Over the last decade or so litigation over ownership of the GAP
trade mark in South Africa has been a recurring event in the South
African courts. The latest tussle culminated in a judgment by the
Supreme Court Appeal (SCA) which has developed the way we think
about the concept of "trade mark use".
The appellant, The Gap Inc., carrying on business in San Francisco, California, had sought an order from the SCA reversing a decision by the High Court expunging its trade mark registration no. 1994/10423 GAP on the basis of non-use in terms of section 27 (1) (a) and (b) of the Trade Marks Act 194 of 1993 (the Act).
The relevant parts of section 27 read as follows:
(1) ...a registered trade mark may, on application to the court, ...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 either-
The application for expungement was issued on 5 March 2008 and,
as such, the relevant period during which the appellant had to
prove bona fide use of its trade mark was from 4 December 2002 to 4
December 2007. It argued that such use had been made during two
periods, namely August 2002 – May 2003 (the First Period)
and October 2007 to May 2008 (the Second Period).
In the High Court - the First Period
The evidence of use during this period was as follows: during or about October 2002 and following upon negotiations for a period of almost 6 months, GAP International BV (the Gap Inc.'s subsidiary and licensee of GAP trade marks) entered into a retailer license agreement with a South African distributor named Clicks. In terms of this agreement Clicks undertook to distribute GAP personal care products through its nationwide chain of stores. GAP products appeared in approximately 100 Clicks stores throughout South Africa and on 11 December 2002 the appellant issued an invoice for a total of 2200 units of the appellant's 'Sense' eau de toilette. However, between January and May 2003 Clicks sold only a total of 21 bottles of GAP personal care products.
Bona fide intention to use
In finding against the respondent on this aspect of the case the
High Court had regard, primarily, to an affidavit deposed to by its
chairman in 1999 (five years after the application for
registration of the trade mark in question) for purposes of
separate litigation at that time.
The following evidence was also considered:
- The Gap Inc. only took steps to sell class 3 products in South Africa after November 2001 when its attorney received a letter demanding that the trade mark be removed from the Trade Marks Register;
- It had commenced advertising and selling GAP personal care products elsewhere in the world in 1994, and between then and 2002 sold them mainly in the United States of America, Canada, the United Kingdom, France Germany and Japan as well as in a few other countries (although the class 3 trade mark was registered in 39 countries);
- During the period 1995 to 2001 it advertised its GAP class 3 products extensively throughout the world, at a cost from US$60 million in 1995 to US$422million. However, in South Africa there were no advertisements of GAP personal care products;
- There were no sales of products in South Africa either at the time of application for registration or at any time thereafter for a period of 8 years;
- No explanation was advanced for The Gap Inc.'s failure to use its trade mark in relation to personal care products in South Africa for a period of eight years.
These facts were found to be entirely consistent with the
absence of a bona fide intention to use the mark when applying for
its registration. The intention to enter the South African market
when it was considered commercially appropriate to do so was
therefore an 'uncertain and indeterminate possibility',
which fell short of what is required.
Was there any bona fide use of the mark?
The applicants contended that the facts fell short of
establishing that there was bona fide use of the GAP trade mark on
personal care items. They submitted that from the chronology,
particularly the letter of demand in November 2001 followed by the
sudden attempts in February and April 2002 to find distributors in
South Africa, the inadequate attempts to get goods into the
South African market, the failure to provide promotional materials
when requested, the limited number of personal care goods sold in
South Africa, and the sudden inexplicable cessation of sales by
Clicks, the inference was warranted that the sale of class 3
products by Clicks was not bona fide use of the trade mark. This
use, according to the argument, was simply for the purpose of
saving the mark, not for the purpose of facilitating and furthering
the trading in class 3 products.
The High Court agreed with the contention that the most natural and plausible inference was that the sale of goods to Clicks was done for an ulterior purpose based on the following -
- There was no explanation for The Gap Inc.'s failure to advertise or promote its GAP personal care products in South Africa after it decided to find a distributor for these products in South Africa in February 2002;
- Once it had entered into an agreement with a distributor, Clicks, in October 2002 there was an unexplained lack of urgency in providing the distributor with the point of sales materials it had requested;
- There was no evidence that The Gap Inc. had ever attempted to establish the cause of Clicks sudden loss of interest in continuing to sell GAP personal care products and to deal with the problem;
- There was no use of the trade mark from May 2003 until August 2007, and no explanation of the failure to do anything to market GAP personal care products during that period.
Interestingly, the High Court also found that the twenty-one
100ml bottles of personal care products proven to have been sold by
Clicks between January and May 2003 were 'a tiny number and an
insignificant volume' and therefore did not assist The Gap
The Second Period
With regard to this period The Gap Inc. purported to rely on
evidence of its efforts to appoint a local distributor for its
products, as evidence of bona fide use, as opposed to actual sales
of those products.
The evidence of its Vice-President and Deputy General Counsel was that in August 2007 the Chief Executive Officer of Stuttafords met with representatives of The Gap Inc. to place orders for GAP Apparel. During this meeting the Stuttafords representatives were also shown GAP body care products and this culminated in an order being placed in October 2007. A confirmation of this order being placed was attached to the affidavit of Stuttafords' Group Marketing and Merchandising Director, who also stated that she had discussed the issue of introducing GAP branded personal care items into Stuttafords in a meeting in New York with the Chief Executive Officer of Stuttafords on 14 August 2007. Following on various communications, she said, on 3 October 2007 Stuttafords placed an emailed order for 800 units of various body lotions. A copy of the purchase order (which was processed on 7 December 2007) was attached to her affidavit.
According to the argument the use by The Gap Inc. of its trade mark during the negotiations to extend the range of goods marketed by Stuttafords in South Africa to include personal care goods, including when The Gap Inc. executed the order for the goods and issued the purchase order describing the goods, constituted use of the GAP trade mark 'in other relation' to class 3 products. This was said to be in accordance with the provisions of sections 2 and 3 of the Act, namely that 'use' in relation to goods shall include use upon, in physical or other relation to such goods.
The evidence of 'use' within the extended meaning of the term was not disputed, but it was contended that the evidence did not support an inference that the use of the mark was bona fide, and therefore that on the facts set out it should be inferred that the use not bona fide.
The High Court dealt with the argument as follows -
In the SCA
Based on the above it appeared as if The Gap Inc.'s
prospects of success on appeal were minimal. However, the SCA took
the position that the dispute could be determined by leaving out of
the reckoning the evidence of use adduced in respect of the First
Period, but considering only the evidence in respect of the Second
It follows from this approach that the evidence concerning the surrounding circumstances, which was influential in the High Court, would necessarily be omitted from consideration as it relates to events occurring prior to the Second Period.
The SCA resolved that the question for it to answer was whether
the evidence established that there had in fact been bona fide use
of the trade mark in South Africa during the Second Period. The
question may be paraphrased as follows: does evidence of
negotiations taking place in New York, coupled with use on a single
email and an order form (which may not have been seen in South
Africa) amount to proof of bona fide trade mark use for purposes of
section 27 of the Act?
With regard to the negotiations in New York, the SCA stated that, "it is [...] somewhat artificial to suggest that if the negotiations were to have occurred within the borders of this country that would have constituted use, but where, as occurred here, the negotiations took place outside of our borders that cannot constitute use. What is of significance... is that the negotiations involved South Africans representing a South African company taking steps to use a South African trade mark in South Africa".
The SCA relied heavily on a High Court judgment in K-Mart (Pty) Ltd v K-Mart Corporation 13942/86 TPD 1987. In that case the respondent, carrying on business in the United States of America, led evidence that it had for many years had an active interest in establishing trading outlets and other business connections in South Africa. In promoting this interest it had extensively advertised its goods and services in magazines and periodicals which were distributed in South Africa. Copies of pages from numerous publications circulated in South Africa were annexed. It was not disputed that the goods advertised for sale in those publications were available, and could have been delivered in South Africa if anyone reacted to the advertisement. The Respondent had had discussions and corresponded over several years from 1978 to 1985 with Edgars Stores Limited thereby promoting and advertising its business services and goods. Price lists were also sent. The court held that this use of the trade mark was sufficient for purposes of defeating an expungement action based on non-use.
Although the facts were clearly different and the court's eventual finding was not based solely on the evidence of use during negotiations, the K-Mart judgment is authority for the proposition that use of a trade mark in South Africa during negotiations and other efforts aimed at introducing a business or goods into the market under a trade mark, but prior to actually placing any goods on the market or rendering services, may constitute trade mark use for purposes of section 27.
What is less clear is whether there is any legal precedent in South Africa for the SCA's position regarding the use of the GAP trade mark outside of South Africa. No precedent was cited. The finding therefore that it is an artificial distinction whether or not the alleged use takes place within the borders of South Africa constitutes a new development in our law.
If the evidence of use of the trade mark outside of the country, as well as the order form not established to have been seen in South Africa, was taken out of the equation all that would have been left is a single email.
The High Court in Wistyn Enterprises (Pty) Ltd v Levi Strauss & Co 1986 (4) SA 796 (T) at 816H held that, "...the extent of the use within the relevant period is not material to the question of bona fides except insofar as the extent of the use may afford guidance on the question whether its purpose was or was not that which would make the use bona fide...If the necessary object and intention were present, even use to a minor extent may defeat an application for expungement." Apparently this could mean that even a lone email may suffice in appropriate circumstances, although there may be room for application of the de minimis principle.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.