The Copyright Bill and its Threat to Patent Rights – BizNews, 7 October 2015

By Anthea Jeffery 

The Department of Trade and Industry (DTI) has found a new way to weaken patent rights via the Copyright Amendment Bill of 2015 (the Copyright Bill) and its proposed new “intellectual property tribunal” (the IP tribunal).

Under the Copyright Bill, the IP tribunal will have the power to set aside the granting of patents. It will also be empowered to issue “compulsory licences” that will allow the copying of patented products in return for royalties to be decided by the DTI minister.

The DTI has long criticised South Africa’s “depository” or “non-examining” system for the granting of patent rights. Under current rules, the Companies and Intellectual Property Commission (CIPC) grants all patent applications made to it, provided a detailed patent “specification” (description of the invention) is provided and all formal requirements are met. In various other countries, by contrast, patent applications are substantively “examined” for their novelty and utility (sometimes through a process of prior objection and adjudication) before patents are granted.

Critics of the depository system allege that the absence of prior examination inevitably leads to the granting of “weak” or “frivolous” patents. But the depository system has safeguards too, for it puts pressure on all applicants to ensure that no similar patent already exists. (If an earlier patent for the same invention subsequently comes to light, the later patent is invalid, the money spent on developing the invention is wasted, and damages for infringement may also be payable.) In addition, the validity of a patent can always be challenged in the patents court after it has been granted.

Important too is the skills shortage that forced South Africa to abandon its earlier examination system. Writes Judge Louis Harms, a retired judge president of the Supreme Court of Appeal: “We had an examination system from 1952, but we had to abolish it in 1978 because we never had the people… It is highly specialised. You need a scientist [who is also] a lawyer and will do the job at a government salary.”

Since 2013, the DTI has been trying to make patents harder to obtain by pushing for the introduction of an examination system. But such a system would be difficult and costly to implement, whereas the Copyright Bill could now provide a cheaper way of attaining the same goal.

Under the Copyright Bill, applications for patent rights would continue to be made to the CIPC and would be granted by the commission in the usual way. However, objections to the granting of these rights would then be lodged – not with the patents court – but rather with the IP tribunal, which will have the power to set aside any decision made by the CIPC.

Yet the differences between the patents court and the IP tribunal are stark. The patents court is presided over by the commissioner of patents, who is both a specialist in intellectual  property matters and a high court judge. In addition, the patents court applies the usual high court rules of evidence and civil procedure, which are designed to exclude unreliable evidence and ensure fairness to all.

By contrast, the IP tribunal will clearly be a creature of the executive. All its members will be appointed by the minister, who will also have the power to decide on their remuneration and to dismiss any who fail to function “to his satisfaction”. Tribunal members will not be required to have any knowledge of intellectual property law, while many of them are likely to be public servants appointed more for their political loyalties than their legal expertise.

In proceedings before the IP tribunal, moreover, the usual rules of evidence and civil procedure will be replaced by new principles of procedure, to be decided either by the tribunal or by the minister himself. The emphasis in the new rules will be on brevity and informality, not on whether evidence is properly admissible or objectively evaluated.

Under the Copyright Bill, many of the patent rights granted by the CPIC could be set aside by the IP tribunal, which may easily be persuaded that a given invention is not sufficiently “novel” to warrant patent protection. Though the aggrieved inventor could still apply to the high court to set aside the tribunal’s decision on review or appeal, the process of obtaining patents would become more arbitrary and more time-consuming. The time element is important, for the 20-year period of patent protection begins from the date an application for a patent is lodged – not from the time it is finally granted.

The IP tribunal will also be able to issue compulsory licences that allow the copying of patented products against the patent holder’s will. At present, only the patents court is empowered to issue such licences – and then only to counter an “abuse” of a patent right, such as an unwarranted failure to “work” or exploit the patent within a reasonable time.

By contrast, the DTI wants compulsory licences to be issued in much wider circumstances: for example, where negotiations over a stipulated period (say, 60 days) have failed because the patent holder refuses to accept the royalty rates proposed (which could be as little as 3% of the price of the copies to be made and sold).

Under the Copyright Bill, the IP tribunal will be able to “adjudicate any application” on any “dispute…relating to intellectual property rights”. This will clearly allow the tribunal to issue compulsory licences over patented products. It could also empower it to do so in the wide-ranging circumstances the DTI seeks.

To achieve this, the Patents Act might need to be changed to extend the grounds on which compulsory licences may be issued. On the other hand, the IP tribunal’s powers broad powers under the Copyright Bill might be seen as having superseded the Patents Act.

As for the royalties payable, the patents court currently decides on these in the light of market rates and the costs of research and development (R&D). By contrast, the Copyright Bill gives  the power to decide on royalties to the IP tribunal, which will presumably be bound by the “royalty rates” to be prescribed via ministerial regulation. Under these rules, royalties could be set low and without regard to R&D expenses.

The Copyright Bill thus poses a significant threat to patent rights. It could also put South Africa in breach of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which lays down minimum standards for the protection of patent rights. Though TRIPS allows “limited exceptions” to patent rights, it stipulates that these exceptions must not “unreasonably conflict” with normal patent exploitation, or “unreasonably prejudice the legitimate interests of the patent owner, taking into account the legitimate interests of third parties”.

The IP tribunal and its powers over patent rights go beyond what TRIPS allows. The tribunal is also in conflict with Section 34 of the Constitution, which gives everyone (including patent holders) the right to have legal disputes decided either by the courts or by “independent and impartial” tribunals. The IP tribunal does not begin to meet these vital criteria.

Key aspects of the Copyright Bill are thus clearly unconstitutional. In addition, the Bill is poorly drafted, inherently vague, and often difficult to understand. Overall, the measure is so potentially damaging and so defective that it should simply be withdrawn.

*Anthea Jeffery is Head of Policy Research at the IRR and author, among other things, of a monograph entitled Patents and Prosperity: Innovation + Investment = Growth + Jobs, published by the IRR in 2014.