South Africa: Counterfeiting in South Africa

Counterfeiting of goods involves not only the infringement of intellectual property rights per se, but also the dealing in the same type of goods as those of the proprietor, or his licensee, of the intellectual property right in question. The Counterfeit Goods Act (" the Act") creates both criminal and civil remedies and procedures in order to protect against counterfeiting. The Act is supplementary to existing remedies available to copyright and other intellectual property right owners for protecting and enforcing their rights. The Act makes possible taking prompt and effective action to limit the dealing in counterfeit goods with a minimum of formalities and reduce as far as possible the potential liability of the police or other inspectors in seizing counterfeit goods. Responsibility for the action of seizing and detaining goods is placed squarely on the complainant.

Protected goods

Protected goods include a wide variety of goods protected by copyright, including books, computer software, sound recordings and films. Having regard to the provisions of section 15(3A) of the Copyright Act it will not provide protection where the reverse engineering of an artistic work will not constitute an infringement. Protected goods are goods featuring, bearing, embodying or incorporating the subject of an intellectual property right, or to which such subject matter has been applied, by or with the authority of the owner of that intellectual property right, and goods which may legitimately embody or incorporate, or have applied to them, the subject matter of an intellectual property right only by or with the authority of the owner of that right

Counterfeit goods

Counterfeit goods are imitations of goods embodying an intellectual property right, or goods bearing false marks, being infringing articles in respect of an intellectual property right. Section 1 of the Act qualifies counterfeit goods as goods that are the result of counterfeiting, and includes any means used for purposes of counterfeiting. "Counterfeiting" means:-

(a) without the authority of the owner of any intellectual property right subsisting in the Republic in respect of protected goods, the manufacturing, producing or making, whether in the Republic or elsewhere, of any goods whereby those protected goods are imitated in such manner and to such a degree that those other goods are substantially identical copies of the protected goods;

(b) without the authority of the owner of any intellectual property right subsisting in the Republic in respect of protected goods, manufacturing, producing or making, or applying to goods, whether in the Republic or elsewhere, the subject matter of that intellectual property right, or a colourable imitation thereof so that the other goods are calculated to be confused with or to be taken as being the protected goods of the said owner or any goods manufactured, produced or made under his or her licence; or

(c) where, by a notice under section 15 of the Merchandise Marks Act, 1941 (Act 17 of 1941), the use of a particular mark in relation to goods, except such use by a person specified in the notice, has been prohibited, means, without the authority of the specified person, making or applying that mark to goods, whether in the Republic or elsewhere.

Goods that are counterfeit goods, may not-

(a) be in the possession or under the control of any person in the course of business for the purpose of dealing in those goods;

(b) be manufactured, produced or made except for the private and domestic use of the person by whom the goods were manufactured, produced or made;

(c) be sold, hired out, bartered or exchanged, or be offered or exposed for sale hiring out, barter or exchange;

(d) be exhibited in public for purposes of trade;

(e) be distributed for purposes of trade or for any other purpose to such an extent that the owner of an intellectual property right in respect of any particular protected goods suffers prejudice;

(f) be imported into or through or exported from or through the Republic except if so imported or exported for the private and domestic use of the importer or exporter, respectively;

(g) in any other manner be disposed of in the course of trade.

A person will be guilty of an offence if he performs or engages in any of the above acts. In addition the doer of the act either must know or must have had reason to suspect that the goods in question were counterfeit goods or must have failed to take all reasonable steps to avoid performing or being engaged in one of the restricted acts with reference to counterfeit goods.

Apart from what one normally understands by the description "counterfeit goods", the Act includes for example the following as counterfeit goods: Pirate records, compact discs and tapes; pirate video tapes; pirate computer programs and computer games; pirate copies of books; goods bearing marks which are obvious infringements of registered trade marks; and goods bearing marks prohibited under the Merchandise Marks Act used without authority

Penalty

A person convicted of the offence of dealing in counterfeit goods is liable, in the case of a first conviction, to a maximum fine of R5 000 or to imprisonment for a period of up to 3 years, or to both such fine and such imprisonment, for each article to which the offence relates. In the case of a subsequent offence the maximum fine increases to R10 000, and the maximum period of imprisonment increases to a period not exceeding 5 years. A person convicted of a subordinate offence is liable to a fine of up to R1 000, or to imprisonment for a period of up to 6 months.

The Act also creates various secondary offences in addition to the principal offence. It is an offence to fail to comply with any request, directive, demand or order made or given by an inspector in carrying out his functions under the Act or to obstruct or hinder him in carrying out his functions. It is also an offence for a person to refuse or fail to give information or an explanation relating to a matter within his knowledge, or to furnish information or an explanation in the knowledge that it is false or misleading, when asked by an inspector to do so. Any person who without authority breaks, damages or tampers with a seal applied by an inspector, or who removes goods, documents, articles, items, objects or things sealed-off or sealed by an inspector or detained or stored at a counterfeit depot, commits an offence.

Remedies

The owner of an intellectual property right who is aware or has reasonable grounds to believe that an act of dealing in counterfeit goods has taken place, is taking place, or is about to take place, may apply ex parte to a Judge in chambers for an order:

(a) directing the sheriff or another person designated by the court (referred to as a "designated person"), accompanied by such other persons as the court may specify, to enter a specified place or premises and there (i) such premises search for and seize documents, (ii) remove records or other materials specified by the court and specified goods alleged to be counterfeit goods (referred to as "subject goods") and (iii) attach such materials and goods;

(b) directing the respondent to point out to the sheriff or designated person executing the order all subject goods and to disclose and make available to him all documents and materials relevant to the determination of whether the goods in question are counterfeit goods or to any dealings in such goods (referred to as "ancillary materials") at the place or premises or elsewhere , and permitting the person executing the order to attach such items and to remove them for detention in safe custody;

(c) restraining the respondent from interfering with the state of the subject goods or ancillary materials during the search, seizure, attachment or removal and carrying out or continuing with the relevant act of dealing in counterfeit goods;

(d) granting any further or alternative relief which the court considers appropriate.

Before a court grants the order it must be satisfied (i) that the applicant has a prima facie claim against the respondent for the infringement of an intellectual property right, and (ii) that, whether on account of the nature of the goods with which the application is concerned, or other circumstances, the applicant's right to discovery of documents in proceedings to be instituted is likely to be frustrated, or the goods in issue in such proceedings, or evidence pertaining to dealings in such goods, are likely to be altered or destroyed, disposed of or otherwise placed beyond the access of the applicant if the normal court procedure is implemented or followed.

Procedure for laying a complaint

A person having an interest in protected goods whether as the owner or licensee of an intellectual property right or as an importer, exporter or distributor of protected goods, may lay a complaint in respect of counterfeit goods under the Act. A complaint is laid with an inspector.

The complainant must furnish to the inspector a specimen of the alleged counterfeit goods, or, if not reasonably possible, sufficient information and particulars from which the essential physical and any other distinctive features, elements and characteristics of the alleged counterfeit goods may be ascertained. In addition the complainant must furnish sufficient information and particulars as to the subsistence and extent of the relevant intellectual property right and his title to or interest in that right.

Once the inspector has satisfied himself that:-

1. the person laying the complaint is prima facie entitled to do so;

2. that the goods claimed to be protected goods are prima facie protected goods;

3. that the intellectual property right in question prima facie subsists;

4. that the suspicion on which the complaint is based appears to be reasonable in the circumstances,

the inspector is entitled to take various steps. An inspector who suspects that an act of dealing in counterfeit goods has taken place, is taking place, or is likely to take place, can of his own initiative also take these steps provided the aforegoing requirements are met.

Warrant

Before an inspector can take action in respect of counterfeit goods, he must seek a warrant entitling him to conduct a search and seizure raid. Either a Magistrate who has jurisdiction or a Judge of the High Court in chambers can issue this warrant. It must appear to the judge or magistrate from information on oath or affirmation that there are reasonable grounds for believing that an act of dealing in counterfeit goods is taking place or is likely to take place. A warrant may be issued either with reference to one separate suspected act dealing in counterfeit goods, or with reference to any number of such acts, whether any such act involves only one alleged offender or any number of alleged offenders, irrespective of whether such offender or number of offenders is identified specifically by name or by reference to any particular place or circumstances, and any point in time. This enables the warrant to be issued even though a complainant is unable to identify a specific offender. A warrant in terms of this section may be issued on any day and will be in force until-

(a) it has been executed; or

(b) it is cancelled by the judge or magistrate who issued it, or, if not available, by any other judge, or by any other magistrate with like authority (as the case may be); or

(c) the expiry of three months from the day of its issue; or

(d) the purpose for which the warrant was issued, no longer exists,

whichever may occur first.

A warrant may be executed only by day unless the person issuing it authorises its execution by night at times which must be reasonable. When executing a warrant an inspector must before the commencement of the procedure:-

(a) identify himself or herself to the person in control of the place, premises or vehicle to be entered upon or entered, if that person is present, and hand to that person a copy of the warrant, or, if that person is not present, affix a copy of the warrant to a prominent spot at, on or to the place, premises or vehicle;

(b) furnish that person at his or her request with particulars regarding the inspector's authority to execute such a warrant.

Reasonable force may be used to overcome any resistance to an entry and search. In undertaking any search for and inspection and seizure of suspected counterfeit goods an inspector may be assisted by the complainant (if any) or any other knowledgeable person in identifying goods as suspected counterfeit goods.

Where an inspector acts without a warrant any steps taken by him will cease to have any legal effect unless the complainant or the inspector applies to the court for confirmation of the action taken within ten days and the court grants such application.

Powers of Inspector

An inspector may carry out search and seizure raids on suspected counterfeiters and operations concerned with counterfeit goods where he has reasonable grounds to suspect that the offence of dealing in counterfeit goods has been, or is being, committed, or is likely to be committed, or to believe that an act of dealing in counterfeit goods has taken, or is taking, place, or is likely to take place. He can make his decision on the grounds of a complaint laid with him or on the strength of any other information at his disposal.

An inspector acting on the authority of and in accordance with a warrant issued may at any reasonable time enter any place, premises or vehicle in order to inspect any relevant goods and to seize any suspected counterfeit goods and may seize and detain such goods and, where applicable, remove them for the purposes of detention. He may also collect or obtain evidence relating to the suspected counterfeit goods or an act of dealing in such goods. He may conduct whatever search (including of a person) may be necessary at the place, premises or vehicle in question in order to give effect to his aforementioned powers. In addition he is entitled to take whatever steps may be reasonably necessary in order to terminate the relevant act of dealing in counterfeit goods.

The inspector must as soon as possible remove the goods, if transportable, to a counterfeit goods depot for safe storage, or if not capable of being removed or transported, declare the goods to have been seized and secure them at the place where they were found, whereafter that place is deemed to be a counterfeit goods depot

Any person suffering injury or prejudice caused by the wrongful seizure of goods alleged to be counterfeit goods, or by any action taken by an inspector in effecting the seizure, is entitled to claim compensation against the complainant

The disposal of seized goods

Where suspected counterfeit goods have been seized by an inspector, the complainant if he wishes to lay a criminal charge against the suspect for having committed an offence or request that a criminal investigation into the matter be undertaken, must do so not later than three days after the date he has been notified of his right to lay a criminal charge. If a criminal charge is not laid within three days the seized goods must be released to the suspect.

Where a criminal charge is laid, the State must within 10 days after the date of the above notice given inform the suspect of its intention to institute criminal prosecution against him.

The complainant must also within 10 days after the above notice inform the suspect, by further written notice, of the person's intention to institute against the suspect civil proceedings founded on an act of dealing in counterfeit goods on the part of the suspect. The criminal or civil proceedings must thereafter be instituted within 10 days, failing which the goods seized must be returned to the suspect.

Where counterfeit goods bearing an infringing trade are ordered by the court to be delivered-up to any person, those goods may not be released into the channels of commerce after merely removing the infringing mark, or if imported, may not be exported in an unaltered state, unless the court on good cause shown has ordered otherwise.

A court convicting a person of an offence of dealing in counterfeit goods may order the destruction of counterfeit goods and their packaging and, where applicable, any tools used by the convicted person for the manufacture, production or making of those or any other counterfeit goods, or for the unlawful application to goods of the subject matter of any intellectual property right. Alternatively, the court may declare the counterfeit goods in question to be forfeited to the State.

Any person who submits any counterfeit goods purchased by him to an inspector, together with proof of the price that was paid for those goods, will be entitled to receive payment of a sum of money equivalent to three times the amount of that price, provided he co-operates fully in the prosecution of the seller and upon the seller's conviction for the offence of dealing in those particular counterfeit goods or the making of an order that such goods be delivered up to the owner of the intellectual property right or to a complainant deriving title from him.

This article has been prepared to provide general information. This does not constitute legal advice and as such cannot be relied upon. Always seek professional advice for your particular case.

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