Rebranding: a few legal considerations

Sometimes the reason for rebranding may be connected to a desire to shed a "tainted" image.

For example, it has recently been reported that the global oil and gas giant, BP, may be considering a re-brand in light of the negative publicity it has received as a result of the oil spills in the Gulf of Mexico. Closer to home it has been reported that the South African Football Association (SAFA) may be considering a change of the popular national football team name Bafana Bafana due to the fact that this mark has been registered in the name of another party. There are a few basic intellectual property considerations which businesses would do well to keep in mind in the rebranding process.

Valuable form of intellectual property

Perhaps a good starting point is the recognition that trademarks or brands are a valuable form of intellectual property. Their function is to indicate to the public that "these are the goods or services of me, the trademark owner." Their role in attracting customers should not be underestimated since consumers generally stick to the brands that they know or hold in high esteem. That is the power of a good brand.

Nowadays the value of trademarks can be reliably calculated and determined, and this is an everyday process accepted by none other than the Receiver of Revenue, as well as financial institutions and the business community. For example, the magazine Business Week has ranked Coca-Cola as the most valuable brand in the world with its notional value exceeding US$65 billion.

Obviously very few brands can be compared with Coca-Cola, but this brand illustrates well the point that trademarks are valuable property.

It stands to reason that a sizeable chunk of the value of a trademark can be attributed to the exclusivity attached to it. It is therefore critical to ensure that this exclusivity is maintained at all costs, which can normally be achieved through trademark registrations, domain name registrations and preventing others from diluting the mark.

Protect the "old"

When rebranding, consideration should be given to the protection of the "old" as well as the new brand in order to prevent potential losses as a result of diverted custom. If a registered trademark is being discontinued, the registration should be maintained for as long as possible. There will obviously be a cost implication in maintaining and promoting the brand, which would have to be considered, but in the vast majority of cases the benefit in maintaining the trade mark registration will far outweigh the related cost as this would provide a relatively easy and inexpensive way of preventing potential competitors from profiting from any goodwill in the brand. It will also always be possible for the trademark owner to sell the brand if it is considered to be expendable, as opposed to merely abandoning it.

An important consideration in relation to discontinued brands is that in most jurisdictions trademarks which are not in use in the course of trade will at some point become vulnerable to removal from the Trade Marks Register. In South Africa registered trade marks become vulnerable to such an attack after a period of five years of non-use. In order to prevent this from happening, the mark will have to be used in the course of trade at least periodically.

As some beer drinkers would be aware, for example, SABMiller has discontinued its Lion Lager brand, but in order to prevent the mark from becoming vulnerable to an attack based on non-use, Lion Lager beer is now available in South Africa only during the festive season.

Protection for the new brand

When rebranding, protection for the new brand should definitely be secured prior to its launch or publication. Typically this would entail conducting searches of the registries in all the countries in which one has or intends to have a viable business undertaking, to ensure that the proposed trademark is available for use and registration. If the mark is available it should be registered immediately in all the relevant classes.

This applies equally to business names as well as domain names. In the case of Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd, news of the incorporation of A under the name of Fletcher Challenge, which was formed through the merger of three New Zealand companies, was announced to the Stock Exchange of New Zealand on 22 October 1980. On the next day the news appeared in a number of newspapers and financial journals. On the same day, B reserved the company name Fletcher Challenge.

In Glaxo Plc v Glaxowellcome Limited, A issued a press release on 23 January 1995, announcing a takeover bid which, if successful, would form a new entity called Glaxo-Wellcome Plc. On 24 January 1995 B filed an application to register the company name Glaxowellcome Limited. Both matters had to be resolved through litigation.

Copyright protection

An often overlooked aspect of trademarks is that some of them also enjoy copyright protection. If a mark is in the form of logo or a combination of words and a design or device, such as the BP and Coca-Cola trademarks, it will generally also enjoy copyright protection as an "artistic work". The term "artistic work" as it is used in the Copyright Act No. 98 of 1978 has no reference to artistic quality, and should therefore not be misunderstood. Even "plain looking" logos or devices will in most instances enjoy copyright protection.

Another little known fact is that copyright generally belongs to the author of the particular work and can only be transferred in writing. It makes no difference that the designer was remunerated for creating the logo. Unless there is a written agreement in terms of which ownership of the copyright in the logo or device is transferred to the trademark owner, the copyright subsisting therein belongs to the designer. So what happens if during the course of A's rebranding exercise the designer of A's new logo, as the legitimate owner of the copyright, sells it to B, a competitor of A?

In terms of section 10(12) of the Trade Marks Act 194 of 1993 ("the Act") a trade mark shall not be registered, or if registered shall be removed from the Register if its registration is contrary to any law. In the circumstances mentioned above if A tries to register the new mark he can be blocked in terms of section 10(12) of the Act. If he uses the mark he will infringe B's copyright and can therefore be stopped in terms of the Copyright Act. Consequently A's rebranding exercise could be stopped dead in its tracks.

Depending on the extent of A's outlay at that stage this could potentially result in a substantial loss, or at least some embarrassment. It is also arguable that a trademark "owner" who does not also own the copyright in the mark cannot be the bona fide owner of the mark. In terms of section 10(3) of the Act, a mark in relation to which the applicant for registration has no bona fide claim to proprietorship shall not be registered. All of this points to the importance of ensuring that the ownership of the copyright in logo and device marks is secured.

Fresh look at the business

Rebranding signals change. A new image will cause consumers to take a fresh look at a business. It would be a pity if they find a business which has unwittingly opened itself up to litigation as a result of a failure to adequately secure its intellectual property.