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[2010] ZASCA 140
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Puma AG Rudolph Dassler Sport v Rampar Trading (Pty) Ltd and Others (59/10) [2010] ZASCA 140; 2011 (2) SA 463 (SCA); [2011] 2 All SA 290 (SCA); 2010 BIP 317 (SCA) (19 November 2010)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 59/10
In the matter between:
PUMA AG RUDOLF DASSLER
SPORT
Appellant
and
RAMPAR TRADING (PTY)
LTD
First Respondent
THE COMMISSIONER OF
SOUTH AFRICAN
REVENUE
SERVICES
Second Respondent
MAGISTRATE H C
NIEUWOUDT NO
Third Respondent
Neutral
citation:
Puma v Rampar Trading
(59/10)
[2010] ZASCA 140
(19 November
2010)
Coram:
Harms DP, Heher, Snyders and Tshiqi JJA and R
Pillay AJA
Heard:
03 November 2010
Delivered:
19 November 2010
Summary:
Counterfeit Goods Act 37 of 1997
–
definition of ‘counterfeiting’ – definition of
‘protected goods’.
ORDER
On
appeal from:
Kwa-Zulu Natal High Court
(Durban) (Koen J sitting as court of first instance):
‘
The
appeal is upheld with costs and the order of the court below
substituted with an order dismissing the application with costs.’
HARMS DP (HEHER, SNYDERS
AND TSHIQI JJA AND R PILLAY AJA concurring)
HARMS DP:
[1]
The
interpretation of the
Counterfeit Goods Act 37 of 1997
remains
contentious but since no visible steps have been taken to solve the
problems it remains our duty to interpret it as best
we can.
[1]
[2]
The appellant, Puma AG Rudolf Dassler Sport
(Puma for short), is a German company with an international
reputation in the field
of sportswear, including sport shoes. It has,
in addition to its Puma word and leaping puma device trade marks, a
number of other
device trade marks referred to generically, as the
form strip device. These are registered in class 25, usually in
respect of clothing,
footwear and headgear.
[3]
The basic form strip device can, in very
general terms, be described as a tapering curved stripe running from
the upper left to
the lower right. If applied to the side of a shoe
it conventionally runs from the upper portion of the heel to meet the
sole at
the middle of the shoe. Two form strip marks (one of which is
in issue in this appeal) formed the subject matter of a recent trade
mark infringement judgment of this court in
Puma
AG Rudolf Dassler Sport v Global Warming (Pty) Ltd
2010
(2) SA 600
(SCA).
[4]
The
respondent,
Rampar
Trading
(Pty)
Ltd,
is
the
owner
of
a
chain
of
retail
shoe stores known as Dodo’s. It sells generally known branded
shoes but also a budget line under its name mark and
a device mark
consisting of a stylised letter D. The Dodo name has been known for
about a century in relation to shoe stores and
shoes although the
respondent’s relationship with the original business is
somewhat tenuous.
[5]
During September 2009, inspectors appointed
under the Act detained a consignment of shoes imported by Rampar on
suspicion that the
shoes were counterfeit. The shoes, of which there
were four types, bear some or other stripe device on the side of the
shoe which,
according to Puma, infringed one or other of its form
strip marks and were indeed counterfeit. They also bear a Dodo trade
mark.
Rampar’s main contention was that stripe devices were
only decorative and did not perform a trademark function
[6]
Acting on the suspicion (enforced by an
affidavit on behalf of Puma) that the goods were counterfeit the
police applied for and
obtained a search and seizure warrant in terms
of
s 6
of the Act, and an inspector seized the goods on 28 October
2009, and removed them to a counterfeit depot.
[7]
Rampar
filed an application in the Durban High Court seeking, first, the
setting
aside of the warrant and the subsequent search and seizure. This was
soon abandoned. It also sought an order under
s 7(4)
of the Act,
namely a declaration that the goods were not counterfeit and for a
consequent order that the goods be returned.
[2]
This was the case before the court below and, with its leave, the
case before us.
[8]
The application turned in this regard
primarily on two issues. The first, to which I shall refer as the
cloning issue, can best
be described with reference to a simplified
example.
A trade
mark is registered in class 25 in relation to clothing, shoes and
headgear. The rights owner uses the trade mark on shoes
only but the
alleged counterfeiter uses the identical mark on headgear or on a
completely different type of shoe. One can also
conceive of a
situation where the rights holder has
not
used
the
trade
mark
at
all.
In
these
cases
the
infringer
(because
it
will
be
trade mark infringement), although using the identical trade mark,
did not clone goods bearing a trade mark of the rights holder.
Rampar
argued that unless trademarked goods have been cloned they cannot be
‘counterfeit’ within the
meaning of the Act and that cloning of the
mark itself and used on goods covered by the mark is not enough. What
this would have
meant in the context of counterfeiting of money notes
is that one cannot make a counterfeit R300 note because the Reserve
Bank
does not produce one.
[9]
The court below agreed with this submission
of Rampar’s counsel and
granted
an order in terms of
s 7(4)(a)
without finding it necessary to deal
with the second issue namely whether the shoes were counterfeit
within the meaning of the
definition of ‘counterfeiting’
in
s 1
of the Act. This depends on whether the shoes
bore a sufficiently identical trade mark to
that of the registered mark. It should be noted that one of the four
types has been
released from detention by the inspectorate on this
ground and that leaves for consideration the other three.
THE FIRST ISSUE: IS
CLONING REQUIRED?
[10]
The
background to the Act was dealt with in
AM
Moolla
where
it was pointed out that the Act had its genesis in the Trips
agreement.
[3]
Although South
Africa is party to Trips by virtue of its membership of the World
Trade Organisation, the provisions of Trips do
not form part of our
municipal law. This means that although one would tend to interpret
consequent legislation to conform to the
provisions of Trips, the
legislation on a proper interpretation may nevertheless not comply
with the Trips obligations or, on the
other hand, have stricter
requirements.
[4]
[11]
The object of the Act is to prevent dealing
in counterfeit goods. This object is obtained by prohibiting a number
of acts in relation
to counterfeit goods, such as (in very general
terms) possession, manufacture, sale, exhibition, distribution,
importation or export
of such goods for commercial as distinct from
private or personal purposes
(s 2(1)).
A person who performs a
prohibited act will be guilty of an offence if at the time of the act
or conduct, the person knew or had
reason to suspect that the goods
to which the act or conduct relates, were counterfeit goods;
or failed to take all reasonable steps in
order to avoid any such dealing from being performed or engaged in
with reference to the
counterfeit goods
(s 2(2)).
[12]
The
prohibition is directed to the protection of those ‘intellectual
property rights’ (‘IPRs’) defined in
s 1(1)
of the
Act. These are copyright (in relation to which the term
‘counterfeiting’ is inappropriate – it should
have
been ‘piracy’), trade marks registered in terms of the
Trade Marks Act 194 of 1993
, unregistered well-known foreign marks
that are entitled to local protection by virtue of art 6bis of the
Paris Convention,
[5]
and certain
marks protected by s 15 of the Merchandise Marks Act 17 of 1941. For
present purposes we are concerned with registered
trade marks only.
[13]
‘
Counterfeiting’ is defined in
s 1(1) in a somewhat opaque manner but one thing is clear: it is not
the same as copyright or
trade mark infringement – it requires
more. This follows from the proviso to this definition, namely that
‘the relevant
act of counterfeiting must also have infringed
the intellectual property right in question’.
And it follows from the fact that the Act
did not refer back to or reproduce the definitions of infringement in
the IPR statutes.
This appears to be logical because ‘to
counterfeit’ ordinarily means to make an imitation of something
in order to
deceive or to make a copy of something.
[14]
The
elements of counterfeiting under para (a) of the definition are in
logical order:
[6]
(i)
manufacturing, producing or making of any
goods
(ii)
in the Republic or elsewhere
(iii)
without the authority of the owner of any
IPR
(iv)
subsisting in the Republic
(v)
in respect of protected goods
(vi)
whereby they are imitated
(vii)
in
such
manner
and
to
such
a
degree
that
they
are
substantially
identical copies of the protected goods.
[15]
Counterfeiting
under para (b), in turn, means:
[7]
(i)
manufacturing, producing or making, or
applying to goods
(ii)
in the Republic or elsewhere
(iii)
without the authority of the owner of any
IPR
(iv)
subsisting in the Republic
(v)
in respect of protected goods
(vi)
the subject matter of that IPR, or a
colourable imitation
(vii)
so
that
the
‘infringing’
goods
are
calculated
to
be
confused
with
or
to
be
taken as being the protected goods of the IPR owner.
[16]
The
first question is whether paras (a) and (b) are intended to cover
both copyright piracy and trademark counterfeiting. (Para
(c), which
deals with counterfeiting of goods protected under the Merchandise
Marks Act can be discounted for present purposes.)
The authors of
Webster
and Page
[8]
believe quite reasonably that they do. I have to disagree because in
my judgment para (a) was intended to deal with piracy while
para (b)
was intended to deal with trademark counterfeiting. Although both (a)
and (b) refer in general terms to ‘any’
IPR, there are
other indications that each is limited to either the one or the
other. The words ‘substantially identical
copies’ in para
(a) are phrased in copyright terms while the concepts in para (b),
‘colourable imitation’ and
‘calculated to be
confused’, are cast
in
traditional trademark terminology. Another indication is the
reference to ‘applying’ to goods in para (b), something
that in spite of the definition of ‘apply to’, cannot
refer
to copyright but clearly does apply to trade marks. Also, para (b)
covers the use of identical marks by the use of the phrase
‘the
subject matter of that IPR’ and it is accordingly not necessary
to rely on para (a) to prohibit the use of ‘copies’
of
trade marks. Last, the definition of IPR distinguishes between the
three rights, namely trade marks, copyright and merchandise
marks,
and it is reasonable to assume that the definition of counterfeiting
would do the same, although it did not do so in the
same sequence.
[17]
The next issue concerns the meaning of
‘protected goods’. It has two meanings. First, it means –
‘
(a)
goods featuring, bearing, embodying or
incorporating the subject matter of an intellectual property right
with the authority of
the owner of that intellectual property right,
or goods to which that subject matter has been applied by that owner
or with his
or her authority.’
Applied to trade marks,
protected goods are genuine goods that feature the registered trade
mark. With reference to the other provisions
of the Act it simply
intends to protect cloning of goods incorporating the relevant IPR.
[18]
The second meaning is –
‘
(b)
any particular class or kind of goods
which, in law, may feature, bear, embody or incorporate the subject
matter of an intellectual
property right only with the authority of
the owner of that intellectual property right, or to which that
subject matter may in
law be
applied,
only by that owner or with his or her authority, but which has not
yet been manufactured, produced or made, or to which
that subject
matter has not yet been applied, with the authority of or by that
owner (whichever is applicable).’
[19]
Shorn of verbiage para (b) covers any
particular class or kind of goods which may bear a registered trade
mark, but has not yet
been produced or to which it has not yet been
applied with the authority of or by the IP owner. In other words, the
goods protected
by para (b) are not actual goods but notional goods,
ie, goods to which the owner could have applied the trade mark. It
means that
counterfeiting is possible without cloning and the fact
that Puma may not have produced a shoe bearing the particular trade
mark
does not mean that Rampar’s shoes could not be
counterfeit.
[20]
Confirmation
of
the
fact
that
the
Act
contemplates
counterfeiting
of
notional goods is also to be found in s
3(2)(b), which deals with the information a complainant has to supply
when laying a complaint.
It concludes by requiring a specimen of the
relevant protected goods where the IPR ‘that subsists in
respect of or has been
applied to protected goods contemplated in
paragraph (a) of the definition of “protected goods” in
section 1(1)’.
Significantly, it does not require a specimen in
the case of para (b) because one would imagine there cannot be one.
[21]
Counsel
for Rampar submitted that in spite of the wide wording, para (b)
should be read to conform with Trips which, it was suggested,
does
not require such protection. This, he said, is supported by a
statement by the which was quoted with approval by this court
in
Cadac
v Weber-Stephen
[2010]
ZASCA 105
where it was said that ‘counterfeit cases involve an
infringer attempting to reproduce – and substitute for –
the goods (not just the trademark) of the trademark owner’. A
study sponsored by the New Zealand government, for instance,
states
as follows in this regard:
[9]
‘
The
term "counterfeiting" is generally understood to mean the
unauthorised manufacture and distribution of copies of such
goods and
works which are intended to appear to be so similar to the original
as to be passed off as genuine examples. This includes
use of famous
brands on clothing not manufactured by or on behalf of the owner of
the trade mark, and exact copies of CDs containing
music or software,
which are traded in a form intended to be indistinguishable to
ordinary consumers from the genuine product.’
Counsel
also relied on a statement in
Webster
and Page
,
[10]
submitting that the authors were of the view that para (b) was
intended to protect only famous foreign marks that have not been
registered and goods that have been produced elsewhere but not in
South Africa.
[22]
Whatever
the general understanding of the term ‘counterfeiting’ or
the motive behind the anti-counterfeiting Trips provisions,
the
limitation is not to be found in Trips
or
the
clear
wording
of
the
Act.
[11]
The
extract
was
quoted
in
Cadac
v
Weber-Stephen
in
another
context
to
make
a
different
point.
As
far
as
Webster
and
Page
are
concerned, I believe that counsel misread the learned authors.
THE SECOND ISSUE: ARE THE
SHOES COUNTERFEIT?
[23]
It
follows that in my judgment the court below erred in requiring
cloning. It is now necessary to consider the second question,
namely
whether the shoes were counterfeit. As mentioned above, the answer
has to be sought in para (b) of the definition of counterfeiting.
In
view of the common cause facts the only remaining issue is whether
the marks applied to Rampar’s shoes are ‘the
subject
matter’ or ‘a colourable imitation’ of any of
Puma’s registered trade marks. To be ‘the subject
matter’
means, as mentioned, that the Rampar mark must be identical to a Puma
trade mark. An ‘imitation’, in
turn, is by definition a
copy, and the adjective ‘colourable’ reinforces the fact
that the copy is counterfeit. In
other words, the definition says no
more than that a counterfeit must be counterfeit. That is why it must
be ‘calculated
to be confused with’ or ‘taken as
being’ the registered mark and why it involves deliberate and
fraudulent infringement
of trademarks.
[12]
[24]
This
test is not the same as the standard trade mark infringement test of
‘likely
to deceive or cause confusion’
[13]
but counterfeiting, by its very nature, amounts
a
fortiori
to
trade mark infringement.
Reference
during argument to the test to be applied to determine the likelihood
of deception and confusion, confusing similarity,
to passing-off
principles, imperfect recollection, momentary confusion, the
prospective purchaser, that a substantial (ie, not
negligible) number
of people have to be confused, evidence about the public’s
perception and how Rampar intended to market
the goods was,
accordingly, singularly out of place and unhelpful.
[25]
My main problem with the manner in which
Puma’s case was presented was that it took a bundle of related
(some associated)
trade marks, referred to them as its form strip
mark (in the singular), and then argued that the marks on the Rampar
shoes were
counterfeit. The heads of argument relied on five marks in
relation to three shoes. During argument the number came down to two
and when it transpired that one of them had not been registered at
the time of seizure, Puma was left with one, called its ‘split’
form strip which is registered under no 2004/14412.
[26]
This trade mark consists of the basic form
strip device of a tapering curved stripe running from the upper left
to the lower right,
but splits into two with an
inverted V, widening towards the lower more
substantial part. If applied to the side of a shoe it would run (but
not necessarily
so) from the upper portion of the heel to
meet the sole at the middle of the shoe.
[27]
There can be little doubt that the white
Rampar shoe (C) has a copy of the split form strip device on its
inner and outer sides.
The strip is in blue and the split is white.
This device however has additionally two white strips that run more
or less parallel
with the strip form thereby framing it. But these
stripes make no impression against the white background of the shoe.
Rampar sought
to distinguish this reproduction of the Puma mark by
relying on the presence of a prancing dragon and the Dodo device mark
on the
heel and the name Dodo Sport on the inside of the shoe. It
also said that the mark would have been perceived as decorative and
not as a trade mark. I disagree on both counts. The dragon and the
Dodo marks are at best subsidiary and they do not touch the essence
of the split form strip. One also cannot use a trade mark and then
argue that it was used as ornamentation. It could be different
if one
is dealing with changes to the mark, for instance, if the registered
mark consists of three stripes it would be a question
of fact whether
the use of two or four stripes would be perceived as decorative or as
trade mark use but one could not, I would
think, use the same
argument in relation to the use of three stripes. On the other hand,
I could not understand Puma’s reliance
on the presence of the
dragon, which was said to be similar to the prancing horse on the
Ferrari mark and which Puma is licensed
to use, to establish
counterfeiting. It was probably based on a confusion of
counterfeiting with passing off.
[28]
Shoe B is virtually identical to the one
just mentioned but differs, importantly, in colour. It is a black
shoe. It also contains
the split form device, which is now in black.
The V of the split is in white and the outer parallel stripes are in
white. In other
words, the Rampar shoe contains a counterfeit split
form framed in contrasting
white.
In my judgment the addition of the frame does not change the result.
Rampar took the registered mark and in spite of the
presence of the
frame the mark on the shoe is still ‘calculated to be confused
with’ or ‘taken as being’
that of Puma.
[29]
The third shoe (A) also incorporates the
split form but in addition has an inverted form strip made of a
different material at the
heel but which appears to be part of the
construction of the shoe. It, too, in my assessment, is counterfeit
because even with
the inverted strip the shoe is still ‘calculated
to be confused with’ or ‘taken as being’ that of
Puma
especially since the inverted device is identical to Puma’s
‘traditional’ strip form.
CONCLUSION
[30]
It follows that the court below had erred
and that the appeal must be upheld. The following order is made:
‘
The
appeal is upheld with costs and the order of the court below
substituted with an order dismissing the application with costs.’
L
T C HARMS
DEPUTY
PRESIDENT
APPEARANCES
APPELLANT/S
I
Joubert
Instructed
by Spoor & Fisher Pretoria
C/o
Chapman Dyer Inc Durban
Matsepes
Inc Bloemfontein
RESPONDENT/S:
G
Marriott
Instructed
by D M Kisch Inc Sandton
C/o
Barkers Attorneys Durban
Rossouws
Attorneys Bloemfontein
[1]
For
an earlier discussion see
AM
Moolla Group Ltd v The Gap Inc
2005
(2) SA 412 (SCA).
[2]
Section
7(4)(a): ‘Any person prejudiced by a seizure of goods in terms
of section 4(1), may at any time apply to the court
on notice of
motion for a determination that the seized goods are not counterfeit
goods and for an order that they be returned
to him or her.’
[3]
Agreement
on Trade-Related Aspects of Intellectual Property Rights.
[4]
Compare
Gallo
Africa v Sting Music
(40/10)
[2010] ZASCA 96
para 18.
[5]
Paris
Convention for the Protection of Industrial Property.
[6]
Section
1: ‘Counterfeiting (a) means, without the authority of the
owner of any intellectual property right subsisting in
the Republic
in respect of protected goods, the manufacturing, producing or
making,
whether in the Republic or elsewhere, of any goods whereby those
protected goods are imitated in such manner and to such
a degree
that those other goods are substantially identical
copies
of the protected goods.’
[7]
Section
1: ‘Counterfeiting (b) means, without the authority of the
owner of any intellectual property right subsisting in
the Republic
in respect of protected goods, manufacturing, producing or making,
or applying to goods, whether in the Republic
or elsewhere, the
subject matter of that intellectual property right, or a colourable
imitation thereof so that the other goods
are calculated to be
confused with or to be taken as being the protected goods of the
said owner or any goods manufactured, produced
or made under his or
her licence.’
[8]
South
African Law of Trade Marks
(4
ed) para 17.5.
[9]
AJ
Park & Son for the Ministry of Commerce
Consultant’s
Report on Theft of Intellectual Property –
Piracy
and Counterfeiting
para B7
http://www.med.govt.nz/templates/MultipageDocumentPage
1830.aspx
(accessed 10 November 2010).
[10]
Para
17.4
[11]
Whether
para (b) can apply to copyright piracy is not clear.
[12]
Cadac
v Weber-Stephen
[2010]
ZASCA para 6.
[13]
Trade
Marks Act s
34(1). Trade mark infringement and not counterfeiting
was the issue in
Puma
v Global Warming.