Help for brand owners in fighting counterfeiting

Counterfeiting is a world-wide problem... a US Customs and Border Protection officer opening a case of toothpaste, believed to be counterfeit. (Image: US Customs [transferred by Gobonobo/Originally uploaded by Wikiwatcher1], via Wikimedia Commons)

Counterfeiting continues to make the news. Locally, we recently had a report of a R10m bust in the Vereeniging area, during which fake soaps, shampoos, clothing and bags were seized, and seven suspects from Malawi, Mozambique and China (no surprises there), were taken into custody.

But we are increasingly getting reports of counterfeiting in product areas that go way beyond the traditional stomping ground of FMCG and luxury goods. It's now well known that there is a huge market in fake prescription drugs - these goods are sold online, and a considerable number of deaths have been attributed to their use. The problem of fake drugs has become so serious that the major pharmaceutical companies have teamed up with Interpol to establish a programme that's aimed at training law-enforcement officers to identify fake prescription drugs.

The New York Times recently reported on the fact that the recession has created a huge market for counterfeit foodstuffs, with cash-strapped consumers desperately trying to save money on the brands they know and trust. You can now apparently get counterfeit anything - wine, chocolate, olive oil. This, hot on the heels of the horsemeat scandal.

Organised crime drives it

Organised crime is, of course, very much behind the trade in counterfeit goods, and the newspaper report tells of the recent conviction of the leader of a gang which ran a huge counterfeit alcoholic drinks operation - the vodka sold by this gang was spiked with bleach in order to lighten the colour, and the product was also found to contain methanol, something which can apparently lead to blindness. Unsurprisingly, deaths from fake alcohol are not uncommon. One of the enterprising methods employed by the counterfeiters these days is to fake the packaging of well-known brands using foreign languages, which apparently leads consumers to believe that these are genuine goods that were destined for other markets, but then diverted.

So what can you, the brand owner, do when your goods are targeted by counterfeiters? You can, of course, rely on your trademark registration and sue for trademark infringement. You can also rely on your common-law rights and sue for passing off. And you may even have a case of copyright infringement - for example, if you can show that some artwork (your logo or your get-up) has been copied. But legal proceedings are slow and expensive, and evidence can be difficult to obtain.

Help is at hand

Fortunately, help is at hand. The Counterfeit Goods Act 37 of 1997 (CGA) is a piece of legislation that provides procedural mechanisms that assist brand owners in the fight against counterfeiting. The CGA has a very wide reach, because it defines counterfeit goods as those that were made without the authority of the owner of the trademark or copyright, are of the same type as the goods of the trademark or copyright owner, and are "substantially identical" copies of those goods or are "calculated to be confused" with them.

The goods do not need to be clones of the goods of the trademark or copyright owner, however. That's because the Supreme Court of Appeal examined the CGA in the famous case of Puma AG v Rampar Trading 2011 (2) SA 463 (SCA), and it said that goods are counterfeit in cases where an unauthorised party uses a registered trademark in relation to goods covered by the registration, even if the trademark owner doesn't itself make goods of that type. So, for example, if Puma has a trademark registration for the mark Puma which covers all footwear, the CGA will apply where an unauthorised party applies the mark Puma to a type of shoe that Puma has never made. What is necessary, however, is that there must have been an intention to cause confusion - intention will invariably be present in the case of counterfeiting.

You have state resources behind you

The CGA has two very important and practical consequences. The first is that it effectively gives the brand owner access to the resources of the state. That's because the brand owner can request the police and customs authorities to search premises (including airports and harbours) where it suspects that counterfeit goods are being stored or entering the country, and seize those goods so that they can be used as evidence in civil proceedings for trademark or copyright infringement. The brand owner must bring the civil proceedings within a specified period of time after the raid. This is, of course, a very valuable evidencegathering tool.

Naturally, the state does not exercise such draconian powers lightly. For starters, the authorities will act only in cases where the trademark is registered, so registration becomes more important than ever. And they will also need a great deal of information before they will act - for example, proof of the registration, a statement confirming that the use of the trademark by the other party is unauthorised, and security in respect of any damages claim that may be instituted against them for an unlawful search and seizure. As with most things, there's considerable admin involved here.

The second major consequence of the CGA is that it creates various criminal offences. This means that the state can itself charge counterfeiters with offences, even if the brand owner decides not to proceed with civil proceedings. The CGA provides that it is an offence for a person to make, possess, sell or import counterfeit goods if they knew or had reason to suspect that goods were counterfeit. The penalties are not to be sniffed at: R5,000 or three years in prison per article (so yes, per T-shirt) for first-time offenders, and R10,000 or five years per article for repeat offenders.

Source: The Times, via i-Net Bridge