The law is a living instrument, giving meaning and momentum not just by the words of the legislature, but by how those words are tested and interpreted in our courts. The Counterfeit Goods Act 37 of 1997 (CGA) has been on the statute books for 28 years. Despite its importance, there have been relatively few cases that have tested the CGA’s provisions, leaving some uncertainty around its application.
That changed recently when the Supreme Court of Appeal (the SCA) breathed new life into the CGA with its recent judgment in Yossi Barel v Popular Trading CC. This landmark case has given the courts an opportunity to clarify the distinction between trade mark infringement and counterfeiting and its implications will be of importance to brand attorneys, brand owners, law enforcement and importers alike who need to understand how the law treats counterfeit goods differently from other intellectual property violations.
At the heart of this case is the key issue surrounding the interpretation of the CGA, particularly the question of what constitutes “counterfeiting” and the requisite intent, contrasting it with mere trade mark infringement – were the goods in question truly “counterfeit” as defined in the CGA or were they just involved in a regular trade mark dispute?
As with any matter before Court, it is necessary to set the scene by mentioning the facts, noting that there may well be some context in the actual court record that would not have found its way into the judgement being considered. The ENRICO COVERI trade mark and brand was founded in the 1980s by late Italian fashion designer of the same name, Enrico Coveri, whose products were sold globally. The ENRICO COVERI trade mark was registered in South Africa in the 1980s but was removed from the register due to non-payment of renewal fees.
On the facts, this removal allowed Yossi Barel (Mr Barel), in 2005, to apply for and have the trade mark registered in his name. Mr Barel claimed that he did this as the brand aligned with his products and, furthermore, that he believed that the original ENRICO COVERI brand had ceased to exist. Notwithstanding this, the original Italian company and its licensees continued manufacturing products under the same name.
Enter, Popular Trading CC (Popular Trading). Popular Trading initially imported non-authentic ENRICO COVERI-branded footwear from China but later began sourcing authentic ENRICO COVERI footwear manufactured by the original Italian company founded by the late fashion designer. Mr Barel, the appellant, obtained a search warrant, as the owner of the ENRICO COVERI trade mark, to seize the ENRICO COVERI-branded goods imported from Italy from Popular Trading on the basis that it constituted counterfeit goods under the CGA. The warrant was, in terms of the CGA, granted and subsequently executed at premises belonging to Popular Trading.
Popular Trading disputed the claim, arguing that the goods were authentic ENRICO COVERI footwear, manufactured by the original Italian manufacturer and imported into South Africa and, while the goods bore the registered trade mark owned by Mr Barel in South Africa, there was no evidence that they were imitations or meant to trick consumers into thinking they were something that they were in fact not and, as such, that an act of “counterfeiting” as per the CGA’s definition was not present.
The court a quo agreed with Popular Trading and set aside the warrant concluding that the seized goods, though bearing the registered trade marks belonging to Mr Barel, were authentic products sourced from the original Italian manufacturer and lacked intent. The Court placed considerable emphasis on the absence of intent to deceive – a critical element in establishing counterfeiting under the CGA. Unlike trade mark infringement, which is primarily a civil wrong, counterfeiting as defined in the CGA is a criminal offence and requires a higher threshold of proof. There must be a deliberate and dishonest purpose behind the use of the mark. In this case, Popular Trading did not attempt to pass off the goods as coming from Mr Barel or as unauthorised imitations. They were, by all accounts, genuine goods made by the originator of the brand. Thus, while the goods may have infringed Mr Barel’s registered rights, the requisite fraudulent or deceptive intent that would elevate the conduct to criminal counterfeiting was missing. In an attempt to have the decision overturned, Mr Barel appealed to the SCA which did not yield a different verdict. The majority upheld the court a quo’s finding that the goods were not counterfeit. The court found that the goods were not counterfeit because they were produced by the original manufacturer, there was no proof of intent to deceive consumers or to pass the goods off as something that they were not and that for goods to be counterfeit something more – like deliberate fraud – is needed.
Counterfeiting involves more than just unauthorised use of a trade mark. It must be proven that the use of the trade mark is intended to mislead consumers into thinking that the goods are, so to say, the real thing. In other words, for it to be considered counterfeiting, there must be a dishonest purpose – some kind of fraud or deception. Trade mark infringement, by contrast, is a civil matter; it does not require proof of fraudulent intent.
This raises some difficulties. A key challenge from the decision is the high bar it sets for proving intent in counterfeiting cases—something that is often difficult, especially when genuine goods enter unintended markets. This blurs the line between counterfeits and parallel imports. As a result, rights holders may shy away from using the CGA and opt instead for slower civil action, weakening enforcement. Law enforcement and customs officials may also hesitate to act without clear evidence of deception.
Moreover, law enforcement authorities and customs officials may face uncertainty in deciding when to act under the CGA. Without clear signs of intent, enforcement officials may be reluctant to seize goods out of fear that such action could later be overturned by the courts.
There is also a risk that the decision could invite manipulation of trade mark registrations as a means of supressing parallel imports under the guise of anti-counterfeiting, As seen in this case, a party who registers a lapsed mark may attempt to criminalise the importation of legitimate goods made by the original brand owner, raising broader questions around trade policy, market access and consumer choice.
The case reinforces the position that tends to get lost in the murky waters of trade mark infringement and counterfeiting. –Where trade mark infringement can be unintentional and is generally dealt with through civil suits, it is not the same for counterfeiting. The latter is treated as a criminal offence and requires clear evidence of intent to deceive. The SCA warned against using counterfeiting in trade mark disputes, especially when there is no fraud involved, it is not a “catch all” for trade mark disputes. As the law continues to evolve, this judgment will undoubtedly have a lasting impact on the protection and enforcement of intellectual property rights in South Africa.
