Soon after the fast-food giant opened its first restaurant in South Africa, a Pretoria Supreme Court judge ruled that a local businessman had a prior right to the McDonald's name. Judge B R Southwood decided that the American firm had fallen foul of a South African law which insists that foreign firms must use their trademark or lose it.
The ruling could jeopardise foreign investment, boosted by the end of sanctions following all-race elections last year. "The United States is surprised, dismayed and concerned about the court verdict reached against McDonald's," the US embassy said in a terse statement.
The case will not stop McDonald's from selling hamburgers in South Africa, the company said. It will press ahead with construction, staff training, and development plans. The newly completed Johannesburg outlet and another in Cape Town are due to open next month under South African franchises.
The dispute arose when George Sombonos, who owns the local Chicken Licken chain, went to court seeking to bar McDonald's from using its name. Under a South African law dating from the days of white minority rule, any foreign company not using its trademark for five years could lose the right to use its name. McDonald's trademark had been registered in South Africa since 1968, but the company never opened a restaurant becuase of international economic sanctions.
A new Trademarks Act was passed in March that brought South Africa's rules in line with international norms. Mr Sombonos, who has indicated he wants to open his own restaurants under the McDonald's name and use its trademarks, golden arches and all, filed suit before the new law's cut-off date.