Is your brand safe? … and what can you do to protect it?

While no industry is immune, it would appear that the footwear industry is the one in which we see substantial quantities of copy products and identical products entering the South African market and being sold in this country. No accurate statistics exists but Adams & Adams Attorneys has on occasion, with the assistance of the South African Police Services, acted to seize, in a month, in excess of R2-million to R3-million worth of counterfeit footwear alone. This is only the tip of the iceberg. Estimates are also made more difficult by the growth in the informal sector where it is difficult to determine the quantity of counterfeit and knock off products which are being sold.

Unfortunately, in South Africa, counterfeiting is often not viewed as a serious crime. The attitude displayed by many is that counterfeiting is no more than copying, and copying is surely the “purest form of flattery”. Unfortunately, this view not only pervades the industry but is a view that has been instilled in the public who on seeing the price tag on the counterfeit shoes, are encouraged to buy the shoes without understanding the extent and the nature of the problem.

Counterfeiting and copying famous brands is a serious crime. Many manufacturers invest substantial resources to ensure that the footwear which they sell is not only attractive but also incorporates technical specifications intended to correct foot problems. This is often what determines the price tags on the footwear. These same manufactures have invested substantial sums of money in building up their brand only to see the market flooded with cheap copies which trade on their extensive reputation and goodwill, damage their market and do not meet the high standards set by the lawful manufacturer.

Counterfeiting also has other negative impacts. It is our experience that many of the counterfeit products are imported illegally and duties on the footwear are either under declared or not paid at all, hence damaging the local shoe production industry. Flooding of the local market with counterfeit products also results in the manufacturer of the shoes having to increase its prices substantially to cover losses in turnover. The tremendous effect this has on the footwear industry in South Africa also leads to job losses.

Having examined the problem, we must consider possible solutions and what protection is offered to manufacturers, brand holders and importers of footwear into South Africa.

As far as the law is concerned, the Trade Marks Act of 1993 makes provision for the protection of registered trade marks. The word “trademark” can often be used interchangeably with the word “brand”. Provision exists under the Trade Marks Act to apply to register a trade mark in relation to either the goods or services in respect of which the trade mark is to be used. Class 25 (which is the class which covers footwear and clothing) would be the most pertinent class to manufacturers and brand holders who have an interest in selling branded shoes. An application to register a trade mark is lodged with the Trade Marks Office. Subsequently it will examine the trade mark and thereafter accept the application, provided the Registrar is satisfied that there are no conflicting trade marks registered or other obstacles to registration. The mark is then advertised to allow interested parties to lodge objection. If no objection is received, the mark will be registered.
Unfortunately, due to delays in the Department of Trade and Industry, which administers the Trade Marks Act, it currently takes approximately 36 months to register a trade mark.

Once the trade mark is registered, this registration, which is territorial and would only cover South Africa, can be used to stop any other party from using a similar or identical trade mark. Armed with a trade mark registration the trade mark owner can stop anyone else from selling, producing or manufacturing footwear to which that trademark is applied. The trade mark owner may consider instituting civil action or, alternatively, lodging a formal complaint with the South African Police Services on the basis that the possession and / or the sale, distribution or manufacture of the offending footwear is an offence under the Counterfeit Goods Act 37 of 1997 and/or the Merchandise Marks Act no 17 of 1941. These Acts make provision for the police, or an inspectorate appointed by the Department of Trade and Industry, to seize counterfeit goods and to charge criminally the person found in possession, selling or manufacturing the goods. Recently, the fines have been increased substantially and it is now possible for a court to impose fines of up to R5000 per item (or per pair of shoes) seized and / or a maximum jail term of three years on a first offence or a fine of R10 000 per item seized and / or a maximum imprisonment of five years on a second offence.

While one hopes that this would act as a deterrent to counterfeiters there are a number of reasons why this has not yet occurred. The first and most serious of these is that the Department of Trade and Industry, while obliged in terms of the provisions of the Counterfeit Goods Act to appoint an inspectorate to administer the Act and counterfeit goods depots, has not yet done so. Accordingly, the South African Police Services and Department of Customs and Excise, who are also required to investigate offences under the Counterfeit Goods Act, are refusing to act under the provisions of the Act.

In the circumstances, it had become very important that government be lobbied to effect the necessary changes and to ensure that the Department of Trade and Industry sets up an inspectorate.

Another area where enforcement is inhibited is where the footwear enters our South African ports. Unfortunately the Customs & Excise Authorities do not have the manpower to check all containers entering South Africa and, therefore, many of these containers of unlawful products enter our borders undetected. Moreover, South Africa is a member of a common Customs Union and often footwear, originally destines for Lesotho or Botswana where the brand owner has no trade mark protection, finds its way back into the South African market.

How does one improve the situation?

I believe the onus is on every manufacturer and brand holder in South Africa to ensure that their brand is better protected by registering it as a trade mark. It is also the brand owner’s responsibility to take action against counterfeiters and to make customers aware of the importance of buying only authorised and legitimate products.

In the United States of America, there has been a strong move to fitting securitisation mechanisms in all clothing and footwear to ensure at least that when the South African Police Services or Customs Officials are required to identify the goods, they can do so more easily. Customers who know about the securitisation, by the addition of a hologram tag for example, will also be better protected. It is also believed that customers will begin to see the advantages of buying legitimate products. Together with a concentrated advertising campaign this should increase brand awareness and loyalty.

Another area to concentrate on is lobbying the government for better enforcement of the laws and better detection of counterfeit goods. To be successful in this area, it is important for all industry players to unite and approach government with one voice. Organisations such as the Intellectual Property Owners’ Association (IPOA)exist which concentrates on exactly this aspect. There are also organisations like the Anti-Counterfeiting Coalition (ACC), which has been successful in removing large quantities of counterfeit goods from the streets. Manufacturers and importers and brand holders alike should continue to support these organisations or, if they are not already members, join with them, to make your voice heard.

PS. Should you require any further details about trade marks please do not hesitate to contact Adams & Adams.