Cape
Horn is a rugged headland that lies at the southernmost point of Terra de Fuego,
an archipelago at the very tip of South America. It is notoriously difficult to
navigate, with unpredictable weather, high seas, strong winds and turbulent
conditions. It is where the Atlantic and Pacific oceans meet and it took a Dutchman
Jacob Le Maire to first circumnavigate this cape in 1616. Fast forward 400 odd
years and we have a case report of a South African judge navigating the
turbulent waters of a trade mark dispute between a licensor and its former licensee
involving the brands PACIFIC and ATLANTIC for cigarettes. Can these trade marks mix in the marketplace, was the essential question.
Judge
Hughes of the Gauteng Division of the High Court was called upon to decide whether
Carnilinx (PTY) Ltd, a former licensee of Open Horizon Ltd’s PACIFIC trade
marks (whose license had been terminated for selling counterfeit PACIFIC BLUE cigarettes!),
was infringing those trade marks through the use of the mark ATLANTIC. Illustrations
of the marks in use are helpfully inserted in the judgment.
The
application was launched claiming infringement under Section 34(1)(a) of the South
Africa Trade Marks Act 194 of 1994. This section is the identical/similar mark,
identical goods infringement provision. It was trite that the goods, namely the
sale of cigarettes, were identical and so what lay before the court was to
decide whether the use of ATLANTIC infringed one of more of the PACIFIC trade
marks owned by Open Horizon. Although there are a number of trade marks to
consider, the essential question was whether ATLANTIC was a similar mark to
PACIFIC. Not surprisingly, Judge Hughes,
in a well-reasoned judgment, decided that they were not, noting in the process
that a number of trade marks co-exit in the marketplace and on the register
with “ocean/sea/water” type themes.
The
interesting aspect of this case is not so much the decision – few would argue
that the marks are too similar (except of course if this was your former licensee
who had built up trading goodwill using your brand only to switch it to something
arguably similar after selling counterfeit products of your own brand) – but the
lessons for licensors.
In
the decision, there is reference to a standard clause in a license agreement requiring
the licensee not to impair any right, title and interest in the intellectual property:
‘Title to the Intellectual
Property
5 1 The Licensee agrees that all right, title and internet in and to the
Intellectual Property vests in the Proprietor and that it shall have no claim
in and to the Intellectual Property.
5.2 The Licensee may not during or after termination or cancellation of
this agreement:
5.2.1 dispute the validity or enforceability of these rights or the
Patents;
5.2.2 do anything that contests; or
5.2.2 in any way impairs, any part of that right and title and interest
of any of the intellectual property rights which may be the subject of this
Agreement and will not direct or assist any other person to do so.’
Now
knowing the outcome, the question is how this clause could have been strengthened
to avoid such a situation. The good about this clause is that it contemplates that it would survive the
termination of the agreement but it would have been better (for the licensor)
had it also prohibited the use of marks that contained, for example, “ocean-like
connotations” and made it clearer that it did survive termination of the agreement. Hindsight is an exact science but it does illustrate that care
should be taken when considering standard clauses and adapting them to one’s brand.
Too often short thrift is given to these clauses by licensors.
The
second lesson of this case lies in the attempt by Open Horizon to introduce a claim
for unlawful competition at the very last moment. The argument is contained in
para 41 of the decision:
‘Bearing in mind the history of this matter
and the fact that the Respondent was previously licensed by the Applicant and
its predecessor-in-title, STIP, there can be no doubt that the only plausible
explanation is that the Respondent deliberately adopted its confusingly similar
ATLANTIC marks and get-ups in order to imitate the Applicant’s successful
PACIFIC range of products, thereby obtaining a springboard advantage and taking
unfair advantage of the Applicant’s fruits and labours. The Respondent is also
unlawfully interfering with the Applicant’s exclusive rights in its
PACIFIC trade marks and PACIFIC get-ups.’
This
argument was not determined by the judge because it was relied on only after
pleadings had closed but, in my opinion, is a stronger argument than S34(1)(a) trade
mark infringement, especially as the optics do favour the licensor. However, it would have likely required
considerably stronger papers to have had any chance of being successful (it is not a slam dunk by an means) and
hence would have been more costly to bring. It is telling that the judge simply
dismissed it on grounds that it was out of time and did not express a finding
on the merits of it at all. This can signal that there is something in the argument.