BMW Case likely to have impact on comparative advertising law

South Africa

The South African Supreme Court of Appeal has upheld an appeal by Verimark, a television marketing company, against a decision that it was infringing the BMW logo.

Verimark is the market leader in South Africa in the field of television marketing in which so called 'infomercials' are used. Two of its products are its DIAMOND GUARD car care kit and DIAMOND GUARD car polish, which have been widely advertised and sold since 1996. Throughout this period, Verimark used vehicles of different makes, but especially BMW cars, to demonstrate these products. In one particular television advertisement, a BMW car is first treated with DIAMOND GUARD and then an inflammable liquid is poured onto the hood of the car and set alight without causing any damage to the car's paint work. In another instance, an older and cheaper car is treated with DIAMOND GUARD and it then transforms into a BMW. The complaint of BMW is that its logo on the BMW car is clearly visible and that Verimark is consequently infringing its trademark registrations.

BMW claimed that two of its registered trademarks were being infringed by Verimark - its registrations in Class 3 of the Nice Classification for polishes and in Class 12 for vehicles. The trial court held that the Class 3 registration was being infringed, but not the Class 12 registration. Verimark appealed against this decision.

The Supreme Court of Appeal upheld Verimark's appeal. It found that there can be trademark infringement only if the registered mark is being used "as a trademark". The primary function of a trademark is to indicate the source or origin of a product. Consequently, if the use creates an impression to a consumer that there is a material link between the product and the owner of the registered trademark, then there is infringement; otherwise there is not. A trademark which is used for purely descriptive purposes is not being infringed.

In applying this reasoning to the facts of the case, the court was satisfied that no customer would perceive that there exists a material link between BMW and DIAMOND GUARD or that the logo on the car forms any guarantee of origin function in relation to DIAMOND GUARD. The car is simply being used to illustrate DIAMOND GUARD's properties rather than being used as a trademark.

BMW also claimed that Verimark was infringing its trademark based on the dilution provisions of the Trademarks Act. The appellate court held that although it is not necessary for purposes of dilution to show that a trademark is being used "as a trademark" (in the sense already discussed), the trademark must be used in such a way that it takes unfair advantage of the registered mark.

Turning to the facts of the case, the appellate court held that Verimark's emphasis in its advertisements is on the effectiveness of its own product, which is sold under established trademarks. It also noted that it would not be reasonable to expect Verimark to advertise car polish without using any make of car and it would be contrived to expect Verimark to show vehicles in such a way that their logos were hidden or removed. Consumers would consider the presence of the logo on the car as incidental and would accept that the choice of car was fortuitous. The court failed to see how the use of the logo could affect the advertising value of the logo detrimentally. The fact that there is a mental association with a particular brand and product, does not necessarily lead either to blurring or tarnishing, which is the intended realm of protection of the dilution provisions.

This decision represents an important change in trademark law in South Africa. It will have a particularly significant impact on marketers who have previously been prohibited from comparative advertising. Comparative advertising will no longer automatically be regarded as trademark infringement. It is now a prerequisite for a trademark owner to show that its mark is being used "as a trademark" and that the use creates an impression of a material link between the product and the owner of the trademark before infringement will be found (unless dilution can be proved).

Megan Reimers, Spoor & Fisher, Pretoria

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