ALLEGED "COUNTERFEIT" GOODS: STERLING AUTO PARTS CC v. THE STATE AND BMW AND DAIMLER CHRYSLER PDF Print E-mail
Written by Ron Wheeldon   
Wednesday, 21 December 2011 18:43

 

There is an old, old principle of the Roman-Dutch law, of English law, of United States’ law that is considered vital to justice being done. It is central to equality before the law which is central to The Rule of Law. It is also very simple. It has names in many languages but, in simple English, it is “listen to both sides of the story before making a decision”.

I do not know of anyone who has not experienced why that is so. It is key to the plot of many movies and plays – mainly tragedies. If the story is seen only from one perspective, the door is thrown wide to misunderstanding, misconception, deceit. “He was clearly guilty, your worship, he was running from the scene”. Well, was he guilty of something, or out for an evening run? Or running to assist someone else, or because he was late? There can be all sorts of reasons why a person may be running, the simple fact of the running itself is conclusive of nothing.

In the motor parts industry there are three basic sorts of part for a vehicle, namely “OE” (original equipment – something made by or for the manufacturer of the car which bears the manufacturer’s trade mark), “after market” (something made to fit a specific vehicle that is not made by or for the original manufacturer, nor represented to be so made, which gives the consumer a choice) and “counterfeit” (something made to look like an OE part which is not and which is intended to dupe the consumer). Internationally it is accepted that after market parts are perfectly legitimate and part of normal competition. In South Africa, s. 34(2)(c) of the Trade Marks Act specifically makes it clear that the trade marks of manufacturers may be used on after market goods where the use is reasonable to indicate the purpose of the goods. It must also be fair. This is a provision also of TRIPS (the agreement on the trade related aspects of Intellectual Property) to which SA is a signatory. Capitalism is hostile to monopolies because, in the absence of competition, there is no incentive to efficiency and no ceiling on what may be charged for a product. It is axiomatic that, in a free society, consumers have a choice of what to buy and the right to be honestly informed of the pros and cons of the choices available. It is equally plain that it is not healthy to allow consumers to be deceived by unscrupulous traders into buying something which is not what it seems to be.

Counterfeiting has become a major global problem, there is no question about that and it is estimated as being a US$60 billion industry. Fake “Rolex” watches, fake “Calvin Klein”, fake “Levis”, faux “Dior”, fake almost any well – known fashion label goods abound in the streets of major cities and are even sold openly in countries where enforcement is weak, Thailand being a popular example. It goes much further than fashion, though. Cases have been reported of fake pharmaceuticals, aircraft parts (the chunk of metal that caused the Concorde crash in France was reputedly from a fake part), fake car parts. I have seen fake “Bosch” coils for car ignition systems which copy the colours, the numbers, the codes of the original, but in boxes of clearly inferior cardboard (they didn’t work very well either, unlike the original). Counterfeiting is linked to organised crime and draconian measures are necessary to combat it, because, very often, a duly summonsed street trader, who may well also be an illegal alien of no fixed abode, will not arrive in court on the specified day! He – and the fake goods – will simply vanish to reappear somewhere else. Shadowy importers of counterfeit goods prove impossible to trace, with address details and identities proving to be false. This sort of thing renders normal proceedings before a court all but impossible and the Counterfeit Goods Act was passed to provide for up front seizure of goods that appear to be counterfeit. It is a draconian piece of legislation, there can be little doubt of that. Of course, if it is used against you unfairly, you can always appeal to the High Court to direct that your goods be released, so the rights of ordinary citizens are protected. Yeah, right! The rights of fabulously WEALTHY ordinary citizens MIGHT be protected – ordinary citizens have NO RIGHTS AT ALL.

Hard words? I would like to put it much more strongly than that, but I’m a lawyer so I need to be controlled about it. Sterling is a case in point. The close corporation imported a container of goods, after market parts for cars. These goods were detained by customs, because they thought the goods might be counterfeit because they indicated which vehicles they might fit. They extracted a sample each of parts which claimed to be suitable for BMW and Mercedes-Benz, and sent these to the parties concerned. Affidavits were duly returned to customs stating that the goods are “counterfeit” because they look nothing like the originals! That’s like saying they’re counterfeit because they are not counterfeit. In fact, they are legitimate after market parts. So, how to get them released?

It is quite true, as much was made of, that lawyers acting for both BMW and Daimler Chrysler had written to me, telling me what Sterling must do before they would authorise customs to release the rest of the container (agree to destroy the goods, undertake to import no more of them). It is important to remember that neither company had sued Sterling; they were using the machinery of the State to hold the goods without having to incur the cost of suing! The State is meant to be there for everyone and I did not and (with due deference to the full bench of the TPD) still do not believe it is lawful for an organ of State to give one person an undue advantage over another. I therefore advised Sterling to sue Customs as a matter of urgency. They instructed me to bring the application, which I did, and the court found that customs had been acting illegally. They were ordered to release the goods. I did not bring the application against BMW or Daimler-Chrysler because the complaint was not against them; it was Customs that had seized the goods. The High Court in the Cape found, in the same circumstances, that the person who had instigated the action by the authorities did not have a legal interest in the outcome, so at least one other judge agreed with Judge Patel. The full bench of the TPD and the SCA, it seems, disagree and, if anyone believes their goods have been unjustly seized under the Counterfeit Goods Act, they must sue not only the organ of state that took the goods, but also each and every complainant. I would have used an exclamation mark at the end of that sentence, but it may be construed as disrespectful.

What does this all mean – in practical terms? High Court litigation is extremely expensive. Indeed, it is beyond the means of the average individual citizen. In an Intellectual Property (“IP”) case it is customary for a firm acting for a motor manufacturer to field a team of lawyers, including a Senior Counsel, a Junior Counsel (advocates), a senior attorney and his or her assistants. If the State is involved, it will likewise field the State Attorney and at least one advocate. A senior counsel might charge as much as R50 000 a day in court, his junior two thirds of that, many would charge quite a lot less, but those with deep pockets are not noted for frugality. So the stakes go up substantially for each complainant one has to cite by, say, R45 000 a day, each. Each will naturally want to have its say, so the affidavit of the person who believes himself wronged will attract an answer not only from the state, but from each complainant too. He then needs to pay his own legal team to go through all those papers (they can quickly grow to a thousand pages or more) and pages equal time, and time is money. All this time, of course, you have already been deprived of your goods on the mere say so of someone not qualified to determine whether they are counterfeit or not, without you getting a chance to say anything in your defence.

So, say you felt strongly enough about it to take a chance against stakes that would make a sensation in a casino, you had the money to get your own legal team, and you won. The court saw it your way and ordered the State to give you your goods and pay your costs.

Wonderful, no? No.

The State then, aided by the complainants, does not accept the judgement, and seeks leave to appeal. The court says that no other court could reasonably come to a different conclusion, and refuses leave. That’s STILL not good enough for the State; it petitions the SCA in Bloemfontein for special leave, again assisted by the complainants. The SCA grants leave, but does not hear the matter itself, it refers it back to the TPD, a full bench of three judges. The stakes just got higher still, but you cannot let go, because then you lose by default, so you must continue. Then the TPD finds against you, hands down, and you must pay the costs of the State and of each complainant, and of course your own, and you still do not have your R65 000 worth of goods. Neither the Constitutional Court nor the SCA want to assist you and you are toast. And the newspapers go on about “pirates” though you, passionately, are NOT a counterfeiter. In the Sterling case, this is essentially what happened. It does not mean – even at this stage – that the goods are counterfeit; it means simply that Customs did not act illegally even though Sterling, I and the first court of the TPD thought they did. It will take ANOTHER case to determine whether they were actually “counterfeit” – or not. Even if the TPD full bench had agreed with its single judge, the cost to Sterling would have far exceeded the value of the goods.

A statutory preservation of rights guaranteed by the Bill of Rights in the Constitution of South Africa is absolutely meaningless if there is no access to it. If you reading this did not feel an icy hand clutch at your heart, you do not understand the situation. If Customs take away the contents of your suitcase when you return from an overseas trip on the allegation that they are counterfeit, it does you no good to assert that they are not; just to be heard at all you must spend the price of a new BMW car. Makes your “right” not to be arbitrarily deprived of your property ring a little hollow, doesn’t it?

In my opinion, it is an abuse of the Counterfeit Goods Act and the legislature and/or the Constitutional Court need – urgently – to put an end to it. If you are a legitimate trader with premises, someone who can reasonably be expected to remain within the law and to come to court when summoned, there is absolutely no justification for any official to take away your goods until you have been heard, weighed, and found lacking under a balanced procedure. Only then, when it has been positively established that the goods are “counterfeit”, is it fair that you lose them and pay whatever penalty may be your due.

Ron Wheel don
14th February, 2006

 

Last Updated on Wednesday, 21 December 2011 19:31