“… the more he got away with it, the more he did it…”
Daniel Golden, investigative reporter and author of The Price of Admission
The seizures of large numbers of counterfeit goods and consignments are regularly communicated in statistics and annual reports on enforcement efforts. Despite this valiant and ongoing work by authorities to combat these criminal activities, little information is disclosed on the individuals behind the syndicates and the sanctions imposed on them, if any.
For brandholders, their main anti-counterfeiting legal strategy often involves opting for the cheapest option in seizing and destroying counterfeit goods. Where the source of these illicit goods can be traced, civil undertakings are often concluded on the basis that the goods may be destroyed. Although some settlements are accompanied by details of the sources of these counterfeit goods, the said details are rarely verified, and further action is not taken. If civil judgements are obtained on an undefended basis, cost orders are seldom pursued and the cases are considered closed upon destruction of the counterfeit items. This creates an opportunity for counterfeiters to move the basis of their operations, replenish stock and repeat their unlawful activities.
Although focusing on the volumes of counterfeit goods remains important in trying to halt this criminal activity, some cases may warrant more aggressive and targeted approaches to shift the focus to the actual sources and individuals behind the manufacturing and supply of the illicit goods. Many counterfeiting syndicates feel brazen enough to register companies that branch out into franchise enterprises, openly dealing in counterfeit goods. Proceeds of these illegal activities are channeled through bank accounts without any fear of forfeiture to the authorities.
Anti-counterfeiting practitioners have an important responsibility to consider the circumstances of each case and to inform their clients (brandholders) of all the available options under South African legislation to enforce their rights to the extent possible.
The Counterfeit Goods Act authorises both criminal and civil action relating to counterfeiting activities. Dealing in counterfeit goods carries a possible imprisonment sentence of up to three years per article upon conviction of a first offence. Repeat offenders or even the presence of a pending case will require a Suspect to be subjected to a formal bail application as required by Schedule 5 of the Criminal Procedure Act. Criminal courts of first appearance are often inundated with new cases, and anti-counterfeiting practitioners are advised to inform prosecutors and investigating officers if they are aware of previous or pending cases against a Suspect.
The Prevention of Organised Crime Act, No. 121 of 1998 (POCA) authorises the preservation and forfeiture of property (including money) if the property concerned is an instrumentality of an offence or where the said property (including money) is the proceeds of unlawful activities. Evidence collected during private investigations on behalf of brandholders or by the Police may warrant and justify POCA enforcement and, similarly to the above, brandholders’ attorneys should communicate with law enforcement and prosecutors to consider whether the above provisions are appropriate.
Selecting the appropriate civil action in combination with a criminal prosecution may just deliver the knock-out blow required to dismantle a counterfeiting operation. Electing the appropriate civil action to be filed may also play a crucial role in curbing this criminal activity, particularly if this is filed in addition to criminal charges preferred by the State. Many anti-counterfeiting practitioners have fallen into a habit of issuing civil summons against counterfeit dealers as the only civil enforcement strategy. In the short term, this may be a cost-effective approach for brandholders to ensure preservation of evidence and prevent the release of the seized counterfeit goods. However, in some cases this approach may lead to more costs and lengthy delays, as vague pleas or bare denials are entered by defendant attorneys and trial dates allocated years into the future.
In certain matters and where appropriate, preferring the Application Procedure opposed to issuing civil summons, may deliver more expedient results, particularly when these proceedings have been filed in addition to a criminal case. Responding to the facts in the founding affidavit (submitted on behalf of the brandholder) will require the respondent (alleged counterfeiter) to deliver an answering affidavit supported by documentary and other evidence to support their version. Binding themselves to a version (defence) under oath will not seem very attractive to the respondent, especially if facing additional criminal charges.
Not only can brandholders file civil proceedings against counterfeit dealers, but recent case law further suggests that third parties (even if not part of a particular counterfeiting operation) can be ordered by court to disclose the information of a counterfeit dealer and face a contempt of court sanction if they fail to comply.
Attorneys representing brandholders should be in a position to identify and inform their clients of the most appropriate options available rather than simply following the norm of a one size fits all approach. Brandholders who implement and develop multiple anti-counterfeiting strategies may very well be the biggest deterrent to counterfeiting operations in the long run.