High Court applies passing-off principles to domain name registration

South Africa

In Fairhaven Country Estate (Pty) Ltd v Harris ((735/2015) [2015] ZAWCHC 100, July 8 2015), Henney J has applied the common law principles of passing off to a domain name registration.

The applicant is the developer of the Fairhaven Country Estate and the respondent is a real estate agent. In 2011 the respondent registered the domain names 'fairhavenestate.co.za', 'fairhaven.co.za', 'fairhavencountryestate.co.za', 'fairhaven-country-estate.co.za' and 'fairhaven-estate.co.za' in anticipation of business from the estate. The primary domain, where the website is hosted, is 'fairhavenestate.co.za'; the rest re-direct to that domain.

The applicant and respondent entered into an agreement that the respondent would assist in selling properties on the estate. The website would be developed and maintained by the applicant despite being registered in the name of the respondent. At no point did the respondent inform the applicant that the website was registered in his name. As a result, when the agreement came to an end during 2014, no change in the registration of the domain names were recorded.

In early 2015 the applicant received an email from G Studio (the joined party managing the website on behalf of the applicant). This email stated that the respondent had informed G Studio that the respondent was the owner of the domain and that it should be transferred to him immediately. G Studio informed the applicant that this would give the respondent exclusive access to all of the applicant’s emails, as well as full control over the website the applicant had developed.

The applicant argued that it had spent substantial recourses on the website’s development and maintenance. In addition, it included the primary domain on all marketing material. The overall spend in marketing incorporating the website was around R70 million ($5.6 million). Thus, it was argued, and accepted by the court, that the website had garnered substantial reputation due to the sole efforts of the applicant.

The respondent argued that the applicant does not have any statutory rights in Fairhaven Estate and thus cannot prevent the respondent from using it as a domain name. Further, it argued that the domain name was registered in the respondent’s name and that the respondent paid the registration fee.

Henney J accepted the applicant’s argument, rejected that of the respondent, and granted the applicant an interdict preventing the respondent from instructing G Studio to redirect or transfer the domain names in dispute to any third party other than the applicant.

Addressing the specific point that the domains were registered in the name of the respondent, Henney J stated that “mere registration of the domain name that was linked to the property of someone else cannot result in having exclusive use”.

As such, the respondent abandoned any right to exclusive use of the domain, as when the domains were registered, the intention was always that they be used by the owner of the property. Further, whilst the domains were in use by the applicant, the respondent had raised no objection, and if the respondent used the domains after the applicant had built up their reputation, it would not be possible for the two companies to be distinguished.

As a result, the respondent would “pass off” its business as that of the applicant. In addressing this, Henney J stated that, per the ratio in Telestream Communications (Pty) Ltd v Halo Mobile (Pty) Ltd (2013 JDR 1647 (GSJ)), a domain name can qualify for the common law delict of passing off where the applicant does not own the trademark.

The test for passing off in South African law was determined in Century City Property Owners' Association v Century City Apartments Property Service CC (2008 JDR 1420 (C)) and Pioneer Foods (Pty) Limited v Bothaville Milling (Pty) Limited (2014 JDR 0477 (SCA)) - namely, the court must determine whether there is:

(a) actual detriment to the applicant;

(b) a reputation in the mark being passed off; and

(c) a misrepresentation that the goods or services covered by the mark are those of the applicant, or are in some way associated with the applicant.

The court applied these principles.

The detriment to the applicant would be the loss of sales as, if the respondent possessed the website, it would direct customers to the respondent. A substantial reputation was proven in that the applicant had spent R70 million in marketing activities. Finally, the misrepresentation was that customers would believe that the business activities of the respondent was that of the applicant, or was in some way connected. That said, Henney J stated that, even though the misrepresentation had not taken place, it was sufficient that it would take place in the future.

The applicant was granted an interdict preventing the respondent from obtaining the website; the managing agent is to transfer the registration of the website to the applicant. The effect of this judgment is that, despite a domain being registered in the name of one person, if it is used and developed by another they will be considered to have exclusive rights to the domain, if transferring the domain to the owner would result in unfair competition.

Brendon Ambrose, Spoor & Fisher, Pretoria

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