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[2012] ZASCA 3
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New Balance Athletic Shoe Inc v Dajee NO and Others (251/11) [2012] ZASCA 3; 2012 BIP 102 (SCA) (2 March 2012)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 251/11
No precedential significance
In the matter between:
NEW BALANCE ATHLETIC SHOE INC
…................................
Appellant
and
ABDULLAH MOHAMED DAJEE NO
….........................
First
Respondent
HASSEN GOOLAN MOHAMED
KAROHA NO
…...............................................................
Second
Respondent
BASHIR AHMED MOHAMED NO
…............................
Third
Respondent
Neutral citation:
New
Balance Athletic Shoe Inc v Dajee NO
(251/11)
[2012] ZASCA 3
(2
MARCH 2012)
Coram:
NUGENT, SNYDERS,
MALAN, BOSIELO and MAJIEDT JJA
Heard:
16 FEBRUARY 2012
Delivered: 2 MARCH 2012
Summary: Trade mark –
removal from register – non-use under
s 27(1)
(b)
of the
Trade Marks Act 194 of 1993
– bona fide proprietor
under
s 10(3)
– deceptive or confusing use under
s 10(13).
___________________________________________________________
ORDER
___________________________________________________________
On appeal from: North Gauteng
High Court, Pretoria (Southwood, Phatudi and Makgoka JJ sitting as
court of first instance):
The appeals are dismissed with
costs that include the costs of two counsel.
___________________________________________________________
JUDGMENT
___________________________________________________________
NUGENT JA (SNYDERS, MALAN,
BOSIELO and MAJIEDT JJA CONCURRING):
[1] The appellant (which I will
refer to as New Balance Inc) is a United States corporation. It has a
wholly owned subsidiary in
this country – New Balance South
Africa (Pty) Ltd – that conducts business in Cape Town (I will
refer to it as New
Balance SA).
[2] New Balance Inc is the
registered proprietor in South Africa of two trade marks, namely, P-F
FLYERS (registration 1972/1361)
and P-F (registration B 1965/02999),
both registered in class 25 in respect of footwear. It acquired the
trade marks from a former
registered proprietor, Leif J Ostberg Inc,
also a United States corporation, on 5 February 2001. The assignment
of the trade marks
to New Balance Inc was registered on 19 September
2002.
[3] The late Mr Dajee conducted
business in this country retailing, marketing, selling and
distributing clothing and footwear. His
was a family business that
commenced operating in 1931. Mr Dajee took control of the business in
1968. He died after the current
proceedings were commenced and was
substituted by the executors of his estate, who are the respondents
in these appeals. For convenience
of narration I will refer to Mr
Dajee as if he was still alive and party to the proceedings.
[4] Mr Dajee is the registered
proprietor of the trade mark POSTURE FOUNDATION – PF
(registration 1996/06063), which is registered
in class 25 in respect
of clothing, footwear and headgear. The circumstances in which he
became the registered proprietor are dealt
with later in this
judgment.
[5] In August 2005 it came to the
knowledge of Mr Dajee that New Balance SA intended to promote
footwear bearing the trade marks
of New Balance Inc (P-F and P-F
FLYERS), in association with the mark POSTURE FOUNDATION, at a trade
exhibition that was to be
held the following month. Alleging that by
doing so New Balance SA would be infringing his trade marks Mr Dajee,
through his attorneys,
made various demands of New Balance SA. New
Balance SA declined to submit to the demands, and announced its
intention to apply
for the removal from the register of Mr Dajee’s
trade mark (POSTURE FOUNDATION – PF).
[6] Mr Dajee’s response was
to apply to the registrar for the removal from the register of New
Balance Inc’s trade marks,
relying for his application on
s 27(1)
(b)
of the
Trade Marks Act 194 of 1993
, which
allows for such removal at the instance of an interested party on the
grounds of non-use.
[7] Apart from opposing that
application New Balance Inc applied in turn for the removal from the
register of Mr Dajee’s trade
mark on various grounds. Only two
remain relevant to this appeal. They are that the mark was not
registrable because, first, it
was a ‘mark in relation to which
the applicant for registration [had] no
bona fide
claim to
proprietorship’
(s 10(3))
, and secondly, because it was ‘a
mark which, as a result of the manner in which it [had] been used,
would be likely to cause
deception or confusion’
(s 10(13)).
[8] The registrar upheld Mr
Dajee’s application, and dismissed that of New Balance Inc. New
Balance Inc appealed against both
orders to the full court of the
North Gauteng High Court, as it was permitted to do by
s 53.
That court (Southwood, Phatudi and Makgoka JJ) dismissed both
appeals, but granted leave to appeal to this court.
[9] I deal first with the appeal
against the order removing the trade marks of New Balance Inc from
the register.
[10] It is trite that a trade
mark is registered in order for the proprietor to use it and not
merely to prevent others from using
it.
1
That principle is recognised in
s 27(1)
(b)
, which allows
for the removal of a trade mark from the register for non-use, in the
following terms:
‘
[A]
registered trade mark may, on application to the … registrar
by any interested person, be removed from the register in
respect of
any of the goods or services in respect of which it is registered, on
the ground … that up to the date three
months before the date
of the application, a continuous period of five years or longer has
elapsed from the date of issue of the
certificate of registration
during which the trade mark was registered and during which there was
no
bona
fide
use
thereof in relation to those goods or services by any proprietor
thereof or any person permitted to use the trade mark as contemplated
in
section 38
during the period concerned.’
[11] The allegations made by Mr
Dajee in support of his application were straightforward. He alleged
that he keeps himself informed
of existing and new products that have
a bearing on his business, and that he constantly monitors the South
African trade so as
to remain aware of the activities of competitors
and potential competitors. He said that he was not aware of any use
in South Africa
of the trade marks of New Balance Inc in relation to
the goods for which they are registered nor, indeed, in relation to
any other
clothing, footwear, or related fashion goods, up until
August 2005, when he learnt that New Balance SA intended introducing
goods
to the trade in South Africa at the trade exhibition. Those
allegations were supported by a director of Tomenco (Pty) Ltd, Mr
Ivan
Kukuljevic, which had been involved in the footwear and clothing
industries since 1967. Mr Kukuljevic said that to his knowledge
there
had been no use of the trade marks in relation to any fashion goods,
including footwear, by any other person in the normal
course of trade
in South Africa prior to the exhibition.
[12] Mr Edward J Haddad, the vice
president of New Balance Inc, who deposed to the answering affidavit,
said nothing himself concerning
the use of the trade marks in this
country, confining himself to their use in other parts of the world.
As to alleged use in South
Africa he relied upon a supporting
affidavit of Mr Gary van Rooyen, the General Manager of New Balance
SA.
[13] Mr van Rooyen’s
affidavit is decidedly sparse. He said that footwear bearing the
trade marks P-F and P-F FLYERS had been
sold to members of the public
in the ordinary course of business at the factory store of New
Balance SA in Cape Town ‘during
the past four years’. He
attached a photograph depicting the interior of the store, a
photograph of footwear on display in
the store, two photographs
depicting models displaying the footwear, and two photographs
depicting what was said to be ‘the
typical manner in which the
. . . trade marks P-F and P-F FLYERS are being used in
South Africa’. He said that
the turnover in South Africa of
goods bearing the trade marks ‘during the past five years’
amounted to R700 000,
and that promotional expenditure of
R250 000 had been incurred during that period. Three executives
of New Balance SA deposed
to affidavits, in identical form, in which
they purported to ‘confirm that footwear bearing the trade
marks P-F and P-F FLYERS
have been sold by [New Balance SA] in at
least the past four years’ at its factory store.
[14] Mr van Rooyen also said that
as a result of great demand for the footwear, and after conducting
market research ‘for
the best part of 2005’, it had been
decided by New Balance SA, in conjunction with New Balance Inc, that
New Balance SA would
expand sales of the footwear, and that an
agreement had been reached with a wholesaler on 10 May 2005 to assist
in the distribution
of the goods. An affidavit deposed to by a member
of the close corporation that operates the wholesaler makes no
mention of the
alleged agreement, nor, indeed, of any discussions or
negotiations to that end, but in any event, the evidence advanced by
Mr van
Rooyen is not evidence of relevant use.
[15] That is the extent of the
evidence that was advanced by New Balance Inc in support of its
allegation of relevant use. There
are no invoices or delivery notes
recording purchase or receipt of the stock that was alleged to have
been sold at the Cape Town
factory store, no invoices recording
sales, no accounting records of the transactions: in short, no
documentary evidence at all
was advanced to corroborate the
allegation that footwear was sold.
[16] The court below evaluated
the evidence according to the rules laid down in
Plascon-Evans
(the case is so well known that
its full citation will only further burden its annotation) and both
counsel accepted that that was
the correct approach. Those rules
manifest the principle that application proceedings are intended for
the resolution of legal
issues. For that reason final relief will be
granted only where the relief is justified by undisputed facts (facts
alleged by the
applicant that are not disputed, together with facts
alleged by the respondent), though there are exceptions,
2
which applies as much where the
respondent bears the onus of proof.
[17] But the rule in
Plascon-Evans
is not blind to the potential for abuse. As this
court said in
Fakie NO v CCII Systems (Pty) Ltd
,
3
‘in the interests of justice, courts have been at pains not to
permit unvirtuous respondents to shelter behind patently implausible
affidavit versions or bald denials.’
4
That seems to me to be particularly important in proceedings of this
nature, in which the proprietor respondent, who bears the
onus of
proving relevant use,
5
can be expected to have comprehensive and peculiar knowledge of that
fact if it has occurred. In those circumstances it can be
expected
that a proprietor who alleges relevant use will advance clear and
compelling evidence to that effect, and ought not to
expect that the
evidential burden will be discharged by allegations that are sparse,
ambiguous, or lacking in conviction.
[18] In this case it is
remarkable that no documents were advanced to corroborate the
allegations of sales. Nonetheless, counsel
for New Balance Inc
submitted, while its evidence might have been fuller, the factual
allegations made by Mr van Rooyen, corroborated
as they are by three
others, cannot be summarily dismissed as false. While that might be
correct, in my view New Balance Inc faces
an insurmountable hurdle.
[19] The relevant period during
which relevant use needs to be shown is 3 July 2000 to 3 July 2005.
Use outside that period is immaterial.
The court below pointed out
that the affidavits of Mr van Rooyen and the three executives were
deposed to on 2 March 2006, which
was eight months after expiry of
the relevant period. The evidence of sales is decidedly unspecific as
to when the alleged sales
occurred. The four deponents content
themselves with alleging that the sales took place, variously,
‘during the past five
years’ and ‘during at least
the past four years’. In both cases that could mean that they
took place between
6 July 2005 and 2 March 2006, just as much as that
they took place between 3 July 2000 and 3 July 2005. Greater
particularity concerning
the dates might have been revealed by
documentary evidence, of which there is none, and the evidence does
not disclose when the
various photographs were taken.
[20] On that issue Southwood J,
who delivered the judgment of the court, said the following:
‘
None
of the witnesses has attempted to show that sales took place during
the relevant period and their statements are ambiguous
about when the
use, if there was use, took place. In view of the documentary
evidence which would be available to these witnesses
if their
statements were correct the vagueness and ambiguity must be
deliberate.’
[21] Counsel for New Balance Inc
took issue with the finding of the learned judge that the absence of
evidence must be deliberate.
He submitted that that equates to a
finding that the deponents set out to mislead the court, which was
not justified. He submitted
that a court must assume that witnesses
are honest, and that while better evidence might have been presented,
the allegations are
nonetheless prima facie factual evidence of use.
[22] Greater particularity
concerning the time at which sales took place would indeed have been
revealed by documentary evidence
corroborating the alleged use, of
which there is none, and the evidence does not disclose when the
various photographs were taken.
Given the clear requirement of the
section that use be demonstrated during a specific period I, like the
court below, find it difficult
to avoid the inference that
documentation was not advanced lest it revealed the time at which the
alleged sales occurred. But in
any event it is not necessary to find
that the ambiguity, and absence of supporting evidence, was
deliberate. The fact remains
that there is no clear evidence that the
alleged use occurred during the relevant period, and the surrounding
circumstances revealed
in the affidavits provide no sufficient basis
for inferring that they must have occurred then. Whatever
corroborating evidence
might or might not be required in proceedings
of this kind, what is called for, at the least, is clear and
unambiguous factual
evidence that brings the matter within the terms
of the section. I agree with the court below that the evidence was
insufficient
for that purpose
[23] In the absence of clear and
unambiguous proof of relevant use during the relevant period, the
trade marks of New Balance Inc
are liable to be removed from the
register, though the registrar, and the court below, retained a
discretion not to do so. For
reasons that will become apparent I deal
later in this judgment with the submission by counsel for New Balance
Inc that that discretion
ought to have been exercised in its favour.
I turn to the second appeal, which is against the dismissal of the
application by New
Balance Inc for removal of Mr Dajee’s trade
mark.
[24] I deal first with
s 10(3)
,
which precludes registration of, and renders liable to removal from
the register, a ‘mark in relation to which the applicant
for
registration has no
bona fide
claim to proprietorship’.
[25] A United States corporation,
BF Goodridge Company, was at one time the proprietor in the United
States (and perhaps in other
countries as well) of the trade marks
POSTURE FOUNDATION, P-F and P-F FLYERS. At some unspecified time the
three trade marks were
sold by BF Goodridge Company to Brookfield
Athletic Shoe Company Inc. They then came into the hands of Leif J
Ostberg Inc (when
and how it came to be the proprietor does not
appear from the evidence), which sold them to New Balance Inc on 5
February 2001.
[26] BF Goodridge had used the
mark POSTURE FOUNDATION in the United States, and elsewhere in the
world, as far back as the 1930’s.
Mr Dajee said that in 1996 he
was looking for a new trade mark, and recalled the mark (the mark
that he said he recalled was POSTURE
FOUNDATION P-F). He believed
that the use of the mark had long since been abandoned and it had not
been used anywhere for many
years. He said he was satisfied that the
mark was unknown to consumers in South Africa and he adopted and
registered the trade
mark in good faith in 1996.
[27] The meaning of a
‘proprietor’ of a mark, as that term was used in
s 20
of the former Trade Marks Act 62 of 1963,
6
was considered by this Court in
Victoria’s Secret Inc v
Edgars Stores Ltd,
7
and there is no basis for construing the word differently in s 10(3).
On the contrary, it should be assumed that the drafter of
s 10(3) was
well aware of the construction that had been adopted in
Victoria’s
Secret
, and intended that the word should bear that meaning when
it was repeated in that section.
8
[28] In
Victoria’s
Secret
Nicholas AJA said that ‘one can claim to be the
proprietor of a trade mark if one has appropriated a mark for use in
relation
to goods or services for the purpose stated’,
9
using the verb ‘appropriate’ in its meaning of ‘to
take for one's own’. To that must be added that a trade
mark is
a territorial concept, with the consequence that a person might be
considered to have adopted a mark, and thus become its
proprietor,
notwithstanding that it has been used in a foreign country. As
Nicholas AJA said in
Victoria’s Secret
:
‘
[T]he fact
that a trade mark is registered and has been used, even extensively
used, by one person in a foreign country does not
in itself
constitute a bar to its adoption and registration by some other
person in South Africa.’
10
Later he said the following:
11
‘
In the case
of a foreign trade mark, there is no legal bar to its adoption in
South Africa unless it is attended by something more.
Thus in
delivering
the
unanimous judgment of the Full Court in
P
Lorillard and Co
(
supra
at 356G-H),
Boshoff J said:
“
The basis of
the challenge on this ground is that the objector was to the
knowledge of the applicant the proprietor of such a trade
mark in the
United States of America and that the applicant improperly
appropriated the mark. In the present state of the law a
trade mark
is a purely territorial concept and there is, generally speaking,
nothing to prevent a person from asserting a proprietary
right in a
trade mark in relation to which no one else has in the same territory
asserted a similar right.”
See also
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 1156A-B; and
Re Impex Electrical Ltd's Trade
Marks; Impex Electrical Ltd v Weinbaum
[1927] 44 RPC 405
(Ch).’
[29] The learned judge went on to
point out that the principle has been similarly recognised in
comparable jurisdictions:
12
‘
The
principle has been recognised also in Australia. In a passage in his
judgment in
The
Seven Up Company v OT Ltd
[1947] HCA 59
;
(1947)
75 CLR 203
, Williams J said at 211:
“
In
my opinion the effect of these cases is that in the absence of fraud
it is not unlawful for a trader to become the registered
proprietor
under the Trade Marks Act of a mark which has been used, however
extensively, by another trader as a mark for similar
goods in a
foreign country, provided the foreign mark has not been used at all
in Australia at the date of the application for
registration. But the
position is different if at that date the mark has become identified
with the goods of the foreign trade
in Australia because those goods
have been brought into Australia by the foreign trader himself or by
some importer or in some
other manner. The Court frowns upon any
attempt by one trader to appropriate the mark of another trader
although that trader is
a foreign trader and the mark has only been
used by him in a foreign country. It therefore seizes upon a very
small amount of use
of the foreign mark in Australia to hold that it
has become identified with and distinctive of the goods of the
foreign trader
in Australia. It is not then a mark which another
trader is entitled to apply to register under the Trade Marks Act
because it
is not his property but the property of the foreign
trader. The Registrar is entitled to refuse to register the mark for
such goods.
If it has been registered the Court may rectify the
register on the ground that the mark is wrongly entered on the
register.”
In the appeal in
The
Seven Up
case
loc cit
Latham CJ said at 215-6:
“
The
use of the trade mark elsewhere than in Australia is not in itself a
relevant matter, nor is registration of the trade mark
abroad in
itself a relevant matter . . . In my opinion the knowledge that a
trade mark is registered in another country or used
in another
country is irrelevant in considering whether or not the registration
of a mark would be likely to cause deception in
Australia or in
considering whether the mark is otherwise disentitled to protection
in a court of justice. User in Australia would
be relevant. So also
would facts establishing a breach of confidential relations or any
fraud . . .
The
desire to use in Australia a successful trade mark in competition in
trade with a person who may come here and who uses that
trade mark in
another country cannot be described as fraud or as involving any
breach of the law
.”
(My emphasis.)
Similarly, Rich J said at 216:
“
Although
the mark "7Up" has been extensively used in the United
States, there has been no user of it in Australia. It
is to the
market of this country alone that one has to have regard. For that
purpose foreign markets are wholly irrelevant unless
it can be shown
by evidence that in fact goods marked with the foreign mark have been
imported into this country and the foreign
mark thus acquires this
characteristic that it is distinctive of the goods of the
manufacturer.”’
[30] The trade mark that was used
and registered by BF Goodridge Company outside South Africa (and
which ultimately passed to New
Balance Inc) was POSTURE FOUNDATION,
which was not the mark that was adopted and registered by Mr Dajee
(POSTURE FOUNDATION –
PF) but nothing turns on that. New
Balance Inc advanced no evidence of use of the mark POSTURE
FOUNDATION – PF, nor, indeed,
of the mark POSTURE FOUNDATION,
in this country prior to its use by Mr Dajee, and it was on that
basis that the court below found
that it had not established that Mr
Dajee was not the bona fide proprietor of his trade mark at the time
he applied for its registration.
There was some suggestion in
argument before us that the affidavit of Mr Dajee himself, carefully
construed, reveals at least some
use of the mark in South Africa
prior to its adoption by Mr Dajee, but I think that is a strained
construction of his evidence
and the submission has no merit. I do
not think that the finding of the court below on this issue can be
faulted.
[31] Much of the argument was
directed instead to inviting us to depart from the territorial
approach to trade marks and to embrace
in its place a
trans-territorial concept, having the effect that foreign
proprietorship of a mark should cling to the mark when
it is used in
this country. The concept of territoriality, it was submitted in
short, has become outmoded in the global village.
A similar
invitation was extended to this court, and rejected, in
Victoria’s
Secret
. There Nicholas AJA said that to accede to the invitation
would pre-empt s 35 of the present Trade Marks Act, which had not yet
come into existence, and his observation naturally carries even more
weight now that the section does exist.
[32] But in any event I think
there is an insuperable hurdle to accepting the invitation. We are
not now concerned with the common
law, which, as counsel correctly
submitted, is capable of being constitutionally developed. We are
concerned with the application
of a statute. Territoriality is
imbedded within the proper meaning of the term in the statute, as it
has been judicially interpreted,
and it is not open to a court to
alter the statute. That is a matter for the legislature, which will
no doubt need to consider
carefully the implications of reforming the
law, including its implications for the country’s international
relations and
obligations, before embarking on that course.
[33] That brings me back to the
outstanding issue in the first appeal.
A court has a general or
residual discretion to refuse removal of a trade mark from the
register but that discretion is to be exercised
against removal only
where the circumstances are exceptional.
13
New Balance Inc advanced various factors that, in combination, so it
was submitted, constitute exceptional circumstances.
[34] First, it was submitted that
the removal of the trade marks from the register will have no
practical effect on the activities
of Mr Dajee or on the use of his
own trade mark. Secondly, it was submitted that the trade marks have
been on the register for
a considerable time (almost 50 years in one
case and almost 40 years in the other case), that New Balance Inc (or
at least its
subsidiary) has demonstrated that the trade marks were
used, if not during the relevant period, then at least shortly
thereafter,
and it has evinced a clear intention to use them even
more extensively in the future. Finally, it was pointed out that the
trade
marks have been registered, and used extensively in other parts
of the world. I do not think it can be said with any conviction
that
removal of the trade marks will have no practical effect. As for the
remaining factors, it seems to me that it would entirely
undermine
the section if removal were to be refused on those grounds.
[35] The second ground upon which
it was sought to have Mr Dajee’s trade mark removed was the
injunction in s 10(13) of the
Act, which precludes registration, and
allows for removal from the register, of a mark which, ‘as a
result of the manner
in which it has been used, would be likely to
cause deception or confusion’.
[36] The court below pointed out,
and it is conceded by counsel for New Balance Inc, that it is the use
of the mark, and not merely
a portion of the mark, which must be
likely to cause deception or confusion, in order for the section to
be invoked. It pointed
out that the attack under this subsection was
founded on the fact that at times Mr Dajee used the letters P-F on
footwear, which
was not use of the mark. Before us counsel for New
Balance Inc drew our attention to the mark on an advertisement that
is amongst
the papers filed in this case. That was not the basis upon
which the claim was brought and pursued either before the registrar
or before the court below – indeed, it is not mentioned even in
the heads of argument – and I do not think the belated
reference to that document calls for consideration.
[37] In my view the orders of the
court below cannot be faulted. The appeals are dismissed with costs
that include the costs of
two counsel.
__________________
R W NUGENT
JUDGE OF APPEAL
APPEARANCES:
For appellant: O Salmon
F Southwood
Instructed by:
Eversheds, Johannesburg;
Webbers, Bloemfontein.
For respondents: G E Morley SC
I Joubert
Instructed by:
Adams & Adams, Pretoria
Honey Attorneys, Bloemfontein.
1
The
Advocate General, F G Jacobs, in
Hölterhoff v Freiesleben
(ECJ) (Case C-2/00), cited with approval in
A M Moolla Group
Ltd v The Gap Inc
2005 (6) SA 568
(SCA) para 26.
2
‘
[F]or
example, where the allegations or denials of the respondents are so
far-fetched or clearly untenable that the Court is justified
in
rejecting them merely on the papers’
Plascon-Evans
at 635C.
3
Fakie
NO v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA).
4
Para
55.
5
Section
27(3).
6
Section
20(1): ‘Any person claiming to be the proprietor of a trade
mark used or proposed to be used by him and who is desirous
of
registering it, shall apply to the registrar in the prescribed
manner for registration and the application shall be accompanied
by
the fee prescribed.’
7
Victoria’s
Secret Inc v Edgars Stores Ltd
[1994] ZASCA 43
;
1994 (3) SA 739
(A).
8
Cf
Ex parte Minister of Justice: in re Rex v Bolon
1941 AD 345
at 359-360.
9
At
744I.
10
At
745H-I.
11
At
746F-I.
12
At
746I-747G.
13
McDonald’s
Corporation v Joburgers Drive-Inn Restaurant (Pty) Ltd; McDonald’s
Corporation v Dax Prop CC; McDonald’s
Corporation v Joburgers
Drive-Inn Restaurant (Pty) Ltd and Dax Prop CC
1997 (1) SA 1
(A).