The Counterfeit Goods Act (37/1997) was proclaimed to enforce and protect IP rights holders against counterfeiting. The act enables owners of certain IP rights or any other person with an interest in the protected goods, including the licensee, importer, exporter, distributor or a duly authorised attorney or agent, to act speedily and efficiently against persons involved in counterfeiting on either a criminal or civil level.
In order to rely on the Counterfeit Goods Act, the counterfeit goods must:
- feature a trademark that is registered in South Africa, or constitute a trademark which is well known in South Africa (whether registered or not); or
- feature a prohibited mark, which is protected under the Merchandise Marks Act.
The ambit of the act does not cover the infringement of registered designs or patents and, in such cases, the Patents and Designs Act would be relied on to prevent the unlawful copying of the protected features of products.
In order to effectively combat counterfeiting in South Africa, it is necessary to ensure that IP rights are properly protected.
Any person with an interest in protected goods, who reasonably suspects that a counterfeiting offence is being or has been committed, may file a complaint with an inspector, who may be an official appointed by:
- the minister of trade and industry;
- a police official with the rank of sergeant or higher; or
- the commissioner of customs and excise.
On filing a complaint, the complainant must furnish the inspector with sufficient information to confirm that an act, which is prohibited under the Counterfeit Goods Act, is being performed or is likely to be performed. Once the inspector is satisfied that the complainant is entitled to lodge the complaint that an IP right subsists in the protected goods, and that the suspicion on which the complaint is founded is reasonable, the inspector may obtain a warrant for the seizure and removal of all counterfeit goods and evidence which serves to confirm that an act of counterfeiting has been or is being committed.
Any act which amounts to dealing in counterfeit goods is prohibited under the act, including:
- the possession or control of such goods in the course of business;
- the manufacture or production of such goods for use, other than private or domestic;
- the selling, hiring out or exchanging of such goods, or offering or exposing them for sale;
- the exhibition of such goods for the purposes of trade or any other purpose with the result that the IP rights holder suffers prejudice;
- the import into or through, or the export from or through the Republic of South Africa, except if such an import or export is for the private and domestic use of the importer or exporter; and
- the deposal of such goods in any other manner in the course of trade.
The warrant entitles the inspector and complainant to:
- enter any place, premises or vehicle and to seize, detain or remove any counterfeit goods;
- collect evidence relating to the counterfeit activities;
- conduct any searches reasonably necessary;
- seal off any place, premises or vehicle where counterfeiting activities have taken place or are taking place;
- seize, detain or remove any tools involved in the counterfeiting activities; and
- procure any relevant documents, books and materials, including supplier and customer details.
Once the suspected counterfeit goods and any evidence relating to the counterfeit activities have been seized and properly recorded in an inventory, the seized goods are then removed and stored in declared counterfeit good depots, where they will be held pending the closure of the criminal or civil proceedings against the suspect.
The complainant must elect whether to proceed civilly or criminally against the suspect. Failure to do so within the prescribed time period will result in the goods being returned to the suspect.
Whether a civil or criminal action is taken will depend on the circumstances of each case, taking into account:
- the quantity and value of the goods that were seized;
- whether the offender has previous convictions or whether they are a first-time offender; and
- the likelihood of reclaiming any costs and damages from the offender.
In cases where large consignments of goods have been seized, and the suspect can be easily identified and is in a financial position to comply with a damage and cost order, it is advisable to proceed with civil action against the suspect.
The advantage of proceeding with civil action is that the complainant can claim damages that they have suffered as a result of the act of counterfeiting. The court may also order that the seized goods are delivered up to the IP rights holder, or to the complainant, for destruction and that the identity be disclosed of any person who is involved in the manufacture, importation and distribution of the counterfeit goods.
In criminal proceedings and on conviction of an offence under the Counterfeit Goods Act, the person convicted may face:
- a fine of up to R5,000 per article;
- imprisonment for a period of up to three years; or
- both the fine and imprisonment.
On subsequent convictions, the fine increases to R10,000 per article and the maximum period of imprisonment is five years.
Although criminal proceedings are less costly than civil proceedings there is a substantial delay in obtaining a criminal conviction. This factor must be considered by the complainant as they are liable for the storage costs until the matter is finalised.
The owner of an IP right, which is protected under the Counterfeit Goods Act, may apply to the commissioner for customs and excise to seize and detain all counterfeit goods that fall under customs control. This includes any goods which are exported from, or goods imported into or entering, South Africa, thereby providing an effective means of preventing any counterfeit goods from entering the local market. In such cases, the commissioner requires the complainant to lodge a formal application, setting out the IP rights, to indemnify the customs authorities and cover the expenses associated with the detention, seizure and storage of the counterfeit goods.
Proceedings under the Counterfeit Goods Act are subject to strict technical requirements and deadlines. If these time limits and procedures are not complied with, the counterfeit goods must be returned to the suspect who may then claim any damages that they may have suffered as a result of the wrongful seizure of the suspected counterfeit goods.
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