PASSING-OFF – WHEN THE GOODWILL OF YOUR BUSINESS IS EXPLOITED FOR ANOTHER’S BENEFIT

Some of you may follow the new reality drama series called Die Real Housewives van Pretoria.?Some participants may have received more attention than they were anticipating, including Melanie Viljoen, the owner of Tammy Taylor Nails South Africa. ?

Carte Blanche described the South African Tammy Taylor franchise as “The empire that is built on false promises and stolen dreams”.?According to Carte Blanche, Tammy Tailor Nails US cancelled the License and Distribution agreement with Melanie and Peet Viljoen in April 2022.?However, the Viljoen couple proceeded to trade as “Tammy Taylor”, using the intellectual property of Tammy Taylor Nails US to convince the public that it is still part of the franchise.?Tammy Taylor Nails US owns the registered trade marks (i.e., the name “Tammy Taylor” and all Tammy Taylor logos used in the business) in South Africa.

The Trade Marks Act provide various remedies to proprietors whose registered trade marks are being infringed.?However, the Act does not provide any remedies for persons whose intellectual property rights are unregistered.

Passing-off is a common law principle that occurs when there is a misrepresentation that the goods or services marketed by person A are the goods of person B or that the goods and services of person A are connected to the business of person B.?In other words, the goods and services are passed off as being that of another person.?Unlike trade mark infringement, passing-off protects the unregistered rights of a business, such as its “goodwill”.?The goodwill of a business refers to the reputation that the business has built-up in its industry.

In the recent court case of Dart Industries Incorporated and Another v Botle Buhle Brands (Pty) Ltd and Another (636/2021) [2022] ZASCA 170 (“Draft Industries v Botle Buhle”), the Supreme Court of Appeal (“SCA”) held as follows –

“A certain measure of copying is permissible, provided that the imitator ‘makes it perfectly clear to the public that the articles which he is selling are not the other manufacturer’s, but his own articles, so that there is no probability of any ordinary purchaser being deceived.”

In the above case, Botle Buhle Brand released a bottle that is identical to Tupperware’s Eco Bottle.?Tupperware then applied to court seeking to restrain the Botle Buhle Brand from infringing its registered mark.?Tupperware also sought a restraining order based on passing-off.

In passing-off proceedings, the test is whether confusion is likely.?In the above case, the Supreme Court of Appeal held that there are three requirements for a successful passing-off action, namely -

(i) proof of the applicant’s reputation in the business;

(ii) there must be a reasonable likelihood that the public may be deceived into believing that the business of the respondent is the business of the applicant; and

(iii) proof of damage to the applicant.?

Accordingly, the onus of proof is on the applicant to prove that it has reputation in the industry, that there is a likelihood of confusion and that the conduct of the respondent caused damage to the applicant.?

In the case of Draft Industries v Botle Buhle, the SCA held that reputation can be established by providing evidence regarding the manner and the scale of the use of the overall commercial image of the products and services in the industry.?The court considered the sales figures, the promotional material and catalogues that were distributed to customers on a monthly basis to determine whether the appellant’s succeeded in proving its reputation in the industry.??The SCA further considered both Tupperware and Botle Buhle’s business model and held the following –

“This association is even more likely to be made online with no one to explain the distinction between the two bottles. Because of the similarities, the consumer is likely to perceive the two bottles to be associated. This type of confusion, which results in consumers purchasing one product thinking that it is the one they know, or is associated with it, is at the heart of the action of passing-off. Therefore, the likelihood of confusion exists.”

Accordingly, Tupperware succeeded with the passing-off action, with the SCA concluding that “damage to Tupperware is inevitable”.

In the case of Tammy Taylor, it appears as though the Viljoen couple is still advertising its products and services on Instagram under the name “Tammy Tailor Nails South Africa”.?Their Instagram page does not contain a statement which makes it clear to the public that their products are not those of Tammy Taylor Nails US. ?This may likely confuse the public into believing that the products advertised are still those of Tammy Taylor Nails US.?It will be interesting to see what course of action Tammy Taylor Nails US intends to utilise to protect their intellectual property rights and what the Viljoen couple’s defence will be in this regard.

Read more on the court case of Draft Industries v Botle Buhle by clicking on the following link: