THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable
Case No 543/03

In the matter between:

A M MOOLLA GROUP LIMITED

First Appellant
A M MOOLLA CLOTHING (PTY) LTD

Second Appellant
SALT OF THE EARTH CREATIONS (PTY) LTD
Third Appellant
KINGSGATE CLOTHING MANUFACTURERS
(PTY) LTD

Fourth Appellant
MAJESTIC CLOTHING MANUFACTURING
(PTY) LTD

Fifth Appellant
STAR  SHIRT AND CLOTHING (PTY) LTD

Sixth Appellant
RICKEMP (PTY) LTD

Seventh Appellant

and

THE GAP, INC

First Respondent
GAP (APPAREL) INC

Second Respondent
GAP (ITM) INC

Third Respondent
GAP INTERNATIONAL SOURCING (PTY) LTD
Fourth Respondent

Coram:
HARMS, STREICHER, FARLAM, CLOETE JJA and
PONNAN AJA

Heard:
23 NOVEMBER 2004
Delivered: 30 NOVEMBER 2004

Subject:
Counterfeit Goods Act 37 of 1997 – whether goods in transit or
transhipped through South Africa subject to provisions of Act

J U D G M E N T

HARMS JA/

HARMS JA
[1] This appeal concerns the interpretation of some provisions of the
Counterfeit Goods Act 37 of 1997 (‘the Act’). The factual background is
simple. The trade mark GAP is registered in 110 countries in the name of
one or more of the respondents (a group of affiliated companies to whom I
shall refer in the singular since their individual corporate identities are not
relevant). In South Africa the respondent holds registrations for the mark in
classes 3 and 30 while the marks THE GAP, THE GAP device and GAP
device are registered in the name of the third appellant in class 25 in respect
of clothing. In related litigation the TPD has expunged the third appellant’s
trade marks and simultaneously dismissed an application for expunging the
respondent’s marks. That judgment is presently on appeal and for present
purposes it will be assumed that the registrations in the name of the third
appellant are valid.

[2] The respondent sources clothing carrying the GAP trade mark in
Lesotho, Swaziland, Zimbabwe, Mauritius and Madagascar (countries where
it holds registrations for the mark) destined for marketing in other countries
where it also holds registrations. In other words, the source and destination
of the goods are countries where the goods are genuine and not counterfeit
(ie fraudulent imitations). The goods from Mauritius and Madagascar have

to be transhipped via South African harbours and goods from the landlocked
countries mentioned have to be transported through South Africa to a
harbour. Relying on the third appellant’s registered trade marks, the
appellants (a group of related companies) have used, attempted to use and
threatened to use the provisions of the Act to have the goods in transit
impounded by the SA Police Services or the Commissioner of Customs and
Excise. To prevent further interference with these ‘transhipments’, the
respondent sought and obtained an order from the Durban High Court
(Magid J) declaring that it is not unlawful under the Act (or the Trade Marks
Act 194 of 1993) for the respondent to export through or to import through
(ie, tranship through) the Republic goods bearing the GAP marks in
circumstances where such marks are placed on the goods outside of the
Republic and where such goods are not for sale in the Republic.

[3] The appellants allege that transhipment (by which I include the
transportation of goods in transit) is hit by the provisions of s 2(1)(f) of the
Act which provide that goods that are ‘counterfeit goods’ may not be
imported into or through or exported from or through the Republic except if
so imported or exported for the private and domestic use of the importer or
exporter, respectively.1 (The exception is not applicable and will be ignored

1 The full text of s 2(1) reads:
‘(1)  Goods that are counterfeit goods, may not—

in the discussion that follows.) A person who performs or engages in such an
act is guilty of an offence if certain requirements are present.2 The
respondent, on the other hand, submits that its actions are not hit by these
provisions.

[4] Before entering into a detailed analysis of the relevant provisions of
the Act, it is necessary to say something about its background and genesis.
Counterfeiting of trade marks has, historically and imperfectly, been dealt
with by different Merchandise Marks Acts.3 Piracy, which concerns
copyright infringement committed knowingly, was criminalised by
Copyright Acts and still is.4 International concern about counterfeiting and

(a)
be in the possession or under the control of any person in the course of business for the
purpose of dealing in those goods;

(b)
be manufactured, produced or made except for the private and domestic use of the person
by whom the goods were manufactured, produced or made;

(c)
be sold, hired out, bartered or exchanged, or be offered or exposed for sale hiring out,
barter or exchange;

(d)
be exhibited in public for purposes of trade;

(e)
be distributed—

(i)
for purposes of trade; or

(ii)
for any other purpose to such an extent that the owner of an intellectual property right in
respect of any particular protected goods suffers prejudice;

( f )
be imported into or through or exported from or through the Republic except if so
imported or exported for the private and domestic use of the importer or exporter, respectively;

(g)
in any other manner be disposed of in the course of trade.’
2 Section 2(2): ‘A person who performs or engages in any act or conduct prohibited by subsection (1), will
be guilty of an offence if—

(a)
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

(b)
the person failed to take all reasonable steps in order to avoid any act or conduct of the
nature contemplated in subsection (1) from being performed or engaged in with reference to the counterfeit
goods.’
3 The Merchandise Marks Act 12 of 1888 (C); Merchandise Marks Law 22 of 1888 (N); Merchandise
Marks Ordinance 47 of 1903 (T). These were replaced by the Merchandise Marks Act 17 of 1941 which is,
partly, still in force.
4 Copyright Act 98 of 1978 s 27.

piracy led to certain provisions in the TRIPs agreement,5 the preamble of
which speaks of the desire of member states –
‘to reduce distortions and impediments to international trade, and taking into account the
need to promote effective and adequate protection of intellectual property rights, and to
ensure that measures and procedures to enforce intellectual property rights do not
themselves become barriers to legitimate trade.’
The agreement requires of member states to provide certain minimum
measures for the protection of intellectual property rights but leaves it to them
to grant more should they wish to do so.6 As far as border measures are
concerned, art 51 is of significance for present purposes:
‘Members shall, in conformity with the provisions set out below, adopt procedures to
enable a right holder, who has valid grounds for suspecting that the importation of
counterfeit trademark or pirated copyright goods may take place, to lodge an application in
writing with competent authorities, administrative or judicial, for the suspension by the
customs authorities of the release into free circulation of such goods.  . . .  Members may
also provide for corresponding procedures concerning the suspension by the customs
authorities of the release of infringing goods destined for exportation from their territories.’
(My underlining.)

[5] In footnote 14, the terms ‘counterfeit trademark goods’ and ‘pirated
copyright goods’ are defined in these terms:

5 The GATT agreement on Trade-Related Aspects of Intellectual Property Rights.
6 Art 1.1: ‘Members shall give effect to the provisions of this Agreement.  Members may, but shall
not be obliged to, implement in their law more extensive protection than is required by this
Agreement, provided that such protection does not contravene the provisions of this Agreement.
Members shall be free to determine the appropriate method of implementing the provisions of this
Agreement within their own legal system and practice’

‘For the purposes of this Agreement:

(a)
"counterfeit trademark goods" shall mean any goods, including packaging,
bearing without authorization a trademark which is identical to the
trademark validly registered in respect of such goods, or which cannot be
distinguished in its essential aspects from such a trademark, and which
thereby infringes the rights of the owner of the trademark in question
under the law of the country of importation;

(b)
"pirated copyright goods" shall mean any goods which are copies made
without the consent of the right holder or person duly authorized by the
right holder in the country of production and which are made directly or
indirectly from an article where the making of that copy would have
constituted an infringement of a copyright or a related right under the law
of the country of importation.’

[6] As indicated, the Act prohibits certain acts in relation to ‘counterfeit
goods’ but, although it to some extent follows the wording of footnote 14, it
does not distinguish clearly between piracy and counterfeiting in the technical
sense. Instead, both are referred to as counterfeiting. In the definition of
‘counterfeiting’ the Act has also changed the wording of the footnote in such
a manner as to make the definition unintelligible. The definition of
‘counterfeiting’, to the extent that it deals with the counterfeiting of trade
marks, reads as follows:
‘Counterfeiting . . . means, without the authority of the owner of any intellectual property
right [meaning, for present purposes, the rights in respect of a trade mark conferred by the

Trade Marks Act] subsisting in the Republic in respect of protected goods [meaning, if one
paraphrases, goods bearing a trade mark registered under the Trade Marks Act],
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 . . ..
However, the relevant act of counterfeiting must also have infringed the intellectual
property right in question.’

[7] There are  serious shortcomings in the definition. First, the definition
tends to equate trade mark infringement with counterfeiting, something
contrary to TRIPs and something completely unnecessary.7  Counterfeiting, as
mentioned, is a fraudulent imitation. The use of the term ‘calculated’ is
especially confusing in this context because it has a special meaning in
trademark law, meaning ‘likely’.8 Why a developing country such as ours
should give greater trademark protection via criminal sanctions than, for
instance, the European Community, is not readily apparent. The greater
problem though, which is not a matter of policy but one of interpretation, is
the meaning of the proviso. What TRIPs did was to define counterfeit
trademark goods (I paraphrase) as goods with marks identical to registered
trade marks and which cannot be distinguished from the original and ‘thereby’

7 Cf Kitchin et al Kerley’s Law of Trade Marks and Trade Names 13 ed p734.
8 American Chewing Products Corp v American Chicle Co 1948 (2) SA 736 (A).

infringe a trade mark. The definition in the Act, on the other hand, by means
of the proviso, does not draw a conclusion of infringement but adds an
additional requirement of infringement (by the use of ‘however’ and ‘also’).
To explain by way of an example: the Trade Marks Act (s 34(10)) requires,
for infringement, use in the course of trade, obviously in this country since
trade marks are territorial. Must that, too, be established in addition to the acts
proscribed in s 2(1) of the Act under consideration? If it must, it would mean
that transhipment would not amount to a prohibited act because the goods
would then not be the result of ‘counterfeiting’. On the other hand, why list
the proscribed acts in s 2(1), many of which duplicate the requirement of ‘use
in the course of trade’? What then is the sense of the definition in covering
goods manufactured ‘elsewhere’ (ie not in this country)? The problems
accumulate if one attempts to harmonise the definition with the infringement
provisions of s 23 of the Copyright Act.

[8] In the light of the conclusion I have reached it is not necessary to try to
solve these problems. Reverting then to s 2(1)(f), it may be useful to quote the
salient wording again:
‘goods that are counterfeit goods, may not be imported into or through or exported from
or through the Republic . . .’.
For purposes of the present debate it will be assumed that should the
respondent, for instance, import GAP clothing into this country, it would

amount to a contravention of the provision. The first question is whether
‘transhipment’ is included in the words ‘imported into’ the Republic.
Transhipment (also spelt transshipment) is a concept well known to the
legislature and in ordinary legislative language a distinction is drawn
between the two concepts.9 Interpreting a 1918 statutory provision requiring
that a person who ‘imports’ wheat flour into the country must submit
immediately ‘after the importation’ certain returns and mix it with other
flour, our courts have held that the intention of the legislature could not have
been to include flour in transit to another country to fall under ‘import’.10
Magid J relied on these judgments to conclude that the same applied in this
case. This court, too, has held that goods in transit are not ‘imported’ into the
country for purposes of the Customs and Excise Act 91 of 1963.11

[9] Although TRIPs does not require countries to provide for impounding
counterfeit goods in transit, the European Community does. The rationale,
the European Court of Justice held, was that –
‘the external transit of non-Community goods is not completely devoid of effect on the
internal market. It is, in fact, based on a legal fiction. Goods placed under this procedure
are subject neither to the corresponding import duties nor to the other measures of
commercial policy; it is as if they had not entered Community territory. In reality, they

9 Eg Liquor Act 27 of 1989 s 136(1)(a), Explosives Act 15 of 2003 s 33(1)(h), Medicines and Related
Substances Control Act 101 of 1965 s 35(1)(xix); Drugs and Drug Trafficking Act 140 of 1992 s 1.
10 Beckett & Co Ltd v Union Government 1919 TPD 6 and on appeal 1921 TPD 142.
11 Tieber v Commissioner for Customs and Excise 1992 (4) SA 844 (A). Cf Capri Oro (Pty) Ltd v
Commissioner for Customs and Excise 2001 (4) SA 1212 (SCA).

are imported from a non-member country and pass through one or more Member States
before being exported to another non-member country. This operation is all the more
liable to have a direct effect on the internal market as there is a risk that counterfeit goods
placed under the external transit procedure may be fraudulently brought on to the
Community market . . ..’12

[10] In  a local context there may be good reason to wish to provide for
remedies to impound counterfeit goods in transit as there would be to
impound illegal drugs or weapons in transit. On the other hand, is there any
reason to impound goods, which are not in the ordinary sense of the word
‘counterfeit’, that have to be transhipped through this country from island and
landlocked countries, especially if no local rights holder is thereby affected
and no intellectual property right infringed? Counsel could not suggest any
and I cannot conceive of any. One has to assume that this country would not
wish to interfere with the legitimate trade of countries that, due to their
particular geographical location, are dependent for access and egress on this
country. In the light of the preamble of TRIPs quoted above, it is not lightly to
be presumed that legislation based on it would ‘become barriers to legitimate
trade’.

[11] The Act is intended to criminalise a particular species of fraud. What
the respondent does can by no stretch of the imagination be considered as

12 The Polo/Lauren Co LP v PT Dwidua Langgeng Pramata International Freight Forwarders [2000]
ETMR 535 (ECJ), [2000] EUE CJ 383 para 35.

fraudulent. Would the Act then wish to criminalise its actions? Since this Act
is a penal statute it must be interpreted restrictively without doing violence to
the wording.13 Where, as indicated, the word ‘import’ need not include
transhipment, as the cases referred to indicate, I do not believe that the
interpretation contended for by the appellants should prevail. I am mindful of
the fact that the position is different in the European Community and that the
respondents’ interpretation would mean that truly counterfeit goods might be
transhipped through this country without hindrance. However, if the
legislature wishes to have our law conform to the European model it should
do so in clear language.

[12] The appellants relied additionally on the phrase ‘be imported . . .
through . . . or . . . exported through the Republic’ in s 2(1)(f), but
immediately conceded that it has no discernable meaning. The respondent
suggested that it might refer to a case where the goods are landed in, say,
Durban to be cleared by customs at City Deep, Johannesburg; in such a case
there would be a reason to criminalise the importation through the country en
route to City Deep. Whether that is the meaning we need not to decide. What
we have to is whether the respondent imports ‘through’ this country. It does
not and, once again, if the legislature intended otherwise it was obliged to
make its intention clear.

13 Steyn Uitleg van Wette 5 ed p111-113 and cases there quoted.

[13] The judge below was consequently correct in his finding and the
following order is made:
The appeal is dismissed with costs, including the costs of two counsel.

__________________
L T C HARMS
JUDGE OF APPEAL

AGREE:
STREICHER JA
FARLAM JA
CLOETE JA
PONNAN AJA