Unilever [Omo] vs Procter & Gamble [Ariel]: Regulation of Advertising under Kenya’s Competition and Intellectual Property Laws

“What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade (….) The goodwill of a business is one whole.” – Lord MacNaughten in The Commissioners of Inland Revenue v Muller & Co’s Margarine Limited [1901] AC 217 223-224.

According to a recent Consumer Insight survey, Ariel by Procter & Gamble East Africa (PGEA) enjoys a market share of 25 per cent, Omo by Unilever Kenya (UK) is at 18 per cent, Sunlight also manufactured by UK is at 17 per cent, Toss by Kapa Oil Refineries is at 6 per cent and Ushindi by PZ Cussons is at 6 per cent. According to this survey, despite Ariel’s re-entry into the Kenyan market, it has become “the leading brand” and has “successfully captured a loyal following” thanks to it’s Enzymax formula and ‘one wash’ campaign which has really “connected with consumers”.

The Business Daily now reports that PGEA has been sued by UK with respect to its “one wash” detergent advertising campaign for Ariel which the Omo manufacturer alleges is non-factual. The adverts in question (an earlier version of which is available above in Swahili) promote Ariel as the best stain removal detergent “in one wash” and is compared as a superior choice to the “other popular powder detergent in the market” (an alleged reference to UK’s Omo detergent). UK contends that the adverts thus depict Omo as incapable of removing the stains in “one wash”, arguing that the claim is not based on any independent research. Therefore UK alleges that PGEA’s ‘one wash’ advertisements are unlawful. From an intellectual property (IP) perspective, advertisements are important mode of building and promoting IP rights.

The High Court last month granted UK interim orders restraining PGEA from “running or airing the Ariel One Wash campaign advert in its current form at all media houses and all forms of print and electronic media” until the matter is back in court. Subsequently, it was reported that the court directed that the suit be referred to a Tribunal of the Advertising Standards Board of Kenya.

Comment:

The central question which arises in the present case is whether one manufacturer may compare its product in an advertisement with that of his competitor and indicate that its product is better or that there are defects in its competitor’s products.

This practice is known as comparative advertising.

According to Prof Owen Dean, IP Chair at Stellenbosch University, a trader who resorts to comparative advertising is “attempting to “ride on the back” of a well known and successful product and to use the repute of that product as a platform from which to generate sales of his own product.”

Kenya has a broad framework of national and international legal frameworks that have a direct impact on the regulation of comparative advertising. First and foremost, the Paris Convention, signed and ratified by Kenya, contains important provisions on competition. Article 10bis reads as follows:

“(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.
(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.
(3) The following in particular shall be prohibited:
– false allegations in the course of trade of such a nature as to discredit the establishment, the goods or the industrial activities of a competitor;
– indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quality, of the goods.”

In addition Article 2 of the TRIPs Agreement requires members of the WTO to comply with the substantive provision of the Paris Convention as highlighted above.

Nationally, comparative advertising is regulated through common law and statute.
Kenya’s principal legislation governing false or misleading advertising is the Competition Act. For our present purposes, it is important to note the definition of asset in this Act which includes both “asset” includes both “intellectual property” and “goodwill”.

Most notably, section 55 of the Act makes it an offence to engage in false or misleading advertising. The section reads as follows:

“55. False or misleading representations
A person commits an offence when, in trade in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, he―
(a) falsely represents that—
(i) goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use;
(ii) services are of a particular standard, quality, value or grade;
(iii) goods are new;
(iv) a particular person has agreed to acquire goods or services;
v) goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have;
(vi) the product has a sponsorship, approval or affiliation it does not have;
(b) makes a false or misleading representation—
(i) with respect to the price of goods or services;
(ii) concerning the availability of facilities for the repair of goods or of spare parts for goods;
(iii) concerning the place of origin of goods;
(iv) concerning the need for any goods or services; or
(v) concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.”

In common law, the torts of passing off and injurious falsehood relate to forms of conduct which constitute an infringement of a competitor’s right to attract custom whose object is the trader’s goodwill. The common law action of passing off is expressly recognised in section 5 of the Trademarks Act. Whereas the common law tort of injurious falsehood seems to have received tacit recognition in section 6 of the Trade Descriptions Act which states as follows:

“6. (1) It shall be an offence for any person, in the course of any trade-
(a) to make a statement which he knows to be false; or
(b) recklessly to make a statement which is false, as to any of the following matters-
(i) the provision in the course of any trade of any services, accommodation or facilities;
(ii) the nature of any services, accommodation or facilities provided in the course of any trade;
(….)
(2) For the purposes of this section-
(a) anything(whether or not a statement as to any of the matters specified in subsection (1)) likely to be taken for such a statement as to any of those matters as would be false shall be deemed to be a false statement as to that matter; and
(b) a statement made regardless of whether it is true or false shall be deemed to be made recklessly, whether or not the person making it had reasons for believing that it might be false.”

Thus far, it appears that the relevant law cited is in favour of UK’s claim of false, misleading advertising. However PGEA may seek to refute UK’s claims by relying on the Constitution of Kenya, 2010 as well as non-binding/persuasive jurisprudence from South Africa.

In South Africa, the question of comparative advertising arose in the case of Post Newspapers (Pty) Ltd v World Printing & Publishing Co Ltd 1970 where both parties were publishers of two newspapers – Post and The World. Both papers targeted the same potential readership and so they competed for advertising. Under the cover of a circular letter, the respondent sent a market review to some advertising agents. In it, Post was unfavourably compared with The World as an advertising medium. The applicant sought an interdict prohibiting the dispatch of those documents. Nicholas J referred with approval to some English cases, in which it had been said: “The general position in law is: comparison – yes; but disparagement – no.”

In refusing the application, the court held that:

“To the extent that the statements complained of involved merely a comparison of The World and Post, they are not actionable. There are, however, statement which amount to a disparagement of Post as an advertising medium. If these statements were shown prima facie to be untrue, the applicant would be entitled to relief. The applicant does not, however, say that these statements are untrue, nor is there any evidence that they are untrue.”

Therefore in terms of South African case law, purely comparative advertising is not unlawful – unlawfulness only occurs if the competitor is discredited by untrue allegations. This precedent would bolster PGEA’s case against UK. However South African scholars in the law of torts, Van Heerden & Neethling disagree with the holding in this case. They argue that comparative advertising always entails a disparagement of a competitor’s goods and therefore it constitutes an impairment of the latter’s goodwill and it is unlawful unless there are grounds for justification.

Aside from reliance on South African precedent, the makers of Ariel may chose to focus on the protection of intellectual property rights expressly guaranteed under the Constitution. In this connection, counsel for PGEA would argue that the state must balance consumer rights (Article 46) as advanced by UK together with the IP rights of PGEA in its advertisements (Article 40). Connected to this right to property is PGEA’s constitutional right to freedom of expression which is also enshrined in Article 32.

This blogger has previously discussed here and here the various intellectual property rights that may be owned within the context of advertising, most notably copyright in all literary, artistic and audio-visual works and trademark rights with respect to brand names, logos and slogans. In this regard, it is important to note that UK has not disputed PGEA’s IP rights relating to the adverts. Therefore by ordering that the Ariel ‘One Wash’ adverts be removed from media circulation, it may be argued that the courts have infringed on PGEA’s IP rights in the adverts. Article 40(5) compels the courts to support, promote and protect the IP rights of the people of Kenya. Any limitation of rights under the Constitution must be justified under Article 24 of the Constitution. PGEA would also argue that the restraining order by the court is a deprivation of property and therefore would have to comply with Article 40(3) of the Constitution.

Nestle S.A. v Cadbury UK: The Problem with Registering Colour Trade Marks

cadbury dairy milk chocolate

“….unconventional or “exotic” marks, such as colours, sounds and smells, give rise to conceptual problems, which are not encountered with more conventional trade names and logos. As the registration of a trade mark creates a form of intellectual property conferring a potentially perpetual monopoly in the mark and excluding everybody else from use in various ways, the point of principle has some public importance.”

Recently, the England and Wales Court of Appeal in the case of Société Des Produits Nestlé S.A. v Cadbury UK Ltd. [2013] overturned a decision of the High Court to proceed with an application to register a trade mark for Cadbury’s chocolate, which featured a specified shade of the colour purple. In particular, the trade mark applied for by Cadbury was shown as a rectangle, which is a purple block when reproduced in colour, and described as:-

“The colour purple (Pantone 2685C), as shown on the form of application, applied to the whole visible surface, or being the predominant colour applied to the whole visible surface, of the packaging of the goods.” [Emphasis Mine]

Read the rest of this article here.

Longhorn Acquires Publishing Rights for Malkiat Singh Titles in 300 Million Shillings Deal

Longhorn Publishers Kenya

The Business Daily reports that Longhorn Publishers have acquired the works of iconic educational textbooks writer and publisher, Malkiat Singh. The details of this deal are reported as follows: Longhorn Publishers will pay Singh KES 83 million in cash and annual royalties of about KES 24 million for the next 10 years (12% of yearly sales). The octogenerian Singh is a household name in Kenya’s textbook publishing market, with over 20 titles approved by the State for Primary Education. It is reported that the buyout deal does not include the purchase of Singh’s publishing house, Dhillon Publishers therefore as part of the deal, he is restricted from publishing with Longhorn rivals over the next decade.

While announcing the deal, Longhorn Managing Director Musyoki Muli is reported as saying:

“We will be offering Mr Singh a royalty rate of 12 per cent on net sales which is slightly higher than the average of 10 per cent (….) The publisher was experiencing some challenges in marketing the brand; challenges which we hope to overcome through the rebranding that we have just carried out and backed with vigorous marketing.”

Read the rest of this article here.

On the Proposed Parastatal Merger of the Copyright Board, Industrial Property Institute and Anti-Counterfeit Agency

kenya intellectual and industrial property corporation

The Daily Nation reports that a special taskforce appointed by the President to streamline the operations of state corporations has proposed that KECOBO, KIPI and ACA be merged to form a single state corporation christened: “Kenya Intellectual and Industrial Property Corporation”. Before commenting on this proposed merger of intellectual property (IP) parastatals, we must put into context the full scope of the proposals by the Abdikadir-led taskforce.

At the heart of the taskforce’s proposals is that all parastatals be categorised into two, namely, state corporations and state agencies. It is proposed that power and oversight of these corporations and agencies be moved from “parent ministries” to two new entities, namely, Government Investment Corporation (GIC) and the National and County Agencies Oversight Office (NACAAO). As their names suggest, GIC and NACAAO will regulate state corporations and state agencies respectively. All regulatory authorities, public universities and research institutions will be classified as state agencies while all commercially-oriented institutions where the government controls more than 50 per cent shareholding will be categorised as state corporations.

Comment:

At present, there are two “parent ministries” in charge of IP in Kenya namely, the Ministry of Industrialisation and Enterprise Development which is in charge of KIPI and ACA and the Office of the Attorney General which is in charge of KECOBO. These three IP parastatals administer four IP laws namely, the Industrial Property Act, the Trademarks Act, the Anti-Counterfeiting Act and the Copyright Act. In addition, these parastatals administer several ratified international instruments on IP including the Paris and Berne Conventions, TRIPS Agreement and a host of other regional and international IP-related treaties and protocols.

From the outset, this blogger is in full support of the move to have one state corporation dealing with all the administration and enforcement of all the branches of IP in Kenya. Among the benefits of this merger would be better service delivery to Kenya especially enforcement of IP rights and awareness creation as well as the promotion of creativity and innovation among Kenyans. In the case of IP enforcement, ACA has been at the forefront of conceptualising and implementing an “inter-agency approach to IP protection and enforcement” along with KRA, KEBS, KIPI, KEPHIS and KECOBO, among other public and private partners. In this regard, the discussion has centred mainly on ACA’s empowering legislation the Anti-Counterfeiting Act 2008 which provides ACA with broad enforcement powers with relation to both copyright and trademark infringements.

In addition, this merger appears to have taken into account several constitutional factors. First and foremost, Articles 11, 40 and 60 all impose an obligation on the State to support, protect and promote the IP rights of the people of Kenya Secondly, under the proposed parastatal structure, the President as the Head of the National Government shall the chair and board of the GIC, who shall in turn appoint appoint chairpersons and directors of all state corporations in Kenya. This is in line with the fourth schedule of the Constitution, which lists intellectual property among the functions of the national government.

However the proposed merger as it stands is problematic for two reasons. Firstly the name itself appears to be misinformed. By definition, “intellectual property” includes “industrial property” therefore there is no need to refer to the entity as “intellectual and industrial property corporation” is unnecessary. This blogger submits that the name “Kenya IP Corporation” would be more appropriate and sufficiently descriptive for all to understand.

The second problem with this proposed merger is that it leaves out plant breeders’ rights (PBRs). In fact, the taskforce proposes that the Kenya Plant Health Inspectorate Services (KEPHIS) which administers PBRs in Kenya should merge with the National Biosafety Authority. The crucial question to be asked in this regard is: Are PBRs recognised in Kenya as a branch of IP? During this blogger’s LLM studies, two leading IP professors offered two divergent answers to this question with Ben Sihanya saying “No” while James Otieno-Odek saying “Yes”. This blogger is swayed by the latter answer by Prof. Otieno-Odek, who has since left academia and currently serves as Judge of the Court of Appeal. According to Odek, industrial property was the first recognized category of intellectual property in 1893, followed by copyright in 1895 and Plant Breeders Rights in 1961. Odek explains that all these categories have been given legal recognition under the WTO TRIPS agreement. Odek states that Kenya was the first country in Africa to domesticate the UPOV Convention through the Seeds and Plant Variety Act Chapter 426 Laws of Kenya, which is modeled on UPOV 1961.

Politics and power play aside, this blogger is convinced that the merger would be good for IP in Kenya, especially if KEPHIS is included alongside KIPI, ACA and KECOBO. Let us wait and see whether the taskforce proposals will be adopted by the Executive and Legislative arms of government.

#TellACABoss Online Debate: Balancing Protection of Public Health and Intellectual Property in Kenya

counterfeit-drugs

This blogger has inadvertently stirred a heated debate on social media involving health activists who are actively engaging the government to review Kenya’s Anti-Counterfeit Act. This blogger alerted the twitter accounts of Aids Law Project (ALP), the Anti-Counterfeit Agency (ACA) and the CEO of ACA to an article published on the CIPIT blog by Paul Ogendi – Deputy Director at ALP. In this article ALP raised concerns on the goverment’s implementation of the High Court’s judgment in Patricia Asero Ochieng & 2 Others vs Attorney General. This landmark decision declared the Anti-Counterfeit Act unconstitutional because of its provisions affecting access to essential medicines including generics. In his twitter response, Stephen Mallowah the ACA CEO stated as follows:-

These responses by the ACA sparked off a spirited twitter campaign under the hashtag #TellACABoss where various health activists reaffirmed that the constitutional rights of people living with and affected by HIV, TB and Malaria remain threatened unless the Anti-Counterfeit Act is reviewed particularly section 2 which defines “counterfeit”.

Read the rest of this article here.

IP Kenya Blog ‘Favourably Received’ by Oxford University Press Journal of Intellectual Property Law and Practice

OUP JIPLP Vol. 8 No. 10 October 2013 Cover

Exactly a month ago, the renowned blogger, IPKat a.k.a Prof Jeremy Phillips invited the online intellectual property (IP) fraternity to review a number of IP blogs and Twitter accounts from around the world. This blogger was alerted that IP Kenya was among the blogs selected for review. In the call for reviews, IPKenya is described as an “often challenging blog”.

Taken positively, this is a definitely a huge nod of approval. With this great privilege, there are also great expectations to keep the blogging momentum going, diversify the IP subject matter discussed in the blog articles, sharpen the IP analysis presented on the blog while making it all seem effortless like IPKat does.

This blogger is both humbled and happy to be the only other blog from Africa that continues to receive such positive attention and looks forward to the challenges that lay ahead.

Kenyan Cattle Herdsboy Seeks Petty Patent Protection for “Lion Lights” Invention

turere-1-600x397 by WildlifeDirect

For those who may not know, IPKenya’s friend Dr Isaac Rutenberg is the voice behind a series of blog articles over at the Afro-IP blog dubbed “Diary of A Patent Lawyer in Kenya”. In his latest entry, he explains that he was “helping a 14-year old Kenyan attempt to secure IP rights after he had designed a system useful in rearing domestic livestock as well as in wildlife conservation.” He further discloses: “At our inventor’s [the 14-year old Kenyan’s] request, and with the guidance of a local wildlife conservation group, we prepared and filed a Utility Model Certificate application.”

This blogger is strongly convinced that the Utility Model (UM) application in question is in respect of the “Lion Lights” invention by young Richard Turere and supported by WildlifeDirect, in particular CEO, Dr. Paula Kahumbu.

Earlier this year, the Daily Nation published a story about a 13 year old boy Richard Turere: “the young Maasai boy who figured out how to scare off lions by irritating them with flash lights.” According to WildlifeDirect, a local wildlife conservation group, Turere was discovered while the group was working on a project to find new ways to reduce human lion conflict in the Kitengela area just south of the Nairobi National Park in Kenya.

Turere’s invention was born out of a necessity to protect his family’s cattle herd from carnivorous predators, especially lions since they lived right on the edge of the Nairobi National Park. Turere is said to have used his knowledge of lions’ fear of flashing lights to devise an automated lighting system made up of torch bulbs, a box, switches, an old car battery and a solar panel. According to reports, Turere’s lights are “designed to flicker on and off intermittently, thus tricking the lions into believing that someone was moving around carrying a flashlight”.

Lion Lights Invention Richard Turere Wildlife Direct

It is reported that “since Turere rigged up his “Lion Lights,” his family has not lost any livestock to the wild beasts, to the great delight of his father and astonishment of his neighbours.” This invention has become very popular and “around 75 “Lion Light” systems have so far been rigged up around Kenya”. With the support of WildlifeDirect, Turere has presented his invention at the well known TED Conference in 2013 and obtained a scholarship to one of Kenya’s top private preparatory schools.

Comment:

Right off the bat, this blogger was pleased with some of the the comments in the original Daily Nation story about Lion Lights where a couple of ordinary Kenyans wondered whether Turere had obtained patent protection for his invention.

Lion Lights Invention DN comments

These comments demonstrate an increased awareness of intellectual property, its value and the importance of securing IP rights.

Secondly, I salute Dr Rutenberg and his team over at CIPIT for the good work they are doing in helping Kenyans like Turere to identify, understand, protect and promote their IP rights using the various IP systems available in Kenya.