In Reynolds Presto Products Inc v PRS Mediterranean Limited, the High Court was called upon to decide whether a registered trademark should be removed from the Register.

PRS Mediterranean Limited was the proprietor of trademark registration No 2007/17821 for GEOWEB, and Reynolds Presto Products Inc sought an order for the removal of the trademark in terms of Section 24(1) of the Trademarks Act (194/1993). Presto relied on two grounds contemplated in Sections 10(3) and 10(7) of the act in support of its contention. It contended, firstly, that PRS was not the bona fide proprietor of the GEOWEB trademark and, secondly, that the conduct of PRS in registering GEOWEB was mala fide.

In 1996 Presto and PRS entered into a licence agreement in terms of which Presto granted PRS a non-transferable, exclusive licence to use the trademarks PRESTO and GEOWEB in certain territories. South Africa was explicitly excluded from the exclusive territories. Clause 12.01 of the agreement governed the question of trademark ownership and specifically provided that Presto was the owner of the trademarks. In 1997 the parties agreed to amend the 1996 agreement to provide for South Africa to become part of the exclusive territory.

A dispute later arose regarding the performance of both parties’ obligations under the 1996 agreement asamended. The dispute was resolved under a settlement agreement entered into in 2001. The 2001 agreement implicitly repealed the licence to the PRESTO trademark and altered the scope of the licence of the GEOWEB trademark – allowing PRS to use it for limited goods only. The agreement made specific reference to many of the clauses in the 1996 agreement but notably did not refer to Clause 12.01 – the clause which made clear the ownership of the PRESTO and GEOWEB trademarks. The 2001 agreement superseded all prior agreements. It terminated in April 2006.

In April 2007 PRS applied for registration of the GEOWEB trademark in South Africa. Presto argued that PRS was not entitled to apply for registration of the GEOWEB trademark.

Presto reliedon Clause 12.01 of the 1996 agreement in terms of which PRS had agreed it would not “..use or adopt, during or subsequent to this agreement, any mark, trademarks or trade name identical with or confusingly similar..” to the GEOWEB trademark. It maintained that this provision was operative on April 10 2007, when Presto filed its GEOWEB trademark application. On that basis, it contended that PRS had no bonafide claim to proprietorship and had made the application mala fide.

PRS argued that the 2001 agreement superseded the 1996 agreement and that, as Clause 12.01 was not expressly incorporated in the 2001 agreement, the obligation imposed by that clause on PRS not to use oradopt the GEOWEB trademark “during or subsequent to” the 1996 agreement was terminated. PRS also argued that it had adopted the GEOWEB mark in 2003 and had acquired a reputation in the mark.

The court found that the determination of both bona fide proprietorship and the question of mala fides involves an ethical value judgment. The court held that, while strictly speaking the contractual obligation imposed on PRS by Clause 12.01 of the 1996 agreement may well have expired, the “sharp reliance” on those terms in these circumstances “falls short of the ethical standards of acceptable commercial behaviour”.

The court found that bad faith in relation to claims to proprietorship and trademark registration need not necessarily involve a breach of a legal obligation; it is sufficient if the court is of the view that the conduct is unethical. In addition, even if PRS had gained a reputation in the mark, any claim to proprietorship had been tainted by “an element of sharp practice and unethical dealing”. The court found that the dealings between the parties were based upon the agreed belief that Presto was the proprietor of the GEOWEB trademark. In such circumstances, it was commercially unethical for PRS to adopt the mark without authorisation during the term of the contract.

In the premises, the court ordered the trademark GEOWEB to be removed from the Register of Trademarksin terms of Section 24(1) as an entry wrongly made.

Author: Hlogi Kgothadi, under the supervision of Megan Reimers.

This article first appeared on WTR Daily, part of World Trademark Review, in April 2014. For further information, please go to www.worldtrademarkreview.com