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[2007] ZASCA 96
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Commercial Auto Glass (Pty) Ltd v Bayerische Motoren Werke Aktiengesellschaft (331/06) [2007] ZASCA 96; [2007] 4 All SA 1331 (SCA); 2007 (6) SA 637 (SCA); 2007 BIP 222 (SCA) (7 September 2007)
Links to summary
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case No: 331/06
In the matter between:
COMMERCIAL
AUTO GLASS (PTY) LTD
.......................
Appellant
and
BAYERISCHE MOTOREN WERKE
AKTIENGESELLSCHAFT
.......................
Respondent
Coram :
Harms
ADP, Cloete, Heher, Combrinck, Cachalia JJA
Heard :
17 August 2007
Delivered :
7 September 2007
Summary:
Trade marks ─ infringement ─ use in
relation to unauthorised spare parts
Neutral Citation:
This judgment may be referred to as
Commercial Auto Glass
(Pty) Ltd v BMW AG
[2007] SCA 96 RSA
JUDGMENT
HARMS ADP/
HARMS ADP:
[1] The appellant, Commercial Auto Glass (Pty) Ltd, applies for leave
to appeal against a judgment of Prinsloo J in the high court,
Pretoria, which held that the appellant infringes certain trade marks
belonging to the respondent, Bayerische Motoren Werke AG, also
known
as ‘BMW’. Leave to appeal depends on the appellant’s
prospects of success and it is accordingly necessary
to consider the
merits of the proposed appeal.
[2] This case was argued on behalf of the appellant as a matter of
principle with profound constitutional implications whereas, on
analysis and shorn of all the unnecessary adornment, the issues are
factual and fall within a narrow compass. First the statutory
setting: BMW’s claim is based primarily on the provisions of
s
34(1)(a)
of the
Trade Marks Act 194 of 1993
, which is in these terms:
‘
The
rights acquired by registration of a trade mark shall be infringed
by—
(a) the unauthorized use in the course of
trade in relation to goods or services in respect of which the trade
mark is registered,
of an identical mark or of a mark so nearly
resembling it as to be likely to deceive or cause confusion’.
The appellant relies mainly on the statutory ‘exception’
contained in
s 34(2)(c)
, namely:
A registered trade mark is not infringed
by—
. . .
(c) the bona fide use of the trade mark
in relation to goods or services where it is reasonable to indicate
the intended purpose of
such goods, including spare parts and
accessories, and such services;
. . .
provided further that the use
contemplated in paragraph . . . (c) is consistent with fair
practice.’
[3] This means that BMW had to establish (a) its trade mark
registrations; (b) unauthorised use in the course of trade by the
appellant
of those trade marks; (c) of an identical mark; (d) in
relation to the goods in respect of which the mark is registered.
Concerning
(c), BMW could, on different facts, have relied on the use
of a mark so nearly resembling its registered trade mark ‘as to
be likely to deceive or cause confusion’ but that is not its
case. It relies on use of an identical mark and that by its very
nature deceives and confuses.
1
In addition, as this Court recently held in line with developments in
Europe and the United Kingdom, the defendant’s use must
have
been ‘trade mark use’, meaning that –
‘
[t]here
can only be primary trade mark infringement if it is established that
consumers are likely to interpret the mark,
as
it is used by the third party
,
as designating or tending to designate the undertaking from which the
third party’s goods originate.’
2
‘
What
is, accordingly, required is an interpretation of the mark through
the eyes of the consumer as used by the alleged infringer.
If the use
creates an impression of a material link between the product and the
owner of the mark there is infringement; otherwise
there is not. The
use of a mark for purely descriptive purposes will not create that
impression but it is also clear that this is
not necessarily the
definitive test.’
3
[4] BMW relied on three registration certificates
4
relating to goods in class 12 (schedule 3) described as ‘vehicles
. . . [and] . . . parts of and accessories for all the aforegoing.’
The registrations are all for word marks, namely ‘BMW’,
‘BM’ and ‘3 Series’. It should be noted
that
the appellant did not attack the validity of any of these marks and
did not ask for the rectification of the register. The registrations
are, accordingly, deemed to be in order.
[5] The appellant is in the business of supplying and fitting
accessories and spare parts for all types of vehicles but the main
part of its business (if regard is had to its name and the signage on
its premises) is the supply of windscreens for motor cars.
It is
apparently not a manufacturer. It is fair to conclude from the
affidavits and the argument that the appellant is not in the
business
of supplying ‘original equipment’, i.e., spare parts made
by or under the control or with the authorisation
of the vehicle
manufacturer. Instead, it supplies what is sometimes referred to as
‘pirate’ or ‘counterfeit’
parts although
these terms fit uncomfortably because unauthorised parts may be
legitimate because they may not infringe any rights
of the original
manufacturer.
[6] In the course of its business the appellant supplies and fits
unauthorised windscreens for different BMW models, something about
which BMW cannot and does not complain. BMW’s case concerns the
manner in which this business is conducted. The appellant advertises
windscreens under its name, Commercial Auto Glass, and it lists them
with their prices in this fashion:
‘
BMW E30 3 Series 83-92 R355
BMW E36 3 Series 91-97 R460
BMW E46 3 Series 98 R490’
It likewise lists windscreens for some other motor car series such as
Fiat, Ford and Honda and also for some trucks and bakkies.
On the
windscreen itself one finds an embedded marking with the appellant’s
name, a statement that the glass is laminated and
shatterproof, and
serial numbers. There is also a stick-on label which includes the
mark ‘BM E 36’. In quoting it undertakes
to fit a ‘BMW
E36’ windscreen and its invoices will describe the goods sold
as ‘BMW E36 2 DR 92-97 WS’ (WS
obviously meaning
windscreen).
[7] It follows that the appellant is using BMW’s registered
trade marks without authority in the course of trade in relation
to
the goods in respect of which the mark is registered.
5
But, says the appellant, it is using the trade marks to inform the
public that it is selling windscreens that fit BMW cars and not
that
the windscreens are original BMW windscreens and that its use is,
accordingly, not trade mark use. In other words, it is not
misleading
the public and, in any event, speech that is not misleading is
constitutionally protected speech.
[8] The object of trade mark law as reflected in
s 34(1)(a)
and(b) 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:
6
“
When
the mark is used in a way that does not deceive the public, we see no
sanctity in the word as to prevent its being used to tell
the truth.”
[9] The European Court of Justice pointed out that the question
whether advertising may create the impression that there is a
commercial
connection between someone like the appellant and the
trade mark owner is a question of fact to be decided in the light of
the circumstances
of each case.
7
Especially when dealing with spare parts and alleged counterfeits,
the issues are not always black and white. It all boils down to
a
question of trade mark use because, as Webster & Page
8
point out,
‘
a
phrase such as “XYZ Spare Parts” [where XYZ is the
registered trade mark] would not be protected by the section while
“Spare parts for XYZ goods” would clearly fall within the
provisions of
section 34(2)(c).
’
[10] At best for the appellant, its use of the BMW mark is capable of
two constructions: on the one hand it may be interpreted as
informing
the public that it is supplying unauthorised windscreens that fit BMW
cars or, on the other hand, it may mean that it is
supplying BMW
windscreens. It may be that some customers will realize, having
regard to the price or the fact that the appellant
does not advertise
itself as an ‘authorised dealer’, that the goods are not
genuine BMW parts. But that is not the test.
If, on balance (as I
find), a substantial number of persons may be deceived by
interpreting the actions of the appellants as representing
that the
windscreens are genuine BMW parts, the argument that the use is not
trade mark use must fail. This is not really an issue
in the case
because, as the high court mentioned, the appellant did not dispute
BMW’s allegations in the founding affidavit
that its use ‘is
likely to give the impression to a substantial number of potential
customers that the windscreens being offered
for sale by the
[appellant] emanate from or are in some way connected with or
associated with [BMW]’ or that ‘the impression
is created
that these are genuine BMW windscreens’.
[11] The question of trade mark use under
s 34(1)(a)
is closely
connected to the ‘exceptions’ listed in ss (2), more
particularly the one relied in para (c) quoted earlier
because the
provisions of ss (2) are in a sense the mirror image of the trade
mark use requirement of ss (1)(a) and (b). The next
question is
whether the appellant’s use of the marks on spare parts
amounted to bona fide and reasonable use consistent with
fair
practice. Once again, whether the use by the appellant is bona fide,
reasonable and consistent with fair practice is a factual
question
9
on which the court below held against the appellant. On appeal we
should generally defer to the judgment of a lower court unless
that
court clearly erred. The appellant did not seek to discharge that
burden but simply reargued the matter as if the lower court
had not
spoken.
[12] On the question of bona fides the high court (correctly in my
judgment) relied on and applied a dictum of du Plessis J in an
unreported case where the learned judge said the following:
10
‘
Use
will not be bona fide, however, if the user does not unequivocally
make it clear that his goods are not connected in the course
of trade
with the proprietor of the trade mark. It follows that bona fide use
in
s 34(2)(c)
means honest use of a trade mark, without the intention
to deceive anybody and while unequivocally making it clear that the
goods
are not connected in the course of trade with the proprietor of
the trade mark.’
[13] The European Court of Justice in the
Gillette
case
11
espoused a similar approach:
‘
In
that regard [dealing with honest practices], account should be taken
of the overall presentation of the product marketed by the
third
party, particularly the circumstances in which the mark of which the
third party is not the owner is displayed in that presentation,
the
circumstances in which a distinction is made between that mark and
the mark or sign of the third party,
and
the effort made by that third party to ensure that consumers
distinguish its products from those of which it is not the trade
mark
owner.
’
[At
para 46. Emphasis added.]
[14] The question that arises is why the appellant insists on
conducting its business in the manner described. Why can it not,
through
the use of a few words, convey the true facts to the public?
The answer does not appear from the papers and none was suggested
during
argument save for relying on the appellant’s ‘right’
to act in the manner it does. From this one can only deduce
that the
appellant wishes to obtain an unfair advantage from the use of the
trade marks and does not wish to inform the public of
the true facts
concerning the origin of the windscreens. In other words, the
argument that the advertisements ‘consist wholly
of
descriptive, truthful commercial speech’ is without factual
foundation. On that finding the use cannot be bona fide or consistent
with fair trade practice and it follows that the high court’s
finding that the appellant is infringing BMW’s trade marks
under
s 34(1)(a)
was correct.
[15] From the narrative above it appears that the appellant also uses
the designations E30, E36 and E46. These are not registered
trade
marks but BMW relied on
s 35
of the Act which deals with the
protection of an unregistered trade mark which may be entitled to
protection under Article 6 bis
of the Paris Convention as a
well-known trade mark (i. e., well known in the Republic as being the
mark of person who is a national
of a convention country).
Section
35(3)
provides that:
‘
The
proprietor of a trade mark which is entitled to protection under the
Paris Convention as a well-known trade mark is entitled to
restrain
the use in the Republic of a trade mark which constitutes, or the
essential part of which constitutes, a reproduction, imitation
or
translation of the well-known trade mark in relation to goods or
services which are identical or similar to the goods or services
in
respect of which the trade mark is well known and where the use is
likely to cause deception or confusion.’
[16] It is not necessary to traverse all the aspects of this
provision because of the finding of the high court that BMW has
established
its entitlement to protection and because the appellant
has restricted its argument to one aspect only, namely that these
marks cannot
be trade marks. They are, according to the submission,
merely descriptive of certain models of BMW cars and purely
descriptive marks
cannot be trade marks because they cannot serve to
distinguish in the trade mark sense by serving as a badge of origin.
I disagree
that these marks are purely descriptive. They perform in
my view two functions: to distinguish one BMW model from the other
and to
serve as a badge of origin. To use a classic example, the mark
‘E Type’ not only described a specific model Jaguar car
but also identified the car as being of a particular provenance. It
follows that the appellant has also in this regard no prospects
of
success on appeal.
[17] It is, however, necessary to grant leave to appeal because of
the form of the order issued. In the first instance, it contains
two
obvious errors, namely it granted an order also under
s 34(1)(b)
–
it is not possible to infringe under para (a) and (b) at the same
time and there was no finding in the judgment of such an
infringement
– and it granted an order based on passing-off, something that
was not in issue during the hearing in the court
below. These errors
occurred because an order was issued in terms of the notice of motion
without reformulation considering the terms
of the judgment itself.
These errors could have been rectified by the court below under
Uniform
rule 42
and do not justify a costs order in favour of the
appellant on appeal.
[18] In addition, during the course of argument this Court raised the
question whether the orders granted were capable of misinterpretation
and misapplication. This issue was not raised by the appellant and,
accordingly, does not justify a costs order in its favour. For
the
sake of good order leave to appeal consequently has to be granted,
the appeal has to succeed in the limited respects mentioned,
and a
new order will issue.
[19] The following order is made:
1. Leave to appeal is granted.
2. The appeal is upheld to the extent that the following order is
substituted for the order of the court below:
‘
(a) The respondent is restrained in terms
of
s 34(1)(a)
of the
Trade Marks Act, 1993
, from infringing the
rights of the applicant in any of its trade mark registrations
1979/06501, 1998/17028 and 1984/01620 in relation
to windscreens and
windows for motor vehicles.
(b) The respondent is restrained in terms of
s 35
of the
Trade Marks
Act, 1993
, from infringing the rights of the applicant in any of its
unregistered well-known trade marks E30, E36 and E 46 in relation to
windscreens
and windows for motor vehicles.
(c) The respondent is to pay the costs, including the costs of two
counsel.’
3. The appellant is to pay the costs, including the costs of two
counsel in relation to both the application for leave to appeal
and
the appeal.
_______________________
L T C HARMS
ACTING DEPUTY PRESIDENT
AGREE:
Cloete JA
Heher JA
Combrinck JA
Cachalia JA
1
Cf
Berman Brothers (Pty) Ltd v Sodastream Ltd
1986 (3) SA 209
(A) at 232H-233A.
2
Verimark
(Pty) Ltd v BMW AG
[2007] SCA 53 (RSA) para
5.
3
Verimark
(Pty) Ltd v BMW AG
para 8.
4
TM
79/06501, TM 98/17028, and TM84/01620 respectively.
5
The
somewhat faint argument that there is no evidence that windscreens
may be registered in class 12 need not be considered.
6
Prestonettes
Inc v Coty
263 US 359
at 368 (1924). Quoted by Jonathan Moskin
‘Frankenlaw: The Supreme Court’s Fair and Balanced Look
at Fair Use’
95 (2005)
The Trademark Reporter
848 at
851.
7
Bayerische
Motorenwerke AG (BMW) and BMW Nederland BV v Deenik
Case
C-63/97.
8
South
African Law of Trade Marks
(loose-leaf edition) para 12.40. The
authors quote
Bayerische Motoren Werke AG v BW Tech
2004
Burrell’s IP 170 and
Aktiebolaget Volvo v Heritage
(Leicester)
[2000] FSR 253.
For further case-law guidance see
Bayerische Motorenwerke AG (BMW) and BMW Nederland BV v Deenik
Case C-63/97 (ECJ).
9
The
Gillette Company and Gillette Group Finland Oy v LA-Laboratories Ltd
Oy
[2005] FSR 37
,
Case C-228/03 (ECJ).
10
Bayerische
Motoren Werke AG v Autostyle Retail
(TPD case 5887/2005).
11
The
picture of the packaging can be found on the following website (the
Finnish Supreme Court's subsequent decision applying the
ECJ’s
judgment):
http://www.finlex.fi/fi/oikeus/kko/kko/2006/20060017
.