A TWIST in the tale: Not your typical cola war

The Supreme Court of Appeal handed down a landmark decision recently involving a trade mark dispute between two of the world’s largest beverage manufacturers, PepsiCo Inc (Pepsi) and Atlantic Industries (Atlantic), a wholly-owned subsidiary of The Coca-Cola Company.

This case was not your typical “cola war”, but rather involved TWIST, the well-known carbonated beverage brand which has been available in South Africa since the 1970s (originally as LEMON TWIST). Atlantic is the proprietor in South Africa of the TWIST, LEMON TWIST and DIET TWIST trade marks in relation to non-alcoholic drinks falling in class 32.

In 2006, PepsiCo applied to register the trade marks PEPSI TWIST and a PEPSI TWIST label, also in relation to non-alcoholic beverages in class 32.

Atlantic opposed the registration of PepsiCo’s PEPSI TWIST trade mark applications on the basis, firstly, that they were confusingly similar to Atlantic’s prior, registered trade marks and, secondly, that Pepsico could not claim to be the bona fide proprietor of the PEPSI TWIST trade marks, given that they wholly incorporated Atlantic’s TWIST mark.

PepsiCo countered by seeking the removal of Atlantic’s registered trade marks from the Trade Marks Register, alleging that they were descriptive of the goods to which Atlantic’s marks relate and not inherently capable of distinguishing its beverages from those of other proprietors.  It is trite that words which exclusively describe the goods to which they are applied cannot be registered as trade marks.

In support of its contentions, PepsiCo relied heavily on two dictionary definitions of the word “twist”, being “a curled piece of lemon etc. 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 etc.”

The matters were initially referred by the Registrar of Trade Marks to the North Gauteng High Court which dismissed both Atlantic’s opposition and PepsiCo’s counter-application, leading to the parties appealing to the Full Bench of the North Gauteng High Court.  The Full Bench upheld the appeal by Atlantic and dismissed the cross-appeal by PepsiCo, with costs.

PepsiCo petitioned the Supreme Court of Appeal for leave to appeal the decision of the Full Bench, which it was granted. The matter was heard before Judges Lewis, Cachalia, Petse, Lamont and Rogers on 28 August 2017.

Decisions from the Supreme Court of Appeal in recent years regarding confusing similarity between trade marks, including those involving the trade marks YUPPIE CHEF vs YUPPIE GADGETS, KNIGHTS vs BLACK KNIGHT and LUCKY STAR vs LUCKY FISH, although all decided on their particular facts, had overwhelmingly found against there being any likelihood of confusion, leaving trade mark attorneys and trade mark owners alike concerned that perhaps the SCA was leaning away from enforcing registered trade mark rights in South Africa.

However, the Supreme Court of Appeal returned to basic trade mark principles in the Pepsico/Atlantic case and ruled in favour of Atlantic, dismissing PepsiCo’s appeal with costs.

The Supreme Court of Appeal rejected PepsiCo’s contention that “twist” meant a beverage of mixed ingredients and commented that this definition was “obsolete English slang, known by very few, if any, South African consumers, even those whose first language was English”.  The Court also went on to state that, to most South African consumers, the mark TWIST as applied to Atlantic’s beverages is an arbitrary brand name without meaning and, when it is applied to a particular product, it is the “exemplar of a mark inherently capable of distinguishing”.

The Court also commented that this case was distinguishable from Pepkor Retail v Truworths Ltd [2016] ZASCA146, in that the trade mark THE LOOK which was the subject of that decision was, in the fashion retail industry, an expression which carried “the universal ordinary meaning of fashionable or trendy clothing or outfits”, rather than being a “covert or skilful allusion to such goods”.

In finding in favor of Atlantic in the opposition, the Court felt it necessary to only rule on the issue of confusing similarity, ie. whether the proposed PEPSI TWIST trade marks were sufficiently similar to Atlantic’s trade marks to create a likelihood of deception or confusion.

The Court found that if a side by side comparison of the marks in the market place is made, the TWIST trade mark, which is the whole of the Atlantic’s TWIST trade mark and the dominant and distinctive feature in its LEMON TWIST and DIET TWIST trade marks, when incorporated within the PEPSI TWIST trade mark, has equal prominence and essentially retains its distinctive features, which will create a likelihood of deception or confusion.

Interestingly, one of the factors which the Court took into account in finding that there would be a likelihood of deception or confusion is the worldwide trend of companies using primary and sub-brands, eg. Pepsi-Cola and Pepsi Wild Cherry. The Court held that, in these instances, the emphasis will fall on the sub-brand or consumers will refer to the sub-brand when identifying the product. As such, consumers wanting a Pepsi Twist may drop the “Pepsi” and simply order a “Twist”, as consumers are likely to equate Pepsi with the well-known Pepsi-Cola beverage.

The Court also referred to with approval the European Court of Justice judgement in Medion v Thomson Multimedia Sales Germany & Australia GmbH [2005] EUECJ C-120/04, which concerned the infringement of the LIFE trade mark by Thomson through use of its THOMSON LIFE trade mark and found that the principles laid down in that case were consistent with the principles of our law.

It would be fair to say that the lines have now been drawn and that one cannot simply add one’s house brand to a competitor’s trade mark and argue that they are different as consequence. The judgement is a victory not just for Atlantic but for the enforcement of trade mark rights in general in South Africa.