USE IT OR LOSE IT! CANCELLATION OF A REGISTERED TRADE MARK FOR NON-USE

A trade mark registration in South Africa gives the trade mark proprietor statutory rights in the mark registered.  These rights are governed by the provisions of our trade mark legislation and can be terminated on various grounds, including expiry of a trade mark registration for failure to renew the registration or cancellation of a trade mark registration due to non-use, in terms of Section 27(1)(b) of the Trade Marks Act, 193 of 1994 (hereinafter “the Act”).

Section 27(1)(b) of the Act provides that any ‘interested person’ may apply to have a trade mark registration cancelled on the ground that there was no bona fide (good faith) use of the trade mark for a continuous period of five years or more, from the date of issue of the registration certificate. The effect of this provision is that a trade mark registration is not vulnerable to cancellation, for non-use, within the first 5 years after issue of the registration certificate. This period is, therefore, often referred to as the honeymoon period by trade mark attorneys.  However, after the honeymoon period, trade mark proprietors need to be aware that a trade mark registration is vulnerable to cancellation for non-use.

In order to successfully defend a cancellation action, the trade mark proprietor is required to show that the registered mark was indeed used in the relevant 5 year period.  However, the alleged use must be in relation to the goods or services for which the trade mark is registered and, in addition, the use must constitute bona fide use.

In a recent judgment, Westminster Tobacco Co v Philip Morris Products SA (925/2015) [2017] ZASCA 10 (16 March 2017), the Supreme Court of Appeal (SCA) commented on what constitutes bona fide use, for the purposes of Section 27(1)(b) of Act.  The crux of the case turned on whether Westminster Tobacco Co (“WTC”), the registered proprietor of two PARLIAMENT trade mark registrations, made use of its mark, in good faith, during the relevant 5 year period.  If not, it was liable to lose its registrations because its competitor (Philip Morris Products SA, “PMI”) had applied for cancellation of its registrations on the basis of non-use, in terms of Section 27(1)(b) of the Act.

The facts of the case are uncomplicated.  WTC registered the trade mark PARLIAMENT in South Africa in relation to, essentially, cigarettes.  PMI, however, uses the trade mark PARLIAMENT internationally in respect of one of its premier brands of cigarettes.  PMI could, therefore, not register or use the mark PARLIAMENT in South Africa, in relation to cigarettes, due to WTC’s earlier trade mark registration in South Africa.  PMI, accordingly, sought to cancel WTC’s registration, on the basis that the PARLIAMENT mark was allegedly not used in good faith, by WTC, for a continuous period of 5 years, from the date of issue of the registration certificates.

In light of the above, PMI filed a cancellation application in the High Court on the basis of Section 27(1)(b) of the Act.  The onus to prove bona fide use rested upon WTC, in terms of s 27(3) of the Act. In defending the application, WTC alleged and was able to show that it had indeed used its PARLIAMENT mark in the relevant 5 year period.  PMI, on the other hand, acknowledged that the mark was used in relation to cigarettes, but contested that the use was in good faith because, on WTC’s own version, the mark PARLIAMENT was aimed at protecting the PARLIAMENT trade mark, disrupting WTC’s competitors in the low-price cigarette market and at protecting WTC’s premium cigarette brand PETER STUYVESANT.

The High Court found that bona fide use means that a mark must be used on goods solely with the object of promoting trade in those goods and that use for an ulterior purpose, such as disrupting the business of a competitor, or protecting the trade mark proprietor’s trade in other goods, does not constitute bona fide use. PMI was, accordingly successful in the High Court and, in turn, WTC appealed the decision to the SCA.

In the appeal judgment, the SCA had regard to its own 2005 judgment in A M Moolla Group Ltd and Others v The Gap Inc and Others 2005 (6) SA 568 (SCA) and the international case of Ansul BV v Ajax randbeveiliging BV 2003 (RPC) C-40/01, in the European Court of Justice. The SCA found that the enquiry into bona fide use is a factual enquiry and required:

  1. use of the registered trade mark in relation to goods or services of the type in respect of which the mark is registered;
  1. use of the registered trade mark as a trade mark, for the commercial purposes that the trade mark registration exists to protect; and
  1. use of the registered trade mark in the course of trade and for the purpose of establishing, creating or promoting trade in the goods or services in relation to which the mark is used.

The court indicated that the use does not have to be extensive, but that it must be genuine and not merely as a token.  In other words, the use must not be solely to preserve the rights conferred by the mark, but must be consistent with the essential function of a trade mark, which is to sufficiently distinguish the goods in relation to which it is used from other goods, which have a different origin.

In addition to the above, the court also found and that it is irrelevant if the use is motivated by the fear of removal from the register or protecting the proprietor’s trade generally or even from preventing the mark from falling into the hands of a competitor, as long as the use is bona fide and genuine and principally directed at promoting trade in goods bearing the mark.  The court, however, cautioned that it is not permissible to use the mark for an ulterior purpose, not associated with a genuine intention of pursuing the object for which the Act allows the registration of a trade mark and protects its use.

In the appeal case, PMI’s argument turned on the allegation that, on the evidence presented by WTC, it was evident that the intention for launching the PARLIAMENT brand in South Africa was based on three objectives, other than the launch itself, namely, to protect the trade mark registrations, to test the commercial viability of a low price offer in the cigarette market and finally, to gain insight into the low price segment of the cigarette market. PMI, therefore, argued that there was no desire or objective on the part of WTC to build up any commercial long term sales strategy in its PARLIAMENT cigarettes and the objectives of WTC for using the mark were counter to the functions of a trade mark as defined in the Act. It, accordingly, alleged that the nature of the use, as testified to by  WTC’s main witness, did not constitute use as a trade mark for the purposes for which trade marks are afforded statutory protection and was, therefore, not bona fide use.

WTC countered the allegations of PMI with evidence that the introduction of the PARLIAMENT brand of cigarettes was for several reasons, including dealing with low priced cigarettes.  WTC also argued that its use of the mark was for commercial reasons and that the launch of the PARLIAMENT mark in small towns was geared to investigate and learn how the brand would be received by consumers and was also aimed at disrupting the sales of low priced cigarettes by its competitors.  WTC further disclosed that the implementation of the PARLIAMENT brand was purposely conservative so as not to harm its premium cigarette brand PETER STUYVASENT.

In making a determination as to whether WTC’s use of the mark was bona fide and genuine, the court applied the test set out above. The SCA found that, in the circumstances, the use of the mark PARLIAMENT was bona fide because it was affixed by WTC to goods covered by its registration, i.e. cigarettes, for the purpose of identifying the source from which the goods were derived and distinguished it from its competitors.   The Court also found that there was a commercial purpose in WTC providing different offerings aimed at different sectors of the market and pricing them differently. Accordingly, the court expressed the view that because WTC’s strategy for the PARLIAMENT brand of cigarettes precluded a full-blooded launch of a competing product in the low price segment did not mean that the launch was not genuine.

In light of the above, WTC successfully defended the application for cancellation of its marks on the basis that it, in fact, did use its trade marks in good faith and that the use was genuine.  Although it was not relevant to the SCA case, it is worth knowing that in addition to using a trade mark, trade mark proprietors may also prevent losing a trade mark registration, for failure to use the registration, by associating related trade marks (that are in use).  However, associating trade marks places some limitations on how the associated trade marks may be dealt with.  It is, therefore, important to take a considered approach when dealing with registered trade marks and to bear in mind that when it comes to registered trade marks, beware to use it or you may lose it!

By Jameel Hamid | Associate

 

GERARD DU PLESSIS

Partner & Firm Chairman
Trade Mark Attorney

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