PepsiCo Inc v Atlantic Industries

PepsiCo Inc is the registered proprietor of various trade marks consisting of or incorporating the words PEPSI and PEPSI-COLA. Atlantic Industries, a wholly owned subsidiary of The Coca-Cola Company, is the registered proprietor of the trade marks TWIST, LEMON TWIST and DIET TWIST. All registrations are in class 32, which includes mineral and aerated waters and other non-alcoholic drinks. In 2006, PepsiCo applied to register the word mark PEPSI TWIST and a device mark incorporating the words PEPSI TWIST. Atlantic opposed the registration. PepsiCo countered by applying for the expungement of Atlantic's TWIST marks on the grounds that they fell foul of sections 10(2)(a) and 10(2)(b) of the Trade Marks Act, alleging the marks were not capable of distinguishing and were purely descriptive. The Registrar referred the matter to the High Court. The High Court dismissed PepsiCo's expungement application but granted PepsiCo's registration application. Both parties appealed to the Full Court, which upheld Atlantic's appeal and dismissed PepsiCo's cross-appeal. PepsiCo obtained special leave to appeal to the Supreme Court of Appeal.

• Whether Atlantic's registered marks TWIST, LEMON TWIST and DIET TWIST were wrongly remaining on the register for failing to be capable of distinguishing within the meaning of section 9 of the Trade Marks Act
• Whether Atlantic's marks consisted exclusively of a sign or indication which may serve in trade to designate the kind, quality, quantity, intended purpose, value, geographical origin or other characteristics of the goods in contravention of section 10(2)(b)
• Whether PepsiCo's proposed marks PEPSI TWIST were so similar to Atlantic's registered marks that their use would be likely to deceive or cause confusion in terms of section 10(14) of the Trade Marks Act
• Whether the word 'twist' as applied to soft drinks is inherently capable of distinguishing or is purely descriptive

The appeal was dismissed with costs, including the costs of two counsel. This meant that: (1) PepsiCo's application to expunge Atlantic's TWIST, LEMON TWIST and DIET TWIST marks was dismissed; and (2) Atlantic's opposition to PepsiCo's registration of the PEPSI TWIST marks was upheld, preventing PepsiCo from registering those marks.

The ratio decidendi comprises several binding principles: (1) A common word that is arbitrary when applied to a particular product (i.e., has no descriptive connection to the product) is inherently capable of distinguishing within the meaning of section 9 of the Trade Marks Act, even if the word has meanings in other contexts. (2) For a mark to be considered purely descriptive under section 10(2)(b), other traders must be likely, in the ordinary course of business and without improper motive, to desire to use the same mark in connection with their goods; words that are merely allusive or metaphorical in relation to goods are not purely descriptive. (3) In assessing likelihood of confusion under section 10(14), a global assessment must be conducted based on the overall impression created by the marks, considering visual, aural and conceptual similarities and their distinctive and dominant components. (4) Where a proposed mark incorporates the whole or the sole distinctive element of a registered mark in relation to identical goods, there is a likelihood of confusion, even if the proposed mark also incorporates another well-known element. (5) An earlier mark can retain an independent distinctive role in a composite mark even if it does not dominate the overall impression, and this can create a likelihood that consumers will believe the goods derive from economically linked undertakings. (6) In assessing likelihood of confusion, it is sufficient that a substantial number of consumers would be confused or uncertain; confusion need not affect all or most consumers.

The court made several obiter observations: (1) The court noted without deciding that there was overwhelming evidence that Atlantic had used TWIST widely on millions of cans and bottles through substantial advertising, such that any deficiencies at registration would have been cured by subsequent use, though this issue did not require determination. (2) The court expressed doubt (without finally deciding) about whether, in applying section 10(14), a court may have regard to extraneous matters such as the existence and reputation of other registered marks, or whether the comparison must be based solely on notional fair and reasonable use of the marks in question. This issue, raised but not fully resolved in earlier cases like Upjohn Company and Cowbell, was noted as not requiring final determination because the result would be the same on either approach. (3) The court observed that the proposed device mark was depicted in monochrome in the record, though the court assumed there was no color limitation under section 32 of the Act. (4) The court noted in passing that PepsiCo could choose in fair and reasonable use to give greater visual prominence to TWIST than to PEPSI in the proposed marks. (5) The court commented that the 'Pepsi' brand would be regarded by most consumers as a primary identifying mark with TWIST functioning as a sub-brand, and that in such configurations the sub-brand has a unique and important function in identifying the particular product.

This case is significant in South African trade mark law for clarifying the distinction between descriptive and inherently distinctive marks. It establishes that common words used arbitrarily in relation to goods (where the word has no descriptive connection to the goods) are inherently capable of distinguishing and deserve protection. The judgment provides important guidance on the assessment of likelihood of confusion under section 10(14), particularly in cases involving composite marks and the use of sub-brands. The court's adoption of the reasoning in the European Court of Justice's Medion decision demonstrates alignment with international trade mark principles, particularly the concept that an earlier mark can retain an independent distinctive role even when incorporated into a composite sign with another well-known mark. The case reinforces that when assessing confusion, courts must consider the practical realities of how consumers purchase and request products, including oral requests in bars and restaurants. It also emphasizes that the relevant consumer base for mass-market products like soft drinks is broad and includes unsophisticated consumers who may not scrutinize labels carefully.