Diageo North America Inc and Another v DGB (Pty) Ltd

• Judge: Daniels J
• Judgment Date: 25 February 2004
• Docket Number: 6881/03
• Hearing Date: 25 February 2004
• Court: Transvaal Provincial Division

Daniels J:

The first applicant is the owner of all rights in and to the get-up of its vodka / lemon 'spirit cooler' beverages sold under the trade marks Smirnoff Ice and Smirnoff Spin. The second applicant is licensed by the first applicant to use the get-up and trade marks in

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South Africa in relation to these vodka/lemon 'spirit coolers'. The locus standi of the applicants is not disputed.

The respondent is DGB (Pty) Ltd which manufactures, bottles, markets and sells in South Africa a similar vodka/lemon 'spirit cooler' beverage. It sells this competing product under the name of Nordic Ice.

The applicants claim the following relief-

1

Interdicting and restraining the respondent from passing off its vodka cooler and any other alcoholic spirit product as that the applicants or as being connected in the course of trade with the applicants by using in regard thereto -

1.1

any get-up which is identical to the get-up used in relation the applicants' Smirnoff Ice and Smirnoff Spin products as illustrated in annexure 'UDV1' to the affidavit of Solace Kgomoco Tseliso ('the founding affidavit');

1.2

any get-up which is likely to deceive or cause confusion due to its similarity with the appearance of the get-up used in relation to the applicant's Smirnoff Ice and Smirnoff Spin products as illustrated in annexure 'UDVl' to the founding affidavit.

2

Interdicting and restraining the respondent from competing unlawfully with the applicants at common law by manufacturing, marketing and exhibiting for commercial purposes, offering for sale and or selling the Nordic Ice vodka spirit cooler product and any other alcoholic spirit product incorporating a get-up as illustrated and identified as annexure 'UDV32' to the founding affidavit.

3

Costs of the application.

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Daniels J

I understood from mr Bester who appears for the applicants, that they are not pursuing the relief originally sought in paragraphs 3 and 4 of the Notion of Motion. The relief there claimed was not referred to in his heads of argument, and he did not address me in regard thereto.

The first applicant first launched its Smirnoff Ice product in the United Kingdom in 1999 and thereafter in South Africa in April 2000. It is common cause that Smirnoff Ice acquired a substantial reputation within a relatively short period. It became the first ranked flavoured alcoholic beverage in South Africa in 2002, with sales in excess of 205 million units between April 2000 and February 2003. During the period September 2002 to March 2003 (after the launch of this application) sales in excess of 5 million units were allegedly made. Smirnoff Ice's major market share was amongst young adults, and then specifically young females. The applicants then sought to broaden their market to include a greater male and more adult market. Smirnoff Spin was conceptualised and developed after extensive and intensive market research through the period June 2002 to its launch on 14 October 2002 at a cost in excess of R3 million. It remained the intention to retain the 'essential and distinctive' features of the highly successful Smirnoff Ice product.

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According to the deponent to the applicants' founding affidavit Smirnoff Spin sold over 40 million units, and spent R8 million on pre-launch research and publicity and a further R7 million on post-launch publicity.

According to the respondent, and this appears to be common cause, rapid growth was experienced in the RTD ('Ready To Drink') market at the time when it was decided to replace Smirnoff Ice. There is some dispute as to whether there was going to be a complete withdrawal of Smirnoff Ice and a replacement with a similar beverage, or whether Smirnoff Ice would remain on the market alongside the new product. For the moment it does not matter. The fact is that the respondent was at the time looking for an opportunity to enter this obviously lucrative and expanding market. It had previously in September 2000 attempted to enter the market with a product called 'PO10C' (pronounced 'potency') but this was unsuccessful, and the product was withdrawn. The withdrawal of Smirnoff Ice presented the respondent with an opportunity to enter the market with a cloudy lemon-flavoured vodka product. The respondent had at that stage another product on the market called Nordic Ice. The respondent became the registered proprietor of the name 'Nordic Ice' in 1996 and in December of that year a product was launched under that trade mark. This was not, however, a RTD,

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but a natural fruit flavoured high alcohol vodka cocktail. This product did not even closely resemble the current Nordic Ice: not in appearance, get-up or presentation. It was sold in an elongate, pyramid shaped 500 ml bottle and served in 'tot' glasses as bracers or chasers, ie 'consumed from a small glass in a single motion'. The market targeted by that product was quite different from the market catered for by the vodka / lemon coolers such as are here under consideration. However that may be, it is the respondent's case that having identified the opportunity, it merely adapted its established Nordic Ice range of high alcohol (24%) vodka 'shooters' to a low alcohol (5%-6%) vodka / lemon spirit cooler with a get-up entirely different from the product it then had on the market.

The respondent launched its competing vodka/lemon 'spirit cooler' to its sales force on 5 October 2002 ie 9 days before the launch of the applicants' Smirnoff Spin vodka / lemon 'spirit cooler' and it was presented to the market within a couple of days thereafter.

The respondent apparently developed the get-up for its Nordic Ice 'spirit cooler' range during September 2002 and it was finalised by the second or third week of September 2002. It is common cause that there was no pre-launch publicity campaign for this Nordic Ice product and very little post-launch publicity.

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Daniels J

Counsel were agreed on the general principles governing passing-off. It is not required to say anything more on the subject. Counsel were similarly agreed upon the requirements which the applicants have to meet in pursuit of the relief claimed, those requirements being -

(i)

proof of a reputation ie that the get-up of the applicant has become distinctive in the sense that it is regarded by a substantial number of members of the public or in the trade as coming from a particular source;

(ii)

proof of a direct or indirect representation by the respondent, whether intentionally, negligently or even innocently made, that its product is that of the applicants or that it is at least associated with that of the applicants, and in order to determine whether the representation amounts to a passing off, the enquiry is whether the adoption and use of a get-up by the respondent so resembles the applicants' get-up as to be reasonably likely to confuse or deceive the members of the public into believing that the respondent's goods emanate from the applicants or that there is an association between such goods and the applicants' business;

(iii)

proof that the representation is or was made by the respondent to prospective customers or the ultimate consumers of those goods in the course of trade;

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(iv)

proof of a threat of actual or prospective damage to the applicants' reputation.

It is common cause that the applicants and the respondent target the same consumer market and that the representation by the respondent is made in the course of trade with the same product namely vodka/lemon cooler products. Should the second requirement be met damage to the applicants' reputation follows as a matter of course. It is therefor necessary for the applicants to prove their reputation and the representation amounting to a passing-off in the sense previously described.

I return to the requirements, the first being proof of a reputation. The question to be asked and answered is whether -

'the plaintiff has, in a practical and business sense, a sufficient reputation amongst a substantial number of persons who are either clients or potential clients of his business.'

(Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd and Another 19983 SA 938 (SCA) 950)

What is required of a plaintiff was explained by Harms JA, quoting from Reckitt & Colman Products Ltd v Borden Inc and Others [1990] RPC 341 (HL) ([1990] 1 All ER 873) at 406 (RPC) and 880g-h (All ER), in the Caterham Car sales judgment supra at 950 -

'First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing

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public by association with the identifying "get-up" (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff's goods or services.'

(My emphasis.) See also Lord Jauncey at 417 (RPC). The words emphasised are pertinent and echo those of Nicholas J that

'the plaintiff must prove that the feature of his product on which he relies has acquired a meaning or significance, so that it indicates a single source for goods on which that feature is used'. (Adcock-Ingram Products Ltd v Beecham SA (Pty) Ltd 1977 4 SA 434 (W) at 437 A--B.) Put differently, reputation is dependent upon distinctiveness (cf Van Heerden and Neethling at...