Merchandise Marks Amendment Bill: hearings

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
25 October 2002
MERCHANDISE MARKS AMENDMENT BILL: PUBLIC HEARINGS

Documents handed out:

Merchandise Marks Amendment Bill B63-2002
Patents Amendment Bill B64-2002
Committee amendment to Clause 2 (see Appendix 1)
Cape Media Corporation submission (see Appendix 2)
NAB submission (written submission available here shortly)
UCB submission (oral submission only)

Chairperson: Dr Davies

SUMMARY
In public hearings on the Merchandise Marks Amendment Bill, submissions were heard from the United Cricket Board and from the Cape Media Corporation. The committee agreed to extend the cut-off date for public hearings to Tuesday 29 October 2002 as it emerged during the meeting that there were issues in the Bill that were cause for concern by stakeholders.

MINUTES
Introduction by Chairperson
The Chair hoped that the Portfolio Committee on Sports and Recreation was attending the meeting as the relevant amendment would have an impact on the sporting industry. He noted that a briefing had been given on these two intellectual property bills on 22 October 2002. He explained that the bills would now be separated and they would be dealing today with the Merchandise Marks Amendment Bill. Submissions would be presented by Mr Sulimann of the United Cricket Board, Mr Pienaar of the Cape Media, and hopefully from representatives of the Soccer Association. He noted that they would be meeting with the Portfolio Committee on Health on Wednesday 30 October 2002 to begin public hearings on the Patents Amendment Bill. He stated that the committee had proactively contacted various interested parties and said that they should expect to receive further comments. He explained that deliberations on the Bill would begin upon completion of the public hearings. The Chair added that the committee had since the briefing meeting, drafted a proposed additional clause to allay certain concerns.

Submission from the United Cricket Board
Mr Sulimann, from the Marketing Portfolio of the United Cricket Board, noted that the United Cricket Board would be hosting the Cricket World Cup in 2003, and he emphatically stated that the Board supported the Bill. He said that the amendment would be beneficial to South Africa as a whole, and stated that the informal business sector would have a role to play through the opportunities that it would be granted to contribute to the event. The amendment would produce major confidence in the South African market, thereby increasing the likelihood for the hosting of global events in South Africa. He believed the time had come for South Africa to take centre stage in the world arena through the fact that it had become empowered to stage global events, and this would require the passing of an amendment such as the one before the committee.

Discussion
The Chair sought an indication of the opportunities that would be available for the informal business sector.

Mr Sulimann explained that the UCB of South Africa and the Cricket World Cup organizers had contacted all role players, and stated that they would ensure the participation of the sector. He added that there would also be a tourism aspect to the event, and stated that the informal business sector would be given the opportunity to submit applications in that regard. He noted that the informal sector had been drawn in through the MECs of the different cities.

Mr Redcliffe (NNP) wanted to know who the main sponsor behind the event was.

Mr Sulimann stated that they included LG Electronics, Pepsi, Hira Honda from India, and South African Airways.

A member explained that it sounded as though the event organizers would control the goods sold by the informal business sectors and said that the licencing requirement would reduce the access to the events.

A member stated that the MECs did not have much information relating to informal business trading in their cities, and wanted to know the mechanism envisaged to draw such businesses in.

Mr Sulimann responded that they were in the process of creating a database. However, he explained that the line of trading would be in different forms, and gave the example of the supply of Pepsi to the informal traders at a discount. He added that there would be a traffic free zone surrounding the stadium and informal businesses would be located therein.

Ms Sono added that practical experience had shown that there were no databases of the informal business industry and stated that they would invariably be excluded from the process.

Mr Sulimann explained that the UCB was fortunate in that it had managed to draw in the underprivileged sectors of society in relation to the Cricket World Cup. This process had been very successful, and the measures involved would be extended to the informal business sector. He emphasized that measures would be taken to ensure the participation of all interested businesses.

Ms September wanted a comment regarding the unintended consequences of the Bill due to the way it had been crafted.

Mr Sulimann stated that all suppliers attributed to the event would have to have a Black Economic Empowerment component between 40% and 48%. This meant that small business and Black Empowerment would be first preferences.

The Chair wondered whether small traders would then be forbidden to sell Coca Cola, for instance.

Mr Sulimann stated that global sponsorship would result in massive job creation and overall benefits for the South African economy. This cricket event would leave a legacy behind in South Africa, and gave the example of the many stadiums that had been built. Since such initiatives could only be attributed to the global sponsors, it would be necessary to take care of them.

The Chair wanted to know the main concern felt by the UCB regarding the amendment. He wanted to know whether the sponsors were driving the amendment.

Mr Sulimann explained that the global sponsors were uncomfortable, and noted that Pepsi had contributed massively to the event. He stated that they would not be protected and said that this meant that in order to lay stepping stones for further global events in South Africa, it would be necessary to be accountable to the sponsors whilst also remaining accountable to the citizens of South Africa.

Ms Sono (DP) said that part of their jobs as Members of Parliament was to engage in constituency work. As such, she wondered whether the UCB could provide the members with the database they had created.

Mr Sulimann stated that this would not be a problem.

A committee member noted that the only beverage sponsor was Pepsi and wondered what the consequences would be if persons walked into the stadium wearing Coca Cola t-shirts and drinking Coca Cola.

Mr Sulimann explained that they were already in the process of broadcasting what may and may not be brought into the stadium. This meant that the forms of advertising referred to would not be allowed. He added that there would be searches outside the stadium, and stated that the sphere of influence for the event would be limited to the 200metres around the stadium.

The UCB was asked if informal traders would be allow to sell chips, sweets and such goods.

Mr Sulimann stated that there would be contracts for the sale of other products and said that he could not foresee any problems in this regard.

Mr Frolick (UDM) pointed out that through the courtesy of a provincial cricket board in South Africa, a school had secured a large amount of money from Coca Cola. However, this school was located across the road from the stadium. He added that Coca Cola had made it a condition that the school must put up Coca Cola signs around the school, and wanted to know whether these posters would have to be removed for the event.

Mr Sulimann explained that the 200m clearance radius would apply. This meant that only areas within the stadium would be cleared of such advertising, and this would not extend to the school.

Mr Frolick stated that the school was 50m from the stadium.

Mr Sulimann said that there would therefore have to be a compromise requiring the school to take down the signs for the period of the event. He added that the period would be running from February 2003 to March 2003 and explained that the situation would have to be accommodated.

Mr Frolick wondered whether the Bill meant that the sovereignty of South Africa would be sacrificed for the sponsors. In light of that, he wanted to know what the financial impact on the sponsors would be in the event that contrary sales occur outside. In addition, he wanted to know whether studies had been conducted to investigate the matter.

The Chair reminded the committee that they had actually dealt with a number of the issues that were being raised. He stated that the basic problem faced by the Committee was that the intellectual property would amount to giving the sponsors a monopoly. Nevertheless, the arguments to the contrary were that the benefits of the event would outweigh the disadvantages of that 'monopoly'. He stated that one proposal had been that there should be sufficient accommodation for the framework of small traders in the event, and referred the Committee to the proposed Clause 2. In terms of this, the Minister would have to be satisfied that opportunities for small business exist before designating an event as a special event.

Submission from the Cape Media Corporation
 

Mr Pienaar, General Manager of the magazine publishing company: Cape Media Corporation,

made the request that the committee should postpone the cut-off date for submission. In that regard, he explained that he had only been informed of the public hearing on 24 October 2002. As such, his submission was not as detailed as he would have liked it to be. In addition, the Johnnic Group and the Financial Mail Group had also asked him to extend the same request on their behalf. He stated that the matter at hand would greatly concern the public interest and said that this would necessitate more detailed discussion. He noted that the effects of the Bill would be great.

The Chair responded that the absolute limit for public hearings on this Bill would be extended to Tuesday 29 October 2002. This meant that the committee would not be finalizing the matter in this meeting.

Mr Pienaar thanked the Chair. He explained that the 'gist' of his submission was that they as publishers could not support the amendment. He could foresee possible infringements on the freedom of speech and the press. He stated that they were dealing with a 'very very very very' broad definition because it sought to extend property rights far beyond the traditionally accepted protectable intellectual property rights.

The Chair thanked him for the input and opened the floor to questions.

Discussion
 

Mr Turok (ANC) expressed concern with Clause 1(a) because the Bill appeared to cover a great deal of events. He wondered whether the limitation of the amendment to sporting events would assist Mr Pienaar.

Mr Pienaar said that this would probably be closer to the intention behind the whole amendment as sports events were more closely linked to commercial aspects. Nevertheless, he stated that his ultimate concern was the fact that the protection offered in the Bill would be too broad.

The Chair wondered whether Mr Pienaar could be accommodated via other means. He referred to Clause 15(a) in terms of which the Minister must designate an event, and explained that the committee could insert a provision requiring that the Minister must hear the views of interested parties before reaching a decision. He noted that it would be necessary to provide the sponsors with some concession in light of the potential socio-economic benefits for South Africa.

Mr Pienaar stated that this would probably be a step in the right direction. He noted that the monopoly was already sufficiently protected by law.

A member confirmed that Mr Pienaar was solely concerned with freedom of publication.

Mr Pienaar responded that this was one of their major concerns. Nevertheless, he felt that the protection offered in the Bill was too broad in light of the fact that it appeared to place the use of one's trademark in the hands of another.

Mr Lockey (ANC) noted that constitutionally guaranteed rights were not absolute and stated that they could be limited in terms of S 36. Nevertheless, he could not see the stranglehold on the publishing industry and called on Mr Pienaar to indicate the clauses in the Bill that would lead to this stranglehold.

Mr Pienaar agreed that freedom of speech and of the press were not absolute rights. He explained that their main concerns lay in subsection 3 as the provision had been broadly formulated. He added that there were likely to be inadvertent far-reaching consequences.

Mr Lockey wondered whether the benefits to South Africa did not outweigh the inconveniences felt by Mr Pienaar.

The Chair stated that this Bill would be dealing only with intrusive marketing mechanisms. This meant that publishers would still have the power to advertise other brands. As such, he felt that the situation was not as drastic as suggested by Mr Pienaar.

The Chair explained that they were dealing with commercial brands competing in the marketplace and not with the freedom of speech of the masses.

Ms September (ANC) felt that the concerns raised by the media should be given a response. She noted that willfulness on the part of the publication industry would also be important and it appeared as though a number of the concerns raised had been covered by Clause 2. In light of this, she wondered whether Mr Pienaar had engaged with other bodies such as the UCB because she felt that a number of the concerns raised could have been answered on that level.

Mr Pienaar explained that he had only become aware of the public hearings a few days earlier. He said that although he had interacted with the UCB on a number of issues, they had not interacted in relation to this issue. He expressed concern with the idea that an international body could prescribe the clothes worn by persons at an event, and noted that there were already laws in place that sufficiently protected the sponsors.

The Chair said that they would not be finalizing the Bill on this occasion. He reminded the committee that they would be meeting on Tuesday 29 October 2002, and pointed out that Mr Pienaar would have adequate time to sufficiently prepare himself.

The Chair summarized the situation as it stood:

- The question of principle: - in order for South Africa to become more attractive, the Minister should be allowed to enhance intellectual property rights.

- Other related issues: - the event must be in the public interest. He noted that the committee had proposed clause 2 in this regard.

- The issue of whether the Minister should accommodate the views of interested parties when exercising his discretion.

- A limitation of the events to which the amendment applies: - he personally felt that cultural and entertainment events were debatable in this regard, and expressed great concern with the application of the amendment to religious events.

Mr Turok added that he had met with a member of the Cape Chamber of Commerce perchance, and explained that the member was complaining that they had not been given the opportunity to make a submission. He wondered whether they could be informed about the extension of the deadline to Tuesday 29 October 2002.

Mr Turok felt that the proposals made by the Chair were a major improvement to the current position. Nevertheless, he agreed that the Bill was very broadly formulated and pointed out that a 'nasty Minister' could use the Bill in a 'nasty way'. He recommended limiting the amendment to sporting events at this stage, and explained that the ambit could be expanded in the event that the amendment operates without major difficulties. He expressed great discomfort with Clause 1 (a) and exclaimed that there would be a major infringement on marketing rights.

The Chair decided to leave it at that - and they would deal with the issues during the next meeting. He pointed out that although they were operating within time constraints, it would be necessary to allow interested parties to make a submission.

Mr Lockey sought an indication of the international best practice. He noted that he did not require a response at this stage. The Chair added that it would be better termed as 'international prevailing practice'.

Ms September referred to the precedents in the Competition Tribunal with relation to the 'public interest', and suggested that such a body could possibly provide the committee with a framework within which to make a decision.

Ms Sono expressed concern with the inclusion of religious groups in Clause 1 (a).

The Chair stated that intellectual property effectively dealt with private monopoly. As such, it would be useful to consider any conflicts with competition law.

A member added that it would be necessary to consider the possibility that in certain instances, the Minister would be required to vary the conditions for the application of the Act in relation to a particular situation.

Mr Sulimann noted that cricket as a whole was acting completely differently to other world events in light of the fact that disadvantaged communities were being involved. He firmly stated that the benefits would greatly outweigh the disadvantages.

Mr Turok responded that the committee was in the process of making legislation and was not concerned with passing rules which apply to only one event. He explained that while they were sympathetic with his cause, the committee would have to exercise great caution in its decision-making. He firmly stated that they would not be able to pass the amendment on the basis of the Cricket World Cup.

The Chair agreed. The meeting was adjourned on that note.

Appendix 1:
Committee amendment to Clause 2
To insert after 'interest':

and the Minister is satisfied that the commercial interests of Small Businesses and in particular the previously disadvantaged communities will not be adversely affected.

Appendix 2:
Cape Media Corporation submission
Submissions with regard to MERCHANDISE MARKS AMENDMENT BILL

1 The proposed bill expands intellectual property rights far beyond the traditional approach in terms of which direct exploitation of another's original idea is prohibited in terms of various intellectual property related Acts.

2 The traditional approach has been to afford the "inventor" protection over his "invention" and to prevent interlopers from exploiting same.

3 There are a number of both procedural and in-principle objections which should be lodged against the passing of the present amendment. Each issue will be discussed as it arises seriatim in dealing with the proposed amendment bill.

3.1 The definition of an "event" covers virtually every public gathering where an event is "financed to a significant extent by a commercial sponsorship". There is no definition of the word "significant" and notionally it could arise that sponsorship to the tune of a small percentage of the event could afford the protection of this Act to the sponsor.

3.2 The definition of "trademark" has been expanded to include, any "marks" which relate to goods or services, whether registered or not.

4 The ambit of the bill is potentially very broad, applying to an unspecified number and type of events as well as to an unlimited number of "marks". Section 15A(1) empowers the Minister "after such investigation and subject to such conditions as he may think fit" to designate an event a "protected event". Protection would then be provided for a period commencing from the date stipulated in the notice and terminating two months after completion of the event. This designation shall only take place if the minister "deems that its staging is in the public interests".

5 There are a number of issues arising from this paragraph:

5.1 There is no definition of the investigation nor is there of the conditions that apply to the Minister and his decision;

5.2 In terms of the audi alteram partem rule, it is incumbent upon the Minister when taking steps which may affect the rights of citizens, to allow those citizens to make representations to him. This is not provided for in this section and the Act will curtail the right to exploit one's own intellectual property.

5.3 There is no limitation upon the time period prior to the event which may be covered by such a notice and, it is submitted, a period of two months after the completion of the event provides an unreasonably long period of protection for the organizers.

5.4 No definition is provided of the qualifying "public interest" as stated in this section.

6 Section 15A(2) provides for what appears to be a blanket prohibition on the use of a trade mark in the advertising of non-authorised goods and services during the period of protection without the authority of the organizers.

7 There are a number of objections to this subsection and in particular to the broad definition of abuse of a trade mark which is defined as:

7.1 the use of a trade mark;

2. by the owner or anyone directly or indirectly acting as his licencee or agent;
3. in a manner which is calculated primarily to achieve publicity for that trade mark;
4. thereby to derive special promotional benefit from the event.

8 Section 15A deems that such use shall amount to an "abuse" of the trade mark in question (this appears to be the use of the trade mark of the abuser as defined in Section 15A(4)) and renders the abuser guilty of an offence.

9 Section 15A defines "use of a trade mark" in a manner designed to be as broad as possible and states, as follows:

- the use of a visual representation of such mark, or the audible reproduction of the mark;

- the use of the trade mark upon, or in physical or other relation to goods, or in relation to the performance of services or promotional activities;

- which directly or indirectly in any way have, or are brought into, association with or allude to, the event.

This section appears to be designed to curtail both the free and unfettered use of a trade mark by the proprietor, as well as the public's right to freedom of speech in circumstances where there may be even a distant association with, or allusion to, the protected event.

10 On a proper interpretation of the proposed bill, it grants to the "organizer" a total monopoly during the protected period with respect to:

any advertising of a mark in any of the media, whether this be print, radio or television, in the event that the medium in question covers or advertises the event;

the wearing of clothing apparel whether it be shirts, caps, sports equipment which bear the logo or advertising material of an "unauthorized trade mark" without the consent of the "organizer" of the event where such apparel is worn in such a way as to be brought directly or indirectly into association with, or which may allude to, the event (the clothing of attendees of the event, or even of passersby, for example).

11 The amendment bill will therefore empower the organizers of an event to exercise complete control over and to prohibit the appearance of advertising material or publications on any nature whatsoever, which might be used "in association with" or which may "allude to" the event. Contravention of such prohibition will result in the commission of a criminal offence.

12 Taken to its logical conclusion, should a television channel broadcast the event itself or broadcast news relating to the event, no unauthorized advertisers will be allowed to advertise on that channel for the duration of the period of protection. There will be an "abuse of the mark" and thus a criminal offence in terms of the bill, should this occur. The wording appears to be broadly stated enough to prevent unauthorised advertising from taking place (even advertising by and for the producer of the medium itself) in the medium, whether that be radio, television or print for the duration of the protection.

13 Notionally, should the broadcaster or publisher not be authorised by the organizer and have merely provided news coverage of the event, related matters or even have alluded to the event, it will not be permitted to advertise itself, or to broadcast or publish advertising by its "unauthorized" advertisers, during the protected period.

14 The protection goes further, by logical extension, the publisher or the broadcaster will not be permitted to benefit from any greater circulation, viewership or listenership created by coverage of, or allusion to, the event by selling advertising space or time to unauthorized advertisers. It follows too, that unauthorized advertisers will not be able to derive promotional benefit by advertising in the media which may experience greater circulation or viewership and listenership which may arise due to any association with, or allusion to, the event in its general coverage.

15 It appears that the amendment bill, if passed, will grant to the organizer a stranglehold on all of the media in their various forms where any mention of, reporting on, or allusion to the event is made in such media. This monopoly on advertising could be created by the organizer itself simply by way of itself advertising the event in the medium concerned.