Court of Appeal Restores Muse AF Enterprises’ PANASUPER Trademark, Finds Infringement and Passing Off by Former Business Partners, and Reaffirms That Trademark Ownership and Intention.
Court of Appeal Restores Muse AF Enterprises’ PANASUPER Trademark, Finds Infringement and Passing Off by Former Business Partners, and Reaffirms That Trademark Ownership and Intention to Use May Precede Formal Registration.
Muse AF Enterprises Co. Ltd v Bilen General Trading Ltd & 2 Others
Court of Appeal of Uganda at Kampala
Coram: Hon. Justices Geoffrey Kiryabwire, Jesse Byaruhanga-Rugyema and John Mike Musisi, JJA.
Snapshot
The Court of Appeal allowed the appeal in a long-running dispute over the PANASUPER battery trademark. It was held that Ownership of a trademark can exist independently of, and prior to, registration; that an agreement concerning a mark concluded before registration is not for that reason a forgery, that fraud in the registration of a mark must be proved to a standard higher than a balance of probabilities; and that a court cannot, on its own motion, remove a mark from the register for non-use where no aggrieved person has applied for that relief.
FACTS OF THE CASE
The Appellant, Muse AF Enterprises Co. Ltd, a Ugandan company dealing in batteries, instituted proceedings against Bilen General Trading Ltd and Linyi Huatai Battery Co. Ltd over the use of the PANASUPER trademark in Uganda. The dispute arose from a commercial relationship initiated in 2006 when the Appellant's Managing Director, Muse Aferwoki, attended the Canton Trade Fair in Guangzhou, China, and met Mr Shore, who acted on behalf of the Second and Third Respondents. During the meeting, the parties discussed and agreed that the Appellant would own the PANASUPER trademark in Uganda, enter into an Original Equipment Manufacturer (OEM) agreement with the Second Respondent and purchase other battery brands from it.
Following these discussions, the Appellant applied to register the PANASUPER trademark in Uganda on 3 August 2006. The application was advertised in the Uganda Gazette on 4 August 2006 and was subsequently opposed by Matsushita Electronic Industrial Co. Ltd of Japan. The objection was resolved in the Appellant's favour, and the trademark was registered on 13 May 2008. By virtue of section 21(b) of the Trademarks Act, Cap. 217, the registration was deemed effective from the date of application, namely 3 August 2006. The Appellant and the Second Respondent also executed an OEM Cooperation Agreement, while the Third Respondent subsequently issued a Power of Attorney in favour of the Appellant in respect of the trademark.
The Third Respondent, Linyi Huatai Battery Manufacture Co. Ltd, was itself the registered proprietor of the PANASUPER trademark in China and had registrations with international intellectual property organisations. A dispute subsequently arose around 2012 when the Second and Third Respondents terminated their supply relationship with the Appellant and began supplying PANASUPER batteries to the First Respondent, Bilen General Trading Ltd, as their newly appointed agent. The Appellant contended that the Respondents had infringed its registered trademark and passed off their batteries as those associated with the Appellant.
In response, the Third Respondent instituted a counterclaim alleging that the Appellant had fraudulently registered the PANASUPER trademark in Uganda. The two proceedings were consolidated before the High Court.
Proceedings in the High Court
The Appellant sued the First and Second Respondents for trademark infringement and passing off (Civil Suit No. 102 of 2013). The Third Respondent filed a separate suit against the Appellant alleging fraudulent registration of the PANASUPER trademark (Civil Suit No. 271 of 2013). The two suits were consolidated and heard together.
The learned trial Judge dismissed the Appellant's suit for lack of merit and entered judgment on the counter-claim. She made the following orders;
a declaration that the Appellant registered the PANASUPER trademark fraudulently;
an order that the mark be removed from the Register of Trademarks in Uganda;
an order that the Appellant pay the First Respondent general damages of UGX 10,000,000;
interest on the general damages at 10% per annum from the date of judgment until payment in full; and
costs to the Respondents.
Being dissatisfied, the Appellant appealed to the Court of Appeal.
Grounds of Appeal
The Appellant raised seven grounds, complaining that the learned trial Judge erred in law and in fact in:
holding that it would not be possible for the Appellant to contract in respect of the mark as its owner before the entry of the mark onto the register;
holding that the OEM Agreement was a forgery with no legal consequence;
failing to properly evaluate the evidence and concluding that, by registering the mark in its name, the Appellant exceeded the authority granted by the power of attorney;
failing to properly evaluate the evidence and concluding that the Appellant was a distributor or agent of the Third Respondent;
failing to properly evaluate the evidence and concluding that the Appellant registered the mark fraudulently;
holding that the mark could be removed from the register for non-use or lack of bona fide use, even if it had been found to be properly registered; and
holding that the First and Second Respondents did not infringe the mark or pass off their batteries as those of the Appellant.
LEGAL REPRESENTATION
For the Appellant:
Mr. Muziki Moses, holding brief for Mr. Robert Kirunda.
For the Respondents:
Mr. Nuwagaba Patrick, holding brief for Mr. John Patrick Barenzi of Barezi & Co. Advocates, together with Mr. Areemwa of Tareemwa & Co. Advocates.
SUBMISSIONS OF THE PARTIES
Whether the OEM Agreement was a forgery with no legal consequence
Counsel for the Appellant submitted that the OEM Agreement was validly executed between the Appellant and the Second Respondent on 8 August 2006, as evidenced by the original document produced before the trial Court. Counsel maintained that the Appellant's Managing Director had testified that he executed the agreement with Mr. Shore, who was then the Second Respondent's Sales Manager for Africa.
Counsel further submitted that the Respondents had not adduced credible evidence to establish that the agreement was forged. It was argued that the Respondents' witness, Yin Lei (DW1), could not competently testify about the circumstances surrounding the execution of the agreement in 2006 because he only joined the Second and Third Respondents in 2008. Counsel therefore contended that his evidence was hearsay and could not establish forgery.
Counsel also submitted that section 19(1) of the Trademarks Act, Cap. 217, permitted a person claiming to be the proprietor of a trademark which he or she had used or proposed to use to apply for its registration. Accordingly, ownership or proprietorship of a trademark could exist before formal registration, and the Appellant was not legally precluded from entering into a commercial agreement concerning the trademark before it was entered on the Register.
Counsel for the Respondents submitted that, at the time the alleged OEM Agreement was executed, neither the Appellant nor the Second Respondent was the registered proprietor of the PANASUPER trademark in Uganda. Counsel maintained that the Third Respondent was the registered proprietor in China and had international registrations of the mark.
It was further submitted that the OEM Agreement was void for lack of consideration because the Appellant's Managing Director had admitted during cross-examination that he did not pay any consideration to the Second or Third Respondents under the agreement. Counsel also argued that the Appellant could not simultaneously act as the lawful attorney of the trademark owner and claim ownership of the same trademark.
Whether the Appellant fraudulently registered the PANASUPER trademark
Counsel for the Appellant submitted that the Respondents had failed to prove fraud to the standard required by law. Relying on Kampala Bottlers Ltd v Damanico Ltd, Civil Appeal No. 22 of 1992, Counsel argued that fraud must be strictly proved, with a burden heavier than the ordinary balance of probabilities applicable in civil proceedings.
Counsel further submitted that the Power of Attorney issued in February 2007 could not have been the instrument through which the Appellant fraudulently obtained registration because the trademark application had already been lodged on 3 August 2006, approximately seven months earlier. It was argued that the Power of Attorney was obtained subsequently to address the opposition lodged by Matsushita Electronic Industrial Co. Ltd.
Counsel also contended that the words “in its names and for its own use” in the Power of Attorney authorised the Appellant to register the trademark in its own name and for its own benefit. Further, Counsel submitted that the Respondents had failed to establish that the Appellant was merely a distributor or agent of the Third Respondent. The evidence relied upon to establish the alleged distributorship was challenged as hearsay, while the Appellant's Managing Director denied signing the disputed distributorship agreement.
Counsel for the Respondents submitted that the Appellant knew that the Third Respondent was the registered proprietor of the PANASUPER trademark in China. Counsel relied on the Appellant's Managing Director's testimony in which he acknowledged the Third Respondent's ownership of the mark and explained that he had requested a Power of Attorney from Linyi Huatai.
Counsel further argued that the Power of Attorney merely authorised the Appellant to register and protect the trademark on behalf of the Third Respondent. It was submitted that the expressions “our PANASUPER” and “our Mark” used in the instrument demonstrated that the trademark belonged to the Third Respondent. Counsel relied on Frederick Zaabwe v Orient Bank & Others, SCCA No. 04 of 2010, in support of the proposition that knowledge of another person's rights, accompanied by an intention to defeat those rights, could constitute fraud.
Whether the trademark could be removed from the Register on grounds of non-use
Counsel for the Appellant submitted that no application had been made by any aggrieved person for removal of the PANASUPER trademark on grounds of non-use, as required by section 46(1) of the Trademarks Act, 2010. Counsel argued that the trial Court had improperly assumed the role of an aggrieved applicant by raising and determining the issue on its own motion.
It was further submitted that the Court had acted contrary to its role as an independent arbiter and had denied the Appellant an opportunity to be heard on an issue that had not been pleaded or identified for determination at the scheduling conference.
Counsel for the Respondents submitted that the trademark was liable to removal under section 46(1)(a) and (b) of the Trademarks Act, 2010, on account of non-use or lack of bona fide use. Counsel argued that the Appellant had failed to demonstrate that it manufactured or dealt in PANASUPER batteries in its own capacity, other than when it was acting as the Third Respondent's distributor.
Whether the Respondents infringed the trademark or passed off their batteries as those of the Appellant
Counsel for the Appellant submitted that, having lawfully registered the PANASUPER trademark, the Appellant enjoyed the exclusive rights conferred upon a registered proprietor under section 36 of the Trademarks Act, 2010. Counsel argued that the First Respondent's importation and sale of PANASUPER batteries in Uganda, pursuant to its distributorship arrangement with the Second Respondent and without the Appellant's consent, constituted trademark infringement.
On passing off, Counsel submitted that the Appellant had outsourced the manufacture of its batteries to the Second Respondent under the OEM Agreement. However, the Second Respondent subsequently manufactured its own batteries bearing the PANASUPER mark and sold them in Uganda through the First Respondent.
Counsel contended that this conduct amounted to passing off because the Respondents were representing their batteries as products belonging to or associated with the Appellant.
Counsel for the Respondents submitted that the Appellant had no exclusive rights over the PANASUPER trademark because its registration had allegedly been obtained fraudulently.
Counsel further argued that there could be no infringement because the batteries sold were manufactured by the Second and Third Respondents. On passing off, Counsel maintained that the Appellant had merely acted as a distributor or agent and had not manufactured the products in question.
Preliminary Matters
The Court's duty as a first appellate court
The Court noted that this was a first appeal and that it was charged with the duty of re-appraising the evidence and drawing inferences of fact, as provided under Rule 30(1)(a) of the Judicature (Court of Appeal Rules) Directions, SI 13-10. Relying on Pandya v R [1957] EA 336 and Kifamunte Henry v Uganda, Supreme Court Criminal Appeal No. 10 of 1997, it was observed that the first appellate court must review the evidence, reconsider the materials before the trial judge and make up its own mind, "not disregarding the judgment appealed from but carefully weighing and considering it".
Standard of proof of fraud
The Court further reiterated, citing Kampala Bottlers Ltd v Damanico Ltd, Civil Appeal No. 22 of 1992, that fraud must be proved strictly, the burden being heavier than the balance of probabilities generally applied in civil matters.
Preliminary objection
whether the appeal was overtaken by events
It was submitted by Counsel for the Respondents that the appeal had been overtaken by events because the PANASUPER mark had since been registered in the name of the Third Respondent. Counsel for the Appellant responded that the alleged registration was premised on the very decision under appeal and could not stand independently of a confirmed decision.
The Court agreed with the Appellant. It was held that the subsequent registration was a direct consequence of the High Court's order removing the mark from the Appellant's name, and that if the High Court had erred, "the foundation of that subsequent registration ceases to exist". The appeal raised live and justiciable issues with practical and enforceable consequences. The preliminary objection was accordingly overruled.
COURT'S FINDINGS
The OEM Agreement was not a forgery merely because questions arose regarding its enforceability
The Court of Appeal began by distinguishing between a document that is legally unenforceable and one that is forged. It observed that forgery involves the fraudulent making or alteration of a document with the intention that it be used as genuine. Accordingly, the fact that an agreement may contain legal deficiencies does not, without more, make it a forgery.
The Court examined the evidence surrounding the execution of the OEM Agreement and noted that the document had been physically executed by the Appellant and Mr. Shore of the Second Respondent. It further observed that the Respondents had not produced a witness with personal knowledge of the events surrounding the agreement's execution in 2006. In particular, the evidence of Yin Lei (DW1) was found to be hearsay because he had not joined the relevant companies until 2008 and was merely repeating what he had been told by a colleague.
The Court therefore rejected the contention that the OEM Agreement was forged, observing that:
“There is a critical distinction, therefore, between a document that is a legal nullity and one that is a forgery.”
On whether the Appellant could claim proprietorship before registration, the Court considered section 19(1) of the Trademarks Act, Cap. 217, which permits a person claiming to be the proprietor of a trademark that he or she has used or proposes to use to apply for registration. It held that proprietorship and the intention to use a trademark could exist before its formal registration. Registration did not necessarily create ownership; rather, it formally recorded and evidenced the proprietary interest and conferred the exclusive rights associated with registration.
The Court stated;
“Registration therefore does not create ownership; it merely records and evidences it, granting the registrant the exclusive right to use the mark.”
It further held that a prospective proprietor who had agreed to own and use a trademark in a particular territory was not legally prevented from entering into an agreement to give effect to that arrangement before registration.
The Court also addressed the Respondents' argument that the agreement lacked consideration because no monetary payment had been made. It noted that the agreement contemplated a wider commercial arrangement under which the Second Respondent would manufacture batteries for the Appellant, while the Appellant would grant the Second Respondent the right to use the trademark on those products. The absence of monetary consideration did not automatically render the agreement a forgery.
Consequently, the Court held that the trial Judge had erred in characterising the OEM Agreement as a forgery. At most, certain provisions could have raised questions about enforceability, but that did not change the character of the document itself.
Grounds 1 and 2 of the appeal accordingly succeeded.
Fraudulent registration of a trademark must be strictly proved
The Court reiterated that fraud in civil proceedings attracts a standard of proof higher than the ordinary balance of probabilities. It relied on Kampala Bottlers Ltd v Damanico Ltd, Civil Appeal No. 22 of 1992, in which the principle that fraud must be strictly proved was affirmed.
In re-evaluating the evidence, the Court considered the chronology of the trademark application, the OEM Agreement and the Power of Attorney. It noted that the Appellant had applied for registration on 3 August 2006, the OEM Agreement was executed on 8 August 2006, and the Power of Attorney was obtained in February 2007 to address the opposition lodged by Matsushita Electronic Industrial Co. Ltd.
The Court observed that the Power of Attorney could not have been the instrument through which the Appellant initially procured registration because the application had preceded it by approximately seven months. It considered this chronology fundamentally inconsistent with the finding that the Power of Attorney had been used to commit fraud in obtaining registration.
The Court stated;
“The fact that the registration application pre-dated the Power of Attorney significantly undermines the finding of fraud.”
The Court also examined the wording of the Power of Attorney, particularly the phrase “in its names and for its own use.” It found that the language was genuinely ambiguous and that, when read naturally and in context, it supported the Appellant's position that the trademark was intended to be registered in its own name and for its benefit. The references to “our PANASUPER” and “our Mark” elsewhere in the instrument did not conclusively resolve the ambiguity.
On the alleged distributorship relationship, the Court found that the Respondents had failed to discharge their burden of proof. It noted that Yin Lei's evidence was based on information received from another person and that the Appellant's Managing Director had denied signing the disputed distributorship agreement. The trial Judge had also observed that the signature on the document was not that of the Appellant's director.
The Court consequently found that the trial Judge had improperly reversed the burden of proof by requiring the Appellant to establish that it had not executed the disputed distributorship agreement.
In its conclusion on fraud, the Court held:
“Having re-evaluated the evidence as I am required to do at first appeal, I find that the evidence of fraud was not proved to the standard required by law.”
It therefore found that the Respondents' case rested substantially on hearsay evidence and a disputed agency agreement, which were insufficient to establish fraudulent registration. The Court accordingly allowed the grounds of appeal relating to fraud.
A court cannot order removal of a registered trademark for non-use without a proper application by an aggrieved person
The Court considered section 46(1) of the Trademarks Act, 2010, which provides for removal of a registered trademark from the Register upon application by an aggrieved person. It observed that the statutory provision expressly contemplated an application as the basis for initiating removal proceedings.
The Court noted that none of the Respondents had made an application for removal of the PANASUPER trademark on grounds of non-use. Further, non-use had not been included among the agreed issues for determination at the scheduling conference.
The Court therefore found that the trial Court had acted improperly by introducing and determining the issue on its own motion. It emphasised that the Court's role was that of an independent arbiter and that it could not assume the position of an aggrieved applicant.
on the limits of judicial intervention, the Court stated:
“The trial court therefore acted without jurisdiction when it ordered the removal of the trademark on the ground of non-use, a matter that was neither pleaded nor applied for in the prescribed manner.”
The Court further noted that, by raising and determining the issue without giving the Appellant an opportunity to be heard, the trial Court had violated the Appellant's right to a fair hearing on that question.
It accordingly held that the High Court had erred in ordering removal of the trademark on grounds of non-use in the circumstances of the case.
The sixth ground of appeal succeeded.
The Respondents' importation and sale of PANASUPER batteries constituted trademark infringement
Having found that the OEM Agreement was not a forgery and that the PANASUPER trademark had not been fraudulently registered, the Court concluded that the Appellant was the lawful registered proprietor of the trademark in Uganda.
The Court considered section 36 of the Trademarks Act, 2010, which confers upon the registered proprietor the exclusive right to use the trademark in relation to the goods for which it is registered.
It was noted that the First Respondent had imported and sold PANASUPER batteries in Uganda pursuant to a distributorship arrangement with the Second Respondent, without the Appellant's consent. The Court held that those acts infringed the Appellant's exclusive rights as the registered proprietor.
The Court stated:
“Those acts therefore constituted infringement of the Appellant's registered trademark under Section 36 of the Trademarks Act 2010.”
The Court's finding was significant because the Respondents' defence was substantially premised on the assertion that the Appellant had no valid proprietary rights in the trademark. Once the Court rejected the allegations of forgery and fraudulent registration, the Appellant's rights as the registered proprietor became the basis for determining infringement.
The Respondents' conduct also amounted to passing off
On the claim of passing off, the Court identified the essential elements as:
Goodwill or reputation attached to goods or services supplied by the claimant;
A misrepresentation by the defendant to the public, whether intentional or otherwise, leading or likely to lead the public to believe that the defendant's goods or services are those of the claimant; and
Damage to the claimant arising from the erroneous belief created by the misrepresentation.
Having found on Issues 1 and 2 that the OEM Agreement was not a forgery and that the mark was not fraudulently registered, the Court held that it followed that the Appellant was the lawful registered owner of the mark in Uganda.
Section 36 was noted to confer on the registered owner the exclusive right to use the mark in relation to the relevant goods. Since it was not in dispute that the First Respondent imported and sold PANASUPER batteries in Uganda under a distributorship arrangement with the Second Respondent, and without the Appellant's consent, those acts constituted infringement.
On passing off, the Court restated the elements of the tort: goodwill or reputation attached to the claimant's goods or services; a misrepresentation by the defendant to the public, whether or not intentional, leading or likely to lead the public to believe that the defendant's goods or services are those of the claimant; and damage to the claimant by reason of the erroneous belief so engendered.
It was held that, by virtue of the OEM Agreement, the Appellant owned the PANASUPER brand in Uganda. The Second Respondent, after manufacturing batteries for the Appellant, went on to manufacture its own batteries under the same mark and sold them in Uganda through the First Respondent. This was held to be a misrepresentation to the public that those batteries were the Appellant's or were associated with it, and the Appellant suffered damage, "having lost its market and commercial position".
Issue 4 succeeded.
Issue 5: Remedies
Having found for the Appellant on all substantive grounds, the Court made the following orders;
The appeal was allowed.
The judgment and orders of the High Court were set aside in their entirety.
It was declared that the Appellant lawfully registered the PANASUPER trademark in Uganda and that the registration was not fraudulent.
The OEM Agreement executed between the Appellant and the Second Respondent on 8 August 2006 was declared a valid and enforceable document.
The First and Second Respondents were found to have infringed the Appellant's trademark and passed off their batteries as those of the Appellant.
The PANASUPER trademark, as registered by the Appellant, was to be reinstated on the Register of Trademarks in Uganda.
Since damages were not argued by the Appellant on appeal, the Court, exercising its discretion, awarded nominal damages of UGX 10,000,000 for infringement and passing off, from the date of judgment of the trial court, with simple interest at court rate from that date until payment in full.
8. The Appellant was awarded the costs of the appeal and of the court below.
Justices Byaruhanga-Rugyema and Musisi, JJA, each delivered a short concurring judgment, agreeing with the lead judgment and orders.
Holding
The Court of Appeal held, unanimously, that;
The OEM Agreement was not a forgery. Absence of monetary consideration or pre-registration execution may affect enforceability of particular clauses, but does not make a document a forgery.
Proprietorship of a trademark can exist before and independently of registration, and registration merely records and evidences ownership.
Fraud in the registration of the mark was not proved to the strict standard required, and the High Court wrongly shifted the burden on the alleged distributorship agreement.
The High Court acted without jurisdiction in removing the mark for non-use, there being no application by an aggrieved person under section 46(1) of the Trademarks Act, 2010, and no hearing for the Appellant.
The First and Second Respondents infringed the mark and passed off their batteries as the Appellant's.
The appeal was allowed, the High Court's orders were set aside, the mark was reinstated, and nominal damages of UGX 10,000,000 with interest and costs were awarded to the Appellant.
Read the full case
Key Takeaways
Ownership is not created by registration.
Reading section 19(1) of the Trademarks Act, the Court emphasised that a person who claims to be the proprietor of a mark that it has used or proposes to use may apply for registration, and may contract in respect of the mark before it appears on the register. Parties negotiating brand rights ahead of registration should nonetheless document the arrangement carefully.
A defective agreement is not necessarily a forged one.
The Court distinguished a legal nullity or unenforceable instrument from a forgery. Allegations of forgery require proof of fraudulent making or alteration with intent to deceive, and should not be used as shorthand for deficiencies in consideration or timing.
Fraud must be strictly proved.
Citing Kampala Bottlers, the Court reaffirmed that the burden is heavier than a balance of probabilities. Chronology matters: a power of attorney obtained months after the application could not be the instrument of fraud in that application.
Hearsay will not carry a fraud case.
The Respondents' witnesses lacked personal knowledge of the 2006 events, and their testimony was discounted. Litigants alleging fraud must call witnesses with first-hand knowledge.
Burden of proof must not be reversed.
The party alleging an agency or distributorship relationship bears the burden of proving it. A trial court erred when it required the other party to disprove the allegation.
Ambiguity in a power of attorney is read in context.
Where an instrument is imprecisely drafted, the Court will look at its purpose and the circumstances in which it was procured. Practitioners should draft powers of attorney in clear, unambiguous terms, particularly on whose name the mark is to be registered in.
Removal for non-use must be applied for.
Under section 46(1), removal is initiated by an application by an aggrieved person. A court cannot raise non-use suo motu, and doing so, without an issue framed or a hearing given, is a jurisdictional error and a denial of the right to be heard.
Courts are arbiters, not participants.
The Court endorsed the principle that a trial court must not "descend into the arena" by assuming the role of a party.
Damages may be awarded on appeal in the court's discretion.
Although damages were not argued on appeal, the Court awarded nominal damages of UGX 10,000,000 with interest. Counsel should still address remedies expressly in appellate submissions.
Registered owners enjoy robust protection against parallel supply.
Importing and selling goods bearing the registered mark without the owner's consent was held to infringe section 36, even where the goods came from the foreign manufacturer.
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