TED Case Studies
Number 777, 2005
by Lindsay Carter
South Africa: Rooibos
General Information
Legal Cluster
Bio-Geographic Cluster
Trade Cluster
Environment Cluster
Other Clusters
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I. Identification

1. The Issue

South Africa is currently the lead producer of Rooibos, which in Afrikaans means red bush. Commonly used to make a caffeine free tea, it has been used for many years by the indigenous peoples of South Africa. Cultivated for commercial sales began in the 1930s. Beyond tea its purposes include natural hair dye, a meat tenderizer, and a substitute in almost any recipe for the water or milk. The use of Rooibos in as a drink or in recipes results in health benefits as it is an antioxidant. Rooibos has also been linked to relief of hay fever, asthma, allergies, and insomnia.1

2. Description

The debate currently taking place over Rooibos is between the US Patent and Trademark Office and South Africa's DTI (department of trade and industry). Burke International, an American company, “claims it is the sole owner of the name Rooibos Tea in the United States and that other companies are only allowed to sell products with that name through Burke. The trademark not only covers the tea, but also products made with an extract of the tea."2

Counter to the normal practice surrounding geographic indicator, Rooibos Limited is pushing for it to be labeled a generic term. In February 2005, “Rooibos Limited, the processor and marketer of rooibos tea worldwide, has come a step closer to winning its trademark battle in the US after a court there ruled that rooibos was a generic term that was not entitled to any trademark.”3

3. Related Cases

Darjeeling Tea: Intellectual Property Rights of Darjeeling Tea in the age of globalization and world trade

India Tea and Environment

Ceylon Tea

Bountiful Harvests of Despair: Vietnam and the Global Coffee Crisis

Coffee Market and Colombia

Shade Coffee

Zimbabwe Tobacco Exports

Key words: Tea and Agriculture

4. Author and Date: Lindsay Carter (Spring 2005)


II. Legal Clusters

5. Discourse and Status: Disagree and In Progress

Rooibos could be considered a ‘geographic indication’ because it is indigenous to South Africa. “Article 22(1) of TRIPs defines “geographical indications” as identifying 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 geographic origin.”4

However, South Africa is not pushing this approach. Instead, according to one managing director of a South African exporting company they, “strongly believe the rooibos name belongs to all the people in SA and should not be registered.”5 In the Uruguay Round of the WTO talks, geographic indications was taken up. The language reads, “in respect of geographical indications, the agreement lays down that all parties must provide means to prevent the use of any indication which misleads the consumer as to the origin of goods, and any use which would constitute an act of unfair competition…Exceptions are allowed for names that have already become generic terms, but any country using such an exception must be willing to negotiate with a view to protecting the geographical indications in question.”6

Surprisingly, Rooibos Limited, the marketing company representing South African producers, has taken the case to US patent office with the argument that ‘rooibos’ is a generic name. It is not arguing for it to be considered a 'geographic indication' as many counties are currently doing with original goods, plants, and processes.

6. Forum and Scope: US and Bilateral (South Africa)

Annique Theron, who "discovered" rooibos in the 1960s founded, Forever Young, a company which markets rooibos and describes its many uses. She "discovered" rooibos’ healing qualities as an accident. She was trying to sooth and calm her crying baby by giving the infant rooibos, It not only calmed the child, but she found that it relived the child’s colic and insomnia. She was “amazed by its natural healing potential [and] went on to investigate and document its health-promoting properties as a caffeine-free, low-in-tannin tea. Not just for babies, but allergies and ailments across a broad spectrum of age groups”7. She went on to write a book, Allergies: an amazing discovery in which the health benefits of rooibos are discussed in just for insomnia and colic but also for allergies and eczema.8

Several years ago, she won the Gold Medal as the Best Woman Inventor of 1997 in Geneva, Switzerland because of her research. In the early 1990s, Forever Young and Theron registered rooibos as a trademark in the US. It then trademarked the name ‘rooibos’ in three countries (The Netherlands 1998) besides the US, but in the other countries it has included a clause which allows competitors to market rooibos.9 She, however, has not so far enforced the trademark in the other counties, but has in the US. In 2001, Virginia Burke-Watkins of Dallas-based Burke International bought the trademark for $10 from Theron.10

Burke International then began demanding fees from shops and cafes for the use of the name rooibos on the teas sold in the US. They have “been suing small US tea cafes and internet traders for the use of the name ‘rooibos’ after sending them ‘cease and desist’ letters and demanding $5 000 (R33 500) from each.”11 Some businesses paid the fee and settled out of court, while others businesses and Rooibos Limited took the matter to US courts. Recent court documents show that Burke-Watkins, “had spent more than $250 000 (R1.6 million) in policing and enforcing her trademark rights against competitors in the industry.”12

7. Decision Breadth:

The ‘rooibos’ case has been litigated in US district courts and so did not require involvement of the WTO. The trademark dispute is also under review by the US Patent Office and it concerns several multinational companies. In February 2005 a district court in Missouri ruled in favor trademark case between US-based company, Republic of Tea, against Burke International over the used of the name ‘rooibos’. The court said that, federal trademark for rooibos registered under the name of Virginia Burke-Watkins was invalid. It also ruled that Republic of Tea's use of the term rooibos on its packaging and advertising, as describing the origin of its Red Tea label, did not infringe Burke-Watkins' rooibos trademark.”13

A decision could have a major influence on Rooibos Limited’s decade long dispute in the US Patent Office to have the rooibos trademark expunged. A decision is expected from the US Patent Office in mid-2006.14

8. Legal Standing: Law

The legal proceeding involving the trademark of the name ‘rooibos’ have generally followed WTO dispute settling rules. These rules state that “although much of the procedure does resemble a court or tribunal, the preferred solution is for the countries concerned to discuss their problems and settle the dispute by themselves. The first stage is therefore consultations between the governments concerned, and even when the case has progressed to other stages, consultation and mediation are still always possible.”15


 

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: Africa

b. Geographic Site: South Africa

c. Geographic Impact: South Africa

10. Sub-National Factors: Yes, Western parts of the Cape in South Africa

11. Type of Habitat: Temperate


 

IV. Trade Clusters

12. Type of Measure: Intellectual Property

The litigation section above and the legal settlement mechanisms illustrate that most of the trading and trade marking is bilateral.

13. Direct v. Indirect Impacts: Direct

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: Yes, Rooibos

b. Indirectly Related to Product: No

c. Not Related to Product: No

d. Related to Process: Yes, Intellectual Property

15. Trade Product Identification: Tea

Rooibos tea and is considered part of the South African agriculture sector. The South African National Department of Agriculture classifies rooibos as a horticulture product in the same category as deciduous and other summer fruit and vegetables.

16. Economic Data
South African Trade by HS 4 Digit Codes (by country): Exports: 0902 Tea
Country Name
Export (R 000)
Rank
Proportion 2004
Annual Growth

Oct 2004

2004
2003
2002
2001
2004
2003
%Total
Cum.
2004-2003
United Kingdom
1847
39108
48978
87477
46364
1
1
57.9%
57.9%
-4.2%
Mozambique
1814
11950
14068
16440
9463
2
2
17.7%
75.6%
1.9%
Germany
193
3568
6681
5913
2928
3
3
5.3%
80.9%
-35.9%
Dem. Rep of Congo
691
3193
1822
3013
5555
4
7
4.7%
85.6%
110.3%
Zambia
695
3153
2867
5410
3532
5
6
4.7%
90.3%
32.0%
Pakistan
0
1199
326
3477
4466
6
20
1.8%
92.1%
341.0%
Netherlands
0
727
770
5168
2608
7
13
1.1%
93.2%
13.4%
United States
72
616
3452
10195
535
8
5
0.9%
94.1%
-78.6%
Australia
2
511
1381
10622
6720
9
9
0.8%
94.8%
-55.6%
Angola
24
457
1138
354
118
10
12
0.7%
95.5%
-51.9%

The United Kingdom and Mozambique make up just over 75% of total exports.
South African Trade by HS 4 Digit Codes (by country): Imports: 0902 Tea
Country Name
Export (R 000)
Rank
Proportion 2004
Annual Growth

Oct 2004

2004
2003
2002
2001
2004
2003
%Total
Cum.
2004-2003
Malawi
5802
51827
63145
73043
54248
1
1
51.2%
51.2%
-1.5%
Zimbabwe
2179
23942
33907
51836
40292
2
2
23.6%
74.8%
-15.3%
Sri Lanka
1508
12678
11981
25419
24546
3
3
12.5%
87.3%
27.0%
Kenya
516
4639
3675
11117
8498
4
4
4.6%
91.9%
51.5%
Tanzania
99
1935
1942
0
0
5
5
1.9%
93.8%
19.6%
India
254
1748
28
61
2899
6
20
1.7%
95.6%
7479.7%
Germany
346
1003
149
236
112
7
16
1.0%
96.6%
708.4%
United Kingdom
1
1001
1547
2226
2061
8
6
1.0%
97.5%
-22.3%
China
134
880
501
838
1799
9
9
0.9%
98.4%
110.9%
Ireland
0
313
76
0
3
10
18
0.3%
98.7%
394.2%

Malawi and Zimbabwe make up almost 75% of imports.

17. Impact of Trade Restriction: High

 
Rooibos Data for South Africa by Foreign Earnings
1995 Foreign earning amounted to R14 million for Rooibos (Downes and Laird)
1997

Production estimates range from 5,000 to 10,000 tons.

1/10 was exported with total sales of about R50 million (US$ 10.3 million) (Downes and Laird).

1999 Foreign earnings amounted to about R20 million (http://www.info.gov.za/speeches/2002/02081612461001.htm ).
2001 Rooibos tea industry earning R65-70 million (10-20% of this through export sales) (Arendse, Adele. Trade, Environment & Sustainable Development. Environmental Monitoring Group, July 2001).
2002 "Rooibos tea products amount to R120 million of the estimated R160 million South African tea market in the United States" (http://www.tralac.org/scripts/content.php?id=506).
2004

The rooibos tea export industry was valued at about R100 million (http://www.busrep.co.za/index.php?fSectionId=561&fArticleId=2108884).

This was a hard year because of a widespread and long lasting drought. "The rooibos industry was hard hit by the dry conditions, which led to a steep increase in producer prices. Last year's crop came in below expectations, which meant that the industry had to plough into its reserves. And if the rain continues to stay away this year, the industry could find itself in short supply, with a resultant further increase in prices” (http://www.busrep.co.za/index.php?fSectionId=561&fArticleId=2370089 ).

18. Industry Sector: Food and Drink

Key Exporter: "Rooibos Limited is the market leader with a market share of 90 - 95% in the local market and 50 - 60% internationally."16


In respect to the size of the export sector and foreign earning from rooibos the growing sector is quite small. In 2004, "the industry employs about 5 000 people in a growing area stretching from Niewoudtville in the north to Darling in the south. About 30 000ha is under rooibos cultivation, compared with 14 000ha in 1991."17

In 2001 there were about 20 enterprises involved in the industry but Rooibos Ltd is a major exporter of rooibos. It was formed in 1993 when the industry was deregulated. It acts as the umbrella marketing body of the rooibos industry in South Africa. However, like any product in the agriculture sector the price of rooibos fluctuates and is very vulnerable to supply which is directly related to the weather and environment.

19. Exporters and Importers: South Africa and USA

The largest markets for Rooibos are Germany and Japan though it is marketed in over 30 countries. Germany consumed about 60% with Japan, the Netherlands, the UK, Malaysia, South Korea, and the US following.18

"Great market potential exists in the Far East, USA, Europe, and Australasia, but cost associated with penetrating new markets are high".19 These trading partners are not surprising as according the WTO in 2004 the top 5 exporters of South African goods were: European Union (15), United States, Japan, China, and Zimbabwe. While South Africa mainly imports goods from: European Union (15), United States, Japan, China, and Saudi Arabia.(Downes and Laird).

Joekels Tea Packer bought Rooibos Laager brand from Unilever Foods in December 2003. "Joekels is now the third-biggest of the 23 tea packaging companies in South Africa, with a 15 percent share of the rooibos market and just under 5 percent share of the black tea market."20

South African Producers/Exporters of Rooibos:
Rooibos Limited,
Coetzee & Coetzee (Pty) Ltd., Gold Scarab, Cape Natural Tea Products, Herbal Teas of Africa, Khoisan Tea


V. Environment Clusters

20. Environmental Problem Type: Intellectual Property

Rooibos tea is made from the needle-shaped leaves of a shrub, Aspalathus linearis, which is part of the legume family. This shrub is endemic to the fybos, an “ecosystems of Mediterranean shurbland found in the Western parts of the Cape in South Africa”.21 Fynbos is “the major vegetation type of the small botanical region known as the Cape Floral Kingdom. Only five other floral kingdoms are recognized, and these cover huge areas such as the whole of Australia and most of the northern hemisphere. The Cape Floral Kingdom, also known as Cape Floristic Region, is both the smallest and the richest floral kingdom, with the highest known concentration of plant species: 1 300 per 10 000 km2! The nearest rival, the South American rain forest has a concentration of only 400 per 10 000 km2”.22 The ecosystem is rich in the benefits it provides. These benefits range from economic opportunities to cultural values for the communities that make up the Cape Floral Kingdom, but also to South Africa.

 

21. Name, Type, and Diversity of Species

The ecosystem in which rooibos grows is threatened by the spread of alien species and the commercialization of several fynbos plants, including rooibos, to be used in food, drugs, and horticulture crops.23 The plant grows best on mountain slops, 450 meters above sea level, in sandstone soil with limited winter rain, “the stress of the local environment reportedly contributes to the plant’s development".24 The soils generally are nutrient poor and lack the much needed nitrogen that grazing mammals would require, but the plants do support a wide variety of butterfly species.25 Although only one type of A.linearis is commercially cultivated, the plant is “highly variable morphologically, genetically, and chemically”.26

Cultivation practices of the one A.lineraris that is cultivated, rooibos, have changed over the years and the environment has played a big part in this change. Originally, seed collection was difficult because the seed is “shot” out of the plant when it is ripe Each plant produced only one seed so catching the seed was difficult. However, as research improved collection methods improve. It was discovered that ants collected the seeds and that by digging up the ant holes, the seeds could be gotten. “Some within the industry argue that the difficulty of locating seeds and the importance of the local ant population are reasons why rooibos has never been cultivated outside of South Africa”.27

The Rooibos plant, is an indigenous shrub-like plant in South Africa, specifically in an area about 200km north of Cape Town. The leaves are harvested and crushed then allowed to ferment which brings out the flavor and gives the tea its red colour. The plants are usually planted in February and March, transplanted in between June and August and then reach maturity 18 months later. The Cape is the only place it is currently grown commercially.28

Name: Aspalathus linearis

Type: legume family

Diversity:

22. Resource Impact and Effect: Law and Product

23. Urgency and Lifetime: Low

24. Substitutes: Rooibos is a substitute for Black tea. Often times pregnant women drink rooibos because it tastes similar to regular tea, but has no caffeine. It can also be substituted in any recipe for water or milk.


VI. Other Factors

25. Culture: Yes

Rooibos has a distinct place in South African history and daily life. It was originally used by the Khoi in the Clanwilliam region and today it is one of only a few other indigenous plants to be commercially important to South Africa.29 Cultivation began in around the turn of the last century and as a drink, rooibos gained popularity. During World War II the demand for rooibos increased dramatically as Ceylon tea got harder and harder to procure.30 Over the years the government got involved in regulations and marketing to keep the demand for rooibos strong.

26. Trans-Boundary Issues: No

27. Rights: No

28. Relevant Literature
1 http://en.wikipedia.org/wiki/Rooibos
2 http://www.tralac.org/scripts/content.php?id=506
3 http://www.busrep.co.za/index.php?fSectionId=552&fArticleId=2403036
4 http://www.tralac.org/scripts/content.php?id=514
5 http://www.tralac.org/scripts/content.php?id=519
6 http://www.wto.org/english/docs_e/legal_e/ursum_e.htm#nAgreement
7 http://www.annique.com/rooibosstory/story1.html
8 http://www.annique.com/products/books/books.html
9 http://www.tralac.org/scripts/content.php?id=519
10 http://www.busrep.co.za/index.php?fSectionId=552&fArticleId=2403036
11http://www.proudlysa.co.za/about/news/2004/0520.html
12 http://www.busrep.co.za/index.php?fSectionId=552&fArticleId=2403036
13 http://www.busrep.co.za/index.php?fSectionId=552&fArticleId=2403036
14 http://www.busrep.co.za/index.php?fSectionId=552&fArticleId=2403036
15 http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm
16 http://www.rooibosltd.co.za/
17 http://www.busrep.co.za/index.php?fSectionId=561&fArticleId=2108884
18 http://www.busrep.co.za/index.php?fSectionId=561&fArticleId=2108884
19 Downes, David R. and Sarah A. Larid. Innovative Mechanisms for Sharing Benefits of Biodiversity and Related Knowledge: Case Studies on Geographical Indications and Trademarks. UNCTAD Biotrade Initiative 1999
20 http://www.busrep.co.za/index.php?fSectionId=563&fArticleId=296906
21 Downes and Laird
22 http://www.botany.uwc.ac.za/envfacts/fynbos/
23 Downes and Larid
24 Downes and Larid
25 http://www.botany.uwc.ac.za/envfacts/fynbos/
26 Downes and Larid
27 Downes and Larid
28 http://www.rooibosltd.co.za/
29 Downes and Larid
30 Downes and Larid



1/2001