Puma AG Rudolf Dassler Sport v Global Warming (Pty) Ltd (1546/2002) [2007] ZAWCHC 14 (13 March 2007)

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[2007] ZAWCHC 14
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Puma AG Rudolf Dassler Sport v Global Warming (Pty) Ltd (1546/2002) [2007] ZAWCHC 14; 2007 BIP 139 (C) (13 March 2007)

REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO:
1546/2002
In
the matter between:
PUMA
AG RUDOLF DASSLER SPORT
Plaintiff
and
GLOBAL
WARMING (PTY) LTD
Defendant
JUDGMENT
NTSEBEZA,
AJ
INTRODUCTION
On 11 October 2005,
I began to hear evidence in an action brought by the Plaintiff
(Puma), a German company, which manufactures
clothing and footwear.
The Defendant (Global Warming), amongst other things, imports and
distributes footwear in South Africa
in its capacity as a
manufacturer, and/or wholesaler and/or retailer thereof.
The gravamen of
Puma’s gripe with Global Warming is that the latter, from a date
unbeknown to it, has been selling footwear depicting
an infringing
mark that is confusingly similar to Puma’s registered trade mark,
being registration number 80/5551 Form Strip
Device in class 25,
which, it was claimed by Puma, is a mark registered “in respect of
‘footwear, including sports footwear
and footwear for leisure
wear” and trademark registration no. 82/4607 Form Strip Device in
class 25 registered in respect of
“footwear of all types and
descriptions including footwear for sport and footwear for leisure
purposes; articles of clothing”.
1
The two marks, for purposes of this trial, were referred
collectively as the Plaintiff’s mark. This mark, annexed to
Particulars
of Plaintiff’s Claim as “B” is reproduced here for
ease of reference and for comparative purposes. The Defendant’s
alleged
“infringing mark”, also annexed to the Particulars of
Plaintiff’s Claim as “C”, is also herein reproduced for the
same
reason.
Puma’s claim is
that the unauthorized use by Global Warming of the infringing mark
constitutes an unlawful infringement of its
rights that flow from
its registration of the mark. As such, so it was claimed, Global
Warming’s stated unlawful conduct was
violative not only of Puma’s
exclusive rights flowing from its registered mark, but also if the
provisions of Section 34(1)(a)
of the Trademarks Act 194 of 1993
(the Act) which provides as follows:
“
34
Infringement
of registered trademark
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 trademark is registered,
of an
identical mark, or of a mark so nearly resembling it as to be likely
to deceive or cause confusion.”
Puma
therefore claimed that Global Warming’s stated unlawful conduct
entitles it to a reasonable royalty as provided for in Section
34(3)(d) of the Act, as and in lieu of damages. It was argued that
a reasonable royalty would be 10% of gross sales of over the
period
during which, as the discovery process indicated, Global Warming
sold products with the infringing mark, namely, from 31
July 2001 to
October 2002.
I am being asked,
therefore, in this action, to:
Declare that the
sale of goods, depicting the infringing mark to have infringed
Puma’s rights flowing from its registered trademark
aforementioned.
Interdict and
restrain Global Warming from infringing Puma’s mark in terms of
the provisions of Section 34(1)(a) of the Act
insofar as Global
Warming does so by using the infringing mark.
Order Global
Warming to remove the infringing mark from all footwear. Where the
infringing mark is inseparable or incapable of
being removed from
the footwear, I am asked to order that Global Warming should
deliver up to Puma, in terms of Section 34(3)(b)
of the Act all
footwear depicting the infringing mark.
Order Global
Warming to pay Puma an amount of R 283,998.00 plus interest from
the date of judgment to the date of payment.
Order costs
against Global Warming.
It is common cause
that Global Warming is resisting the action. In essence, Global
Warming denies that the alleged infringing mark
is violative of
Puma’s mark, either as stated, or at all. It argues that its
footwear bore the trade names DT New York, DTNY
or Down Town New
York – (which Puma’s footwear does not) and that over and above
these trade names, its footwear bore the device
depicted in Annexure
“C” to the Particulars of Plaintiff’s Claim, already referred
to herein.
2
Consequently, Global Warming refutes any claims by Puma of its
alleged entitlement to royalties, as and in lieu of damages, and
also resists Puma’s entitlement to any of the reliefs it seeks
mentioned above.
3
Right from the
start, on trial date, Exhibits “A” and “B”, reproduced
herein for ease of reference, were handed up. They
purport to be
original registration certificates, respectively – (and both
signed by the Registrar of Trade Marks on 30 September
2005) – of
Trade Mark 1980/05551 and Trade Mark 1982/04607. For all practical
purposes, Exhibits “A” and “B” seem to
have been handed in,
in terms of Section 50 of the Act, as
prima facie
evidence of
the registration of Puma’s mark, copies of which had been annexed
to Particulars of Puma’s Claim. In any event,
it had not appeared
that Mr Newdigate, who appeared for Global Warming, had placed the
validity of the mark’s registration in
issue.
By agreement, the
parties also proceeded on the basis of an amended summons which
cleared the air as to whether or not Puma would
also rely on passing
off as a cause of action. It was therefore common cause at the
commencement of trial that Puma would no longer
rely on passing off.
Its case would be based on the alleged infringed trademark (number
80/5551 and number 82/4607 collectively).
In that form, reliance
would be placed on the correct application, to the facts of the
case, of the jurisprudence developed over
time with respect to the
reach of section 34(1)(a) of the Act.
EVIDENCE LED
Mr Michau, Counsel
for the Plaintiff, first led the evidence of Puma’s Managing
Director in its South African subsidiaries, Puma
Sports Distributors
(Pty) Ltd and Puma Sports SA (Pty) Ltd, Mr Ronald Alexander Rink.
He has had a long association with Puma,
dating back to the
eighties, having served the organization in various capacities in
Canada, Austria and eventually, in late 2001,
as MD of Puma Sports
Distributors (Pty) Ltd as aforementioned. He had, even as MD in
South Africa, kept close liaisons with Puma,
having visited their
offices more than 30 times for business meetings, strategic planning
sessions and the like.
During his
testimony, he identified Exhibits “A” and “B” as Puma’s
trademarks. He testified that the two marks are applied
to the side
of the shoe by adhesive strip, and in some cases, by perforations.
There is also a leaping cat logo, and the word
“Puma” on the
side of the shoes. Testifying about the extent of Plaintiff’s
business, Mr Rink told me that in South Africa,
Puma was considered
one of the top three companies in the branded athletic footwear
companies, with Nike and Addidas as the other
market leaders in this
regard. To a direct question from me, Mr Rink could not warrant
which of the three was the leader in the
market. The mark was
exclusively promoted through the use of the form strip via media
adverts and sponsorships of material and
club teams, as well as of
individuals in various disciplines, and of high profile
personalities. In South Africa, for example,
they had sponsored
football teams like Kaizer Chiefs, Mamelodi Sundowns, Ajax Cape
Town, Cosmos, and so on. Internationally, Puma
sponsored Italy,
Poland, Senegal, Switzerland, to mention but a few. Sponsored teams
were obligated to wear the products, the
contract stipulating a
minimum of 70% of the team being so obligated. In some instances,
all the team members would be contractually
bound to wear the
footwear.
In his experience,
national and international television channels carried their
products. In his testimony, Mr Rink gave a wide
range of sports
codes associated with Puma, as well as the principal actors in those
codes that enhanced the visibility of their
mark worldwide, thus
making it popular. In cricket, Makhaya Ntini was identified as a
celebrity.
4
In rugby, players like Schalk Burger and Percy Montgomery got
mentioned, and in tennis, Serena Williams,
5
got special mention. In athletics, the Comrades Marathon Bruce
Fordyce got mention, and even in the music industry, Mr Rink
insisted
their mark got promoted through usage by Western Cape rap
groups like Black Noise.
In
short, Puma’s mark was there in the open market, wherever one went,
on television, radio, the print media and other various media
forms.
Mr Rink testified
that Puma, in using the phrase “
life-style footwear
” in
promoting their products, was deliberately promoting their footwear
not just as “
sports
” footwear, but as casual footwear as
well. Exhibits “B” and “C”, for example, he testified,
would count as casual footwear.
This shoe was worn by people from
all walks of life – easily available at fashion boutiques, from
informal retail street vendors
and in flea markets, with the price
ranging from the insignificant to something pricy. In his
experience, people recognized shoes
more by this trademark rather
than through word of mouth. Inasmuch as athletic parlance
identified Nike’s “
tick
”, the “
form strip
”
was what Puma was known by. This “
form strip
” was
clearly depicted, Rink testified, in various products, in sales
catalogues with shoes depicting the mark. Reference, throughout
the
testimony, was made to voluminous exhibited photographs in support
of the contentions made by Mr Rink.
Mr Rink referred to
a licensing agreement between Puma and the South African subsidiary
I referred to earlier, Puma Sports SA (Pty)
Ltd (Puma SA), signed by
Mr Rink, which granted Puma SA, rights to manufacture and sell its
licensed products,
inter alia
.
In consideration of
the rights granted, Puma SA had undertaken to pay royalties to Puma
at an agreed rate.
Article IX of this
License Agreement reads as follows:
“
ARTICLES
IX: ROYALTIES AND ACCOUNTING
In
consideration of the rights granted under this Agreement LICENSEE
undertakes to pay to PUMA royalties calculated at a rate
of 5%
(five percent) of the net sales price of THE LICENSED PRODUCTS sold
under this Agreement in THE LICENSED TERRITORY and
7.5% (seven
point five percent) of such price of THE LICENSED PRODUCTS sold
under this Agreement to THE EXPORT COUNTRIES and
outside THE
LICESED TERRITORY which latter sales may only be made with PUMA’s
prior written consent, such price being the price
in each case
invoiced to a purchaser at arms’ length (by LICENSEE or
Springfield as the case may e) exclusive of freight, packaging,
insurance and sales tax, if separately specified on the invoice as
well as the amount of value added tax or similar tax that
may take
its place, discounts or comparable deductions shown on the related
invoice and reduced by credit notes relating to returns
of THE
LICENSED PRODUCTS, and after deduction, when royalties are
calculated in respect of a quarter year as provided for in
Clause
IX.3, of the in-factory landed costs of all imports of raw
materials and components imported directly or indirectly from
PUMA
for the purpose of this Agreement and invoiced to LICENSEE in the
preceding quarter year, but with no other deductions.
LICENSED
PRODUCTS shall be considered as sold when invoiced or, if not
invoiced, when delivered or dispatched by LICENSEE or Springfield
to the customer, or when set aside for LICENSEE’s or
Springfield’s own use.
Current
royalties will become due for payment on 31 March, 30 June, 30
September and 31 December of each year.
All
payments under this Agreement to be made by LICENSEE shall be
effected in Deutsche Mark or any other currency as reasonably
determined by PUMA in writing.
The
current royalties shall be calculated in South African currency and
shall be converted into Deutsche Mark or any other currency
as
reasonably determined by PUMA in writing at the official exchange
rate (most favourable to PUMA) of the South African Central
Bank
prevailing during the calendar quarter year in question.
In
case of delay of any royalties, PUMA shall be entitled to charge
interest as from the date the related payment of such royalties
has
to be made. The interest rate shall correspond to such charged by
PUMA’s bank/banks and shall be communicated by PUMA
to LICENSEE
from time to time.
Each
royalty payment shall be accompanied by a certificate by a director
or other responsible of LICENSEE stating in particular,
but not
limited to, the nature and sales volume of THE LICENSED PRODUCTS,
the amount of royalty due and the rate of exchange
applied for the
computation of royalties. Hereto, LICENSEE shall use the forms for
royalty statements as contained in
Schedule IX.7
.
For
the term of this Agreement and of the obligation to pay royalties,
and 2 years thereafter, LICENSEE will keep accurate and
complete
records and accounts from which its obligations to PUMA under this
Agreement may be ascertained, including accurate
and complete
records of any transactions carried out in terms of Article VIII
hereto and any independent auditor appointed by
PUMA may inspect
such records and accounts at any time during office hours in order
to verify the accuracy of the records and
accounts.
In
case of any withholding of any part of the royalties due to be paid
by LICENSEE or any third party in accordance with any law,
regulation, decree, resolution, LICENSEE undertakes to send to PUMA
a certificate verifying the amount withheld and the reason
therfor.
The
traveling and accommodation expenses of PUMA’s technician(s) in
terms of Article IV will be borne directly by LICENSEE.
The
daily field service compensation for the services of the
technician(s) will be paid at the time of the royalty payment next
made
after the completion of the technician(s)’ period of such
service.”
Mr Rink also
referred to a “
Trademark License Agreement
” between Puma
SA and Puma Sports Distributors (Pty) Ltd (Puma Distributors) a
subsidiary of Puma SA whose relationship with Puma
SA was governed
by this sublicensing agreement. The effect of this sublicensing
agreement was that Puma Distributors had to pay
to Puma SA a
royalty.
Clause 6 of this
Trademark Licensing Agreement reads as follows:
“
CLAUSE
6: ROYALTIES AND ACCOUNTING
In
consideration of the rights granted by Puma to Licensee hereunder,
Licensee shall pay to Puma for all Licensed Products manufactured
by or for Licensee a current royalty of 8.5% (eight and one half
percent) (“Current Royalty”) of Licensee’s net sales.
“
Net
sales” as mentioned in this Agreement shall be the price of The
Licensed Products invoiced to its customers at arms’ length
by the
Licensee, exclusive of freight, packaging, insurance and sales tax,
if separately specified on the invoice, as well as the
amount of
value added tax or similar tax that may take its place, discounts or
comparable deductions shown on the related invoice
and reduced by
credit notes relating to returns of Licensed Products.
Licensed
Products shall be considered as sold when I was invoiced or, if not
invoiced, when delivered or dispatched by the Licensee
to the
customer, or when set aside for Licensee’s own use.
Current
Royalties shall become due for payment on 31 March, 30 June, 30
September and 31 December of each year. Payment to be
made within
30 days of the end of each calendar quarter year in net and without
any deduction.
The
traveling and accommodation expenses of footwear technician(s) in
terms of Clause 3.14 will be borne by Licensee or reimbursed,
as the
case may be.
The daily field service
compensation for the services of the technician(s) will be paid at
the time of the current royalties’ payment
next made after the
completion of the technician(s)’ period of such service.
All
payments to be made to PUMA in accordance with this Agreement shall
be in South African Rands.
Licensee
shall notify PUMA by telefax on the date each payment is made and of
the sum being remitted and the method of remittance.
In case of delay of any Current
Royalty PUMA shall be entitled to charge interest as from the date
the related payment of the Current
Royalty has to be made. The
interest rate shall correspondent to the current South African prime
interested rate charged by South
African banks and shall be
communicated by PUMA to the Licensee from time to time.
Each
royalty payment will be accompanied by a certificate by a director
or other responsible of Licensee stating in particular,
but not
limited to, the nature and sales volume of The Licensed Products
and the amount of royalty due. Hereto, Licensee shall
use the
forms for royalty statements as contained in
Schedule 6.4
and/or any other format as determined by PUMA from time to time
regarding (a) The Licensed Territory (country by country) and
(b)
The Export Countries (country by country).
Licensee
shall maintain for two (2) years at least after the termination or
expiry of this Agreement accurate and complete records
from which
its obligations to PUMA under this Agreement may be ascertained and
any representative of PUMA and/or any auditor
appointed by PUMA may
inspect such records at any time during office hours to verify the
accuracy of our records and may take
written notes, extracts or
copies of such records for its/their audit. Licensee shall bear
the costs of such inspection if any
underpayment of royalties is
revealed thereby but not otherwise.
All
sums payable to PUMA in terms of this Agreement are exclusive of
Value Added Tax which shall be payable by Licensee in addition
to
any royalties and/or any other payments.”
The Trademark
License Agreement was later supplemented in October 2002. The
effect thereof, essentially, was that the date of the
License
agreement was extended to 31 December 2007 (from 2002), which would
then mean that as at the date that I was hearing evidence,
the
agreements were still in place, a fact which Mr Rink confirmed.
Under
cross-examination, it was put to Mr Rink that there had been no
sales by Global Warming, of the shoes bearing the infringing
mark
before July 2001. He refused to comment on being confronted with
discovered sales inventory documents for the period 1 January
1999
to 31 October 2002. It was put to him by Mr Newdigate that the
record showed “
as a statement of fact
”, that the earliest
sales date according to the document was July 2001. He also would
not comment, and accept, that there were
no sales after 2002. As to
the trademarks in dispute, it was put to Mr Rink that his company
had various stripes on its products.
The various trademarks have
been reproduced here for illustration purposes.
Mr Newdigate
queried whether it was reasonable of Puma, with such a variety of
stripes, to now rely only on those that were the
subject matter of
this litigation. Besides, as recently as on the 23
rd
August 2004, Puma, through Spoor and Fisher, attorneys in Pretoria,
had applied for the registration of a new trademark, a copy
of which
is reproduced here for ease of reference and comparison. It was put
to Mr Rink that the trademark, now sought to be registered
by Puma
even involved the type of split which Global Warming had, a fact
that Mr Rink conceded, even as he claimed, at the same
time, that he
had not been aware that Puma had applied for a trademark
registration. He had actually seen the document for the
first time
only the day before the commencement of trial. Mr Newdigate put it
to him that there were very distinct differences
between Global
Warming’s mark and the mark in issue in this litigation. Mr Rink
conceded that these were different but that
the consumer would not
make out the difference.
It was put to him,
for example, that Puma’s mark did not have the distinct split that
one clearly noticed in the alleged infringing
mark depicted on
Global Warming’s product. Mr Rink replied that Puma used the
stitches to give different colours, by which I
understood him to be
saying the different colours in the stitches would illustrate the
“split”, very much to Mr Newdigate’s
expressed incredulity.
Mr Newdigate insisted that the difference in the trade marks was the
only reason Puma had made the application
for trademark registration
in South Africa. Further, it was put to Mr Rink, Global Warming’s
own mark had therefore the distinction
of “
DT New York
”
clearly depicted on the side of the shoe.
Insofar as mileage
was intended to be gained by evidence that showed the Puma products’
popularity across the board, as the promotional
material
demonstrated, it was put to Mr Rink that the promotional material
dated back to the 80’s, covered the 90’s and there
was nothing
in the 2000’s. Mr Newdigate then suggested that it was clear that
Puma had not had a significant presence in South
Africa in the past
recent years.
Mr Michau then
called Mr Derek Brian Momberg who testified to his expertise in
royalty evaluation. He had done some evaluations
in many
institutions, including FNB when they applied for a building society
brand in Namibia and, amongst his better known projects,
it was in
being involved in negotiating the licensing of clothing and footwear
for South Africa’s national soccer side, Bafana
Bafana. He had
looked at the business’ financial statements, amongst other
things. He was satisfied, all factors taken into
account, that the
brand was worth 10%.
Under
cross-examination, Mr Momberg’s attention was drawn to the
Discovery Bundle from all of which it appeared that the royalties
contracted for by the Plaintiff were contained in the only contract
that had been placed before the Court, the Plaintiff’s agreement
with the subsidiary, Puma Sports SA (Pty) Ltd. It was pointed out
to Mr Momberg that the agreement made provision for the payment
of
royalties at the rate of 5% of the net sales of the licensed
products.
Mr Momberg
insisted, however, that, the rate of 10% accorded with rates that he
had experienced in the footwear apparel industry.
He also testified
that he had called for the Plaintiff’s financial statements to
determine what levels of profitability prevailed
in the footwear
industry. He had to concede that he took into account documents
that had
not
been discovered, even though, as an attorney in
his own right, he appreciated the inappropriateness of seeking to
rely on documents
which had not been discovered to the opposing
side. Mr Momberg sought to downplay this irregular conduct by
suggesting that he
had been told (presumably by the Plaintiff’s
representatives) that the documents were not relevant. Mr Newdigate
pressed Mr
Momberg about the fact that it was clear from the
discovered documents that the South African Government’s position
(through
the Department of Trade and Industry) - (DTI) - stipulated
that a maximum royalty of 5% of net sales would be allowed. Mr
Newdigate
bluntly put it to him, that his was an attempt to evade
the limitations put on the maximum royalty of 5% of net sales, and
no amount
of submitting royalties in the form of dividends could
legitimize a capping of royalties at 10% (instead of the DTI
prescribed
– 5%).
Mr Michau’s last
witness was Owen Henry Dean who stated that he was the Plaintiff’s
attorney who was apparently brought to explain
the process involved
in trade mark registration. The process of registration took
eighteen (18) months, in some cases two (2)
to three (3) years, a
matter of grave concern.
6
Counterfeiting of products was a very serious offence. He,
however, did not know that a massive proportion of all sports shoes,
including large proportions of Puma and Nike shoes, were
manufactured in China.
I am not sure that
Mr Dean’s evidence was particularly helpful either in clearing up
the question of whether the trademark registration
application under
discussion was significant because of the split in the design or why
the financial statements which Mr Momberg
testified about were not
discovered earlier and yet were given to Mr Momberg after an initial
refusal or reluctance to make them
available. Consequently, I will
not let it detain me any longer.
That,
in a nutshell was the Plaintiff’s case.
DEFENDANT’S CASE
Mr Newdigate called
Gregory Edward Paton, the director of Global Warming, who testified
that chain stores like Markhams, Foschini,
Truworths, Man, and so
on, were their commercial market in shopping malls throughout the
country. As Product Director, his job
was to interpret trends in
fashion designs and have the goods manufactured mainly in China and
Thailand. China had become the
world’s leading shoe manufacturers
with well in excess of 70% of Global Warming’s requirements.
Continuously for 20 years,
he had travelled far and wide overseas,
particularly to Trade Fairs in Bologna and Milan, Germany
(Dusseldorf), Las Vegas (bi-annually)
and China.
In one of his
trips, he had taken a sample, and a photograph, of a Puma shoe in
Amsterdam to China via Germany. In China he visited
Xiamen C&D
Inc whereat he dealt with one Xia Rhu, whom he met in his showroom
and with whom he discussed the design of a shoe
which, though
inspired by the Puma shoe, had to be such that it would not be
confusingly similar to the Puma shoe. For example,
Mr Paton
testified, Global Warming’s trademark was distinctly different
from the Puma trademark. He was referred by Mr Newdigate
to the
relevant page of the Discovery Bundle where a reproduction of
Annexure “C” to the Particulars of Puma’s Claim is.
From
that, he highlighted the differences between Puma’s mark, and
Global Warming’s.
For example, he
testified that their mark had the distinct inscription “
DT New
York
” or “
DTNY
” appearing at various places on the
shoe. There was no animal representation on their product. Their
shoes were sold to the
members of the public, who would have, as
part of the product sold to them, a container box, together with a
plastic bag.
7
Both the shoe box and the plastic bag exhibit the brand “
Down
Town New York
”, abbreviated variously as “
DT New York
”
or “
DTNY
”. This was over and above the fact that there
was a marked difference between price and quality between the
Plaintiff’s product
and that of the Defendant’s.
Mr Paton confirmed
evidence in the Discovery Bundle, of sales inventories, being
evidence of where the products came from in China,
dates of sales
and entities to whom sales took place. These sales between 1
January 1999 to October 2002 showed that the Defendant
sold to a
wide range of customers during the requisite period – Pick ‘n
Pay Hypermarket, Strand Outfitters, OK Fashion Centres,
Foschini,
and so on. Mr Paton testified that no complaints were ever made to
them that their products were confusingly similar
to Puma products,
nor were there any consumers who ever came back to them to complain
that in purchasing their products, they had
thought they were buying
Puma products.
Under
cross-examination and on being shown Annexure “B” to the
Particulars of Plaintiff’s Claim, Mr Paton conceded that in
Germany (on his way to China), he purchased a product similar to
Annexure “B”, which he gave to his manufacturer in China with
instructions
not
to infringe anyone else’s trademark. For
example, he told the manufacturer to have neither a leaping animal
nor the word “
Puma
” on the product. He testified that
whilst he could not recall the exact instructions he gave to the
manufacturer, he would have
asked the manufacturer to vary the
thickness of the soles, the shape of the last and to have no
brandmarks (Puma) on.
He did not agree
with Mr M Michau that the only change between Plaintiff’s mark
(Annexure “B”) and Defendant’s mark (Annexure
“C”) is the
white portion (signifying the split). Mr Paton was adamant that if
one had regard to the “flashes” (in the
flash or form strip),
the outlines were not identical because the original one splits and
makes a sharp curve, the effect of which
was that the end product
was trendy, fancy and sleek without infringing the Puma “flash”.
He admitted that he had not received
legal advice, (before adapting
the shoe), as to whether it would infringe Puma’s mark or not. He
had relied on his own judgment
based on his own considerable
experience. Under re-examination, Mr Paton reiterated his
conviction that there was really nothing
comparably similar between
Annexures “B” and “C” to the Particulars of Plaintiff’s
Claim. Quite apart from the differences
to which he had already
testified, there was also the difference in quality, one product
using leather.
Mr Newdigate called
his last witness, Mr Christopher Faure, who told me that pursuant to
receipt by the Defendant of a letter of
demand from Mr Dean, there
had been an appointment arranged with Mr Rink at which session Mr
Rink told him that the Defendant was
infringing Puma’s trademark
and that they should stop selling their shoes at once. He had
promised to revert to him within 24
hours, a period within which the
Defendant would have had time to consider their demand. He had
subsequently telephoned him to
inform him that since they were not
infringing on anyone’s mark, any legal action would be resisted.
He also mentioned
that their position notwithstanding, Defendant had decided to stop
any sales of the shoes referred to, and would
not promote or sell
the products in future. Most of the transactions occurred only
after July 2001 and that there were no sales
after 2002, nor did
they stock any of the products since 2002. It was thus pointless
for Plaintiff to seek to interdict them from
selling a product they
no longer even kept in stock since 2002. Even under
cross-examination, Mr Faure steadfastly maintained
his evidence that
they had run out of shoes. He denied the suggestions that well
after 2002 they were still selling. He maintained
that they stopped
selling these shoes because they had run out of shoes. All that they
had were shoes that were either rejects
or those that had been
retuned by customers. Whether or not a royalty of 5% was reasonable
depended on a number of factors, he
said, in concluding his
testimony.
THE LEGAL PRINCIPLES
The underlying goal
of trademark law is to promote the proper functioning of the market
place through the avoidance of confusion
and deception. Section
34(1)(a) has greatly increased the ambit of trademark infringement.
In order to show infringement under Section 34(1)(a) the applicant
has to establish in respect of its trademark:
unauthorised use;
in the course of
trade;
in relation to
goods and services in respect of which the mark was registered;
of an identical
mark or a mark so nearly resembling it as to be likely to deceive
or cause confusion.
Under Act 194 of 1993, a trade mark’s primary
function is to distinguish, as opposed to operating as a ‘badge of
origin’ as
was the case under the old Act.
“
The
badge of origin element of the trademark is no longer at the
forefront and has been replaced by the distinguishing capability
of
the mark
.”
8
The Court in a
trademark infringement case is only permitted to consider the marks
themselves.
“
In
infringement of trade mark actions the enquiry is confined to a
comparison of the registered mark with that portion of the
respondent’s
get-up which is alleged to infringe the applicant’s
registered rights.”
9
The enquiry into the
likelihood of confusion or deception is limited to a comparison of
the marks. The onus rests on the plaintiff
to show on a balance of
probabilities, that the mark used by the defendant so nearly
resembles the plaintiff’s trade mark as to
be likely to deceive or
cause confusion. It is enough for the plaintiff to show “
that a
substantial number of persons will probably be confused as to the
origin of the goods or the existence or non-existence of
such a
connection”
.
10
Furthermore, Corbett JA
expressed the view that:
“
When
comparing the marks it is necessary to ‘notionally transport myself
to the market place and consider whether the average customer
is
likely to be deceived or confused”
.
11
This test has been adopted and accepted for the
purposes of Section 34(1)(a).
The “
likelihood
of deception or confusion must be judged with reference to the
average purchaser. It must be born in mind that the purchaser
will
not necessarily see the marks side by side, but will probably come
across them separately on different occasions. Deception
or
confusion exists when there is a probability that a person or
persons will be deceived into thinking,
(a) that
the respondent’s product is that of the applicant’s; or
(b) that there is a material connection between the respondent’s
product and the applicant as producer and marketer of the products
in
issue, or
(c) is
confused as to whether or not there is such a connection.”
12
In this case
Traverso DJP commented that,
“
The
respondents selected a confusingly similar mark with the intention
and for the purpose of deceiving potential purchasers … while
such
an intention and purpose is not necessary to be established, it is a
further indication of the likelihood of deception and confusion.”
The defendant
cannot rely,
“…
upon
matter extraneous to the mark itself, which he may have used in
conjunction with the mark, in order to negate the likelihood
of
deception or confusion … the wrong of infringement consists in the
unauthorized use of a registered trade mark or of a trade
mark that
so nearly resembles a registered mark as to be likely to deceive;
once that use has been established, it will avail the
defendant
nothing to show that his goods are sufficiently differentiated. The
likelihood of deception or confusion must be decided
in relation to
the trade mark itself and not in relation to the label of which it
forms a part.”
13
Therefore,
“
the
enquiry is confined to the marks themselves and no regard should be
had to other features of the getup or other indications of
origin of
the goods as actually marketed by the plaintiff and defendant
respectively.”
14
In
Ramsay,
Son & Parker (Pty) Ltd v Media 24 Ltd and Another
15
when coming to a decision on the claim for trademark infringement
Motala J stated that, “
when two marks are compared for
infringement purposes, it is necessary to ignore extraneous factors,
and that the general get-up
and content of the two magazines must
not be taken into account
”. Only the two marks themselves
would be in focus.
“
Note
that it is trite that, in South African trade mark law, a comparison
of marks can take place on three bases – visual, phonetic
and
conceptual. For a number of years it has been the received wisdom
that a finding of confusing similarity on any of these grounds
would
suffice for infringement. But recent European decisions which have
been followed in South African law point out that the likelihood
of
confusion must be ‘appreciated globally’.
This was approved in
Cowbell AG v ICS Holdings Ltd
2001 (3) SA 941
(SCA)
. (W ALberts, ‘Getting away and taking a break’,
Juta’s
Business
Law, 2005 Vol 12, part 2, 55. See also:
Value Car
Hire Group Ltd v Value Car Hire (Pty) Ltd
[2005] ZAWCHC 23
;
[2005] 4 All
SA 474
(C) para 24.
Section 34(1)(a)
should and has been fairly strictly interpreted and guidelines in
respect of effecting that interpretation have
been provided over the
years in the case law.
“
The
enquiry into alleged infringement is confined with much narrower
limits than the enquiry into alleged passing off, and care must
be
taken to exclude from the former enquiry facts and circumstances
which are germane to the latter enquiry but irrelevant and
inadmissible
in the former.
”
16
The
onus
is placed on the plaintiff to prove the infringement, and
in determining whether a likelihood of confusion/deception exists, a
number
of factors have to be considered by the court including the
strength of the mark; similarity between the marks; proximity of the
goods in the marketplace; actual confusion; the intent of the
infringing user; the relatedness of the goods; and so on.
It is clear that a
fine balance has to be maintained by the court. The danger
presented by too wide an interpretation is to dilute
the test that
has to be applied in terms of the section. This may have
consequences for trademark protection and the marketplace.
However,
too narrow an interpretation by the court may serve unnecessarily to
stifle healthy competition in respect of goods and
services offered,
having equally serious consequences for the marketplace.
Mr Michau strongly
argued that in considering whether the Defendant’s mark infringes
the Plaintiff’s mark, I must have regard
to the fact that, in use,
the Plaintiff’s shoes will be seen by members of the public whilst
players are using them on sports
fields, televised broadcasts of
sports matches, dancing competitions, and so on – instances where
it is, in his submission, virtually
impossible for “
elements
exact detail to be perceived or recollected
”. Arguing for my
acceptance of this what he called the doctrine of “
imperfect
perception
”, he submitted that the evidence of Rink was also
apposite in this regard. He argued that Rink had testified that the
purpose
of the promotional efforts of exposing the shoes in public
in the manner I have just described, was obviously because it would

be difficult to see or read word marks like “
Puma
”,
“
Nike”
, “
Adidas
” in the abovementioned
instances. The distinguishing feature of the Plaintiff’s shoes
was the form strip as depicted on the
side of the shoes.
Mr Michau also made
much of the fact that Mr Paton had taken the Plaintiff’s shoe to
his Chinese manufacturer to copy it as clearly
as possible, and that
he had taken no legal advice but relied on his own experience as to
whether the manufacturer could successfully
design a shoe that would
not infringe his mark. It was clear that the intention had been to
benefit from the admitted reputation
of the Plaintiff and its
products. The Defendant had also ceased selling, on its version,
its shoes. This suggested a lack of
confidence on its part that it
was acting lawfully especially if one had regard to the fact that it
had taken the trouble to commission
the designing of its own range
of footwear for sale in South Africa.
Mr Michau also
dismissed the Defendant’s reliance on the trademarks “
Downtown
New York
” and/or “
DTNY
”. His rejection appeared to
be that,
inter alia
, the phrase “
New York
” was
mis-descriptive since the shoes emanated from China and have no
American connection. If anything, so the submission went,
the
evidence showed that it was the Defendant’s wont to use trademarks
confusingly similar to other well known brands (and to
benefit from
the reputation of those brands) in its determination to promote its
own products. Mr Michau submitted that in trademark
infringement
proceedings, the use of matter extraneous to the infringing mark was
impermissible. The use of the distinguishing
box and other trade
marks on the Defendant’s products - “
DTNY
”, “
Downtown
New York
” and “
DT New York
” - could thus not be
considered for the purposes of the likelihood of deception or
confusion. For these submissions Mr Michau
referred me to the
“
Adidas
” case (
supra at 535H
), to
Stellenbosch Farmer’s Winery v Stellenvale Winery (Pty)
Ltd,
17
and to
Standard Bank of SA Ltd v United Bank Ltd
.
18
Given that even in
placing its trademarks, the Defendant had chosen a position that is
identical to where the trademark “
Puma
” appears in, for
example, trademark number 80/5551 Form Strip Device, immediately
above the horizontal portion of the form strip,
all that was
required by the Plaintiff, in order for it to be successful, was to
show that there was a probability that substantial
number of
persons will be deceived or confused into thinking that the
Defendant’s product was that of the Plaintiff or that there
is a
material connection between the Defendant’s product and the
Plaintiff. Relying on
John Craig (Pty) Ltd v Dupa Clothing
Industries
,
19
Mr Michau argued that it would be enough if people merely wondered
whether the goods had been made by the opponent. In such an
event,
the trademark was likely to cause confusion.
I have already
stated the law as to what the underlying goal of trademark law is
and what the Court should look at when considering
what Section
34(1)(a) contemplates for purposes of determining whether or not an
infringing mark is likely to confuse. It is apposite
to quote the
following important passage from
Cobwell AG v ICS Holdings
Ltd
20
in which the following was stated:
“
The
decision involves a value judgment and ‘[t]he ultimate test is,
after all, as I have already indicated, whether on a comparison
of
the two marks it can properly be said that there is a reasonable
likelihood of confusion if both are to be used together in a
normal
and fair manner, in the ordinary course of business’. (
Smith
Kline
Beecham Consumer Brands (Pty) Ltd (formerly known as Beecham South
Africa (Pty) Ltd) v Unilever plc
[1995] ZASCA 26
;
1995 (2) SA 903
(A) at 912H.)
‘Likelihood’ refers to a reasonable probability (ibid at 910B),
although the adjective ‘reasonable’ is perhaps
surplasage. In
considering whether the use of the respondent’s mark would be
likely to deceive or cause confusion, regard must
be had to the
essential function of a trade mark, namely to indicate the origin of
the goods in connection with which it is used
(
The
Upjohn Company v Merck and Another
1987 (3) SA 221
(T) at 227E-F;
Canon Kabushiki Kaisha v Metro-Goldwyn-Mayer Inc (formerly Pathé
Communications Corporation)
[1999] RPC 117
(ECJ) para 28)
.
Registered trade marks do not create monopolies in relation to
concepts or ideas. More recently this Court in
Bata
Ltd v Face Fashion CC and Another
2001 (1) SA 844
(SCA) at 850 para
[9]
pointed out that the approach adopted in
Sabel
BV v PUMA AG, Rudolf Dassler Sport
[1998] RPC 199
(ECJ) at 224
accords with our case law. There it was said that the likelihood of
confusion must ‘be appreciated globally’ (
cf
Organon Laboratories Ltd v Roche Products (Pty) Ltd
1976 (1) SA 195
(T) at 202F-203A)
and that the ‘global appreciation of the visual, aural or
conceptual similarity of the marks in question, must be based on the
overall impression given by the marks, bearing in mind, in
particular, their distinctive and dominant components’.
Compare
SmithKline at 910B-H and Canon paras [16]-[17]
.”
Against the above
backdrop, I have to say that I am not persuaded that this is a case
where the Plaintiff, in my considered opinion,
has succeeded in
discharging the
onus
that it is burdened with, namely, to
show, as was stated in the much quoted
Plascon-Evans
case (
supra
), “
the probability or likelihood of
deception or confusion”.
The
Plascon-Evans
case (at 640G-641IE and at 642D-F) gives in clear detail all the
factors that have to be taken into account in the determination
of
the question whether an infringing mark is likely to confuse or
deceive. I have also dealt with these already in paragraphs
In order to show infringement under Section 34(1)(a) the applicant has to establish in respect of its trademark:
to above.
I have to agree
with Mr Newdigate that there are significant distinguishing features
between the marks in contestation in this case.
As appears in all
the exhibited depictions of Defendant’s mark, its mark contains
two stripes from approximately the middle
of the shoe – a split
in the stripe – a feature one does not find in the Plaintiff’s
mark. It is ironic that this type of
split, which is the hallmark
of the Defendant’s mark, has been incorporated by the Plaintiff in
its application, in 2004 (some
two (2) years after the present
litigation had commenced), to have a new trademark registered. The
point argued by Mr Newdigate
was that the fact that the mark which
was the subject of its latest application was significantly
different from its existing mark
was the very reason that there was
an application by the Plaintiff for the registration of a
new
trademark – precisely because it was significantly different from
any marks it had registered – because of the type of split
now
characterizing Defendant’s own mark.
Further, the
Defendant’s mark involves a curve in the stripe which turns on
itself and points almost in the direction from which
it originated.
No such feature can be found in the Plaintiff’s mark. I also
agree that the “
DT New York
”, which forms part of the
Defendant’s mark, is by no means an “extraneous feature”, nor
merely part of the Defendant’s
get-up. It forms part of the
Defendant’s mark. The word “
Puma
”, which forms part of
Trademark 80/5551 is not found in the Defendant’s mark, which
therefore accounts for why the argument
holds water that the words
“
DT New York
” distinguish Defendant’s mark entirely
from the Plaintiff’s mark.
I also agree, in
line with the authorities I cited in paragraphs In order to show infringement under Section 34(1)(a) the applicant
has to establish in respect of its trademark:
to above, with Mr Newdigate’s submission that the registered
marks on which the
Plaintiff’s case is built are those in Exhibits
“A” and “B”. it is a comparison between these marks and the
mark utilized
by the Defendant that should be compared to determine
compliance or otherwise with the provisions of Section 34(1)(a) of
the Act.
The comparison between the registered trademarks and the
mark utilized by the Defendant, clearly demonstrates that the marks
are
neither identical nor confusingly similar. In fact, they have
significant differences.
Contrary to what Mr
Michau submitted, I do not consider the fact that the Defendant’s
shoes are sold together with the box of
the Defendant, as well as
the plastic bag containing the shoes, both items reflecting the
brand “
Downtown New York
”, also abbreviated to “
DT
New York
” or “
DTNY
” is extraneous matter that has
no significance in the determination of the questions to be answered
as to whether an infringing
mark is confusingly similar or
deceptive. The authorities themselves state that the comparison
between the two marks must not
take place in
a vacuum
. They
should be compared against the background of the relevant
surrounding circumstances in which they would be sold, and having
regard to the average type customer who would be likely to purchase
the goods.
I agree with Mr
Newdigate that it is absurd to suggest that the average buyer would
be deceived or confused as was suggested by
the Plaintiff when
purchasing the Defendant’s product, given that purchasers of shoes
examine goods relatively closely, try them
on for size and for
comfort. In that maneuver, it is absurd to suggest that the
purchaser would not see the letters and words
“
DT New York
”
on the Defendant’s shoes. It was highly unlikely that this
average buyer, no matter what their level or degree of
sophistication
– or even lack of it! – would be misled or
confused by the significantly different stripes forming part of the
Defendant’s
mark, a view which would be fortified by the bag and
box in which the goods would be purchased. A more discerning
purchaser would
even be aware of the significant differences in
price and in quality – and the evidence of Mr Paton in this regard
stands alone
– between the Plaintiff’s product and the
Defendant’s particular products.
I am also extremely
uneasy about the fact that the Plaintiff led no evidence of anyone
who was deceived or confused by the marks
in contestation in this
matter. If anything, I have evidence from Mr Paton, never seriously
challenged, much less controverted,
that there was not a single
instance that had been brought to his attention of any retailer or
customer who was deceived or confused
by the goods in question.
This I find to be a significant weakness in the Plaintiff’s case.
In argument, Mr
Newdigate pointed out another weakness in the Plaintiff’s case,
regard being had to the
onus
it must discharge. Despite its
promise that “
a sample of the Plaintiff’s footwear as
depicted in annexure “B” to the Particulars of Claim will be
made available at the
hearing of this matter”
, no such sample
was produced. Mr Newdigate argued that this omission led to the
drawing of a reasonable inference that the samples
of the products
in question, had they been produced, far from furthering the
Plaintiff’s case, would actually have emphasized
the significant
differences between the Plaintiff’s trademarks, and the mark
utilized by the Defendant.
I
agree. All things considered, I find that the Plaintiff has failed
to discharge the
onus
of proving the probability of deception
or confusion. The Plaintiff’s case thus fails.
In the view that I
have taken of the case, therefore, it becomes unnecessary for me to
determine the question of a “
reasonable royalty”
in terms
of Section 34(3)(d) of the Act. Quite apart from the fact that the
Plaintiff led no evidence of any loss it has suffered,
financial or
otherwise, as a result of the Defendant’s alleged unlawful
conduct, I do not see on what basis I could award a royalty
to the
Plaintiff as though I were penalizing the Defendant for something.
For no reason given, no proof of loss or damages incurred
by the
Plaintiff as a consequence of the Defendant’s sale of its products
has been demonstrated. In any event, were I wrong
to have dismissed
Plaintiff’s claim on the basis stated above, I would clearly not
be persuaded that the Plaintiff would be entitled
to anything more
than the 5% royalty of the net sales which was apparently agreed
upon.
However, my views
with regard to what the percentage of royalty is reasonable or not
are irrelevant in the light of my finding that
the Plaintiff has
failed to make out a case for the relief sought. In the
circumstances, the Plaintiff’s entire claim is dismissed
with
costs.
__________________________________________
NTSEBEZA
AJ
Dates
of Hearing: 11, 12, 13 October 2005
Date
of Judgment: 13 March 2007
For
the Plaintiff:
ADV R MICHAU
Instructed
by: Spoor & Fisher
PRETORIA
c/o Edward
Nathan Sonnenberg
CAPE
TOWN
For
the Defendant:
ADV J NEWDIGATE SC
Instructed
by: Fairbridge Arderne & Lawton
CAPE TOWN
1
See:
Particulars of Claim, p 13
2
In
para 2 (
supra
)
3
In
para 5 (
supra
)
4
The
court takes judicial notice that this black African legend in the
Proteas team has become internationally known as one of the
most
exciting fast bowlers and is destined, on current form, to break
many international records for a record number of test cricket
wickets that he is capable of taking.
5
The
indefatigable African-American
6
Harms
JA, commented as follows in fn 2 of
Die
Bergkelder Bpk v Vredendaal Koöpwynmakery and Others
[2006] ZASCA 5
;
2006 (4) SA 275
(SCA) at 279
[3]
n 2, also lamenting this
unacceptable tardiness in trademark registration. The footnote
says:
“
This
Court has in the past bemoaned the lackadaisical approach to trade
mark applications, giving parties inordinate periods of
time to get
their house in order. The following
dictum
by Jacob LJ in
Bograin
SA’s Trade Mark Application
[2004] EWCA Civ 1690
;
[2005] RPC 14
in para [30] is apposite: ‘The Registry is entitled
to be firmer with this sort of thing; it should have regard to the
public
interest in disposing of applications one way or another.
One must never forget that a pending application for an intellectual
property right hangs over the public at large. A pending
application, even if ultimately refused, may act as a real
commercial
deterrent while it “pends”. It is not fair on the
public to allow the applicant to string things out.’
7
Both
of these items were handed in as Exhibits “D” and “E”
respectively.
8
Abott
Laboratories and Others v UAP Crop Care (Pty) Ltd and Others
1999 (3) SA 624
(C) at 634
9
Stellenbosch
Farmers Winery Ltd v Stellenvale Winery (Pty) Ltd
1957 (4) SA 234
(C) at 240
10
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 640G
11
Plascon-Evans
supra at 642E
12
Albion
Chemical Co Pty (Ltd) v FAM Products CC
2004 (6) SA 264
(C) at 269
13
Webster
and Page,
South
African Law of Trade Marks, Unlawful Competition, Company Names and
Trading Styles
,
4
th
ed, para 12.8.5
14
Adidas
Sportsschufabriken ADI Dassler KG v Harry Walt & Co (Pty) Ltd
1976
(1) SA 530
(T) at 535H
15
CPD,
26 January 2005, case no 4656/04
16
Adidas
Sportsschufabriken ADI Dassler KG v Harry Walt
,
supra
at 532A
17
1957
(4) SA 234
(C) at 240
18
1991
(4) SA 780
(T) at 788
19
1977
(3) SA 144
(T) at 151C
20
2001
(2) SA 941
(SCA) at 948 D