A M Moolla Group Limited and Others v The Gap Inc and Others

The Gap Inc (respondent), a US company, established its first GAP store in 1969 and expanded internationally. By 1991, GAP had become one of the world's largest apparel brands with hundreds of trade mark registrations globally. However, the respondent showed limited interest in South Africa prior to the 1990s. In 1971, a local individual named Hirsch 'coined' and used the GAP trade mark on clothing in South Africa, applying for registration in 1973 (before The Gap Inc's use of GAP on clothing in the US). During the 1970s, the proprietor (Salt of the Earth Creations, third appellant) manufactured and sold jeans under the GAP mark. In 1983, the AM Moolla Group obtained control of the proprietor. Capitalizing on trade sanctions against South Africa and the absence of Article 6bis protection, the proprietor changed its GAP mark to THE GAP and registered additional marks that copied the respondent's logos, including GAP KIDS and GAP STORES. The respondent applied for expungement of these South African registrations on grounds of non-use and sought an interdict against the appellants' use of GAP marks, claiming GAP was a well-known trade mark entitled to protection under section 35(3) of the Trade Marks Act 194 of 1993, which incorporates Article 6bis of the Paris Convention. The High Court granted the interdict and ordered expungement. The appellants appealed.

• Whether the respondent's GAP trade marks constituted well-known trade marks entitled to protection under section 35(3) of the Trade Marks Act 194 of 1993 and Article 6bis of the Paris Convention
• Whether the principle of territoriality in trade mark law precluded the respondent's claim where the local marks were adopted before the respondent's marks became well-known in South Africa
• Whether the proprietor's registered trade marks should be expunged on grounds of non-use under section 27(1)(b) of the Trade Marks Act
• Whether use by members of the AM Moolla Group constituted 'permitted use' by the proprietor under section 38
• Whether quality control by the proprietor is a requirement for permitted use by licensees
• Whether the proprietor had a bona fide claim to proprietorship of the trade marks under section 10(3) of the Act

The appeal against the section 35(3) interdict was upheld with costs (including two counsel). The appeal was otherwise dismissed. The cross-appeal was allowed with costs (including two counsel). The following trade marks were ordered expunged: TM 73/1378, TM 80/5548, TM 88/4994, TM 88/8783 and TM 89/5087. The Registrar was ordered to effect the necessary rectification. The respondents were ordered to pay the costs of the application (including two counsel). The counter-application was dismissed with costs.

The binding legal principles established are: (1) The principle of territoriality applies to trade marks - they are purely territorial concepts, legally operative only within the territory in which they are used and registered. A foreign trade mark registration and use does not itself bar adoption and registration by another person in South Africa unless attended by 'something more'. (2) For Article 6bis protection of well-known marks under section 35(3) to apply, the foreign mark must have been well-known in South Africa at the time the local mark was adopted as a 'reproduction, imitation or translation'. Subsequent acquisition of well-known status does not retrospectively taint earlier legitimate adoption. (3) Under the Trade Marks Act 194 of 1993, 'bare licensing' (licensing without quality control) is permissible. Quality control by the proprietor is not a legal requirement for permitted use under section 38, though loss of distinctiveness may be a separate ground for expungement if it occurs. (4) The proprietor bears the onus of proving permitted use in expungement proceedings under section 27(1)(b), and must provide factual evidence (not mere allegations) of licensing arrangements, including details of who granted the license, to whom, when, and on what terms. (5) Use of associated marks or marks with non-substantial alterations may be accepted as equivalent to use of the registered mark under section 31(1).

The court made several non-binding observations: (1) On trafficking: Harms JA noted that 'trafficking' is an emotive term that appeared in the repealed Act but not in the current Act, and that exploiting marks to increase their value for sale does not constitute improper or mala fide commercial exploitation. (2) On business morality: While the court found Hirsch's adoption of the first GAP marks legally proper, it questioned 'the business morality of the adoption by slavish imitation of the respondent's trade marks after the Group's take-over', though this was legally permissible absent well-known mark status. (3) On the respondent's explanation: The court expressed skepticism about the respondent's political explanation for not entering the South African market earlier, noting it 'rings somewhat hollow' given the slow pace of enforcement efforts. (4) On the Group's corporate structure: The court commented critically on the 'loose structure of the Group, which consists of companies and partnerships with an overlap of shareholders and directors' and tendency to 'ignore corporate identities'. (5) On future litigation: The court acknowledged that the result 'may satisfy neither party because their respective ability to prevent the other from using GAP marks in this country hangs in the air and further litigation may be on the cards'. (6) The court cited with approval the approach in Scandecor that customers rely on market forces and the proprietor's self-interest in maintaining mark value rather than legal guarantees of quality.

This case is a leading South African authority on the principle of territoriality in trade mark law and the protection of well-known trade marks under Article 6bis of the Paris Convention. It establishes that foreign trade mark use and reputation do not automatically preclude local adoption unless the mark was already well-known in South Africa at the time of local adoption. The judgment clarifies that Article 6bis protection only applies to reproduction/imitation of marks that were well-known at the relevant time. The case is also significant for endorsing the concept of 'bare licensing' (licensing without quality control requirements) under the Trade Marks Act 194 of 1993, departing from the more restrictive registered user requirements of the previous Act. It provides important guidance on what constitutes 'permitted use' and the evidentiary requirements for proving licensing arrangements in expungement proceedings. The judgment demonstrates the court's strict approach to the onus of proof in non-use expungement applications.