anti-counterfeiting

Counterfeiting is a serious problem for manufacturers and distributors of merchandise.  Counterfeiting is a global problem and South Africa has during the past few years increasingly been targeted by unscrupulous businesses and organised crime syndicates as a dumping ground for goods which are copies of well-known brands. Counterfeiting and copying of famous brands has created real dangers for the individual purchaser, manufacturer and distributor.

If a customer is put at risk when buying counterfeit goods, the brand owner or importer loses more than just sales. Counterfeit eats into the market and undermines the purchaser’s public attitude towards the product and its worth. Brand reputation is usually built on the back of years of investment in trade marks, advertising campaigns and developing of new products and lines of distribution. This investment can be quickly threatened if counterfeit goods are allowed to infiltrate the system.  The good name, relationship with distributors, safety record and exclusivity on which the brand owner relies to keep one step ahead of the competition can be badly affected.

the law

Counterfeit Goods Act No. 37 of 1997 came into operation by proclamation on 1 January 1998.  This body of law provides the essential protection for trade marks and copyright matters being copied. The Counterfeit Goods Act, at its most basic level, seeks to prevent and provide an effective mean of preventing and curbing trading in counterfeit goods. The Act introduced dramatic and far-reaching measures to assist brand owners in dealing with counterfeit goods.

the aims of the act

Counterfeit goods, per definition, are goods, which are imitations of genuine goods in respect of which trade mark rights or copyright exists and which are owned by an intellectual property right owner. Unauthorized use of a trade mark or copyrighted matter is tantamount to an offence in terms of the Counterfeit Goods Act.

In essence, the Act aims to achieve the following:

1. To prohibit certain Acts in relation to counterfeit goods as well as the possession thereof,
2. To create offences in that regard and prescribe penalties in relation thereto,
3. To confirm upon inspectors and certain members of the South African Police Services the power to enter premises, to search for and, if found, to cease and remove counterfeit goods or suspected counterfeit goods,
4. To provide the commissioner of customs and excise and his or her staff with the authority to cease and detain counterfeit goods imported into or entering the Republic during a particular period.

what is counterfeiting?

Counterfeiting means the manufacturing, and/or producing of goods for which an intellectual property right subsists in respect of the protected goods or a colorable imitation thereof in such a manner that they are calculated to be confused, with or to be taken as being the protected goods.  The relevant act of counterfeiting must have also infringed the intellectual property right in question either being copyrighted matter or a trade mark.

Prohibited marks in terms of the Merchandise Marks Act are also protected by the Counterfeit Goods Act and can be the subject of counterfeiting.  A prohibited mark would be “The Springbok” or the “Protea” emblem etc.

what is intellectual property?

An intellectual property right includes registered trade marks and well-known trade marks, copyright in any work and a right of a person to use a specific prohibited mark.

what is protected goods?

Protected goods are the goods to which an intellectual property right subsists and that right is enforceable by the proprietor even if he has not exercised his rights in the past or whether the goods are indeed in existence in South Africa.

what action is regarded as an offence?

Acts amounting to dealing in counterfeit goods, which are prohibited include the following:

1. The possession control by any person of counterfeit goods in the course of business,
2. The manufacturing, producing or making of counterfeit goods other than for private or domestic use,
3. The selling, hiring out, bartering or exchanging of counterfeit goods or the offering or exposing for sale thereof,
4. Exhibiting of counterfeit goods in public for the purpose of trading therein,
5. Distributing counterfeit goods for the purpose of trading therein or for any other purpose to the detriment of the owner of an intellectual property right,
6. Importing or exporting into or through the borders of South Africa other than for private and domestic use; and
7. Disposing of counterfeit goods in any manner in the course of trade.

The above actions will amount to dealing with counterfeit goods if such a person knows or has reason to suspect that the goods are counterfeit or does not take reasonable steps to avoid that action which will also amount to an offence in terms of the Counterfeit Goods Act.

who can be an interested person?

Any person with an interest in the protected goods, who reasonably suspect that a counterfeiting offence is being committed, or has been or is likely to be committed, may lay a complaint with an inspector. The interested person can be the owner or licensee of an intellectual property right in respect of the protected goods or an importer, exporter or distributor, duly authorized agent, representative or the attorney of such a person.

An inspector is an official appointed by the minister of Trade and Industry as well as a police official holding the rank of sergeant or higher or the Commissioner for Customs and Excise.

procedure

The Act has introduced three types of remedies that would cover most instances of counterfeiting, namely

1. Criminal Procedure
   
   

   A complaint is filed with an inspector, providing him with sufficient information with regard to the right and title of the intellectual property owner and right of complainant as well as the prohibited act being committed or likely to be committed.  Once the inspector is satisfied that an offence is being committed or likely to be committed and that an intellectual property right subsists in the protected goods, he will take the necessary action to terminate the counterfeiting activities.  The inspector will obtain a warrant of search and seizure from a magistrate or a high court judge in chambers.  An inspector may also act without a warrant if the delay in obtaining a warrant will defeat the ends of justice.

   Once a warrant has been issued the inspector may enter any place or premises or vehicle to seize and remove any counterfeit goods and collect evidence relating to the prohibited act.  In addition the inspector may take any steps necessary to stop the act of counterfeiting. 

   After the goods have been seized and, if possible, they will be removed to a counterfeit depot.  This is a warehouse, which has been designated by the Minister of Trade and Industry as a place where counterfeit goods will be stored until a case has been finalized.

   After a seizure the complainant has three days to notify an inspector that it wishes to lay criminal charges. If this is not done the goods, must be released.  In addition, if the state prosecutor decides not to prosecute the case the seized goods must be returned or if a complainant fails to institute civil proceedings within certain time periods.

2. Civil Procedure
   
   The Act has introduced extensive measures to assist intellectual property right owners in combating counterfeit products. Such an owner may apply ex parte to a judge in chambers for an order directing the sheriff or an authorized official to search, seize and remove documents and or counterfeit goods specifically with a view to preserve the seized goods as evidence in relation to counterfeit activities.  The owner has to satisfy the judge that their rights to discovery of documents are likely to be frustrated or should the normal court procedure be followed the relevant goods or evidence is likely to be destroyed or concealed.  These provisions create statutory relief of a nature similar to the common law Anton Piller type of order, which is available to any intellectual property right in certain cases.
   
   
3. Customs Procedure
   
   

   Application can be made to the Commissioner of Customs and Excise to seize and detain certain goods, which have been identified as counterfeit and are being imported and/or exported into or through the Republic.  If the Commissioner is satisfied on reasonable grounds that an offence has been committed and that the intellectual property right subsists, he will grant such a request.  The Commissioner will require indemnity from the complainant.  Once again, when the seizure has been completed prosecution of the importer and/or exporter commence. 

penalties

Apart from a court order declaring that the counterfeit goods in question be forfeited to the state or that the goods, packaging and the tools used in acts of counterfeiting be destroyed, the Act introduced stringent penalties to be imposed upon conviction.  Any person convicted of an offence, will in the case of a first conviction, be punishable with a fine in respect of each article or item, which may not exceed R5000 per article or item, or imprisonment for a period that may not exceed three years, or both.  In the case of a second or subsequent conviction the fine in respect of each article or item may not exceed R10000 per item or article and imprisonment may not exceed five years.

The Act has further introduced an interesting provision that operates as an incentive to combat the trade in counterfeit goods.  Any person who submits any counterfeit goods purchased by him to an inspector together with the proof of the price that was paid for these goods, will be entitled to receive payment of the sum of money equal to three times the amount of the price under certain circumstances.

conclusion

The Counterfeit Goods Act has for the first time in South Africa sought to define and curb acts of counterfeiting.  With the Counterfeit Goods Act an effective weapon against counterfeiting has been created.