[Guest Post] Bad blood is not bad faith in South African trade mark disputes

The IPKat has received and is pleased to host the following guest contribution by KatfriendKatfriend Thato Moloto (Trademarkia) on the decision of the High Court in Pretoria, South Africa on whether an applicant for trade mark registration who applies without a bona fide claim to a mark is to be considered to be making their application for registration in bad faith. Here’s what Thato writes:

Bad blood is not bad faith in South African trade mark disputes
by Thato Moloto

It is surprisingly common for former members of an organization, sometimes even founding members, to resign or be pushed out and immediately apply for the former organization's trademark in their own name. The bad blood between them plays itself out as a battle for the “soul” of the organizations. This was the case in Lee Riders Motorcycle Club v Jacobs and Another, decided in the High Court in Pretoria, South Africa. The Court had to determine, among other arguments, whether the former members of a voluntary association had a bona fide claim of proprietorship over the motorcycle club's marks and, related to this, whether the application was made mala fides (in bad faith) where these bona
fides were not established.
 

Background
Lee Riders Motorcycle Club (the Club), a voluntary association of motorcycle enthusiasts established in 1984, opposed the application for the LEE RIDERS word mark and associated logo. These marks were identical to the ones used by the Club since its formation, with the word mark adopted in 1984 and the logo from 2000. The dispute has its roots in 2015 when trade mark applications were filed by estranged
members of the Club (represented by another member, Mr Nigel Jacobs), some of whom were founding members and who had subsequently formed a new club under the same name. The original Club opposed the applications on several absolute and relative grounds, including the confusing similarity between the marks and the use of the proposed registration in a deceptive manner.

Bad blood!

The Court readily ruled in favour of the opponent on the relative grounds. Given that the Club's use of the common law marks since their adoption was not disputed, and neither was the reputation of the marks and the goodwill attached thereto, this conclusion is unsurprising. The Court held that it was apparent that the use of the same name and logo by two different clubs in the same recreational field would deceive and cause confusion.

Bona fide claim of proprietorship
On the absolute grounds, the crux of the trademark applicants’ argument was that the members who had left the Club, outnumbering the remaining members and including the former’s founding members, were the legitimate proprietors of the marks. The Court dispensed with this argument based on the continuing legal status of the voluntary association.
Under South African common law, a voluntary association (or universitas) is comprised of three or more persons entering an agreement to form an organization to achieve a common objective. Although the Club did not have a written agreement on its establishment in 1984, it subsequently adopted its constitution in 1990 and has existed as a voluntary association to date. Critically, whether incorporated through common law or legislation, the association is independent of its members. Therefore, beyond a prior written agreement to that effect, individual members cannot claim ownership of the marks. The Court avoided making a determination on the authorship of the logo design, an issue that is not insignificant in this writer’s view but, the same approach will be adopted here as it is not particularly relevant to the subject matter of this contribution.

Application made mala fide
An interesting further argument was the question of whether the applications were made in bad faith. While, on the face of it, it may seem that an applicant without a bona fide claim to a mark makes their application for registration in bad faith, this is not necessarily the case. The lack of bona fides regarding ownership does not automatically evidence clear mala fides in relation to the application. Instead, this provision refers to the motive or intention of the trademark applicant. The Court expounded on the meaning of mala fides, noting that it means "fraudulent" or "malicious". In other words, bad faith refers to the intentional and dishonest use or registration of a trademark with the intention to deceive consumers or unfairly compete with other businesses. The Court preferred a characterisation of the trademark applicant's conduct as ill-advised rather than wilfully malicious. That the applicants seemingly laboured under a misapprehension regarding their rights was decisive in this instance. The conclusion was that applying for the trade mark was misplaced but that it was not mala fide.


Comment
As the conclusion on the applications made mala fide was based specifically on the Court’s views on the conduct of the applicants, it is difficult to fault beyond the bench. However, there is a question about fiduciary duties that may have warranted a second look. In certain contexts, it could be argued that the fiduciary relationship imposed on the applicants raises a general duty of trust and loyalty regarding the interests of the Club as the earlier rights proprietor. Although no longer a member of the voluntary association, this may colour the intention of the applicants. Nevertheless, what has been clearly reaffirmed in this case is the dishonest or malicious intent required to establish the mala fides of a trademark applicant.
 

Furthermore, although discussed in relation to voluntary associations, the principles discussed in this matter apply equally to directors of statutorily incorporated private companies. Save for an agreement otherwise, an estranged director or co-founder of a company should not be able to leave a company and apply to register the company’s trade mark.
 

Lastly, given the importance and prestige of political monikers in South Africa, several high profile disputes on the political front have played out with the original formations and splinter groups of political parties claiming the names and moral custodianship of political movements. In these disputes too bona fide proprietorship claims have taken centre stage. What is most apparent is that bad blood between former associates may not necessarily mean bad faith, but the stain of it may be an indication of something more in the right context.