Karen Harverson reports on the court verdict against McDonald’s and the burger giant’s preparation for appeal
The first round of the David and Goliath trademark battle fought by local businessman George Sombonos against United States hamburger giant McDonald’s is over — with Sombonos emerging the victor.
Despite the cries of outrage from the United States which claims to be “surprised, dismayed and outraged” at the court verdict and McDonald’s decision to apply for leave to appeal –Sombonos is quietly confident that the judgment reached by Justice Brian Southwood last week will not be overturned.
Carter Drew, chief executive of McDonald’s South Africa said in a press statement, “although we are disappointed with the judgment, we will follow the due process of South African law.”
In the 108-page judgment, Justice Southwood said that there was nothing fraudulent or dishonest in Joburgers — of which Sombonos is managing director — seeking to become the proprietor of McDonald’s trademarks in South Africa.
He dismissed McDonald’s claim that it had been prevented from using the trademarks because of special circumstances, namely sanctions.
No legislation existed that prevented McDonald’s from using its trademarks by investing in black-owned businesses or by entering into so-called developmental licence agreements with black or white entrepreneurs.
Instead he found that McDonald’s had decided in terms of its “orderly international expansion programme” that the time had not yet arrived to extend its business in South Africa.
He said the reasons given by McDonald’s not to do business were vague, unconvincing, and untrue.
He concluded that McDonald’s had simply registered its trademarks (over a period of 20 years) to obstruct others and not for the purpose of using them in terms of the old act.
This week, McDonald’s filed an application to appeal which effectively suspends the judgement until the appeal is either rejected or accepted – a decision which could take days or even weeks. If successful, the case will go to the appellate division in Bloemfontein where it will be retried — which could take a year or longer before heard.
“In the meantime, McDonald’s is entitled in law to use its marks and to legitimately operate in South Africa,” says Drew.
Sombonos’ attorney, Shaun Ryan of Ryans Attorneys and Trade Marks Agents, is confident that if the application for leave to appeal is successful, the appellate court will agree with the first judgment based on the overwhelming evidence. “However, I believe the application for leave to appeal will be rejected,” he adds.
If the application for leave to appeal is rejected, both parties will again apply to the Registrar’s Court to register the trade marks.
“However McDonald’s has a slight problem as the judgment clearly states it systematically abused the registration process and the Registrar must stand by the judgment,” comments Ryan.
Sombonos tells the Mail & Guardian that despite popular opinion — he is not interested if McDonald’s offers him a big settlement to relinquish the trademark.
“It is highly unlikely. I am determined to open up a chain of original South African McDonald’s stores.”
On US company McDonald’s plans to open two stores in South Africa by the end of the year, Ryan points out that once Sombonos has registered the trademark, he will sue McDonald’s for infringement and royalties.
“Not only that but McDonald’s will be forced to remove all signs using the trademark.”
Ryan is scathing of political talk that the court judgment will scare off other foreign investors.
“It is absurd for anyone to suggest that one country will sanction another because a hamburger chain can’t use a trade mark. McDonald’s could have operated here but didn’t bother, they came before our courts and told untruths, and they made misrepresentations to our Registrar about their intentions.”
He says that this particular case does not threaten other foreign countries’ intellectual property rights. “If foreign trade marks have been used in South Africa they are in no danger of losing those trademarks.”
He scorns media claims that he won the case by using a loophole in the old act. “The expungement provision on the basis of non-use in the 1963 Act is echoed verbatim in the new Act.”