South Africa: Recent Zambian Supreme Court Ruling Demands That Business Takes A Closer Look At Trade Marks

Last Updated: 5 July 2012
Article by Donvay Wegierski

A recent ruling by the Supreme Court in Zambia may have serious consequences for business. Up to now it has been possible to rely on an unregistered trade mark in trade mark oppositions in Zambia as provided by common law by demonstrating repute and goodwill in the mark as a consequence of use. Following the 23 April 2012 ruling, however, a business will no longer be able to rely on common law rights in trade mark opposition proceedings. In essence, there is nothing – or very little – stopping a competitor from registering an identical or confusingly similar trade mark to an unregistered trade mark in Zambia.

Even more worrying is that the likelihood of other African states following the Zambian court's interpretation cannot be excluded.

Common law

In South Africa, unregistered trade marks enjoy a measure of protection under section 10 (15) of the South African Trade Marks Act 193 of 1994 ("Trade Marks Act 1994") making provision for an applicant of a pending application to oppose the registration of a latter filed trade mark. Trade mark opposition proceedings pursuant to section 10 (15) may be contemplated when "a mark which is identical to a mark which is the subject of an earlier application by a different person, or so similar thereto that the use thereof in relation to goods or services in respect of which it is sought to be registered and which are the same as or similar to the goods or services in respect of which the earlier application is made, would be likely to deceive or cause confusion, unless the person making the earlier application consents to the registration of the mark".

The onus of proof is somewhat similar to establishing a passing off, a common law action which may succeed where it can be shown that a party "intentionally or negligently misrepresents that his goods or services are those of another or are associated with those of another and the public is likely to be confused into believing that such goods or services are those of the plaintiff or are connected with them".

A similar situation prevails in the United Kingdom. Section 11 of the erstwhile UK Trade Marks Act, 1938 and section 3(3) of the UK Trade Marks Act 1994, also recognise repute and goodwill associated with a prior unregistered mark as grounds for trade mark oppositions.

In Zambia, another former British colony, a likeness to section 11 of the UK Trade Marks Act can be found in section 16 of the Trade Marks Act Cap 401 of The laws of Zambia and regulations ("Zambian Trade Marks Act"). According to this section, "It shall not be lawful to register a trade mark or part of a trade mark any matter the use of which would, by reason of its being likely to deceive or cause confusion or otherwise, be disentitled to protection in a court of justice or would be contrary to law or morality, or any scandalous design".

Proprietors of unregistered marks in Zambia have to date relied on the Zambian Trade Marks Act as a basis for trade mark opposition and cancellation proceedings. In so doing it has been accepted that section 16 of the Zambian Trade Marks Act provides grounds for an opposition.

On 23 April 2012, however, the Zambian Supreme Court handed down its ruling dealing with an appeal in the trade mark opposition matter of DH Brothers (Pty) Limited v Olewine Industries (Pty) Limited.

It held that section 16 of the Zambian Trade Marks Act does not in fact make provision for the proprietor of an unregistered mark to oppose a latter trade mark application.

No legal provision for protection of unregistered marks

The Supreme Court stated that section 16 cannot be read in isolation from other related provisions. It considered section 16 in the context of section 17(1), in particular. This section provides that "Subject to the provisions of subsection (2), no trade mark shall be registered in respect of any goods or description of goods that is identical with a trade mark belonging to a different proprietor and already on the register in respect of the same goods or description of goods, or that so nearly resembles such a trade mark as to be likely to deceive or cause confusion".

The Supreme Court went on to say that the purpose of the Zambian Trade Mark Act is defined in the Preamble of the Zambian Trade Marks Act referring to "the registration of trade marks". Accordingly the Supreme Court ruled that sections 16 and 17 of the Zambian Trade Marks Act confer rights in respect of registered marks only.

Persons conducting business in Zambia should be concerned as this judgment has removed the possible reliance on common law rights in trade mark oppositions in Zambia. Consequently the proprietor of an unregistered mark is unable to prevent a competitor from registering a trade mark that is identical or confusingly similar to its unregistered trade mark in Zambia.

Proprietors of unregistered marks would be well advised to apply for the registration of their trade marks to prevent any competitors from doing so.

Background to the ruling

The Supreme Court's ruling emanates from the Registrar of Zambian Trade Marks March 2009 decision in the trade mark opposition by DH Brothers (Pty) Limited, South Africa against Olewine Industries (Pty) Limited, Zimbabwe.

DH Brothers contended that Olewine's trade mark application DAILY was a reproduction in whole or in part or an imitation of its DAILY trade mark and therefore similar and consequently likely to deceive or confuse the consuming public.

In its Notice of Opposition, DH Brothers provided extensive evidence establishing prior user rights, a strong reputation and goodwill associated with its unregistered mark DAILY used in respect of laundry soap in Zambia since at least 2003. Class 3 is therefore the relevant class of goods.

The opposed trade mark application for DAILY had been filed in class 3 in respect of "Bleaching preparations and other substances for laundry use; cleaning; polishing; scouring and abrasive preparations; soaps; perfumery; essential oils; cosmetics; hair lotions". In its answering affidavit Olewine had further demonstrated that its DAILY mark had been used for personal toiletries in Zambia since at least 1997.

Both the unregistered mark and opposed application as well as the relevant class of goods were identical. The Registrar of Trade Marks could not, however, disregard Olewine's invoice demonstrating that it had exported its DAILY product to Zambia since at least 1997. This refuted DH Brothers' allegation that Olewine's use of the DAILY MARK was not bona fide.

Although the Registrar agreed that DH Brothers had established the necessary goodwill and reputation through use of its mark DAILY in Zambia, it held that the interpretation of section 16 of the Zambian Trade Marks Act did not afford a proprietor of an unregistered mark the basis on which to prevent registration of a trade mark.

The recent Supreme Court ruling supports this view. This contentious decision raises the question whether or not any other African states will follow the Zambian court's interpretation and in so doing, disregard the protection of unregistered trade marks in trade mark oppositions. This warrants a closer look at economic and trade mark trends in Africa.

Africa at a glance

The majority of Africans live below the poverty line. The high unemployment rate, poor education and inability to access proper health care and medication remain a problem. Africa is also notorious for corruption and autocratic governance.

Problems do, however, present opportunity. In recent years Africa has seen an upsurge in the utilisation of technology with an estimated 600 million Africans owning mobile phones and at least 10 percent of these users having access to mobile Internet services. Better access to anti retrovirals means that the incidence of new infections of HIV is dropping, allowing companies to retain trained workers for longer.

Ernst & Young surveys conducted in 2011 indicate that foreign direct investment (FDI) into Africa over the past decade has increased by over 87 percent. The surveys further show that countries attracting around 70 percent of the new FDI projects between 2003 and 2010 include Ghana, Libya, Kenya, Angola, Nigeria, Tunisia, Algeria, Morocco, Egypt and South Africa.

This is not surprising since, according to The Economist, Africa is said to have half of the world's gold reserves and a third of the world's diamonds, not to mention copper, coltan and a range of natural minerals and metals. Interestingly enough, The Economist also notes that the retail sector and Africa's growing interest in retail goods is on the increase, with retail chains such as Marks and Spencer doubling their projects in Africa in the last three years.

Economic forecasts show Angola and the Democratic Republic of Congo as two African countries where the mining and quarrying sectors continue to show an upward trend in Gross Domestic Product since 2008. Agriculture, forestry, fishing and hunting are becomingly increasingly important in Sierra Leone as well as the Democratic Republic of Congo. Tanzania shows some of the greatest growth in its GDP in the wholesale, retail, hotel and restaurant trade since 2008 to date.

Business development encourages growth and competition. This can give rise to opportunistic competition and consequently the unauthorised use of trade marks.

Trade marks in Africa

With a few exceptions, African countries adopt the World Intellectual Property Organisation (WIPO) International Classification of goods and services. Trade mark registration is therefore possible in up to 45 different classes depending on the relevant goods or services.

Not all trade mark registries in Africa are electronic and up to date, and time frames for registering trade marks differ from country to country. Some take a few months and others a few years.

Delays in securing registration should not defer businesses wishing to expand into Africa from protecting their trade marks. As business interests increase in Africa, so too does the need to register trade marks. Trade mark registration should be high on the agenda of companies moving into Southern African Development countries, namely Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, South Africa, Seychelles, Tanzania, Zambia and Zimbabwe.

Another priority country for trade mark registrations is Nigeria, one of Africa's largest exporters of crude oil and source of natural mineral resources.

When conducting business in Nigeria, it is important to consider that every food and drink product (including wines, spirits and liqueurs) imported, exported, manufactured and distributed in Nigeria is required to be registered by the National Agency for Food and Drug Administration and Control ("NAFDAC").

One of the requirements to secure NAFDAC approval is proof of a Nigerian trade mark application or registration. While a local representative is required to make a NAFDAC application, it is paramount for trade mark owners to ensure that the trade mark owner – and not a proxy – applies for and registers the trade mark.

Akin to the European Union's Community Trade Mark (CTM) which covers all 27 member countries, it possible to register an AIPO or OAPI trade mark, with one trade mark registration covering the following 16 African French-speaking countries: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Ivory Coast, Mali, Mauritania, Niger, Senegal and Togo. OAPI is a depository system and it can take between 12 and 18 months to secure registration. An OAPI registration is therefore an attractive option for those wanting to protect their trade mark in West Africa proving to be both time and cost efficient.

Conclusion

Until relatively recently, economic growth in many African countries has been slow, not necessarily warranting attention to trade marks. That is changing fast. As economic growth picks up speed, African consumers' purchasing power is rising – and so is their interest in branded goods and services. This in turn encourages competition, including opportunistic competition targeting well-established brands that may lack only one thing – trade mark protection.

The latest Zambian Supreme Court decision illustrates the importance of trade mark registration and reiterates the need for thorough intellectual property due diligence checks when entering transactions. Unfortunately, while searches of the relevant trade mark registers are recommended there are often inordinate delays in attaining the information and the searches might not yield reliable results, owing to the lack of automation or up-to-date data in the registries of some countries. For this reason, it is recommended that all intellectual property known to the parties also be accounted for during negotiations and specified in agreements.

Against the backdrop of the Supreme Court's decision in Zambia, and the rapid economic change in many African countries, unregistered trade marks have never been more vulnerable than now.

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.

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