A bitter pill to swallow

by | Nov 7, 2017 | Business and Marketing

Counterfeiting generally affects luxury goods, but now a new and worrying trend of counterfeiting fast-moving consumer goods, wine and spirits is gripping markets worldwide.

Counterfeiting is a practice where goods, often of an inferior quality, are manufactured and sold using an imitation of another’s intellectual property rights (trade marks or copyright) without their permission. Consumers are led to believe what they are buying is a genuine product, when in fact it is a fake.

Traditionally, counterfeiters have targeted well-known brands mainly in the clothing and electronics sectors. However over the years they’ve expanded their operations to include counterfeit pharmaceuticals, motor spares and recently wine and other liquor products.

Counterfeiters feed off a brand’s popularity – and wine brands are no exception. Huge financial and reputational damage to a winery’s business may result if counterfeit versions of its wines find their way onto restaurant tables and into homes. Those unfortunate enough to consume the counterfeit wine will be left with a bad taste in their mouth in respect of both the wine and the wine brand.

However they are distributed, fake fast-moving consumer goods (FMCG) and liquor follow the same sales channels as the real deal, so they move quickly. Generally, by the time a raid or visit is arranged, the goods have been sold or dispatched. The abundance of counterfeit goods is sold on by large wholesalers, retailers to street vendors.

“The emergence of FMCG and liquor brand counterfeiting leaves our clients with a legal conundrum,” says Steven Yeates, a partner at intellectual property law firm Adams & Adams. “We’ve had to help authorities develop new approaches to our traditional anti-counterfeiting methods – including a tiered approach that requires a combination of soft measures before we carry out raids. Failing these, we risk losing stock that could potentially endanger thousands of lives.”

So what legal measures are available to winemakers in South Africa to combat counterfeiting? The Counterfeit Goods Act provides mechanisms for owners of intellectual property (trade marks and copyright) to take legal action against counterfeiters on both a civil and criminal basis. In order to rely on the Counterfeit Goods Act, a registered trade mark or copyright for a specific work is required. So as a first step it’s important to ensure your trade marks (such as wine names and logos) are registered and that a proper record is kept of the ownership of copyright in your wine labels. You can then rely on your registered trade mark or copyright to prevent others from dealing in goods bearing the subject matter of your intellectual property right or a colourable imitation thereof. (“Colourable” refers to a calculated attempt to deceive.)

If you suspect your wine has been counterfeited, you may lodge a criminal complaint with the South African Police Service and take civil action against the suspected counterfeiter to prevent further infringement of your intellectual property rights. You may also apply to the Commissioner for Customs and Excise to seize and detain suspected counterfeit wines bearing your registered trade mark or wine label to prevent them from being imported or exported.

The United Nations Office on Drugs and Crime (UNODC) estimates that globally the counterfeit business is in excess of $250 billion a year and hundreds of billions more if pirated digital products and domestic counterfeit sales are included. A massive 63.2% of knockoffs originate from China and American brands are the most counterfeited. In South Africa alone, an average of three raids a day are carried in the fight against counterfeiting. Counterfeiting has become as profitable as trading drugs and illegal narcotics and is a lot less risky. A report by the World Health Organisation (WHO) indicates that nearly a quarter of pharmaceuticals – including HIV/Aids, TB and malaria treatments – in circulation in developing countries are of a poor and unacceptable quality. Such medication is at best ineffective and at worst deadly.

*Steven Yeates is a trade mark attorney and a partner at Adams & Adams.

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