THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case No: 227/2015

In the matter between:

COCHRANE STEEL PRODUCTS (PTY) LTD
APPELLANT

and

M-SYSTEMS GROUP (PTY) LTD
FIRST RESPONDENT

ROLOTI BELEGGINGS (PTY) LTD
SECOND RESPONDENT

Neutral citation:
Cochrane Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd
(227/2015) [2016] ZASCA 74 (27 May 2016)

Bench:
Ponnan, Mbha, Zondi and Mathopo JJA and Fourie AJA

Heard:
19 May 2016

Delivered:
27 May 2016

Summary:
Intellectual property – use of the trademark CLEARVU as a keyword in
the Google AdWords system – does not constitute unlawful competition or passing
off.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: Gauteng Local Division of the High Court, Johannesburg (Nicholls
J sitting as court of first instance):

The appeal is dismissed with costs.
___________________________________________________________________

JUDGMENT
___________________________________________________________________

Ponnan JA (Mbha, Zondi and Mathopo JJA and Fourie AJA concurring):

[1] The parties, who operate, inter alia, in the security fencing industry, are rival
traders. During October 2013 the appellant, Cochrane Steel Products (Pty) Ltd
(Cochrane), sought to interdict and restrain the respondent, M-Systems Group (Pty)
Ltd (M-Systems), from using „the mark CLEARVU (or any mark confusingly similar
thereto, including the marks CLEAR VU and CLEAR-VU) in relation to Google
AdWords advertising.‟ Roloti Beleggings (Pty) Ltd was subsequently joined as the
second respondent to the proceedings.1

[2] On 29 October 2014 the Gauteng Local Division, Johannesburg (per Nicholls
J) dismissed the application with costs, but granted leave to the appellant to appeal
to this court.

1 The joinder was in response to an allegation by Mr Timotheus Meintjies, the deponent to the
answering affidavit filed on behalf of Cochrane, that the appellant had cited a company that does not
exist. It is accepted that any order of court will be satisfied jointly by both respondents.

[3] During 2008, so asserts the appellant, it invented security fencing „comprising
high density, high tensile mesh‟ and conceived and adopted the brand name
CLEARVU for the product. Although there are pending applications for registration
that were filed by the appellant in 2010, CLEARVU is yet to be registered as a trade
mark in terms of Trade Marks Act 194 of 1993. The appellant accordingly relies on
what is described as a common law trade mark (Capital Estate and General
Agencies (Pty) Ltd & others v Holiday Inns Inc & others 1977 (2) SA 916 (A) at
925H).2 Accordingly, the relief sought was based not on any statutory infringement,
but in the common law. For, as Nicholas AJA observed in Schultz v Butt 1986 (3) SA
667 (A) at 683J-684A:
„The fact that in a particular case there is no protection by way of patent, copyright or
registered design, does not license a trader to carry on his business in unfair competition
with his rivals‟.

[4] The activities which have given rise to these proceedings concern the display
on the internet of M-Systems‟ advertisements in response to the entry into the
Google search engine by internet users of search terms consisting of or comprising
the word „CLEARVU‟ or minor variants of it. Google operates an internet search
engine and provides a number of other services on the internet. Google‟s primary
source of revenue is advertising. The principal way in which it provides advertising is
by means of a service called Google AdWords, in terms of which Google offers
advertisers the facility to match a keyword to a user‟s search query so as to trigger
an advertisement in various different ways, and which allows advertisers to display
their advertisements in the Google content network, through either a cost-per-click or
cost-per-view scheme. The operation of the Google AdWords service is described in
detail by Arnold J in Interflora Inc v Marks and Spencer Plc [2009] EWHC 1095 (Ch)

2 In order to establish such a mark, an applicant has to show that the mark has acquired such a
reputation in relation to the applicant‟s business that it may be said to have become distinctive
thereof. See Capital Estate and General Agencies (Pty) Ltd v Holiday Inns Inc 1977 (2) SA 916 (A) at
925H. See also Policansky Bros Ltd v L & H Policansky 1935 AD 89 at 97, where Wessels CJ held
the following in relation to a claim of passing off: „It is an action in tort and the tort consists of a
representation by the defendant that his business or his goods, or both, are those of the plaintiff. The
Roman-Dutch law was well acquainted with the general principle that a person cannot, by imitating
the name, marks or devices of another who had acquired a reputation for his goods, filch the former‟s
trade (Ned. Advies Boek, vol. 1, adv. 68, p. 161). This class of tort had not reached, by the end of the
eighteenth century, the importance that it has today.‟

(Chancery Division Interflora judgment). According to Kitchin LJ (on appeal from
Arnold J) in Interflora Inc v Marks and Spencer Plc [2014] EWCA Civ 1403 (Court of
Appeal Interflora judgment) paras 14-17):
„14.
. . . In broad outline, this service works in the following way. A user of the Google
search engine who has carried out a search is presented with a search engine results page
or SERP which usually contains three elements. The first is the search box which contains
the search term, a word or phrase typed in by the user. The second contains links to
websites which appear to the Google search engine to correspond to the search term. These
are known as the “natural” or “organic” results of the search and are usually displayed in
order of relevance. The third comprises links, referred to as “sponsored links”, to websites
which are displayed because the operators of those websites have paid for them to appear.
They are, in effect, advertisements and are usually displayed in one or more parts of the
SERP, namely in a shaded box in the upper part of the page (above the natural search
results), in a panel on the right hand side of the page (to the right of the natural search
results), or in a panel at the bottom of the page (under the natural search results). Over the
years the labelling of these sponsored links has varied, but they have generally been
headed with the words “Sponsored Links” or “Ads” or variations of them.
15.
A Sponsored link appears when a user enters one or more particular words in to the
search engine through the search box. These words, known as “keywords”, are secured by
the advertiser in return for a fee. This is called “purchasing” or “bidding on” the keyword. The
sponsored link contains three elements. The first is an underlined heading which functions
as a hyper-link to the advertiser‟s website. This may or may not contain the keyword. The
second is a short commercial message or advertisement which, once again, may or may not
contain the keyword. The second is a short commercial message or advertisement which,
once again, may or may not contain the keyword. The third is the Uniform Resource Locator
or URL of the advertiser‟s website.
16.
The fee paid by the advertiser is calculated on the basis of the number of times users
click on the hyper-link to the advertiser‟s website (a process known as “click through”)
subject to a maximum daily limit which the advertiser has specified. A number of different
advertisers may bid for the same keywords, and, if they do, the order in which their adverts
are displayed will depend upon various factors including the maximum daily sum, often
referred to as the “maximum price per click”, that each is prepared to pay.

17.
The search term entered by a user of the Google search engine and the keyword
selected by the advertiser do not have to be identical for the sponsored link to appear on the
SERP. One reason for this is that advertisers have the ability to choose different match types
in relation to each keyword, and these match types govern the circumstances in which the
sponsored links associated with those keywords will appear. For example, “exact match”
requires the search term to be identical to the keyword; “phrase match” requires the search
term to contain the same words as the keyword in the same order, but it may include
additional words before or after the keyword; and “broad match” simply requires the search
term to correspond to variations of the keyword, such as plurals. By 2008 Google had also
introduced a development of broad matching known as “advanced broad matching” which
causes the sponsored link to appear if the Google search engine deems the keyword
relevant to the search term. So, by way of illustration, a search for the term “flowers” might
be deemed to match the keyword “florists”.‟

[5] The appellant‟s contention is that „this is a form of unlawful competition;
alternatively on the facts a passing off occurs‟. It may be convenient to first consider
the alternative cause of action based upon passing off. Passing off is a species of
wrongful competition in trade or business. According to Rabie JA (Capital Estate
(above) at 929C-E):
„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 a passing-
off, one enquires 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.‟
As Corbett CJ put it in Williams t/a Jenifer Williams & Associates & another v Life
Line Southern Transvaal [1996] ZASCA 46; 1996 (3) SA 408 (A) at 418D-F:
„In its classic form it usually consists in A representing, either expressly or impliedly (but
almost invariably by the latter means), that the goods or services marketed by him emanate
in the course of business from B or that there is an association between such goods or
services and the business conducted by B. Such conduct is treated by our law as being
wrongful because it results, or is calculated to result, in the improper filching of another‟s
trade and/or in an improper infringement of his goodwill and/or in causing injury to another‟s
reputation. Such a representation may be made impliedly by A adopting a trade name or a

get-up or mark for his goods which so resembles B‟s name or get-up or that A‟s goods or
services emanate from B or that there is the association between them referred to above.
Thus, in order to succeed in a passing off action based upon an implied representation it is
generally incumbent upon the plaintiff to establish, inter alia: firstly, that the name, get-up or
mark used by him has become distinctive of his goods or services, in the sense that the
public associate the name, get-up or mark with the goods or services marketed by him (this
is often referred to as the acquisition of reputation); and, secondly, that the name, get-up or
mark used by the defendant is such or is so used as to cause the public to be confused or
deceived in the manner described above.‟

[6] Not having any registered right in the name CLEARVU, it was for the
appellant to show that the name has acquired such a reputation in relation to its
business that it may be said to have become distinctive thereof (Capital Estate
(above) at 925H). Whilst I am willing to accept in the appellant‟s favour that it
succeeded in establishing a reputation in the name CLEARVU, I entertain some
doubt as to whether it established the second leg of its cause of action, namely that
the respondents‟ conduct caused, or was calculated to cause, the public to be
confused or deceived. Whether there is a reasonable likelihood of such confusion
arising is, of course, a question of fact which will have to be determined in the light of
the circumstances of each case.

[7] There are a number decisions in comparable foreign jurisdictions dealing with
the question of whether or not the bidding by one trader on another‟s trade mark as a
keyword in Google‟s AdWords service is lawful. In Cosmetic Warriors Ltd v
Amazon.co.uk Ltd & another [2014] EWHC 181 (Ch), the claimants, owners of a
famous mark called Lush, made three classes of claim against the online shopping
retailer, Amazon.  The first two classes of claim concerned internet advertising and
are as a result of Amazon having bid on certain keywords, in particular ones
including the word „lush‟, within the Google AdWords service so as to trigger a
sponsored link advertisement on the Google search engine results page whenever a
consumer types „lush‟ into the search box. The court held (para 45-48):

„45.
In argument, Mr Bloch lumped this class of infringements with the first class and
contended that it was clear that the average consumer would expect the sponsored link to
be of goods which were identified from the search term entered by the consumer. I do not
accept this argument. It fails to recognise that consumers are familiar with sponsored ads
and are used to seeing such ads from competing suppliers.
46.
Moreover, the evidence establishes that Lush users are brand conscious and have
made great efforts to build up a reputation in the Lush name. In my judgment average
consumers would expect an advertisement for Lush products to include some reference to
the Lush mark, some indicia which would distinguish that ad from the ads of others which he
might expect to see on the results page of a Google search.
47.
In [the Chancery Division Interflora judgment] Arnold J held there to be infringement
although the offending ad made reference only to “M & S Flowers Online” and not to
“Interflora”. But that was, in part, because Interflora represents a network of flower shops
and the court was not satisfied that the average consumer would appreciate that Marks &
Spencer were not members of that network. So I think that case is different on the facts from
the one before me.
48.
It will be recalled that in the example pleaded and referred to in paragraphs 9 and 10
above, there was an ad for a third party as well as one for Amazon. In my judgment the
presence of such other ads makes the position even clearer. The average consumer could
not reasonably fail to appreciate that the Amazon ad was just another ad from a supplier
offering similar products to those requested by the internet searcher. My conclusion on this
part of the case does not, however, depend on the presence of this other ad.‟

[8] The Court of Appeal in France,3 the German Federal Supreme Court4 and the
Barcelona Commercial Court5 have all separately determined that the use by one

3 Cobrason v Google Inc, Google France & Home Ciné Solutions (Paris Court of Appeals, May 11,
2011) discussed by Jean-François Bretonniére & Thomas Defaux in „Sponsored links: Has the
Supreme Court finally ended the debate on keywords?‟ World Trade Review Legal updates, 2 April
2013, where it was stated: „It is now well established by the French courts that Google‟s sponsored
links are identified by consumers as advertisements and, therefore, do not create a risk of confusion
by their mere appearance. In order to qualify as unfair competition, an advertisement needs to go
much further, for example by making an explicit reference to the name of the competitor in order to
create confusion for the average consumer.‟
4 In two cases: Most-Pralinen (German Federal Supreme Court of Justice case number I ZR 217/10,
13 December 2012) and Fleurop (German Federal Supreme Court of Justice case number I ZR
53/12, 27 June 2013) discussed by Florian Schwab in „Supreme Court confirms case law on
keywords advertising‟ of 1 March 2013 and Annna Mattes in „Federal Supreme Court follows Interflora
in keyword case‟ of 4 April 2014 in the World Trade Review Legal updates respectively, as follows:

competitor of another‟s trade mark does not constitute trade mark infringement. In
Network Automation Inc v Advanced Systems Concepts Inc 638 F.3d 1137 (9th Cir
2011) the United States Court of Appeals for the Ninth Circuit stated (para12):
„The nature of the goods and the type of consumer is highly relevant to determining the
likelihood of confusion in the keyword advertising context. A sophisticated consumer of
business software exercising a high degree of care is more likely to understand the
mechanics of Internet search engines and the nature of sponsored links, whereas an un-
savvy consumer exercising less care is more likely to be confused. The district court
determined that this factor weighed in Systems‟ favour because “there is generally a low
degree of care exercised by Internet consumers.” However, the degree of care analysis
cannot begin and end at the marketing channel. We still must consider the nature and cost
of the goods, and whether “the products being sold are marketed primarily to expert buyers.”
Brookfield 174 F.3d at 1060.
In Brookfield, the websites were visited by both sophisticated entertainment industry
professionals and amateur film fans, which supported the conclusion that at least some of
the consumers were likely to exercise a low degree of care. Id. at 1056. In Playboy, the

„The decision clearly puts an end to the approach followed by certain German appeal courts whereby
keyword advertising was held to constitute use as a trademark which might give rise to a likelihood of
confusion. The court‟s opinion was well-founded and anchored in the real world, as internet users
should be able to distinguish search results from sponsored links, but the court‟s approach also allows
search engines to continue generating revenue by selling keywords‟
And in respect of the latter, the following is stated:
„The decision is the latest in a series of cases in which the Federal Supreme Court has had to rule on
the issue of the liability of purchasers of keywords for trademark infringement. This decision –
concluding that infringement had occurred – may appear surprising at first glance, in view of the fact
that the Supreme Court has so far consistently ruled that there was no trademark infringement in such
cases, because keyword advertising does not infringe the origin function of a trademark if the
advertisement is visually separated from the natural search results and does not make any reference
either to the trademark owner or the products marketed under that trademark.
With this decision, the Federal Supreme Court followed the decision of the High Court of
England and Wales in Interflora v Marks and Spencer ([2013] EWHC 1291 [Ch]), incorporating the
guidelines laid down by the ECJ in Interflora (C-323/09); the facts of the German Fleurop case
corresponded in all essential aspects to the English Interflora case.
However, the present decision does not appear to constitute a new approach to keyword advertising,
but rather fits into well-established case law: the court itself emphasized that, in principle, keyword
advertising does not amount to trademark infringement, and repeatedly highlighted the exceptional
and specific nature of this case.‟
5 In Fotoprix SA v Vistaprint España SL (Barcelona Commercial Court Number 2, 29 July 2014)
discussed by Maite Ferrándiz in „Court rules on use of third-party trademarks as AdWords‟ World
Trade Review Legal update of 30 October 2014 who stated: „In particular, the court considered, in
accordance with the judgment of the Court of Justice of the European Union in Google France (Joined
Cases C-236/08 and C-238/08, March 23 2010), that the use of AdWords which coincide with third-
party registered trademarks does not, in itself, constitute trademark infringement, when, as in this
case, the advertisement enables the user to determine the origin of the products or services being
advertised, and such use does not undermine the advertising function of the trademark.‟

relevant consumer was looking for cheap, interchangeable adult-oriented material, which
similarly led to our court‟s finding that the consumers at issue would exercise a low degree of
care. 354 F.3d at 1026. In both cases, we looked beyond the medium itself and to the nature
of the particular goods and the relevant consumers.
We have recently acknowledged that the default degree of consumer care is
becoming more heightened as the novelty of the Internet evaporates and online commerce
becomes commonplace. In Toyota Motor Sales v Tabari 610 F.3d 1171 (9th Cir 2010), we
vacated a preliminary injunction that prohibited a pair of automobile brokers from using
Toyota‟s “Lexus” mark in their domain names.  We determined that it was unlikely that a
reasonably prudent consumer would be confused into believing that a domain name that
included a product name would necessarily have a formal affiliation with the maker of the
product, as “[c]onsumers who use the internet for shopping are generally quite sophisticated
about such matters.” Id. at 1178. The Tabari panel reasoned,

[I]n the age of FIOS, cable modems, DSL and T1 lines, reasonable, prudent and
experienced internet consumers are accustomed to such exploration by trial and error. They
skip from site to site, ready to hit the back button whenever they‟re not satisfied with a site‟s
contents. They fully expect to find some sites that aren‟t what they imagine based on a
glance at the domain name or search engine summary. Outside the special case of . . .
domains that actively claim affiliation with the trademark holder, consumers don‟t form any
firm expectations about the sponsorship of a website until they‟ve seen the landing page – if
then.
We further explained that we expect consumers searching for expensive products
online to be even more sophisticated. Id. at 1176 (“Unreasonable, imprudent and
inexperienced web-shoppers are not relevant.”).‟

[9] The Court of Appeals for the Tenth Circuit (1-800 Contacts Inc v Lens.com Inc
722 F.3d 1229 (10th Cir 2013)) endorsed the correctness of Network Automation Inc
in holding:
„Perhaps in the abstract, one who searches for a particular business with a strong mark and
sees an entry on the results page will naturally infer that the entry is for that business. But
that inference is an unnatural one when the entry is clearly labelled as an advertisement and
clearly identifies the source, which has a name quite different from the business being
searched for. It is for this reason that the Ninth Circuit considered “the labelling and

appearance of the advertisements and the surrounding context on the screen displaying the
results page” to be a critical factor in finding no likelihood of confusion in a case in which the
alleged infringer used a competitor‟s mark as a keyword. Network Automation v Advanced
System Concepts 638 F.3d 1137, 1154 (9th Cir 2011).‟

[10] In Vancouver Community College v Vancouver Career College (Burnaby) Inc
2015 BCSC 1470 (CanLII), the Supreme Court of British Columbia was called upon
to decide whether the use by one trader of another‟s trade mark as a Google
AdWords keyword amounted to passing off. The court held (para 183):
„The authorities on passing off provide that it is the “first impression” of the searcher at which
the potential for confusion arises which may lead to liability. In my opinion, the “first
impression” cannot arise on a Google AdWords search at an earlier time than when the
searcher reaches a website. When a searcher reaches the website of the defendant in the
present proceeding it is clearly identified as the defendant‟s website. As was said by Frankel
JA in Insurance Corporation of British Columbia v Stainton Ventures Ltd the “relevant
consumer” will “understand that it is necessary to view a website to determine whose site it
is”. In my opinion that is the point during a search when the relevant first impression is
made.‟

[11] Although the findings for the most part in Intercity Group (NZ) Ltd v Nakedbus
NZ Ltd [2014] NZHC 124, relate to visual use by Nakedbus of its competitor‟s trade
mark (Inter City) in its Google advertisement and on its website, which was found to
constitute passing off and trade mark infringement, the court in considering the
second cause of action, stated (para 229):
„Nakedbus did not infringe ICG‟s trade mark “INTERCITY” when it purchased the key words
“inter city” and variations thereof via Google AdWords. That second cause of action fails
because the requirement of “likely to be taken as used as a trade mark” in s 89(2) has not
been proven. Nakedbus‟ purchase of the keywords while involving use of the trade mark
“INTERCITY”, would not be likely to be taken as use as a trade mark by consumers. Those
consumers would have no or little knowledge of how the Nakedbus advertisement came to
appear in response to their attempt to access the ICG website. They were not shown to be
aware of the purchase by Nakedbus of the keywords.‟

The High Court of New Zealand therefore dismissed the keyword advertising claim
on the basis that consumers would not have assumed that Nakedbus was using the
Intercity trade mark as a trade mark.

[12] The critical question to be answered in a keyword bidding case is whether the
Google advertisement which appears in response to the search using the keyword
does not enable normally informed and reasonably observant internet users, or
enables them only with difficulty, to ascertain whether the goods or services referred
to in the Google advertisement originate from the proprietor of the trade mark (whose
mark has been used as a keyword) or an undertaking economically connected to it
or, on the contrary, originate from a third party.6 Put differently, the question is
whether the advertisement itself gives rise to the likelihood of confusion; and not
whether or not the bidding by one competitor on the trade mark of another is itself
unlawful.

[13] I appreciate that the foreign law in this field must be approached with caution
because it may be influenced by domestic and supranational legislation and other
policy considerations (Gordon Lloyd Page & Associates v Rivera & another [2000]
ZASCA 33; 2001 (1) SA 88 (SCA) at 95A), but it may nonetheless be persuasive, if
not decisive, if decided by applying the same principles to the same or similar facts
(Adidas AG & another v Pepkor Retail Limited [2013] ZASCA 3 (28 February 2013)
para 18).  It is important to reiterate that the law of passing off is not designed to
grant monopolies (Blue Lion Manufacturing (Pty) Ltd v National Brands Ltd [2001]
ZASCA 62; 2001 (3) SA 884 (SCA) para 4).

[14] The facts here are strikingly similar to the second class of complaints in
Cosmetic Warriors (above). Having searched for Clearvu in one form or another, the
consumer is confronted (on such limited evidence as is before us) with

6 Die BergSpechte Outdoor Reisen und Alpinschule Edi Koblmüller GmbH v Günther Guni and
trekking.at Reisen GmbH [2010] ETMR 33 (Court of Justice of the European Union) para 35. See also
Justin Pila & Paul Torremans European Intellectual Property Law (2016) at 415, discussion on
AdWords.

advertisements for a multiplicity of suppliers.7 The natural search results are also not
limited to goods and services provided by the appellant.8 No reasonable consumer
will consider, even momentarily, having searched for Clearvu (or some derivative of
it), that every result obtained relates to the appellant‟s products or services.
Consumers will assume, as all internet users do, that they will have to separate the
wheat from the chaff in deciding which hyperlinks appearing as a result of their
search should be clicked.9  That presumably will cause irritation and perhaps even
annoyance but it does provide the consumer with alternatives thereby fostering
competition. Sorting the wheat from the chaff insofar as Google advertisements are
concerned is by no means difficult. The advertisements are clearly marked as such
and appear in different areas of the screen. What is more is that advertisements are
clearly distinguished from the natural search results. That cannot be lost on the
average consumer, who would immediately notice that these are advertisements
rather than the natural results of their search. Thus if the advertisement contains no
reference to the appellant the consumer ought reasonably to conclude that the result
is not related to the appellant or its products or services. But even if the consumer
went one step further and clicked on M-Systems‟ website its branding would have
left the consumer in no reasonable doubt as to the identity of the trader whose
services were on offer.

[15] Insofar as momentary confusion is concerned (see Orange Brand Services v
Account Works Software [2013] ZASCA 158 (22 November 2013) para 16), both the
US and Canadian courts have rejected this as a possibility. The Canadian decision
(Vancouver Community College) found that most consumers will form no first
impression at all as regards the source of the search results generated by Google
until they reach the webpage to which those results refer. In dealing with what has

7 Including (depending on the search and the time that the search is conducted) advertisements for
firms called (or identified as) C-Thru fencing, Transparent Burglar Bars, Anti Climb Wall Spikes,
Clayton Security, Razorspike.co.za, the Yellow Pages, mfbwalling.co.za, madeinchina.com,
hmeonline.com, securityinsteel.co.za, neospace.co.za, securomesh.co.za and steelpallisade.co.za.
8 Thus, betafence.co.za is a natural first page search result for Clearvu fencing, while Vicor fencing is
a natural first page search result for Clear-Vu.
9 In Premier Trading Co Ltd & another v Sporttopia (Pty) Ltd [1999] ZASCA 48; 2000 (3) SA 259
(SCA) at 273B Nienaber JA stated: „The enquiry must be directed at the potential end customers [of
roller skates]. Judging by the promotional material adduced by the appellant in support of its case, the
end customers would most likely be teenagers or their parents. Teenagers, when it comes to this sort
of product, are notoriously discerning and discriminating purchasers . . .‟

been described as „initial-interest confusion‟10 in the US, the court in 1-800 Contacts
Inc (above) held that it would be unnatural for a consumer who searches for a
business with a strong mark to infer that an entry that is clearly labelled as an
advertisement and clearly identifies the source, which has a name quite different
from the business being searched for, that it is for that particular business. It is thus
unsurprising that the appellant has been unable to adduce any evidence of actual
confusion. And, in the absence of satisfactory evidence as to actual confusion
(Pioneer Foods (Pty) Limited v Bothaville Milling (Pty) Limited [2014] ZASCA 6 paras
23 and 26), I do not think that the appellant had proved its likelihood (see Truck and
Car Co Ltd v Kar-N-Truck Auctions 1954 (4) SA 552 (A) at 558).

[16] I shall now turn to consider the appellant‟s primary contention, which, as I
have said, is based on the general principles of unlawful competition. The argument
advanced is that the respondent‟s use of the appellant‟s trade name as a Google
keyword offends against the boni mores because it amounts to an improper filching
of the appellant‟s skill and labour and thereby constitutes unlawful competition.
According to Corbett J, „[i]t is well established that our common law recognises every
person‟s “right” – “liberty” would, perhaps, be a more correct term – to carry on his
trade without wrongful interference from others, including competitors‟ (Dun and
Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape) (Pty) Ltd 1968
(1) SA 209 (C) at 216). As a general rule, every person is entitled freely to carry on
his trade or business in competition with his rivals. But the competition must remain
within lawful bounds. If it is carried on wrongfully, in the sense that it involves a
wrongful interference with another‟s rights as a trader, that constitutes an injuria for
which the Aquilian action lies if it has directly resulted in loss. (See Schultz v Butt at
678G).

[17] Indeed, as pointed out in Schultz v Butt at 678H-I:
„In order to succeed in an action based on unfair competition, the plaintiff must establish all
the requisites of Aquilian liability, including proof that the defendant has committed a

10 Initial-interest confusion has been described as a „bait and switch‟ tactic that „occurs when a
consumer is in search of the plaintiff‟s product is lured to the product of a competitor‟.

wrongful act. In such a case, the unlawfulness which is a requisite of Aquilian liability may
fall into a category of clearly recognized illegality, as in the illustrations given by CORBETT J
in Dun and Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape) (Pty)
Ltd 1968 (1) SA 209 (C) at  216F-H, namely trading in contravention of an express statutory
prohibition; the making of fraudulent misrepresentations by the rival trader as to his own
business; the passing off by a rival trader of his goods or business as being that of his
competitor; the publication by the rival trader of injurious falsehoods concerning his
competitor's business; and the employment of physical assaults and intimidation designed to
prevent a competitor from pursuing his trade. But it is not limited to unlawfulness of that
kind‟.

[18] No one can claim an absolute right to the exercise of his or her trade,
profession or calling, for, competition often brings about interference in one way or
another about which rivals cannot legitimately complain (Matthews v Young 1922 AD
492 at 507). All that a person can, therefore, claim is the right to exercise his calling
without unlawful interference from others. As Corbett J pointed out (Dun and
Bradstreet at 216E) „[o]ne of the “rights” comprehended in the general right to carry
on a trade is the right to attract custom. Competition by a rival trader necessarily
involves an interference with the exercise of this right in that it results, to some
degree, in the diversion of such custom to the rival trader‟. Thus, the main difficulty in
this branch of the law is to determine the dividing line between lawful and unlawful
interference with the trade of another.

[19] In this case the claim of the appellant which is presently in issue relates to a
competitive act which does not fall within any of the above-mentioned examples or
categories of unlawful competition alluded to by Corbett J. In Gründlingh & others v
Phumelela Gaming and Leisure Ltd [2005] ZASCA 62; [2005] 4 All SA 1 (SCA) paras
40 and 41, the majority (per Farlam et Conradie JJA) held:
„The test for the unlawfulness of a competitive action is essentially public policy and the legal
convictions of the community.  The latter concept ordinarily includes not only right-thinking
members of the community who might be expected to hold a view on the particular topic but
also, as Van Dijkhorst J said in Lorimar Productions Inc and Others v Sterling Clothing

Manufacturers (Pty) Ltd; Lorimar Productions Inc and Others v OK Hyperama Ltd and
Others; Lorimar Productions Inc and Others v Dallas Restaurant 1981 (3) SA 1129 (T) at
1153A, those involved in the industry, “(t)he business ethics of that section of the community
where the norm is to be applied”. Apart from these considerations there are elements like
“an inherent sense of fairplay and honesty; the importance of a free market and strong
competition in our economic system; the question  whether the parties concerned are
competitors; conventions with other countries, like the Convention of Paris”. (At 1153B-C).
While legislative provisions are obviously expressions of policy they may (and we think they
do here) give expression to the community's legal convictions.
The Convention of Paris for the Protection of Industrial Property defines unfair
competition as “any act of competition contrary to honest practices in industrial or
commercial matters”. The theme of honest practices raised in Lorimar had been explored by
Corbett J in Dun &  Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape)
(Pty) Ltd 1968 (1) SA 209 (C)  A and taken up in Schultz v Butt 1986 (3) SA 667 (A) where
Nicholas AJA agreed with Corbett J that “(f)airness and honesty are themselves somewhat
vague and elastic terms” (at 679A-B) but that they are nonetheless valuable concepts; and
that while they are “relevant criteria in deciding whether competition is unfair, they are not
the only criteria . . . questions of public policy may be  important in a particular case. . .” (at
679E). He added that Van der Merwe and Olivier Die Onregmatige Daad in die Suid-
Afrikaanse Reg 5th ed at 58 note 95  “rightly emphasise” that “die regsgevoel van die
gemeenskap” opgevat moet word as die regsgevoel van die gemeenskap se
regsbeleidmakers, soos Wetgewer en Regter (at 679D-E).‟

[20] Once again it may be useful, as a starting point, to call in aid the Interflora
decisions. Interflora operates a network of flower shops, all of which trade under their
own branding and trade marks. This gives rise to certain unique considerations
insofar as keyword bidding is concerned which clearly influenced the outcome of the
trial court decision, which was overturned on appeal and remitted for reconsideration
by the Appeal Court. That the Interflora cases are distinguishable on their facts from
other keyword cases is made clear in Cosmetics Warriors. Although distinguishable
on the facts, the decision of the Court of Appeal provides an extensive analysis of
the general principles which are applied in Europe, and therefore the United
Kingdom, to the determination of whether or not keyword bidding on a competitor‟s
trade mark is lawful or not.

[21] According to the Court of Appeal Interflora judgment (para 98) „internet
advertising using keywords which are identical to trade marks is not an inherently
objectionable practice. On the contrary, its aim is, in general, to offer to internet
users alternatives to the goods or services of trade mark proprietors and it is not the
purpose of trade marks to protect their proprietors from fair competition‟.11 The Court
of Appeal in Interflora accepted that the use of another‟s trade mark as a keyword in
the Google AdWords service does not adversely affect the advertising function of
that mark,12 notwithstanding that that use might have repercussions for the use of
the mark in advertising by the trade mark proprietor.13 The fact that the use of the
other trader‟s trade name or trade mark as a keyword means that the proprietor of
the trade mark might have to pay a higher price-per-click than its competitor if it
wished to ensure that its advertisement appeared before that of the competitor is not
a sufficient basis for concluding that the trade mark‟s advertising function is
adversely affected. This is because the use of a competitor‟s trade name or trade
mark as a keyword does not have the effect of denying the proprietor of that trade
mark the opportunity of using its mark effectively to inform and win over consumers
(as an advertising tool).14

[22] The determination of whether or not an advertiser acts in accordance with
honest practices in commercial matters and fairly in relation to the legitimate interest
of another trade mark proprietor depends upon whether or not consumers would
understand the advertiser‟s Google advertisement to establish a link between the
third party‟s goods and those of the trade mark proprietor, and of the extent to which
the third party ought to have been aware of that. If the trade mark proprietor
establishes the likelihood of this link (i.e. confusion) then the advertiser will be held to
have acted dishonestly or unfairly.15 The Cosmetic Warriors decision makes plain
that there is no likelihood of confusion or deception which arises in circumstances

11 See also para 104.
12 Paragraph 38 and 78, the latter with reference to Joined Cases C-236/08 to C-238/08 Google
France SARL v Louis Vuitton Malletier SA [2010] ECR 1-0000 (Google France).
13 Paragraph 97, with reference to the ECJ decision in the same matter – Case C-323/09 Interflora
(CJEU).
14 Paragraphs 57 – 59 of the ECJ decision quoted in para 97 of Interflora.
15 Paragraph 87, with reference to Case C-558/08 Portakabin v Primakabin [2010] ECR I-6963.

where an advertiser, without more, uses another trader‟s trade name only as a
keyword.

[23] The decisions of the Court of Appeal in France and the Barcelona
Commercial Court referred to earlier also found that the practice did not constitute
unfair competition. They found in this regard that in the absence of confusion or
deception there is nothing unlawful in the practice, which was in fact generally pro-
competitive.16

[24] Although couched in the language of unlawful competition, the appellant‟s
complaint, reduced to its essentials, is that the respondents have appropriated its
trade name for a particular purpose (keyword bidding) and for their own benefit.
However, the use by one trader of the unregistered trade mark or trade name of
another is not unlawful under the common law except to the extent that that use
gives rise to passing off.17 We have not been referred to any South African decision
in which an applicant was afforded protection against the use of its unregistered
trade mark in the absence of dishonest or wrongful conduct on the part of its rival.
Quite the contrary, our courts have generally declined to come to the aid of an
applicant complaining that a rival trader has used its trade name for its own
commercial purposes unless that applicant can establish that the rival trader is using
its trade mark or trade name in a manner likely to deceive or confuse members of
the public.18 As it was put in Payen Components SA Ltd v Bovic CC & others [1995]
ZASCA 57; 1995 (4) SA 441 (A) at 453G-H: „In my opinion a Court should be wary of
allowing the sharp outlines of these two established branches of the law of unlawful
competition [copyright and passing-off], evolved through long experience, to be
fudged by allowing a vague penumbra around the outline. Unlawful competition

16 The decisions in all of these cases appear to be consistent with those of the UK Court of Appeal
decision in Interflora.
17 Phillip Morris Inc & another v Marlboro Shirt Co SA Ltd & another 1991 (2) SA 720 (A) 743F-H.
18 Blue Lion Manufacturing (Pty) Ltd v National Brand Ltd [2001] ZASCA 62; 2001 (3) SA 884 (SCA)
para 1; Payen Components SA ltd v Bovic CC & others [1995] ZASCA 57; 1995 (4) SA 441 (A) at
453G; Phillip Morris Inc v Marlboro Shirt Co SA Ltd  (above) at 743F-H; Moroka Swallows Football
Club v The Bird Football Club 1987 (2) SA 511 (W) at 531; Union Wine v Edward Snell 1990 (2) SA
189 (C); and Lorimar Productions Inc v Sterling Clothing Manufactures (Pty) Ltd 1981 3 SA 1129 (T).

should not be added as a ragbag and often forlorn final alternative to every trade
mark, copyright, design or passing off action. In most such cases it is one of the
established categories or nothing.‟

[25]  It follows that the attempt by the appellant to ground a cause of action based
on unlawful competition in these circumstances is ill conceived. For, „imitation is the
lifeblood of competition‟ and „the bare imitation of another‟s product, without more is
permitted‟ (Schultz v Butt quoting from American Safety Table Co Inc v Schreiber
269 F.2d 255 (2nd Cir 1959)).19 And, as it was put in Moroka Swallows Football Club
v The Bird Football Club 1987 (2) SA 511 (W) at 531:
„Provided that he does not commit the delicts of defamation or passing off or offend against
any specific statutory prohibition, there is no reason why an entrepreneur should not take the
benefit of such advantage as he may be able to gain in the marketing of his goods and
services by associating them with names that have become famous‟.
Indeed, the appellant effectively calls upon this court to allow what Schutz JA
described as an illegitimate „ersatz passing off with requirements . . . less exacting
than those required by the common law‟ (Blue Lion Manufacturing (above) para 1).
Schutz JA added: „Some of the restraints that the common law places on the
passing-off action (the one relevant to this case is the need to prove the likelihood of

19 In Schultz v Butt at 683 Nicholas AJA stated:
„In the American case of American Safety Table Co Inc v Schreiber (1959) 269 F.2d 255 it was said at
271-272:
“... (At) first glance it might seem intolerable that one manufacturer should be allowed to sponge on
another by pirating the product of years of invention and development without licence or recompense
and reap the fruits sown by another. Morally and ethically such practices strike a discordant note. It
cuts across the grain of justice to permit an intruder to profit not only by the efforts of another but at
his expense as well.”
However, this initial response to the problem was curbed in deference to the greater public good:
“For imitation is the life blood of competition. It is the unimpeded availability of substantially
equivalent units that permits the normal operation of supply and demand to yield the fair price society
must pay for a given commodity... Unless such duplication is permitted, competition may be unduly
curtailed with the possible resultant development of undesirable monopolistic conditions. The
Congress, realizing such possibilities, has therefore confined and limited the rewards of originality to
those situations and circumstances comprehended by our patent, copyright, and trademark laws.
When these statutory frameworks are inapplicable, originality per se remains unprotected and often
unrewarded. For these reasons and with these limitations the bare imitation of another's product,
without more, is permissible. And this is true regardless of the fact that the Courts have little sympathy
for a wilful imitator.”‟

deception and confusion) are important in preventing the creation of impermissible
monopolies‟.

[26] It follows that the appeal must fail and in the result it is accordingly dismissed
with costs.

_________________
V M Ponnan
Judge of Appeal

APPEARANCES:

For Appellant:

O Solmon SC (with him M Freed)

Instructed by:

Rademeyer Attorneys, Johannesburg

Honey Attorneys, Bloemfontein

For Respondents:

G Marriott

Instructed by:

Adams & Adams, Johannesburg

Webbers, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

16 March 2016

STATUS

Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal.

Cochrane Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd (227/2015) [2016]
ZASCA 74 (27 May 2016)

The Supreme Court of Appeal (SCA) today handed down judgment relating to use of a rival business’
common law trademark as a keyword in the Google AdWords system and whether that constitutes
unlawful competition or passing off.

The case involved – Cochrane Steel Products (Pty) Ltd (the appellant) and M-Systems Group (Pty)
Ltd (the respondent) – two rival traders in the security fencing industry. During 2008 the appellant had
invented security fencing comprising high density, high tensile mesh and conceived and adopted the
brand name ‘CLEARVU’ for the product. Although there are pending applications for registration
which were filed by the appellant in 2010, CLEARVU is yet to be registered as a trade mark in terms
of Trade Marks Act 194 of 1993. The appellant accordingly relied in the case on a common law trade
mark.

The activities from which these proceedings arose concerned the display on the internet of M-
Systems’ advertisements in response to the entry into the Google search engine by internet users of
search terms consisting of or comprising the word ‘CLEARVU’ or minor variants of it. This was made
possible by the service called Google AdWords, in terms of which Google offers advertisers the
facility to match a keyword to a user’s search query so as to trigger an advertisement in various
different ways, and which allows advertisers to display their advertisements in the Google content
network through either a cost-per-click or cost-per-view scheme. The appellant’s argument was that
this constituted a form of unlawful competition or alternatively a passing off.

Thus, during October 2013, the appellant sought to interdict and restrain the respondent from using
its mark CLEARVU or any mark confusingly similar to the mark including the marks ‘CLEAR VU’ and
‘CLEAR-VU’ in relation to Google AdWords advertising. On 29 October 2014, the Gauteng Local
Division, Johannesburg (per Nicholls J) dismissed the application with costs, but granted leave to the
appellant to appeal to the SCA.

The SCA held in respect of the respondent’s alternative claim of passing off, that it is a species of
wrongful competition in trade or business; and that it consists in a representation by one person that
his or her business or merchandise is that of another, or that it is associated with that of another. The

court further held that in order to determine whether a representation amounts to a passing off, the
test was 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 SCA found that the appellant not having any registered right in the name CLEARVU, that it was
for it (the appellant) to show that the name has acquired such a reputation in relation to its business,
that it may be said to have become distinctive thereof.   The SCA stated that whilst it was willing to
accept in the appellant’s favour that it had succeeded in establishing a reputation in the name
CLEARVU, it (the court) doubted whether the appellant had established the second leg of its cause of
action, namely that the respondent’s conduct caused or was calculated to cause the public to be
confused or deceived. The SCA held in that respect that the question whether there is a reasonable
likelihood of such confusion arising is a question of fact for determination in the light of the
circumstances of each case.

In relation to the appellant’s main contention of unlawful completion: The SCA found that in a number
decisions of comparable foreign jurisdictions dealing with the question of whether or not the bidding
by one trader on another’s trade mark as a keyword in Google’s AdWords service had been lawful.

The SCA thus held that the critical question to be answered in a keyword bidding case is whether the
Google advertisement which appears in response to a search using the keyword itself gives rise to
the likelihood of confusion; and not whether or not the bidding by one competitor on the trade mark of
another is itself unlawful.

The SCA held that the test for the unlawfulness of a competitive action is essentially public policy and
the legal convictions of the community and that the latter ordinarily includes not only right-thinking
members of the community who might be expected to hold a view on the particular topic, but also:
those involved in the industry and its business ethics where the norm is to be applied. Apart from
these considerations, that there are elements like an inherent sense of fairplay and honesty; the
importance of a free market and strong competition in the economic system; and the
question whether the parties concerned are competitors.

The SCA held that the determination of whether or not an advertiser acts in accordance with honest
practices in commercial matters and fairly in relation to the legitimate interest of another trade mark
proprietor depends upon whether or not consumers would understand the advertiser’s Google
advertisement to establish a link between the third party’s goods and those of the trade mark
proprietor, and of the extent to which the third party ought to have been aware of that. The court held
that if the trade mark proprietor establishes the likelihood of this link (ie confusion) then the advertiser
will be held to have acted dishonestly or unfairly.

The SCA found that in this case, the claim of the appellant related to a competitive act which did not
fall within any of the recognised categories of unlawful competition. The court stated that it had not
been referred to any South African decision in which an applicant was afforded protection against the
use of its unregistered trade mark in the absence of dishonest or wrongful conduct on the part of its
rival.   The court held that, to the contrary, the courts have generally declined to come to the aid of an
applicant complaining that a rival trader has used its trade name for its own commercial purposes
unless that applicant can establish that the rival trader is using its trade mark or trade name in a
manner likely to deceive or confuse members of the public.

Based on the foregoing, the SCA accordingly found in respect of the appellant’s main contention
(unlawful competition) that it followed in the case that the attempt by the appellant to found a cause of
action based on unlawful competition in these circumstances had been ill-conceived.

The SCA resultantly dismissed the appeal with costs.

--- ends ---