About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2020
>>
[2020] ZASCA 154
|
|
Beyond Platinum (Pty) Ltd v Ellies Electronics (Pty) Ltd (73/2020) [2020] ZASCA 154; [2020] HIPR 157 (SCA) (27 November 2020)
Links to summary
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 73/2020
In
the matter between:
BEYOND PLATINUM (PTY)
LTD
APPELLANT
and
ELLIES ELECTRONICS (PTY)
LTD
FIRST RESPONDENT
ROBRIDGE CONSTRUCTION CC
T/A
EASY
STORE
SECOND RESPONDENT
MINISTER
OF TRADE AND INDUSTRY
THIRD RESPONDENT
MINISTER
OF POLICE
FOURTH RESPONDENT
CYANRE
FIFTH RESPONDENT
MUHAMMAD MOOLA STORAGE CC
T/A
ALLIED STORAGE SOLUTIONS
SIXTH RESPONDENT
Neutral
citation:
Beyond
Platinum (Pty) Ltd v Ellies Electronics (Pty) Ltd
[2020]
ZASCA 154
(27 November 2020)
Coram:
NAVSA, PONNAN and
CACHALIA JJA and MATOJANE and MABINDLA-BOQWANA AJJA
Heard:
13 November 2020
Delivered:
This judgment was
handed down electronically by circulation
to
the parties' representatives by email, publication on the Supreme
Court of Appeal website and release to SAFLII. The date and
time for
hand-down is deemed to be 09h00 on 27 November 2020.
Summary:
Counterfeit Goods Act
37 of 1997
– whether search and seizure warrants lawfully
obtained – whether interim interdict to preclude dealing in
offending
goods properly sought.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Janse van Nieuwenhuizen J
sitting as a court of first instance):
The
appeal is dismissed with costs, including costs consequent upon the
employment of two counsel.
JUDGMENT
Mabindla-Boqwana
AJA (Navsa, Ponnan and Cachalia JJA and Matojane AJA concurring):
[1]
This appeal concerns the
interpretation and application of provisions of the Counterfeit Goods
Act 37 of 1997 (the Act) in terms
of which the appellant, Beyond
Platinum (Pty) Ltd (BP), caused to be issued three search and seizure
warrants by a magistrate in
Johannesburg, authorising a search for
and the seizure of alleged counterfeit goods, at the business
premises located at Village
Deep Johannesburg, of the first
respondent, a listed company, Ellies Electronics (Pty) Ltd (Ellies).
[2]
The Act prescribes the procedure
to be followed to obtain such a warrant. ‘Protected goods’
in terms of the Act are
inter alia defined as ‘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’. The purpose of
the Act is to protect against the unlawful application of
intellectual property rights and
against the release of counterfeit goods into the channels of
commerce. ‘Counterfeiting’
is defined in s 1 of the
Act.
[1]
Section 2 makes it an offence to
trade in counterfeit goods and to possess them for that purpose.
Section 3 provides for the laying
of a complaint by a person who has
an interest in ‘protected goods’, whether as owner,
licensee, importer, exporter
or distributor where such person
reasonably suspects that an offence referred to in s 2 has been or is
being committed or is likely
to be committed.
[3]
In terms of s 3(1) of the Act,
persons identified in the preceding paragraph, may lay a charge with
an inspector, who, may include
a police official as defined
in
s 1(1)
of the
Criminal Procedure Act 51 of 1977
, holding the rank of
sergeant or a higher rank. The inspector, in turn, in terms of s 4 of
the Act, either on the strength of the
complaint or the strength of
any other information at his or her disposal, if
he
or she has reason to suspect that an offence contemplated in s 2(2)
of the Act has been or is being committed or is likely to
be
committed, or that an act of dealing in counterfeit goods has taken
or is taking place or is likely to take place, has the power
of
search and seizure set out, fairly extensively, in s 4.
[4]
The powers of search and seizure
referred to in the preceding paragraph may however, only be exercised
if a warrant has been authorised
by a judge of the high court or a
magistrate who has jurisdiction in the applicable area, if it appears
to the judge or magistrate,
from information presented on oath or
affirmation, that there are reasonable grounds for believing that an
act of dealing in counterfeit
goods has taken or is taking place or
is likely to take place.
[5]
Pursuant to a search and seizure
the inspector is required to complete an inventory and to give notice
to the parties concerned,
including the suspect, in this case Ellies,
of the action taken and of where the goods are being kept.
[2]
The complainant must also be
notified of the right to lay criminal charges with the police and has
three days after receiving such
notice in which to do so.
[3]
If upon the expiry of that three
day period a criminal charge has not so been laid, the relevant
seized goods must be released to
the suspect.
[4]
Goods must also be released if
the State fails, within ten working days after the date of the notice
given to the suspect, to inform
the suspect by further written notice
of its intention to institute criminal proceedings against him or her
for having committed
an offence. Notice of intention to institute
civil proceedings must similarly be given within ten days by the
complainant.
[5]
That then is the applicable
scheme of the Act.
[6]
I now turn to the facts of the
present case. BP, on its website, describes
itself,
in alliance with a company in Korea, as a developer and manufacturer
of radio frequency and infra-red remote controls units
(RCUs). These
devices are used in a variety of applications in the domestic space,
to control appliances including television sets
and decoders, which
receive signals, from a source, that provides the basis for
television channel programmes. In the present case
the RCUs in
question, which were the subject of the search and seizure warrants,
are used to
communicate
with or control a set-top box (a decoder) employed by DSTV, a
well-known broadcaster of television programs.
[7]
Ellies was established in 1979.
It is a leading Southern African manufacturer, importer, wholesaler
and distributor of lighting,
electrical and electronic products. It
also supplies aerial and satellite equipment, accessories and
hardware to commercial entities
and the public at large. Ellies
presently employs hundreds of people and has a nationwide presence.
Its assertion that it is a
household name in South Africa is
unchallenged.
[8]
For many years Ellies has been
buying RCUs from a variety of sources and packaging them for onward
sales as Ellies’ products.
They are replacements for original
equipment which get lost, broken, chewed by dogs, dropped in swimming
pools and the like. Judging
from this litigation the market in
relation to these products is substantial.
[9]
According to Ellies, the
technology in respect of RCUs is not new. They have a long history
and are utilised in different forms
premised on the same basic
technology, which is that frequencies are used on infra-red emissions
to enable communication between
an RCU and a receiving device. Simply
put, the RCU and device talk to each other in binary code by means of
an infra-red signal.
All that this means in the digital space is that
information is represented in binary form, it allows for numbers and
letters to
be represented and transmitted in this case by infrared
light pulses and permits communication between an RCU and a device.
Ellies
explained that universal remote controls are becoming common
place. RCUs, according to Ellies, have been around for a long time
and their manufacturers are plentiful.
[10]
For some time before the
problems in the present case arose Ellies had been buying RCUs from
BP and on-selling them in Ellies’
packaging. The RCUs are
designed to look like the original DSTV RCU. The RCUs were sold
through
major retail
chains and through Ellies’ own distribution network. During the
middle of 2017, Ellies took a decision to source
RCUs directly from a
manufacturer in China rather
than
from
BP. This decision
was motivated by
a lower
price resulting in higher profit margins for Ellies.
[11]
On 11 December 2017, shortly
before the Christmas period, acting on a warrant obtained at the
instance of BP, which had laid a complaint
in terms of s 3 of the Act
and, after the steps set out earlier were followed, Inspector
Khubeka, a senior police official, arrived
at Ellies’ head
office with a posse of 20 people. They were there to execute the
warrant and to conduct a search and seizure
operation on the basis
that Ellies was trading in counterfeit goods, more particularly any
RCUs not sourced from
BP.
BP claimed that the RCUs that were being seized were counterfeits of
its RCUs. It asserted intellectual property rights in respect
of the
RCUs.
[12]
BP, in its complaint and in the
litigation that ensued, claimed that its RCUs embodied an infra-red
protocol, known as MNEC IR protocol
that it had developed. According
to BP, the protocol constitutes a computer program or literary work
as defined
in
the
Copyright Act 98
of
1978
.
[6]
BP
claimed
to
be
the
author
of
the
protocol.
It alleged that the MNEC IR protocols were developed in or around
2009 by one Kim Yong Tae, a citizen of the Republic
of Korea who was
an employee of a Korean company known as Seoby Electronics Company
Ltd, which BP had instructed to develop the
contested infra-red
protocols, by providing the necessary specifications.
[13]
The search and seizure operation
had apparently, been conducted in a very abrupt and aggressive
manner.
This caused
panic and embarrassment to the
company and its employees. This
extended to Ellies’ customers who were apparently written
letters by BP to stop trading in
the offending products. At a huge
loss to it, Ellies requested all of its customers to remove the stock
from their shelves and
return it to Ellies.
[14]
Millions of rands worth of
Ellies’ stock was seized as was their entire accounting record
base and email servers. BP’s
attorney was also in attendance.
The seized goods were kept in detention at the premises of a
designated Counterfeit Goods Depot
[7]
of the second respondent,
Robridge Construction CC t/a Easy Store (Easy Store).
[15]
Following the aforesaid seizure
of goods, more RCUs ordered by Ellies from China arrived in shipping
containers. Without admission
of liability and in order to
demonstrate good faith, while the copyright issue was being
investigated, Ellies’ attorneys
addressed a letter to BP’s
attorneys, dated 11 January 2018, wherein it undertook to quarantine
the products in question
on the following basis:
‘
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
10.3 below. In so doing our
client will keep comprehensive records of the quantity 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/agrees from the cage controlled by your client who will hold
the keys. Your client is also
welcome to appoint a security guard if
it so wishes to ensure compliance with the undertaking.’
[16]
This offer was accepted by BP
via an email from its attorneys dated 12 January 2018 (the January
2018 agreement). On 29 January
2018 BP issued summons against Ellies
claiming damages for infringement of its alleged copyright. Ellies
filed a notice of intention
to defend the action and thereafter in
terms of
rule 30
a notice that BP’s particulars of claim be set
aside as constituting an irregular proceeding on several grounds. As
can be
gathered from the letter set out in the preceding paragraph,
Ellies, in order to deal with holiday period demand was, in the
interim,
compelled to purchase RCUs from BP.
[17]
Three months later, despite the
above, without warning, BP sought and obtained two further search and
seizure warrants, one issued
on 17 May 2018 (the second warrant) and
the other on 29 May 2018 (the third warrant). The second warrant
related to the goods that
were safely stored under lock and key, ie
securely embargoed in terms of the agreement between the parties. The
third warrant concerned
goods that were kept at the designated
Counterfeit Goods Depot (Easy Store’s premises) pursuant to the
first warrant. Both
warrants were executed on 6 June 2018 at
the premises of Ellies and Easy Store respectively. The reasons
advanced in the
complaint affidavit deposed to by BP’s attorney
in support of these warrants were essentially the following:
‘
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.
. . .
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 counterfeit remote
controls that are identified in the
section 7
(1) (d) notice
(annexure “AD 2”) 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.’
[18]
Earlier, on 6 June 2018, Mr Paul
Kampel, Ellies’ attorney, had telephoned Mr Anthony Dessington,
BP’s attorney, to enquire
whether BP’s attorneys could
serve on them
an
application Ellies had launched in the Gauteng
Division
of
the High Court,
Pretoria (high court) for the setting aside of the first warrant. In
the founding affidavit in support of the application,
Ellies asserted
that BP held no intellectual property right in the RCU technology,
that the technology had been developed by a
Japanese corporation in
the past and was commonplace, that the MNEC protocol was not a
computer programme and that if this had
been properly explained to
the inspector and the magistrate they would have appreciated that
Ellies could independently have created
their own computer programme,
which they did, that generates signals readable by devices which
recognise the IR protocol.
[19]
No mention was made by Mr
Dessington during the telephone conversation mentioned above, of the
further warrants that were about
to be executed on Ellies’ and
Easy Store’s premises on that very day. The issuance and
execution of the two further
warrants resulted in Ellies
supplementing its papers and amending its notice of motion. In turn,
BP brought a counter-application
seeking an interim interdict geared
towards preventing Ellies from trading in the seized goods pending
the outcome of the action
it had instituted against Ellies.
[20]
The application brought by
Ellies served before Janse van Nieuwenhuizen J in the high court, who
granted an order setting aside
all three warrants and ordering the
release of the goods seized in terms of those warrants. She further
directed that an inquiry
be conducted in order to determine damages
suffered by Ellies as a result of such search and seizures. To show
her displeasure
at the way it had behaved she granted a punitive
costs order against BP and in effect dismissed its counter-
application. The appeal
by BP is with her leave.
[21]
The first issue for
determination is whether the second and third search and seizure
warrants were obtained lawfully. The second
is whether BP was
entitled to the interim interdict sought in the counter-application.
Counsel for BP rightly conceded that if
the appeal on the first issue
failed that disposed as well of the second issue.
[22]
In their papers and written
argument, parties devoted much time and attention to
intellectual property rights
issues, including the
question
of copyright and whether the MNEC IR protocol is a computer program
or literary work. This matter has less to do with those
questions
(which are issues for the pending action) and more to do with the
interpretation and application of the Act.
[23]
The remedies contained in the
Act are far-reaching and highly invasive. They impact negatively upon
constitutionally enshrined rights
to privacy, property ownership and
fair trial of a suspected trader. It is settled that these provisions
should be resorted to
only when it is justifiable to do so.
[8]
That is, when ‘there are
reasonable grounds for
believing
that an act
of
dealing
in
counterfeit goods has taken or
is
taking place.’
[9]
As was stated in
LA
Group Limited and Another v B &
J
Meltz (Pty) Limited and Others
,
[10]
the use of the word ‘reasonable’
sets a standard that must be met by a complainant
before
a
warrant
can
be
granted.
The
remedies
are
directed at
preventing
fraudulent conduct and not ‘to give a party to a genuine trade
mark [or copyright] dispute a weapon to be used
in
terrorem
against its
opponent.’
[11]
[24]
Having
regard to what is set out in the preceding paragraph and considering
that warrants are sought and granted ex parte, it is
incumbent on a
complainant to place all the relevant information before the judge or
magistrate who has to decide the matter and
to ensure that it is in
compliance with the requirements of the Act.
[12]
[25]
It is common cause that no
notice
of
intention
to institute
criminal proceedings was ever sent to Ellies. BP says as much in its
complaint affidavit when it sought the issuance
of the second and
third warrants as quoted in para 17 above. Because of the criminal
proceedings not being pursued at the expiry
of the 10-day period
after the notice of seizure was given, Ellies was entitled to have
the goods that were kept at Easy Store’s
premises released back
to it. The inspector ought to have directed the release of the goods
in terms of s 9(3)
(a)
.
BP, instead, sought to have the timelines for the institution of
criminal proceedings reinstated by
deceptively
seeking a second and third
warrant. There is some force to the contention by Ellies that the
first warrant was unlawfully procured
but there is no need to
interrogate that question any further as it was common cause that the
first warrant had lapsed and in any
event had been overtaken by the
second and third warrants.
[26]
As to the
second
warrant, all the offending goods were still in quarantine when the
warrant was sought and there was no indication that the
undertaking
to keep the goods so quarantined would not be kept. Ellies in its
undertaking had offered BP the key to the premises
where the goods
were being kept and had offered it the option of placing a security
guard there to ensure compliance. There were
no reasonable grounds to
suspect that in respect of those goods an act of dealing in
counterfeit goods was taking place. There
was no basis for, nor was
any provided for suspecting that there were any more allegedly
offending RCUs on Ellies premises. Significantly,
no evidence was
presented that any remaining goods were found at Ellies’
premises.
[27]
The third warrant related to the
goods that were kept at the depot,
subsequent
to the first search and seizure. There was no indication that those
goods could then enter the marketplace at the instance
of Ellies. The
second and third warrants ought not to have been sought or granted.
All the warrants were correctly set aside and,
for all the reasons
set out above the appeal must fail.
[28]
As to costs, BP did not seek
this court’s interference with the punitive costs order in the
event it were to be unsuccessful
in the appeal. In any event, its
conduct justified the granting of that order. On appeal, Ellies
sought the costs on the normal
party and party scale.
[29]
In the result, the following
order is issued:
The
appeal is dismissed with costs, including costs consequent upon the
employment of two counsel.
____________________
N P MABINDLA-BOQWANA
ACTING JUDGE OF APPEAL
Appearances:
For
appellant: R Michau SC with K D Iles
Instructed
by: Dessington & Dessington Incorporated, Johannesburg
Symington
De Kock Attorneys, Bloemfontein
For
first respondent: O Salmon SC with I Learmonth
Instructed
by: Kampel Kaufmann Attorneys, Johannesburg
Matsepes
Incorporated, Bloemfontein.
[1]
In s 1 of the Act: ‘counterfeiting’, inter alia, 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’;
and ‘counterfeit goods’ are defined
as ‘goods that
are the result of counterfeiting, and includes any means used for
purposes of counterfeiting’.
[2]
Section 7.
[3]
Section 7(2)(a) of the Act read with s 9(1)(a).
[4]
Section 9(1)(b).
[5]
Section 9(2).
[6]
In terms of the
Copyright Act, a
‘computer program’
means ‘a set of instructions fixed or stored in any manner and
which, when used directly
or indirectly in a computer, directs its
operation to bring about a result’ and ‘literary work’
is defined
inter alia to include ‘tables and compilations,
including tables and compilations of data stored or embodied in a
computer
or a medium used in conjunction with a computer, but shall
not include a computer program’.
[7]
In terms of s 1 of the Act ‘counterfeit goods depot’
means ‘a place designated under section 23 to be a counterfeit
goods depot, and includes any place deemed by section 7(1)(c) to be
a counterfeit goods depot’. Counterfeit goods depots
are
designated by the Minister of Trade and Industry in terms of s 23(1)
of the Act.
[8]
LA Group Limited and Another v B & J Meltz (Pty) Limited and
Others
[2005] ZAGPHC 23
(23 February 2005) para 45. See also Cadac
(Pty) Ltd v Weber-Stephen Products Company and Anothers 2005 JDR
0704 (W) para 17.
[9]
Section 3(1) read with s 6 of the Act.
[10]
Ibid fn 8.
[11]
Cadac fn 8.
[12]
Schlesinger v Schlesinger
[1979] 3 All SA 780
(W);
1979 (4) SA 342
(W) at 349A.