South Africa: Anti-Counterfeiting

Last Updated: 21 March 2007
Article by Vanessa McPhee

Counterfeit products negatively impacts on the economy and the occurrence thereof has seen dramatic increases over the past year.

In a Business Report article, Bert Chanetsa quotes Roger Parloff in a Fortune Magazine article: "Advances in printing, scanning, 3D modeling and so on have made copying through reverse engineering easier and cheaper than ever." In addition to crude methods such as handheld video cameras smuggled into film premieres, pirated copies of films have been diverted from production rooms. A disloyal technician can misappropriate intellectual property using various methods.

Parloff focuses on what he refers to as brand rip-offs, using descriptive terms such as "third shift", "midnight shift" and "ghost shift". He points out that, by outsourcing the manufacture of their goods, Western companies are "entrusting their precious intellectual property - designs, moulds, specifications, trade secrets - to hundreds of contractors and subcontractors all over the world". Typically, a contracting company fills in an order for its principal during two day shifts, say from morning till noon and noon till evening. The unauthorised third shift is then run off during the night, sometimes with inferior materials. Predictably, the contractor sells third shift goods to its own customer list, comprising witting and unwitting participants to the misuse of intellectual property. The third shift has tested the bounds of intellectual property infringement. It is not as obviously detected as the wrong as counterfeiting and normally arises within the rapidly evolving practice of outsourcing. Third shift goods are difficult to distinguish from the genuine article. This makes it hard, if not impossible, to trace them.

The principal will normally react by terminating its relationship with the errant contractor. The situation becomes even more challenging for the principal when the contractor continues to manufacture goods in defiance of the terminated license.

In some cases, the contractor will appear to accept the termination of the license, but then resume production, "knocking off" its former principal's products. Knocking off involves the production of counterfeit goods as well as the production of goods that look like the former principal's branded products.

The Counterfeit Goods Act was proclaimed to enforce and protect intellectual property right holders against counterfeiting.  The Act enables the owner of certain Intellectual Property rights or any other person with an interest in the protected goods, including the licensee, importer, exporter, distributor and/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 provisions of the Act, the counterfeit goods must feature either a trade mark that is registered in South Africa, or constitutes a trade mark which is well-know (whether registered or not) or a copyrighted work and/or must contain a prohibited mark, which is protected under the provisions of the Merchandise Marks Act.

In order to ensure that you effectively combat counterfeiting in South Africa, it is necessary to ensure that your intellectual property rights are properly protected in the Republic. Trade marks, including the names, logos, colour combinations, product get-ups and the like should be registered. In the case of copyrighted works, these works should be properly recorded and documented. In the case of cinematograph films, consideration should be given to the registration of such works under the provisions of the Copyright Act, being the only work capable of registration under the provisions of South African Copyright law.

Where the use of Intellectual Property rights are licensed to third parties, particularly in the case of distribution, manufacture and license agreements, proper care should be taken to ensure that these rights are not only protected in terms of such agreement, but also that the use of such rights are properly policed and monitored. In all cases, a formal written agreement should be entered into between the parties and proper consideration should be given to protective and policing mechanisms.

In cases where such rights are abused, the Counterfeit Goods Act can be employed as an effective mechanism to curb such abuse of the Intellectual property rights. Provided that a complainant is able to establish the existence of a valid Intellectual Property right and provide sufficient proof that the goods in question were manufactured without the authority of the Intellectual Property owner, a warrant can be obtained for the search of specified premises and the seizure of any counterfeit goods. After seizure, the Intellectual Property owner can institute criminal and/or civil proceedings against the suspect.

DM Kisch Inc. offers a one-stop service for all IP related matters, including the protection of Intellectual Property rights, the drafting and enforcement of intellectual property rights agreement, as well as anti-counterfeiting. DM Kisch Inc is also pleased to announce two new members to its anti-counterfeiting team, namely FJ Labuschagne and Rochelle Mahon.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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