Anti-Counterfeiting Bulletin

2002-04-01

The enforcement of anti-counterfeiting measures is a growing field of Intellectual Property Law and fast developing in South Africa and it’s neighbouring countries.

Any product and brand name can become a victim of counterfeiting. Instances of counterfeiting of a large variety of products and brand names have been encountered during the past year. Apart from the traditional counterfeiting of products such as footwear, apparel, leather goods and luggage, the scope has broadened and more and more goods and brands are being faked! The wider range of goods includes foodstuffs such as maize meal, tinned foods and edible oils, disposable razors, razor blades, lighters, cleaning detergents, motor vehicle spare parts and body parts, perfumes, cigarettes, batteries, stationery, toys, and electronic goods.

It is thus imperative to maintain an advanced level of knowledge of this field and the developments in it so as sufficiently to prepare for combating this scourge. A message must be projected that counterfeiting of brands and products will not be tolerated.

Brief Report

Enforcement of the laws against counterfeiting has been one of the principal areas of activity of the firm during the past year.

In October 2000 the Minister of Trade and Industry appointed 22 inspectors in terms of the Counterfeit Goods Act to assist in the countrywide implementation of that Act. This was a positive step. Spoor & Fisher, in conjunction with certain brand holders and other role players in the field, arranged and hosted a three day training workshop for the newly appointed inspectors in early November 2000.

Following on the success of the workshop, negotiations and talks commenced with major role players and authorities in the field with a view to holding national training workshops. During the months of April and August 2001, Spoor & Fisher, in conjunction with other attorney firms, the South African Police Service, the Department of Trade and Industry, the South African Revenue Services and various brand holders, hosted and presented national training workshops in six of the major centres of the country. The workshops stretched over a period of three days and focussed on the Counterfeit Goods Act but included introductory courses in the Trade Marks, Copyright and Merchandise Marks Acts. The workshops were successfully completed by approximately 600 government officials including prosecutors, Magistrates, State attorneys- and advocates, officials of Customs & Excise, inspectors of the Department of Trade and Industry and members of the South African Police Services (Departments Organised Crime and the Commercial Crime Units). The workshop not only educated attendees in the practical working and provisions of the Counterfeit Goods Act but created an enhanced awareness amongst law enforcement officials throughout the country of the existence of Intellectual Property laws and the need for better enforcement.

In August 2001 Spoor & Fisher presented training courses to the leaders of all the Custom teams, which courses focussed on the provisions of the Counterfeit Goods Act dealing with the powers and duties conferred upon Customs officials.

In September 2001 the Commissioner of Customs and Excise embarked on a new strategy by deploying their new Anti-Smuggling and Import teams the first ports of entry into the country. In that month Spoor & Fisher presented a one-day training seminar at Customs and Excise Head Office and explained the operation of the Counterfeit Goods Act to the newly appointed members of the Anti-Smuggling teams.

During the course of the year, counterfeiting was recognised by the South African Police Services, department Legal and Detective Services, as an integral part of Organised Crime. Following on from this at the end of October 2001 the South African Police Services held a specialised workshop as part of their training for the Organised Crime Unit legal team. Spoor & Fisher presented the training on the Counterfeit Goods Act as well as introductory lectures on the Copyright- and Trade Marks Acts to this team.

The primary objective of these workshops was to offer an opportunity to Government officials to be trained in Intellectual Property laws and the enforcement of the relevant Acts. The secondary objective was to create awareness amongst the important role players of the value of brands and to emphasise the current problem posed by counterfeiting world-wide and the negative effect thereof on revenue collection and the growth of the economy.

Statistics

Spoor & Fisher’s statistics for the year show that more than three million items of counterfeit goods were seized and destroyed between the months of July 2000 until August 2001.

It is clear that the problem of counterfeiting is not disappearing but is growing and becoming increasingly sophisticated, complex and serious in its nature. In order to address this problem and assist our clients to stay ahead of these developments in the most feasible and appropriate manner, Spoor & Fisher has decided to appoint an in-house private investigator in 2002. More details about this development are contained in paragraph 5 of this news bulletin.

The statistics for seizures show satisfactory results from an operational point of view. However, from a legal point of view, apart from several successful out of court settlements where damages and costs were recovered and three successful civil cases, the statistics on effective enforcement, particularly in regard to criminal convictions, are a cause for concern. It is our view that the best preventative measure for any crime remains obtaining criminal convictions. Achieving this objective is the primary reason for broadening our services by the appointment of an in-house expert investigator and an attorney with a criminal law and prosecution background.

Recent Changes in the Counterfeit Goods Act

The Counterfeit Goods Act, 37 of 1997, is now properly in operation by virtue of the appointment of inspectors by the Minister of Trade and Industries and the designation of sixteen Counterfeit Goods Depots countrywide, situated near all the major centres in the country. These developments took place between December 2000 and June 2001. Prior to this the Act was largely inoperative and ineffectual.

Another problem experienced with the operation of the Act, was the provisions of Section 5(4), which required that all actions taken by inspectors in terms of the Act, whether with or without a warrant, must be confirmed by an application brought before an appropriate Court within ten days. This provision was a problem both from the point of view of logistics as well as expense. This provision has been amended so as to require a confirmatory court application only when a seizures has taken place without a prior warrant being issued. This is a far more workable and practical arrangement.

A further amendment to the Act, allows a well known unregistered mark in terms of Section 35 of the Trade Marks Act, and not only a registered trade mark, to be the subject of a counterfeit claim. The amendment expands the ambit of the Counterfeit Goods Act and is to be welcomed.

We at Spoor & Fisher regard it as our mission to continually strive for better implementation of anti-counterfeiting measures.

Operational Policies and Procedures

Customs Operations

The new structure of Customs and Excise entailing the introduction of their Anti-Smuggling and Import Teams, as well as the shift of emphasis from seizures in terms of the Customs and Excise Act to seizures in terms of the Counterfeit Goods Act, have brought about new operational procedures regarding the detection of suspected counterfeit goods. It is important for future success that rights owners and their agents understand the working and the procedure under the Act.

Briefly, the detection of counterfeit goods will in the future form part of the monthly targets set for task teams. Suspected counterfeit goods will primarily be detected from waybills, importation documentation and specific and/or general complaints filed with the Commissioner. Once suspected containers or consignments of counterfeit goods have been detected, Customs inspectors will detain them in terms of the Customs and Excise Act. Representative samples will then be drawn and couriered to the authorised agents or brand holders for purposes of analysis and laying of complaints in terms of Section 15 of the Counterfeit Goods Act. A period of seven court days will be granted to agents or brand holders within which time to file a complaint relating to the counterfeit goods. Such time period is however extendable at the discretion of the inspectors based on the merits of each case. Upon filing of the complaint affidavit and indemnity, the goods will be finally seized in terms of Section 15, read with Sections 4 and 5, of the Counterfeit Goods Act. This means that within ten days from the date of the issuing of the seizure notice, (1) either a settlement must be reached with the importer or its agent bringing about the voluntary surrender of the goods, or (2) civil and/or criminal proceedings must be instituted to prevent the goods from being released to the importer.

Experience has taught us that the most practical and expeditious manner in which to pursue these cases is immediately upon detention to despatch a letter of demand to the importer and/or its agent calling for the voluntary surrender of the goods. Ninety percent of cases are successfully finalised in this manner. In the case of second and further offences a contribution for costs and / or payment of damages are also demanded. Should settlement attempts fail, there is sufficient opportunity for rights holders to decide whether or not to proceed with the matter by means of civil litigation or a criminal prosecution.

Procedures Relating To Counterfeit Goods Depots

As mentioned above, all goods seized in terms of the Counterfeit Goods Act, whether as a result of a raid conducted by the police or other inspectors or a seizure by Customs and Excise, must be stored in a declared Counterfeit Goods Depot until finalisation of the case. Unfortunately, these depots are not funded by the Government but are privately owned and operated on a self-funded basis under a State dispensation. As a result, all transport, removal, handling and storage costs are carried by the rights holder. The fee structure for these depots varies from region to region and costs can be as little as R200.00 (US $20) per 15sqm per month, but can be as much as R4, 000.00 (US $400) for 10sqm per month or even per week! In the light hereof it is desirable for the complainant to appoint the appropriate storage facility prior to the removal of the goods. Based on our practical experience we have identified the optimum storage facilities in each region in the country. Rights holders should be aware of the costs involved in counterfeiting matters in order to appreciate the urgency in finalising these matters so as to prevent unnecessary escalation of costs.

New Developments in the Year 2002

Customs On-Line Website

The Commissioner of Customs and Excise has set-up an arrangement for a registration procedure in terms of Section 15 of the Counterfeit Goods Act. This procedure allows rights holders to register their IP rights with the Commissioner with a view to his department taking action to intercept goods which infringe the relevant IP rights. The entire process will be administered through a web site on the Internet. This program will assist customs officials and border police members with the detection and identification of suspected counterfeit goods and provide them with images and details of the registered trade marks as well as the contact details of the rights holders and their attorneys in South Africa. The objective of the program is to make it possible for action to be taken timeously. The program is based on the program currently in operation in the countries of the European Union. Registrants will enjoy free access to the web site in relation to their own cases and brands. A demonstration model and application form relating to this program and procedures are available on compact disc from Spoor & Fisher upon request.

While there is considerable benefit to be derived from assisting law enforcement authorities in the identifying and detecting of counterfeit goods, speedy action is essential to secure successful cases. It is felt that the web site facility will play a vital role in creating the speed of action required by virtue of the time periods required by the Act and will ensure effective enforcement of rights holder’s rights.

A registration and administration fee is payable and a portion of it will be used to provide proper training for officials. The program is designed to be "user friendly".

The registration fee is R2, 500.00 (US $250) per rights holder. This is a once-off fee and thereafter a subscription and administration fee of R1, 400.00 (US $140) per annum is payable. We will be happy to provide further information on this program.

Appointment of Spoor & Fisher’s own In-House Investigator

The need to use investigators to conduct more intensive investigations and surveillance in the market place and to arrange and conduct effective raids has grown to such an extent that Spoor & Fisher has decided to appoint an in-house private investigator.

As mentioned earlier in this bulletin, the best measure for combating crime, including counterfeiting, is to obtain criminal convictions and to identify the principal perpetrators, whether domestic or foreign. To achieve this objective, it is necessary to utilise the services offered by private investigators. Experience has taught us that private investigating firms offering counterfeiting and trade mark investigative services are very expensive and are unsatisfactory from a variety of points of view. We have concluded that the only way in which we can provide proper investigation services to our clients is to conduct them under our own auspices. Consequently, we will henceforth offer this service.

The fee structure for this additional service is yet to be finalised but will be announced.

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