The cost of trademarks

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Starting from 2014 there was one popular legal dispute when a US hotel brands owner, Six Continents, requested to have the trademark of Crowne Plaza Hotels and Resort registration.
The firm went through a long legal battle until the case was closed at the House of Federation based on the recommendation of the Council Constitutional Inquiry (CCI) in September 2017, who averted the cassation bench verdict.
Legal experts said that in Ethiopia registering a trade mark or trade name was not difficult in the past meanwhile it has changed now. Due to lack of legal understanding on trade name and branding, local companies registered their trade marks in Ethiopia, meanwhile that might be already registered at the international level and operating for several years before the Ethiopian companies.
Six Continents and Tsemex Hotels and Business Plc, a subsidiary of Tsemex Business Group, have been agreed to open Crowne Plaza Addis on the facility that the local company constructed in Addis Ababa. However the agreement could not brew fruit due to the legal battle between Six Continents and the local hotel, Crown as the case took years.
Rezene Ayalew, founder and head of Tsemex Business Group, said that because of the legal case his business was significantly affected.
“Because Six Continents was unable to clear its case on time we lost the revenue that should be generated in those years,” Rezene told Capital.
He said that he has filed the case at international arbitration on the international company due to compensate his loss.
At the same time he criticized the government saying that it should protect businesses local or international.
“The government via intellectual property should help local businesses, which are infant, to understand the international business trend and protect them from unnecessary legal battles and losses,” Rezene said.
“Regarding the case of the Intellectual Property Office (IPO), lower courts gave a verdict for the international brand but the cassation has given a decision in favor of Crown Hotel, which was a big loss for Tsemex, meanwhile it has changed by House of Federation,” he said.
“We are the first generation on the Ethiopian private sector business; we did not have ample experience about international brand or chain hotels or trademarks. May be our children or the third generation will learn from this kind of dispute,” he says “the problem is at IPO, that are supposed to keep the dispute before it happened and consult local companies to keep themselves from such problems.”
The case between Crown Hotel and Six Continents might be one of the very few cases appeared at the court, but copying international brands and trademarks mainly in the service sector in Ethiopia is not new.
There are several local hotels, cafes and restaurants that copied a trade mark of international companies in the past, but these days the situation is changing mainly because of local consultancy firms in the hospitality industry that support local investors to operate chain hotels that are well known international brands.
Like Six Continents, Intercontinental Hotels Corporation (IHG), who is now owned the Crowne Plaza brand too, has been also in the legal battle with the local hospitality firm JH Simex the operator of Intercontinental Addis Ababa Hotel for the last seven years.
Early this week the case has got a final verdict after the Federal Supreme Court gave a decision for the US hotel brands owner, IHG.
The Supreme Court verdict indicated that the local firm, which operates for about 13 years, is also penalized to settle royalty compensation for the US hospitality business operator.
Eyob Hagos, Lawyer of IHG, reminded that his client has been registered under Ethiopian law about 19 years ago, while JH Simex Plc has been operating the local hotel for the past 13 years.
“We have consulted JH Simex to skip using the trademark due to infringement of the interest of the multinational brand, but they refused and run the hotel under the international brand,” Eyob says, “then we filed the case for the court to get solution that took years.”
Eyob said that his client case is different since his company is already registered under Ethiopian law but he argued that the local company was not able to operate foreign brands without knowledge of the owner.
“Our claim and the subsequent judgment was given because IHG has registered its trademark as per Article 4 and has the right to prevent the local company not to use as per article 26 and has the right for compensation as per article 40 of the Ethiopian trademark registration and protection proclamation 501/2006,” he said.
“It is also true that intercontinental is a well-known trademark globally,” the lawyer added.
Daniel Getnet, Head of Dabe Investment Consulting and Conveyance PLC, a legal consultancy firm for businesses mainly for FDIs’, supported the idea.
Legal experts stated that the Commercial Registration and Business Licensing Proclamation no 686/2010 supports the idea. They said that article 24 of this proclamation has direct correlation with the concept.
Article 16 of commercial registration and business licensing proclamation no. 980/2016 has similar intent. “Where the trade name requested for registration is renowned in Ethiopia or around the world even though it is not registered in Ethiopia and no written permission issued to use the name under cannot be used,” states article 16 sub article E of the proclamation stated.
Daniel said the country has endorsed that local companies should not register a trademark that has similarity in other countries. “In the past there were not legal framework that rejects local companies to use trade names registered in other countries but it is now changed,” he added.
Daniel said that foreign companies, who come in Ethiopia register at Investment Commission, since it is a priority to invest in the country.
“But registration does not mean the companies invest automatically. Even if they want to commence their activity immediately the process and bureaucracy in the country may not allow them,” the FDI consultant explained.
“Lack of coordination between federal and regional government and even local administrations, access to land, issues related with biodiversity and other different factors have been a challenge for companies who want to invest in the country but that seems to change now,” Daniel explained.
He also recalled that the companies themselves may not run properly or may delay to transfer investment capital, capital goods and other required processes.
AndualemSisay, Managing Editor of New Business Ethiopian that is engaged on due diligence for foreign companies, said “companies may register in Ethiopia for different reasons like to protect their trademark or to get different benefits,” but he underlined that companies that do not automatically invest in the country will abuse the laws of the country and operates in the country against the motive of the investment license.
Because of weak crosscheck between the customs authority and other government offices, companies particularly register at Investment Commission in the past will use their license to import products on duty free basis and may sell it or lease it for others.
Andualem remembered that several companies including big companies were registered in the country, but were not seen in any investment.
The FDI consultant on his part said that there are different registration types that may be a reason for the multinational companies to hold them up from activities in the country.
Daniel on the other hand said that the challenge in the past for FDI was getting trademark registration.
But he argued that meanwhile in the past there was supporting law for foreign trademarks local firms that were registered by local investors could not continue for long. “The trade names registered under local firms but registered internationally in the past supposed to be changed immediately if the country signs international laws,” Daniel added.
He recalled that Ethiopia has not so far signed international laws that mentioned international patent and copy rights like the World Trade Organization (WTO) laws.
“The issue in relation with the accession of WTO will be seen in the future but as per the trend the country will endorse the law and local companies will change their trademarks,” Daniel explained.
Experts said that this is alarming for the country and local businesses. “The case should be seen widely and we have to learn a lesson. When the country becomes member of World Trade Organization (WTO) we will directly accept the laws that govern member countries,” a legal expert said.
Under the WTO law intellectual property include brand and trademarks are a prior points that member countries should respect.
Legal experts recommended that local companies should be ready regarding changing trademarks that are similar with other businesses in different countries and solve problems amicably than go to court.
“The cases seen in the past is a good lesson for other private sectors in Ethiopia,” they said. Brand experts like AschalewTamiru also recommended local companies to look inside to get trademarks than taking the existing one in other countries.
“The Ethiopian diaspora for instance uses Ethiopian brands, trademarks and others for their businesses, but it is vice versa when it comes for business operators in Ethiopia,”Aschalew said.
“Developing and building your own brand from local idea is better than just taking others name and get in trouble,” experts added that the cost is not only for the company owners it is also for the country and the image of Ethiopia.
Investors like Rezene also underline that the government should support and alert the private sector and operators to adopt the international experience and international business laws because it does not only save local private investors but also the cost that the country lose as a nation.
Investors expressed their concern that they don’t know what latest verdict against JH SimexPlc will cost the local company that is expected to settle royalty fee for IHG that will be calculated for 13 years. Legal experts said that the local company might claim the case for cassation bench.
Capital’s effort to get information from SimachewKebede, owner of JH SimexPlc was unfruitful.