South Africa is currently negotiating a global free trade agreement in relation to agricultural products with the European Union (EU). The negotiations began in 1995. The EU has indicated that it is not prepared to enter into such an agreement with South Africa unless South Africa agrees to prohibit any use of the terms "sherry" or "port" in relation to fortified wines manufactured in South Africa. The EU believes that South Africa's continued use of these terms is in breach of article 23 of the TRIPS agreement.
Article 23 of the TRIPS agreement provides that members of TRIPS are to provide legal means for interested parties to prevent the use of a "geographical indication" which identifies wines or spirits as originating in a particular geographical area when the wines and spirits do not in fact originate in that area, even where the true origin of the goods is indicated on the product or the geographical indication is used in translation or accompanied by expressions such as "kind", "type", "style", "imitation" or the like.
Article 23 accordingly prohibits any false use of a geographical indication, even if such use is not misleading or does not amount to unfair competition.
"... indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin."
The TRIPS agreement has therefore recognised that a geographical indication is a commercial exploitable intangible right with an inherent economic value. The use of a false geographical indication could result in the user poaching the established reputation of a geographical indication and could even have a negative erosive impact on the geographical indication.
A geographical indication must, however, fall within the definition of article 22 before it should be awarded the protection of article 23. The two necessary components of a geographical indication are that the name must identify the product as originating in a particular area and that goods which do originate in that area are automatically attributed with a particular quality or reputation.
Possibly the most common example of a geographical indication which falls within the definition of article 22 is the term "champagne". In terms of an arrangement with France, the terms "champagne" and "méthode champenoise" may not be applied to wines produced in South Africa. The term "méthode cap classique" was created to describe South African sparkling wines made by the "champagne method".
At the negotiations with the EU, South Africa argued that the terms "port" and "sherry" do not fall within the definition of geographical indications in terms of article 22. Neither is the name of a region or locality in Spain or Portugal. Both are simply corruptions of the names of particular regions in each country. The word "port" is derived from "Oporto" in Portugal and "sherry" from "Jerez" in Spain. Portuguese port and Spanish sherry apparently do not necessarily originate in Oporto or Jerez. Portuguese port is not produced anywhere near the town of Oporto although it is often aged and blended there. Spanish sherry is made from grapes grown in the vicinity of Jerez, but many sherry producers occupy premises in towns a small distance away.
South Africa argued that it is questionable that the terms "port" and "sherry" are internationally automatically associated with fortified wines of a particular quality which originate in particular regions of Portugal and Spain, respectively.
Even if it were to be accepted that these terms fall within the definition of geographical indications in terms of article 22, it does not follow that South Africa is in breach of the TRIPS agreement.
Articles 24(4) and (6) of the TRIPS agreement provide that a member of TRIPS shall not be obliged to prohibit the use of the particular geographical indication if the member has made continuous bona fide use of such an indication for at least ten years preceding 15 April 1994 or if the particular geographical indication has in fact become generic in the particular member country and is the customary name for the particular goods.
South Africa has made continuous and bona fide use of the terms "port" and "sherry" for at least one hundred years. Some even allege that the names have been used since approximately 1795. The terms have become generic in South Africa. Indeed, it is difficult to imagine an alternative term which could be used for the products which we have called "sherry" and "port" for over a century. There is no misleading or deception of consumers. The South African public harbour no illusions that the sherry and port sold in South Africa originate in Portugal or Spain.
Furthermore, South Africa's use of the terms "sherry" and "port" cannot dilute those names as geographical indications as they are eroded in South Africa already. They have no meaning as geographical indications as defined in terms of article 22. They fall within the public domain as descriptive terms. The removal of these names from the public domain would have tremendous repercussions for the local market.
During the last round of negotiations between South Africa and the EU, the EU refused to change its position. South Africa has offered to compromise by prohibiting the use of the names on goods intended for the export market but remains adamant that the names cannot be prohibited in relation to the domestic market. The most recent development is that the European Development Commissioner, Joao de Deus Pinheiro has suggested that South Africa be allowed to use the terms "Port" and "Sherry" for a period of 12 years whereafter South Africa will be required to introduce other names for these fortified wines.