Member Article

In December 2012 it was reported that a Brazilian company called Gradiente had secured a trade mark registration in its own country for the mark iPhone for smartphones, having first applied way back in 2000. It was also reported that the company had recently started selling a product that looked quite similar to Apple’s iPhone, and that this product featuredthe Android operating system - Android is, of course,  owned by Apple’sfiercecompetitor, Google.  Yes,it sounds unbelievable, but Apple apparently does not have rights to the name iPhone in South America’slargest market. Gradiente explained its apparent tardiness by saying thatits ‘priority was to conclude a corporaterestructuring process that ended earlier this year.’ The news reports said that there had been no contact between the companies,  but this comment from Gradientesuggests that it perhaps anticipates doing a deal with Apple: ‘In Brazil, Gradiente has the exclusive right to use the iPhone brand. This company will adopt all the measures used by companies around the world to preserve its intellectual property rights.’

This is not the first time that Apple has had problems of this sort. A while back it was reported that Apple hadserious issuesregarding its iPad brand in the most important market of them all, China.  What happened there was that Apple  set up a special purpose vehicle (a company created for a specific purpose)  as part of its trade mark clearance exercise, which then bought  all the relevant registrations for the mark iPad. As part of this process, the company bought certain registrations for the mark iPad from a Taiwanese company called Proview for a price of US$35 000. These registrations, Apple thought,covered China, South Korea and the European Union (EU). But it turned out that theregistrations didnotcover China at all, and that the registration for China was owned by another company that was associated with Proview.  Something that Apple’s lawyers failed to pick up. When Apple then started selling its iPad product in China it was sued for trade mark infringement by the company that owned the Chinese registration, which then soughtcompensation in an amount far larger than US$35 000. Apple took the matter to court, claiming that it had genuinely believed that it had acquired the rights for China, and that its error resulted from the fact that it had not properlyunderstood the documentation, which was in Mandarin. The Chinese court dismissed Apples’ case and, as far as we know, some deal was eventually done.

Apple’s problems with iPhone and iPad highlightan anomaly of 21^st century business  –although companies operate in a global village, their intellectual property rights are territorial. What this means, for example, is that  if you get  a trade mark registration or a patentin South Africa, you will have exclusive rights to your name or technology in South Africa, but you won’t have any rights elsewhere. In practice then, whenever you want to bring out a new product you  need to do a clearance exercise to make sure that youaren’t infringing rights in any of the countries where you want to do business. This will require you to not only register your rights in all those countries where thefield is open, butpossiblyalso to buy existing registrations in those countries where it isn’t.  If you’re interested in doing business worldwide, you’ll be embarking on one very large and one very expensive operation.

So IP rights are territorial in nature and even the  so-called international registration systems like the  Madrid system for  trade marks and the PCT system for patents are no more than methods of getting registrations in individual countries through the offices of a central body. There are, however,  certain exceptions to theterritoriality rule. One obvious one is that, although a patent is granted for an particular country, the patent will be invalid if the technology covered by the patent has already been used in any other country. In the case of trade marks, special  recognition is given to so-called  ‘well known marks’, marks which are well known in a country even though they have never been used there, and are therefore felt to be there deserving of some protection -– it was this that allowed a US company to enforce its McDonalds mark against a South African company at a time when the US company had never done business here.

A far more importantexception to the territoriality rule is the creation of supra-national registration systems.  There’s one in French-speaking Africa called OAPI, but themost  important of these is the Community Trade Mark (CTM)system. The CTM system allows a company to get a single trade mark protection for the entire European Union (27 countries) through a single registration.  This system has proved to be very popular and very effective. Yet even here there are anomalies.  For example, the CTM system co-exists with national registration systems in member countries, and this means that a CTM application can be opposed on the basis of a national registration in any membercountry.Another anomaly of the system  was highlighted by a decision of the European Court of Justice that came out at the end of 2012.  The decision in the case of Onel v Omeldealt withthe thorny problem of  where exactly a CTM registration must be used in order to remain valid – a CTM registration, like any other, can be attacked if it is not used for a lengthy period. The court in this case confirmedthat use in just one EU country might be sufficient to keep the registration alive, especially in cases where the market for the product is limited to just one country.

A number of  South African companies are now genuineglobal players, and an even larger number do business across the continent of Africa. These companies need to consider their IP issues very carefully.