Intellectual Property Rights from Publicly Financed Research and Development Act No. 51 of 2008, South Africa
Citation: Journal of Intellectual Property Law & Practice, doi:10.1093/jiplp/jpq021
South Africa has introduced legislation to regulate allocation and commercialization of IP derived from research and development undertaken with public funds.
Legal Context
The Intellectual Property Rights from Publicly Financed Research and Development Act 2008 aims ‘to provide for more effective utilisation of intellectual property emanating from publicly financed research and development’ (Preamble). It seems that government has decided that it can rectify South Africa's low patenting rate by forcing recipients of public finance for research and development, such as universities and research institutions, to protect and commercialize their research results. The legislation has attracted much criticism, raising many questions about the role of research institutions as revenue-generating enterprises, the potentially detrimental effect of the imperative to commercialize research results on the dissemination of information, the negative impact that the Act may have on institutions' ability to work as part of research consortia and to attract foreign funders, the practicality of the bureaucratic processes that have to be followed and the administrative burdens associated with the reporting, disclosure, and commercialization requirements. Although the Act was passed on 22 December 2008, it can only come into effect once Regulations have been passed which will set up the necessary institutional structures. The draft Regulations were first released for public comment in April 2008, but by the start of February 2010, they had yet to be passed.
Facts and analysis
The stated objective of the Act is to ensure that
intellectual property emanating from publicly financed research and development is identified, protected, utilised and commercialised for the benefit of the people of the Republic, whether it be for a social, economic, military or any other benefit (section 2(1))This broad objective is implemented through provisions on the allocation of rights to the IP, the statutory protection of IP, the rules of IP transactions, the obligation to enter into benefit-sharing arrangements, the rights of the state to the IP, and the creation of new administrative institutions such as a National Intellectual Property Management Office (NIPMO) (sections 8–9) and technology transfer offices at institutions (sections 6–7).
The Act applies whenever public funds (excluding funds allocated for scholarships and bursaries), regardless of amount or proportion, are used for research and development by a recipient and applies to all IP emanating there from. For the purposes of the Act, ‘IP’ is defined quite broadly as
any creation of the mind that is capable of being protected by law from use by any other person, whether in terms of South African law or foreign intellectual property law, and includes any rights in such creation, but excludes copyrighted works such as a thesis, dissertation, article, handbook or any other publication which, in the ordinary course of business, is associate with conventional academic work (section 1).
There is a concern that the definition is overly broad even though it excludes certain copyright works. It would appear that even IP that would not ordinarily have statutory protection within South Africa may have to be protected if it would constitute protectable subject matter in a foreign jurisdiction. An example is that of a computer program which may need protection under a software patent in a foreign country, even though software patents are not the norm in South Africa.
Ownership of IP
The Act provides that a recipient of public funds owns the IP emanating from the research, however, if the recipient, ‘prefers not to retain ownership in its intellectual property or not to obtain statutory protection for the intellectual property’ (section 8), it must inform NIPMO (section 4(2)). This situation may arise, for example, where the recipient wishes to disseminate the research results to the public in terms of a collaboration agreement. If NIPMO does not agree that the IP need not be protected through ‘statutory protection’ then it may acquire ownership of the IP and seek such statutory protection itself (section 4(3)). However, if NIPMO decides not to take ownership, the recipient is still obliged to offer the option of acquire ownership and to obtain statutory protection firstly to any co-funders, and failing that, to the IP creators (section 4(4)).
Where the IP emanated from an institution, for example a university (section 1), the Act makes provision for possible co-ownership of the IP by co-funding private entities or organizations (section 15). Co-ownership is, however, subject to a contribution of resources, joint IP creatorship, a benefit-sharing arrangement for the IP creators at the institution, and the conclusion of an agreement for commercialization between the private entity and the institution (section 15(2)).
IP transactions
The Act imposes various conditions on all IP transactions, whether licensing or assignment. A distinction is made between non-exclusive licences and exclusive licences, and in addition, between normal transactions and offshore transactions. Although the recipient of public funds is left to determine the nature and conditions of IP transactions with third parties, in doing so it must take account of a number of factors, including giving preference to non-exclusive licences (section 11(1)(a)), to South African licensees and specifically to BBBEE (broad-based black economic empowerment (sections 11(1)(b) and 1) licensees, and to parties that will use the IP to benefit the people of the Republic (section 11(1)(c)). Exclusive licensees must undertake where feasible to commercialize within the Republic (section 11(1)(d)). Where the exclusive licence is in relation to IP from an institution, there is the added requirement that the exclusive licensee ‘has the capacity to manage and commercialize the intellectual property in a manner that benefits the Republic’ (section 15 (1)). Offshore transactions have additional requirements, including that that it be shown that there is insufficient capacity in the Republic to develop or commercialize the IP locally, and that the Republic will benefit from the offshore transaction (section 12(1)–(2)).
Furthermore, in all cases, licensees must provide the State with an irrevocable, royalty-free licence to use or have the IP used throughout the world for the health, security, and emergency needs of the Republic (section 11(1)(e)). In each IP transaction, the party must agree that a failure to commercialize the property will lead to the State having the right to acquire the IP or to demand a compulsory licence be issued (section 11(2)).
Benefit-sharing
IP creators at institutions are entitled to share in the benefits that accrue to the institution from such IP for as long as the right subsists. The Act provides that they and their heirs are entitled to share in at least 20 per cent of the revenues accruing to the institution for the first one million rands of revenues or such higher amount as Minister of Science and Technology may prescribe; and thereafter, in at least 30 per cent of the net revenues accruing to the institution from the IP (section 10(1)(a) and (b)). This amount is to be shared by all the IP creators. It would seem that if the creators are to share in any benefits that may accrue once the IP right in question has expired, then they would need to enter into an agreement to that effect.
Government rights
IP that is not commercialized by a recipient of public funds may be subject to review by NIPMO, and in the event that it is found that there could be commercialization, the recipient may be required to grant a compulsory licence to a third party (section 14(4)). Recipients who do not disclosure IP to NIPMO run the risk of having the IP assigned to the State (section 14(5)).
Practical Significance
Before the Act, IP that was developed at institutions such as universities was dealt with under the general IP statutes, such as the Patents Act 1978, the Designs Act 1993, and the Copyright Act 1978. The new legislation is of utmost significance to research institutions, as well as to any entity that is considering embarking on collaborations with such institutions or even with individuals at such institutions. In every case where there is use of public finance, for example in the form of professors' wages, office space, use of facilities, or use of existing IP, the Act will kick in. Potential donors and collaborators need to be alert to the fact that even if they are contributing significant resources to a research project with a local university or institution, anything less than funding on a full cost model, will result in a severe curtailment of the ability of the funder to decide on the status of the resultant IP.
The Act not only alters the general position that the IP creator is entitled to first ownership of the IP, it imposes enormous administrative burdens on recipients of public funds who have to meet the reporting, disclosure, and commercialization conditions.
Ownership of IP
The Act provides that a recipient of public funds owns the IP emanating from the research, however, if the recipient, ‘prefers not to retain ownership in its intellectual property or not to obtain statutory protection for the intellectual property’ (section 8), it must inform NIPMO (section 4(2)). This situation may arise, for example, where the recipient wishes to disseminate the research results to the public in terms of a collaboration agreement. If NIPMO does not agree that the IP need not be protected through ‘statutory protection’ then it may acquire ownership of the IP and seek such statutory protection itself (section 4(3)). However, if NIPMO decides not to take ownership, the recipient is still obliged to offer the option of acquire ownership and to obtain statutory protection firstly to any co-funders, and failing that, to the IP creators (section 4(4)).
Where the IP emanated from an institution, for example a university (section 1), the Act makes provision for possible co-ownership of the IP by co-funding private entities or organizations (section 15). Co-ownership is, however, subject to a contribution of resources, joint IP creatorship, a benefit-sharing arrangement for the IP creators at the institution, and the conclusion of an agreement for commercialization between the private entity and the institution (section 15(2)).
IP transactions
The Act imposes various conditions on all IP transactions, whether licensing or assignment. A distinction is made between non-exclusive licences and exclusive licences, and in addition, between normal transactions and offshore transactions. Although the recipient of public funds is left to determine the nature and conditions of IP transactions with third parties, in doing so it must take account of a number of factors, including giving preference to non-exclusive licences (section 11(1)(a)), to South African licensees and specifically to BBBEE (broad-based black economic empowerment (sections 11(1)(b) and 1) licensees, and to parties that will use the IP to benefit the people of the Republic (section 11(1)(c)). Exclusive licensees must undertake where feasible to commercialize within the Republic (section 11(1)(d)). Where the exclusive licence is in relation to IP from an institution, there is the added requirement that the exclusive licensee ‘has the capacity to manage and commercialize the intellectual property in a manner that benefits the Republic’ (section 15 (1)). Offshore transactions have additional requirements, including that that it be shown that there is insufficient capacity in the Republic to develop or commercialize the IP locally, and that the Republic will benefit from the offshore transaction (section 12(1)–(2)).
Furthermore, in all cases, licensees must provide the State with an irrevocable, royalty-free licence to use or have the IP used throughout the world for the health, security, and emergency needs of the Republic (section 11(1)(e)). In each IP transaction, the party must agree that a failure to commercialize the property will lead to the State having the right to acquire the IP or to demand a compulsory licence be issued (section 11(2)).
Benefit-sharing
IP creators at institutions are entitled to share in the benefits that accrue to the institution from such IP for as long as the right subsists. The Act provides that they and their heirs are entitled to share in at least 20 per cent of the revenues accruing to the institution for the first one million rands of revenues or such higher amount as Minister of Science and Technology may prescribe; and thereafter, in at least 30 per cent of the net revenues accruing to the institution from the IP (section 10(1)(a) and (b)). This amount is to be shared by all the IP creators. It would seem that if the creators are to share in any benefits that may accrue once the IP right in question has expired, then they would need to enter into an agreement to that effect.
Government rights
IP that is not commercialized by a recipient of public funds may be subject to review by NIPMO, and in the event that it is found that there could be commercialization, the recipient may be required to grant a compulsory licence to a third party (section 14(4)). Recipients who do not disclosure IP to NIPMO run the risk of having the IP assigned to the State (section 14(5)).
Practical Significance
Before the Act, IP that was developed at institutions such as universities was dealt with under the general IP statutes, such as the Patents Act 1978, the Designs Act 1993, and the Copyright Act 1978. The new legislation is of utmost significance to research institutions, as well as to any entity that is considering embarking on collaborations with such institutions or even with individuals at such institutions. In every case where there is use of public finance, for example in the form of professors' wages, office space, use of facilities, or use of existing IP, the Act will kick in. Potential donors and collaborators need to be alert to the fact that even if they are contributing significant resources to a research project with a local university or institution, anything less than funding on a full cost model, will result in a severe curtailment of the ability of the funder to decide on the status of the resultant IP.
The Act not only alters the general position that the IP creator is entitled to first ownership of the IP, it imposes enormous administrative burdens on recipients of public funds who have to meet the reporting, disclosure, and commercialization conditions.
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