Tuesday, 20 June 2017

Darren Olivier

'Fu ck You!' it's registrable in the US

Yesterday the Supreme Court in the United States ruled that the law prohibiting the registration of offensive and disparaging trade marks is against free speech rights. This case has interesting implications for all trade mark registries, especially those in countries or regions where constitutional rights exist. It also effectively puts to bed the REDSKINS trade mark dispute in the United States.
The case involved the attempt to register the mark SLANTS by Asian-American band member Simon Tam. It was rejected by the USPTO, the appeal court found that to be unconstitutional and the Supreme Court has now agreed. Prof Wim Alberts provides an excellent summary of facts, and the implications for the REDSKINS dispute, in this Afro-IP post here.
Like many others Prof Alberts predicted that the US Supreme Court would find reason to disagree with the appeal court and so this decision comes as a surprise to many.
The judges held that:
"A law that can be directed against speech found offensive to some portion of the public can be turned against minority and dissenting views to the detriment of all,"
"Speech that demeans on the basis of race, ethnicity, gender, religion, age, disability, or any other similar ground is hateful; but the proudest boast of our free speech jurisprudence is that we protect the freedom to express the thought we hate," 
In the US, as in most countries, there are laws preventing the registration of offensive trade marks. It is not without controversy as these US cases illustrate. In South Africa, the South African registry ruled against the registration of BUM for shirts in 1970 on such grounds and the irritation of US counsel makes amusing reading. He wrote that he:
"fear(s) very strongly for the intellectual level of (the) South Afrikaner" and describes the Registrar at the time as having "not yet climbed out of the slime in which he was spawned..". You can read it in full here.
Just as there would be no question that BUM would be registrable in South Africa today, one questions whether the Government, even in  contemporary South Africa, should or is able to be the purveyor of moral codes on communication. It's as controversial as it is probably, impossible.
My apologies for the heading but you get my point (and it's also not as offensive as it could have been).
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Monday, 19 June 2017

Afro Leo

GII shows innovation momentum in Sub Saharan Africa

Last week WIPO, Cornell University, INSEAD and their knowledge partners published their annual Global Innovation Index GII 2017. This index is a global benchmarking tool for determining the state of innovation on the globe. Its premise is that innovation is the key driver for economic growth and general prosperity.
 
The GII is notable because it far more than a measure of R&D or levels of patenting. It covers and uses data from:
 
·         127 country/economy profiles, including data, ranks, and strengths and weaknesses
·         81 data tables for indicators from over 30 international public and private sources, of which 57 are hard data, 19 composite indicators, and 5 survey questions
·         A transparent and replicable computation methodology including 90% confidence intervals for each index ranking (GII, output and input sub-indices) and an analysis of factors affecting year-on-year changes in rankings.
 
Intellectual property and innovation are linked. There is continuous debate on how strong and/or appropriate that link is but the fact is that they are connected.
 
 
Africa is a large dark blob on the GII short video on global innovation hotspots in their press release. It is not alone, according to the GII more than half of the world’s innovators exist in only 30 innovation hotspots across the globe. The usual feature - cities on the west and east coast of the USA, Central and Western Europe and in Asia. GII recognises that innovation is everywhere but thrives in these areas,
 
None of those hotspots exist in the southern hemisphere. Perhaps this is easily explained by the fact that the southern hemisphere has been relatively slow to adopt the patent system or contains few tax havens (indeed often having protectionist regimes considered a disincentive to FDI based innovation), and hence would not feature. However, one just has to consider the geographical origin of the most innovative and largest value companies in the world to realise the direct correlation between the origin of those companies and the innovation hotspots. Indeed, the GII report indicates a very strong link between business value and the results of patent data mapping undertaken by the publishers
 
There is some indication that Africa has opportunities. As the world’s population grows, innovation in the agricultural industry – a large staple of Africa economies – is tipped to be the most important over the coming decades. The relevance of such innovation is a major focus of the GII.
 
Over the next decades, the agriculture and food sector will face an enormous rise in global demand and increased competition for limited natural resources. In addition, it will need to adapt to and help mitigate climate change. Innovation is key to sustaining the productivity growth required to meet this rising demand and to helping enhance the networks that integrate the sustainable food production, processing, distribution, consumption, and waste management known as food systems.”
 
The question is whether Africa has the nous, character and leadership to take advantage of this reality. Put differently, will corruption, poor leadership, naivety, and short termism long associated with Africa make it vulnerable such that its societies do not benefit as much as they could. After all, this has happened over the centuries and there is evidence of it happening again. A different question is whether those who employ the innovators of the hotspots will have learnt from mistakes made in the past and collaborate differently with Africa. This too is a leadership question.
 
The GII recognises a number of what it calls Innovation Achievers – a term used for low income countries whose rate of innovation outpaces its relative growth in development. A number of African countries score high on this ranking. Indeed, 9 of the 17 countries in this category come from Sub Saharan Africa. Take a visit to Rwanda, for example, and this is clear to anyone. A company can be registered in a day and trade marks are registered well within a year. The first two destinations of its A380 aircraft investments are India and China and its skyline boasts increasing numbers of foreign law firms. The other 8 countries are Kenya, Mozambique, Uganda, Malawi, Madagascar, Senegal, Burundi and the United Republic of Tanzania.
 
The positive results from Sub Saharan Africa are despite rating falls in the top three. South Africa becomes  the highest ranked on the index at 57 (falling from 54), followed by Mauritius (64, falling from 53) and Kenya (81 falling from 80). According to the report:
 
Preserving and building upon this innovation momentum in Sub-Saharan Africa is now key.” 
 
 
Touché. How, will be very important too.

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Thursday, 15 June 2017

Darren Olivier

Protectable Interests for Franchisors - The case of the not so Perfect 10

 
Today I was asked by my colleague Lita Miti-Qamata to present on a case in her monthly discussions that had a number of handy lessons for stakeholders in the franchise industry, including lawyers.
 
It is a Pretoria High Court decision involving the cancellation of the Perfect 10 franchise in a prominent shopping centre in Menlyn, Pretoria and the scope of the protectable interest of the franchisor after termination. In lay speak, whether a franchisor can prevent an ex franchisee from competing at the same location under a different name and operating system?
 
 
ENJOY BEAUTY (PTY) LTD V PETROVIA AND SMIT BEAUTY SALON AND ORS Case No: 67970-1/2016


 
Background
 
The applicant/franchisor provides health and beauty services operated through a franchise network. One of the brands is symbolised by the trade mark PERFECT 10 and its associated look and feel. The franchise operation sold the SKINDERM range of products and developed the “HeadStart salon management system”. The franchised IP is owned by The Imbalie Group, who owns the applicant.
 
 
Perfect 10 Branding & SkinDerm Product:


 
 
The respondent is a franchisee who cancelled the franchise contract on 15 August 2016. The primary reasons for its dissatisfaction were the applicant’s insistence on its use of the HeadStart salon system and sale of SkinDerm products only. It claimed that the former was inferior to its current system and the latter would be commercial suicide (as it sold other products).
 
Applicant’s claim for trade mark infringement
 
This was rejected by the courts as being premature. The basis, simply put, is that when the application was launched the applicant claimed both for the store to be “handed over” signage intact, and in the alternative, for the signage to be removed etc. It was only upon election of one of the alternatives (or judgment) that the respondent would know where it stood. Hence the position that the respondent found itself in, was of the applicant’s own making and the claim for infringement premature, according to the judge.
 
 
The judge unfortunately incorrectly applies the law here (para 17-18). He states that because the respondent had no intention of infringing the trade marks (because of the franchisor's confusing requests), there is no trade mark infringement. The correct reasoning that the judge should have used in coming to that conclusion, is that the franchisee's continued use of the trade marks was authorised (because of the franchisor's confusing requests) i.e. the use was not unauthorised as required by the Act. "Intention" has no part to play when considering trade mark infringement. It is questionable though whether the "confusion prayers" of the applicant, amount to "consent" but that was not canvassed..
 
The Restraint of Trade
 
There are two legs to this enquiry:
 
  • Whether the letter of suretyship bound the third respondent (the application against the second respondent having been withdrawn) to the restraint of trade; and
  • The scope of the restraint of trade.
 
Concerning the suretyship, the court gave short shrift to the issue stating that it had been signed prior to the relevant franchise agreement and not simultaneously with it, as the wording required. In addition, that the intention of the suretyship was to provide ongoing indemnification relating to monetary obligations and not to hold the franchisee to the restraint.
 
The judge is correct here and the lesson is to pay particular attention when drafting and agreeing documents. The word "simultaneously" means exactly that, and much like the formalities required for a confirmatory affidavit, it makes no sense to sign a separate suretyship document before the main agreement is signed. The scope of the suretyship should also spell out the obligations they apply to.
 
The analysis of the second leg was more complex. Under RSA law the position on restraints is set out in the well known Magna Alloys case which is summarised in para 27.
 
The judge establishes that that the restraint was reasonable both in time frame (1 year) and geographical extent (5kms).  The question was therefore, what exactly could be restrained. What was the protectable interest?
 
Applied to this matter, the judge held that it was the “operations manual and operating system, their own specific product, branding and logos and everything that constituted the applicant’s trade marks.” (para 34) Absent of this, in this case, the applicant had no protectable interest. The effect of this is that respondents could set up a competing business within one year, within 5kms without falling foul of the restraint.
 
The applicant’s request for interim relief was dismissed in its entirety, with costs.
 
The case will have been a blow for Perfect 10 in that it is foreseeable that the ex franchisee could simply remove the signage, stop using the product, branding and logos and continue to operate from the same store. It would mean too that it could take advantage of the goodwill in the location - the so-called "habit effect" of consumers knowing where to get their "nails done" simply by location of the store. 
 
Yet, the judge is correct, the agreement did not include "location" as part of the goodwill, the ex franchisee did not only sell franchised products and use franchised systems (it had its own) and the franchisee, it appears, was also the lessee of the space. In these circumstances, without additional evidence that showed the location to be part of the protectable interest or at least any interest beyond those noted by the judge, that goodwill belonged to the franchisee.  
 
This does not mean that goodwill in a location and restraints cannot be enforced in agreements. The lessons are to pay attention to them in the drafting and to secure as much clarity in the wording as possible, when entering into the agreement in the first place. This would also apply to non disclosure agreements, co-existence agreements and ordinary licenses. In addition, from a franchisor's perspective, control the lease.
 

  



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Wednesday, 14 June 2017

Afro-Buff

The ASA Making Moves - An Update

Gail Schimmel
It has been six weeks or since you last heard from us on the predicament of the ASA in South Africa. Recently, their new acting CEO - Gail Schimmel* - took time out to speak with Afro-IP on developments.
 
Upbeat and positive, Gail is addressing the main issues raised in the Business Rescue Report as follows:
 
Short Term Funding
 
The ASA is calling on every single player in this industry – every agency, every marketer, every advertiser, every media owner and the lawyers – to pre-pay ONE ASA filing fee (R24 396 including VAT).
 
Their call to action is based on the simple premise that advertising disputes need a place of self-regulation away from the courts and the government, that is both speedy and accessible (an attribute of a well-functioning ASA).
 
In exchange for that filing fee, funders will get:
·       Full credit to file a complaint using this fee at any point in the future;
·       A year’s access to the ASA  Rulings Library, valued at R3300;
·       The right to carry the ASA logo, adapted to reflect that you are a supporter of self regulation, on your marketing material;
·       A responsible marketer MAC certificate (providing the funder qualifies) which in turn earns BEE points;
·       Access to training and support in how to leverage the ASA process.
 
Jurisdictional Concerns
To address concerns over jurisdiction highlighted in the Herbex case (which the ASA currently appealing) Gail aims to address these in its memberships contracts which is consistent with the recommendation in the Business Rescue Report. This means that where mainstream associations are involved, it could address the problem if contractual obligations are adopted and enforced by them as part of their membership with the ASA.
 
Sustainability
 
Gail informed us that the ASA has reduced staff from 22 to 7 and consequently decreased its overheads significantly. It has also received several substantial pledges for funding going forward. Gail hopes to further streamline the ASA process and reduce the cost of appeal to make the system more user friendly. Gail also plans to halt the ASA’s application to become an ombudsman under the Consumer Protection Act, focusing instead on renewing public confidence in the ASA as a forum of choice for advertising disputes.
 
Tea
Visiting the ASA, it is clear that it is already different from the forum just a year ago. Tea is served with the teabag in the cup, leaving nothing to chance, and although this is something Gail also promised to fix it’s indicative of an already more austere, purposeful and pragmatic ASA. In a sense (cents) - it is up to the advertising industry and related stakeholders now.
 
*Who is Gail Schimmel?
 
Bright and affable, Gail is armed with more than sufficient nous and experience to understand the dilemma faced by the ASA and to turn the organisation around. She needs support though. Gail’s online profile, twitter and blog can be viewed through the links.
 
How to pledge?
 
Follow the information here.
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Monday, 22 May 2017

Afro Chic

Africa Regional Update Today in Barcelona - 3pm Hall 8.0-D3

Ed Conlon and Sarah Morgan (WIPR) did a great job promoting today's Africa Regional Update in a two page spread in the INTA Daily News published by WIPR yesterday extensively quoting several of the speakers together with Alison Simpson from MarkMonitor.

This is just a friendly reminder to those of you who are at INTA to attend this session as well as the Africa Reception after that, and if you are not at the session, Afro-Chic will be tweeting about it all on the @afroip handle.

According to official INTA figures there are 10557 delegates registered for the Barcelona event which is a new record, and an increase by 18% of delegates from Africa over 2016 figures. Let's hope there is a great turnout for the RM50 Africa Regional Update which will be held in Hall8.0-D3 today at 15h30 - 17h00, followed by the Africa Reception hosted by INTA.


 

For the full article published online click here.

For more information on the session click here.



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