Exploring the Limits of Trademark Registration as a Legal Defense: A Critical Review of the Supreme Court’s Decision in Dike Geo Motors Limited & Anor. v. Signal Inc & Anor.

In Nigeria's evolving intellectual property (“IP”) landscape, businesses must remain vigilant in protecting their trademarks, as their market presence and brand identity largely depends on it. On February 23, 2024, the Supreme Court delivered a landmark judgment in Dike Geo Motors Limited & Anor. v. Allied Signal Inc . V & Anor.[1]. This decision not only addressed critical issues but also provided valuable insights into the concepts of passing off, trademark infringement, and the extent to which trademark registration can serve as a defense against legal claims. This article aims to provide a comprehensive analysis of the key issues in this case, the ratio decidendi that shaped the final decision, its legal implications, and the essential lessons businesses can draw from it.

Background of the case

This is an appeal against the judgment of the Court of Appeal sitting in Lagos, delivered on May 5, 2006. The appeal arose from the decision of D.D. Abutu J of the Federal High Court, sitting in Lagos, delivered on April 13, 1999.

This case originated from a dispute between the 1^st Respondent, an American company, called Allied Corporation (later renamed to Allied Signal Inc.), and the 1^st Appellant, a Nigerian company called Dike Geo Motors Limited, which was marketing brake and clutch fluid under the “Allied” brand.

Before 1992, 1^st Respondent and its French subsidiary (the 2^nd Respondent) had registered multiple trademarks such as "Allied and Device" under Nos. 40189 (Class 1), 40188 (Class 9), and 40186 (Class 12), "Bendix and Device," "DBA with Parallel Line Design" under No. 49735 (Class 1) and "e5", under which they marketed their products in Nigeria.

 In 1992, Dike Geo Motors Limited began selling a competing brake and clutch fluid product branded as “Allied,” with packaging similar to that of the1st Respondent.

The Respondents complained that the use by the Appellants of marks and designs imitative of the marks and designs on their Bendix brake and clutch fluid cans was calculated to deceive and had in fact, led to deception and the belief that the Appellants’ Allied brake and clutch fluid product is the Respondents’ product or originates from the same source as the respondents’ Bendix brake and clutch fluid. In May 1995, the Respondents filed a lawsuit against the Appellants at the Federal High Court, Lagos for trademark infringement and passing off, citing the Appellants imitation of the design of the Respondents’ Bendix brake and clutch fluid can in their Allied brake and clutch fluid packaging, as well as the unauthorized use of the Respondents’ trademarks, “e5” and “ALLIED,” on their products.

In October 1995, the Appellants Privy (Dom Frank) applied to register the "Allied & Device" trademark under No. TP 18856. This application was published in the Trademark Journal five months after the Respondents had already filed their lawsuit. Despite the ongoing case, Dom Frank successfully registered "Allied & Device" under RTM No. 53200 (Class 4). The 1^st Respondent applied to the Trademark Registry for the removal of the trademark (No. 53200) from the Register of Trademarks

Two years and three months after Dom Frank's trademark registration (No. 53200)—and three months after the trial had begun—the Appellants filed a motion dated January 20, 1999, seeking to dismiss the Respondents’ lawsuit. They argued that the case was frivolous and an abuse of court process since they had registered the trademark, and supported their motion with an affidavit, showing their certificate of registration. The Respondents filed a counter-affidavit, alleging that the opposition proceedings against Dom Frank’s trademark were suspiciously terminated.

The Federal High Court dismissed the Appellants’ motion to strike out the case. Aggrieved by this, the Appellants appealed to the Court of Appeal against the ruling of the Federal High Court. The Court of Appeal in May 2006, dismissed the appeal, upholding the judgment of the Federal High Court and ruling in favor of the Respondents. Further still aggrieved, the Appellants approached the Supreme Court, arguing that their trademark registration constituted a complete defense to the Respondents’ infringement claims, thereby warranting a striking out of the suit in limine.

On February 23, 2024; the Supreme Court delivered its judgment, dismissing the appeal for lack of merit. The Court held that trademark registration does not automatically provide an absolute defense against infringement claims or passing off actions for that matter, especially if the registration was obtained in bad faith. Even if trademark registration were a complete defense, the court noted that the mere existence of a defense is not, in itself, a basis to strike out a suit in limine, as the availability or otherwise of the defense must be assessed through a full consideration of the merits at trial.

A Comprehensive Analysis of the Case.

The court's decision in this case affirms that trademark registration does not automatically shield a rights holder from infringement claims or passing off actions if the use of such registered trademark is likely to mislead consumers or exploit the goodwill of established products owned by prior proprietors. This article seeks to establish that a registered trademark cannot serve as a defense in cases involving bad faith registration or a likelihood of consumer confusion.

A proper understanding of this case requires, first, an appreciation of certain key legal concepts. To wit:

- Trademark Infringement

- Passing Off Claim; and

- Trademark Registration as a Defense

1. TRADEMARK INFRINGEMENT

As provided under the Nigerian Trademarks Act[2] (“TMA”) trademark registration grants the owner exclusive rights to use the trademark for the specific goods for which it is registered.[3] Nigeria operates a first to file system. Under which the first party to file for registration is presumed to be the true proprietor, provided that the registration was not obtained in bad faith. The Trademark act goes on to state that an infringement will occur if anyone, other than the trademark owner or a registered user uses:

 •          An identical mark or

 •          A mark that closely resembles the registered trademark

 •          In a way that is likely to deceive or confuse consumers.[4]

• In the case, the Respondents claimed that the Appellants use of identical marks on their brake and clutch fluid products violated the Respondents’ registered trademarks, including "Allied & Device" and "DBA with Parallel Lines Design." While the Court did not make a final determination on whether infringement had occurred, several factors would typically be considered in assessing such a claim, including:
• Physical similarity between the marks
• Phonetic similarity in how the marks sound
• Conceptual similarity in meaning or impression
• Class of goods or services covered by the trademarks; and
• Notoriety of the mark in the marketplace

These criteria would ultimately guide the trial court’s determination on whether the Appellants use of the mark created a likelihood of confusion sufficient to establish trademark infringement or passing off.

2. PASSING OFF CLAIM

Passing off is based on misrepresentation, customer confusion, and damage to goodwill of an existing brand, not just legal ownership of a trademark. The TMA provides:

 ‘’ …nothing in this Act shall be taken to affect rights of action against any person for passing off goods as the goods of another person or the remedies in respect thereof.’’ [5]

Passing off protects not just a name or logo but also the reputation and overall brand identity. Passing off is broader than trademark infringement for the following reasons:

1. Passing Off Can Exist Even Without a Registered Trademark

Unlike trademark infringement, which hinges on having a registered trademark, a passing off claim can be brought when a party uses a name, packaging, or branding that misleads consumers with or without a registered trademark.

2. Passing Off Can Apply Even When the Infringing Mark is Registered

Even if the defendant has registered a trademark, registration does not provide absolute immunity against passing off claims. If the plaintiff can prove that the defendant’s branding or mark creates consumer confusion, leading consumers to mistakenly associate the defendant’s products with the plaintiff’s business, then, a passing off claim can still succeed alongside, or in the absence of, an infringement claim.

3. TRADEMARK REGISTRATION AS A DEFENSE

The TMA provides that in legal proceedings pertaining to a registered trademark, the mere fact that a person is named as the proprietor serves as prima facie evidence of the mark's validity.[6] It is no doubt that the registration of a trademark is a crucial step in protecting the longevity and exclusivity of a brand name or logo. The primary purpose of registration is to protect rightful owners from infringement in the course of trade.

However, while trademark registration aims to offer protection, it does not serve as an automatic defense to infringement claims. This is because proof of registration constitutes prima facie evidence, as opposed to substantial evidence, of a mark’s validity, meaning it can still be challenged in court.

Understanding the concept of Prima Facie vs. Substantial Evidence in Trademark Registration.

The concept of prima facie evidence means that although the registration is initially presumed to be legitimate, it may still be disputed by additional evidence. It places the onus of proof on the challenger, who must offer more proof as to why the registration ought to be revoked. Conversely, substantial evidence requires a higher standard of proof, demonstrating the trademark's undeniable validity and enforceability under the law.

Where a trademark registration is challenged, the court can re-examine to ascertain if the registration complies with legal requirements, including distinctiveness and rightful ownership.

Limitations of Trademark Registration as a Defense

Despite the existence of a registration certificate as prima facie evidence of a trademark’s validity, the defense of trademark registration will not avail a defendant, if the following conditions exist:

1. Bad Faith Registration:

Bad faith registration compromises the integrity of (IP) rights and interferes with fair competition. When trademarks that closely resemble that of well-known brands are registered, it deceives customers and raise questions about the quality and standards of the actual products. This inconsistency in quality may drive customers away, ultimately harming the rightful brand owner’s reputation and market presence.

To address these issues the TMA, has established procedures to cancel and revoke such bad faith registrations. The standard for trademark registration not only includes distinctiveness[7] but also that the mark must not be deceptive and scandalous[8]. This standard has been upheld in numerous cases,[9] as the courts are quick to expunge or vary any trademark registration once bad faith is established.[10]

2. Consumer Confusion:

The TMA prohibits the registration of a trademark which is confusingly similar to an already existing trademark, and which is likely to deceive or cause confusion in the course of trade.[11] Courts have consistently upheld this rule to prevent unfair capitalization on the goodwill of a pre-existing brand.[12] The standard for determining trademark confusion is not whether a person comparing two trademarks side by side would notice similarities, but whether an average consumer, relying only on their general recollection of the existing trademark, would likely be misled into believing that the proposed trademark is the same or connected to the original.[13]

3. Prior Use by Another Party:

The TMA makes it clear that subsequent trademark registration as a defense to stop a first user from using his mark will not be upheld if prior usage by the first user can be established.[14] Recognizing previous use ensures that businesses make a fair profit from their investments without excessive interference, promoting ethical business practices, brand development, and consumer trust.

The courts and trademark authorities, give precedence to the rights of a prior user particularly in cases where it is evident that the mark has become distinctive and that consumers now associate such mark with a particular brand.

When Does a Registered Trademark Serve as a Defense?

A registered trademark can serve as a defense only when the owner’s use of the mark does not create confusion or violate prior rights.

The protection applies in cases where:

• The mark is lawfully registered under the first-to-file system.
• The use of the mark is not misleading to consumers.
• There is no evidence of bad faith registration.

In the Dike Geo Motors case, the Appellants claimed that they were entitled to use the name "Allied" and the branding that went along with it because they had registered it as a trademark. However, the court determined that registration did not release the Appellants from culpability, if the Respondents successfully proved that the Appellants’ registration and use of the mark was done in bad faith, caused consumer confusion and that the Respondents were in fact prior users of the mark.

The decision of the Supreme court reiterated that the registration of a trademark is not an all-encompassing defense against infringement claims. This decision shows how important it is for Nigerian trademark owners to be truthful in branding to reap the fruits that flows from registration, which is enforcement of their rights.

Implications for Businesses and Brands

Upon the recent decision of the Supreme Court in Dike Geo Motors Limited & Anor. V. Allied Signal Inc. & Anor[15]. it has become imperative that business owners take proactive measures to safeguard their brands. In acting proactively, brand owners must do the following:

1. Early registration of trademarks: Early registration of the mark is the best protection you can give to your brand and brands future. Registration of the mark not only in the home country but also in all regions where the business operates or plans to expand serves as a proactive measure against unpredictable instances of infringement. It is imperative that business owners take proactive measures to safeguard their brands, considering that legal problems, monetary loss, damage to one's brand reputation, and even the loss of trademark ownership could arise from failing to accomplish this. Courts are more inclined to rule in favor of the previous registered owner in cases of infringement,[16] thus businesses who have registered their trademark in compliance with the TMA have better legal standing, as it is more difficult to prove ownership and rights without trademark registration.

2. Market Monitoring: Brand owners must exercise caution when it comes to brand protection, keeping a close watch on the expanding market to ensure that their brand is not being infringed. In instances where brand owners fail to identify and resolve infringements promptly, the brand may suffer serious repercussions, like diminished brand value, loss of exclusivity, consumer confusion, etc. Thus, businesses are advised to put monitoring mechanisms in place and act quickly upon detecting infringement.

3. Enforcement of Legal Rights: To safeguard one’s trademark, businesses should be ready to take legal action as needed, such as sending cease-and-desist letters or filing lawsuits to protect their brand. Enforcing legal rights not only protects the brand’s reputation and value but also sets a strong precedent against future infringements.

Insights on How Brands Can Strengthen Their Trademark Protection-

 (IP) protection is a strategic need for both new and established brands.

We advise the following steps to ensure trademark protection within the parameters of IP laws:

1) Perform Thorough Checks with the Trademark Registry:

It is increasingly common for trademark applicants to proceed with registration of trademarks without first conducting a proper search. Before registering a trademark, it is advised to perform a comprehensive search in the Trademark Registry to ensure that a brand name or logo is both available and unique. By taking this proactive measure, the possibility of needing to rebrand and the likelihood of future legal challenges are greatly reduced.

2) Understanding Trademarks as a Competitive Business Tool:

A brand is more than just its name. Acquiring exclusivity for logos, slogans, product packaging, and other distinguishing brand components must be ensured through trademark registration. This will enhance credibility, brand awareness and offer legal protection against infringement or unlawful usage. A well-protected trademark portfolio leads to the enhancement of the competitive advantage of a business and causes its long-term value to increase.

3) An Informed and Equipped Workforce:

A workforce that is well-informed and equipped can be a very effective instrument for safeguarding your trademark. When employees undergo training and get informed about trademark regulations, guidelines, and infringement issues, they are more capable of recognizing potential threats. An informed workforce strengthens brand integrity and mitigates infringement risks.

4) Consult Legal Experts:

It is impossible to overemphasize the importance of legal experts in IP. Seeking legal expertise helps identify potential risks, pitfalls, and vulnerabilities in your trademark application beforehand, offering tactical direction to successfully negotiate these obstacles, guaranteeing your brand's best protection and success.

Conclusion

The decision of the Supreme Court in the Dike Geo Motors case reinforces the principle that trademark registration alone is not an absolute defense against infringement or passing off claims, particularly in cases involving bad faith registration, consumer confusion or prior use. It establishes a precedent that emphasizes the value of genuineness in trademark ownership and stresses the necessity of a proactive and knowledgeable approach to IP protection in Nigeria. This decision highlights how crucial it is to register trademark early, monitor for possible infringements in the market, and ensure that all legal requirements are met in order to preserve one’s brand integrity. For businesses, protecting their brand identity and market position, involves thorough registration of trademarks, strategical enforcement, and constantly seeking legal advice.