Playing trademark hardball: Supreme Court of Appeal decision in POLO dispute

The origin of the conflict can be traced back to an undisclosed co-existence agreement between LA Group (Pty) Ltd and Ralph Lauren over the use of the image of a polo rider on clothing in South Africa. What is known of the agreement is that the latter company, a world-famous fashion house from the United States, would only sell cosmetics and perfumes under its POLO trademark in the country. Due to the territorial nature of trademarks, LA Group would be at liberty to use a near-identical mark on its own clothing.

Although there were many interesting implications of the judgment, an important one is that the Supreme Court interpreted Section 10(13) of the South African Trade Marks Act 194 of 1993, in doing so setting a precedent on previously unsettled case law. The Section precludes the registration of a trademark that "as a result of the manner in which it has been used, would be likely to cause deception or confusion." The provision often features in responses to cease and desist letters in South Africa as the misleading use of a trademark by a brand owner is also a ground for a defendant to seek the removal of a trademark from the register.

The facts were that POLO trademarks are registered and used in South Africa by more than one proprietor of fashion goods. There are two main POLO brands in South Africa: the POLO brand of Ralph Lauren, who was not a party to this case, and LA Group, a South African company unrelated to Ralph Lauren and which acquired rights to POLO trademarks in South Africa separately, as mentioned. According to the judgment, the settlement agreement sets out how the South African market is delineated and permits both POLO trademarks to co-exist in South Africa.

A third party, Stable Brands (Pty) Ltd, applied to cancel various POLO trademarks belonging to LA Group on various grounds, including that consumers would not be aware that there are two different POLO brands owned by two different proprietors in the South African market and would therefore not know which POLO they are purchasing. It was argued that the brands of Ralph Lauren and LA Group are similar in more ways than just the same mark, POLO. For example, reference was made to their respective marketing styles and strategies which were alleged to be very similar.

Three out of the five judges ruled that the test to determine if a trademark is unregistrable as a result of the "manner in which it has been used" is limited to whether or not the trademark owner's own use of the mark is misleading, such as where a trademark is applied to goods with a false description or in a misdescriptive manner. However, confusion or deception caused due to the existence of identical or similar brands in the market, even where there is a collaboration agreement between the market players, was held to be outside the scope of this provision.

A practical effect of the judgment is that brand owners need not be very concerned that entering into collaboration, co-existence or settlement agreements with other IP owners will result in their trademarks being liable for removal on the ground of misleading use. This argument is now out of scope as far as misleading use is concerned. Of course, brand owners must still be cautious not to lose the distinctiveness of their brands, which is a separate topic and a ground for revocation.

This story demonstrates that complexities can arise in the registration and maintenance of trademarks in highly competitive sectors, even when businesses reach understandings between themselves. Our trademark specialists in South Africa are experts in local law and ready to assist you.