The respondent (The Gap Inc and related entities) held GAP trade mark registrations in 110 countries, including South Africa (classes 3 and 30). The third appellant held registrations for THE GAP and GAP device marks in South Africa (class 25 for clothing), though these were subject to expungement proceedings. The respondent sourced GAP-branded clothing from Lesotho, Swaziland, Zimbabwe, Mauritius and Madagascar (where it held registrations) for marketing in other countries where it also held registrations. These goods had to be transhipped through South African harbours or transported through South Africa. The appellants (a group of related companies) relied on the third appellant's South African trade mark registrations to use or threaten to use provisions of the Counterfeit Goods Act 37 of 1997 to have goods in transit impounded by police or customs. The respondent obtained a declaratory order from the Durban High Court (Magid J) that it was not unlawful under the Act to tranship goods bearing GAP marks through South Africa where such marks were placed on goods outside South Africa and the goods were not for sale in South Africa.
The appeal was dismissed with costs, including the costs of two counsel. The declaratory order of the Durban High Court was upheld, confirming that it is not unlawful under the Counterfeit Goods Act for the respondent to tranship goods bearing GAP marks through South Africa where such marks are placed on goods outside South Africa and the goods are not for sale in South Africa.
Goods in transit or being transhipped through South Africa are not 'imported into' the Republic for purposes of section 2(1)(f) of the Counterfeit Goods Act 37 of 1997. In ordinary legislative language, a distinction is drawn between importation and transhipment. Where penal statutes are concerned, they must be interpreted restrictively without doing violence to the wording. The word 'import' need not include transhipment. If the legislature wishes to criminalize the transhipment of counterfeit goods through South Africa, it must do so in clear language.
The court made several non-binding observations: (1) There are serious shortcomings in the definition of 'counterfeiting' in the Act, particularly its tendency to equate trade mark infringement with counterfeiting, which is contrary to TRIPs and unnecessary. Counterfeiting is properly understood as fraudulent imitation. (2) The proviso in the definition of counterfeiting is unintelligible and creates interpretative problems when attempting to harmonize it with the Trade Marks Act and Copyright Act. (3) It is questionable why a developing country like South Africa should give greater trade mark protection via criminal sanctions than the European Community. (4) While the European Community provides for impounding counterfeit goods in transit based on the risk they may be fraudulently brought onto the market, there is no apparent reason in the South African context to impound goods that are not counterfeit in the ordinary sense and merely being transhipped through the country from landlocked or island states. (5) South Africa should not be presumed to wish to interfere with legitimate trade of countries dependent on it for access due to geographical location. (6) The phrase 'imported through' or 'exported through' in section 2(1)(f) has no discernible meaning, though it might refer to cases where goods are landed at one port for customs clearance at another location. (7) The respondent's interpretation might mean that truly counterfeit goods could be transhipped through South Africa without hindrance, but if the legislature wishes to adopt the European model, it should do so in clear language.
This case is significant in South African intellectual property law as it established the important principle that goods in transit or being transhipped through South Africa do not fall within the prohibition on importing 'counterfeit goods' under section 2(1)(f) of the Counterfeit Goods Act 37 of 1997. The judgment clarifies that 'importation' does not include transhipment, particularly where the goods are genuine in their country of origin and destination and are merely passing through South Africa for geographical reasons. The case protects legitimate international trade, especially for landlocked and island countries dependent on South Africa for access, and prevents the Act from becoming a barrier to legitimate trade (consistent with TRIPs). It also demonstrates the court's critical approach to poorly drafted legislation and confirms the principle that penal statutes must be interpreted restrictively. The judgment highlights deficiencies in the definition of 'counterfeiting' in the Act and its problematic equation of trade mark infringement with counterfeiting.