BY Ilse du Plessis
Business failure: what happens to the trade marks?
The South African publishing industry has been hit by two bombshells, leading to speculation about the future of many much-loved magazine titles.
As in much of the world, the publishing industry in South Africa has been under pressure for some time. But, seemingly, Coronavirus (COVID-19), was the final straw. We recently learned that the South African publishing company, Associated Media Publishing, will be no more, which means that you’ll no longer find the following favourites in your doctor’s waiting room: Cosmopolitan, House & Leisure, Good Housekeeping and Women on Wheels.
Then came the news that the long-established South African publishing company, Caxton, has decided to drop a number of its biggest titles: Bona, Country Life, Essentials, Food & Home, Garden & Home, People, Rooi Rose (on Pretoria’s shelves continuously since 1942), Vrouekeur, Woman & Home and Your Family.
There are some pretty valuable trade marks involved her, but what happens to them? There are all sorts of possibilities and the issues discussed here are by no means exhaustive.
The titles belong to foreign companies
It’s quite possible that some of the titles mentioned are owned by foreign companies and that they have been used in South Africa under licence. The demise of the South African user, or the decision of the South African user to stop publishing, won’t necessarily have a negative effect on trade mark rights. These rights will remain with the foreign company who could, if they chose or were able to do so, license another South African company. If the trade mark is registered, they could record the new licensee as a registered user and, if necessary, cancel the registration of the old registered user. The foreign company could also choose to sell the South African rights to a third party or, even enter the South African market directly.
A saviour is found
There’s word that Caxton is in talks to save or take over some of the titles. This would presumably involve a sale of rights. In the case of titles, which are actually owned by Caxton, this would involve an assignment of the trade mark registrations to the new owner. If Caxton is itself a licensee of a foreign company this arrangement would, of course, require the cooperation and consent of the foreign trade mark owner. What would happen here is that the recordal of the old licence arrangement would be replaced with a recordal of the new one.
Companies go into liquidation
When a business goes into liquidation the liquidator tries to sell the assets. Magazine titles are trade marks and they are therefore assets that can be sold. Titles owned by a publisher going into liquidation could be sold to third parties. As for titles licensed to a publisher going into liquidation, it might be possible to secure a transfer of the licence to a third party, but that transaction would almost certainly require the consent of the trade mark owner.
Trade mark is not sold in liquidation | bona vacantia
What happens to assets that are not sold as part of the liquidation process? In terms of South African law (Rainbow Diamonds (Edms) Bpk en andere v Suid-Afrikaans Nasionale Lewensassuransiemaatsskappy) such assets accrue to the state as so-called bona vacantia. This is something that happens automatically, with no court order being required.
Interestingly, a short article entitled “The forgotten trade mark: bona vacantia, what happens to trade marks when the owner no longer exists?” appeared in a recent issue of the official publication of the UK trade mark attorneys’ profession. It’s likely that the authors of this article were also thinking about the fact that COVID-19 will create havoc with businesses and trade marks.
The authors say that if you’re doing a trade mark clearance exercise, and you find a similar mark, you should make sure that the owner still exists. If the owner no longer exists the registration may well have become Crown property through the concept of bona vacantia. There is a specific government department that is authorised to sell such trade marks. However, they do warn readers not to expect bargains – the department is apparently under a duty to get the best price.
Trade mark registration becomes vulnerable to attack
A registered trade mark that has not been used for a period of five years or longer can be cancelled for non-use by an interested party. If, as a result of the developments regarding Associated Media and Caxton, a magazine title falls into disuse, trade mark registrations for the title could become open to attack by a third party, who might see some benefit in acquiring a name with a residual reputation.
More on residual reputation
Some of the titles that are at stake may retain a reputation for a number of years. What would happen if a third party were to start using such a name? Cleary, if the trade mark owner no longer exists there is no action that can be taken. But in the case of a foreign publisher that used a local licensee it might be tempted to sue a third party for passing off, or to object to an application to register a similar mark.
The COVID-19 pandemic may cause considerable ructions for businesses and brands across the spectrum. If you have any concerns or queries about the issues raised here please contact us.
Ilse du Plessis
IP | Trade Mark Attorney | executive
+27 82 411 7547