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Last Updated: 8 June 2005
THE SUPREME COURT OF APPEAL
OF SOUTH
AFRICA
Reportable
Case No 543/03
In the matter between:
A M MOOLLA GROUP LIMITED
First Appellant
A M MOOLLA CLOTHING (PTY) LTD
Second Appellant
SALT OF THE EARTH CREATIONS (PTY) LTD
Third Appellant
KINGSGATE CLOTHING MANUFACTURERS
(PTY)
LTD Fourth Appellant
MAJESTIC CLOTHING
MANUFACTURING
(PTY) LTD Fifth
Appellant
STAR SHIRT AND CLOTHING (PTY) LTD
Sixth Appellant
RICKEMP (PTY) LTD Seventh
Appellant
and
THE GAP, INC First
Respondent
GAP (APPAREL) INC Second Respondent
GAP (ITM)
INC Third Respondent
GAP INTERNATIONAL SOURCING
(PTY) LTD Fourth Respondent
Coram: HARMS, STREICHER, FARLAM, CLOETE JJA and PONNAN AJA
Heard: 23 NOVEMBER 2004
Delivered: 30 NOVEMBER 2004
Subject: Counterfeit Goods Act 37 of 1997 – whether goods in transit or transhipped through South Africa subject to provisions of Act
J U D G M E N T
HARMS JA/
HARMS JA
[1] This appeal concerns the interpretation of some provisions of
the Counterfeit Goods Act 37 of 1997 (‘the Act’). The
factual
background is simple. The trade mark GAP is registered in 110 countries in the
name of one or more of the respondents (a
group of affiliated companies to whom
I shall refer in the singular since their individual corporate identities are
not relevant).
In South Africa the respondent holds registrations for the mark
in classes 3 and 30 while the marks THE GAP, THE GAP device and GAP
device are
registered in the name of the third appellant in class 25 in respect of
clothing. In related litigation the TPD has expunged
the third appellant’s
trade marks and simultaneously dismissed an application for expunging the
respondent’s marks. That
judgment is presently on appeal and for present
purposes it will be assumed that the registrations in the name of the third
appellant
are valid.
[2] The respondent sources clothing carrying the
GAP trade mark in Lesotho, Swaziland, Zimbabwe, Mauritius and Madagascar
(countries
where it holds registrations for the mark) destined for marketing in
other countries where it also holds registrations. In other
words, the source
and destination of the goods are countries where the goods are genuine and not
counterfeit (ie fraudulent imitations).
The goods from Mauritius and Madagascar
have to be transhipped via South African harbours and goods from the landlocked
countries
mentioned have to be transported through South Africa to a harbour.
Relying on the third appellant’s registered trade marks,
the appellants (a
group of related companies) have used, attempted to use and threatened to use
the provisions of the Act to have
the goods in transit impounded by the SA
Police Services or the Commissioner of Customs and Excise. To prevent further
interference
with these ‘transhipments’, the respondent sought and
obtained an order from the Durban High Court (Magid J) declaring
that it is not
unlawful under the Act (or the Trade Marks Act 194 of 1993) for the respondent
to export through or to import through
(ie, tranship through) the Republic goods
bearing the GAP marks in circumstances where such marks are placed on the goods
outside
of the Republic and where such goods are not for sale in the Republic.
[3] The appellants allege that transhipment (by which I include the
transportation of goods in transit) is hit by the provisions of
s 2(1)(f) of the
Act which provide that goods that are ‘counterfeit goods’ may not 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.[1] (The
exception is not applicable and will be ignored in the discussion that follows.)
A person who performs or engages in such an
act is guilty of an offence if
certain requirements are present.[2]
The respondent, on the other hand, submits that its actions are not hit by these
provisions.
[4] Before entering into a detailed analysis of the relevant
provisions of the Act, it is necessary to say something about its background
and
genesis. Counterfeiting of trade marks has, historically and imperfectly, been
dealt with by different Merchandise Marks
Acts.[3] Piracy, which concerns
copyright infringement committed knowingly, was criminalised by Copyright Acts
and still is.[4] International concern
about counterfeiting and piracy led to certain provisions in the TRIPs
agreement,[5] the preamble of which
speaks of the desire of member states –
‘to reduce distortions
and impediments to international trade, and taking into account the need to
promote effective and adequate
protection of intellectual property rights, and
to ensure that measures and procedures to enforce intellectual property rights
do
not themselves become barriers to legitimate trade.’
The agreement
requires of member states to provide certain minimum measures for the protection
of intellectual property rights but
leaves it to them to grant more should they
wish to do so.[6] As far as border
measures are concerned, art 51 is of significance for present
purposes:
‘Members shall, in conformity with the provisions set out
below, adopt procedures to enable a right holder, who has valid grounds
for
suspecting that the importation of counterfeit trademark or pirated copyright
goods may take place, to lodge an application in writing with competent
authorities, administrative or judicial, for the suspension by
the customs
authorities of the release into free circulation of such goods. . . . Members
may also provide for corresponding procedures
concerning the suspension by the
customs authorities of the release of infringing goods destined for exportation
from their territories.’
(My underlining.)
[5] In footnote 14,
the terms ‘counterfeit trademark goods’ and ‘pirated copyright
goods’ are defined in these
terms:
‘For the purposes of this Agreement:
(a) "counterfeit trademark goods" shall mean any goods, including packaging, bearing without authorization a trademark which is identical to the trademark validly registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the rights of the owner of the trademark in question under the law of the country of importation;
(b) "pirated copyright goods" shall mean any goods which are copies made without the consent of the right holder or person duly authorized by the right holder in the country of production and which are made directly or indirectly from an article where the making of that copy would have constituted an infringement of a copyright or a related right under the law of the country of importation.’
[6] As indicated, the Act
prohibits certain acts in relation to ‘counterfeit goods’ but,
although it to some extent follows
the wording of footnote 14, it does not
distinguish clearly between piracy and counterfeiting in the technical sense.
Instead, both
are referred to as counterfeiting. In the definition of
‘counterfeiting’ the Act has also changed the wording of the
footnote in such a manner as to make the definition unintelligible. The
definition of ‘counterfeiting’, to the extent
that it deals with the
counterfeiting of trade marks, reads as follows:
‘Counterfeiting . . .
means, without the authority of the owner of any intellectual property right
[meaning, for present purposes,
the rights in respect of a trade mark conferred
by the Trade Marks Act] subsisting in the Republic in respect of protected goods
[meaning, if one paraphrases, goods bearing a trade mark registered under the
Trade Marks Act], 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 . . ..
However, the relevant act of counterfeiting must also have
infringed the intellectual property right in question.’
[7] There
are serious shortcomings in the definition. First, the definition tends to
equate trade mark infringement with counterfeiting,
something contrary to TRIPs
and something completely
unnecessary.[7] Counterfeiting, as
mentioned, is a fraudulent imitation. The use of the term
‘calculated’ is especially confusing in
this context because it has
a special meaning in trademark law, meaning
‘likely’.[8] Why a
developing country such as ours should give greater trademark protection via
criminal sanctions than, for instance, the European
Community, is not readily
apparent. The greater problem though, which is not a matter of policy but one of
interpretation, is the
meaning of the proviso. What TRIPs did was to define
counterfeit trademark goods (I paraphrase) as goods with marks identical to
registered trade marks and which cannot be distinguished from the original and
‘thereby’ infringe a trade mark. The definition
in the Act, on the
other hand, by means of the proviso, does not draw a conclusion of infringement
but adds an additional requirement
of infringement (by the use of
‘however’ and ‘also’). To explain by way of an example:
the Trade Marks Act
(s 34(10)) requires, for infringement, use in the course of
trade, obviously in this country since trade marks are territorial. Must
that,
too, be established in addition to the acts proscribed in s 2(1) of the Act
under consideration? If it must, it would mean
that transhipment would not
amount to a prohibited act because the goods would then not be the result of
‘counterfeiting’.
On the other hand, why list the proscribed acts in
s 2(1), many of which duplicate the requirement of ‘use in the course of
trade’? What then is the sense of the definition in covering goods
manufactured ‘elsewhere’ (ie not in this country)?
The problems
accumulate if one attempts to harmonise the definition with the infringement
provisions of s 23 of the Copyright Act.
[8] In the light of the
conclusion I have reached it is not necessary to try to solve these problems.
Reverting then to s 2(1)(f),
it may be useful to quote the salient wording
again:
‘goods that are counterfeit goods, may not be imported into or
through or exported from or through the Republic . . .’.
For purposes
of the present debate it will be assumed that should the respondent, for
instance, import GAP clothing into this country,
it would amount to a
contravention of the provision. The first question is whether
‘transhipment’ is included in the
words ‘imported into’
the Republic. Transhipment (also spelt transshipment) is a concept well known to
the legislature
and in ordinary legislative language a distinction is drawn
between the two concepts.[9]
Interpreting a 1918 statutory provision requiring that a person who
‘imports’ wheat flour into the country must submit
immediately
‘after the importation’ certain returns and mix it with other flour,
our courts have held that the intention
of the legislature could not have been
to include flour in transit to another country to fall under
‘import’.[10] Magid J
relied on these judgments to conclude that the same applied in this case. This
court, too, has held that goods in transit
are not ‘imported’ into
the country for purposes of the Customs and Excise Act 91 of
1963.[11]
[9] Although TRIPs
does not require countries to provide for impounding counterfeit goods in
transit, the European Community does.
The rationale, the European Court of
Justice held, was that –
‘the external transit of non-Community
goods is not completely devoid of effect on the internal market. It is, in fact,
based
on a legal fiction. Goods placed under this procedure are subject neither
to the corresponding import duties nor to the other measures
of commercial
policy; it is as if they had not entered Community territory. In reality, they
are imported from a non-member country
and pass through one or more Member
States before being exported to another non-member country. This operation is
all the more liable
to have a direct effect on the internal market as there is a
risk that counterfeit goods placed under the external transit procedure
may be
fraudulently brought on to the Community market . .
..’[12]
[10] In a
local context there may be good reason to wish to provide for remedies to
impound counterfeit goods in transit as there
would be to impound illegal drugs
or weapons in transit. On the other hand, is there any reason to impound goods,
which are not in
the ordinary sense of the word ‘counterfeit’, that
have to be transhipped through this country from island and landlocked
countries, especially if no local rights holder is thereby affected and no
intellectual property right infringed? Counsel could not
suggest any and I
cannot conceive of any. One has to assume that this country would not wish to
interfere with the legitimate trade
of countries that, due to their particular
geographical location, are dependent for access and egress on this country. In
the light
of the preamble of TRIPs quoted above, it is not lightly to be
presumed that legislation based on it would ‘become barriers
to legitimate
trade’.
[11] The Act is intended to criminalise a particular
species of fraud. What the respondent does can by no stretch of the imagination
be considered as fraudulent. Would the Act then wish to criminalise its actions?
Since this Act is a penal statute it must be interpreted
restrictively without
doing violence to the wording.[13]
Where, as indicated, the word ‘import’ need not include
transhipment, as the cases referred to indicate, I do not believe
that the
interpretation contended for by the appellants should prevail. I am mindful of
the fact that the position is different in
the European Community and that the
respondents’ interpretation would mean that truly counterfeit goods might
be transhipped
through this country without hindrance. However, if the
legislature wishes to have our law conform to the European model it should
do so
in clear language.
[12] The appellants relied additionally on the phrase
‘be imported . . . through . . . or . . . exported through the
Republic’
in s 2(1)(f), but immediately conceded that it has no
discernable meaning. The respondent suggested that it might refer to a case
where the goods are landed in, say, Durban to be cleared by customs at City
Deep, Johannesburg; in such a case there would be a reason
to criminalise the
importation through the country en route to City Deep. Whether that is
the meaning we need not to decide. What we have to is whether the respondent
imports ‘through’
this country. It does not and, once again, if the
legislature intended otherwise it was obliged to make its intention
clear.
[13] The judge below was consequently correct in his finding and
the following order is made:
The appeal is dismissed with costs, including
the costs of two counsel.
__________________
L T C
HARMS
JUDGE OF APPEAL
AGREE:
STREICHER JA
FARLAM JA
CLOETE JA
PONNAN AJA
[1] The full text of s 2(1) reads:
‘(1) 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—
(i) for purposes of trade;
or
(ii) 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.’
[2] Section 2(2):
‘A person who performs or engages in any act or conduct prohibited by
subsection (1), will be guilty of an offence
if—
(a) at the time of
the act or conduct, the person knew or had reason to suspect that the goods to
which the act or conduct relates,
were counterfeit goods; or
(b) the person
failed to take all reasonable steps in order to avoid any act or conduct of the
nature contemplated in subsection
(1) from being performed or engaged in with
reference to the counterfeit
goods.’
[3] The Merchandise
Marks Act 12 of 1888 (C); Merchandise Marks Law 22 of 1888 (N); Merchandise
Marks Ordinance 47 of 1903 (T). These
were replaced by the Merchandise Marks Act
17 of 1941 which is, partly, still in
force.
[4] Copyright Act 98 of 1978
s 27.
[5] The GATT agreement on
Trade-Related Aspects of Intellectual Property
Rights.
[6] Art 1.1: ‘Members
shall give effect to the provisions of this Agreement. Members may, but shall
not be obliged to, implement
in their law more extensive protection than is
required by this Agreement, provided that such protection does not contravene
the
provisions of this Agreement. Members shall be free to determine the
appropriate method of implementing the provisions of this Agreement
within their
own legal system and
practice’
[7] Cf Kitchin et
al Kerley’s Law of Trade Marks and Trade Names 13 ed
p734.
[8] American Chewing
Products Corp v American Chicle Co 1948 (2) SA 736
(A).
[9] Eg Liquor Act 27 of 1989 s
136(1)(a), Explosives Act 15 of 2003 s 33(1)(h), Medicines and Related
Substances Control Act 101 of 1965
s 35(1)(xix); Drugs and Drug Trafficking Act
140 of 1992 s 1.
[10] Beckett
& Co Ltd v Union Government 1919 TPD 6 and on appeal 1921 TPD
142.
[11] Tieber v
Commissioner for Customs and Excise 1992 (4) SA 844 (A). Cf Capri Oro
(Pty) Ltd v Commissioner for Customs and Excise 2001 (4) SA 1212
(SCA).
[12] The Polo/Lauren Co
LP v PT Dwidua Langgeng Pramata International Freight Forwarders [2000] ETMR
535 (ECJ), [2000] EUE CJ 383 para
35.
[13] Steyn Uitleg van
Wette 5 ed p111-113 and cases there quoted.
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