Intellectual Property Laws Amendment Bill: Working Group report, Regulatory Impact assessment briefing, Budget Review & Recommendation Report update

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Trade and Industry

23 August 2011
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Working Group Task Team on the Intellectual Property Laws Amendment Bill (the Bill) presented two new documents to the Committee. One contained the responses from experts (IP11) and the other set out the actions that still needed to be taken on the Bill (IP12). The Working Group had been through the Bill but there were a number of queries identified for answer by the experts. It had reached resolution on a number of issues, but others still required the Committee’s final decision. Document IP11 set out the original queries and responses, and yellow highlighting indicated where agreement had been reached. The experts were due to respond on outstanding matters by the following day, and it was suggested that the Committee should arrange a meeting on the Wednesday 31 August to discuss issues. The State Law Advisors were, in the meantime, still working on drafting changes to the Bill. The formal consideration of the Bill would be scheduled for 9 September. In summary, the Committee needed to decide upon twelve issues. These were
the expansion of the Preamble to discuss the sui generis approach, the need to ensure that Indigenous Knowledge (IK) was expressed as something stand-alone that did not affect existing IP law, and the question of copyright and performers’ rights, including the question of whether a performer’s right was covered under the current law, or needed to be amended. The definition of the terminology “hereditary “and “derivative”; the question of holding a right in perpetuity, and consideration of whether defensive enforcement of rights was sufficient were further points. Then the Committee also needed to decide on the database, the setting up by a community of a protocol, the formation of trusts and how the royalties distribution would work, as well as the involvement of Council in any agreements that the community entered into, how oversight of the Trust would be managed by the dti, and how alternative dispute resolution would work.

Members continued to deliberate on the draft Bill, from clause 28J. They felt that this clause should be tightened to ensure that whole communities, not just the Chiefs, would benefit, and enquired about the limitation on the selling rights, which was described as a policy issue. It was noted that clause 28K had been referred to experts. Under clause 28L, Members wanted there to be consultation with the National Council, and suggested that the process for appointments to that Council should be transparent and public.

Members then received a further briefing on the Regulatory Impact Assessment that was carried out in respect of the 2007 amendments to the Intellectual Property Laws Act. The risks and challenges outlined in that Act were set out, together with the recommendations that had been made to address them. The costs and benefits associated with the protection processes were also outlined. One challenge then had been the international resistance to recognising IK, but it was recommended that the Department of Trade and Industry should continue to try to achieve protection. Members questioned the fact that apparently two documents on the Regulatory Impact Assessment had been presented, one containing information in conflict with what had just been presented, and which came to a different conclusion on some issues. The Department of Trade and Industry suggested that one of the documents was not in line with the instructions given to the consultant, that as a matter of principle consultants would not be asked to speak to this Committee, that the document was nonetheless presented for purposes of transparency and did contain some relevant points. Members also questioned the sustainability of the State Trust and of the National Council, and asked that anomalies in costs be explained. The Chairperson also required clarification of the point that some developed countries were not actively supporting treaties that would lead to protection, stressing that the Committee must ensure that the interest of the country, and not of lobby groups, was protected.   

The Committee Researcher presented an updated version of the Committee’s Budget Review and Recommendation Report (BRRR), which set out budget and expenditure trends of the Department of Trade and Industry. In summary, that Department had received a budget of R6.2 billion in 2010/11 and had spent R5.8 billion, a variance of 6.4%. Members questioned the uptake of the auto industry grants, at only 55% of budget, saying this was an indicator of future problems in that sector. They noted the need to support the National Consumer Council, which had been identified as lacking funds, accommodation and expertise to do its work. Members also stressed the need to monitor not only the figures but whether the spending was effective, and whether key performance indicators were also monitored. The Report still needed to have conclusions and recommendations added. There was also a need to tie in the spending with government’s monitoring and evaluation.


Meeting report

Intellectual Property Laws Amendment Bill: Working Group Report
Ms S van der Merwe (ANC), Head of the Task Team Working Group on the Intellectual Property Laws Amendment Bill (the Bill) tabled two new documents – the first being the responses from experts (numbered as IP11) and the second being an Action List (numbered as IP12), which was for reference purposes. The Working Group had studied the Bill and there were more queries raised for the experts to answer. Although the Working Group had reached resolution on a number of issues, there remained others still to be resolved.

She noted that document IP11 contained the original queries, and the experts’ responses to them. The yellow coded areas represented the areas where agreement had been reached, and the areas left in white represented the issues referred back to the Committee for resolution. The deadline for responses from the experts was the following day, so she recommended that the Committee should leave those clauses in abeyance and continue working through the Bill, from page 40. She noted that Advocate Mongameli Kweta, Senior State Law Advisors, Office of the Chief State Law Advisor, was drafting the changes to the Bill. Because of the new parliamentary programme, the debate on the Bill would be moved to Wednesday 14 September. The Working Group would meet on the following Tuesday, when all the responses from experts and the new drafts of changes would be available. She proposed that the Committee should meet with all experts on Wednesday 31 August, and, since one of the members would be flying in from London, that meeting should be held at 17h00. On Friday 9 September, the Committee would meet to consider the Bill formally.

Adv Charmaine van der Merwe, Parliamentary Legal Advisor, said that the experts and the drafters of the Bill had agreed on the way forward, and would present their documents on the following Tuesday. She wished to highlight some of the topics raised in the IP11 document.

Under paragraph 2, the experts had voiced a concern that the Preamble to the Bill stated that there would be other measures to protect Indigenous Knowledge (IK). There were concerns expressed that it was appropriate that this statement be included in a Preamble, but the drafters could not do anything about this, and suggested that the experts should discuss this with the Committee.

Under paragraph 3, the experts were concerned with having a “stand alone” (sui generis) system, because not only could the IP laws influence the IK adversely, but the reverse also applied. The solution would be to make each amendment state clearly that the section on IK was to be considered as stand alone but should be seen as not able to influence the conventional system. In addition, if the IK was not referred to as “protected” under the Intellectual Property Act (the Act) a lot of confusion would fall away. For this reason, it was necessary to revisit the terminology used.

In respect of paragraph 4, the experts felt that performance rights were protected, regardless of the content, so no protection was needed. On the other hand, the Department of Trade and Industry (dti) did feel that protection was necessary. The experts must address the Committee on this issue, and the dti had to respond, before the Committee could come to a decision

Under paragraph 12, the Working Group had requested the experts to provide definitions of “hereditary traditional intellectual property” and “derivative” work. The Committee would have to decide on the terminology and on what would constitute traditional indigenous knowledge. Currently the term “hereditary” was being used. There had been proposals to change this to “indigenous”. The term itself was not important as the description attached to it.

Paragraph 15 raised concerns about the fact that hereditary intellectual property would last in perpetuity. If indigenous knowledge (IK) was not referred to as “intellectual property”, if it operated under stand-alone provisions so that it was not seen as falling under conventional intellectual property, and if it was named specifically as IK and not indigenous IP, then the experts did not feel that there would be any conflict. The Committee would also need to look again at the definitions.

Paragraph 17 related to issue of how a community would protect its hereditary IP, and how it would know if another person was deriving something from its IP or even from a derivative of its IP. Such issues could be addressed if a duty was imposed to research whether a project was infringing on any rights. The Committee would have to look at whether the nature of this clause was defensive in protecting the existing rights, or proactive in seeking to find whether there had been any infringements of rights. Should it be decided that the correct approach was merely a defensive one, then the current wording of the Bill should suffice.

In relation to paragraph 23, it was felt that the dti should not have a separate database, but that there should be a sub register within the current database, and this would resolve a number of issues. Furthermore, it was suggested that performers’ protection rights should be subject to a voluntary registration.

In respect of paragraph 26, there was a question whether a community should be required to establish a trust or foundation to apply for its design to be registered. Currently, only a natural or juristic person could do so. This raised the question of how it could be assessed whether a person was truly representative of the community, and it was concluded that there needed to be a written document from the community to attest to this. Similar to the case of bio–prospecting, the community also needed to set up a protocol listing as to who represented the community. It was possible that the traditional leader, as a natural person, would be able to represent the community. Alternatively, a trust (a juristic person) could be established as the representative of the community.

Paragraph 32 set out the issues about how to deal with royalties. It was suggested that Members ask the experts to explain how the royalty system would work, and assess whether they agreed or disagreed with it.

Paragraph 35 dealt with Council’s involvement in any agreements that communities might enter into. There was concern that this might stifle the commercialisation of IK. The experts’ opinions were being awaited.

Paragraph 38 noted that because of the way that National Treasury worked with income, it would not be possible for royalty funds to be lodged within dti or the Companies and Intellectual Property Commission (CIPC), and therefore some budget process would be required in order to have the money released. The dti would have to clarify to the Committee how it would oversee the operations of a trust, which was allowed for under the Public Finance Management Act (PFMA).  There was a need to establish if the trust would be sustainable, whether there would be any cost to the fiscus, what budget it may need, and where the funds to run such a trust would emanate.

With regard to Paragraph 44, there were questions to be asked as to whether it was necessary to provide for mediation, arbitration and conciliation. The drafters had looked at customary dispute resolution processes, and had included in the Bill a provision that any alternative dispute resolution mechanism had to take cognisance of a customary resolution process, where conciliation could occur. Comment from the experts on this matter was also awaited.

Ms van der Merwe said she had identified twelve issues for the Committee to decide upon. These were, in summary, the expansion of the Preamble to discuss the sui generis approach, the need to ensure that IK was stand alone and did not affect existing IP law and the question of copyright and performers’ rights, including the question of whether a performer’s right was covered under the current law, or needed to be amended. The definition of the terminology “hereditary “and “derivative”; the question of holding a right in perpetuity, and consideration of whether defensive enforcement of rights was sufficient were further points. Then the Committee also needed to decide on the database, the setting up by a community of a protocol, the formation of trusts and how the royalties distribution would work, as well as the involvement of Council in any agreements that the community entered into, how oversight of the Trust would be managed by the dti, and how alternative dispute resolution would work.

Discussion
Mr T Harris (DA) proposed that the Committee also needed to get clarification on the definition of “community”

Adv van der Merwe said one of the experts was working on that definition and had already sent a proposal, which might be suitable.

Committee Deliberations on the Bill
The Committee then continued to deliberate on the draft Bill, from page 40, clause 28J.

Clause 28J
Mr N Gcwabaza (ANC) wanted to know whether a trust could be inherited by following generations

Adv van der Merwe said that when a trustee died, that trustee would have to be replaced, but the trust itself would continue.  This clause was intended to allow that, in the event of a community dying out altogether, then the rights would be transferred to a State-owned trust.

Ms C Kotsi-Ramotsamai (COPE) said that it was important, in clause 28J(3), that the laws be tightened up, as in the past benefits had accrued to Chiefs, as they played a big role in community affairs, sometimes without consultation. She used the Bafokeng Platinum Mines as an example. She thought it was necessary to ensure that the proceeds of the trusts should benefit the whole community, and not only parts of it.

Mr Harris pointed out that clause 28J(1) prohibited the transfer of ownership of copyright. He said that clause 28D(2) allowed ownership to vest in the State or Trust, and felt that there was a contradiction and this would be impossible to achieve.

Advocate Johan Strydom, Legal advisor, Department of Trade and Industry, said that clause 28J was clearly distinguishable from clause 28D. In a case of hereditary copyright, those rights could not be sold or alienated, as they were vested rights. However, the community could commercially utilise the rights by way of license or contract. On the other hand, clause 28D related to a case where the indigenous community could not be identified or detected, and for that reason then the rights would have to be vested in a State trust.

Both Mr Harris and Mr J Smalle (DA) wanted to know what the limits were on a community wanting to sell the rights.

Adv Strydom said that the one instance was when the rights were assigned to a collecting society, otherwise there was no ability to dispose of the right.

Mr Smalle suggested that clause 28J(1) must be flagged for further debate, particularly around its constitutionality.

Ms C Kotsi (COPE) said that it was important to protect the country’s heritage.

Mr Gcwabaza said that a following generation might have the opposite view to the sale and demand the rights back.

Adv Strydom said it was an issue of policy, and that if the Committee decided to write into the Bill the fact that rights could in no circumstances be sold, then it had the right to do so.

Clause 28K Disputes
Members noted that the whole of 28K had already been referred to the experts.

Clause 28L National Council for Traditional Intellectual Property
Mr B Radebe (ANC) said the use of the word “may” left matters in the discretion of the Minister and he felt that the provision should enforce the idea that he “must” consult.

Mr X Mabasa (ANC) felt that “may” was appropriate.

Adv A Alberts (FF+) said the appointment should be a public process, which had to be advertised. He queried whether Parliament would have any role in approving the appointments or whether it was left solely to the Minister. He noted that a public process for appointment would be good for transparency

Adv van der Merwe replied that the dti should answer on the question of “may” or “must”.

Adv MacDonald Netshitenzhe, Acting Chief Director: Policy, dti, said that the term “may” allowed for things to happen as it was discretionary, and that the dti was opposed to using “must” as this could lead to a deadlock.

Ms Zodwa Ntuli, Deputy Director General, dti, said appointments would be published in the Government Gazette, and in newspapers that were widely circulated.

Adv van der Merwe said the use of the word “may” or “must” would not stop the process, but she was concerned about the wording of “in consultation”

Mr Radebe said that whatever wording was used, it must be clear that the Council of Traditional Leaders and similar bodies had to be consulted, so that their views would be put forward.

The Chairperson said the Committee would consider the use of the term “must”

Regulatory Impact Assessment: Briefing
Mr Surprise Thusago, Policy Developer, Department of Trade and Industry, gave a briefing on the Regulatory Impact Assessment (RIA) process, pointing out that this was a process done jointly with the Presidency and National Treasury in relation to the IP Laws Amendment Bill of 2007. A number of risks and challenges had been identified, and the RIA tried to find solutions. The challenges included the fact that there was inadequate definition of key concepts, and this would be rectified in this new version of the Bill. The high costs of litigation would be solved by using the alternative dispute resolution process. The risk of duplication of effort and overlapping would be addressed, in this new draft Bill, by the fact that the mandate of the dti would extend to intellectual property, but issues relating to biodiversity and Nguni cattle would be dealt with by other departments. In answer to the comment that the scale of successful commercialisation was small, there had been investigations done into how far it could extend. South Africa’s obligations under other international laws were examined, and it was recommended that reciprocity with other countries should apply.

Mr Thusago briefly outlined the costs and benefits of the proposed solutions. The current limitations of the system meant that communities could not adequately protect their knowledge, but the new Bill aimed to incorporate new mechanisms that would enable them to do so. It was expected that benefits would accrue to the pharmaceutical and chemical sectors, agriculture, the medical and health sectors and trade in traditional medicines, currently estimated at about R2.9 billion, with 27 million consumers. The industry players who would be expected to register and comply would be minimal. Holders of IK would benefit from acknowledgment of the value of their knowledge, with9out any costs, except for those third parties who might originally have benefited without having to pay anything. If IK was incorporated into existing systems, to protect collective ownership of knowledge, then any external users of these resources must be acknowledged by registrants in line with international treaties. The National Council would be responsible for the protection and promotion of IK, but the costs of creating the Council would be minimal, and limited to costs of attending meetings. The proposed database would also involve minimal costs, since software already existed for this at the Companies and Intellectual Property Registration Office (CIPRO). The National Trust Fund, who would receive income, would only incur costs of capacitating its members, and this fund would be administered by the Council. Although the costs of drafting benefit-sharing accounts would have to be borne by communities, and they may find this burdensome, it was likely that most firms would adhere to legislation once it was in place.

Mr Thusago noted that the Companies and Intellectual Property Commission that was to be established would be responsible for enforcement. It could refer matters to a tribunal. It must develop mechanisms for monitoring and review of performance.

He set out those who had been consulted

He finally concluded that the RIA was not a substitute but an aid to decision making. He recommended that the dti should continue with the process of amending the existing system to protect IK, that risks and challenges identified in the RIA should be addressed and that all agreements reached at consultations and through the National Economic Development and Labour Council (Nedlac) process should be incorporated. The value system for protection of IK was crucial and could not be left unattended. There would be costs involved, but the protection offered by this Bill would far outweigh the costs, with the most important provision being the Bill’s ability to curb misappropriation of IK and benefit communities.

Discussion
The Chairperson said that in the previous meeting she had ruled that private consultants should not address the Committee but Mr Thusago’s presentation had assisted in explaining the issues.

Mr Harris said that there were two RIA documents, which were IP8 and IP9. The presentation just given had been based on IP8 but not on IP9. There had not been any input on IP9.

Ms Ntuli said that this document was presented to the Committee for purposes of transparency. The Department had taken from it what it wanted. The fact that it had been titled “RIA” was perhaps slightly misleading, and the Department had requested a cost-benefit analysis, which was contained in the document just presented. The first document had informed the RIA process.

Ms van der Merwe drew attention to the sustainability of the State Trust and of the National Council. She asked whether the anomalies in costs could be clarified. She said that it could be a substantial cost burden if communities had to bear the cost of registration.
 
Mr Harris said that IP9 was a free standing report, and was a RIA analysis and not a cost/ benefit analysis as claimed by the DDG. It was relevant because it had in fact come to a conclusion opposite to that stated in IP8. He submitted that there were major contradictions between two RIA assessments done by the Department.

Ms Ntuli said that the Committee outsourced work, but that, as a matter of principle, the Department never brought its consultants before the Committee. It was most unfortunate if Members had the impression that there was a lack of transparency in what had been outlined to the Committee. If service providers did not provide an output according to their terms of reference, then that was something to be dealt with internally by the dti, and even where the terms of reference were not fully adhered to, there might be aspects of the report that could be used, such as the cost benefit analysis. The changing of the policy positions of the Department by the service providers would not be tolerated.

Mr Radebe said RIA was done to check whether the law was in fact achieving what it had been intended to achieve. It was also done to check whether there were gaps that needed to be addressed. However, even when the RIA was complete, there was still work for the Committee to do, and the Bill should be completed by 14 September.

The Chairperson wanted clarification on the term “international resistance” used in the report. She said the report indicated that many developed countries did not support treaties and debate that would lead to protection.

Mr Netshitenzhe said that the World Intellectual Property Organisation (WIPO) had started the protection of IK, but since then the WIPO Secretariat had collated information from Africa, the Group A countries of North America and Europe, and the Latin American countries.  The Group A countries were causing deadlocks, paralysing WIPO and frustrating member states trying to protect their own domestic IK. It was for this reason that it became necessary to try to formulate laws that were not in conflict with WIPO’s international treaties.

Mr Thusago replied that it was important to remember that the RIA was based on the 2007 amendments. The cost calculations were similarly done on this basis, and did not cover the latest version of the Bill.

Mr Netshitenzhe said that there would be a cost associated with the registration of intellectual property by business people but that, in comparison to international rates, it was very low.

Ms Ntuli said that the dti was not in a position to give a comprehensive answer on the sustainability of the trust as yet, but organisations like the National Lottery Trust Fund got a percentage of the trust fund monies for operating costs, and government could provide some start up money.

Mr Harris said he would like the Committee to request the Department of Trade and Industry to give a presentation on the contents of document IP9, and should it fail to do so, then the Committee should be able to see the terms of reference that were given to the consultants.

Mr Gcwabaza said the terms of reference belonged to the Department, and were not relevant to the Committee. If Members had problems with document IP9 then these should be raised in the Committee.

Mr Alberts said the problems stemmed from the fact that Members had received information, both informally and formally, which differed from the information offered by the dti about the direction that the legislation should take – particularly in relation to the sui generis option, and that this had raised some doubts.

Mr Radebe agreed that there were a lot of lobby groups promoting their position, but urged that the Committee had to put the interests of the country first and protect the country’s indigenous intellectual knowledge.

Mr Harris asked if IP9 had any formal status.

Ms van der Merwe said she would have referred to the summary and recommendations of IP9 as relating to a Bill that was not before the Committee at present, since it related to the previous version of the Bill. A number of the issues raised in that report had either been considered or were still under consideration by this Committee.

The Chairperson said that the issues raised in IP9 were the reason that the Committee had undertaken a study tour to Geneva

Budget Review and Recommendation Report (BRRR)
Mr Zibele Ngxishe, Committee Researcher, said that the attached Budget Review and Recommendation Report (BRRR) document was an update to the document that had been presented earlier.  It outlined the budget and expenditure trends of the programmes of the dti. He summarised that this Department had received a budget of R6.2 billion in 2010/11 and had spent R5.8 billion, a variance of 6.4%. Further details about the spending were outlined (see attached document).

Discussion
Mr Radebe said the fact that the uptake of Auto industry grants had been only 55% of budget was an indicator of future problems in that sector, and that there was a need to support the National Consumer Council which had been identified as lacking funds, accommodation and expertise to do its work.

Ms Kotsi said it was more important that projects met their objectives, rather than simply looking at the spending patterns. The Committee would be required to decide if the money allocated was being spent efficiently. She said that Kumba, in the Northern Cape, was a good example of a project administered by the private sector that worked effectively and efficiently, and that this model should be rolled out to the rest of the country.

Mr Mabasa asked how much was invested in incubation, co-operatives and on monitoring and evaluation

Mr Smalle asked whether the R932 million for Industrial Development Zones (IDZ) excluded the R457 million transferred at a later stage. He wanted to have figures for the previous financial years expenditure also presented in the BRRR report. He said the Report did not address the attainment of Key Performance Indicators, nor did it recommend improvements or express conclusions.

Ms van der Merwe wanted to know how the spending analysis linked in to government’s monitoring and evaluations through the Minister in the Presidency. She agreed that the BRRR report should not be looked at purely in terms of numbers. A broader perspective was necessary, that looked also to what strategy the country was pursuing overall, and how effectively it was fulfilling the policy mandates that had been given by the electorate.

The meeting was adjourned.

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