A registered trade mark is a statutory right which is only obtained in South Africa through registration of that trade mark in terms of the Trade Marks Act, 1993. That registration is necessary for statutory protection of a trade mark* is the position generally in the world and, in numerous civil law countries, trade mark rights are gained only by registration so, if no trade mark application has been filed, the entity using that trade mark has no legally enforceable right to it at all. Given that the trade marks of certain businesses are among their most valuable assets, this is akin to leaving your money at the side of the road and hoping no-one picks it up!

In the common law countries – generally those that have legal systems derived from the English system – including South Africa, the position is not quite so dire because common law recognizes a type of trade mark right in an unregistered trade mark in the interest of protecting the public from fraud. In order to exercise this right, though, it falls to the right owner to prove that he has a substantial goodwill which is identified by the mark and that the conduct of the person perpetrating the fraud is likely to deceive consumers so that the fraudster is " passing off" his goods or services as those of, or connected to, the right owner. Discharging the burden of proof requires comprehensive evidence which renders such an action inevitably costly and the results are, at best, uncertain.

Therefore, in order to assert a right of property in a particular trade mark, as distinct from the overall goodwill of a business, it is essential that the trade mark be registered. The act of registration constitutes public notice that the mark is a trade mark and that the registered proprietor has the exclusive right to that trade mark. To enforce that right one only has to prove the registration, by means of the certificate, rather than having to prove the reputation (if there is one). A registered mark is enforceable even if it has never been used and there is no reputation at all.

While there is debate as to whether a registered trade mark right is in fact a right of property, there is no doubt that the Trade Mark statute recognizes this quasi-property right in registered trade marks. Specifically, a registered trade mark may be used to secure a debt, may be attached to found or confirm jurisdiction and will have a far greater value than an unregistered trade mark right simply because security of ownership

Amazingly the importance of registration is regularly overlooked by a range of people who should know better. One can understand it when small traders working from home, with no exposure to the larger commercial world or quality advice do not register through ignorance. Yet it is a sad fact that even large corporates, certain accountants who believe themselves to be qualified to value intellectual property (including trade marks) and numerous lawyers who do not understand trade mark law, routinely neglect the registration of marks. The resulting vulnerability does not come to the notice of the unwitting businessman until he needs to rely on his supposed "rights" and finds that he has none, or that he has based an entire structure on a non-existent foundation. I have seen elaborate tax structures, set up on the basis of a transferred trade mark rights and licenses back, involving millions, which are completely void because the trade marks were not registered and therefore were not capable of being transferred without the business.

The negative effects of non-registration extend even further to put the trade mark owner at a further disadvantage, even where he has succeeded in proving his common law rights and stopping the unlawful competitor, when it comes to recovering damages. One must prove one's damages in order to recover them. Generally, this is an extremely difficult task since a damage caused by confusion, sales one might have made, is by its very nature highly speculative. Accordingly it is almost impossible to show the degree to which the plaintiff business has actually been damaged by the passing off under the common law. Again in stark contrast to this, where a registered trade mark has been infringed, the Trade Marks Act provides for actual damages to be paid where these can be shown, or, alternatively, for a "reasonable royalty" to be paid. Quite clearly, establishing what would be a reasonable royalty in a particular industry for the use of a trade mark is a far easier undertaking than trying to show the actual impact of unlawful competition on a given business.

A South African registered trade mark is freely assignable from one party to another, either together with or separately from the business in which it may have been used. It is readily enforceable in most circumstances and can be used as the basis for a complaint in terms of the Counterfeit Goods Act in terms of which very powerful remedies, including criminal sanctions, are available to the right holder against counterfeiters. It should be valued and should appear on the balance sheet. Except for very well-known marks with an international reputation, none of this is true of a so-called "unregistered trade mark". In a modern business environment, therefore, it is tantamount to negligence for a company not to seek registration of its trade marks.

Wednesday, 21 December 2011

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.