SWARTLAND – A Double Agent
16/05/2011

The case of Groupe LFE (SA) (Pty) Limited v Swartland Winery Limited (467/2009) turned on whether “Swartland” is the name of a wine growing area in the Western Cape, a trade mark under which the Respondent sells its wine (grown in the same area), or, surprisingly, both.

The Swartland Winery was established as a co-operative in what was then the Malmesbury Wine of Origin District in the Western Cape in 1948. This district, which underwent a name change to “Swartland” in 1975, now has its own wine route, spanning Malmesbury, Piketberg, Porterville, Riebeek Kasteel and Riebeek West. It boasts many reputable wineries including Riebeek Cellars, Kloovenburg, Allesverloren, Darling Cellars and Pulpit Rock, to name but a few.

The name “Swartland” therefore has a dual role – both as a designated Wine of Origin district, and a brand name of Swartland Winery. It was this role as a “double agent” which led to the dispute between Group LFE, a Dutch importer of South African Wines to the EU, which used “Swartland” both as a mark and as a geographical indication on wines, and trade mark owner, Swartland Winery.

The Groupe LFE case, handed down by Harms DP for the Supreme Court of Appeal on 4 March 2011, represents a culmination of cases regarding both “trade mark use” and marks consisting of geographical indications. Swartland Winery had been successful in the court à quo in proving infringement of its trade mark registration no. 2004/22804 SWARTLAND in class 33 for goods inclusive of wine against Group LFE, and Group LFE took the matter on appeal on two main grounds (of present relevance).

The first of these was its counter-application for cancellation of the SWARTLAND registration in terms of s10(2)(a) of the Trade Marks Act 194 of 1993 (“the Act”) on the basis that it consisted exclusively of a geographical indication for wine. Secondly, in the event that the validity of the SWARTLAND mark was upheld, Groupe LFE argued that its use of “Swartland” was exempt from infringement in terms of section 34(2)(b) of the Act, as it amounted to a bona fide description of the geographical origin of its goods.

Harms DP acknowledged at the outset that “Swartland” constitutes a recognised “district” in terms of the Wine of Origin (“WO”) Scheme under the Liquor Products Act. The WO Scheme demarcates wine producing areas into larger geographical units, and in turn increasingly small regions, districts and wards, based on common characteristics such as soil type and climate, including wind and rainfall patterns that impact on the characteristics of wines produced in these areas. In essence, “Swartland” is a term describing the characteristics of wines produced in a designated area by virtue of their geographical origin. One would have thought such a scenario would spell disaster for the longevity of the SWARTLAND registration – but perhaps not?

The judgment first addresses the issue of infringement prior to determining the validity of the SWARTLAND registration. Followers of Harms DP’s decisions on trade mark matters over the last few years will recall that the question as to whether use of a mark ought to be use of a particular kind before infringement can occur was first decided in Verimark (Pty) Ltd v BMW AG 2007 (6) SA 263 (SCA) following an allusion to this issue in footnote 15 of Die Bergkelder Bpk v Vredendal Koop Wynmakery 2006 (4) SA 275 (SCA) with reference to English law.

It was held in the Verimark case that as the purpose of a trade mark is to act as a “source identifier”, guaranteeing the origin of goods or services, for unauthorised use to amount to infringement, it must mimic the true function of a trade mark, and must itself purport to be a “badge of origin”. Mere incidental or background use was found not to refer to the source of the goods in question, and not amount to trade mark use - and by extension, infringement.

Non-trade mark use, otherwise referred to as “descriptive use”, which amounts to a bona fide description of characteristics of goods or services (inclusive of their geographical origin), which is consistent with fair practise, is exempt from infringement under section 34(2)(b) of the Act. Groupe LFE’s case was that its use of “Swartland” fell within this exception. It argued that its wines were “no-name brands” sold under a description of their geographical origin.

This argument was rejected on the facts. “Swartland” appeared prominently on the neck of Groupe LFE’s bottle, and was repeated in large script on the main label along with the phrase “Swartland Private Bin Wines”. In addition, the bottle featured a gold medallion sticker indicating that the wine was “Wine of Origin Swartland”. There was also a second variation of Groupe LFE’s wine bottle with minor variations. It was found on balance that the labeling conveyed that “Swartland” was both the trade mark and production area, and that Groupe LFE was not only using the place name “Swartland” in a bona fide manner as an indication of geographical origin.

It is clear that in this instance, Groupe LFE’s use of “Swartland” could not have been dismissed as descriptive use. In the circumstances, it was found that Groupe LFE had infringed the SWARTLAND registration, assuming the registration remained valid. As indicated above, Groupe LFE sought to cancel the SWARTLAND registration on two alternate grounds. The first of these was based on section 10(2)(b) of the Act which states that marks which are not registerable as trade marks, or marks, if registered, are liable to removal from the register include those,
“[which consist] exclusively of a sign or an indication which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin or other characteristics of the goods or services, or the mode or time of production of the goods or of rendering of the services [my emphasis]”.
The test as to whether a trade mark which is also a place name falls within the ambit of section 10(2)(b) was stated in Century City Property Services CC v Century City Property Owners’ Association 2010 (3) SA 1 (SCA), to be whether the geographical area was known for the production of the goods or rendering of the services in question.

Thus no individual proprietor would be entitled to exclusivity for the mark LONDON for gin, gin having been produced in London for centuries. BLOEMFONTEIN for gin would, however, be a permissible registration. On the other hand, GORDON’S LONDON GIN (which does not consist exclusively of an indication of geographical origin) would not be hit by section 10(2)(b).

In this context it is clear (as is acknowledged in the judgment) that the mark SWARTLAND for wine would be a classic example of a registration liable to be removed from register in terms of section 10(2)(b). However, there is a proviso to section 10 of the Act. Marks liable to be removed from register in terms of section 10 may be exempt, if at the date of application for removal, they have become “capable of distinguishing within the meaning of section 9 as a result of use made of the mark”.

The Western Cape High Court, per Bozalek J, found that SWARTLAND was exempt from cancellation under this proviso. The Supreme Court of Appeal upheld this decision, stating that, for decades, Swartland Winery had sold wines under the trade mark SWARTLAND (in sizable quantities), and that no other wine had been sold under such mark. “SWARTLAND” as a trade mark was accordingly found to be distinctive of the wines of Swartland Winery, and its validity was confirmed. The appeal was dismissed with costs.

The judgment clarifies some topical issues in trade mark law. The first of these is that the selfsame term may be used on the one hand as a “badge of origin” or “source identifier” (amounting to trade mark use) and, simultaneously, be used purely descriptively. Only trade mark use may infringe and, as a corollary, only purely descriptive use may be exempt from infringement in terms of section 34(2) of the Act.

Over a decade ago, faced with the question of distinctiveness of the term “Liquorice Allsorts” in Cadbury (Pty) Ltd v Beacon Sweets and Chocolates (Pty) Ltd 2000 (2) (SA 771 (SCA), Harms JA (as he then was) posed the now oft-quoted question as to whether “Liquorice Allsorts’ is the name of … a type of confectionery…or whether it is the name of Beacon’s product”. It was not then contemplated that the same word could refer to a characteristic of a product (its kind, and geographical indication both serving as examples), as well as a brand name.

The Groupe LFE case traverses this boundary by recognising this dual trade mark and descriptive function in the name “Swartland”. Will this double role be permitted in relation only to geographical indicators as characteristics of goods and services, or will it be recognised more broadly in future? While the decision leaves this as a logical possibility, to be determined on the facts of each case, it is expected that such double role may be more easily recognised in relation to geographical indicators than other characteristics of goods and services.

Jessica Axelson
Senior Associate
jessica-a@adamsadams.co.za