{"id":83817,"date":"2016-12-12T20:53:15","date_gmt":"2016-12-12T18:53:15","guid":{"rendered":"http:\/\/www.myza.co.za\/the-necessity-of-reducing-licensing-agreements-to-writing\/"},"modified":"2016-12-12T20:53:15","modified_gmt":"2016-12-12T18:53:15","slug":"the-necessity-of-reducing-licensing-agreements-to-writing","status":"publish","type":"post","link":"https:\/\/www.myza.co.za\/press\/the-necessity-of-reducing-licensing-agreements-to-writing\/","title":{"rendered":"The necessity of reducing licensing agreements to writing"},"content":{"rendered":"

The necessity of reducing licensing agreements to writing<\/a>: <\/p>\n

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The necessity of reducing licensing agreements to writing – By Allison Williams, Director, Norton Rose Fulbright and contributor to LexisNexis Practical Guidance Intellectual Property<\/p>\n

[Durban, 12 December 2016] In terms of South African law, there is no obligation to have a trade mark licence agreement reduced to writing. There are, however, many practical advantages to doing so, particularly when it comes to setting out the parameters of the licensee\u2019s use of the licensor\u2019s trademarks insofar as jurisdictions, time periods, and the quality of the licensee\u2019s products are concerned. Often licence agreements are entered into when both parties are in an amicable business relationship, particularly insofar as group company settings are concerned. However, when the nature of the business relationship changes (either through a falling out between the parties or through a change in ownership), the party seeking to enforce its rights can often find itself in murky waters.<\/p>\n

The all too familiar scenario of a foreign company seeking to enforce its rights against its local distributor\/manufacturer in South Africa once their relationship terminated showcased itself in the recent case of Joest (Pty) Ltd v J\u00d6ST GmbH + Co. KG and others [2016] JOL 36596 (SCA). Joest v J\u00f6st \u2013 round one.<\/p>\n

The essential enquiry in this case revolved around the issue of which party was the lawful proprietor of the Joest\/J\u00f6st trademarks and whether or not the manufacturing agreement between the parties constituted a licence agreement or an assignment agreement in respect of the proprietary rights in the Joest\/J\u00f6st trademarks. The specific facts of the case were as follows:<\/p>\n

Joest Vibrations Technics (Pty) Ltd (Joest\u2019s South Africa\u2019s predecessor) was founded with the aim of operating J\u00f6st Germany\u2019s business in certain Southern African countries under licence from J\u00f6st Germany. Joest Vibrations Technics was, at the time of its incorporation, a subsidiary wholly owned by J\u00f6st Germany. This position changed in 1989 when J\u00f6st sold 75 percent of its share in Joest Vibrations Technics to the Vogel Family (who currently control Joest South Africa).<\/p>\n

During 1989, it was agreed by the parties that Joest Vibrations Technics could use the Joest\/J\u00f6st trade marks in certain jurisdictions in Southern Africa. Joest Vibrations Technics (Pty) Ltd changed its name to Joest (Pty) Ltd in 1992. Subsequently, in 1996, the remaining J\u00f6st shares in Joest (Pty) Ltd were sold to the Vogel Family. Despite the divestment, however, the manufacturing agreement between J\u00f6st Germany and Joest South Africa continued. This provided that Joest South Africa could make use of J\u00f6st Germany\u2019s know-how in respect of the products listed in the manufacturing agreement. During the course of the parties\u2019 relationship, both parties had applied for, and obtained registration of, the Joest and J\u00f6st trademarks, respectively, in South Africa. It was common cause that the word \u201cJoest\u201d was merely the English spelling of the German surname \u201cJ\u00f6st\u201d. The manufacturing agreement continued in this manner until it was terminated in April 2012. Joest South Africa claimed that the agreement had been terminated as it had received very little usable know-how, particularly when taking into account the licensing fees that it was paying to J\u00f6st Germany. Joest South Africa also alleged that it had used its own know-how to develop and manufacture its own products, which it sold under the Joest trade mark.<\/p>\n

Shortly after the termination of the agreement, Joest South Africa instituted proceedings against J\u00f6st Germany for the expungement from the trademarks register of J\u00f6st Germany\u2019s various trademarks incorporating the word \u201cJOST\u201d, \u201cJOEST\u201d and variations thereof. J\u00f6st Germany, in turn, filed a counter-application for the expungement of Joest South Africa\u2019s trademarks, as well as an interdict to restrain Joest South Africa\u2019s continued use of the trade marks. J\u00f6st Germany argued that Joest South Africa was \u201cunprincipled\u201d when they registered the trademarks and it was in fact only years later that they discovered the trademarks had been registered.
It was Joest South Africa\u2019s contention that it had developed and manufactured its own products using its own technology, alongside those that it manufactured under licence and to which it attached the Joest\/J\u00f6st trade mark. On this basis, Joest South Africa contended that it had established its own reputation and, as such, was the lawful proprietor of the Joest trade marks it had registered in South Africa.<\/p>\n

The High Court disagreed and dismissed Joest South Africa\u2019s main application, and upheld J\u00f6st Germany\u2019s counterapplication. Both parties appealed the decision to the Supreme Court of Appeal (SCA) (although J\u00f6st Germany\u2019s appeal was limited to the issue of not being granted an interdict and enquiry into damages). Joest v J\u00f6st \u2013 round two In upholding the decision of the court of first instance to expunge Joest South Africa\u2019s registrations (and granting the relief that J\u00f6st Germany had originally sought), the SCA reiterated the well-known principle that an agent who merely sells goods bearing the mark of its principal does not acquire proprietorship or goodwill in the trade mark. The SCA further emphasised that trade mark law has as its subject matter trade names, symbols, and signs which aim to convey information regarding trade origin. Therefore, as J\u00f6st Germany had at all times maintained control of the products to which the Joest\/J\u00f6st trade marks were applied, Joest South Africa could not have been considered to be the proprietor of the trade marks. This element of quality control is an important factor in cases of this nature. The SCA held further that, particularly during the years when Joest\u2019s predecessors were wholly owned subsidiaries of J\u00f6st Germany, the reputation and goodwill created through Joest South Africa\u2019s use of the trademarks attached to J\u00f6st Germany, as they were under the control of J\u00f6st Germany. Therefore, Joest South Africa\u2019s claim that it derived ownership of the trade mark as a result of its predecessor\u2019s use is flawed, as these predecessors were never the proprietor of the mark.<\/p>\n

Of important consideration in the decision was that:<\/strong><\/p>\n