Brand genocide

Google is one of the largest and most successful multinational companies. Have you ever paused to wonder what its most valuable asset is? Is it the massive bank of computer hardware, its portfolio of software, or its real estate holdings? No, it is the trademark Google. This trademark has been valued at US$44.3 billion and is rated as the most valuable trademark in the world. It constitutes nearly one-third of the company's total value.

A trademark is created and sustained by being used in trading activities, i.e. in advertising, on labels etc. The strength and value of a trademark is dependent on the extent of its use. If such use is discontinued, the trademark will wither and die. Think of trademarks like Studebaker for cars, Instamatic for cameras, Cavalla of cigarettes, Ipana for toothpaste. They were all famous in their day, but they have now been extinguished on account of non-use. Like flares shot into the night sky, they have burned brightly for a while but have faded away to nothing. Trademarks die if they are not used. Valuable items of property are destroyed in this manner.

This scenario is about to unfold before our very eyes.

Global warfare

A global war has broken out against smoking and tobacco products, instigated by the World Health Organisation. Countries, South Africa included, have banned the advertising and promotion of tobacco products and brands. This has severely dented the usage of tobacco trademarks. The war has now entered a new phase and a second offensive has been launched with Australia at the forefront. Other countries are following it into battle and the South African government has indicated that it will soon take up arms and join them.

The new offensive attacks the use of brands on the packaging of tobacco products, by means of legislation banning pictorial trademarks. The Australian so-called "plain packaging" legislation allows the use of only word trademarks, in plain print of very small size, against a fawn-coloured background, to appear, along with anti-smoking wording and lurid pictures of potential damage to health, on the product packaging. This legislation sounds the death knell of all logo and label trademarks, most of which are registered separately under trademarks legislation. Such trademarks are, by virtue of their enforced discontinuation of use, destroyed, literally by the stroke of a pen. Valuable items of property are summarily obliterated. This form of mass extermination amounts to brand genocide.

The question may be asked whether it is equitable and reasonable that valuable items of intellectual property should be destroyed in this manner in pursuit of the goal of curtailing smoking. Is diminishing the ability of the public to distinguish the cigarettes produced by one company from those produced by another company, in other words curtailing the function of a trademark as a "badge of origin", likely to stop new smokers from entering the market? Is this destruction of property by the state lawful?

Major international tobacco companies brought this question before the Australian Supreme Court in a challenge to the constitutional validity of the plain packaging legislation. It was argued that the legislation infringed against the clause of the Australian constitution that protects private property. The court conceded that the prevention of the use of trademarks amounted to the "taking" of property from the trademark owners, but found that such action did not give rise to the "acquisition" of that property by the state as contemplated by the property clause. It therefore held the legislation to be constitutionally valid.

The decision of the Australian court precipitated victory celebrations around the world, including in South Africa, as though VE Day had arrived. The assumption was made that if plain packaging legislation could survive a constitutional challenge in Australia, it necessarily follows that the same will apply in other countries. Following this decision, the South African Minister of Health glibly stated that this country will emulate the Australian legislation and a draft bill to this effect is expected any day.

Too gung-ho?

Is our minister being too gung-ho and jumping to conclusions too hastily? The property clause in our constitution differs significantly from the equivalent clause of the Australian constitution. Our property clause provides essentially that no law can permit an arbitrary deprivation of property and that, moreover, if a deprivation of property amounts to expropriation, reasonable compensation must be paid. Compared to the Australian constitution, the emphasis is on the deprivation of property rather than on its acquisition by the state.

There can be little doubt that preventing trademarks from being used, and thereby destroying them, amounts to a deprivation of property. The crucial question is whether, in the circumstances of the matter, the deprivation is arbitrary as contemplated by the property clause. "Arbitrary" in this context has been interpreted to mean that there is no sufficient correlation between the objective sought to be achieved and the deprivation of the property. It is felt that the mere presence of a logo, as distinct from a word trademark in plain print (which is allowed), on a cigarette pack is unlikely to be the root cause of a non-smoker deciding to take up smoking. The destruction of a logo trademark is thus arbitrary in the context.

There is legal authority for the proposition that the total destruction or nullification of property, which does not entail the passing of ownership of it to the state, can amount to expropriation of that property. This is certainly the situation that prevails in the present instance. Is the minister willing to pay compensation to the tune of millions of rands for every trademark destroyed? Brand genocide could turn out to be an expensive exercise!

It therefore appears that, if the minister goes ahead with his proclaimed intention of cloning the Australian plain packaging legislation, he is likely to encounter a strong challenge that his legislation is unconstitutional. The battle won against tobacco trademarks in Australia is, thus, only of local significance and a fresh battle, with a different outcome, may be looming in South Africa.

The moral of the story is that, if the minister wants to curtail smoking, and really believes that this is achievable by means of legislation, he should look elsewhere than at trademarks (which are but irrelevant pawns in the game) in order to achieve his objective.