Comments on the South African Draft National Policy on Intellectual Property

The good, the bad and the ugly

South Africa does not (yet) have a formalised policy framework regarding intellectual property (IP) to guide different government departments in their approaches to IP. In a recent attempt to codify a consolidated national approach to IP, Mr Rob Davies, the current Minister of Trade and Industry, published a long-anticipated Draft National Policy on Intellectual Property, 2013 (‘DIPP’) in the South African Government Gazette of 4 September 2013. Public comments on the document were invited to be submitted within 30 days from the date of said publication. The IP fraternity was suddenly sent aflutter, and various efforts were made to comment on the DIPP within the brief time provided. Commentators on the (very polarising) DIPP included, amongst others, individuals, law firms, retired judges, pharmaceutical companies (both innovative and generic) and Non-Governmental Organizations, such as the Treatment Action Campaign, Médecins Sans Frontières and Section 27.

Although the initial aim of the DTI was to present a final IP Policy to Cabinet for approval before the upcoming general elections on 7 May 2014, it has recently come to light that this somewhat optimistic deadline will in all probability not be met. This is an encouraging development, and provides an opportunity for the significant feedback received from industry role-players to be tabled for consideration. The added time available for acceptance will hopefully avoid undue expedition of the DIPP through parliament.  This article touches briefly on the parts of the DIPP that are welcomed, as well as those parts that are (or ought to be) open to discussion.

The ‘Good’

The DIPP cites various admirable objectives such as:

“to develop a legal framework on IP that should empower all strata of the citizens of South Africa” and to “engender confidence and attract investment”.

Although all forms of IP are addressed in achieving these objectives, the main focus of the DIPP seems to be the initiation of patent law reform, in the main directed towards the promotion of access to medicines and the improvement of public health.

According to the policy, the current patent deposit system that is used in South Africa is allowing grant of a number of “weak patents”. The main reason cited for the existence of these “weak patents” is the lack of substantive examination infrastructure in South Africa. According to the DIPP, the formal, non-substantive examination of a patent application by the South African Patent Office is being exploited by those seeking to prolong patent monopolies granted in respect of their inventions.  The DIPP has singled out pharmaceutical inventions as a prime source of concern. It also leaves no doubt in its vociferous support for the inclusion of flexibilities (such as compulsory licensing and parallel imports) which has basis in the Agreement on Trade Related Aspects of Intellectual Property Rights (‘TRIPS’) (of which South Africa is a signatory).  These flexibilities are sought to be included in South African legislation to purportedly prevent patents barring access to health. It is interesting to note that the Patents Act 56 of 1978 (“the Act”) in fact makes provision for compulsory licensing under section 56, and that the Medicines and Related Substances Act 101 of 1965 was specifically (and controversially) amended in 1997 to include section 15C which allows for parallel imports. Neither of these provisions, as far as the authors are aware, have been locally invoked in a pharmaceutical context to date.

An example cited by the DIPP on how the depository patent system is being abused is in the form of the concept of so-called “patent evergreening”, which has emerged from foreign jurisdictions (incidentally where patent examination infrastructure does exist). Parties guilty of patent evergreening, so the argument goes, seek to have several patents, filed in succession and usually close to a preceding patent expiry, granted and which covers the same product, albeit with minor changes to overcome obvious patent invalidity. Another example cited in the DIPP is where pharmaceutical patentees are filing patent applications directed towards second medical indications of known pharmaceutical compounds. According to the DIPP, these actions are frustrating access to generic and more affordable medicines that can be used to combat rampant spread of diseases such as HIV/AIDS, tuberculosis and cancer.  The debate at international level rages on, where the opposite side of the evergreening debate argues that such a concept is impossible, given that any person may utilize the technology disclosed under an expired patent.  Be that as it may, what is clear is that this debate has reached South African shores and is as topical as it is mired in controversy. In South Africa, patent evergreening is not a ground for the revocation of a patent.

The ‘Bad’

One of the main and recurring recommendations of the DIPP towards achieving its objectives is the establishment of a substantive examination system, the introduction of pre- and post- grant patent opposition proceedings, and the prevention of patents for inventions that involve the new use of a known substance that is not “sufficiently inventive”. Currently, lack of inventive step is one of the grounds for launching post-grant patent revocation proceedings under the Act.

The ideals of a substantive examination system and opposition proceedings during the prosecution of a patent application are generally supported by role-players in the industry. However, pragmatic causes for concern include the need to recruit proper expertise, in a sufficient number, of qualified patent examiners to process approximately 10,000 annual patent applications (both foreign and local) filed in South Africa. It is interesting to note that by comparison, South Africa is ranked 26th on the list of the world’s largest populations, geographically is 1/8th the size of the United States, just over 1/3rd the size of the European Union, is twice as big as France and four times as big as Germany.  According to 2013 filing statistics released by WIPO, the USPTO had in the year under review received just over 144 000 PCT national phase entries (not necessarily including local applications), Germany just under 57 000 applications and France just under 28 000 applications.

It is also important to note that patent examiners in foreign patent offices are generally PhD graduates with some level of formal training in patent law. Local cost implications associated with the employment the right number of suitably qualified patent examiners is likely to be a factor holding the prospect of higher official filing fees on the cards (and by implication prosecution fees as a new cost centre). This eventuality could spur on an announcement of substantial increases in patent office official fees, the likely end of which could be placing patent protection beyond the reach of ordinary South Africans, as well as SMME’s and start-up companies.  In relation to medicines, the South African market size generally pales in comparison to US and European markets. Raising the cost of patent entry in the local sphere may well discourage foreign investors from placing South Africa on its list of eventual patent filing destinations.  As patent filings are sometimes viewed as a measure of a company’s trust to compete within the South African territory, any reduction of patent filings locally may well be accompanied by diminished foreign direct investment.

The ‘Ugly’

Unfortunately, the predominantly noble objectives of the DIPP are completely overshadowed by the disorganised, and factually and legally flawed document that it is presented in, bearing in mind the nearly six years taken for its publication. Unsurprisingly, an overwhelming reaction of criticism to the DIPP is not aimed at the stated objectives, but rather at the apparent lack of sufficiency in the understanding of both local and international IP laws, and the seemingly careless drafting errors that the document displays.

Inherent contradictions present in several places, the most obvious one being the negation of the stated objective of

engendering confidence and attracting investment”

as against a background statement that reads

“this IP Policy needs to take into account the fact that South Africa is a developing country with the bare minimum of a technological, economic and social base”

a mere two paragraphs later.  Not only is such a statement not true, it is seen as an admission that the South African government has no confidence in local talent.  This militates against any move to engender confidence in South Africa as a patent filing destination.

Concluding remarks

The objectives of the DIPP towards improving the health of the poorest of the poor are admirable, especially where human rights issues, such as the access to medicines for the treatment of HIV/AIDS and other diseases are prevalent. The implementation of these objectives is however problematic. Honourable Judge LTC Harms (retired Deputy President of the Supreme Court of Appeal) sums up the general feeling of the IP industry in his commentary on the DIPP, where he states

“...the real issue from a legal perspective is not so much the ‘what’; it is the ‘how’...

The stated objectives could well be achieved in time, but only if the final IP Policy reflects an understanding and consideration of the concerns towards the DIPP raised by various participants and commentators in the industry.  Without substantive industry involvement, the policy will be remembered as a wasted opportunity to develop our law under an avoidable cloud of perceived intransigence. Considering that the DTI spent in excess of six years to formulate the DIPP, it would be beneficial to all interested parties if the DIPP is not rushed from draft format to final format. The importance of the subject justifies a thorough review of feedback received.