In 2012 the Western Cape High Court handed down a trade mark judgement that raised eyebrows. The facts were that the owner of a farm called Zonquasdrift had a trade mark registration for the mark Zonquasdrift covering wine (but not grapes). The owner of another farm in the area sold wine grapes under its name, Zonquasdrif Vineyards (no ‘t’ at the end). The court found that this use of the name Zonquasdrif Vineyards did not infringe the section of the Trade Marks Act that makes it an infringement to use a mark which is ‘identical or similar’ to a registered mark, in relation to goods or services which ‘are so similar to the goods or services in respect of which the trade mark is registered that in such use there exists the likelihood of deception or confusion’.   The court’s decision was based on the fact that wine and wine grapes are very different goods. There was also a counter-application to cancel the registration on the basis that it indicated geographical origin, but the court felt that it didn’t need to decide this issue.

On 19 November 2013 the Supreme Court of Appeal (‘SCA’) handed down its judgment.  It kicked off with some history.  It told us that Zonquasdrift - best known as the name of the end of the first stage of the famous Berg River canoe marathon - is the name of a natural crossing over the Berg River. The name, which is Dutch, has been around since 1660, but the letter ‘t’ dropped off in Afrikaans and it’s now known as Zonquasdrif.   A farm called Zonquasdrift was established in the 1700s, and the farm of the trade mark owner is a sub-division of the original farm – the crossing is, in fact, on the farm of the trade mark owner. On the opposite side of the river the crossing is on a farm called Klein Zonquasdrif, and the farm of Zonquasdrif Vineyards is also on that side of the river, some 300 metres from the crossing.

The court then told us a bit about grapes and the wine industry.  Wine grapes are not suitable for human consumption (the grapes you eat are called table grapes) and they’re not sold to the public. The trade mark owner does not make wine but sells its grapes to a wine producer called Riebeek Cellars, which sources grapes from some 32 farms in the area and sells its wine under the trade mark Riebeek Cellars. There is, however, an exception to this – Riebeek Cellars does make a small amount of Chenin Blanc from grapes grown by the trade mark owner and this wine is sold in Germany under the trade mark Zonquasdrift, which basically makes the trade mark owner a wine grape grower and a limited exporter of wine.

Zonquasdrif Vineyards is also a wine grape grower and it sells it grapes to a different wine producer.

The court then got down to some law, and in particular the tricky issue of the double similarity requirement - marks and goods. It agreed with this statement in the earlier South African case of New Media Publishing (Pty) Ltd v Eating Out Web Services CC 2005 (5) SA 288 (C): ‘‘There is, it seems to me, an interdependence between the two legs of the enquiry: the less the similarity between the respective goods or services of the parties, the greater will be the degree of resemblance required between their respective marks before it can be said that there is a likelihood of deception or confusion in the use of the allegedly offending mark and vice versa.’ The court in that case had looked across the water to the case of Canon KK v Metro-Goldwyn-Mayer Inc (1999) RPC 117 (ECJ).

The SCA said that the marks Zonquasdrift and Zonquasdrif Vineyards were ‘virtually identical’, the word ‘vineyards’ being non-distinctive and the letter  ‘t’  insignificant, which meant that it was all down to the similarity of the goods. The court referred to the old UK case of British Sugar Plc v James Robertson & Sons Ltd (1996) RPC 281, where the court said that you need to looks at factors like these:  the uses of the goods; the users of the goods; the physical nature of the goods; and the trade channels though which they reach the market. The SCA emphasised that this list is not exhaustive.

Applying these tests, the SCA concluded that the goods were very different: the one being an alcoholic beverage, the other a fruit; the one being sold to the public, the other to the trade. It then dealt with the trade mark owner’s argument in some detail.  This argument went as follows: the one is a raw ingredient of the other; there is no clear delineation between farms that produce grapes and those that sell both grapes and wine; the trade mark owner could choose to sell Zonquasdrift wine in South Africa so this notional use must be considered; if one does consider such notional use, it’s clear that people might assume that Zonquasdrift wine and Zonquasdrif Vineyards’ grapes come from same farm.

The court rejected this argument. First, the buyers of wine grapes won’t be confused because they’re experts who base their purchasing decisions on various factors but not trade marks. Second, the buyers of wine (the general public) won’t be confused either because they won’t even be aware of Zonquasdrif Vineyards’ grapes. Besides, in order for  members of the public to be confused they would need to make all sorts of assumptions,  for example about there actually being a wine farm called Zonquasdrift, about that farm being owned by the owner of the trade mark, and about the wine that’s made there actually being made from grapes that come from the farm. Assumptions they’re unlikely to make, given that wine makers often source their grapes from many different farms (like Riebeek Cellars does). The SCA also made the point that, although a trade mark serves as a badge of origin, in the wine industry a trade mark serves to guarantee the origin of the wine only and not the grapes – the badge of origin in respect of the grapes is provided by the ‘Wine of Origin’ (WO) scheme, in terms of the geographical areas where wine is produced are divided up into regions and districts. So basically the SCA felt there was never going to be any confusion as to the origin of the goods.

The court also discounted two instances of actual confusion – one involved Eskom, which threatened to cut off the trade mark owner’s power when Zonquasdrif Vineyards failed to pay its account, and the other occurred when someone asked the trade mark owner’s farm manager whether his employers had opened a business called Zonquasdrif Vineyards CC. The court felt that this type of confusion related to the business or farm names rather than trade marks.

So the finding of non-infringement was upheld, based on the differences in the goods.  Once again there was no need to deal with the claim for the cancellation of the trade mark, but some may feel that the geographic nature of the trade mark may have influenced the court in some way. Some may also wish that there had been some reference to recent European cases on the similarity issue.   It’s not the easiest judgement to follow and it’s not entirely clear how significant it is. It’s arguably very industry-specific, with the differences in the purchasers of the two goods clearly playing an important role. Yet it may also be seen as another sign that our courts are adopting a more restrictive approach to trade mark rights. This does, of course, have important implications for trade mark owners, especially when it comes to making decisions about what goods or services to cover in trade mark applications.