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The importance of documenting licensing arrangements properly

by Liezal Mostert on 15 November 2018


A recent decision of the Supreme Court of Appeal in Moris Material Handling Limited v Moris Material Handling SA (Pty) Ltd (829/2017) [2018] ZASCA 67 again highlighted the importance of the manner in which owners allow others to use their trade marks, and the dangers inherent in not having proper licensing arrangements in place with the authorised users of a mark. 


The Morris case dealt with an application for the cancellation of the registered trademark MORRIS on the basis of non-use.  The Trade Marks Act allows for the removal of a mark from the register if no bona fide use had been made of that mark for a continuous period of 5 years or longer from the date of the issuance of the registration certificate.

 

A South African company, Morris Material Handling SA (Pty) Ltd (the Respondent) alleged that it had been using the mark MORRIS in South Africa for many years in relation to cranes and hoisting equipment.However, despite this use the Respondent had been unable to obtain registration of the mark MORRIS, as the registration was blocked by the existence of a prior identical mark on the register in the name of Morris Material Handling Ltd (the Appellant). The Respondent accordingly brought proceedings with a view to having the Appellant’s mark expunged from the register on grounds of non-use, hoping to clear the path for the registration of its own mark.

 

The Appellant, however, claimed that it had, in fact,made use of the mark MORRIS in South Africa in the preceding 5 years. In support of this contention it presented evidence such as advertising material,press releases and invoices.

 

The threshold to defeat a non-use attack is usually very low. It is not necessary to show that a mark has been used extensively,but merely that genuine (bona fide) use has been made of the mark by the owner or an authorised user.  In other words, the owner of the mark must prove use which is consistent with the essential function of a trade mark,namely as a badge of origin. 

 

In the present matter, the Supreme Court of Appeal ("SCA") accepted that the mark MORRIS has been used. However, despite this finding the SCA still dismissed the appeal and ordered that the MORRIS trade mark should be expunged (i.e. removed from the register).

 

The SCA held that upon analysing the evidence of use,it was clear that the Appellant did not prove that the MORRIS mark was being used by the registered proprietor of the mark, namely Morris Material Handling Ltd, in the exercise of its rights as the owner of the mark.

 

It appeared that the Appellant was taken over by an international company called Konecranes, and a South African company called Konecranes SA, had been using the MORRIS mark in South Africa.  However, the actual evidence of use presented did not clarify the relationship between the parties or the entity which was factually making use of the MORRIS mark. Invoices, for example, did not specify which entity was supplying the relevant goods.

 

In this regard the SCA held that "it was wholly unclear who was making use of the MORRIS mark in South Africa…the picture that the documents paint is of a number of brands and marks falling within the overall Konecranes stable being advertised collectively by or on behalf of one or more of the Konecranes entities, rather than specific use of the MORRIS mark by the Appellant for its own business purposes".

 

No evidence was presented to the SCA to explain the relationship between the various companies which all seemed to form part of a group of companies, or to clarify how they conducted business.  The Appellant simply made the vague allegation that there was an 'internal arrangement' allowing the use of the mark.

 

The SCA was very critical of this allegation and in dismissing the appeal stated that "I find it difficult to believe that if there were an arrangement under which either the international or the South African company was acting as distributor for MORRIS branded products in this country there would be no record of it. In enterprises of that size records are kept of such matters in formal agreements,minutes of board and executive meetings and in correspondence. Yet none of these have been produced".

 

Consequently, the court could not find that any bona fide use was made by the proprietor of the mark, and allowed the mark to be expunged.

 

The SCA in this case specifically referred back to a prior SCA decision ("the GAP case")  where the court criticised the use of trade marks as group property without proper licensing agreements in place. The court specifically held that the mere allegation that a mark is used with licence is not sufficient if there is no evidence to support such a finding. 

 

This case, as well as others such as the GAP case [1], serve as a warning to trade mark proprietors not only to ensure that their marks are in fact being used, but also to take great care when allowing others to make use of their marks.  It is essential that proper (written) licensing agreements and records are in place with users of a mark, even if these users fall within the same group of companies.  


[1] A M Moolla Group Ltd and Others v Gap Inc and Others 2005 (6) SA 568 (SCA)




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