Assignment of unregistered trademarks - without goodwill to which it is attached?

Unregistered trade marks continue to be governed by common law as opposed to registered trade marks which are regulated by statute.

Source: Linda Moeketsane, Professional Assistant, Spoor & Fisher
 
In terms of s 39 (1) of the Trade Marks Act 194 of 1993 (the Act), a registered trade mark can be assigned with or without the goodwill of the business connected with the goods or the services.
However, with regard to unregistered trade marks, it has always been trite law that one cannot assign an unregistered trade mark without the goodwill of the business in connection with the goods or services. In BUTTERWORTHS PUBLICATIONS (PTY) LTD v JACOBSENS GROUP (PTY) LTD AND ANOTHER 2005 2 All SA 588 (T), the court held that an unregistered trade mark is not capable of being the object of proprietary rights independently of the business and the goodwill to which it is attached. Consequently, an unregistered trade mark cannot be transferred separately from the business or from the goodwill to which it is attached.
It follows from the above that the purchaser cannot obtain rights in an unregistered trade mark without the goodwill of the business.
On 19 November 2009, the Western Cape High Court discussed this issue in INCLEDON CAPE (PTY) LTD v DPI PLASTICS (PTY) LTD (5850/07) [2009] ZAWCHC 182, the facts of which are summarized briefly below:
On 28 February 2001, the respondent sold its business division INCLEDON ENGINEERING WESTERN CAPE as a going concern to the applicant. The applicant continued using the name INCLEDON IN THE WESTERN CAPE and the rest of the Republic. In terms of the agreement, the respondent sold its business assets and trade names. These concepts were defined as follows in the agreement:
Business assets – includes trade names
Trade names – means registered and unregistered trade name, trade marks and designs of INCLEDON in respect of the business, including the name INCLEDON CAPE.
The respondent traded as DPI Plastics and had a subsidiary, DPI PHUMELA.
Five years after the conclusion of the sale agreement, DPI PHUMELA changed its name to INCLEDON DPI and this entity traded in similar goods as the applicant.
The applicant sought an interdict to prevent the respondent from using its trading name INCLEDON.
The applicant argued that it had acquired goodwill of the business which confers on it the right to the exclusive use of the name INCLEDON within Western Cape and that the trade name already had a reputation there at the time of the alleged passing-off. Furthermore, the business was sold to the purchaser inclusive of the trade name and the goodwill previously owned by INCLEDON ENGINEERING WESTERN CAPE and the seller has lost the right to use the trade mark in respect of the territory to which it applies.
The respondent argued that the mark was sold in terms of the sale agreement without the goodwill of the business. The exclusion of the goodwill implied that the respondent had never intended to dispose of the name INCLEDON and had always wanted to retain ownership thereof.
The sale agreement did not stipulate whether the trade name was transferred with or without the goodwill in the business.
The contentious issue was whether the trade name INCLEDON was transferred to the applicant, but most particularly, whether an unregistered trade mark can be assigned independently of goodwill of the business.
The court conceded that at the time of the purchase of the business, the name INCLEDON had a reputation in the territory. Furthermore, goodwill can exist independently of the entrepreneur of the business undertaking. Hence an undertaking may be sold without including its goodwill as part of the mark. The sale of a business without its goodwill allows the seller to set up a competing business in the vicinity of the old business and to transplant its goodwill to the new business. The purchaser of the old business will then have to start afresh to develop the goodwill of the business. A distinctive mark is capable of existing independently of the business and the goodwill of the business.
Although Goliath J, held that the assignment of the name also included assignment of the goodwill of the business (since the business was sold as a going concern, together with its fixed assets, contracts, debtors and trade names), he stated that the two concepts (an unregistered trade mark and goodwill) are capable of existing independently of each other.
Therefore, this judgment raises some questions regarding the nature of an unregistered trade mark. If the two concepts exist independently, I suggest “one could argue that it may be assigned separately”.