Supreme Court of Appeal decision in ZONQUASDRIFT case: a worry for brand owners

A wine brand owner has recently been unable to enforce his trademark registration against use of a confusingly similar mark for wine grapes in a case that went on appeal to the Supreme Court of Appeal.

Registered trademarks are protected against use of confusingly similar marks on goods or services which are so similar to those for which the mark is registered that, in use, there exists a likelihood of deception or confusion.

The introduction into the Trademarks Act (1993) of protection against use of a confusingly similar mark in relation to “similar” goods or services came in the wake of the repeal of the 1963 act, which had allowed brand owners to file trademark applications defensively. Under the 1993 act, a trademark applicant must either be using the mark or must intend to use the mark on the very goods for which registration is sought, for the application to be valid. Filing applications for a mark one has no intention to use must result in invalidity.

Extending trademark protection to similar goods and services makes practical sense. A trademark serves as an indication of origin of goods or services. If one encounters a confusingly similar mark used in respect of similar goods or services to those for which a mark is registered, it stands to reason that one would wonder whether they have a common source.

Against this background, the strength of a registered trademark in Class 33 for wines was tested in the case of Mettenheimer v Zonquasdrif Vineyards CC, with judgment handed down by the Supreme Court of Appeal on November 19 2013 ([2013] ZASCA 152).

Mr Mettenheimer is the owner of the registered trademark ZONQUASDRIFT in Class 33 for goods inclusive of wine, and owner of the farm Zonquasdrift, situated between Malmesbury and Riebeek Kasteel in the Western Cape.

In 2010 a neighbouring farm started trading through the close corporation Zonquasdrif Vineyards CC, and sold wine grapes under the trading name Zonquasdrif Vineyards. The trademark owner applied to the High Court for an interdict against infringement of the trademark, and for an order that the close corporation name be amended to remove the confusing similarity between it and the registered trademark ZONQUASDRIFT.

The close similarity between the marks ZONQUASDRIFT and ZONQUASDRIF VINEYARDS was clear. The word 'vineyards' is purely descriptive, and does not distinguish the one ZONQUASDRIF from the other ZONQUASDRIFT. The case accordingly turned on the similarity between the goods in question – being wine on the one hand, and wine grapes on the other.

Given the function of a trademark as a source indicator, the question the Supreme Court of Appeal had to decide was whether consumers, having knowledge of the trademark ZONQUASDRIFT as applied to wines, and upon encountering the mark ZONQUASDRIF VINEYARDS for wine grapes, would be confused. Would they wonder whether such wine and wine grapes come from the same commercial undertaking, or source?

On a common sense approach one would. Say, for instance, one encountered wine grapes being sold under the trademark MEERLUST. Would it not be reasonable to assume that these raw ingredients for wine production emanate from the same source as MEERLUST wine?

The Supreme Court of Appeal’s finding has unfortunately been that such confusion would not arise. With reference to the UK case of British Sugar Plc v James Robertson & Sons Ltd ([1996] RPC 281 (Ch D)), it reiterated that considerations for assessing “similarity” in a trademark sense include:

1. the uses of the respective goods;
2. the users of the respective goods;
3. the physical nature of the goods; and
4. the respective trade channels through which the goods reach the market.

In applying these criteria, the Supreme Court of Appeal found any similarity to be “slight indeed”. The crux of the decision relies on a finding that wineries that buy bulk wine grapes for wine production form a specialised consumer base, and that the likelihood of confusion is therefore reduced.

This decision is surprising given that the Office for Harmonisation in the Internal Market, which handles oppositions to Community Trademark applications in the European Union, recently issued the opposite finding on virtually the same facts. There, the opponent, Smart Wines GmbH, owned the registered trademark SMART WARE for goods including wine. On the basis of this registration, it opposed an application for SMART VINEYARDS for wine grapes. OHIM refused the SMART VINEYARDS application based on the cumulative similarity between the marks (SMART WARE v SMART VINEYARDS) and the respective goods (wine v wine grapes).

The Supreme Court of Appeal’s finding in the present case is a worry not only for wineries which may be unable to prevent use of a near identical mark on wine grapes, but also for brand owners in general. Although there is little South African case law on the 'similarity of goods' test, this finding by the country's highest court foreshadows that that test shall be applied very narrowly, and consequently is to the detriment of brand owners.

Jessica Axelson, Adams & Adams, Pretoria