Cyberlaw@SA - Chapter 3


M Viljoen BLC LLB GM du Plessis BLC LLB G Vivier BEng (Electronics Eng) BCom LLB Partners at Adams & Adams, Pretoria

1. Introduction

South African trademark law recognises and protects the rights that persons acquire in trademarks, trade names or trading styles.¹ These rights are protected by statute² and also in terms of the common law.

Since the Internet has become such an important marketing tool, it is self-evident that the right of a proprietor to use a domain name, which is identical to or incorporates its trademark, is of the utmost importance for any business that the proprietor intends to conduct on the Internet. A domain name is a business asset. In the last few years, a vast number of disputes have arisen between parties which do not have any legal right to register or use specific domain names and the true trademark proprietors, which claim to be legally entitled to register and use the relevant domain names.

To understand the complexity of domain name disputes and other trademark disputes on the Internet, including the use of trademarks as metatags, it is necessary to explain briefly what a trademark is and how it can generally be protected against infringement by third parties.

2. Trademarks

Trademarks can, broadly speaking, be divided into registered trademarks and unregistered (or common law) trademarks. Registering a trademark is not mandatory, but trademark registration affords the proprietor strong statutory protection and remedies against infringement.³

A trademark is any mark used or proposed to be used by a person in relation to goods or services for the purpose of distinguishing that person’s goods or services from those of another.⁴

2.1 Registered trademarks

In South Africa a registered trademark may include a device, name, signature, word, letter, numeral, shape, configuration, pattern, ornamentation, colour, container for goods or any combination of these.⁵

In terms of the Trade Marks Act 194 of 1993, infringement of a trademark will occur when:

an identical mark, or a mark so nearly resembling a registered trademark as to be likely to deceive or cause confusion, is used in the course of trade, without the authority of the trademark owner, in relation to the goods or services for which the trademark is registered⁶
an identical or similar mark is used in the course of trade, without the authority of the trademark owner, in relation to goods or services which are so similar to the goods or services in respect of which the trademark is registered, that in such use there exists the likelihood of deception or confusion⁷
unauthorised use is made of a mark, in relation to any goods or services, in the course of trade, which is identical or similar to a registered trademark, if such trademark is well known in South Africa and use of the mark would be likely to take unfair advantage of, or be detrimental to, the distinctive character or the repute of the registered trademark, notwithstanding the absence of deception or confusion⁸

The meaning of the term “well known” was examined in the McDonald’s⁹ case. A trademark will be considered to be well known in South Africa if the mark is known to a substantial number of persons interested in the relevant goods or services. In essence, the test is the same as the well-established common law test applied to determine whether a trader has acquired the necessary reputation to succeed in a passing-off action.

The Act also provides protection for unregistered well-known trademarks against the unauthorised use of a reproduction, imitation or translation of the mark, in relation to goods or services which are identical or similar to the goods or services for which the trademark is well known if the use is likely to cause deception or confusion.¹⁰

From the above it appears that, in principle, if a third party uses a trademark which is identical or confusingly similar to that of the trademark proprietor and such use is without the authority of the trademark proprietor, such use could amount to trademark infringement.

The Trade Marks Act refers to fair practice and instances where bona fide use of a trademark will not amount to trademark infringement. Section 34(2) states that a registered trademark will not be infringed by any bona fide use by a person of his own name of any bona fide description or indication of the kind, quality, intended purpose or characteristics of the person’s goods or services, provided that such use is consistent with fair practice.

Although South African courts have not interpreted whether the use of trademarks as metatags¹¹ would amount to trademark infringement, it would certainly depend on the circumstances of each case. When a web site offers a directory of cars for sale, it is arguable that the use of trademarks of car models may be descriptive use, which is consistent with fair practice. On the other hand, where one car manufacturer uses the trademark of another car manufacturer as a metatag to direct Internet traffic to its own web site, it is doubtful that such use would be bona fide or consistent with fair practice.

Furthermore, notwithstanding the possibility that use of a trademark as a metatag by a third party of a registered trademark could fall within one of the exceptions set out in section 34(2), such use could still amount to passing-off or unlawful competition, depending on the circumstances.

It is important to note that the use of a mark in the course of trade is a requirement for any type of infringement in terms of the Trade Marks Act. Whether a mark is being used in the course of trade is a question of fact and depends on the circumstances of each particular case. It should be noted, however, that it is questionable whether the mere registration of a domain name, without any use of such domain name, constitutes infringement. This aspect has been examined in a number of domain name disputes and is discussed in more detail below.¹²

2.2 Unregistered trademarks

Our common law recognises the rights that a person acquires as goodwill (which includes, as a component, a reputation)¹³ or the ability to attract custom, which attaches to a trademark. The principles of unlawful competition and passing-off are of particular relevance. Passing-off has been defined in the case of Capital Estate & General Agencies (Pty) Limited v Holiday Inn, Inc.¹⁴ as follows:

“The wrong known as passing-off consists in a representation by one person that his business (or merchandise, as the case may be) is that of another, or that it is associated with that of another, and, in order to determine whether a representation amounts to passing-off, one inquires whether there is a reasonable likelihood that members of the public may be confused into believing that the business of the one is, or is connected with, that of another”.

The protection afforded to a trademark owner in terms of the common law is in addition to any statutory protection the owner may have in terms of the Trade Marks Act and is not affected in any way by legislation on the subject of trademarks.¹⁵

The proprietor of a common law trademark is entitled to prevent another person from passing-off goods as being associated or connected, in the course of trade, with the proprietor or the proprietor’s goods. In this regard, the proprietor has to prove two things:

that he has used his mark to such an extent that he has acquired a reputation and goodwill in the mark
that the other person’s conduct is likely to cause deception or
confusion among customers¹⁶

Against the background of the above, the difficulties arising from the registration of domain names that conflict with prior trademark rights are now examined.

3. Domain names

3.1 Differences between trademark registrations and domain name registrations

To understand the peculiar difficulties underlying domain name disputes, it is necessary to have some background regarding the resolution of domain name disputes internationally, and the difference between the domain name registration system and the general system of registration of trademarks throughout the world.

First, each domain name must be unique, whereas under the trademarks
registration system in general, there can be a multitude of identical trademarks coexisting on the register; for example, if they are used and registered for different goods or services, or used and registered in different territories. However, of all the proprietors that own the identical trademark, only one can register and use the corresponding domain name. By way of example, there are a number of proprietors that use the same trademark STERLING, but for different goods and services. Only one of them would be allowed to register the domain name sterling.co.za in South Africa.

Second, registration is allowed of any domain name that is not exactly identical to a domain name registered earlier. It therefore does not prohibit the allocation of similar (even confusingly similar) domain names to different proprietors in the same business. For example, sterling.co.za could be registered by the proprietor of the trademark STERLING and stirling.co.za by a competitor, although the principles of trademark law prohibit the use of confusingly similar trademarks, as mentioned earlier.

3.2 General registration procedure

The registration procedure for domain names normally involves the completion of a form that is available on each of the administration sites of the different domains, which is then e-mailed, faxed or hand-delivered to the administrator of the relevant domain.

The information usually required by these domain administrators is:

the full domain name to be registered
the organisation in whose name the domain name will be registered
an administrative and technical contact
a domicilium citandi et executandi

The entry of a primary and secondary domain server is normally required.

Usually the application form contains an annexure, which sets out the terms and conditions of the registration and use of the domain name.

3.3 Trademark and domain name conflicts

Domain administrators have generally adopted a passive attitude and domain names are accepted on a “first come, first served” basis. The terms and conditions for registration normally state that the administrators do not have the resources or legal obligation to screen domain names to determine whether they would infringe the rights of a third party. It therefore often happens that a party registers a domain name which incorporates a trademark to which it has no legal right.

Before dealing with the question of whether the registration of a domain name infringes the trademark rights of another party, two scenarios which often arise in practice are worth mentioning. The first scenario relates to the situation where a registered domain name has not been used for a period of time, and the second where the domain name proprietor neglects to pay the registration fees.

In some instances there is provision in the terms and conditions governing registration that a domain name may be reallocated if it is not used for a period of 90 days or longer. In practice, though, the right to reallocate domain names is seldom exercised. The attitude of domain administrators is generally that they will only abide by a court order to deregister a domain name or to change the details of the domain registration to reflect the true proprietor of the trademark as being the proprietor of the domain name.

It is usually not sufficient for the domain name proprietor to indicate in writing to the trademark proprietor that he relinquishes the domain name registration. The domain administrator normally requires the domain name proprietor to notify the administrator, by way of e-mail or in writing, that he is prepared to relinquish the domain name. Only then would the administrator be prepared to reassign the particular domain to the true proprietor.

It also often happens that the domain name owner has not paid the registration fee. This results in the deletion of the domain name after some time. The trademark proprietor then has the option to await the deletion of the domain name, after which it can be registered in the trademark proprietor’s name. The disadvantage of this approach is that it usually takes several months for the domain administrator to delete the domain name.

The only other recourse available would be to institute proceedings on the basis of trademark infringement or unlawful competition.

The circumstances under which the use of a domain name would amount to the infringement of a registered trademark are set out in 2.1 above. It must be borne in mind that, as more than one party may have a valid right to the same trademark (for instance in respect of different goods and services or in different jurisdictions), more than one party could be entitled to register and use a particular domain name. In practice, however, the bulk of domain name disputes arise as a result of the registration of a domain name in respect of which the registrant has no statutory or common law rights.

In the United States of America and the United Kingdom many disputes relevant to South African businesses have been heard. In South Africa no High Court judgments regarding domain name disputes have yet been reported, although High Court proceedings have been instituted. It is to be expected that where such disputes involve trademark issues, South African courts will be referred to cases in countries where domain disputes have already been heard, in particular, countries which have trademark laws similar to South Africa’s, e.g. the United Kingdom, Australia, New Zealand and Canada. The United States also remains relevant, as it has in many ways been the forerunner in these types of dispute.

4. Trademark and domain name disputes examined in other jurisdictions

4.1 United Kingdom

4.1.1 Domain name registry

Domain names ending in .uk in the United Kingdom domain are administered by Nominet UK. It is recognised as the United Kingdom registry by the Internet Assigned Numbers Authority (IANA) based in the United States. Nominet UK provides a search facility WHOIS for Internet users to establish whether a name is available for registration.

Nominet currently has a dispute resolution service. On learning of a dispute about a domain name registered under a sub-domain of the .uk level domain, Nominet will assist the parties by providing the following formal action:

Nominet may, under certain circumstances, suspend the assignment of an Internet domain name.
Nominet will conduct an investigation, through the impartial intervention of senior executive staff of Nominet, to establish whether a mutually acceptable resolution to the dispute can be found. If the investigation does not lead to a mutually acceptable resolution, Nominet will consider the evidence gathered during the investigation with a view to determining whether the assignment of the domain name should be suspended.
If any of the parties are dissatisfied with the decision, the matter will be referred to an independent expert for a written recommendation on whether it should confirm or revoke its decision.
The expert will issue his written recommendation, with reasons, to Nominet.
Nominet will reconsider its earlier decision, after the expert has made a recommendation, and a final decision will be made and confirmed to all interested parties. If any of the parties is still dissatisfied with the final decision, the matter will be referred to the Nominet Alternative Dispute Resolution Service for mediation.

If the dispute is not resolved by mediation, or one of the parties refuses to enter into a mediation agreement, the parties will still be entitled to seek legal advice from their lawyers.

The Nominet Alternative Dispute Resolution Service is a form of mediation whereby parties involved in the dispute agree on a neutral third party intermediary to assist them in reaching a negotiated settlement agreement.

The mediation is non-binding in that there is no commitment to settle. The mediator also has no power to impose a solution or to make any binding order. When an agreement is reached, however, it may be documented and signed by both parties and this will create a binding agreement which can be enforced in court. According to its rules, Nominet may also cancel a registration or suspend assignment of the name:

if the name is administered in a way likely to endanger operation of the domain name service
if the basis on which the name was registered has changed (for example, the organisation making the application no longer exists)
if it is drawn to Nominet’s attention that the name is being used in a manner likely to cause confusion to Internet users
where Nominet has been informed that legal action has commenced regarding use of the name
when Nominet is of the opinion that one of the above events is likely to occur

In practice, trademark proprietors may choose to institute proceedings in the High Court when a dispute arises.

4.1.2 Case law

In the United Kingdom domain name dispute proceedings have been instituted mainly on the basis of trademark infringement or passing-off. English law recognises a tort of passing off, which has been expanded and broadened to cover situations which would not have been included in the classic formulation of the tort. The broadened scope includes misrepresentations likely to injure the goodwill of traders.

In terms of English law, an essential allegation in a passing-off action would be that there is both a misrepresentation and damage to a trader’s business or goodwill. This test can be applied to establish whether the conduct of a party that makes unauthorised use of a domain name may mislead consumers into believing that the holder and user of the domain name is associated with another entity, i.e., the true trademark proprietor. If the answer is positive, it is arguable that passing-off exists.¹⁷

The difficulty in establishing passing-of or trademark infringement arises where cyber-squatters do not make commercial use of the domain name and merely offer it for sale to the true trademark owner or the highest bidder.

This issue was considered in two of the United Kingdom cases discussed below.

4.1.2.1 Harrods Ltd v UK Network Services Ltd¹⁸

In this case the defendant, a domain name pirate, which did not have any right to the trademark HARRODS, registered the domain name harrods.com. It did not use the domain name itself, but offered it for sale to the well-known department store. Harrods sued the defendant on the basis of trademark infringement and passing-off.

The court granted an injunction (or interdict) prohibiting the defendant from infringing Harrods’ trademarks and from passing-off. The court also ordered the defendant to assist in the transfer of the domain name to Harrods.

However, no reasoned judgment was given, since the defendant did not defend the case.

It is therefore unclear how the court considered that the domain name was being used in the course of trade, and in relation to which goods or services.

4.1.2.2 British Telecommunications plc and others v One in a Million and others¹⁹

The defendants in this case were dealers in domain names and specialised in registering domain names with second-level domains of well-known trademarks and then offering them for sale or hire, either to the proprietor of each particular trademark (at vastly inflated prices) or to other interested parties.

The defendants had registered at least one .com or .co.uk domain name corresponding to the trademarks of each plaintiff in this case, for example, sainsburys.com and marksandspencer.co.uk. The domain names had not been used as web sites or even addresses.

The plaintiffs, Marks & Spencer, Ladbrokes, Sainsburys, Virgin and British Telecom, all famous British trademark proprietors, sued on the basis of passing-off and trademark infringement.

The court granted final injunctions prohibiting the defendants from using the domain names and also made mandatory injunctions requiring the defendants to take steps to have the domain names assigned to the plaintiffs.

The court accepted that the mere registration of a misleading domain name did not itself amount to a misrepresentation sufficient to establish passing-off.

However, the court ruled that there was a threat of misrepresentation where the defendants were offering to sell the misleading domain names to others for them to use, and thereby putting an instrument of deception or instrument of fraud into the hands of others.

The court ruled that the elements of passing-off were considered to be present in the One in a Million case and that there was trademark infringement in terms of section 23 of the United Kingdom Trade Marks Act, 1994.

The court held that the defendants’ offer to sell the domain names amounted to use in the course of their trade as professional domain name dealers.

The defendants’ appeal against the judgment failed.

On appeal, the court ruled the registration of domain names such as sainsburys.com and bt.org as blocking registrations, and the threat to sell them to third parties if the plaintiffs did not purchase them, amounted to passing-off, threatened passing-off and trademark infringement.

The court said that whether a name is an instrument of fraud depended on all the circumstances; a name which will, by reason of its similarity to the name of another, inherently lead to passing-off, is such an instrument.

The court took the following factors into consideration:

the similarity of the names
the intention of the defendant
the type of trade
all the surrounding circumstances

If it was the intention of the defendant to appropriate the goodwill of another or to enable others to do so, this would lead to the inference that the domain name was being used as an instrument of fraud.

The court ruled that an injunction was appropriate if, taking all the circumstances into account, the court concluded that the name was produced to enable passing-off, was adapted to be used for passing-off and, if used, was likely to be fraudulently used.

The High Court and Court of Appeal decisions in favour of the trademark owners indicate that the conduct of cyber-squatters will not be tolerated where the registration of domain names amounts to passing-off or trademark infringement.

4.1.2.3 Prince plc v Prince Sports Group Inc.²⁰

Prince plc (“Prince UK”), a United Kingdom information technology services company, registered the Internet domain name prince.com in 1995. This domain name has featured as part of its address since then.

When Prince Sport Group Inc. (“Prince Sports”), the well-known United States company, which has used the trademark PRINCE in respect of tennis racquets, sports shoes and associated sports equipment, decided to apply for the name, it found that the United Kingdom company had registered it first.

Prince Sports owned a registered trademark for PRINCE in the United Kingdom. On discovering Prince UK’s domain name registration, Prince Sports instructed its attorneys to write to Prince UK, claiming that its use of prince.com as a domain name infringed Prince Sports’ United Kingdom registered trademark and diluted its trademark rights. Prince Sports sought an assignment of the disputed domain name, together with an undertaking from Prince UK not to use “Prince” as part of any new domain name, in order to avoid litigation.

The United Kingdom Trade Marks Act of 1994 provides that where a person threatens another with proceedings for infringement of a registered trademark (subject to limited exceptions), any person aggrieved may bring proceedings for a declaratory order that those threats are unjustifiable and seek an injunction against their continuance. However, this relief will not be available where the person who issued the threats can show that the other acts constitute an infringement of the registered trademark concerned.

In this case, Prince UK availed itself of this provision and commenced legal proceedings against Prince Sport, seeking a declaratory order that the threats contained in the United States attorneys’ letter were unjustifiable, and an injunction restraining Prince Sports from issuing similar threats in the future.

The court ruled that the threats contained in the letter were contrary to United Kingdom trademark law and granted the relief sought. Prince plc had also sought a declaratory order that its registration and use of the domain name prince.com did not infringe Prince Sports’ United Kingdom registered trademark. However, conscious that Prince UK was pursuing proceedings in the United States in relation to ownership of the prince.com domain name, the court did not consider it appropriate to grant this relief.

The court considered that a declaratory order in relation to trademark infringement might be invoked unfairly against Prince Sports before a court in the United States and the view was expressed that a declaration would not take matters further than the relief that it had granted.

4.2 United States

4.2.1 Domain name registry

In the United States, INTERNIC and Network Solutions Inc. (NSI) used to be responsible for the registration of second-level domain names in the top-level domains .com, .org, .net and .edu. America Online was among five companies recently named as “testbed” competition to NSI. The other four companies selected by the Internet Corporation for Assigned Names and Numbers (ICANN) are CORE (Internet Council of Registrars), France Telecom/Deane, Melbourne IT and register.com.

As a first step, prior to the registration of a domain name, the WHOIS register can be checked to ascertain if a name is available. Registrations are accepted on a “first come, first served” basis. When a domain name is available, the domain name registration agreement will be entered into. Network Solutions in particular only administers its dispute policy for domain names in the .com, .org, .net and .edu top-level domains. The dispute policy is referred to in more detail below.

When the registration agreement has been completed by an applicant for a domain name and it has been accepted by NSI, the domain name applicant and now the holder of the domain name registration has to agree to be bound by the terms of the registration agreement and, specifically, the terms of NSI’s domain name dispute policy.²¹

As part of the domain name registration agreement, the applicant is required to confirm that the statements in its application are true and that the particular domain name does not, to the best of the applicant’s knowledge, interfere with or infringe the rights of any third party. The applicant is also required to state that the domain name has not been registered for any unlawful purpose.

The procedure makes provision for a third party to complain regarding the registration of a domain name that conflicts with its trademark rights. The trademark owner is required to submit an original certified copy of its valid trademark registration. This procedure can only be followed where the trademark is identical to the domain name. It need not only relate to registrations in the United States, but can also be in respect of registrations in other countries. However, it has to be a trademark on the principal or equivalent register, and a trademark registration incorporating a design will not be applicable. The complainant has to give notice to the domain name registrant, setting out that it believes that the registration and use of the disputed domain name will conflict with its trademark rights and allege the factual and legal basis.

Once the complaint has been submitted, NSI will consider the matter with reference to the creation date of the registrant’s domain name registration in order to ascertain whether the creation date preceded the effective date of the trademark registration. Where the domain name was only registered after the effective date of the trademark registration, the domain name registrant will be required to either submit proof of ownership of its own registered trademark or relinquish the domain name and transfer it to the complainant and register a new and different name. In certain circumstances, NSI will also place the domain name on “hold”, pending resolution of the dispute.

NSI will reinstate the domain name placed on “hold” status, or will not place it in “hold” status, once it has received a temporary or final order by a court of competent jurisdiction or an arbitration award, stating which party in the dispute is entitled to the domain name or if it received other evidence from the parties of the resolution of the dispute or the complainant requests that the domain name not be placed on “hold”.

4.2.2 Case law

Many cases have been heard in the United States regarding domain name conflicts. Where trademark infringement has occurred, and provided that the court where proceedings were instituted had jurisdiction, the true proprietors have generally been successful in restraining the registrants of conflicting domain names from continuing such use.

In the case of Panavision International, LP v Toeppen,²² Panavision, which is a California-based company, sought to register panavision.com as an Internet domain name but discovered that the defendant, Toeppen, had previously registered the domain name and had also established a web site under that name. The web site was not used in relation to any goods or services, but displayed an aerial view of Pana, Illinois. Panavision informed Toeppen that it wanted to use the domain name panavision.com but Toeppen demanded US$13 000 to transfer the name to Panavision. Panavision refused to pay and subsequently, Toeppen also registered Panavision’s PANAFLEX trademark as a domain name for a web site on which he posted only the message “Hello”. Toeppen was a known cyber-squatter who had registered hundreds of other well-known trademarks as domain names.

The court found that Toeppen was running a scheme to hold the plaintiff hostage by registering the plaintiff’s marks as domain names. The court found that Toeppen had deliberately targeted his activity at California, with the intent of causing harmful effects there. The court also held that Panavision’s infringement and dilution claims arose out of Toeppen’s conduct, as Panavision would have been able to avoid harm and set up an Internet web site using its trademarks, if it were not for Toeppen’s unauthorised registration of the marks as domain names.

A number of cases have been heard in the United States where interdicts were granted against the use of trademarks in metatags. In the case of Playboy Enterprises Inc. v Calvin Designer Label²³ the court granted an interdict to restrain the use of Playboy’s trademark in both the defendant’s domain names playboyxxx.com and playmatelive.com in any machine-readable code or metatags.

In another United States case, Playboy Enterprises Inc. v Welles,²⁴ also involving the PLAYBOY trademark, the court held that the use of Playboy’s trademarks in metatags did not amount to trademark infringement in this particular case.

In the United States the “fair use” doctrine is applied. This doctrine permits the good faith use of a registered or famous trademark in a non-trademark manner, e.g. to describe a party’s goods or services.

In the case mentioned above, the defendant, Terri Welles, who had won the title Playmate of the Year from the plaintiff, the publisher of Playboy magazine, used the term “Playmate of the Year” to describe herself on her web site. She did not use the trademark PLAYBOY or PLAYMATE in her domain name and she included disclaimers that indicated that she was not affiliated with, or endorsed by, the plaintiff. She used the abbreviation “PMOY ’81” as a repeating background on the web pages. PLAYBOY, PLAYMATE and PLAYMATE OF THE YEAR are registered trademarks of the plaintiff. PLAYMATE OF THE YEAR is commonly abbreviated to PMOY. As she used the marks in good faith only to describe herself as a former Playmate of the Year and there was no other way to describe the title that had been bestowed on her by the plaintiff, the court held that she could use the term “Playmate of the Year” and the mark PMOY on her web site descriptively and include the marks in the invisible metatags code, again in a descriptive manner. The court reasoned that the metatags referenced editorial use of the terms in the text of her web site.

The opinion has been expressed²⁵ that the use of “PMOY ’81” as a repeating background on web pages may have exceeded the boundaries contemplated by the fair use doctrine, namely, to use only what is necessary to describe one’s goods and services. The author of the article did not, however, comment on the defendant’s use of the trademark in metatags.

5. Domain name dispute resolution procedures – international developments

A number of initiatives were launched in order to try and tackle the rapidly increasing problems surrounding the assignment and use of Internet domain names. Probably the most important initiative was the establishment by the Internet Society of the International Ad Hoc Committee (IAHC). The committee had 11 members, including representatives from the World Intellectual Property Organisation (WIPO), the International Trade Mark Association (INTA) and the International Telecommunications Union (ITU). The committee submitted its final report in February 1997, announcing a plan which included the following measures:

the introduction of seven new generic top-level domains (in addition to the five existing ones)
the creation of international panels of experts to resolve disputes and challenges to domain name registrations, to be administered by WIPO
the appointment of up to 30 new domain name registrars

Apart from participating in the IAHC, WIPO itself undertook certain activities with respect to domain name issues. The International Bureau of WIPO convened a meeting of consultants on trademarks and Internet domain names, which examined possible solutions for the problems which have arisen in this area.

Subsequently, the IAHC developed the private sector framework called the “Generic Top-Level Domain Memorandum of Understanding” (gTLD-MoU), the international framework in which policies for the administration and enhancement of the Internet’s Generic Domain Name System (DNS) were developed and deployed. These policies were developed in co-operation with the Internet Assigned Numbers Authority (IANA), which manages the root of the Domain Name System (DNS).

The gTLD-MoU included the addition of new general top-level domains, the selection of new domain name registrars and development of equitable dispute resolution mechanisms over conflicts between parties concerning rights to domain names. The MoU was developed as part of a DNS administration plan from the now dissolved International Ad Hoc Committee. The MoU was a recognition of the need to formalise the consultative policy framework for continued evolution of the Internet DNS.

The policy framework relating to the gTLD-MoU was developed by the gTLD-MoU Policy Oversight Committee (POC), in consultation with the Policy Advisory Body (PAB), the Council of Registrars (CORE) and public comments received through the POC’s request for comments proceedings.

The new generic top-level domains are:

.firm for businesses, or firms

.shop for businesses offering goods to purchase

.web for entities emphasising activities relating to the World Wide Web

.arts for entities emphasising cultural and entertainment activities

.rec for entities emphasising recreation and entertainment activities

.info for entities providing information services

.nom for individuals or a personal nom de plume

This initial set of seven new generic TLDs was chosen by the International Ad Hoc Committee in its final report. All the gTLD names in the IAHC final report were confirmed, except .store which was replaced by .shop.

On the dispute resolution side, it was proposed that a number of options be made available to a third party wishing to lodge an objection to a domain name registration. One was to commence traditional litigation against the registrant, but it would be for the third party to elect to use one of three potential dispute resolution alternatives, namely, mediation, expedited arbitration or the ACP procedure. The ACP procedure would consider only the issue of which party has the superior right to the domain name. The mediation and arbitration procedures would also allow the decision-maker and the parties to consider any monetary damages issues, if one of the parties had raised such issues.

The launch of the actual registrations was planned for March 1998 but was delayed by the publication of the United States Government’s Green Paper in February 1998. The Green Paper incorporated many of the ideas developed in the gTLD-MoU framework, but also contained views divergent from the gTLD-MoU.

Subsequently, the Department of Commerce released its revised policy statement on the management of the Internet domain name system (the White Paper), which set out United States policy for the privatisation of domain name systems.

The essential points of the new statement covered the following:

principles for the new system
the co-ordinated functions
co-ordinated but separate name and number authority
creation of new corporation and management of the domain system
structure of the new corporation
registrars and registries
the creation of new gTLDs
trademark infringement problems
competition concerns
the agreement with NSI
a global perspective
the .us domain name

The White Paper strongly endorsed the privatisation concept.

The Internet Corporation for Assigned Names and Numbers (ICANN) has made considerable progress towards establishing the structures for representative decision-making contemplated in the White Paper. On the proposal of the United States government, and with the approval of its member states, WIPO has since July 1998 undertaken an extensive international process of consultations. The purpose has been to make recommendations to ICANN on certain questions arising out of the interface between domain names and intellectual property rights. Consultation meetings were held in 15 different cities throughout the world and written submissions were received from over 300 governments, intergovernmental organisations, professional associations, corporations and individuals. An interim report containing draft recommendations was issued in December 1998 and the final report was published on 30 April 1999. This report has been submitted to ICANN and to the member states of WIPO.

It has been recommended that certain practices be adopted by registration authorities. It is believed that standard practices for registrars with authority to register domain names in their generic top-level domains will reduce the tension that exists between domain names on the one hand and intellectual property rights on the other hand. It was concluded that the collection and availability of accurate and reliable contact details of domain name holders will form an essential tool for facilitating the protection of intellectual property rights, particularly in view of the borderless and anonymous nature of the Internet. Accurate and current contact details will provide the means by which trademark owners can enforce their rights. Trademark owners’ experience is that contact details provided on the WHOIS databases are very often inaccurate or unreliable. WIPO has suggested that where it is found that such details are inaccurate and contact cannot be established with the domain name holder, a third party should have the right to serve notification to this effect on the responsible registrar. Once it has been independently verified that it is impossible to establish contact, the
registrar should then be required to cancel the domain name registration.

A specific administrative procedure concerning abusive domain name registrations has been proposed. It is suggested that ICANN should adopt a dispute resolution policy in terms of which a uniform administrative dispute resolution procedure is made available for domain name disputes in all gTLDs. It is recommended that the scope of the administrative procedure be limited to cases of bad faith, abusive registration of domain names that violate trademark rights, i.e. cyber-squatting. This proposal will require domain name holders to agree to the administrative procedure when allegations that they are involved in cyber-squatting are made. This administrative procedure will be quick, efficient, cost-effective and conducted to a large extent on-line. The determinations in terms of this procedure will be limited to orders for the cancellation or transfer of domain name registrations and the allocation of the costs of the procedure (excluding attorneys’ fees) against the unsuccessful party. The determinations will be enforced by the registration authorities under the dispute resolution policy.

In view of the fact that famous and well-known marks have been specifically targeted by cyber-squatters, a mechanism is suggested whereby the owner of a famous or well-known mark can ensure that the mark cannot be registered in specific territories, where it is well known. The effect of the proposed exclusion would be to prohibit any person other than the owner of the famous or well-known mark from registering the mark as a domain name. However, as it has been shown that cyber-squatters also register many close variations of famous or well-known marks, once an exclusion is granted, it is suggested that it should be regarded as an evidentiary presumption in the administrative procedure. This will place the burden of proving justification for the use of a domain name on the domain name holder, where the domain name is identical or misleadingly similar to the famous or well-known mark and where it is being used in a way that is likely to damage the interests of the true owner of the mark. This presumption will assist the trademark owner in domain name conflicts that arise in many different jurisdictions and will make it unnecessary to incur the substantial costs that form part of court proceedings.

6. Conclusion

Although finality regarding the future resolutions of domain name disputes has not yet been reached, it is clear that the intention of WIPO and its member states is to ensure that cyber-squatting and the abuse of trademarks will not be allowed to continue. In South Africa, the resolution of domain name disputes will, until an international policy is established, remain problematical and may have to be resolved through court proceedings, relying on registered trademark and common law rights.

7. Patent protection for Internet-related inventions

The Internet is inherently software driven and its success has contributed to rapid development in the patenting of software-related inventions. The traditional, narrow view of excluding software from patent protection has steadily been eroded. Currently, particularly in the USA, a liberal approach to patent protection for software-related inventions is being followed. Naturally a software-related invention, e.g. a new web browser, must comply with all statutory requirements for valid patent protection, but such inventions are not excluded merely because they are software-related. If a particular invention is eligible for patent protection when implemented in hardware, it should not be excluded from such protection when implemented in software.

7.1 The law in South Africa

In order to receive valid patent protection, any invention must be “new” as defined in the South Africa Patents Act 57 of 1978.²⁶ Although novelty requirements may differ from country to country, most countries are members of international conventions which regulate national laws. Generally, in order to meet international novelty requirements, an invention should be kept strictly secret until after a patent application has actually been filed. In South Africa, confidential disclosure and reasonable technical trial and experiment within the Republic is permissible in certain circumstances.²⁷ However, the novelty of an invention may be destroyed if the invention is used secretly and on a commercial scale within the Republic.²⁸ Further, in order to be patentable, an invention must also involve an inventive step.²⁹ Basically, an invention is deemed to involve an inventive step if it is not obvious to a person of ordinary skill in the art.³⁰

The patentability of software-related inventions is regulated by section 25(2) of the Patents Act which excludes, among other things, the presentation of information, a scheme, rule or method for performing a mental act, playing a game or doing business, a mathematical method and a program for a computer. However, this exclusion is qualified by section 25(3) of the Patents Act which states that the exclusion is “only to the extent to which a patent or an application for a patent relates to that thing as such”. Accordingly, a program for a computer “as such” is excluded from receiving patent protection. The exclusion, however, does not extend to the methods or processes carried out by the software, nor software in combination with hardware.

A South African patent application is not subjected to substantive examination, but does undergo formal examination to ensure that all documentary requirements are satisfied. Accordingly, no applications have been rejected to date by the Registrar on the basis that the invention is software based. However, once a patent has been granted, a third party can apply to have the patent revoked. In any revocation proceedings, the courts would then decide whether or not the invention is patentable. To date there have been no cases in South Africa dealing with sections 25(2) and 25(3).

7.2 The position in the United States

As mentioned above, the trend in the United States of America is to grant patents for both business and software-related inventions. The number of granted patents in US Patent Class 395, which covers information-processing systems, has steadily increased from 792 in 1990 to 1 622 in 1994 and 6 094 in 1998. The total number of granted patents in this class at the end of 1998 was 25 561. This information as well as other statistical information is available on the United States Patent and Trademark web site.³¹ The United States Patent and Trademark Office has issued Guidelines for the Examination of Software-related Inventions and further information in this regard may be obtained from their web site. The current position in the United States is that the operation of a computer, when it exercises the instructions in software, is patentable. Under US patent law, software inventions are viewed either as a computer process, or as a programmed computer which has a unique functionality set.

Many Internet-related inventions not only challenge the exclusion of software from patent protection, but also the mathematical method and scheme, rule or method for performing a mental act, playing a game or doing business exclusions. In a 1998 US Court of Appeals Federal Circuit decision³² a patent³³ for a data processing system for managing the financial services configuration of a portfolio was upheld. More detail on this particular patent is provided below.

7.3 The position at the European, United Kingdom and Japanese patent offices

The European Patent Office (EPO) and the UK Patent Office have recently revised their practice in respect of the patenting of computer programs. As is the case in South Africa, the European Patent Convention contains a provision excluding computer programs “as such” from patentability. The EPO practice is, however, to allow patenting of an invention which uses a computer program if the subject matter as claimed makes a technical contribution to the art, and there are about 13 000 European patents covering software. Basically, a computer program product claim will not be considered excluded from patentability at the EPO if, when the computer program is run on a computer, it produces a “further technical effect” which goes beyond the “normal” physical interactions between program (software) and computer (hardware). This further technical effect may even be an effect known in the prior art.

The Japanese Patent Office has also implemented guidelines for inventions for computer software-related inventions. These guidelines may be obtained from the “Examination Information” section on its web site.³⁴

7.4 Examples of Internet-related inventions

Typical examples of Internet-related inventions are web browsers, application programs, operating systems, encryption methods, user interfaces and software for implementing business systems.

US Patent No. 5,793,964 covers a web browser system: the “web browser makes requests to web servers on a network which receive and fulfill requests as an agent of the browser client, organizing distributed sub-agents as distributed integration solution (DIS) servers on an Intranet network supporting the web server which also has access agent servers accessible over the Internet. DIS servers execute selected capsule objects which perform programmable functions upon a received command from a web server control program agent for retrieving, from a database gateway coupled to a plurality of database resources upon a single request made from a Hypertext document, requested information from multiple data bases located at different types of databases geographically dispersed, performing calculations, formatting, and other services prior to reporting to the web browser or to other locations, in a selected format, as in a display, fax, printer, and to customer installations or to TV video subscribers, with account tracking.”

US Patent No. 5,844,552 covers communication of data in a web television; US Patent No. 5,877,765 covers a method and system for displaying Internet shortcut icons on a desktop; US Patent No. 5,355,472 covers a system for substituting tags for non-editable data sets in hypertext documents and updating web files containing links between data sets corresponding to changes made to the tags; and US Patent No. 5,530,852 covers methods of extracting profiles and topics from a first file written in a first markup language and generating files in different markup languages containing the profiles and topics for use in accessing data described by the profiles and topics.

E-commerce on the Internet has grown substantially and the patenting of business methods is thus of particular relevance. The Signature Financial Group Inc. decision was a landmark decision as far as the patenting of business methods is concerned. The abstract of the invention describes a data processing system for “monitoring and recording the information flow and data, and making all calculations, necessary for maintaining a partnership portfolio and partner fund (Hub and Spoke) financial services configuration. In particular, the data processing system makes a daily allocation of assets of two or more funds (Spokes) that are invested in a portfolio (Hub). The data processing system determines the percentage share (allocation ratio) that each fund has in the portfolio, while taking into consideration daily changes both in the value of the portfolio’s investment securities and in the amount of each fund’s assets. The system also calculates each fund’s total investments based on the concept of a book capital account, which enables determination of a true asset value of each fund and accurate calculation of allocation ratios between the funds. The data processing system also tracks all the relevant data, determined on a daily basis for the portfolio and each fund, so that aggregate year-end data can be determined for accounting and for tax purposes for the portfolio and for each fund.”

7.5 Conclusion

As the South African Patents Act is closely based on the UK Patents Act, it is to be expected that our courts will follow a similar approach. Due to the global nature of the Internet, it is important to bear in mind that a South African patent application may provide an applicant with a priority date for filing corresponding foreign patent applications.

There are a great number of web sites which provide information on patents for inventions. Information on patent protection in South Africa may be found at http://www.adamsadams.co.za, information on software-related inventions in the USA may be found at http://www.ladas.com, and information on granted patents may be found at http://www.uspto.gov, http://www.ibm.com, and

http://www.european-patent-office.

Author biographies
Mariëtte Viljoen is a partner in the trademark litigation department of the firm Adams & Adams. She obtained BLC and LLB degrees at the University of Pretoria and was admitted as an attorney in 1988. She qualified as a trademark practitioner in 1991, at which time she became a partner at her previous firm, specialising in trademark and copyright litigation. Mariëtte is a Fellow of the South African Institute of Intellectual Property Law and a member of the South African Government’s Advisory Committee on Patents, Copyright, Trade Marks and Designs. She is also a member of various local and international professional bodies and committees in the trademark field. She has spoken on trademark issues at seminars and conferences organised by the World Intellectual Property Organization in Tanzania and Malawi and at seminars and conferences in South Africa.
Gérard du Plessis is an attorney and partner of Adams & Adams. He obtained BLC and LLB degrees from the University of Pretoria and practised in the commercial law section of the firm before joining the trademark department. Gérard is the co-author of the South African chapter of International Trade Secrets Law and has spoken at seminars and conferences on issues relating to trademarks, including disputes concerning domain names.
Garth Vivier is a partner in the patents department of Adams & Adams. He attended the University of Pretoria and in 1983 he obtained BEng (Electronics). In 1991 he completed his LLB at the University of Cape Town. He obtained BComm at the University of South Africa in 1996. Garth was admitted as an attorney in 1994 and as a patent attorney in 1995. Prior to joining Adams & Adams, Garth practised as an electronic engineer designing and testing missile control systems.

In this chapter, these terms will be collectively referred to as “trademarks”. (Back)
The Trade Marks Act 194 of 1993 (hereafter referred to as the Act). The repealed Trade Marks Act 62 of 1963 is still relevant under
certain circumstances.
Section 34(3) of the Act. The remedies available to a trademark proprietor in terms of this
section include an interdict, delivery-up order, damages or, in lieu of damages, a reasonable royalty.
Section 2(1)(xxiii) of the Act
Section 2(1)(x) of the Act (Back)
Section 34(1)(a) of the Act
Section 34(1)(b) of the Act
Section 34(1)(c) of the Act
McDonald’s Corporation v Joburgers Drive-Inn Restaurant (Pty) Limited; McDonald’s Corporation v Dax Prop CC; McDonald’s Corporation v Joburgers Drive-Inn Restaurant 1997 1 SA 1(A).
Section 35 of the Act (Back)
Metatags are key words that are embedded in the web site’s code and which can be read by Internet search engines and web browsers to index and identify relevant web sites. Metatags are not visible on the web site.
See par. 4.1.2 below.
Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd 1998 3 SA 175 A.
1977 (2) SA 916 (A) 929C. For a detailed discussion of the elements of passing-off see Webster and Page South African Law of Trade Marks, 4th Ed par 15-5 and further.
Section 33 of the Act (Back)
Adcock-Ingram Products v Beecham SA (Pty) Ltd 1997 SA 434 (W)
Webster and Page supra par 15.6
Chancery Division, 9 December 1996
(unreported)
Court of Appeal, 23 July 1998 (unreported)
1998 FSR 2 (Back)
www.networksolutions.com/legal/ dispute-plicy.html, 29 July 1999
938 F Supp 616, 619 (CD) Calif. 1996
985 F Supp 1220 (IND CAL 1997)
47 USPQ2d 1186 (SD Cal 1998)
Kelly, David M & Gelchinsky, Jonathan M. Trade marks on the Internet : How Does Fair Use Fare? Trademark World #115, 1922 p. 22. (Back)
Sections 25(1), (5), (6)
Section 26
Section 25(8)
Section 25(1)
Section 25(10) (Back)
www.uspto.gov, 29 July 1999
State Street Bank & Trust Co. v Signature Financial Group Inc.
US Patent No. 5,193,056
www.ipo-miti.go.ip, 29 July 1999 (Back)