Working Statements in India: Are You Compliant? – Update

This is an update to our post of January 21, 2018, regarding working statements in India. Specifically, the hearing originally scheduled before the Indian High Court for January 25, 2018, was postponed until February 5th.  During the hearing on February 5th, counsel for the Petitioner, Mr. Shamnad Basheer (an Intellectual Property Professor and activist), continued to argue that the patent working requirement has never been taken seriously by Patentees and unless there is a threat of sanction, Patentees would continue to ignore this statutory mandate.  Mr. Basheer’s counsel suggested that Patentees who had failed to comply with the working requirement (either in whole or in part), be given a deadline in which to comply.

Counsel for the Indian Patent Office (IPO), Mr. Mahajan, admitted that the patent working requirement has never been enforced against non-complying Patentees. Mr. Mahajan stated that until there was a legal framework in place to initiate prosecution against non-compliant Patentees, there was little that the IPO could do.  He noted that Section 122 of The Patents Act,1970 (Patents Act) only provided for a fine or, in limited circumstances (such as when deliberately providing false information), imprisonment for non-compliant Patentees.  Counsel for the government further stated that there needed to be a specific framework (namely, specific rules) to enforce the penalties as provided under Section 122 of the Patents Act.

The Court asked the IPO representative who was present in the court to file an affidavit on February 7, 2018, listing the various steps as well as provide a timetable for implementing a robust enforcement framework for prosecuting non-compliant Patentees.

During the subsequent hearing on February 7, 2018, Mr. Mahajan informed the Court that the IPO had not yet completed its plan for creating a robust enforcement framework for the working requirement.  Nonetheless, the Court passed an order requiring that the IPO strictly enforce Form 27.  The Court also directed the IPO to file an affidavit by February 20th outlining a time plan for putting an enforcement mechanism into place.  A further hearing has been scheduled for March 1st.

The Court’s order also provided some clarification regarding the issue of identifying licensees in Form 27 as well as the issue of the confidential nature of such licenses.  This issue was a key concern raised by Ericsson as part of its intervention application.  In its order, the Court stated that Form 27 did not require that all licensing terms be provided. Rather, the only details regarding such licenses that needed to be provided were those specifically provided for in Form 27. Interestingly, with respect to this point, Form 27 is rather open ended and asks, “Details licenses/sublicenses if any”.  A Patentee is simply required to demonstrate how its Patent has been worked through one or more licenses. In the event there is a court order preventing a Patentee from even disclosing the existence of a license, this can be specifically mentioned in Form 27 as the reason for non-disclosure. Patentees should keep in mind that licenses should not only be disclosed on Form 27, but should also be registered with the IPO pursuant to Sections 67-69 of the Patents Act (the Controller can redact confidential portions of a license at his or her discretion).  Such licenses are open to public inspection under Article 72.  Additionally, Patentees should keep in mind that it is not sufficient to simply state on Form 27 that the patent has been “worked” without anything more. There must be some data and/or other information to support this claim.

With the proceedings thus far in this case, the ball is now in the IPO’s court to decide how to enforce the penalties prescribed under Section 122 for non-compliance with the working statement requirement while at the same time, taking into consideration the difficulties of Patentees in fulfilling this unique requirement under Indian patent law. Under the current legal system in India, criminal liability, including a fine assessed against a person, can only be enforced by the criminal courts comprising Magistrates and Session Judges and not by executives such as the Controller of Patents, unless such power is specifically conferred to such executives under statutory law.  Practically speaking, what this means is that to make the IPO a law enforcing agency to enforce the provisions of Section 122, an amendment would be required to the Patents Act, 1970. Passage of such an amendment could prove to be a long and drawn out process. Furthermore, if the IPO is made responsible for enforcing Section 122, it would face the additional burden of having to monitor all working statements, which would include examining these statements from a compliance perspective as well as conducting penal proceedings in accordance with the principles of natural justice.  Adding these responsibilities will put additional an work load on the IPO which is already crumbling under the weight of having to examine over 70,000 pending patent applications filed almost six to seven years ago.  Given the circumstances, the IPO will have to take a practical and pragmatic approach to handling the monitoring and enforcement of working statements and it is likely it may have to frame rules that would allow for any person aggrieved by the non-filing or incomplete filing of a working statement to raise the issue before the criminal court system, thus limiting the role of the IPO in these cases to that of assisting the criminal court with factual determinations. In addition to making new rules to enforce non-compliance, the IPO may also need to amend the format of Form 27 to make it practical for technology companies to submit their working details. The affidavit that IPO will be filing with the Court by February 20 may provide further insight on these issues.

Please continue to watch the BRIC a Wall blog for updates on working requirements in India.

This post was written by Lisa Mueller and Manisha Singh of LexOrbis.

Working Statements in India: Are You Compliant?

After a patent issues in India, the Patentee and each licensee (whether a nonexclusive or exclusive licensee) is required to file a working statement on an annual basis.  The working statement provides details describing the extent to which the patented invention was worked on a commercial scale in India during the previous calendar year.  The working statement must be provided to the Indian Patent Office (IPO) within three months from the end of the year, namely, by March 31st,using Form 27 (as required by pursuant to Section 146 (2) of The Patents Act, 1970).  Form 27 can be filed at IPO electronically by the Patentee, licensee or via an agent on behalf of the Patentee and/or licensee.

The legislative text in India is very clear that the granting of patents is not merely to “enable Patentees to enjoy a monopoly for the importation of the patented article”, but also to “secure that inventions are worked in India on a commercial scale and to the fullest extent reasonable”.  However, in the context of Article 27(1) of the TRIPS Agreement, it has been debated whether or not “importation” of a patented product or a product produced through a patented process constitutes working of the patent in India.  Some recent judicial decisions have upheld importation as constituting working of patent, particularly in situations where it is economically more practical to produce a patented product outside of India.

The purpose of a working statement is to inform the public whether a patented invention is or is not being worked in India.  In the event a patent has not been worked for three years from the date of grant, or, if the reasonable requirements of the public with respect to the patented invention have not been met, an interested third party can use this information to approach the Patentee for a (voluntary) license to the patent.  If, in response to such a request, the Patentee refuses to license the patent,  requests unreasonable terms to grant the license, or completely ignores the request (after the passage of  a reasonable amount of time), the third party can approach the IPO to request a compulsory license.  Once a compulsory license is issued, the government or any interested person can, two years after the expiration of the date of the order granting the first compulsory license, apply for revocation of the patent if the patented invention has not been worked in India (within those two years).  Therefore, under these circumstances, the burden falls on the licensee (of the compulsory license) to provide evidence of working in India to avoid revocation of the patent.

While a patent will not be held abandoned for failing to file a working statement, there are consequences for failing to make the submission.  Specifically, failure to file a working statement may result in a penalty of up to $25,000 U.S. dollars.  Additionally, knowingly furnishing false information in a working statement or knowingly or having reasons to believe that the information submitted is false or not true may result in criminal prosecution and imprisonment of up to six months.  Moreover, failure to submit a working statement may provide a valid ground for the granting of a compulsory license by the IPO.

If a patent is not being worked in India, the Patentee (and licensee) can provide one of the following explanations as to why the patent was not worked:

  • Lack of market potential for the invention; Market is being developed;
  • The invention may be worked in the future depending on market demand and/or when the technology is mature;
  • Patentee is actively working to develop a market for the patented product/process in India. The technology is available for licensing; or
  • Patentee is looking for working opportunities in a large scale.

If a patent is worked in India, the Patentee and licensee(s) are requested to provide: (1) the amount and value (in Rupees) of the patented invention; (2) whether the patented invention was or was not manufactured in India; and (3) whether the patented invention was imported from other countries (and if so, provide the country(ies) the patent invention is imported from).

Additionally, regardless of whether or not the invention is worked or not worked in India, the Patentee and licensee(s) must also indicate whether:  (1) any licenses and/or sublicenses were granted during the year; and (2) the public requirement has been met partly/adequately to the fullest extent possible at a reasonable price.

On January 10, 2018,  counsel for the Controller General of the IPO, appearing before  a Division Bench of the Delhi High Court, agreed to file a status report on the extent of non-compliance with working statements as well as the actions taken by IPO to amend the Patent Rules concerning working statements.  These submissions were made by the counsel for the IPO in response to a writ petition filed on January 19, 2015, by Shamnad Basheer, an Intellectual Property Professor and activist (Shamnad Basheer v. Union of India & Others (UOI)).  In his writ petition, Mr. Basheer highlighted the non-compliance of many Patentees and licensees in connection with working statements.  This writ petition appears to be the first attempt by any third party to enforce the working requirement using the judicial system.  Not surprisingly, on October 28, 2015, several months after Mr. Basheer filed his writ petition, an application to intervene in the litigation was filed by Mr. Narendra Reddy Thappeta.

In his writ petition, Mr. Basheer noted several examples of non-compliance with Section 146 (2) including:

  • Grant of compulsory license to Natco Pharma (Natco) in connection with Indian Patent No. 215758 covering an anti-cancer drug: In the compulsory license granted on March 9, 2012, Natco was required to provide an accounting of sales to the Controller on a quarterly basis (by the 15th of the succeeding month).  Mr. Basheer sought information from IPO about whether such reports had been filed and received information that “no details” were available.  Mr. Basheer informed IPO of the lapse several times by Natco but no action was taken.
  • Form-27 submitted by Ericsson: Ericsson refused to disclose licensing details in the form citing that the information was “confidential” or a trade secret.  Mr. Basheer pointed out that the Controller took no action with respect to this violation of  Section 146(2).

With respect to Ericsson, the Court noted that all Patentees and licensees are required to submit the details of licenses and sublicenses and that this information could not be termed “confidential” and that IPO had to treat non-inclusion of this information as a failure to comply with the requirements of Section 146 of the Patents Act, 1970. The Court adjourned the matter until January 18th and asked the Government to indicate whether amendments to Form 27 had been effected pursuant to the Patent (Amendment) Rules, 2015.  Not surprisingly, the Court’s order set off a debate on working statements in the country, particularly with respect to the type and extent of information to be submitted.

During the hearing on January 18, 2018, counsel for Natco presented evidence that it had submitted sales figures with the IPO on a quarterly basis and that its submission was available on the IPO’s website.  Unfortunately, the evidence submitted by Natco raised concerns about the quality of the data management performed across the multiple offices of the IPO.  Also during the hearing, the UOI raised concerns about the “confidentiality” of the information submitted as part of the working statement.  Specifically the UOI argued that the information relating to the amount and value of the patented invention worked in the country was sensitive information that could be misused to the disadvantage of the Patentee and/or licensee(s).  Additionally, the UOI argued that Form 27 simply requires mentioning the number of licenses and sublicenses granted during the previous year, not the name of each licensee and amount of each license.  Finally, arguments were made regarding the format of Form 27, specifically, that it was not suitable for all types of inventions.  It was argued that the form works well for Patentees of pharmaceutical inventions, but does not work well for Patentees in others sectors, such as in information and technology.  Specifically, Patentees in these areas find it difficult to provide information for at least the following reasons:

  • Patented inventions such as iPads or computers are often covered by hundreds of patents (for their various components and subcomponents);
  • Patentees of subcomponents may not always have control or knowledge regarding larger, composite products that incorporate their subcomponents to be able to accurately identify which of their patents require a working statement;
  • The global nature of the market makes it difficult to determine the amount and value of the patent invention;
  • There is a lack of an established market value for software such as auto-lock (which is not subject to FRAND); and
  • There is no uniform or standard method for determining public demand. For example, for subcomponents incorporated into larger, composite products, it is not possible to identify the public demand for the patented subcomponent separately.

The Court set another hearing for January 25, 2018.

In view of the writ petition and the Court’s direction to the Controller of IPO to file a status report on the extent of non-compliance and the action taken with respect to that noncompliance, Patentees and licensees should expect increased scrutiny and enforcement of Form 27 and its requirements.  The IPO is likely to amend the format of Form 27 to make it more practical to provide working information by technology companies.  Patentees and licensees should carefully review Form 27 and their responses to make sure they are fully compliant before filing in the IPO.  In cases where the correct working information was not provided due to difficulties in collecting and collating such information, it is recommended that the correct information be collected now and an amended Form 27 be filed with the IPO for any previous year in question.  In cases where the statement was filed as “worked” without providing  any additional information as to the specifics of the working, it is strongly recommended that the Patentee and/or licensee(s)  provide the additional information (via an amended Form 27) as quickly as possibly as the IPO may treat the previously submitted information as “false or incorrect” information.

The hearing in the writ petition is now scheduled for January 25, 2018, and we expect the Court will issue a decision clearly laying down the guidelines with regard to filing of the working statements to end the legal controversy associated these submissions.

Please continue to watch the BRIC Wall Blog for updates on the working statement issue in India.

This post was written by Lisa Mueller and Manisha Singh of LexOrbis.

Hitting the Ground Running: The Brazilian Patent Office Publishes New Guidelines Relating to the Examination of Chemical Inventions

On January 2, 2018, things got off to a fast start in Brazil with the publication of new guidelines (Guidelines) by the Instituto Nacional da Propriedade Industrial (INPI; also known as the Brazilian Patent and Trademark Office (BRPTO)) relating to patent applications involving chemical inventions. The Guidelines complement several other guidelines issued over the last few years, such as block I (BRPTO Rule #124/2013) and block II (BRPTO Rule #169/2016).

The issued Guidelines add substantive text when compared to the draft published for public comment in March 2017.  Specifically, some highlights of the Guidelines include:

  1. Definition of a chemical compound:  A chemical compound should be defined by its chemical structure or chemical name.  Compounds defined only by their physical, physicochemical or biological properties or by its use or application (functional claiming), will not be accepted.  An example of a type of claim that will not be accepted is:  “A compound characterized by having property Y”.
  2. Examination requirements for N-oxides: According to item 2.4 of Guidelines, a simple description of a N-oxide/salt/ester/ether of a known compound will be considered to be obvious unless the compound is associated with a non-obvious property or an “unexpected technical effect” over the prior art.  INPI uses very specific language in this section of the Guidelines thus giving particularly strong emphasis and meaning to the phrase “unexpected technical effects”.  It is important for applicants to keep this phrase in mind when drafting their applications for filing in Brazil.
  3. Esters, ethers, pro-drugs, solvates, hydrates, clathrates, and co-crystals: These terms alone, in the absence of any specific content (namely, a definition), will be interpreted as generic expressions, and as such, run the risk of receiving an “indefiniteness” type rejection during examination.  Applicants should consider defining these terms in the specification to reduce the risk of receiving such a rejection.
  4. Selection patents:  Comparative data between selected compound(s) claimed in an application and those of close structural similarity known in prior art should be provided for the purpose of demonstrating how the selected compounds are non-obvious over the prior art.  Specifically, applicants should demonstrate how the selected compounds exhibit an unexpected technical effect over the prior art compounds.
  5. Written description of polymorph inventions:  Advanced techniques used to characterize crystalline solid substances that were not foreseen in the Guidelines will be considered, in addition to x-ray diffraction data, by examiners in light of their relevance in the identification of the claimed crystalline solid.  Additionally, a lack of data characterizing a crystalline solid will result in the specification being considered to not clearly and sufficiently describe the claimed subject matter.  Moreover, INPI will consider the submission of further data on the characterization of crystalline solids after the filing date to be added subject matter (or new matter) which will not be accepted (however, such a decision could form the basis of a challenge in the Brazilian court system).
  6. Combination claims:  As discussed in the draft of the guidelines, when assessing the obviousness of a combination claim, the combination should not have been disclosed in the prior art in connection with compounds belonging to the same chemical class.
  7. New medical use claims: The specification should provide evidence supporting a new medical use as of the filing date of the application.  Failure to do so may result in the application being considered to lack an essential technical feature thereby resulting in the invention being considered to be insufficiently disclosed.  According to the Guidelines, extrapolation of “in vitro” tests to support an in vivo effect will only be possible when complementary information  proving equivalence is provided (such as through the use of a scientific publication stating that an in vitro-in vivo correlation exists).  Additionally, studies carried out in animal models must be capable of being extrapolated to humans or the animals being treated.
  8. Submission of additional data during prosecution:  Item 9.1.3 of the Guidelines states that an applicant can submit additional data during examination exclusively to complement the information already contained in the specification as originally filed.  If no experimental data is provided in the specification at the time of filing, there is a risk that INPI may reject the submission of such new data.

This post was written by Lisa Mueller and Roberto Rodrigues Pinho.

Draft Intellectual Property Policy of the Republic of South Africa – Phased Implementation – Phase 2 – Part IV

On August 25, 2017, the Draft Intellectual Property (IP) Policy (Draft IP Policy) of the Republic of South Africa was published for public comments by November 17, 2017.  This Draft IP Policy follows from the IP Consultative Framework that was approved by the South African cabinet on July 6, 2016.  In this multi-part series, we address the need for the policy, the goals, the strategies to meet the goals, and the phases of implementation.  In the fourth part of this series, we focus on Phase 2 of the phased implementation of the Draft IP Policy.  In part one, we provided an introduction and the goals of the Draft Intellectual Property Policy.  In part two, we provided information on the strategies and key reforms of the Draft IP Policy.  In part three, we provided information on the phased implementation of the Draft IP Policy as it relates to IP and Public Health.

In order for the South African government to pursue urgent action in certain areas, conduct further in-depth study and consultation in other areas, and respond to a fast-evolving discipline, the Draft IP Policy will be implemented using a dynamic, two-phase approach.  Phase 1 will focus on: 1) IP and Public Health; and 2) will focus on International IP Cooperation (See, part three).

Phase 2 will focus on:

  • Intellectual Property Rights (IPRs) and the informal sector;
  • Branding of South African goods and services (collective marks, certification marks, and geographical indications);
  • Safeguarding South Africa emblems and national icons;
  • Commercialization of IP;
  • Enforcement;
  • IP localization and beneficiation;
  • IP awareness and capacity building;
  • IPRs and the environment/climate change/green technologies; and
  • IP in agriculture, IP and biotechnology, genetic resources and genomic sovereignty.

a) Intellectual Property Rights (IPRs) and the informal sector

The informal sector in South Africa has provided opportunities for employment for some of the most vulnerable populations in the country.  This sector is not traditionally thought to generate the type of innovation that would require IP protection.  Nonetheless, the Draft IP Policy raises the question as to whether IP is of relevance to the informal sector.  However, that does not mean that this sector may not be empowered and entitled to IPRs.  A key component of Phase 2 will be to explore how IPRs may optimally benefit the informal sector and generate a greater understanding of the costs and benefits.  Specifically, it has been suggested that the IP system could be used to empower this sector of the economy by using intangible assets as a veritable tool for the uplifting of economically marginalized communities.  The benefits of utility models and industrial designs, among others, will be explored.

b) Branding of South African goods and services (collective marks, certification marks, and geographical indications)

A key component of Phase 2 is assessing whether the relevant legislation provides sufficient and appropriate brand protection to South African goods and services.  Three signs used in branding are collective marks, certification marks, and geographical indications.  Collective marks are signs used to distinguish certain valued characteristics common to the products of the members of an association or cooperative.  Certification marks are distinctive signs used to indicate compliance with standards and characteristics pre-established by the owner of the mark, but are not confined to any membership.  Geographical indications are signs that have a specific geographical origin and possess qualities, reputation, or characteristics that are essentially attributable to that place of origin.  Currently, the Trade Marks Act makes provision for both collective marks and certification marks, and for the application of the provisions of the Trade Marks Act to such marks in so far as they can be applied.   With respect to geographical indicators (GI), the Liquor Products Act (LPA) provides protection for wine and spirits.  The Merchandise Marks Act (MMA) protects broader agricultural GIs as an interim measure pending migration of the protection to the Agricultural Products Standards Act.

c) Safeguarding South Africa emblems and national icons

In Phase 2, the Draft IP Policy will evaluate whether legislation is needed to protect South African emblems within the country.  If it is determined that protection is needed, the next step will be to determine the form of the protection.  Other countries have taken similar approaches, such as Australia, whose federal government decided against legislating a system specifically designed for protecting national icons.  This decision was made after Australia’s Advisory Council on IP (ACIP) was tasked with examining the possible mechanisms for doing so.  Currently, emblems and other official signs and hallmarks are protected at the international level by Article 6ter of the Paris Convention.  A party to the Convention, who is interested in obtaining protection, must notify other parties via WIPO of its desire to do so for its identified emblems.  Article 6ter requires that legislation must be enacted to protect other countries’ emblems, but does not require action to protect a country’s emblems domestically.

d) Commercialization of IP

The commercialization of IP is defined as the process, in which IP-protected products or services are brought to market.  Commercialization may be done by the rights holder alone, in partnership with another party, or by another party acting in terms of a license or an assignment of rights.  The process of commercialization as it currently stands, has proven challenging for innovators of varying scale in South Africa.  Phase 2 of the Draft IP Policy will explore options for ways that IP can help in bringing goods and services to market in the country.  Possibly policy interventions that may aide in this regard include: 1) the Department of Trade and Industry’s National Technology Commercialization Strategy; 2) the Department of Science & Technology’s (DST’s) Innovation White Paper; and 3) the Department of Telecommunications and Postal Service’s (DTPS) National Integrated Information Communication Technology (ICT) Policy White Paper.

e) Enforcement

Enforcement is an essential aspect in protecting IPRs.  The legal and institutional framework, in which IPRs are enforced, is provided by the South African government.  The government is also required to take reasonable measures to ensure that constitutionally protected rights are not infringed.  It has been suggested that South Africa may have to play a more active role in the enforcement of certain rights.  Accordingly, Phase 2 of the Draft IP Policy will evaluate the country’s current execution of enforcing the protection of IPRs, and will make modifications where necessary.

f) IP localization and beneficiation

The Draft IP Policy recognizes that IP is both an opportunity and a challenge to South African industry and society.  It is believed that Phase 2 will make use of existing scholarly evidence on the current production of IP within South Africa.  In doing so, and within the parameters of South Africa’s international obligations, the country will be able to create a differentiated system of empowerment and beneficiation for local industry groupings and individuals who seek to take advantage of the IP system in myriad ways.  Such a system will help to empower the people of South Africa.

g) IP awareness and capacity building

In an effort to promote IP awareness and capacity building, it is essential to thoroughly study and understand the opportunities and challenges that are presented by domestic and international IP policies in South Africa.  An optimal way to assess the opportunities and challenges is to garner input from diverse stakeholders from sections of industry, health, civil society, agriculture, and the arts.  This input would aid in remodeling and optimizing the IP system of South Africa.  During Phase 2, the work and coverage of the Companies and Intellectual Property Commission (CIPC) will be scaled up, so that South Africa is better able to communicate with stakeholders, particularly the most disadvantaged stakeholders.  This key element will ultimately help to promote domestic social and economic development.  

h) IPRs and the environment/climate change/green technologies

The development and use of green technologies are essential for meeting South Africa’s obligations with respect to the environment and climate change.  It has been suggested that adopting comprehensive flexibility to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) will be essential for the transfer and diffusion of new green technologies.  These measures will also help to facilitate opportunities for domestic research and generation of green technology.  A goal of Phase 2 will be to determine if there is any relevant flexibility in TRIPS that should be implemented in South Africa’s domestic IP law.  The use of such flexibilities would then be promoted for delivering domestic green technology to the country.

i) IP in agriculture, IP and biotechnology, genetic resources, and genomic sovereignty

The discussion on how to optimally apply IP within agriculture and related fields has been an evolving conversation that parallels that in other developing countries with comparable natural heritage, such as Asia and Latin America.  Thus, decisions made on domestic IP policy will take into consideration international obligations, which include conditions within the Paris Convention and the TRIPS Agreement.  Phase 2 of the Draft IP Policy will consider at least the following four issues: 1) how to reconcile provisions mandated by TRIPS and the Convention on Biological Diversity, especially as it pertains to “access and benefit-sharing” clauses that seek to give control of a region’s natural heritage to residents of that region; 2) Supporting efforts at developing indigenous and international biotechnology, without endangering access to agricultural products and/or limiting plant variety diversity; and 3) ensuring farmers’ rights, as well as implementing constitutional obligations to protect genomic sovereignty within South Africa; and considering other potential protections to boost domestic agricultural production.

The Draft IP Policy will ultimately promote and contribute to South Africa’s socioeconomic betterment by encouraging innovation, promoting local manufacture, preserving and leveraging the country’s resources and heritage, and empowering domestic industries and individuals who seek to take advantage of the IP system.  The implementation of phases of the Draft IP Policy will be monitored and evaluated to ensure success, which will greatly benefit South Africa and the international community as a whole.

This post was written by Lisa Mueller and Kate Merath of Michael Best and David Cochrane of Spoor & Fisher.


Draft Intellectual Property Policy of the Republic of South Africa – Phased Implementation – IP and Public Health – Part III

On August 25, 2017, the Draft Intellectual Property (IP) Policy (Draft IP Policy) of the Republic of South Africa was published for public comments by November 17, 2017.  This Draft IP Policy follows from the IP Consultative Framework that was approved by the South African cabinet on July 6, 2016.  In this multi-part series, we address the need for the policy, the goals, the strategies to meet the goals, and the phases of implementation.  In the third part of this series, we focus on the phased implementation of the Draft IP Policy as it relates to IP and Public Health.  In part one, we provided an introduction and the goals of the Draft Intellectual Property Policy.  In part two, we provided information on the strategies and key reforms of the Draft IP Policy.

In order for the South African government to pursue urgent action in certain areas, conduct further in-depth study and consultation in other areas, and respond to a fast-evolving discipline, the Draft IP Policy will be implemented using a dynamic, two-phase approach.  Phase 1 will focus on:  1) IP and Public Health; and 2) International IP Cooperation.

The key components of IP and Public Health are as follows:

  • Local manufacture and export in line with industrial policy;
  • Patent–substantive search and examination;
  • Patent opposition;
  • Patentability criteria;
  • Disclosure requirements;
  • Parallel importation;
  • Exceptions;
  • Voluntary licensing;
  • Compulsory licenses; and
  • IP and competition law.

“International Cooperation” refers to the international treaties that South Africa will consider joining.  Specifically, South Africa will explore legal instruments and international treaties that are critical to advance the objectives of the Draft IP Policy. These will include:

  • Locarno Agreement Establishing an International Classification for Industrial Designs (1968);
  • Strasbourg Agreement Concerning the International Patent Classification (1971);
  • Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks (1973);
  • Nice Agreement Concerning the International Classification of Goods and Services for Marks (1979);
  • Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (1989); and
  • Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled (2013).

Phase 2 will focus on:

  • Intellectual Property Rights (IPRs) and the informal sector;
  • Branding of South African goods and services (collective marks, certification marks and GIs);
  • Safeguarding South Africa emblems and national icons;
  • Commercialization of IP;
  • Enforcement;
  • IP localization and beneficiation;
  • IP awareness and capacity building;
  • IPRs and the environment/climate change/green technologies; and
  • IP in agriculture, IP and biotechnology, genetic resources and genomic sovereignty.

As mentioned previously herein, this post will focus on phase 1, specifically, on IP and Public Health.  A future post will focus on phase 2.

a) Local manufacture and export in line with industrial policy

An overreaching goal of the Draft IP Policy will be to increase the local production of pharmaceuticals to meet domestic needs in South Africa.  In addition, the increase in production will lead to export opportunities throughout Africa and beyond.  This aspect of Phase 1 is in line with the National Development Plan (NDP), as well as the National Industrial Policy Framework (NIPF), and implemented through the Industrial Policy Action Plan (IPAP).  Substantive policy recommendations that follow in the NDP are designed to boost local production and export.  It has been recommended that additional policy measures be implemented, so that domestic industry is encouraged to take full advantage of the opportunities offered in the Draft IP Policy.

The pharmaceutical industry is one of the priority sectors identified by Industrial Policy Action Plan (IPAP).  The pharmaceutical market in South Africa is a two-tier pharmaceutical market, which is divided into a public and a private market.  This market is the largest in Sub-Saharan Africa, and worth a total estimated R40 billion (approximately $3 billion USD) annually.  However, the South African pharmaceuticals sector is still relatively small by international standards.  This sector constitutes a mere 0.4% value and 1% volume of the global market.  The contribution of this industry to South Africa’s GDP has also declined from 1.6% to 1.1% over the past six years.  Despite the decline, the sector provides direct employment to approximately 10,000 people, and the downstream segment provides approximately 25,000 jobs.  Thus, there is tremendous potential for this sector to grow and contribute value-added jobs to the South African economy.  The availability of employment opportunities is critical to whether a student or researcher channels her or his efforts toward a particular scientific area.  Thereupon, growth of the pharmaceutical production sector is important to developing and maintaining the science and technology community in South Africa.

Growth of the South African pharmaceutical industry will also contribute to the sustainability of supply and allow the country to fulfil key health objectives as outlined in the National Drug Policy.  Specifically, the growth of the industry will ensure the availability and accessibility of essential drugs.  Currently, approximately 65% of the demand for pharmaceuticals in South Africa, by value, is met by imports.  It has also been reported that medical products are the fifth largest contributor to South Africa’s trade deficit.  Imported pharmaceuticals have played an important role in improving public health.  However, increasing locally produced pharmaceuticals in South Africa will ensure the availability of medications specific to the country’s unique disease burden.  In order to treat many of the diseases in South Africa, medications are needed that require specific active pharmaceutical ingredients (APIs), of which global supply is limited.  Therefore, formulating an appropriate IP Policy and implementing the corresponding legal framework will contribute to significantly strengthening the local industry and meeting local needs.

b) Patent–substantive search and examination

Currently South Africa employs a deposit system for patent applications.  Therefore, patent applications are not subjected to a substantive search and examination (SSE) procedure.  A discussion on the proposed SSE was discussed in part two of this series.

c) Patent opposition

Currently, there is no opposition procedure in South Africa.  A patent may only be challenged after grant in an application for revocation, which must be brought before the Commissioner of Patents who is a High Court Judge.  Patent oppositions afford an opportunity for public intervention in the patent application process.  The Draft IP Policy recommends that participation in the process be made open in order to maximally benefit the state and South African industry.  Optimally, opposition proceedings will be enacted in the law, both prior to and after, the grant of a patent.  In the interim, owing to capacity constraints, the Draft IP Policy recommends that South African patent law recognize a third-party submission system or “observation” to stand in place of the pre-grant opposition process and that existing provisions in administrative law to be used in lieu of post-grant oppositions.

By their nature, opposition proceedings can achieve a range of policy aims in respect of substantive patent examinations.  Importantly, such proceedings seek to ensure that only those inventions that meet domestic statutory requirements for patentability are granted patent protection. Given the purpose of such proceedings, no legitimate public purpose would be served by limiting the class of persons who may participate.  Put differently, no specific standing requirements should have to be met in order to oppose the grant of a patent.  From the perspective of the South African government, the choice of recognizing any particular opposition proceeding has implications for human and financial resources. Thus, the third-party observation mechanism is the least resource-intensive, as it does not trigger any specific procedure involving the third-party once the relevant information has been submitted.  Pre-grant opposition proceedings are potentially more resource-intensive as they require the South African government to put in place an administrative procedure that makes provision for the active participation of applicants and third-parties.  However, by harnessing available information and expertise relevant to the application for or grant of a patent, the state’s resources may effectively be supplemented.

The IP Policy aims to make a provision for a third-party observation mechanism in terms of which all self-identified parties would be entitled to make written submissions opposing the grant of any particular patent.  A provision will also be made for a post-grant opposition mechanism that would require the development and promulgation of regulations.  This would allow all such oppositions to proceed by way of administrative review, in accordance with the provisions of the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”).  This provision would be available for as long as the contemplated system of post-grant opposition is not yet in force.  In addition, a legislative provision has been suggested  to allow for the introduction of pre-grant opposition proceedings once the Minister of Trade and Industry is satisfied that there is sufficient capacity within the substantive examination system to make appropriate use of such proceedings.

d) Patentability criteria

The Draft IP Policy states that, in line with emerging best practice, patentability criteria will be developed in order to promote genuine innovation through the patent system in South Africa, and the criteria will be implemented through the process of patent examination.  The criteria should form part of the Patents Act and also regulations and guidelines for patent examination.  The Draft IP Policy states that Article 27.1 of the TRIPS agreement allows South Africa the flexibility to interpret and implement patentability requirements in a manner consistent with its constitutional obligations, developmental goals, and public policy requirements.  Amongst other things, this would include the adoption of patentability criteria that address the country’s health and environmental concerns, as well as industrial policy objectives.  The Draft IP Policy mentions Australia, which in 2012 adopted legislation that upwardly adjusted the standards of patentability in Australia.

e) Disclosure requirements

Applicants are required to adequately disclose the nature of the invention therein, in order to gain a full and fair understanding of a patent application.  To assist in the process of examination of such applications, in addition to the existing disclosure requirements in the Patents Act, it is recommended that Applicants be asked to provide information regarding the status of similar and related applications filed in other international jurisdictions.

The Draft IP Policy provides that in terms of Article 29(1) of the TRIPS agreement, an Applicant for a patent disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art. The patent law in South Africa already provides that a complete patent specification must sufficiently describe, ascertain and, where necessary, illustrate or exemplify the invention and the manner in which it is to be performed.  The Draft IP Policy recommends that Applicants be asked to provide information regarding the examination of corresponding patent applications in other countries.  This will assist the examiners during the search and examination procedure.

f) Parallel importation

South Africa’s unique developmental needs, particularly in public health, require the exploration of every legal opportunity to support the viability and expansion of the public health system.  In the case of patented products, such as medicines, this includes the ability to purchase said medicines from any external territory that is necessary.  The implementation of parallel importation will be undertaken in a controlled manner pursuant to consultations with respective stakeholders.

The parallel importation of medicines in South Africa is governed by the 1997 amendments to the Medicines and Related Substances Act 101 of 1965 (Medicines Act).  This legislation is administered by the National Department of Health (DOH).  The relevant provision applies notwithstanding any rights conferred in terms of the Patents Act.  A narrow interpretation of section 45(2) of the Patents Act in its current form could potentially give rise to challenges, should parallel importation be pursued.  Thus, there is a need to clarify that parallel importation of medicines in the manner prescribed in the Medicines Act does not constitute an infringement of the Patents Act.  Doing so would allow Ministries responsible for specific sectors to sanction sector-specific parallel importation in a controlled manner.  This importation would be pursuant to consultations with their respective stakeholders.  The result would be striking a balance between access and the interests of nascent industries.

g) Exceptions

The TRIPS Agreement explicitly states that the objective of promoting and enforcing IPRs is to contribute to the promotion of technological innovation and to the transfer and dissemination of technology.   This is to be done to the mutual advantage of producers and users of technological knowledge alike, and in a manner conducive to social and economic welfare, thus achieving a balance of rights and obligations.  As a means of striking a balance between the rights of owners and users of IPRs, Article 30 of the TRIPS Agreement allows members to provide limited exceptions to patent rights.  The Draft IP Policy mentions Bolar exemptions and research exceptions.  The Bolar exemption allows a party to obtain regulatory approval for a product prior to the expiry of a patent covering the product.  Currently, the South African Patents Act does not include a research exemption.  The Draft IP Policy appears to go further than a research exemption, stating, with reference to pharmaceutical products, that it is essential to facilitate research, development and testing of IP products in the commercial and industrial sectors prior to the expiry of the patent term.

 h) Voluntary licensing

A voluntary license occurs when a patent holder offers, on his or her own accord, a license to a third party to produce, market, and distribute the patented product.  In the South African public health context, the third-party has tended to be a domestic generic producer, or the Medicines Patent Pool (MPP), which acts as a public health intermediary to ensure generic producers voluntary licenses with access-friendly terms and conditions.  The Draft IP Policy recognizes that voluntary licensing has contributed to generic competition, lower prices and accessibility, particularly where antiretroviral drugs (ARVs) used in the treatment of HIV/AIDS are concerned.  The document recommends greater transparency in respect of the terms of these licenses, and encouragement to conclude such license agreements.

 i) Compulsory licenses

Draft IP Policy mentions that compulsory licenses are an important mechanism to ensure affordability of essential goods and to restrain anti-competitive practices.  The grant of a compulsory license is subject to an expensive judicial process and infers that there should be a less expensive and less complicated administrative process to apply for a compulsory license.  The Draft IP Policy mentions that, currently Section 4 of the Patents Act entitles a Minister of State to use an invention for public purposes, but requires negotiation on conditions of use, and if agreement cannot be reached then the State may approach the Commissioner of Patents to determine the conditions.  The Draft IP Policy suggests that prior negotiations and determination by the Commissioner of Patents should not be required, and that the law should be amended so that the State can take advantage of flexibilities provided in the TRIPS agreement.  The Draft IP Policy states that the South African Government is fully aware of the limitations of “Paragraph 6”, and will engage stakeholders to find ways of ensuring simpler implementation.  This is a reference to the implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health which relates to compulsory licenses for local manufacture and export.

 j) IP and Competition Law

The Draft IP Policy mentions recent competition law cases involving IP and public interest.  In 2001, instead of using the provisions of the Patents Act, a complaint was lodged with the Competition Commission against pharmaceutical companies which held patents on a number of ARV pharmaceuticals in South Africa.  This led to a settlement and the patentees agreed to license the patents to South African pharmaceutical companies and, as a result, these pharmaceuticals have been made available successfully in SA.  The Draft IP Policy recommends the clarification of the scope of intersection between competition law and IP.  In this regard, the document states that both competition law and patent law can be used to implement competition-related TRIPS flexibilities and advance consumer welfare.

Please continue to watch the BRIC Wall Blog for the remainder of the series on the Draft Intellectual Property Policy of the Republic of South Africa.

This post was written by Lisa Mueller and Kate Merath of Michael Best and David Cochrane of Spoor & Fisher.


Draft Intellectual Property Policy of the Republic of South Africa – Strategies and Key Reforms – Part II

On August 25, 2017, the Draft Intellectual Property (IP) Policy (Draft IP Policy) of the Republic of South Africa was published for public comments due by November 17, 2017. This Draft IP Policy follows from the IP Consultative Framework that was approved by the South African cabinet on July 6, 2016.  In this multi-part series, we address the need for the policy, the goals, strategies to meet the goals, and the phases of implementation.  In the second part of this series, we focus on the strategies and key reforms of the Draft IP Policy.  In part one, we provided an introduction and the goals of the Draft Intellectual Property Policy.

As discussed in part one, the goals of the Draft IP Policy are:

  • To consider the development dynamics of South Africa and improve how IP supports small institutions and vulnerable individuals in society, including in the domain of public health;
  • To nurture and promote a culture of innovation, by enabling creators and inventors to reach their full potential and contribute towards improving the competitiveness of South African industries;
  • To promote South African arts and culture; and
  • To solidify South Africa’s various international obligations, such as the Convention on  Biological Diversity (CBD) and the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization (Nagoya Protocol on ABS), in the service of genetic resources and traditional knowledge associated with genetic resources.

The primary strategies that will be employed in the Draft IP policy to achieve the above-listed goals, include:

  • Advancing a balanced and coordinated approach to IP that regulates intellectual property rights (IPRs) in line with the South African Constitution;
  • Introducing key policy reforms that account for the developmental dynamics of South Africa;
  • Promoting an innovation and knowledge economy; and
  • Leveraging competitive and comparative advantages to advance the transformation of the South African economy.

One of the key reforms will be the introduction of substantive search and examination (SSE) for patents. The introduction of this key reform will aid in ensuring that genuine innovation is stimulated within South Africa. A major benefit to the public at large will be ensuring that patents, and hence market exclusivity, are only granted when appropriate.  A major benefit to patent holders is that they will be granted rigorously assessed rights that are more likely to withstand validity challenges.

Initially, SSE will be applied in the health sphere due to capacity constraints and resources of the South African Patent Office (SAPO). However, as the capacity of SAPO progressively increases, SSE will be expanded to other fields.  The decisions on the initial fields in which SSE will occur will be decided by the Inter-Ministerial Committee on Intellectual Property (IMCIP) in consultation with a diversity of stakeholders.  Although the draft policy document states that these will not be the only technical areas that will be examined, the pharmaceutical and life sciences areas will be one of the initial fields to undergo SSE.  In anticipation of these changes, the South African Patent Office has hired 20 recruits who are currently undergoing training to become patent examiners.  These recruits have degrees in physics, chemistry, and life sciences.

Another key reform focuses on ensuring that South Africa protects IP rights, while simultaneously promoting public health, local manufacture, research and development, innovation, food security, environmental considerations, transfer of technology, and overall socio-economic development. This reform will be addressed by the leveraging of flexibilities contained in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).

The promotion of economic through implementation of a “utility model” is another key area of reform. It is important to note that the term “utility model” may be addressed differently in other countries.  Other frequently used terms are “petty patents”, “short-term patents”, and “innovation patents.”  Exclusivity is enacted similar to a patent right, which is granted to an inventor or the inventor’s assignee, by the state, for a fixed period of time.  In contrast to a typical “original” patent, the terms and conditions for granting a utility model include a shorter term of protection and less stringent patentability requirements.  This utility model will support the registration of patents by resident small, medium, and micro-enterprises (SMMEs), historically disadvantaged individuals, and companies who are operating in the informal sector.

In order to protect nationally-owned IP related to indigenous resources, traditional innovation, and traditional knowledge, South Africa is taking a coordinated approach to create awareness about IP among its citizens. Specifically, South Africa will create a system for the protection of traditional knowledge that will not only safeguard such knowledge from misappropriation and exploitation, but will also promote research and development in the area of products and services based such knowledge.  The situation with the protection of traditional knowledge in South Africa currently is quite complicated.  The National Environmental Management: Biodiversity Act 10 of 2004 (NEMBA) provides for benefit sharing, and the Patents Act was amended in 2005 to provide for disclosure in the event that indigenous (i.e. indigenous to South Africa) biological or genetic resources were used in the development of the invention, and to ensure compliance with NEMBA.  In 2013, the Intellectual Property Laws Amendment Act 28 of 2013 was promulgated in an attempt to amend the current IP laws to allow protection for indigenous knowledge.  Regulations have not been promulgated and the IP Laws Amendment Act have not come into effect.  In fact, the IP Laws Amendment Act has been criticized, because the current IP laws cannot be amended to cater for indigenous knowledge.  Another bill that provides a sui generis system for the protection of indigenous knowledge has been proposed.  Many in South Africa hope that the IP Laws Amendment Act will be repealed and replaced by the proposed bill.

Additional key reforms addressed by the Draft IP Policy include the promotion of cooperation and integration on IP, a commitment to all relevant international obligations that South Africa is party to, and the promotion of international best-practices in IP that align with South Africa’s development strategies. 

Please continue to watch the BRIC Wall Blog for the remainder of the series on the Draft Intellectual Property Policy of the Republic of South Africa.

This post was written by Lisa Mueller and Kate Merath of Michael Best and David Cochrane of Spoor & Fisher.


Mexico Faces Renewed Pressure to Implement the 1991 Act of the UPOV Convention

In 1997, as a result of the commitments arising from the North American Free Trade Agreement (NAFTA), and after the publication of the Federal Law on Vegetal Varieties drafted in accordance with NAFTA, Mexico officially adopted the International Union for the Protection of New Varieties of Plants (UPOV) Act of 1978.

As with all UPOV member states, the criteria for the protection of plant varieties in Mexico is that the plant variety be: (1) new, (2) distinctive, and (3) uniform and stable. However, the enforcement of plant breeder rights in Mexico substantially differs from other jurisdictions. As a signatory of the UPOV Act of 1978, instead of the updated 1991 Act, the term of protection for plant varieties is shorter than in most countries, namely, 18 years for perennial species (forest and fruit trees, vines and ornamentals) and their rootstocks) and 15 years for all other varieties.

In 2012, there was an attempt to approve a new Federal Law on Vegetal Varieties to bring Mexico in line with the UPOV Act of 1991 (1991 UPOV Act).  Unfortunately, due to the fragile state of the Mexican agricultural system along with several other issues, approval of the 1991 UPOV Act did not occur.  In 2012, the fragile state of Mexico’s agricultural system was due to the lack of regulations to properly address the social and economic complexities associated with the system as well as the challenges associated with obtaining access to financial resources to further develop the system within the country.

However, the recent negotiations of the Trans-Pacific Partnership (TPP) as well as the current renegotiation of the NAFTA Agreement have resulted in new initiatives from the agroindustry in Mexico to modify the law and implement the 1991 UPOV Act.  Implementation of the 1991 UPOV Act would provide additional rights for plant breeders and improve the economic development of the agricultural industry.

Regarding the new initiatives, three particular areas are specifically being highlighted

a) Extension of the term of protection from 15 to 18 years to 20 to 25 years (depending on the species), in order to provide an equitable remuneration for the breeder and also to distribute the cost of the investment

b) Extension of the scope of protection to cover not only propagating material but also the product resulting from the harvest; an

c) Incorporation of the concept of “essentially derived variety” for the purpose of encouraging

The main objective of these proposed initiatives is to increase the competitiveness of Mexican developed varieties by improving the research programs available for Mexican native species, strengthening the enforceability measures available for protected varieties in order to promote an environment of innovation and investment as well as facilitate access and the transfer of technologies.

The most recent initiative is currently under internal review by the Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA), however, there is a chance these may addressed sooner by the Mexican Congress.  However, the pace of the renegotiation of NAFTA will likely set the timetable for any movement on these initiatives.

This post was written by Lisa Mueller and Abraham Díaz and Erwin Cruz of Olivares.