Consumer Protection Act to benefit both mark owners and consumers

South Africa
The Consumer Protection Act (68/2008), which comes into full operation on October 24 2010, contains important provisions relating to the use and registration of business names. In broad terms, it seeks to prevent the use of business names which may mislead consumers into thinking that one business is endorsed by, or associated with, another. This type of confusion is often caused by the inclusion of a registered trademark in the business name of another entity.

The provisions of the act regarding business names should thus be welcomed by trademark owners, as they provide benefits for both proprietors and consumers.

Sections 79 to 82 of the act deal specifically with business names. These provisions should be viewed as operating in parallel to any rights or remedies which the common law or statute law (such as the Trademarks Act) provides:
  • Section 79(1) is to the effect that a person may not carry on business, advertise, promote, offer to supply or supply any goods or services, or enter into any agreement with a consumer under any name unless that name, in the case of a juristic person, has been registered as a business name in terms of Section 80 of the act, or has been registered under any public regulation (ie, in terms of the Companies or Close Corporations Acts).
  • Section 79(2) provides that a person doing anything contemplated in Subsection (1) must include on any trade catalogue, trade circular, business letter, order for goods, sales record or statement of account that the person issues, the name, title or description under which the business is carried on, as well as a statement of the primary place at which, or from which, the business is conducted. If the activity is carried on under a business name, the name of the person by whom that business name is registered must be included.
  • Section 79(3)(a) provides that, if a person performs any of the acts mentioned in Section 79(1) under a name that is not the person’s full name, or a business name registered by that person, the National Consumer Protection Commission may issue a compliance notice in terms of Section 100 which may require, among other things, that person to apply for registration of the business name - or, if the application is unsuccessful, to discontinue business activities under that name. A compliance notice may be issued to a person whom the commission believes on reasonable grounds has engaged in prohibited conduct in terms of the act. Non-compliance with a compliance notice is an offence and may result in the imposition of an administrative fine or even criminal prosecution.
  • Section 81 deals with the registrability of business names. A business name may not be the same as, or confusingly similar to, the name of a juristic person incorporated in terms of the Companies Act or Close Corporations Act, or to a registered trademark, a mark for which an application for registration has been filed in South Africa, or a well-known mark in terms of Section 35 of the Trademarks Act. A business name may also not falsely imply or suggest, or be of such a nature that it would reasonably mislead, a person into believing incorrectly that it is a part of, or associated with, another entity. The procedure for objecting to the registration of a business name is, at this stage, somewhat unclear. It may be that the current procedure in terms of the Companies and Close Corporations Acts will apply - namely, that a formal objection to the registration of the business name should be lodged with the Companies and Intellectual Property Registration Office within one year of registration. Alternatively, an aggrieved person may be able to lodge a complaint with the National Consumer Protection Commission for the investigation of the matter. This position will have to be clarified.
  • Section 79(3)(c) entitles the owner of a registered business name to apply to the court for a restraining order if a person performs any of the acts contemplated in Section 79(1)(a) under an offensive business name.
  • Under Section 80(4), if the registrar believes that an entity has not been carrying on business under its registered business name for at least six months, he or she may require the registrant to show cause why the registration should not be cancelled. If it fails to do so, or fails to provide satisfactory evidence, the registration will be cancelled.
What does this mean practically for trademark proprietors?
  • As all business names will have to be registered, it will now be possible to identify infringing names (and persons) which might previously have gone undetected because they were unregistered and the entities traded on a small scale or in relative obscurity.
  • Since the name, title or description under which a business is carried on will have to appear on its trade catalogues, circulars, letters, orders for goods, sales records or statements, such a business will not be able to “fly under the radar” by trading under an infringing name, but by using another name on documents.
  • A business name which incorporates the registered trademark of another person (or a confusingly similar mark) will contravene Section 81(2)(b) of the act if it trades in the same or similar goods or services as those covered by the representation.
It is often difficult for trademark proprietors to enforce and protect their IP rights against small and obscure businesses. Since all business names must now be registered, and since registration will not succeed where trademark rights are infringed by a proposed business name, the Consumer Protection Act affords trademark proprietors the opportunity to monitor and enforce their rights more effectively.

The act also achieves its aim of protecting consumers from being misled into believing that a business which incorporates a registered trademark in its business name is connected with the trademark proprietor.

Chris Job and Nicole Smit, Adams & Adams, Pretoria

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