The positive role to be played by the Intellectual Property owner
30/12/2002

The South African business perspective.

As long ago as July 1993, the European Commission announced in a press release that counterfeiting activity had stepped up in the preceding years and accounted for at least 5% of world trade. The loss of sales attributable to counterfeits had a direct impact on employment and profitability. Trade in counterfeits was estimated to have cost the European Union 100 000 jobs in 1992. Corresponding figures for South Africa in respect of the past few years are not available but the impact would have been equally high and is growing rapidly, especially as South Africa had not previously experienced the problem because of its political isolation and had no established infrastructure to deal with the problem. It has become a prime dumping ground for counterfeit goods from the East.

New laws that are in existence in South Africa to deal with the counterfeiting problem will be discussed in this article. They have been in force and in effect from 1 January 1998. The laws are revolutionary and are about as much as the legislature and the law enforcement agencies can do to provide effective procedures and remedies to prevent and deter internally, and at the borders, infringements of intellectual property rights. They are, however, not perfect and as the whole counterfeiting industry becomes more sophisticated, there is an onus upon the intellectual property owner to protect its intellectual property rights by participating in general anti-counterfeiting activities and by looking at every available means to protect its properties. These include involving national policing and intelligence agencies to combat piracy and related organised crime, of which counterfeiting has been proven to form part, engaging experts within business to prevent leakage of information and, most importantly, joining forces with other intellectual property owners.

Currently intellectual property owners' associations and coalitions in South Africa are reaching the highest levels of the administration, co-operating in the fight against counterfeiting and sharing relevant information. Established organisations such as The Motion Picture Association, which concentrates its efforts primarily to prevent the manufacture and sale of pirate films and the Business Software Alliance, which looks at the protection of information technology, have been very successful. With the growth of the market in counterfeiting goods, two other associations have recently been formed, one being the Anti-Counterfeiting Coalition (S.A.) and the other, the Intellectual Property Owners Association, originally formed as the Anti-Counterfeiting Action Group. The Anti-Counterfeiting Coalition (S.A.) is an active on-the-ground organisation that is primarily concerned with the eradication of counterfeit goods at street level, including investigations into the source of the goods and assisting the South African Police Services or Customs officials in subsequent raids. The Intellectual Property Owners Association (commonly known as IPOA) is largely run by businesses owning trade marks and assists its members in fighting counterfeiting at street level and also lobbies government to create awareness and improve enforcement of anti-counterfeiting measures. It promotes the protection of intellectual property rights in general and liaises with other groups and associations in South Africa in connection with matters relating to intellectual property rights and their enforcement.

The active and positive involvement of intellectual property owners, in addition to the implementation and enforcement of the latest anti-counterfeiting legislation in South Africa, must be encouraged effectively to combat intellectual property right violations.

An overview of South Africa's new statutory anti-counterfeiting measures

The Merchandise Marks Act has in the past been the principal Act used to combat anti- counterfeiting activities but, dating back to 1941, it faced serious shortcomings. It only prohibited the manufacture of or trade in counterfeit products and not possession. It did not impose stringent penalties and fines were limited to an amount of US$30. This discouraged law enforcement agencies to take steps under the Act.

The Intellectual Property Law Amendment Act, which came into effect on 1 January 1998, amended the Merchandise Marks Act to give powers to inspectors and provide for procedures to prevent the application to goods of false trade descriptions, but it removed the provisions relating to trade marks. As far as counterfeits are concerned, the most relevant offence in terms of this Act is the application to goods of any trade description which is false in a material respect as regards the number, quantity, measure, gauge or weight of any goods or as to the name of the manufacturer or producer, or the place or country in which any goods were made or produced. It imposes heavy penalties. Persons found guilty of an offence could be fined on the same basis as those found guilty of an offence in terms of the Counterfeit Goods Act, which is discussed below.

The Counterfeit Goods Act is an advanced body of legislation and a front runner in comparison with existing international anti-counterfeiting laws. This Act provides three types of measures that cater for most instances of counterfeiting.

1. Action by the South African Police Services and Inspectors appointed by the Department of Trade and Industry

In terms of the new Act, counterfeit goods are goods which are imitations of genuine goods in respect of which there subsists an intellectual property right. This right includes the right in respect of a registered trade mark and copyright.

The intellectual property owner, his distributor, authorised agent, or attorney may lay a complaint with the South African Police Services or an Inspector, if he or she reasonably suspects that an offence has been or is likely to be committed. The offence of counterfeiting is widely defined as including and encompassing the manufacturing or production (for non domestic and non private use), sale, hiring out, exchange, distribution, importation or exportation or possession in the course of business of counterfeit goods.

The South African Police Services or the Inspector, as the case may be, if satisfied that the complaint discloses a cause of action, is entitled to seize and detain any counterfeit goods and take all steps reasonably necessary to terminate the act of dealing in the counterfeit goods. Having been seized, the goods have to be removed to a designated counterfeit goods depot and a criminal prosecution will commence.

2. Action by Customs officials

An important innovation in this Act has been the statutory enlistment of Customs officials. In the past, the Customs department has not been very active in anti-counterfeiting activities and it is hoped that effective border control in future will greatly limit the distribution and sale of counterfeit goods in South Africa. Experience has shown that the majority of counterfeit goods are manufactured and exported from countries in the East and their importation often involves evasion of customs duties. The new provisions assist the customs officials to deal with both problems.

In terms of the Act, application may be made to the Commissioner for Customs and Excise to seize and detain counterfeit goods being imported into the Republic. Once the Commissioner is satisfied that an intellectual property right subsists and that the applicant is the owner thereof, he must deal with the request without delay. The Commissioner may however, require the applicant to furnish security indemnifying the customs authorities against any liability. Once the Commissioner has taken appropriate action, a criminal prosecution should follow.

3. Civil action

Special provision is made in the Act for a complainant to approach a Judge in chambers for an order directing the sheriff or an authorised official to search, seize and remove documents or counterfeit goods specifically with the view to preserve evidence relating to counterfeiting activities. Before such an order is granted, the Judge must be satisfied that the usual procedure for the discovery of evidence is likely to be frustrated because the evidence may be concealed or destroyed. This is effectively a streamlined Anton Piller order. Certain safeguards against the abuse of the procedure have been introduced, such as the right of the respondent to have his or her attorney present during the execution of the order.

4. Penalties

In any criminal or civil proceedings under these Acts, the court may order the seized goods, and any tools used in their manufacture, to be destroyed or delivered to the complainant and that the identity of any persons involved in the manufacture, importation or distribution of the counterfeit goods be disclosed.

Substantial penalties have been introduced. In the case of a first conviction, the penalties include a fine of up to US$800 per article or item seized, or imprisonment for a period not exceeding three years, or both. In the case of a second conviction, a fine of up to US$1700 may be imposed per article or item, or imprisonment for a period not exceeding five years, or both.

5. Bounty hunting

The Counterfeit Goods Act also has a built-in incentive to combat the trade in counterfeit goods. If a person submits any counterfeit goods purchased by him or her to an inspector together with proof of the price paid for them and the seller is convicted of an offence in terms of the Act, he or she may be awarded a sum of money equal to three times the amount paid for the counterfeit goods.

The new and amended Acts are still in their infant stages and problems are being experienced with their implementation. For instance, counterfeit goods depots have not yet been officially promulgated and although they are expected to take the form of police stations and customs warehouses already in existence until promulgation takes place, the Counterfeit Goods Act cannot be fully implemented. Hopefully, all the problems will soon be addressed by amendingn legislation to introduce more streamlined procedures.