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[2019] ZAGPPHC 324
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Ellies Electronics (Pty) Ltd v Beyond Platinum (Pty) Ltd and Others (39111/2018) [2019] ZAGPPHC 324 (11 July 2019)
IN THE HIGH COURT OF SOUTH
AFRICA
(GAUTENG DIVISION, PRETORIA)
REPUBLIC OF SOUTH AFRICA
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES:
YES
/NO
Case
Number: 39111/2018
11/7/2019
In
the matter between:
ELLIES
ELECTRONICS (PTY) LTD
Applicant
And
BEYOND
PLATINUM (PTY) LTD
First Respondent
ROBRIDGE CONSTRUCTION CC T/A
EASY STORE
Second Respondent
THE
MINISTER OF TRADE AND INDUSTRY
Third Respondent
THE MINISTER OF POLICE
Fourth Respondent
CYANRE
Fifth Respondent
MUHAMMAD
MOOLLA STORAGE CC
Sixth Respondent
JUDGMENT
JANSE
VAN NIEUWENHUIZEN J
INTRODUCTION
[1]
Ellies
Electronics (Pty) Ltd ("Ellies") has been selling DSTV
remote control units ("DSTV RCU's") for a considerable
period of time. Every person in South Africa who owns a DSTV decoder
is well acquainted with this device, possession of which,
could cause
considerable animosity between household members.
[2]
The
present case revolves around the technology involved in this daily
household item. Beyond Platinum (Pty) Ltd ("BP")
alleges it
has copyright to the technology, whereas Ellies maintains that the
workings of a remote control are common knowledge
in the industry and
that the DSTV RCU could by no stretch of the imagination qualify as
"
intellectual property'
[3]
BP's
view culminated in the issuing of no less than three search and
seizure warrants in terms of the provisions of section 6 of
the
Counterfeit Goods Act, 37 of 1997 ("the Act").
[4]
The
present application pertains to the setting aside of the warrants
with ancillary relief.
PARTIES
[5]
The
applicant is Ellies Electronics (Pty) Ltd, a South African company
registered under number 2007/010759/07. Ellies is the importer
and
distributor of the DSTV RCU's which were seized in terms of three
search and seizure warrants issued at the behest of BP.
[6]
The
first respondent is Beyond Platinum (Pty) Ltd, a South African
company registered under number 2012/085787/07. According to
Ellies,
BP's website indicates that BP together with an alliance partner in
Korea, is a developer and manufacture of radio frequency
(RF) and
infra-red remote controls. These are predominantly - in order to
control electronic devices such as televisions, decoders,
air-conditioning, hi-fi systems, curtains, lights, garage doors and
the like.
[7]
The
second respondent is Robridge Construction CC, a South African close
corporation. The second respondent operates an authorised
counterfeit
goods depot as contemplated in the Act. The DSTV RCU's that were
seized in terms of the first search and seizure warrant
were in pound
at the second respondent's premises.
[8]
The
third respondent is the Minister of Trade and Industry. The Minister
of Trade and Industry is cited as being the responsible
Minister for
the enforcement of the Act.
[9]
The
fourth respondent is the Minister of Police. Ellies stated that it
joined the Minister of Police due to a pending criminal investigation
that was instigated by the BP.
[10] The
fifth respondent is CYANRE, an entity that renders digital forensic
services and was involved in
the seizure of electronic information
during the first seizure operation.
[11]
The sixth respondent is Muhammed Moolla
Storage CC, which trades as Allied Storage Solutions. The sixth
respondent is also a designated
counterfeit goods depot and the goods
seized in terms of the second and third search and seizure warrants
are stored at the sixth
respondent's premises. In the result, all the
seized goods are in storage at the sixth respondent's premises.
[12]
The application is only opposed by BP.
RELIEF
[13]
Ellies claims the following relief:
[13.1]
the setting aside of the various search and seizure warrants
and the
seizures effected as a consequence thereof;
[13.2]
a declaration that the goods seized are not counterfeit
goods;
[13.3]
relief in respect of the misappropriation of its confidential
information;
[13.4]
an enquiry into damages suffered by it.
[14]
BP
launched a counter application in terms of which it seeks an interim
interdict prohibiting Ellies from dealing with the goods
pending
finalisation of the action instituted by it.
SEARCH
AND SEIZURE WARRANTS
Facts
[15]
Ellies has, for many years, been buying
a variety of remote control products from varied sources. The
products were not considered
original and were branded as Ellies
products. The original products would emanate from for instance Sony,
Panasonic or DSTV, whilst
Ellies' products were marketed as
replacements for the original remote controls purchased with the
device.
[16]
The manufacturers of remote controls are
plentiful and mostly utilise the same or similar technology. Each
remote control is individualised
to operate a specific device for
instance a hi-fi, a television set, an air-conditioning unit and the
like.
[17] BP is
a manufacturer of DSTV RCU's and Ellies, in the course of business
purchased DSTV RCU's from
BP, branded it as its own and sold the
products in various stores.
[18]
BP denies that the DSTV RCU's are sold
under the Ellies brand and alleges that the RCU's are embossed with
its mark as well as the
DSTV mark. According to BP, Ellies only do
the packaging, which packaging describes the DSTV RCU as an original.
This is in turn
denied by Ellies, who asserts that the RCU's are sold
as DSTV products by Ellies and not by BP. Ellies further points out
that
the BP branding is on the back of the DSTV RCU and not visible
when a client purchases the unit.
[19]
It appears from the papers that a good
business relationship developed between Ellies and BP over the years.
This relationship,
however soured significantly when Ellies, during
mid-2017, decided to source DSTV RCU's from a Chinese manufacturer.
To this end,
Ellies placed a specific order for the manufacturing of
DSTV RCU's that looked and operated the same as the DSTV RCU's
manufactured
by BP ("imported RCU's"). I pause to mention,
that this matter pertains to three specific DSTV remotes, the details
of
which are not important for present purposes.
[20]
BP is of the view that it is the owner
of the technology in respect of the three DSTV remotes in question.
Notwithstanding the longstanding
business relationship between BP and
Ellies and for reasons still unknown, BP chose not to inform Ellies
of its view nor did it
endeavour to obtain an undertaking from Ellies
that it will desist from selling the imported RCU's pending the
resolution of any
dispute that may exist between the parties in
respect of the ownership of the technology in the DSTV RCU's.
[21]
Instead, and on, 27 November 2017, Mr
Bick ("Bick"), a director of BP deposed to a complaint
affidavit in terms of section
2 read with section 3 of the Act. In
the affidavit Bick stated that BP is the exclusive manufacturer of
original DSTV RCU's for
Multichoice. According to Bick, Ellies
previously supplied the DSTV RCU's manufactured by BP ("BP
RCU's") to a wide network
of retailers.
[22]
In respect of BP's alleged Intellectual
Property rights in the DSTV RCU's it manufactures, the following
appears from the complaint
affidavit:
“
48.
The Complainant
(BP)
is the owner of
the Copyright, as provided for in the
Copyright Act 98 of 1978
, in
the computer program constituted by the remote control protocol for
the remote control of Multichoice decoders (''the work").
49.
The work is an infra-red
protocol, referred to as UMNEC IR protocol Each of the buttons on the
remote control, when pressed, generates
a unique binary code (or
digital command) which is transmitted to the decoder by way of a beam
of infra-red light. The MNEC IR
protocol translates the pulses of
light emitted by the remote control into particular commands.
50.
The commands transmitted by the
remote control to the DSTV decoder when received by the decoder,
bring about the result or effect
on the television which corresponds
with the command sent. I
am
advised that this constitutes a computer program within the meaning
of the
Copyright Act.
"
(own
emphasis)
[23]
As will appear more fully
infra
the correctness of this advice is
vehemently denied by Ellies.
[24]
In its founding affidavit deposed to by
Mr. Adrian Bock "Bock" the Chief Financial Officer and
Acting Chief Executive
Officer of Ellies, Ellies denies that BP has a
copyright to the MNEC protocol. Ellies' allege that the MNEC protocol
was developed
many years ago by the Japanese corporation NEC
Corporation. An 'infrared red' is, according to Ellies, no more or no
less than
the use of short bursts of infrared light to send messages.
In support of these allegations, Ellies provided a lengthy technical
explanation in respect of the technology underlying the transmission
of signals from the DSTV RCU to a DSTV decoder.
[25]
BP responded to this allegation, by
stating that whether the protocol is sufficiently original is a
matter for argument. BP is further
of the view that any disputes in
respect of the origin of the protocol is a matter that should be
resolved in the pending trial,
BP having issued summons in which its
claim is based on the copyright in the protocol.
[26]
More pertinently, Ellies denies that the
protocol could be classified as a computer program. In response BP
changed its stance in
its answering affidavit by stating that should
it be held that the protocol is not a computer program, it still
qualifies as a
'literary work' for purposes of the
Copyright Act.
[27]
In response to the detailed and highly technical explanation in
respect of the protocol and operation of the DSTV RCU's in question,
BP provided its own lengthy and technical expose supporting the claim
that it has copyright in the DSTV RCU's.
[28]
In respect of Ellies' knowledge of BP's
copyright claim, the following is stated in the complaint affidavit:
"82
The Suspects (inter alia
Ellies)
are committing
this copyright infringement with the knowledge that they are doing
so.
8.3
An email from the Complainant to Mr Brett Blackman 11 September 2015
is attached marked
"Z The email brings copyright protection in
the MNEC protocolto the attention of Mr Blackman, who was at the time
the general
manager of Ellies (Ply) Ltd, the Second Suspect By virtue
of this notice, paragraph C. 10 above and the relationship between
the
Suspects and the Complainant the Suspects are aware that the
remote controls are protected by the Complainant's intellectual
property.
In addition to this, there is also the copyright notice
that is presented with both the Complainant's remote controls.
84.
The copyright notice, which states "MNEC IR Copyright ©
2012 Beyond Platinum';
is provided on the paper slips inside the
battery compartments of the Original Remotes as shown in the
annexures marked "J
"N and "S
"
[29] I
pause to mention, that the email referred to was a request to include
a contractual term in a proposed
agreement between BP and Ellies
during 2015. It is not clear from the papers whether the clause ever
formed part of a contract
between the parties.
[30]
·Ellies' response to these allegations in the complaint
affidavit is noteworthy:
''37. BP's
Complaint Affidavit (annexure B, referred to below) revealed that it
was aware of its perceived cause for
concern from as long ago as
early October 2017. The Applicant finds it remarkable that at no
stage, did anyone from BP pick up
a phone and call me, or to the best
of my knowledge and belief anyone of the far-better known executives
at Ellies, to raise demur
about Ellies' importation of the RCU's in
question. That would have been the responsible and prudent thing to
do, particularly
seeing that the products are not fraudulent fakes
sold at a Rea-market or on the roadside of the William Nichol
carriage-way; and,
more so, seeing that all BP has to complain about
is a possible infringement of Its (even less likely) copyright. That
BP waited
until the start of the Christmas holiday to action its plan
is also remarkable- and, palpably, a stratagem employed to maximize
the damage and harassment caused by the seizure."
[31]
On the strength of the complaint's
affidavit a search and seizure warrant was issued by a magistrate at
Johannesburg Magistrate
court on 11 December 2017. The raid that
ensued at Ellies' offices on 11 December 2017 was, according to
Ellies, of epidemic proportions.
Approximately 20 people, including a
dozen police officials armed and clad in riot gear arrived at Ellies'
head office. During
the raid R 4 million worth of stock was
confiscated and the entire accounting record database as well as
email servers were copied.
Save for denying that the police officers
were clad in riot gear and armed, these allegations are not seriously
disputed by BP.
[32]
BP does, however, state that although
its attorney, Mr Dessington ("Dessington") was present, it
had no control over the
raid.
[33]
Shortly after the raid more stock
arrived via shipping containers and to avoid further harassment,
Ellies undertook to quarantine
the goods in demarcated locked cages.
Mr Salkow, chairman of Ellies also addressed a letter to BP's
attorney on 11 December 2017,
stating the following:
"Ellies Electronics (Pty)
Ltd hereby agrees to the fact that we have imported remote controls
from the East.
We were totally unaware of
copyright infringement on your product, and want to work with you to
resolve this issue.
We are happy to supply you all
relevant documentation, as regards to quantities imported and sold."
[34]
BP's attorney responded to the letter on
11 January 2018 and stated that the aforesaid letter served as an
admission that the imported
remotes were counterfeit. BP further
demanded that Ellies collect all counterfeit goods in order to enable
BP to destroy the devices.
[35]
Ellies' attorney responded to the letter
on the same date, denying that the 11 December letter was an
admission. The letter further
explains that due to the holiday period
it would only be possible to consult with Senior Counsel during the
week of 15 - 19 January
2018 and an extension to respond to BP's
demands were requested until 26 January 2018. Pending Ellies'
response the following undertaking
was given:
"10.
In the interim, without admission of any liability whatsoever but in
order to demonstrate our
clients ongoing good faith to this process
it will quarantine the products on the basis set out below:
10.1
Remove
the products from its shelves at its head office and all branches
throughout South Africa;
10.2
Replace the offending products at
retail outlets with the new products ordered from and supplied by
your client which are presently
in the process of being packaged by
our client. As soon as the packaging is complete the products will be
distributed and swapped
out whereafter the return products will be
placed in the caged storage facility controlled by your client
referred to in paragraph
10.3below. In so doing our client will keep
comprehensive records of the quantify and movement of the products.
10.3 At no
charge provide your client with a storage facility at its premises at
94 Eloff Street Extension Johannesburg
which area will be caged
thereby securing access/egress from the cage controlled by your
client who will hold the keys. Your client
is also welcome to appoint
a security guarantee if it so wishes to ensure compliance with the
undertaking.
11.
...
12. We
respectfully submit that our client is dealing with this matter with
the urgency deserving thereof and
in a bona fide manner. For this
reason, approaching the retail outlets directly and the filing of a
further complaint with the
Commercial Crimes Unit on Monday 15
January 2018 is unnecessary. Your clients threatened action to
approach the Commercial Crimes
Unit on Monday 15 January 2018 is
beyond our clients control and accordingly its rights are reserved in
toto."
[36]
In an email dated 12 January 2018, BP's
attorney advised that Ellies' proposal is accepted as an
"interim
measure'.
[37]
It does not appear from the papers what
transpired after 26 January 2018 between the parties. The undertaking
was, however, not
withdrawn and remained in place.
[38]
The present application was issued on 5
June 2018.
[39]
Notwithstanding the aforesaid
undertaking and on 6 June 2018, members from the South African Police
Service attended at the offices
of Ellies with a further search and
seizure warrant issued on 17 May 2018 in respect of the goods that
were placed in quarantine
by Ellies during December 2017. It appears
that the second search and seize warrant was issued on the strength
of a further complaint
affidavit deposed to by Dessington. Dessington
referred to the correspondence
supra
between the parties and simply
stated that no settlement could be reached between the parties.
[40] Quite
astonishing, the warrant indicated that there was a
need
to search for
and seize the goods that was clearly at that stage kept in
quarantine. Having regard to the undertaking by Ellies
to keep the
goods in quarantine, it is unclear why there was a need to search for
the goods and seize same.
[41]
The following reasons for the further
complaint are set out in the affidavit as follows:
"F
THE REASON FOR THE CURRENT COMPLAINT
26.
As
already indicated, no settlement of the Complainant's civil claim has
been achieved.
27.
A
combined summons was issued and served on the Suspects initiating
civil proceedings. The Suspects have defended those proceedings.
28.
I
was advised by the State Advocate charged with prosecuting the
criminal complaint on behalf of the National Prosecuting Authority
that the Specialised Commercial Crime Unit did not deliver to the
Suspects a notice in terms of Section 9(2)(a)(i) of the
Counterfeit
Goods Act. For
this reason, the State Advocate declined to proceed
with a criminal complaint.
29.
The
Complainant wishes to have the Suspects prosecuted for the offences
under the
Counterfeit Goods Act.
30.
The
Suspects want to have the counterfeit remote controls that are
identified in the
section 7(1)(d)
notice (annexure ''AD 2 ")
released into their possession.
31.
Unless
the Suspects wish to sell the remote controls, there is no reason for
them to seek the release of the controls. The Complainant
wishes to,
and is entitled to, enforce the provisions of the
Counterfeit Goods
Act to
prevent any such sales.
32.
In
the circumstances, the Complainant requires a warrant to perform a
search and/or to seize:
(a)
Any remaining counterfeit
remote controls that are held by the Suspects at their premises (94
Eloff Street Ext, Village Deep, Johannesburg)
including any such
remote controls in the caged area; and
(b)
The counterfe1l remote
controls that are identified in the
section 7(1}(d}
notice (annexure
''AD 2'J and currently held at the premises of Easy Store (11
Highview Boulevard, Ferndale Ext 29, Randburg).
33.
The
search and/or seizure referred to would reinstate the timelines for
compliance under the
Counterfeit Goods Act in
relation to the
counterfeit remote controls already seized and any further
counterfeit remote controls that can be seized from
the Suspects
premises."
[42]
There are no facts to support either the
allegation that Ellies wanted to remove the seized goods or that they
wanted to sell the
imported remotes. As set out
supra,
the undertaking of 11 January 2018
was not withdrawn and was still in place.
[43]
On 29 May 2018 a third search and
seizure warrant in respect of the goods that were seized in terms of
the first warrant and kept
at the second respondent's premises, was
issued.
[44]
As a result of the second and third
seizures, Ellies filed a supplementary affidavit detailing the
aforesaid events. In the supplementary
affidavit, Bock pointed out
that the allegation that Ellies wishes to sell the goods in dispute
is without any factual foundation
and devoid of truth. He emphasised
that the goods were at all relevant times kept in quarantine pending
resolution of the dispute
between the parties.
[45]
According to Bock the sole reason for
the second and third search and seizure warrants was to overcome the
statutory difficulties
encountered by BP subsequent to the first
search and seizure warrant.
[46] Although Bick
referred in the answering affidavit to two purchases of the imported
remotes made during
June 2018 by Dessington, he confirms that
"the
execution of the second search and/or seizure warrants reinstated the
timelines for compliance under the Act in relation
to the RCU's
already seized and any further RCU's that might be seized'
Ellies
furthermore pointed out that the further search and seizure warrants
were issued on respectively 17 and 29 May 2018, i.e.
before the
alleged June 2018 purchases.
[47] BP
admitted that, subsequent to the first search and seizure, it failed
to institute the action within
the ten-day period prescribed by the
Act.
Legal Framework:
Counterfeit Goods
Act, 37 of 1997
[48]
From the preamble of the Act, it is
clear that the Act is aimed at supplementing the civil remedies
available to owners of trade
marks, copyright and certain marks under
the Merchandise Marks Act, 17 of 1941.
[49]
In respect of the aim of the Act, Harms
JA (as he then was) stated in
A M
Moolla Group Ltd v The Gap Inc
2005
(2) SA 412
SCA at 418 F-G that
"The
Act is intended to criminalise a particular species of fraud'
It
is for this reason that the Act should be resorted to only in
circumstances where there is a
bona
fide
reasonable suspicion that a
crime as defined in the Act is committed. A mere alleged infringement
of a copyright should be properly
resolved through the utilisation of
civil remedies.
[50]
This much was confirmed by the Supreme
Court of Appeal in
Cadac (Pty) Ltd v
Weber-Stephen Products Co and Others
2011
(3) SA 570
SCA at 574 B-C
("
Cadac SCA" ):
"Counterfeiting involves
deliberate
and fraudulent infringement
of trademarks and counterfeit cases involve an infringer attempting
to reproduce-and substitute for-the goods (not just the trademark)
of
the trademark owner. That is why the Act is concerned with trademark
and copyright infringements that are
criminal
in
nature.
The
Act does not permit a rights holder to steal a march on an alleged
infringer in order to settle a bonafide dispute about the
boundaries
of rights
.
Those disputes should be litigated under either the Trade Marks Act
or the
Copyright Act.
"(own
underlining)
[51]
Civil litigation has the advantage that
litigating parties usually engage each other prior to the institution
of proceedings. Both
parties are as a result aware of the others
stance on the issue in dispute which lays the foundation for a fair
legal process.
[52]
Due to the criminal nature of the Act,
this basic element of fair proceedings is absent. Section 6 of the
Act provides for an
ex parte
procedure in obtaining a search and
seizure warrant. It is as a result, incumbent on a complainant to
display
uberrima tides
and
to fairly and honestly state all facts that have a bearing on the
matter under consideration.
[53]
Once a complainant fails in this
respect, the possibility that the Act might be utilised for purposes
other than to curb and prevent
criminal conduct, arises.
Discussion
[54]
In the present circumstances, utmost
good faith would have entailed that BP brought the fact that it
believed that Ellies is trading
in counterfeit goods to the attention
of Ellies. It is difficult to fathom on what conceivable basis Ellies
could have been involved
in a criminal activity in circumstances were
it was blissfully unaware of BP's copyright claim.
[55]
BP's failure resulted in a situation
where the magistrate had to make a decision without having knowledge
of all the facts. The
failure to mention all known facts is, to my
mind, akin to a failure to obtain and present all relevant facts.
[56]
It is clear from the affidavits filed
herein that a
bona fide
dispute
in respect of BP's assertion that it has a copyright in the
technology of the goods exists. To make matters worse, when
BP was
faced with the difficulty that the protocol might not classify as a
«computer program
it
changed its stance and stated that the protocol qualifies at least as
a literary work. This was not the basis on which the warrants
were
obtained and is an indication that the facts presented to the
magistrate only depicted a one-sided version.
[57]
Had BP taken the most basic step and
alerted Ellies to its claim, the complaint affidavit would have read
quite different. It would
not have been possible for BP to assert
without fear of contradiction that it had a copyright in the
protocol. The mere advice
that the protocol is a computer program,
would, in view of Ellies' version not have sufficed. More
importantly, the criminal element
of Ellies' conduct would have been
in serious dispute.
[58]
In failing to engage with Ellies prior
to resorting to the draconic remedies of the Act, BP
"stole
a march"
on Ellies in order to
settle what is clearly a
bona fide
dispute in respect of BP's alleged
copyright.
[59]
BP, no doubt, could argue that it was
not aware that its copyright was in issue until it received
correspondence from the attorneys
acting on behalf of Ellies. The
sole reason for its claimed
''innocence"
is, however, its failure to
determine the status of its copyright claim before rushing off to
obtain a warrant in terms of an Act
that deals with criminal
behaviour.
[60] Even
if there was a shadow of a doubt in respect of BP's
bona
tides
in
obtaining the first search and seizure warrant, all doubt in respect
of its
bona tides
is removed when
it obtained the second and third search and seizure warrants. The
warrants were obtained for the sole purpose of
reviving the statutory
machinery of the Act.
[61] More
disconcerting, however, is the fact that BP utilised the first search
and seizure to elicit a
settlement of the dispute between the
parties. In the second complaint affidavit, Dessington made it clear
that further search
and seizure warrants were necessary because the
parties could not reach a settlement. This is confirmed by Bick in
his answering
affidavit. Bick stated that further warrants were
applied for because Ellies, instead of settling the matter, defended
the civil
claim instituted by BP. This is a clear example of a party
abusing the provisions of the Act in order to procure a settlement of
a
bona fide
civil
dispute between the parties.
[62]
At the stage when the further search and
seizure warrants were applied for, it was perfectly clear that Ellies
had desisted from
trading in the goods. Ellies gave a clear written
undertaking not to trade in the goods until the dispute in respect of
BP's alleged
copyright was resolved.
[63] To
make matters worse, there were no grounds whatsoever to allege that
Ellies made itself guilty of
criminal conduct. To utilise the
draconic measures of the Act in the prevailing circumstances, is an
absolute abuse of the legal
process and should not be countenanced.
[64]
When confronted with BP's abuse of the
Act, Mr Michau SC, counsel for BP merely stated that BP was entitled
to utilise the provisions
of the Act. Entitlement is, however,
somewhat different from placing all relevant facts before a court in
order to exercise the
entitlement. Had the magistrate been made aware
that the copyright in the goods is in dispute and that Ellies had no
intention
of trading in the goods until the dispute between the
parties was resolved, the second and third warrants would, no doubt,
not
have been issued.
[65]
Exacerbating matters, BP knowing full
well that Ellies had attorneys on record, laid a second and third
complaint without the courtesy
of informing Ellies' attorneys of
their intention.
[66]
BP's conduct as a whole and more
specifically its lack of utmost good faith in obtaining the second
and third warrants, justifies
the setting aside of the warrants.
[67]
The facts
in
casu
are a text book example of an
alleged copyright infringement that should have been resolved by
resorting to civil litigation.
DECLARATION
THAT GOODS ARE NOT COUNTERFEIT
[68]
Ellies relies on section 7(4) of the Act
which provides that any person whose goods have been seized may apply
to a court for a
determination that the goods are not
counterfeit and for the return of the goods.
[69]
In
setting aside the warrants, Ellies is entitled to the return of its
goods and it is consequently not necessary to decide this
issue.
[See:
Cadac v Weber-Stephen
Products Co2005
BIP 439 WLD
("Cadac WLD']
MISAPPROPRIATION
OF CONFIDENTIAL INFORMATION
[70]
During
the raid, the fifth respondent was requested to obtain information
from the applicant's computer system. To this end the
employees of
the fifth respondent made mirror-images of the entire accounting
database and the mail server. According to Mr Bock
the hard drives on
which the copies were made were simply placed in a plastic bag and
carried away.
[71]
Ellies
alleges that the aforesaid conduct by the employees of the fifth
respondent resulted in a misappropriation of its confidential
information.
[72]
In
view of the aforesaid assertion, Ellies claims extensive relief
against the fifth respondent to wit:
"C.1 The Fifth
Respondent is ordered, within 10 days to file with the Registrar and
serve on the Applicant's attorneys
of record a full and comprehensive
written report, in the form an affidavit deposed to under oath and
including with reference
to annexed documents and/or data-messages,
recording the following:
a.
The
precise terms of its appointment, mandate or request, and whether it
was from SAPS or from or on behalf of the First Respondent
or its
attorneys, being the reason for its presence and attendance at the
premises of the Applicant during the raid on 11 and 12
December 2017
(and subsequently);
b.
The
precise terms of its acceptance of such mandate and/or request,·
c.
Whether
anyone in its employ or service at any stage saw or read or inspected
or took any advice on the warrant issued on 11 December
2017 by the
Magistrate: Johannesburg Central,·
d
Precisely what action was taken as a result·,
e.
Precisely
what instructions were issued to anyone in the employ or service of
the Fifth Respondent concerning in any way the purpose
and/or
execution of the mandate
f.
Precisely
what happened to the mirror-image of the Applicant's Accounting
Database that was made by the Fifth Respondent (or at
it instigation
or under its control or that of the First Respondent or its
attorneys) and which was removed from the premises by
the Fifth
Respondent·,
g.
In particular, to whom was access
to the said(copy of the) database (or parts thereof) given, by what
means, where, and on what
occasions;
h.
Whether any copies of any part of
the said database were made; and, if so, by whom, how, when, by what
means, and what parts,·
i.
What happened to such copies,·
j
Who requested such access and/or such copies, how, and on what
grounds,·
k.
Precisely
what happened to the mirror-image of the Applicant's email server
that was made by the Fifth Respondent (or at its instigation
or under
its control or that of the First Respondent or its attorneys) and
which was removed from the premises by the Fifth Respondent,
I.
In particular, to whom was access
to the said (copy of the} server (or parts thereof) given, by what
means, where, and on what occasions·,
m.
Whether any copies of any part of
the said server were made; and, if so, by whom, how, when, by what
means, and what parts·,
n.
What happened to such copies; and
o.
Who requested such access and/or
such copies, how, and on what grounds.
C.2 The Fifth
Respondent is ordered to deliver up to the Applicant the storage
media on which the said mirror-images
were made, same to be retained
by the Applicant pending the outcome of the further proceedings as
set out below:
C.3. The Fifth Respondent
is ordered, in the presence of a representative of the Applicant and
to his/her satisfaction, permanently
and irretrievably to delete from
any other medium in its possession or under its control, all and any
information of any sort copied,
mirrored, retrieved or taken from the
Applicant's servers.
"
[73]
In the answering affidavit, Bick dealt
in detail with the steps that were taken in the presence of
Lieutenant Colonel Kubeka, to
properly seal the bags containing the
information retrieved from Ellies' computer system by employees of
the fifth respondent.
On each occasion a photo was taken of the
properly sealed bag. The photos are attached to the answering
affidavit.
[74]
The sealed bags were taken by Lieutenant
Colonel Kubeka to the counterfeit goods depot of the second
respondent and deposited with
the remainder of the seized goods.
[75]
The fifth respondent's involvement,
according to the papers, ceased once the hard drives containing
Ellies' information was handed
to Lieutenant Colonel Kubeka.
[76]
Consequently, there is no factual basis
to support the assertion that the fifth respondent has
misappropriated Ellies' confidential
information.
[77]
In the result, I am not prepared to
grant the relief sought under this heading.
REFERRAL
TO AN ENQUIRY
[78]
Section
17(1) and section 10(1)(c) of the Act makes provision for payment by
the complainant of any damages suffered by a person
whose goods were
unlawfully seized, removed and detained.
[79]
It follows from the setting aside of the
warrants that the seizure, removal and detention of Ellies' goods
were wrongful and that
they are entitled to damages.
[See:
Cadac WLD supra]
[80]
The only question that remains is the
proper procedure to be followed in determining the quantification of
the damages. The Supreme
Court of Appeal in
Cadac
SCA supra
dealt with the procedure
to be followed in cases of this nature and a similar order will
follow herein.
[81]
I pause to mention, that BP submitted,
that the setting aside of the first search and seizure warrant is no
longer necessary due
to the fact that the goods are presently
detained in terms of the second and third search and seizure warrant.
For purposes of
the determination of damages I, however, deem it
necessary to issue an order in respect of the first search and
seizure warrant.
COUNTER-
APPLICATION
[82]
In order to succeed with the relief
claimed in the counter-application, BP needs to allege and prove
that:
[82.1] It has a
prima
facie
right to prevent the sale of Ellies' goods pending the
finalisation of the pending trial;
[82.2 there is a
well-grounded apprehension of irreparable harm if the interdict is
not granted;
[82.3] the balance of
convenience favours the granting of the interim interdict; and
[82.4] there is no other
satisfactory remedy.
[See:
Setlogelo v Setlogelo
1914 AD 221at
227]
Prima
facie
right
[83]
The approach in determining whether an
applicant claiming an interim interdict has established a
prima
facie
right, has been set out in
Webster v Mitchell
1948
(1) SA 1186
Wat 1189 as follows:
"[T]he right to be set up
by an applicant for a temporary interdict need not be shown by a
balance of probabilities. If it
is 'prima facie established though
open to some doubt' that is enough. ...
The proper manner of approach I
consider is to take the facts as set out by the applicant, together
with any facts set out by the
respondent which the applicant cannot
dispute, and to consider whether, having regard to the inherent
probabilities, the applicant
could on those facts obtain final relief
at a trial. The facts set up in contradiction by the respondent
should then be considered.
If serious doubt is thrown on the case of
the applicant he could not succeed in obtaining temporary relief, for
his right prima
facie established, may only be open to 'some doubt'.
But if there is mere contradiction, or unconvincing explanation, the
matter
should be left to trial and the right be protected in the
meanwhile, subject of course to the respective prejudice in the grant
or refusal of interim relief”
[84]
In
Gool
v Minister of Justice
1955 (2) SA
682
C at 688D-E Ogilvie Thompson J commented as follows on the above
passage:
“
With the greatest
respect, I am of opinion that the criterion prescribed in this
statement for the first branch of the inquiry thus
outlined is
somewhat too favourably expressed towards the applicant for an
interdict. In my view the criterion on an applicant's
own averred or
admitted facts is: should (not could) the applicant on those facts
obtain final relief at the trial. Subject to
that qualification, I
respectfully agree that the approach outlined in Webster v
Mitchell... is the correct approach for ordinary
interdict
applications.”
[85]
The right in question is BP's alleged
copyright in the goods. In its answering affidavit, BP clearly stated
that:
“
The basis for this
interim relief is the infringement of the first respondent's
copyright in the RCU's. I address the necessary
elements for the
interdictory relief further below.”
[86]
Notwithstanding the aforesaid, Mr Michau
SC advanced further grounds on which the interim interdict is sought
to wit, passing off
and unlawful competition. This was not the case
Ellies had to meet on the papers and I proceed to deal with the
grounds for the
interim interdict that BP relied upon in its
answering affidavit.
[87]
Both parties provided lengthy highly
technical explanations in support of their divergent views in respect
of the question whether
it is possible to claim copyright in respect
of the technology of RCU's. For present purposes a short summary will
suffice.
[88]
In the complaint affidavit Bick
explained that the work to which copyright is claimed, is an
infra-red protocol, referred to as
the "MNECIR protocol".
Each of the buttons on the remote control, when pressed, generates a
unique binary code (or digital
command) which is transmitted to the
decoder by way of a beam of infra-red light.
[89]
Bick states that he instructed a Korean
company, Seoby Electronics Co Ltd, to develop a new infra-red (IR)
remote control device
for use with a new version of the
Multichoice/DSTV decoder. A unique combination of binary codes was
utilised by an employee of
Seoby, one Kim Yong Tae, for the
technology of the RCU. These codes were chosen by Bick and thus, Bick
asserts, BP has a copyright
to the technology of the DSTV RCU's.
[90]
Ellies responded by stating that it is a very simple exercise to
emulate the infrared protocol and
the binary codes for each command.
The infrared protocol and binary codes are built into commonly
available RCU's.
[91]
According to Ellies it is common knowledge that, digitally,
information is represented in binary form.
All data can be
represented as a combination of binary O' s and 1's. Thus, the
decimal number 0, for example, is typically represented
by the binary
combination 0000. Decimal number 1 is binary 0001, 2; is 0010, 3 is
001 and so forth. The combinations that can be
created are endless.
[92]
Ellies states that there are, literally,
thousands of binary codes that had at one stage or another been
used for consumer
infrared wireless communication, and particularly
RCU's. The creation of a set of binary codes in respect of a
particular RCU is
simply applying the well-known principles of the
binary code to create a specific combination for the remote in
question.
[93]
According to Ellies, the protocol relied
upon by BP, is, in any event, in itself valueless in the absence of a
variety of other
electronic circuitry. A remote control is composed
of .a circuit board to which is attached an integrated circuit
("IC"),
an infrared ("IR") light emitting diode
("LED")and various other buttons. The binary codes are, but
one of
the various elements that ensures the proper functioning of a
RCU.
[94]
Ellies asserts that the software in a microchip inserted into an RCU
ensures that the desired commands
created by the binary code is
dispatched to the infrared LED transmitter, which in turn transmits
the code from the storage into
the light, which is then pulsed out.
Ellies alleges that the software in the microchip utilised in the
imported RCU's is wholly
different from that in BP's RCU. The fact
that both can send the same signal does not make them the same
program. Any allegation
that the imported RCU's infringe BP's
so-called copyright is as a result, according to Ellies, dispelled.
[95]
Insofar as the claim to a "literary"
work is concerned, Ellies pointed out that, if it is possible to
claim any kind of
right to the binary code, Kim Yong Tae, the
employee of Seoby Electronics is the author of the protocol. In the
result, BP is not
the author of the protocol and any claim based on a
"literary" work must fail.
[96]
The aforesaid expose, albeit in the most
basic terms, points to one thing and one thing only - serious doubt
is thrown on BP's right
to claim intellectual property to the
protocol be it by way of copyright or in the form of a literary work.
[97]
It follows that BP has not succeeded in
establishing a
prima facie
right
for the purposes of an interim interdict.
[98]
In the absence of a
prima
facie
right, there is no need to
consider the remainder of the requirements for an interim interdict.
The application for an interim interdict
stands to be dismissed.
COSTS
[99]
Mr Salmon SC requested that a cost order
on an attorney and client scale be granted against BP. The basis for
such a costs order
is
inter alia,
BP's unreasonable conduct and the
fact that their conduct amounts to an abuse of process.
[100]
In view of my findings
supra,
I agree that a special cost order is
called for in the circumstances.
ORDER
[101]
In the premises, I grant the following
order:
1.
The
search and seizure warrants issued by the Magistrate: Johannesburg
Central on respectively 11 December 2017, 17 May 2018 and
29 May 2018
are set aside.
2.
The Sixth Respondent is ordered to
release the goods that was seized in terms of the second and third
search and seizure warrants.
3.
The Registrar of the High Court, Gauteng
Division, Pretoria is directed to fix a date for an inquiry to be
conducted by way of a
High Court trial for the purposes of:-
3.1
the
determination of the amount of compensation to be paid by the First
Respondent to the Applicant as contemplated in
section 10(1)(c)
of
the
Counterfeit Goods Act 37 of 1997
; and
3.2
the
payment by the First Respondent to the Applicant of the amount of
compensation found to be due to the Applicant pursuant to
the
determination, together with interest on such amount at the
prescribed rate of interest from the date of such determination
until
the date of payment and the costs of the determination.
4.
The
Applicant shall within 20 (twenty) days of the date of this order
serve upon the Respondents and file a declaration particularizing
the
damages allegedly suffered by it as a result of the seizure of its
goods under the search and seizure warrant issued on 11
December
2017, 17 May 2018 and 29 May 2018.
5.
The
First Respondents if so advised, shall with 10 (ten) days of the
service of the Applicant's declaration, file a plea thereto.
6.
The
Uniform Rules of Court relating to discovery, inspection and all
other matters of procedure shall apply to the determination.
7.
The
parties are authorised, on notice to the other parties and should it
be required by one or both of them, to make application
to the High
Court of South Africa, Gauteng Division, Pretoria to add to, or vary
the above order so as to facilitate the conducting
of the
determination and generally to make application for further
directions in regard thereto.
8.
The
first respondent is ordered to pay the costs of the application on an
attorney and client scale, which costs includes the cost
of two
counsel.
9.
The
counter-application is dismissed with costs, which costs to include
the costs of two counsel.
N.
JANSE VAN NIEUWENHUIZEN
JUDGE
OFTHE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
DATES
HEARD
23, 24 and 25
th
of April 2019
JUDGMENT DELIVERED
11 July 2019
APPEARANCES
Counsel
for the Applicant:
Advocate O. Salmon SC and
Advocate I. Learmonth
(082 577 2439/073 659 4689))
Instructed
by:
Kampel
Kaufmann Attorneys
c/o Friedland Hart Solomon &
Nicolson
(012 424 0200)
Ref: Mr Painter/wU34554
Counsel
for the First Respondent:
Advocate R.
Michau SC and K. lIes
(083 288 2345/011 290 4000)
Instructed
by-
Dessington
Marais Inc.
c/o Van Stade van der Ende Inc
(012 940 8345)
Ref: LIT0117 (Mr A Dessington/LIT 0100)