Patents next in line in the property rights grab – Daily Maverick, 29 October 2014

The Department of Trade and Industry (DTI) is pressing ahead with controversial proposals to limit intellectual property (IP) rights, including patent rights. This has significant implications for healthcare and other sectors in South Africa.


The plan is to put a bill to this effect before Parliament before year-end, as the DTI said ten days ago.

The DTI first published its proposals in September 2013, in a document too vague to be easily understood. The DTI document needs to be read together with a much more comprehensive article published two months later by the United Nations Development Programme (UNDP) with the help of Section27, a South African activist NGO.

In combination, these documents provide important insight into how the African National Congress (ANC) plans to limit IP rights in what it sees as this ‘second’ and more ‘radical’ phase of South Africa’s transition.

Patents are a particularly important form of intellectual property because they prevent inventions from being copied, thereby encouraging innovation and stimulating investment. This in turn helps to quicken the growth rate and generate jobs.

South Africa has a proud record of innovation in deep-level mining and the development of petrol from coal, to say nothing of the CAT scan (3-D X-rays to detect disease), the retinal cryoprobe for cataract surgery, the smartlock safety syringe against needle-stick injury, encryption technology for computers, and other valuable inventions. The DTI has also stressed the importance of innovation, and wants spending on R&D to rise from 0.7% to 1% of GDP, which is more the global norm.

However, the DTI’s proposals on IP contradict this goal and seem calculated to choke off local innovation. They could also rob patent holders of much of the fruits of their creativity, insights, and costly R&D.

Most worrying is the DTI’s proposal vastly to increase the scope for ‘compulsory licences’ over patented inventions. Such licences undermine patent rights by allowing patented inventions to be copied and sold without the inventor’s consent.

South Africa’s Patents Act already permits compulsory licences, but only to counter an ‘abuse’ of patent rights (a persistent failure to ‘work’ or exploit an invention, for instance). In addition, the patents court must decide on such matters, and must take into account the value of the patent holder’s R&D in determining the royalties payable to him.

Under the DTI’s proposals, by contrast, the patents court will be replaced with a patents tribunal. This new administrative body will fall outside the high court system and could be run by bureaucrats, not judges. It will decide on compulsory licences and all patent disputes without having to follow the usual high court rules of civil procedure, which the DTI describes as too “technical and legalistic”.

The new IP rules may require the granting of compulsory licences after short periods (say, 60 days) of unsuccessful negotiations with patent holders. In addition, the royalties payable may be limited to around 3% of the price of the copied products – often too little to compensate inventors for their R&D.

The government may also be able to obtain compulsory licences over all patented inventions in much the same way. Prior negotiations may not be needed in these circumstances, while the royalties payable are likely to be similarly limited. Moreover, as the DTI policy document points out, patent holders will not be able to claim any additional compensation from the State as they will still own their patents and no ‘direct expropriation’ will have taken place.

The government claims all these changes are in line with the World Trade Organisation’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the ‘limited exceptions’ to IP rights that it allows. However, this claim is inconsistent with much of the clear wording in the TRIPS Agreement and other relevant WTO documents.

The government also claims that all these changes are necessary to bring down the price of anti-retrovirals (ARVs) and other medicines. However, ARV prices are already sharply down in general, while the DTI’s proposals could choke off the innovation needed to counter new diseases in the future.

In addition, if the cost of medicines is truly the key issue, there is no need for sweeping changes to IP rights which extend far beyond the health sector and threaten all South African patents over both local and foreign inventions.

With land, mining, and other rights already under threat, the projected growth rate for 2014 a lacklustre 1.4%, and more than 8m people out of work, South Africa cannot afford to keep projecting itself as a ‘rogue’ state with scant respect for property rights and the rule of law.

The more this perception takes hold, the more the country will battle to attract direct investment, expand the economy, or overcome its unemployment crisis. DM

Anthea Jeffery is head of Policy Research at the IRR. Jeffery is the author of ‘Patents: The Next Part of the Property Rights Grab’, an article published today in @Liberty, the policy bulletin of the IRR.