South Africa: Diluting Dilution

Last Updated: 28 August 2014
Article by Manisha Bugwandeen-Doorasamy

Most Read Contributor in South Africa, September 2016

The trade mark laws of the world are, by and large, fairly well harmonised, or at least well on their way to becoming so. Which makes perfect sense in an era where multinational companies operate in a global village – a multinational should ideally get the same protection for its brand in all the countries where it operates.

It is for this reason that South African trade mark law offers the same sort of protection to trade mark owners that many other countries offer. First, it offers protection against consumer confusion, in other words a situation where the trade mark owner finds that a competitor has a similar trade mark, and consumers are confused about who the products come from. Second, it offers protection against what is loosely referred to as 'dilution'. What this means is that the owner of a trade mark that is well known will have recourse if it finds that a third party (not necessarily a competitor) has a similar trade mark in circumstances where, even though there is no consumer confusion, other detrimental things happen. For example, an erosion of the distinctiveness of the well-known trade mark (sometimes referred to as 'blurring'). Or a tarnishing of the reputation of the well-known trade mark.

It is the second form of protection that concerns us here. A recent US Trademark Office decision involving Chanel shows how it can work. A simple little case this: a Canadian individual applied to register the trade mark Chanel for real estate development services; Chanel opposed the application claiming that it had registrations and rights in respect of a wide range of goods including perfumes, jewellery, handbags, sunglasses and retail services; and Chanel claimed that the real estate trade mark would blur its well-known trade mark.

Chanel filed a lot of evidence in support of its opposition. Its evidence showed that the company was founded by Coco Chanel, that the brand has been around for at least 90 years (the famous little black dress goes all the way back to 1926), and that it's extremely well known in the USA. It showed that the company monitors things very closely and that it's made a concerted effort to ensure that it has exclusivity in the name Chanel in all product areas. And it showed that the Canadian has made a habit of using famous names like Givenchy, Cartier, Versace and Dior for units in his buildings.

The tribunal made the point that distinctiveness and fame are not the same thing, that fame is hard to prove, and that to succeed the trade mark owner must show that if 'the general public encounters the mark in almost any context, it associates the term, at least initially, with the mark owner.' It emphasized that in dilution cases a company does not need to prove confusion, competition or actual economic injury - what it does need to establish is an association that 'impairs the distinctiveness of the famous mark.' It said that courts will consider various issues in cases like this, including the degree of inherent distinctiveness of the famous trade mark, and the extent to which it is used exclusively by the owner. It held that Chanel is a household name in the USA. And it held that there was dilution because a substantial number of people seeing Chanel in relation to real estate would be reminded of the fashion trade mark, even if they didn't believe there was a connection.

Short and sweet. A bit like a UK case where Ford opposed an application to register a trade mark comprising the word 'Fraud' in a logo form that looked remarkably similar to the Ford logo. The opposition was based on dilution and the hearing officer made very short work of it. He accepted that Ford had the necessary reputation. He had no problem with the argument that the public would make a link between the two brands, even if they weren't confused. And he accepted that, because the word 'fraud' has negative connotations, the Ford trade mark would be tarnished.

Again nice and easy. But don't expect the same in South Africa. That because in the famous tarnishing case of SAB v Laugh-It-Off (involving satirical t-shirts), the Constitutional Court introduced a further requirement - the need to prove a likelihood of economic loss. Something SAB was unable to do, because there was no proof that the t-shirt had affected the sales of Black Label beer in any way. And it's something that few companies will be able to do.  It's led to a situation where many believe that in South Africa trade mark dilution is dead in the water. Certainly retired judge and IP expert Louis Harms has voiced these concerns!

So, in South Africa we don't provide the protection against dilution that many other countries do. But on top of that, it's also arguable that we no longer provide the same level of protection against confusion that other countries do. The problem very simply is this: in cases where the likelihood of confusion is raised our courts seem to be interpreting trade mark rights in an increasingly restrictive way. We've had one case where, to the surprise of many, the Supreme Court of Appeal found that an inherently strong trade mark, Zonquasdrift, could co-exist for wine and wine grapes, because wine and wine grapes are not similar goods – the court applied tests that deal with things like the composition of the goods and the trade channels through which they're sold. We've had another case where a court held that the trade mark Due South could co-exist for various goods because the goods fell into different classes of the classification system, seemingly suggesting that the classification system pretty much determines the issue. In the Due South case the court also cited competition law as a reason for a restrictive interpretation of trade mark rights. It's a topic in its own right.

It's quite possible that the Chanel and Ford cases would have been determined differently in South Africa. Which suggests that, in an era of increasing harmonization, South Africa's acting in a way that's a bit unharmonious.

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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