Legal pitfalls to avoid when venturing into Africa

We recently had a Namibian court decision in a passing off matter, in the case of Mega Power Centre CC t/a Talisman Plant and Tool Hire v Talisman Franchise Operations (Pty) Ltd. The decision is interesting for a number of reasons. First, passing off cases are fairly rare, so any new decision is welcome. Second, intellectual property (IP) law decisions are few and far between in Africa, so any new judgment is read with interest. Especially now when more and more companies are doing  business in Africa - South African companies will be interested  to note that the case pitted a Namibian company with South African connections against a South African company seeking to start business in Namibia.  Which brings us on to the third reason why the judgment is interesting:  it highlights some of the pitfalls that should be avoided when venturing into Africa.

The facts of the case were simple. A Namibian company, which was a franchisee of a South African company, had been hiring large, 'operator-intensive' tools and equipment to the Namibian building industry under the name Talisman Tool Hire for a number of years.  When it discovered that a South African company intended to start a business hiring smaller, 'non- operator-intensive' tools under the name Talisman Hire, the Namibian company sued for passing off.

Passing off is what's known as a 'common law action', which means that the law on this topic  is not contained in any statute √¢‚Ǩ‚Äú the law has been developed over many years, and the principles are to be found in decided cases.  The law of passing off in Namibia follows South African law which, in turn, tends to follow UK law. In order to sue for passing off you do not need to have a trade mark registration but you do need to establish three things: that you enjoy a reputation or goodwill in a name or get-up; that the other party is, through the use or a similar name or get-up, misrepresenting that there is a connection with your business; and that you are likely to suffer damages.

The Namibian judge relied heavily on South African law. He quoted from the South African case of Adcock-Ingram Products Ltd v Beecham SA (Pty) Ltd 1977 (4) SA 434 (W),where passing off was explained as follows: 'The plaintiff must prove in the first instance that the defendant has used or is using in connection with his own goods, a name, mark, sign or get-up which has become distinctive. ...The plaintiff must prove that the defendant's use of the feature concerned was likely or calculated, to deceive, and thus cause confusion and injury, actual or probable, to the goodwill of the plaintiff's business, as, for example by depriving him of the profit he might have had by selling the goods.'

The judge also quoted from the famous South African case of Brian Boswell Circus (Pty) Ltd and Another v Boswell-Wilkie Circus (Pty) Ltd 1985 (4) SA 466 (A) where this was said of passing off: 'The wrong known as passing off  is constituted by a representation, express or implied, by one person that his business or merchandise, or both, are, or are connected with those of another√¢‚Ǩ¬¶such representations...are usually made by the wrongdoer adopting a name for his business which resembles that of the aggrieved party's business; and the test is then whether in all the circumstances the resemblance is such that there is a reasonable likelihood that ordinary members of the public, or a substantial section thereof, may be confused or deceived into believing that the business of the alleged wrongdoer is that of the aggrieved party or is connected therewith.'

The Namibian judge felt that Talisman was not a particularly distinctive word: 'The word "talisman" is not a fancy or invented word...it is a word commonly used in the English language...the applicant is not entitled to the exclusive use of the name'. Yet he was prepared to accept that the reputation or goodwill was there. He also accepted that the names were likely to be confused. Despite this, he held that there was no passing off. The reason: there was no likelihood of damage apart from a possible loss of custom, and the judge felt that this was unlikely to happen.  The judge said this: 'I invited (applicant's counsel, name removed) during the course of argument before me to deal with this issue, and to indicate how the applicant is likely to suffer damage. The impression I gained is that the argument will have it that the public will be likely to hire the equipment they need, from the second respondent, in the mistaken belief that they are doing business with the applicant. Given the distinct, although related difference between what the applicant makes available for hire and what the second respondent makes available for hire, there is no possibility that the applicant will lose customers.'

The decision will raise some eyebrows, given the strength of the name Talisman and the closeness of the business areas. But what the decision certainly does bring home is this: attention to detail is critical.  If you're going to do business in Africa, you certainly don't want to have to be relying on a nebulous common law action like passing off. You should, of course, have trade mark registrations in place (and indeed patents and designs where applicable). Trade mark registration is possible throughout the continent of Africa, through either national registrations, regional registrations like OAPI, and, in certain countries, the international registration system (Madrid).   It's very likely that if the Namibian company had had a trade mark registration for Talisman it would have been successful.

The judgment also throws a spotlight on the fact that there still isn't a great deal of IP expertise in Africa.  As we have seen the judge was critical of the inability of the Namibian company's advocate to suggest any form of damage beyond loss of custom. He was equally critical of the company's attorney who failed to act swiftly and decisively when the South African company first appeared on the scene. He said this: 'The steps taken by the applicant and its lawyer (name removed) to redress the threat leave much to be desired. The steps taken to put it bluntly were inept and ineffective. To that end a reading of the affidavit deposed to by (name removed) on that aspect makes for poor reading.'

The case therefore brings home the importance of getting good representation in Africa. IP owners are discovering that it makes sense for them to channel all their African IP work through a single firm. A firm that not only has specialist knowledge of African IP laws, but also understands the challenges that exist in doing business on the continent.  A firm that has established offices in a number of African countries, and that has solid relationships with quality firms in those countries where it doesn't yet have offices.

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Ilse Du Plessis is a director in IP (Intellectual Property) at ENS (Edward Nathan Sonnenbergs)