etraction had ever made use of the mark INFINITY in
relation to tyres although
there was some limited evidence of its use
in relation to rims. Even there it is unclear to what extent it was
used. Other marks
such as MRW and JAZZ featured in the brochures and
advertisements. There was no evidence of the extent of sales of rims
bearing
the INFINITY mark or of the amount spent on advertising or
the share of the market claimed for such rims.
[9]
Against
this, the mark Infinity has been in use in relation to tyres in South
Africa since at least 2006, initially by Falck and
latterly by
Tyrecor. Falck obtained an import permit for a first shipment of 5000
tyres branded with the Infinity mark in 2006.
In September 2006 it
obtained four further permits for the importation for exhibition
purposes of various types of tyres. In 2006
it exhibited tyres under
this mark at two different exhibitions. The one was the Electra
Mining Expo and the other the Tyre Expo
Africa. In relation to the
former there is a photograph of the stand bearing on all four sides a
very large board with the single
word ‘Infinity’ and the
symbol ® which is customarily used to indicate that the word or
words is a registered trade
mark.
[5]
In relation to the latter there is an exhibitors’ show
guide that identifies the stand as being that of ‘INFINITY
TYRES’ and refers to the brand Infinity. Again the symbol ®
was included whenever the mark was used and this has been
a feature
of the use that Falck and Tyrecor have made of the Infinity mark. The
show guide refers to Infinity tyres having recently
been launched at
a German trade show. That is consistent with the claim by Tyrecor
that the mark is an international one used on
tyres
by
the Al Dobowi Group with which it is engaged in this business in
South Africa, that group being an indirect shareholder in Tyrecor.
[10]
Tyrecor furnished sales and advertising
figures in respect of Infinity tyres for the period from 2006 to 2011
showing a considerable
growth in sales and advertising expenditure
during this period. Taking the figures for 2006 and 2007 alone, on
the basis that they
were clearly prior to the date of registration of
Etraction’s mark, these show sales of over 15000 units for
nearly R10 million
and advertising expenditure of about R140 000.
That is by no means insignificant. From 2008 onwards, sales volumes
have increased
substantially and revenues in excess of R100 million
have been generated. That there was awareness in the market from 2006
onwards
of the existence of Infinity tyres emanating from Falck was
acknowledged in the founding affidavit and could not be gainsaid
bearing
in mind that Etraction was also an exhibitor at the Tyre Expo
Africa in 2006 with a stand relatively close to that of Infinity
Tyres.
Vested
rights
[11]
Section 36(1) of the Act protects
continuous and bona fide prior use of what would otherwise be an
infringing mark. It provides
that:
‘
Nothing
in this Act shall allow the proprietor of a registered trade mark to
interfere with or restrain the use by any person of
a trade mark
identical with or nearly resembling it in respect of goods or
services in relation to which that person or a predecessor
in title
of his has made continuous and
bona fide
use of that trade mark from a date
anterior –
(a)
to the use of the first mentioned trade mark in relation to those
goods or services by the proprietor or a predecessor in title
…;
or
(b)
to the registration of the first mentioned trade mark in respect of
those goods or services in the name of the proprietor or
a
predecessor in title of his;
whichever
is the earlier …’
The
underlying purpose of this section is to prevent a proprietor of a
trade mark from exercising rights merely on the basis of
priority of
registration and it preserves whatever common-law rights there may be
antecedent to the rights of the registered proprietor.
[6]
A party relying on this defence must establish bona fide and
continuous use of the mark, either by itself or by its predecessor
in
title, at a time prior to the use or registration of the registered
mark by the proprietor thereof, whichever is earlier. In
this case
registration was the earlier date.
[12]
It follows that Tyrecor had to show that
it, or its predecessor in title, had made continuous and bona fide
use of the trademark
‘Infinity’ from a date prior to 15
April 2008, being the date of registration of Etraction’s
trademark. On the
facts as summarised in para 10 above there can
be no question but that the trademark Infinity was being used from
2006 on
a continuous basis in relation to the sale of tyres in South
Africa. Nor can there be any question that the use was bona fide. In
view of my assumption that Tyrecor only commenced trading in tyres
bearing the ‘Infinity’ mark at a date in early 2009
we
are concerned with the use of the mark by Falck.
[13]
Falck
used the trade mark Infinity in relation to tyres prior to Tyrecor
and prior to Etraction’s registration of the mark.
Two
questions must be addressed. The first is whether that use was of the
character specified in s 36(1). That requires some
explanation
in the light of what I have said above about that use being in
practical terms both continuous from 2006 and bona fide.
The argument
on behalf of Etraction was that mere use of this character does not
suffice to entitle someone to claim the protection
of s 36(1).
It submitted that the use had to be use as the proprietor of the
mark.
[7]
As matters transpired
that proposition lay at the heart of the argument addressed to us
albeit formulated in various guises. The
second question was whether
Falck was Tyrecor’s predecessor in title. I will deal with each
in turn.
[14]
Conceptually
there was an immediate difficulty with the submission that a party
seeking the protection of s 36(1) must be the proprietor
of the
disputed mark. As explained in
Webster
and Page
:
[8]
‘
Under
the common law a trade mark cannot as such be the subject of
proprietary rights. One can only become the proprietor of the
goodwill of the business in relation to which the mark is used in
consequence of the use which has been made of the mark.’
Unlike
a registered trade mark, an unregistered mark is not itself an
incorporeal asset capable of being owned. It contributes to
the
goodwill of a business by identifying a business, goods or services
in the market place with a particular source and, unlike
a registered
mark, it is incapable of being alienated separately from the goodwill
of that business.
[9]
Where
someone else adopts the same or a confusingly similar mark they seek
thereby to represent that their business, goods or services
are from
the same or a connected source. The action for passing-off is the
means that the law affords to protect against that type
of
misrepresentation. In summary:
‘
A
passing-off action is a remedy for the invasion of a right of
property not in the mark, name or get-up improperly used, but in
the
business or goodwill likely to be injured by the misrepresentation
made by passing-off one person's goods as the goods of another.
Goodwill, as the subject of proprietary rights, is incapable of
subsisting by itself. It has no independent existence apart from
the
business to which it is attached.’
[10]
[15]
Etraction’s
argument was therefore based on an incorrect premise. While, for the
purposes of registration of a mark, the Act
makes use of the concept
of proprietorship in respect of an unregistered mark
[11]
it is clear that the word has a special meaning in that context.
[12]
It is only on registration that the applicant for registration
becomes the proprietor of the registered mark. It cannot therefore
be
the case that in order to enjoy the protection afforded by s 36(1)
it is necessary to show that the party claiming protection
owned the
mark in issue. The endeavour by counsel to bolster his argument in
this regard by reference to s 27(1), to which
I will revert in
due course when dealing with the expungement application, and the
cases that have said that bona fide use under
s 36 bears the
same meaning as bona fide use under s 27(1), was likewise
misplaced. The reference in s 27(1)
(a)
to the proprietor of a mark is a reference to a registered proprietor
who is seeking to resist expungement, and does not refer
to an
unregistered mark.
[16]
The
clear purpose of s 36(1) is to protect common law rights arising
from continuous and bona fide use of an unregistered trade
mark prior
to either the use
[13]
or
registration
[14]
of the mark
in issue. Consistent with that purpose, any person entitled to bring
a passing off action based on the reputation they
had acquired from
the use of the unregistered mark would be entitled to invoke s 36(1)
against a claim for infringement by
the proprietor of a registered
mark.
[17]
Perhaps
anticipating this approach counsel for Etraction drew our attention
to the passage in
Webster
and Page
[15]
that
reads:
‘
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 the particular
manufacturing provenance and not that they were imported
and/or
distributed by that particular agent.’
Seizing
on a statement that the mark Infinity was owned by a British Virgin
Islands registered company in the Al Dobowi group of
companies
counsel submitted that Falck could not have acquired in its own right
any reputation or goodwill in Infinity tyres. Accordingly
he
submitted that it would not have been open to Falck, prior to April
2008, to bring proceedings to prevent another party from
marketing
tyres in South Africa under the name Infinity. The argument was
advanced notwithstanding that
such
registration of a trade mark in a foreign jurisdiction by a foreign
company could not give rise to any rights as a trade mark
in South
Africa in view of the principle of territoriality that applies in
respect of trade marks.
[16]
[18]
In my view that argument must fail because
it ignores the word ‘merely’ and the phrase ‘without
adding anything
to the mark’ in the quoted passage. It also
ignores the passage that follows immediately thereafter, which reads:
‘
On
the other hand, it is possible for a distributor so to market the
goods which he distributes that the name or get-up under which
they
are sold acquires a reputation as indicating that they emanate from
him: in which case the goodwill adhering to that name
or get-up will
vest in him. The enquiry as to which trade source the symbol has come
to indicate in the territory in question is
in every case one of
fact.’
[19]
If
Tyrecor could show that Falck had acquired a sufficient reputation
for tyres sold under the mark Infinity
[17]
among a substantial number of actual or prospective purchasers, that
would have entitled it to bring passing off proceedings against
anyone marketing tyres under that or a confusingly similar name. For
this purpose I assume that it would have been possible for
such
marketing to take place, notwithstanding the requirement that before
any tyres can be marketed in this country they must be
homologated by
the South African Bureau of Standards, which would presumably avoid
confusing similarities in tyre brand names.
[20]
The usual way in which to discharge the
onus of proving such a reputation is by way of proof of actual sales
and advertising to
establish the requisite reputation. The evidence
reflects sales in the period from 2006 to April 2008 of over 15000
units for nearly
R10 million and advertising expenditure of about
R140 000. The sales trajectory was upwards. The product was
being actively
marketed at industry shows and by approaches to
potential customers, as demonstrated by an approach in March 2008 by
Mr de Villiers,
who deposed to the opposing affidavit on behalf of
Tyrecor, to Mr Akram of Etraction with a view to supplying Etraction
with Infinity
tyres. This evidence is uncontroverted. It sufficed to
establish that Infinity tyres had acquired a reputation in this
country
capable of being protected by way of passing-off proceedings.
[21]
The only remaining question is whether that
reputation vested in Falck. In my view it did and the
characterisation of Falck as a
mere importer and distributor of tyres
from another source was incorrect. Falck was originally known as
Tyrecor Holdings (Pty)
Ltd and it was always clearly associated with
the Tyrecor group of companies in which Mr de Villiers and his
brother were the moving
spirits. It was not an importer and
distributor in the sense of a retail outlet that imports and sells
goods bearing marks indicating
that the goods have an origin other
than that of the retailer. Falck was the commercial vehicle through
which the Al Dobowi group,
which markets tyres under the name
Infinity on an international basis, and the Tyrecor group undertook a
joint venture to market
Infinity tyres in South Africa. Thus, the
public presence of ‘Infinity’ tyres in this country at
all times manifested
itself solely through the corporate vehicles
associated with the Tyrecor group.
[22]
Bearing
in mind that any injury underpinning a passing-off action would arise
from a misrepresentation damaging the reputation
(and
consequent goodwill) in South Africa, as the place where the
misrepresentation was made,
[18]
it seems logical that the joint venture partners would have wished
the reputation they were intent on building for their brand
of tyres
to vest in the entity through which they were carrying on the joint
venture. There would be little point in trying to
separate that
reputation from the broader goodwill attaching to Falck as a business
trading in tyres, a goodwill that would arise
from the service
rendered by the staff of the business, the quality of its product,
the advertising and marketing that it undertook
and the like. Lastly
there is the fact that the marketing of Infinity tyres, as is
apparent from the materials in the papers, always
occurred in
conjunction with the Tyrecor name and the Tyrecor group. No doubt
that was to take advantage of any reputation that
the De Villiers
brothers had built up in South Africa in the tyre business.
[23]
Counsel
did submit, albeit faintly, that Tyrecor was not the successor in
title of Falck. In the face of the undisputed evidence
that a
decision was taken by the joint venture partners no longer to use
Falck as the commercial vehicle for their operations in
South Africa,
and henceforth to conduct that business through Tyrecor, as indeed
happened, that was an optimistic submission. Such
a rearrangement of
business affairs within a trading group or as between joint venture
partners, without the business itself changing,
is by no means
uncommon.
[19]
I can see no
reason to doubt the correctness of Mr de Villiers’ statement
that Tyrecor took over Falck’s business in
about March 2009. As
already pointed out that is consistent with the records in regard to
the importation of tyres and sales by
Tyrecor. Counsel complained
that there was no proof that there had been compliance with the
requirements of s 228 of the Companies
Act 61 of 1973, but I
fail to see on what footing it would be open to Etraction as a
stranger to the relationship between Falck
and Tyrecor to complain of
any such non-compliance. So long as the parties to the transaction
are content with what they have done
and no-one affected thereby and
having a direct and substantial interest in the transaction, such as
a shareholder, creditor or
the revenue authorities, wishes to
challenge its validity, it seems to me that it must stand on the
terms arranged by the parties
to it.
[20]
[24]
I
therefore hold that Tyrecor was the successor in title to Falck’s
business of selling Infinity tyres in South Africa and
was entitled
to rely on the latter’s bona fide and continuous use of the
mark Infinity to resist Etraction’s infringement
claim. That
relieves me of the necessity to consider whether the use contemplated
by s 36(1) is limited to such use as would
entitle the user to
bring a passing-off action. I do not, however, wish to foreclose the
possibility that the section may have
a broader reach than that and
may extend to any bona fide and continuous use irrespective of
whether it would give rise to a legal
right capable of founding a
claim.
[21]
There seems to me
to be much to be said for the proposition that any lawful use having
the characteristics of being both continuous
and bona fide may found
the defence. That is, after all, precisely what the section says and
I am not persuaded that the niceties
of trade mark law require a
different construction. It seems to have been the approach in the
only case to which we were referred
that dealt directly with a
defence under this section namely the case of
Bosch
.
[22]
There, a firm of engineers, named eponymously after its founder, had
established a subsidiary company undertaking work in regard
to
computer systems. In turn a further subsidiary was established
advising on information systems. All the companies in the group
used
the name ‘Bosch’ and a similar logo. That use by the
information services subsidiary was held to be sufficient
to justify
the invocation of the s 36(1) defence, without there being any
finding that it was vested with a reputation for
purposes of
passing-off in the mark ‘Bosch’.
[25]
The appeal against the dismissal of
Etraction’s infringement claim must therefore be dismissed. I
turn then to consider the
appeal against the partial expungement
order.
Expungement
[26]
The high court ordered a partial
expungement of Etraction’s trade mark by the exclusion from the
scope of the registered trade
mark of the word ‘tires’.
In terms of s 27(1)
(a)
of
the Act a registered trade mark may be expunged if:
‘…
the
trade mark was registered without any
bona
fide
intention on the part of the
applicant for registration that it should be used in relation to
those goods or services by him or
any person permitted to use the
trade mark as contemplated by section 38, and that there has in fact
been no
bona fide
use of the trade mark in relation to those goods or services by any
proprietor thereof or any person so permitted for the time
being up
to the date three months before the date of the application’.
The
section has two elements. A person invoking the section must prove
that the registration occurred without any bona fide intention
to use
the mark and that there has in fact been no bona fide use of the
registered mark. For present purposes, only the first is
relevant,
because it is common cause that Etraction has not made any use of the
registered mark INFINITY in respect of tyres.
[27]
Whether Etraction had a bona fide intention
to use the mark INFINITY in relation to tyres is a question of fact.
The background
to its registration of the mark is accordingly
important. I have already outlined the use it made from 1995 of that
mark in relation
to rims and the fact that it has never used the mark
in relation to tyres. On its own admission it became aware in 2006
that tyres
were being sold under the mark Infinity. During the next
two years it must have seen the advertisements for Infinity tyres in
trade
magazines in which it also placed advertisements, yet it
was only in 2008 that it did anything about it. The circumstances
in
which it did so are highly relevant to its bona fides.
[28]
Etraction lodged its application for
registration of the INFINITY mark on 15 April 2008. Although it
claimed in its affidavits to
be a neophyte in respect of trade mark
applications, that was untruthful. It had applied for two trade marks
in August 1998 –
interestingly enough not for INFINITY –
and these had been registered on 8 October 2002. On 12 March 2008,
one month before
it lodged the application in dispute, it lodged ten
other applications for registration of the trade marks Malas and MRW.
On 18
March 2008 it lodged further applications for the marks Lexani
and Asanti. The claim of ignorance can hardly be sustained in the
light of those facts.
[29]
On 17 and 18 March 2008 Mr de Villiers and
Mr Pelser addressed emails to Etraction offering to supply it with
INFINITY tyres. The
emails enclosed photographs of the tyres that
Tyrecor was offering to supply and set out the prices at which it was
offering the
tyres. On 26 March 2008 Mr de Villiers sent an e-mail
recording a meeting he had had with Mr Tayob and Mr Akram. It read:
‘
I
would once again like to thank you for affording me the time to meet
with both of you today to introduce our products. We are
very proud
of the INFINITY brand and believe that we will be able to add value
to your organization.
I
sincerely hope that we can establish a beneficial relationship in the
near future. Please do not hesitate to contact me should
you require
any additional information.’
[30]
Within three weeks after that meeting
Etraction applied for registration of the mark INFINITY in relation
to tyres. It did not,
however, convey to Tyrecor that it objected to
it using the mark nor did it give any notice of its application to
Tyrecor until
it had secured registration of the mark, which occurred
on 19 May 2011. During the three years between the date of its
application
and registration Tyrecor continued to trade and built up
its business in the sale of Infinity tyres without any inkling that
Etraction
objected thereto or that it intended itself to enter the
market for tyres under that brand name. In 2011 its turnover from
this
trade exceeded R100 million.
[31]
It is impossible in those circumstances to
come to any conclusion other than that Etraction’s purpose in
seeking the registration
of the INFINITY mark in respect of tyres was
to stultify Tyrecor’s business. There is not a jot or tittle of
evidence to
suggest that it genuinely intended at any stage to trade
in tyres under the Infinity mark. Nor can it be said that the mark
was
registered in these broad terms as a defensive mark. The
coincidence in timing between Mr de Villiers’ sales visit and
the
application for registration of the INFINITY mark is indicative
of an attempt to harm the business of a successful competitor. No
other plausible explanation for this conduct has been proffered and
the one that was advanced, that Etraction was unfamiliar with
trade
marks, was simply untrue.
[32]
There
have been a number of judgments of this court on what constitutes
bona fide use of a trade mark and I need quote only two.
In
Rembrandt
[23]
Steyn CJ said that use:
‘…
for
an ulterior purpose, unassociated with a genuine intention of
pursuing the object for which the Act allows the registration
of a
trade mark and protects its use, cannot pass as
bona
fide
user.’
Then
Harms JA in
The
Gap
,
[24]
said:
‘
For
present purposes, it suffices to say that “
bona
fide
user”
“
means
a user by the proprietor of his registered trade mark in connection
with the particular goods in respect of which it is registered
with
the object or intention primarily of protecting, facilitating, and
furthering his trading in such goods, and not for some
other,
ulterior object”.
This
test is similar to that proposed in an opinion by the Advocate
General in the European Court of Justice in the
Ansul
case:
“
When
assessing whether use of the trade mark is genuine, regard must be
had to all the facts and circumstances relevant to establishing
whether the commercial exploitation of the mark is real, particularly
whether such use is viewed as warranted in the economic sector
concerned to maintain or create a share in the market for the goods
or services protected by the mark, the nature of those goods
or
services, the characteristics of the market and the scale and
frequency of use of the mark.”’
[33]
In considering whether the proprietor of
the mark bona fide intended to use it in relation to the goods in
respect of which it is
registered one examines the facts, as they
appear from the course of events leading up to the application for
registration, to
determine whether there was a genuine intention to
use the mark in the course of trade in respect of those goods or
whether the
registration was intended for an ulterior purpose.
Etraction had used the mark Infinity to some degree in respect of
rims from
1995, but made no attempt to register a trade mark or to
assert any rights in respect of its use especially in respect of
tyres.
From when Falck entered the market in 2006, until Mr de
Villiers’ fateful attempt to sell Infinity tyres to Etraction
in
March 2008, it made no complaint about the branding, nor did it
ever suggest that this was an infringement of its existing rights
or
would interfere with any planned expansion of its commercial
activities. Nothing in its conduct showed a genuine intention to
use
the mark in relation to the sale of tyres. Its registration of other
house marks pointed in the opposite direction.
[34]
There is no acceptable explanation for
Etraction’s decision a mere three weeks after Mr de Villiers’
attempt to sell
it Infinity tyres to apply for registration of the
INFINITY trade mark. Can one infer an ulterior motive from this? In
my view
one can. Surreptitiously seeking to register a trade mark
when one is aware of the fact that another person is using it and
with
the intention of exploiting registration to disrupt their use or
to procure an undue advantage justifies the inference of ulterior
motive.
[35]
It
seems to me that this case is similar, in regard to the conduct of
Etraction, to what occurred in the context of the registration
of a
domain name in an arbitration involving
Finter
Bank
[25]
in
Switzerland. The bank had existed for a number of years and held a
registered mark ‘Finter”, which was the name by
which it
was commonly known. It had also registered a domain name ‘Finter.ch’.
When the system, of domain registration
was altered to give priority
to domain names with suffixes such as ‘org’ or ‘com’
Mr Olivieri registered
two names ‘finter.org’ and
‘finter.com’, claiming to have done so because his family
dog was called ‘Ruby
der Finter’. However, this was
belied by his conduct, ten days after receiving the domain
registration, of trying to sell
the two domain names to the bank. The
arbitrator dealt with whether he had acted in bad faith in the
following way:
‘
Although
it is difficult to define in general terms a multi-facetted notion
such as bad faith, it should under Swiss law comprise
two elements:
–
the
knowledge of given facts, in the present case the prior use by
Complainant of a trade name and a trademark …
–
the
awareness to act against a rule of law.’
[36]
Following that approach Etraction acted
with a knowledge of given facts namely the extensive trade already
built up in relation
to Infinity tyres. Second it acted for a purpose
other than that for which trade mark registration is permitted. Its
conduct when
it applied for registration can only be described as
underhand, I am satisfied that it did not have any bona fide
intention to
use the mark in respect of tyres. In common parlance its
motive was to throw a spanner in the commercial works of Tyrecor’s
successful trade in Infinity tyres.
[37]
Accordingly the high court was correct to
grant the order for the expungement from Etraction’s
registration of the word ‘tires’.
However, undaunted by
this Etraction sought to argue that such a limited expungement would
not assist Tyrecor, because tyres are
similar goods to the goods in
respect of which the registration would survive. Accordingly it
submitted that for it to continue
to use the mark Infinity in respect
of tyres would infringe its trade mark in terms of s 34(1)
(b)
of the Act. For my part I doubt that
such an argument would or could succeed in the face of a finding that
tyres should not have
been included in the registered mark in the
first instance. But to put the matter beyond doubt the terms of
registration of Etraction’s
mark should be further amended by
the insertion of a clear disclaimer that the registered mark does not
include tyres
[38]
In the result the following order is made:
1
Save for paragraph 2 of this order the appeal is dismissed with
costs, such costs to include those consequent upon the employment
of
two counsel where two counsel were employed.
2
The order granted in respect of the counter-application is amended to
read as follows:
‘
The
counter application succeeds with costs and the Registrar is directed
in terms of
section 24(1)
of the
Trade Marks Act, to
expunge the word
‘tires’ from the Applicant’s trade mark
registration and to amend the registration to read ‘
Vehicle
components and Accessories: wheels and rims, but not including
tyres’.
M
J D WALLIS
JUDGE OF APPEAL
Appearances
For
appellant: Mark Seale
Instructed
by:
Brian
Bacon Inc, Cape Town;
Webbers,
Bloemfontein
For
respondent: R Michau SC (with him I Joubert)
Instructed
by:
Hahn
& Hahn Inc, Pretoria
Peyper
Attorneys, Bloemfontein.
[1]
The registered mark uses the American spelling.
[2]
It is not suggested that it makes any difference that the registered
mark is in block capitals, as are the depictions of the
mark relied
on by Etraction, whilst Tyrecor only capitalises the initial letter
‘I’ in its use of the mark ‘Infinity’.
[3]
In
the affidavits there was a measure of confusion in that ‘wheels’
was sometimes used to refer to rims and tyres,
and sometimes to rims
alone. In this judgment I will refer to rims and tyres as the
component elements of wheels, so that the
latter expression will
refer to a rim and a tyre in combination.
[4]
Etraction was formerly called Malas Car Sales & Spares (Pty)
Ltd. The brochures and advertisements annexed to the affidavits
were
all published under this name but, for the sake of simplicity and
convenience, I have used the current name throughout the
judgment.
[5]
Such use was a contravention of s 62(1) of the Act, but Etraction
makes no point of that fact. Tyrecor claims an international
use of
the mark, but there was no compliance with the provisions of
s 62(2)
(a)
or
(b)
of
the Act.
[6]
Nino's
Coffee Bar & Restaurant CC v Nino's Italian Coffee &
Sandwich Bar CC & another; Nino's Italian Coffee &
Sandwich
Bar CC v Nino's Coffee Bar & Restaurant CC
1998 (3) SA 656
(C) para 63.
[7]
‘Proprietorship of the mark is required before the claim to a
prior right will be accepted.’ Appellant’s heads
of
argument para 26.
[8]
C E Webster and G E Morley
Webster
and Page South African Law of Trade Marks
4ed
(looseleaf, Issue 9) para 5.3 at 5-3.
[9]
Butterworths
Publishers (Pty) Ltd v Jacobsens Group (Pty) Ltd
[2005]
2 All SA 588
(T);
[2005] ZAGPHC 42
; paras 10-12.
[10]
Star
Industrial Co Ltd v Yap Kwee Kor (t/a New Star Industrial Co)
[1976] FSR 256
(PC) at 269 cited with approval in
Caterham
Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd
&
another
1998
(3) SA 938
(SCA);
[1998] ZASCA 44
; paras 11 and 29. I have omitted
the final sentence in the quotation that said that goodwill has a
locality. Although Harms JA
quoted the advice of Lord Diplock in
Star
Industrial
with approval in
Caterham
,
he rejected his view that the existence of a protectable reputation
was dependent upon having customers within the jurisdiction
of the
court. He followed the approach of Christopher Wadlow
The
Law of Passing-off: Unfair Competition by Misrepresentation
4ed (2011) paras 3-109 to 3-130 where the author suggested that
common law jurisdictions no longer take a ‘hard line’
in
regard to the need for there to be customers within the jurisdiction
in order for there to be passing-off and held that goodwill
can be
severed from reputation. However, it is debatable whether Wadlow was
correct in his analysis in the light of the recent
decision and
review of the authorities on which he relied in
Starbucks
(HK) Ltd v British Sky Broadcasting Group PLC
[2015]
UKSC 31.
It may be that South Africa, and probably Australia, are
now the only jurisdictions that do not take a hard line.
[11]
Sections 10(3) and 18 of the Act.
[12]
Victoria's
Secret Inc v Edgars Stores Ltd
1994
(3) SA 739
(A);
[1994] ZASCA 43
; at 744A-745B.
[13]
Section 36(1)
(a)
of the Act.
[14]
Section 36(1)
(b)
of the Act.
[15]
Para 15.8.1 (Issue 15) at 15-47.
[16]
See
Victoria's
Secret Inc v Edgars Stores Ltd
[1994] ZASCA 43
;
1994 (3) SA 739
(A) at 745E-747F and
AM
Moolla Group Ltd & others v The Gap Inc & others
2005 (6) SA 568
(SCA);
[2005] ZASCA 72
; paras 9 and 10.
[17]
Hoechst
Pharmaceuticals (Pty) Ltd v The Beauty Box (Pty) Ltd (in
liquidation) & another
1987
(2) SA 600
(A);
[1987] ZASCA 5
; at 613F-G;
Caterham
Car Sales
supra
para 16.
[18]
Caterham
Car Sales
supra
para 20.
[19]
It is a situation specifically contemplated in
s 197
of the
Labour Relations Act 66 of 1995
.
[20]
c/f
Traub
v Barclays National Bank Ltd; Kalk v Barclays National Bank Ltd
1983
(3) SA 619
(A) at 629-630.
[21]
Such as the example given in Jeremy Phillips
Trade
Mark Law
para
8.50 at 232 of a company Rytz Industriebau AG having used the same
name for many years prior to the registration of the mark
in
question and had incorporated the name in its registered domain name
as rytz.ch. When Rytz Cie SA was formed it registered
a trademark
and then claimed infringement. The court dismissed the claim on the
basis of prior usage.
Rytz
Cie SA v Rytz Industriebau AG
[2001]
ETMR 363
(Federal Civil Court, Switzerland).
[22]
Robert
Bosch GmbH v Bosch Information Systems (Pty) Ltd & others
2000
BIP 286 (D).
[23]
Rembrandt
Fabrikante en Handelaars (Edms) Bpk v Gulf Oil Corporation
1963
(3) SA 341
(A) at 351C-F.
[24]
AM
Moolla Group Ltd v The Gap Inc
supra
para 42. The earlier authorities are collected in
Arjo
Wiggins Ltd v Idem (Pty) Ltd & another
2002 (1) SA 591
(SCA);
[2002] 2 All SA 147
(SCA);
[2001] ZASCA 109
;
in para [6]
[25]
Finter
Bank Zurich v Gialuca Olivieri
Case
No D 2000-0091 (WIPO Arbitration and Mediation Centre).