LA Group (Pty) Ltd v Stable Brands (Pty) Ltd and Another

• Jurisdiction: South Africa

LA Group (Pty) Ltd v Stable Brands (Pty) Ltd and Another
2022 (4) SA 448 (SCA)

2022 (4) SA p448

Citation	2022 (4) SA 448 (SCA)
Case No	650/2020; [2022] ZASCA 20
Court	Supreme Court of Appeal
Judge	Ponnan JA, Makgoka JA, Schippers JA, Plasket JA and Phatshoane AJA
Heard	February 22, 2022
Judgment	February 22, 2022
Counsel	P Ginsburg SC (with P Cirone and N Nyembe) for the appellant.; LG Bowman SC (with I Joubert SC) for the first respondent.

Flynote : Sleutelwoorde

Intellectual property — Trademark — Expungement — Mark which, as result of manner of its use, likely to cause deception or confusion — Test — Requiring determination whether mark itself likely to cause deception or confusion — Not contemplating passing-off-type deceptiveness or use of mark based on mark of different trader — Manner of use of trader's own mark to be considered, not likelihood of deception or confusion arising from similarity to mark of other trader — Trade Marks Act 194 of 1993, s 10(13).

Intellectual property — Trademark — Registrability — Distinctiveness — By reason of use to date — Generic mark POLO having become associated in mind of public with proprietor through long-term, continuous and widespread use — Mark capable of distinguishing — Trade Marks Act 194 of 1993, s 10(2)(a).

Headnote : Kopnota

Virtually identical POLO trademarks were registered and used in South Africa by two clothing and accessories retailers: Ralph Lauren, a US company not party to the present proceedings, and the LA Group (the appellant), a South African company unrelated to Ralph Lauren that had used POLO marks locally since 1976. When Ralph Lauren subsequently decided to enter the South African market, it concluded an undisclosed settlement with the LA Group under which they agreed to a delineation of goods in respect of which each would use its various POLO marks in South Africa.

When a third party, Stable Brands (the respondent), was subsequently granted a licence to sell trademarked US Polo Association (USPA) garments in South Africa, [*] the LA Group, claiming that the USPA logo was almost identical to its POLO and POLO PONY & PLAYER marks, sued Stable Brands out of the Pretoria High Court for interdictory relief for trademark infringement. Stable Brands counter-applied under s 24 of the Trade Marks Act 194 of 1993 (the Act) for the cancellation of all the LA Group's 46 POLO marks on various grounds, but principally on the ground in s 10(13), namely that the marks were unregistrable because their manner of use was 'likely to cause deception or confusion'. Stable Brands also contended that the LA Group's POLO marks were 'not capable of distinguishing' as intended in s 10(2)(a) of the Act. [†]

Before the High Court could hear the main application, the LA Group withdrew it. But Stable Brands successfully persisted in its counter-application for the cancellation of the LA Group's marks. The High Court found that the confusion or deception proscribed by s 10(13) became a reality when Ralph Lauren was allowed to enter the market and register marks similar to those

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of the LA Group in respect of similar goods. The High Court also agreed with Stable Brands' argument that the generic 'POLO' word marks were not capable of distinguishing within the meaning of s 10(2)(a) because the fashion industry did not consider the word 'polo' to be a badge of origin.

The LA Group appealed to the Supreme Court of Appeal (the SCA), which rendered a split judgment in its favour. Both judgments — Schippers JA for the majority (paras [87] – [209]) and Ponnan JA for the minority (paras [1] – [86]) — principally discussed cancellation under s 10(13).

Stable Brands argued that the LA Group's failure to add distinguishing features to its goods constituted confusing 'use' for the purposes of s 10(13) and that this 'manner' of use was the one that had to be considered in deciding whether it was likely to result in deception or confusion. Stable Brands also reiterated, in respect of its attack under s 10(2)(a), that the word 'polo' was incapable of distinguishing and was not exclusively associated with the LA Group.

The LA Group in turn argued that the High Court had incorrectly interpreted s 10(13) 'as involving a comparison between the use of LA Group's POLO trademarks and the use of Ralph Lauren's POLO trademarks', whereas it could 'only relate to the manner in which the LA Group had itself used its own trademarks . . . and whether, as a result, such use would now be likely to cause deception or confusion'. In respect of s 10(2)(a), the LA Group presented evidence that the POLO marks had over the years become distinctive of its goods through continuous and widespread use, and were therefore, in the light of the proviso to s 10(2), not liable to be removed from the register. The proviso states that 'a mark . . . shall not be liable to be removed from the register by virtue of [s 10(2)] if . . . it has in fact become capable of distinguishing . . . as a result of use made of the mark'.

Held for the majority per Schippers JA

The LA Group had established that its POLO (word) trademarks were capable of distinguishing its goods from those of another person by reason of their use, as envisaged in the proviso to s 10(2). It was clear from the evidence it presented that the marks had, through their long-standing and continuous use by the LA Group for over 40 years, become well known and distinctive of its goods in the eyes of the general public. The High Court, by failing to consider the proviso to s 10(2), had erred in ordering their removal (see [118], [121]).

Stable Brands' arguments failed both on the law and the facts. As to the law, what s 10(13) required was a determination as to whether the mark itself was likely to cause deception or confusion. It did not contemplate passing-off type deceptiveness or the use of a mark based on the mark of a different trader. It followed that the High Court had erred in its construction of s 10(13). Instead of considering the LA Group's 'manner of use' of its own marks, the High Court compared its marks to those of Ralph Lauren and determined the likelihood of deception and confusion with reference to a test that was, inter alia, a value judgment — 'largely a matter of first impression, without undue peering at the two marks to be considered'. The manner in which the LA Group had used its marks had at all times been lawful and did not constitute use in a manner that was likely to result in deception or confusion as envisaged in s 10(13). And the LA Group's conclusion of the agreement with Ralph Lauren, indispensable for Stable Brands' case, did not constitute a use of its marks. (See [189], [192] – [194].)

As to the facts, the LA Group and Ralph Lauren's respective marks had coexisted in the marketplace since 2011. Trademark co-existence, where two different enterprises used a similar mark to market a product without interfering with each other's business, was neither novel nor unique. The effect of the

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agreement had been to give the LA Group free rein in the field of clothing and similar items, while leaving Ralph Lauren to import and sell its brand of cosmetics and skincare products. Consumers buying clothing bearing the POLO mark, or the device of a right-facing pony, were buying the LA Group's goods. It did not matter that they thought they were buying from a well-known US fashion house. The badge of origin function of a mark was fulfilled, provided all items bearing that badge came from the same source. The same applied to consumers buying cosmetics or perfume bearing the Ralph Lauren marks: they were buying Ralph Lauren's goods. Its marks distinguished its goods from those having a different source and thus the badge of origin function of the Ralph Lauren marks was fulfilled. Nor would the goods have been encountered in the marketplace next to each other: Ralph Lauren had no stores in South Africa, and the High Court erred in finding that the LA Group 'mimicked' Ralph Lauren's sales approach. There was no potential for any confusion or deception. (See [200] – [203].)

Therefore, Stable Brands failed to establish that the LA Group's 46 POLO marks — the lifeblood of its business — were liable to be removed from the register under s 10(13) (see [207]).

Held by the minority per Ponnan JA

There was no evidence to support the majority's conclusion that the LA Group and Ralph Lauren had reached a compromise and that their respective marks had co-existed in the marketplace since 2011. Nor was there any warrant for a speculative or conjectural hypothesis in favour of the LA Group that the effect of its agreement with Ralph Lauren was to give the former free rein in the field of clothing and similar items while leaving Ralph Lauren to import and sell its brand of cosmetics and skincare products (see [13]). But even assuming in favour of the LA Group that the matter could be approached on this footing, its case in relation to the s 10(13) enquiry still did not survive scrutiny because it disregarded its clear wording, which did not limit the nature of the confusion which could result from LA Group's use of its own marks, and certainly did not preclude a comparison of its marks with other marks available in the market. Section 10(13) simply required a situation to exist where the manner of use by a mark's proprietor was likely to cause deception or confusion. It neither prescribed, nor limited in any way, the manner of use from which such a likelihood of either deception or confusion was likely to arise. (See [17] – [19].)

It did not matter, as far as s 10(13) was concerned, whether the user of a mark had earlier rights to it. The question was whether the manner of use of the mark was likely to result in deception or confusion. So, whereas initially a mark might have been validly...