South Africa’s Supreme Court of Appeal (“SCA”) has handed down an important trade mark judgment. The case of PepsiCo Inc v Atlantic Industries deals with the issues of distinctiveness and likelihood of confusion, with a special emphasis on sub-brands. There are a lot of important points in this short judgment, so I am going to quote liberally.

The facts: PepsiCo applied to register the trade mark Pepsi Twist (with and without a device) for soft drinks. The applications were opposed by Atlantic Industries (“Atlantic”) on the basis that they clashed with their existing registrations for Twist, Lemon Twist and Diet Twist in the name of Atlantic; so PepsiCo counter-applied for the cancellation of the earlier registrations.

Cancellation

The basis of the cancellation claim was that “twist” is a descriptive word. The SCA disagreed. It said that, although the word does have meanings in the context of drinks – for example, “a curled piece of lemon peel used to flavour a drink” and “a drink consisting of a mixture of two different spirits or other ingredients, such as gin and brandy” – these meanings are slang, obsolete and known to very few South Africans. The court felt that most people would see Twist as an “arbitrary brand name without meaning”. It made the important point that, when it comes to brand creation, you do not always need a coined word:

“Like a made-up word a common word which is arbitrary when applied to a particular product is the exemplar of a mark inherently capable of distinguishing.”

The court referred to an Australian decision, Cantarella Bros Pty Ltd v Modena Trading Pty Ltd, where the court said that, although a word that is descriptive of the goods will be refused, this does not extend to words that are “allusive or metaphorical”. Applying this test, the SCA said this: “If ‘twist’ has any meaning as applied to soft drinks, it is ‘allusive or metaphorical’.”

Likelihood of confusion

When it came to the issue of whether the trade mark Pepsi Twist was likely to cause confusion, the SCA repeated much of what it has said in recent judgments such as Yuppiechef Epson Holdings (Pty) Ltd v Yuppie Gadgets Holdings (Pty) Ltd. It said that a “value judgment” is required; that this must be based on the “global appreciation of the two marks”; that “lesser similarities in marks may be counterbalanced by stronger similarities in the goods”; and that “if they (marks) share a dominant feature, there is ordinarily a greater likelihood of deception or confusion”. 

The SCA also said that it was relevant that the soft drinks market is huge and diverse. It said that the market “includes persons of all ages, the rich and the poor, the sophisticated and unsophisticated … soft drinks are often bought on a whim … consumers would not ordinarily subject the bottle or can to careful scrutiny”. 

But what about the elephant in the room, the presence of major trade mark Pepsi in Pepsi Twist, what was the relevance of that? The SCA made a number of points:

• It said that, although in the case of PepsiCo’s trade mark the words Pepsi and Twist have equal prominence, in fair and reasonable use, PepsiCo could increase the size of Twist. 
  
  
• It said that Twist is the distinctive part of the trade marks Twist, Lemon Twist and Diet Twist, which means that PepsiCo’s trade mark incorporates the sole distinctive feature of Atlantic’s registrations.
  
  
• It said that Twist is in fact no less inherently distinctive than Pepsi: “Because Twist in this context is non-descriptive, it has the same ability as the made-up word Pepsi to be memorable and distinguishing.”
  
  
• Although it seemed a little unsure of this, the SCA decided that the renown of the Pepsi trade mark should not make any difference – it referred to earlier South African decisions that have said that you simply place the trade marks side by side in the marketplace and ignore extraneous factors.
  
  
• It made the point that confusion works both ways: “While the incorporation of Pepsi into the proposed mark would avoid creating in the minds of ordinary consumers the mistaken belief that Pepsi Twist was produced by a party independent of the Pepsi stable, consumers might be deceived into thinking that, or confused about whether, the producer of beverages under the name Twist (i.e. Atlantic) is part of the Pepsi stable.”
  
  
• It examined the issue of sub-brands in some detail: “Another relevant consideration is that Pepsi would be regarded by most consumers as a primary identifying mark of all PepsiCo’s products. When a second word is added to a primary mark in order to distinguish the producer’s products from each other the second word has a unique and important function in identifying the product – e.g. Pepsi-Cola, Pepsi Zero, Pepsi Max, Pepsi Wild Cherry and (if it is registered) Pepsi Twist. In the case of primary and sub-brands, the sub-brand is important to consumers. They will not look out for Pepsi products in general but for a particular product. Because Pepsi-Cola was the first and probably still is the most widely sold Pepsi beverage the word ‘Pepsi’ on its own would probably be understood as referring to Pepsi Cola. For other Pepsi products the emphasis would fall on the sub-brand, in the present case the Twist component.”
  
  
• It referred to the European decision of Medion AG v Thomson, where the issue was whether a registration for Life for electronic devices had been infringed by the use of Thomson Life. The court there said that if the common word (Life) has “an independent distinctive role” in the composite mark (Thomson Life) there can be infringement. 
  
  
• It also referred to a French decision where an opposition to HYUNDAI EON on the basis of EON was upheld.

So, the trade mark registrations for Twist, Lemon Twist and Diet Twist stood and the trade mark applications for Pepsi Twist failed. Undoubtedly, a very important decision.