Copyright Law: A Weapon Against Parallel Importation; (Frank & Hirsch (Pty) Ltd v A Roopanand Brothers (Pty) Ltd 1993 (4) SA 279 (A).
This appeal related to an attempt to prevent "parallel importation" by relying on the law of copyright. The Appellant sought the reversal of the decision of Booysen J in the Durban & Coast Local Division (see Frank & Hirsch (Pty) Ltd v A Roopanand Brothers (Pty) Ltd 1991 (3) SA 240 (D & CLD)).
The Appellant is the exclusive distributor of TDK blank audio tapes in South Africa. TDK tapes are amongst the most famous and popular blank tapes in the world and the importation and distribution thereof is a major aspect of Appellant´s business. Appellant spends considerable sums of money each year on advertising and otherwise promoting the sale of TDK tapes and maintaining the pre-eminence of these goods in the South African market.
The Respondent obtained supplies of TDK tapes in Singapore from a distributor who, in turn, obtained them from the authorised dealer appointed by TDK Electronics in Singapore. It appears as if it would be unlawful in terms of Japanese law for TDK Electronics to impose contractual restrictions on the re-sale of TDK tapes supplied by it to its distributors with the result that the re-sale of the goods in Singapore was without restriction.
The Appellant limited its claim specifically to the new getup of the TDK D-60 audio cassette tape and copyright infringement in terms of Section 23(2) of the Copyright Act ("secondary" or "indirect" infringement).
The court found that the copyright was validly assigned and that such copyright still subsists. The effect of a valid assignment is to vest in the assignee ownership of the copyright in the work or works covered by the assignment and entitles the assignee to sue for infringement of such copyright. To complete its cause of action in terms of Section 23(2) the Appellant had to establish also:
that the Respondent either
(i) imported into South Africa the tapes in issue (for a purpose other than for its private or domestic use); or
(ii) sold, let or by way of trade offered or exposed for sale or hire in South Africa the tapes in issue; or
(iii) distributed in South Africa the tapes in issue for the purposes of trade or for any other purpose to such an extent that the owner of the copyright in question is prejudicially affected;
that to the Respondent´s knowledge the making of the tapes in issue either:
(i) constituted an infringement of Appellant´s copyright; or
(ii) would have constituted such an infringement if the article had been made in South Africa;
that the Respondent had no licence from the owner of the copyright to do what he did.
it was not disputed that the evidence of the activities of the Respondent in importing and marketing the tapes in issue established one or more of the requirements of a) above. As to b), Appellant relied on alternative (ii).
Applying the law to the facts the court found that the cardinal questions to be asked were:
If TDK Electronics hypothetically had made the tapes in issue in South Africa, would this have constituted an infringement of Appellant´s copyright in the getup of the tapes? If so,
Whether Respondent knew this? And
Whether Respondent acted without the licence of the owner? The answer to the first question depended on whether the getup of the tapes in issue contained subject matter enjoying copyright protection. The court analyzed the getup and concluded that the whole of the wrapper constituted "artistic work" within the meaning of the statutory definition. Although it was reaffirmed that artistic quality is not a necessary requirement Corbett CJ made the observation that he was nevertheless satisfied that considerable design and draughting skill had gone into the production of the wrapper.
In the light of the decision in respect of artistic work it was not necessary for the court to consider the claim that the wrapper included literary work although the comment was made in passing that this claim was more debatable. The court accordingly found that the getup of the tapes in issue did contain subject matter for copyright protection and, as the assignment of the South African copyright vested in the Appellant exclusively all the rights comprehended by the South African Copyright Act and divested TDK Electronics thereof, it followed that hypothetically, the making in South Africa of the getup of the tapes in issue by TDK Electronics would have constituted an infringement of the Appellant´s copyright. In dealing with the second question the court considered earlier cases where knowledge was held to mean notice of facts such as would suggest to a reasonable man that a breach of copyright law was being committed. The court found that the cease and desist letters addressed to the Respondent had placed before the Respondent sufficient facts from which it could and should have appreciated that its commercial activities relating to the tapes in issue constituted infringement of the Appellant´s copyright. It stated, furthermore, that it would have been no answer for the Respondent to say that although it knew all the relevant facts it nevertheless believed, as a matter of law, that it was committing no infringement. In answer to the third question (lack of licence) the Respondent argued that TDK Electronics labelled and packaged the tapes without any restriction on resale and the subsequent lack of restriction on resale to, inter alia, a South African importer by the person first purchasing them, occurred to the knowledge of and without action by the Appellant against TDK Electronics. It was argued that this constituted an unconditional consent by conduct on the part of the Appellant to (and thereby an implied licence for) the sale of the goods in that form, so packaged and labelled and that this consent extended to resales. The court found no substance in this argument and stated, moreover, that the Appellant made it abundantly clear to the Respondent in its letters of 16 July 1987 and 6 October 1988 that the continued importation and the sale of the tapes in issue would infringe its copyright. This would have dispelled any notion of an implied licence.
In the circumstances the appeal was allowed and the Respondent was interdicted from infringing the Appellant´s copyright in the getup (consisting of the cellophane wrapper and the first insert of TDK´s 60 audio cassette tapes) by importing and/or selling the tapes in question. The Respondent was also ordered to deliver up to the Appellant for destruction all copies of the subject works and to pay costs. The interdict granted by Corbett CJ was only against the Respondent despite the fact that the Appellant´s notice of motion and prayers for an interdict were directed against "Respondent, its servants and agents". The court recognised that orders of this nature are granted but after considering various authorities concluded that there is no established tradition regarding the form of such orders. Corbett CJ stated that insofar as an order refers to "servants" it seems to be redundant, particularly in the case of a limited liability company which perforce acts to a great extent through its servants. The unqualified reference to "agents" was said to be anomalous in that such agents are not before the court and consequently the order would not be binding on them. In the circumstances the court discarded what was seen to be a misleading and ineffectual formula and simply granted the order against the Respondent.
The important principle established was that the court was prepared to enforce an assignment of copyright which was aimed at preventing the parallel importation of copyrighted works made by the original copyright owner. This decision can have a far reaching effect in relation to all products where the packaging is an integral part of the product and such packaging is protected by copyright law (as an artistic and/or literary work). Thus, for example, a software publisher may assign the copyright in his computer software, underlying manuals and packaging to a local distributor in order to give the distributor the means to enforce his exclusive rights in South Africa by being in a position to prevent the importation and/or trading in products manufactured for other markets. Where the software publisher is reluctant to assign rights in the computer software in South Africa to a third party (as may well be the case and practice) a similar result could be obtained if the copyright in the packaging and/or manuals were to be assigned. While the local distributor would not be able to enforce copyright in the underlying computer software, he would be able to prevent any use of the packaging and/or manuals thereby forcing the grey marketeer to change the goods to such a degree that members of the public would be alerted to the fact that the product in question is not sold with the blessing of the local distributor.
SPOOR & FISHER