The Supreme Court of Appeal (SCA) decision in the long-running case of Nestlé v Iffco (27 November 2014) contains a substantial amount of trade mark law. Nestlé had trade mark registrations for 3D representations of its Kit Kat chocolate, and for various slogans including Have a Break, Have a Kit Kat. When Iffco sold chocolate bars that were very similar in appearance to Kit Kat - in packaging that featured names like Quanta Break and Tiffany Break, as well as 2D representations of the product - Nestlé sued for trade mark infringement. Iffco, in turn, applied for the cancellation of Nestlé’s 3D trade mark registrations. In response, Nestlé applied for the cancellation of Iffco’s trade mark registrations for Quanta Break and Tiffany Break.
Iffco’s attack on Nestlé’s 3D trade mark registrations was two-pronged. First, there was a procedural attack, in which Iffco argued that the Registrar of Trade Marks had been wrong to allow Nestlé to amend a trade mark application for a picture of a Kit Kat chocolate by adding the endorsement: ‘The mark consists of the distinctive shape or appearance of the goods’. Iffco’s argument went as follows: as it wasn’t clear that the trade mark that had originally been filed was a 3D trade mark, the endorsement had effectively transformed a 2D trade mark into a 3D trade mark, something that amounts to an impermissible amendment which substantially affects the identity of the trade mark.
The court disagreed. It held that, although the Registrar cannot allow a substantial amendment to a trade mark in the case of a registration, this limitation does not apply to pending applications. In any event, the endorsement did not substantially amend the identity of the trade mark because the South African public, who are very familiar with Kit Kat, would have interpreted the original application (the picture of a Kit Kat chocolate) as a 2D representation of a 3D trade mark, rather than as a 2D trade mark.
The more substantive attack was that Nestlé’s 3D trade mark registrations – the so-called ‘trapezoidal-shaped’ registrations - were in conflict with the prohibition on registering a trade mark that consists ‘exclusively’ of a shape that is necessary to obtain a specific technical result. The court again disagreed. It held that even though Nestlé’s trade marks have functional aspects that relate to the release of the chocolate, they also contain non-functional features such as the plinth or apron. It made the point that the purpose of the prohibition on registering trade marks that are exclusively technical in nature is to ‘prevent trade mark protection from granting its proprietor a monopoly on technical solutions, or functional characteristics of a product which a user is likely to seek in the product of competitors.’
As regards the alleged infringement of Nestlé’s 3D registrations, the court held that this had been established, not only through the use of what the court described as an ‘almost identical’ product shape, but also through Iffco’s use of the depiction of its product on the packaging (the court rejected the argument that this was ‘descriptive use’). The court said that the fact that there was no proof of actual confusion was not significant. It also said that, when it comes to making a comparison, it’s a matter of ‘global first impression’, that one must consider whether the allegedly infringing trade mark ‘creates a material link’, and whether it’s perceived as a ‘source identifier’.
Not only did the court find that there was standard ‘likelihood of confusion’ infringement (section 34(1) (a), but it went on to hold that there was also dilution-style infringement (section 34(1) (c)). It said that the dilution section ‘aims to protect the commercial value that attaches to the reputation of a trade mark, rather than its capacity to distinguish the goods or services of the proprietor from those of others.’ It said that ‘the advantage or detriment complained of must be of a sufficiently significant degree to restrain the use of the trade mark… the court must be satisfied by evidence of actual detriment or unfair advantage, but depending on the primary facts, these may be self-evident’. Here, said the court, the detriment was both significant and self-evident: ‘The loss of the unique shape of Nestlé’s Kit Kat bar as a distinctive attribute will inevitably result in a loss of advertising or selling power to Nestlé… this will clearly result in “blurring” of Nestlé’s finger wafer shape trade mark… economic harm to Nestlé is consequently self-evident from the primary facts.’
Many readers will know that for years dilution has been pretty much dead in the South African water. That’s because in 2005 the Constitutional Court ruled that the t-shirt manufacturer Laugh-It-Off had not diluted SAB’s trade mark by producing a satirical t-shirt that featured a trade mark that looked very much like the Carling Black Label logo, and that the reason for this was that there was no likelihood of economic loss. That makes the Nestlé v Iffco judgment very significant. Whether it will lead to classic dilution cases succeeding in South Africa - by which I mean cases where there’s no likelihood of confusion - remains to be seen.
The court did, however, reject the claim that Nestlé’s slogan registrations like Have a Break, Have a Kit Kat had been infringed through the use of the trade marks Quanta Break and Tiffany Break, on the basis that there was no likelihood of confusion. It felt that it was significant that most of Nestlé’s registrations had disclaimers against the word ‘break’, saying that ‘a disclaimer allows others to use disclaimed features in a trade mark sense and is not simply intended to protect third parties who use the word “Break” descriptively’. As there was also no proof that Iffco’s use of the trade marks was causing harm or creating unfair advantage (and nor was it self-evident), there was no dilution-style infringement either.
As a result of the finding that the trade marks Quanta Break and Tiffany Break weren’t confusingly similar to Nestlé’s slogan registrations, Nestlé’s application to cancel these registrations also had to fail.
Finally the court had to deal with an estoppel / laches-type defence that had been raised by Iffco, which argued that Nestlé had waived its right because it had taken a long time to take action. The court rejected this, saying that Nestlé’s conduct ‘never unequivocally indicated a waiver of the rights it held in the contested trade marks, nor did it amount to a representation that action would not be taken against Iffco to enforce these rights.’
As I said at the outset, a whole lot of trade mark law in one document. This will prove to be a seminal judgment.