Supreme Court Rules Authentic Designer Goods Can’t Be Called Counterfeit: will the real Enrico Coveri please stand up?

South Africa’s highest court has delivered a landmark ruling that authentic designer goods cannot be seized as counterfeits, even when imported without permission from local trade mark holders.

The Supreme Court of Appeal dismissed an appeal by Yossi Barel, who holds the South African trade mark rights to the ENRICO COVERI brand, after he attempted to have authentic Italian-made designer footwear seized as counterfeit goods.

The case centred on Popular Trading CC, which imported and distributed authentic ENRICO COVERI footwear manufactured in Italy by the original Enrico Coveri company. Despite the shoes being authentic products from the international brand owner, Barel obtained a search warrant under the Counterfeit Goods Act, leading to their seizure.

Court Split on Key Issue

The five-judge panel was divided 3-2 on the crucial question of what constitutes “counterfeiting” under South African law.

The majority, led by Acting Judge of Appeal Bloem, ruled that counterfeiting requires more than just trade mark infringement. “There must be a deliberate and fraudulent intention to confuse or deceive,” the court emphasised, noting that the law uses the word “calculated” when defining counterfeit goods.

Since Popular Trading’s footwear was manufactured by the Italian company founded by the late fashion designer, Enrico Coveri, and there was no evidence of intent to deceive consumers, the majority found the goods could not be considered counterfeit.

“The goods were authentic and of legitimate origin,” the judgment stated. “Mere confusion or similarity is insufficient – there must be a calculated plan to deceive.”

Fashion Industry Testimony Proves Crucial

A key factor in the court’s decision was testimony from Enrico Coveri’s sister, who explained the paramount importance of authenticity in the fashion world. In her affidavit, she stated that by distributing footwear under the ENRICO COVERI name, Barel “undermines and contradicts the essence of [her] brother’s name” and what it represents in the fashion industry.

Crucially, she testified that “authenticity is prized above all else” in the fashion industry. Despite responding to other allegations in her affidavit, Barel elected not to contest these specific claims about authenticity and its significance in fashion. This silence may have proved costly, as the court appeared to give considerable weight to the uncontested evidence about the industry’s emphasis on authentic goods.

Minority Wanted Stricter Approach

However, two judges disagreed, finding that any unauthorised use of a registered trade mark constitutes counterfeiting, regardless of whether the goods are authentic.

The minority judgment focused on Barel’s rights as the registered South African trade mark owner, finding that Popular Trading’s continued importation after being notified of the local registration amounted to deliberate infringement.

The Question of Intent

The Counterfeit Goods Act is not a beacon of clarity in the context of legislative drafting. Its interpretation requires a sensible, intelligible and constructive approach. Trade mark infringement involves a purely objective, technical assessment with only civil consequences. Counterfeiting, by contrast, is a crime. Plainly, therefore, it must involve intent. The minority found that Popular Trading acted with intent simply because it failed to comply with Mr Barel’s letter of demand. The majority’s view, which was aligned with the facts, was that Popular trading chose not to comply because it did not agree with the letter. With respect, the minority approach, if adopted, would lead to the anomalous situation that anyone who is placed on terms is automatically guilty. That sort of bizarre outcome would presumably not have been in the minds of those who drafted the statute.

Background to the Dispute

The ENRICO COVERI brand originated in Italy as a fashion house. While Barel registered the trade mark in South Africa, the original Italian company and its licensees continued manufacturing products under the same name.

The High Court initially ruled in favour of Popular Trading, setting aside the search warrant and declaring the goods were not counterfeit. Barel then appealed to the Supreme Court of Appeal, but this appeal has now been dismissed.

The case highlights ongoing tensions between local trade mark rights and the global nature of fashion brands, particularly where different entities may hold rights to the same trade mark in different countries.

Mr Barel’s Enrico Coveri Instagram page, enrico_coveri_sa, bears a logo that appears to be a replica of the Italian moniker and is titled “The only Official ENRICO COVERI in South Africa”. The court did not analyse the meaning of “official”, but we know now that the court was more concerned with identifying which goods were “authentic”.