Litein Tea Factory case highlights conflict between Trademarks and Companies Acts

Kenya

The conflict between the provisions of the Kenyan Trademarks Act and the Companies Act has reared its ugly head again in Litein Tea Factory Company Limited v Davis Kiplangat Mutai ([2015] eKLR). Kenyan courts routinely downplay this obvious conflict and often avoid the issue when it arises in proceedings. It is apparent, however, that a definitive ruling is needed to end this clash between the two acts.

In the Litein Tea Factory case, all of the issues revolved around whether the defendants had obtained a valid registration for the name Chelal Tea Factory Company Limited. It was undisputed that Litein Tea Factory Company Limited had reserved the same name with the registrar of companies until October 30 2014. It was Litein’s intent to use the name for a satellite office it had built to distribute tea under the trade name Chelal Tea Factory. In fact, Litein was issued with a registration certificate from the registrar of trademarks in the same name in 2012. 

Before Litein’s reservation deadline had expired with the registrar of companies, the defendants reserved and incorporated the same company name – Chelal Tea Factory Company Limited. Subsequent to the incorporation, the registrar of companies requested the defendants to change the name of their company “as the subject registration is untenable”. The defendants ignored the registrar of companies’ request and instead insisted that the incorporation document be hung at Litein’s satellite office. The defendants also demanded that Litein hand over the satellite office’s assets and liabilities to the defendants. The defendants also held a board meeting in the satellite factory and sought to acquire the title deeds to the satellite company’s land.

Litein sought relief, asking the court to:

  • order the defendants’ incorporation of Chelal Tea Factory Corporation Limited with the registrar of companies invalid;
  • rule that the defendants were infringing against the CHELAL trademark; and
  • rule that the defendants were illegally attempting to take over Litein’s satellite tea factory. 

In attempting to dismiss the case, the defendants argued that:

  • Litein did not have standing to bring the case;
  • the court did not have jurisdiction to hear the case; and
  • there was no evidence given to warrant an injunction. 

The court first addressed the issue on whether it had jurisdiction to hear the case. The court acknowledged that, if the proceedings were solely regarding the name of the defendant under the Companies Act, then the appropriate procedure would be judicial review. However, the suit also alleged trademark infringement and tortious acts by the defendants, giving the court jurisdiction to hear the case. The court then addressed Litein’s standing to bring the case and ruled unequivocally that Litein had standing to file the suit because it had reserved the name Chelal Tea Factory and the reservation was effective at the time Chelal Tea Factory Company Limited was registered and it was brought to the attention of the defendants, but they chose to ignore the directions of the registrar of companies. Lastly, the court enjoined the defendants from entering Litein’s satellite factory’s premises and from attempting to take it over.

In the ruling, the judge recognised the perennial problem created by the conflict between the Trademarks Act and the Companies Act, but chose not to settle the issue. The judge cited the decision of Webtribe Limited t/a Jambo Express Limited ([2014] eKLR) where the court did not solve the issue at hand but, rather, held that trademark law deals with the identification of goods or service while the Companies Act deals with the registration of companies, and the responsible office is the registrar of trademarks and the registrar of companies, respectively. The registrar of companies and the registrar of trademarks do not have the authority to resolve the conflict, however – that authority rests solely with the High Court of Kenya. For instance, the Companies Act at Section 20 gives the registrar of companies the right to strike off a company from the register or order it to change its name if the name is identical to another name in the register. However, an aggrieved party must lodge the name objection within six months, and if such an application is made after six months, then it will be statute barred. The other option open to an aggrieved party is to file an application at the High Court which has the jurisdiction to hear and determine such an application.

It is clear from the Litein Tea Case and Webtribe that neither the Trademarks Act nor the Companies Act offers a conclusive answer on dealing with this conflict. It is worth noting that the Kenyan Parliament is currently debating a new Companies Bill 2015 which has far-reaching provisions under Clauses 57 and 58 in regards to registration of companies with similar names. Though it does not specifically refer to trademarks, it provides that the registrar of companies shall not register a company by a name that is similar to another name or by a name that would otherwise be prohibited.

In Kenya, there is no coordination between the registrar of companies and registrar of trademarks which has led to extreme anxiety amongst users of the two services. Neither the registrar of companies nor the registrar of trademarks have the capability to search for identical names or marks already registered or incorporated with either registry. As a result of the conflict, infringers are either registering well-known marks as companies with the registrar of companies and either adding a prefix or suffix or by adopting a similar name or mark and thereafter registering it as a trademark with the registrar of trademarks. The conflict is escalated by the fact that the registrar of companies and registrar of trademarks do not have a common reference database to guard against the use of or adoption of famous trade names. An infringer, therefore, can easily get away with the incorporation of a company using a well-known trademark or trade name. 

Such a scenario was dealt with in Agility Logistics Limited v Agility Logistics Kenya Limited (2010) where Public Warehousing Company KSC, a well-known-company, acquired Agility Logistics Limited incorporated in the United Kingdom and thereafter Public Warehousing Company rebranded all its global subsidiaries with the brand name Agility. In 2007 Public Warehousing Company acquired a Kenyan company then known as Starfreight Logistics Ltd and obtained registration of the trademark AGILITY in Kenya. Also in 2007 Agility Logistics Kenya Limited registered the business name Agility and thereafter registered the company Agility Logistics Kenya in 2008. Both companies were to conduct the same business. The High Court held that the Companies Act only protects such names to the extent that no other company can be registered by a similar name but does not protect the intellectual property in the name itself as to confer exclusive use, as does a trademark. However the court granted an injunction in favour of Public Warehousing Company because it had made a prima facie case against Agility Logistics Kenya for trademark infringement and passing off.

Accordingly, any company wanting to register a trademark or name in Kenya should take the following steps to ensure its mark or name is protected:

  • register the company name under both the Companies Act and the Trademarks Act at the same time;
  • consider using either a formal or informal “watching service” to monitor the registrar of trademarks and registrar of companies for infringers; and
  • be ready to take action as a soon as an identical mark or name is registered in either registry.

In conclusion, it is clear that this conflict will persist as long as the Kenyan courts are unwilling to address the issue. Legislative amendments to the Trademarks Act and the Companies Act may ease the conflict and provide avenues for the registrar of trademarks and the registrar of companies to address this conflict, but this does not seem to be imminent. The legislature must also provide clear procedure of dealing with this conflict so anyone wanting to register a trade name or trademark must undergo strict procedures to ensure their marks are protected.

John Syekei, Coulson Harney Advocates, Nairobi

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