Deadly counterfeiting

Business Day Law and Tax Review editor Evan Pickworth interviews anti-counterfeiting expert and trade mark attorney, Charl Potgieter, who recently joined Spoor & Fisher.

How serious is the counterfeiting problem in SA right now and what is the expected cost to the economy?

Unfortunately, in South Africa, we do not have consolidated statistics from the three agencies – SAPS, DTI and Customs responsible for fighting counterfeiting. A report released in 2013 by the South African Revenue Service (SARS) shows that it conducted more than 25 000 seizures and confiscated illegal goods valued at R2.6bn. Last year Customs officials at O. R. Tambo alone detained counterfeit clothing, footwear and other goods valued at over R206 million. As recently as December 2018, a joint operation by different enforcement agencies working together with the City of Johannesburg netted counterfeit goods with a street value of R18 million on a single day. Reporting on a global scale is more precise. According to the Global Brand Counterfeiting Report 2018 the amount of total counterfeiting globally reached USD 1.2 trillion in 2017 and is expected to reach USD 1.82 trillion next year.

Is the Anti-Counterfeiting Act having any impact in curbing counterfeit goods?

South Africa is one of the few countries that has a special legislation to deal with counterfeits and is called the Counterfeit Goods Act 37 of 1997 (the CGA). However, laws alone cannot fix the problem. Given the pervasive nature of the crime, it is important for the legal fraternity to work closely with investigators and customs officials. At Spoor & Fisher, we have had a number of successes working closely with clients and law enforcement agencies identifying perpetrators and enforcing rights and prosecuting importers of counterfeit products. There needs to be consistency in how the law is applied and the frequency, so infringers are well aware of the consequences.

How sophisticated are the crooks becoming?

With the level of sophistication that counterfeiters are using on their websites and in their manufacturing, they can easily fool the most ardent of brand lovers.

Counterfeiters are getting very clever on where to sell the product to you. According to The Global Brand Counterfeiting Report 2018, online sales of fake goods accounted for 31% of total counterfeiting-related losses in 2017 and in dollar terms, some $323-billion. Counterfeiters also monitor trends and against the backdrop of economic pressures know very well that consumers will happily buy a product advertised for a steep discount. They are also adept at social media setting up Instagram, Twitter and Facebook pages and offer for sale counterfeit and/or elicit products. These can also be quickly taken down to erase trails.

Which are the most popular goods being targeted?

Generally, the most counterfeit products are clothing and footwear, consumer electronics, watches, medicines and bags. The growth in counterfeit pharmaceutical products and automotive components is particularly concerning. Anti-malaria and antibiotics are some of the most commonly reported counterfeit medicines manufactured and distributed in the world. According to the World Health Organization (WHO) 10% to 15% of the global drug supply is counterfeit and Africa accounts for up to 30% of the counterfeit medicine in circulation. A more worrying statistic is that it is estimated that 1 in 10 drugs sold worldwide is counterfeit. According to the health body, more than 100 000 deaths a year are linked to counterfeit drug trade.

Is SA’s legal system keeping pace with global developments when it comes to anti-counterfeiting?

Counterfeiting is a global scourge however laws continue to be “localised”. We are dealing here with unscrupulous faceless individuals who conduct their operations from different parts of the world and there are often jurisdictional, legislative and financial challenges in going after counterfeiters. An infringer and/or counterfeiter can open multiple accounts across different social networks using different identities from a different geography. It is hard and a time consuming exercise to track counterfeiters and successfully sue or prosecute them.

Is bribery within the system an added problem?

It adds to the problem but more than corruption there are many legitimate issues that can be easily addressed to further tighten the screws on counterfeiting. Training is very important especially around trade marks. As counterfeiters get sophisticated and manufacturing keeps place, counterfeits an easily slip through a pair of untrained eyes. We have a long track record in training enforcement officials from customs and SAPS on identifying products and protocols in terms of the Counterfeit Goods Act as well as anti-counterfeit operations.

Please tell us how you landed up becoming an anti-counterfeiting expert?

After University I started my articles in the anti-counterfeiting department and loved the excitement and challenges. It is completely different from other fields in law.

You have worked with many multi-nationals in Africa on trade Marsland counterfeiting cases. Are these markets winning the war?

Counterfeiting is already a huge challenge and when you face that challenge on a continent that has laws that change from region to region it becomes an onerous task to win the war against counterfeiting. In many markets on the continent, it is about consistently winning the battles. A “one size fits all” anti-counterfeiting strategy cannot be easily implemented or for that matter work for Africa. Fortunately, authorities are taking steps in the right direction to curb counterfeiting activities. One of the positive developments is in Kenya where President Uhuru Kenyatta recently issued a stern directive to all law enforcement agencies to combat counterfeit goods and to have these goods destroyed as soon as possible.

What must Africa do to get to grips with the problem?

I think it is very important for brand holders to push for prosecution in all known cases of infringements. Very often you find a brand holder not too keen to police or publicise counterfeiting which only emboldens counterfeiters to push the envelope. A consistent and zero tolerance approach should be the cornerstone of any anti-counterfeiting strategy. Furthermore, brand holders should ensure that their trade marks are registered not only in their country of operation but rather in territories it intends to expand in. Very often counterfeit goods are manufactured in a completely different jurisdiction and make their way into markets via informal trade routes. Again, training goes a long way in ensuring customs, law enforcement and officials at border posts have the wherewithal to understand, anticipate and arrest counterfeiting activity.

Advice for young students keen on becoming a trade mark lawyer...

The idea of brand value is evolving – today we have trillion dollar brand clubs and Apple has already hit the 12 zero mark with Amazon, Google, Facebook within striking distance. So, a trade mark lawyer in my opinion can’t be simply focussed on trade marks, they need to develop an all-round understanding on what drives these valuations. Furthermore, brands today are not only multinational but dimensional, attorneys today need to have view on protecting domain trade marks or manage trade marks in social media handles – none of this existed a few years back. I wont proffer advise but will give context – trade marks today are not limited to legal departments they have been catapulted into the boardrooms.

This article was first published in Business Day.

Date published: 8 April 2019
Author: Spoor & Fisher

Tags: counterfeiting charl Potgieter