Kenya: With Industrial Growth, More Trademark Disputes?
Friday, 21 November 2008
With the growth in Kenya’s manufacturing sector has come a clash between brand names amongst similar sector players. Albert Muriuki looks at the increase in trademark disputes, the reasons behind them and their significance for new investors.

Motor sport enthusiasts were shocked when the police in Maranello, northern Italy, broke up a ring of counterfeiters selling fake Ferraris made from old Pontiacs. For many Kenyans, however, the bust had a tinge of familiarity: Kenyans are used to buying fake Armani, Adidas, Nike and all sorts of goods and accessories. With some ingenuity, Armani becomes Armeni, Nike becomes Nikee and Adidas becomes Adidos. But this does not only affect high-end imported brands. And businesses in Kenya are now fighting back and contesting their trademarks and names. It is not only small backstreet traders infringing on rival’s names   in Kenya, the stakes run high and involve fierce business rivals. With a vibrant industrial base that has a number of established international multinationals, it is not a surprise that emerging entrepreneurs want to ride of the success of the old-timers to achieve success.

High Stakes

Kenya has a large manufacturing sector that serves both the local market and exports to the East African region. Dominated by subsidiaries of multi-national corporations, the sector contributed approximately 10% of the gross domestic product (GDP) in 2004.
Manufacturing faces many challenges, most notably high fuel and energy prices and Kenya’s notorious infrastructure problems, but the sector is a powerful player in the economy – and indeed in the East African Community (EAC). So it is little wonder that copycats should emerge in every sector of the industry, from pharmaceuticals to tobacco, to cash in on established brands. An increase in suits contesting brand names in the Kenyan market shows how important the protection of brand identity has become to maintain an edge in an increasingly competitive business environment. But not all cases are as clear cut as the fake Ferraris. In some instances, competing suppliers of the same product are also trying to use trademarks laws to get an edge over their competitors. One of the recent examples is Lords Healthcare, a case that was decided in October 2008:

Same Product, (Slightly) Different Packaging?  

Lords Healthcare Ltd is a distributor of pharmaceutical products, importing, packaging, distributing, supplying and selling drugs in Kenya. Among its range of pharmaceutical products is an inhaler used for the treatment of asthmatic patients known as Budercort-200. Budercort-200 is manufactured in India by Cipla Limited. According to Lords Healthcare, Cipla Limited had entered into an agreement that Lords should be the sole distributing agent of its products in Kenya.

The company spent about KES5m since 1998 and was awarded successive tenders to supply pharmaceutical products to Kenyatta National Hospital and other government institutions for four years. In May 2006, Lords unsuccessfully bid for the supply of 2,400 units of Budercort-200 Budesonide Inhalers to Kenyatta National Hospital. Subsequently, Lords claimed that they discovered that another company, Salama Pharmaceuticals, had won the tender and had been supplying a similar pharmaceutical product known as budercort-200 Budesonide Inhaler to Kenyatta National Hospital. The only difference here is in the spelling with a small ‘b’.

The Managing Director of Lords claimed that the product supplied by Salama was identical to their own and was therefore infringed on their trademark. Kenya’s Trademarks Act gives an owner of a trademark the exclusive right to the use of a trademark in relation to the goods or in connection with the provision of any services. It also precludes any person who is not the proprietor of the trade mark from using a mark identical with or so nearly resembling it as to be likely to deceive or cause confusion in the course of trade in connection with the provision of any services in respect of which it is registered.

In the dispute between Lords Healthcare and Salama Pharmaceuticals, the courts saw no case of trademark infringement. The reason behind the judges’ decision was that Lords Healthcare is not the manufacturer of ‘Budercort’ products, but merely packages and distributes it. Budercort trademark is an international trademark registered under the Madrid Protocol and protected through the Paris Convention to which Kenya is a signatory. The registration by Lords Healthcare of Budercort-200 with the Pharmacy and Poisons Board as a drug did not confer any exclusive rights to Lords Healthcare. Both companies had interest with the same manufacturer and parallel importation allows for importation of same products from other markets. Lords Healthcare was selling the drug manufactured by Cipla Ltd India, which had got the rights to manufacture the drug from Fujisawa Deutschland GmbH ltd, whereas Salama directly bought their ‘budercort-200’, there was no infringement.

Nivea Defends Trademarks

In a previous incident in 2002, Kenya’s Court of Appeal set out the principles upon which the courts can stop the usage of a company that is infringing another’s copyright. That case involved German cosmetics giant, Beiersdorf Ag (BDF), the manufacturers and distributers of the Nivea range of products that include soaps, toilet powders, creams, skin oils, shampoos and other hair products. The company has been selling the products worldwide under the trademark Nivea. In Kenya, the products have been manufactured and sold in Kenya by BDF’s subsidiary, Beiersdorf East Africa Limited, for over 30 years. One of BDF’s products, Nivea Pure Petroleum Jelly, is marketed in a rectangular container bearing a label comprising the word ‘Nivea’, and immediately below the words ‘pure petroleum jelly’ in small letters, all in the typical corporate design in white with a dark blue background.

However, a rival firm, Emirchem Products Ltd, was manufacturing and selling a jelly known as ‘Nivelin’ pure petroleum jelly. Nivelin was also marketed in a rectangular jar and with ‘pure petroleum jelly’ right below the word Nivelin. BDF complained that Nivelin was so similar to the name Nivea, such that it was an infringement of its trademark. BDF also complained that the design of the jar in which Emirchem marketed Nivelin was designed to pass-of the product as Nivea. Emircherm denied all these and stated that Nivelin was not similar to Nivea and there was no infringement on the trademark of BDF. Mary Gatumbi, a lawyer from the firm of Hamilton Harrison & Mathews, acting for BDF, claimed that the Managing Director of Emirchem, Peter Otieno, was working for BDF as its production manager from 1995 till he left after giving a three months notice of termination of his services.

In analyzing the case, Justice Tom Mbaluto explained that the Trademarks Act implies that a proprietor of a trademark has the exclusive user of the mark and any person who wishes to use it has to do so with a license from the proprietor. “I must observe that I find similarities and resemblance in the defendant’s mark ‘Nivelin’ whose first two syllables are exactly the same as the first two syllables of BDF’s registered mark ‘Nivea’ are striking,” said Justice Mbaluto. He also thought that it was more than a coincidence that Emirchems’ managing director was formerly the production manager at BDF East Africa before setting up Emirchem.

In ordering that Emirchem stop using the words ‘Nivelin’ as the trade mark for their brand of petroleum jelly, Justice Mbaluto noted that BDF had never acquiesced to the use of the trade mark ‘Nivelin’. On the contrary, it immediately lodged a complaint with the Kenya Industrial Property Office,” a clear indication that they were concerned with the infringement of their trademark”.

BAT’s Case Dismissed

For the tobacco conglomerate British American Tobacco (BAT), acquiescence cost the company a case that saw local rival Cut Tobacco eat into the sales of BAT’s flagship cigarette in East Africa, Sportsman. BAT, the manufactures of Sportsman cigarettes, sued Cut Tobacco, the manufacturers of Horseman, claiming that Cut Tobacco had infringed or attempted to infringe the trade mark of the Sportsman brand since 1998.

BAT had been selling cigarettes in Kenya since 1932, with their leading brand being Sportsman cigarettes. The company had registered the Sportsman brand in Nairobi in 1936, 1956 and subsequently renewed it in 1976 and 1996. The Sportsman trademark registered was the name ‘Sportsman’ with a picture of a man and the head of a horse. The man was wearing a jockey’s cap and holding a whip against a brown background.

In 1995, Cut Tobacco introduced into the market a new brand of cigarettes labeled ‘Horseman’. In 1999, Cut Tobacco redesigned Horseman which was predominantly red in color with a jockey riding a horse. According to Joseph Njuguna Kiragu, the company secretary of BAT Kenya, the introduction of Horseman cigarettes in the new redesign, coupled with a price that was lower than Sportsman’s, led to drastic reductions in the sale of Sportsman cigarettes.

That is when BAT decided to go to court. Their main objection related to the use of a color in Cut Tobacco’s cigarettes, which resembled their Sportsman as well as the use of a horse with a jockey. However, Cut Tobacco contended that BAT had acquiesced in their use of the trademark Horseman in that since the launch of the brand in 1995, Cut Tobacco had used it and sold cigarettes bearing the trade mark Horseman without any complaint from the appellant.

In the High Court, Justice Tom Mbaluto accepted Cut Tobacco’s argument on that BAT had acquiesced in their use of the trademark Horseman, similarly, the court held that there can be no proprietary rights in a particular color and that there can be no property, in general words that are descriptive of the goods. “We can say that evidence would be needed to show if the get-up of the Horseman cigarette packet is likely to deceive the cigarette buying public into believing that they are buying a Sportsman packet of cigarettes,” he court said, concluding that it did not.

But of immense interest was the use of colors, one of the major complaints of BAT. The judge’s assessment: “With regard to that complaint, it has to be observed that the use of the color red as the predominant color in a packet of cigarettes is not the exclusive preserve of anybody including BAT, the color being a conventional indicator in the industry of a strong brand of cigarettes. Indeed, there is clear evidence that the color red is used in that fashion by another manufacturer of cigarettes in this country, namely Mastermind. It is also used by BAT itself to indicate its other strong brands of cigarettes,” said Justice Mbaluto in dismissing BAT’s case.

BAT appealed against this decision to the Court of Appeal, the highest court in the land, where a bench of three judges in December 2007 unanimously backed justice Mbaluto, stating that “we are of the opinion that the learned judge (Mbaluto) cannot be faulted in any way in the manner he handled this dispute of cigarette manufactures.” BAT now has to contend with fewer sales of its leading Kenyan brand.

A similar case that is still ongoing in the commercial courts is between breakfast cereals maker Weetabix Ltd who have applied for various court orders against a local based company, Healthy U Two Thousand for allegedly infringing on the trademark of their cereal Weetabix. Weetabix argue that the make up of Health U Two Thousand cereal is similar to their and that the word ‘Beetabix’ is confusing to ‘Weetabix’. The case is still on going.

Group Four Security and Group 4 Security  

Start ups are not the only companies trying to get an edge by using a recognised established brand names, in some instances, international rebranding of multinationals, puts them in direct conflict with local companies that had already registered similar names in the local market. This became a real headache for international security firm, Group Four Security (G4S).

Operating in over 100 countries globally, G4S used to operate in Kenya as Securicor Limited since 1964. Another company, Group 4 Security, established offices in Kenya in 1982 and incorporated the trade name, Group 4 Security. The two firms provided similar services and were among the leading private security firms in Kenya. In July 2004, G4S Security Services (UK) was formed from the merger between Securicor plc and Group 4 Falck A/S’s security businesses. This necessitated a rebranding of all subsidiaries worldwide, and it was Kenya’s turn in February 2006.

However, the local G4S Security services complained about the use of a similar trademark by one of its major competitors, initiating a suit alleging that Group Four Security was infringing in its trademark and passing it off as theirs. In the High Court, Justice Azangalala agreed that there was an infringement: “In the case at hand, Group Four Security Limited name was changed from Securicor Security Services Kenya Limited to G4S Security Services (Kenya) Limited in February 2006. The name Group 4 Security was neither in the earlier name nor in the new name. In the new name, Securicor has been dropped, so the only reason why the defendant uses the mark ‘Group 4 Securicor’ is to enable it comply with the requirement of its parent company based outside Kenya. I do not find that a sufficient reason to deny the complainant the protection given it by the law, particularly as the name incorporates the trade mark. In a sense the trade mark Group 4 Security is in reality its name: Group Four Security!” said Justice Azangalala.

Although the former Securicor appealed, they saw it wiser to settle the dispute out of court and reached an amicable compromise with G4S.

Conclusions and Perspectives

Businesses anywhere in the world will seek to protect their trademarks. As the above examples show, this is becoming increasingly difficult and complex in an integrated global economy, but neglect bears far larger losses. In Kenya, trademark challenges are becoming increasingly common. As the G4S case shows, businesses often realize the importance of registering their trademarks abroad once it is too late, that is, once they are faced with counterfeiters or once they are accused of infringing the rights of others. The risks of doing so are high and the consequences may be extremely costly for a company’s entire business and growth strategy.

Since April 1, 1996 it has been possible to file a Madrid Protocol International Trade Mark application to obtain a single International Registration covering more than 70 countries. An application can designate one or more Madrid Protocol countries at the time of filing, and additional countries can be added later. Although an International Registration is generally not considered to be cost effective unless at least three or four countries are designated, it may still be a useful option considering the state of the judicial system in countries like Kenya. From the highlighted cases for example, it is clear that court cases may be decided either way, and given Kenya’s often challenging judiciary, it also pays to get specialized lawyers who know their way around the judicial system. This can have a significant impact on each particular trademark infringement. Similarly, court proceedings in Kenya can take extremely long to be concluded, therefore when an injunction is sought, the lapse in time from using a trademark can be extremely costly.

In the long run, the best cause of action for safeguarding one’s trademark internationally is through using the Madrid Protocol. British United Provident Association (BUPA), Great Britain’s leading private medical insurer, was shocked to find BUPA (Kenya) Ltd carrying out business in Kenya already. BUPA Kenya Ltd was incorporated under the Companies Act in 2000, and argued that they were entitled to a monopoly of that name in Kenya.

However, BUPA (UK) is contesting this allegation in court. This is a good example of the long judicial cases in court and the importance of registering under the Madrid Protocol. The suit was initiated in 2001, but is still dragging on and BUPA (UK) faces the risk of an upstart company undermining its credibility if anything was to happen to the Kenyan company while transacting its business. However, if BUPA (UK) had registered its trademark under the Madrid Protocol, they would have a very string case in Kenya, since both Great Britain and Kenya are parties to the law, and thus, BUPA (UK) would have relied on the protocol for protection.  

Registering under the Madrid Protocol is the same as getting several national registrations, basically making subsequent management trademark protection much easier. Only one registration is required at the International Register, and only one renewal upon expiry, and only one submission to register changes such as a change in ownership, the name, or the address of the owner. Companies having an industrial or commercial establishment in one of the Madrid Protocol countries, and individuals who live in or who are nationals of one of the Madrid Protocol countries, can file a Madrid Protocol trade mark application.

It is worth nothing that in Africa, only nine countries are signatories, with Kenya the only signatory in the whole east and central Africa. Indeed, in north, central and west Africa, only Kenya and Morocco are signatories. Kenya is an economic and business hub in the region and this is useful to investors attracted by the region’s largest market. However, it offers little reassurance to those investors who want to expand their operations or distribution network throughout the East African Community (EAC). For a trademark owner in a country that is not a party to the Madrid Protocol, the only way to obtain protection abroad is to apply separately for registration in each of the countries concerned.

Especially in African countries, such individual registrations are an extremely cumbersome, time consuming and costly process because it entails getting involved with different legal requirements and languages of the respective countries, paying fees in different currencies and engaging local lawyers. All these formalities have also a cost, which goes well beyond the fees charged by the offices. Agent fees, fees for the issuance of supporting documents, for their certified translations, etc. should also be taken into account.

Moreover, obtaining a portfolio of national registrations is not the end of the process. If the company changes its name or address, or if there is a change of ownership of the mark, this should be recorded in each of the respective countries, involving once again different legal procedures, languages and fees. However, the above examples show that failure to do so can lead to significant costs at a later stage if an opportunistic competitor, observing a company’s entry into one of the regional markets, or the success of a local company, register the same trademark in one of the neighbouring markets. Strong registration gives businesses a strong position to deter copycats and also ensures that they have much needed exclusivity in an ever competitive business scene. Registering a trademark abroad is also a source of business, both for established companies and young ingenious entrepreneurs; it provides the opportunity to license the trademark to others and may be the basis for a company’s franchising or merchandising strategy.

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Comments (2)Add Comment
written by Njuguna, November 25, 2008
THis is a good article which gives concise summary of the court cases. However apart from the Madrid system of registering trade marks internationally and the registration afforded in each individual country concerned, there is a also a regional organization called ARIPO based in Harare Zimbabwe in which it is possible to register a trade mark covering a number of countries who are members of this organization. However Kenya which is a member of this organization has not ratified the treaty which would allow its nationals to apply for trade marks through ARIPO.
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Very insightful
written by Brenda, October 07, 2009
This is one of the most insightful articles I have read about trademarks in Africa. I must congratulate you very much on a substantive and detailed analysis. Seeing as it is that trade infringement is such a common practice even in countries in Africa, what steps are African governments doing to deter this practice? Similarly, how can investors interested in Kenya check if the names they want to use are already in place? Can the author shed light on this?
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