Intellectual Property Rights from Publicly Financed Research Development Bill: adoption; Innovation Fund on State of Patenting in SA

Science and Technology

12 August 2008
Chairperson: Mr G Oliphant (ANC)
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Meeting Summary

The Committee formally adopted a revised version of the Intellectual Property Rights from Publicly Financed Research Development Bill. The adoption came after clause-by-clause deliberation on the amendments.

A report on the state of patenting in South Africa was presented by the Innovation Fund of the Department of Science and Technology. This report was intended to provide the Committee with an impression of the patenting landscape in South Africa. The report had been prepared by the Innovation Fund in 2007 as a tool for evaluating South Africa’s performance in terms of intellectual property and to make comparisons of patent activity across different sectors and in both local and international jurisdictions. According to the findings, the level of patenting activity in South Africa’s public sector was currently very low as shown using a mapping technique to compare the position of intellectual property in the public sector with that of the private sector. The Department noted that this inordinately low patenting activity in the public sector was a concern which current legislative and policy changes should address. This would deal with problems such as the lack of harmonisation between public/private approaches to intellectual property.

In deliberations on the Bill, the Committee made several amendments to the definitions of key terms and terminology throughout the Bill. Some of the important changes included the substitution of “arising” with “emanating” in the Long Title of the Bill. Clause 10 which dealt with the contentious issue of benefit-sharing was approved after some debate on one hand, on whether the rights of intellectual property creators would be adequately protected and on the other, whether the Bill adequately took into account the costs accruing to funding institutions as a result of research and development activities. Much of the debate on clause 10 was centred on possible outcomes in terms of the stipulation to provide for a minimum of 20% of the benefits of intellectual property to the intellectual property creator. Concerns were raised by some members about the time-frame within which benefits could become available to the intellectual property creator since commercialisation of the intellectual property could take many years. It was felt by some members that the legislation ought to make allowance for a “reasonable” length of time to avoid situations where intellectual property creators could lose out on the benefits of their intellectual property as a result of lengthy commercialisation.

The Department of Science and Technology pointed out that clause 10 addressed the balance between the need to incentivise innovation and technology and the funding interests of institutions. This was achieved by the requirement that the first one million of gross revenues paid out a minimum of 20% to the intellectual property creator before paying out 30% of the remaining nett revenues, after deductions of allowable costs. It also mentioned that commercialisation was an issue that largely remained beyond legislative reach because of the nature of business transactions which could be agreed upon in terms of lump-sum payments or as running royalties. The Department assured members that intellectual property creators would always acquire benefit especially if the
National Intellectual Property Management Office implemented a continuous education and awareness campaign for both intellectual property creators and institutions. Current business practices by institutions, according to the Department, showed that some institutions might decide to sell their intellectual property whilst others may engage in commercial activities through spin-off companies that allow them to acquire shares in entities that utilise their intellectual property.

Meeting report

Department of Science and Technology (DST) comment on amendments
Dr Boni Mehlomakulu, Deputy Director-General: DST, presented the Department’s response to the proposed amendments to the Bill implemented by the State Law Advisers. She indicated that the Department was comfortable with the amendments that had been effected by the State Law Advisers. The Department would now look that the B version of the Bill correctly incorporated amendments to see how they were reflecting in the revised Bill.

State of Patenting in South Africa: briefing by Innovation Fund
Mr Mclean Sibanda, Senior Patent Attorney: Innovation Fund, presented a special report on the state of patenting in South Africa in response to the Committee’s request to be provided with an impression of the country’s patenting landscape. The report had been compiled by the Department’s Innovation Fund to evaluate South Africa’s performance in terms of intellectual property and to make comparisons of patent activity across different sectors. It had been compiled with a view to finding out what lessons could be learnt from the patenting habits of the private sector institutions. In general, the report concluded that patenting was very low at publicly financed institutions. The report had identified institutions that were better at patenting than others and it also identified some of the challenges within the system from a policy perspective. The clustering of patent activity in the private sector spoke of the need for institutions like the CSIR and other research institutions with a truly focused research agenda to develop concrete centres of competence in respect of intellectual property (IP). There was the lack of a harmonised approach to protection of intellectual property in situations of co-funded research and development initiatives between public and private institutions. The report also found that in some instances, institutions did not have intellectual property policies whilst the researchers enjoyed full benefit of the IP to the exclusion of those institutions. Another finding was the identification of future prospects, particularly, bio-technology which indicated that the Department’s biotechnology strategy was bearing fruit after its implementation a few years ago. He recommended that the report would provide a benchmark to enable the Committee to evaluate the impact of the Bill in a few years time. This was because when the exercise was repeated in five or ten years, it would be possible to see how the harmonisation of IP policies at institutions has had an impact in respect of IP ownership and whether the issue of disclosure around IP was having an impact in terms of the number of patents coming out of institutions.

Office of the Chief Law Adviser Briefing
Ms Desiree Swartz, Senior State Law Adviser: Office of the Chief Law Adviser, pointed out the omission of certain amendments in the A version. She observed that the Department of Justice was happy with the constitutionality of the Bill as well as the drafting. Alerting Members to the said omissions, she pointed to clause 13 in the A version and stated that there was a need for re-ordering this to include an omitted amendment. An amendment meant to follow number 13, which would have been number 14 was to be included so that a new numerical order of the amendments would be established from 13 right up to 16 in the A-list. She also suggested that number 14, in line 10, thereof, should have read as follows: to omit “derive” and to substitute “emanating”.  In the B-Bill which included the amendment, on page 3 dealing with clause 2, she pointed a problem with incorporation of the A-list amendment in terms of a consequential re-arrangement of sections so that the objects of the act clause should have been a long list from a-g. The Chairperson asked Ms Swartz to re-draft the A-list so that I would reflect these consequential amendments.

Ms Maloney (ANC) enquired about the interpretation procedure in terms of the rules of Parliament according to which this was meant to be done at least three days before the Bill could be debated upon.

Mr Oliphant asked whether the Bill was available in any other language.

The State Legal Advisers replied that a SiSwati version of the Bill was available and that they were satisfied with it.

Mr Oliphant noted that there were three versions of the Bill, that was the A-Bill and the B-Bill and the original Bill that was put forward for public hearings and that it was necessary to ensure that the A-Bill correctly reflected the amendments to the Bill incorporated in the B-Bill. He then took the Committee through each of the amendments in the A-Bill to reconcile them with the way they appeared in the B-Bill so that Members could agree that the amendments were correctly captured. Commenting on the A-list amendments, he queried whether the use of “society” as the replacement for “ordinary people of the Republic” was appropriate. He commented that the use of this term could sound clumsy and that it tended to be generic. He pointed out that the use of “society” had been abandoned in some part of the legislation and adopted in other parts. He suggested that even there he foresaw no legal problems, but for clarity’s sake and to be consistent, it might be advisable to avoid using the term.

Ms Swartz responded that retaining “society” would not be a problem for the State Law Advisers. She noted however that there was constant reference to “people of the Republic” and would therefore change it to that usage for consistency.

Mr Oliphant identified clause 10(2) that dealt with percentages, as a contentious provision. He requested a real-life example of the 20%, the 30%, the nett and the gross revenues mentioned in it. Even with all the definitions, he commented that while these were sensible to him, he would like more clarity on the 20% stipulation from the Department.

Mr Sibanda gave a practical example based on the assumption that the institution applied the minimum stipulated in the clause which was 20% and 30%. If an amount of R3 million was the benefit from IP, it would depend on whether that amount became available immediately since under ordinary circumstances such amounts were disbursed over a period of time.  If the amount was available immediately, then in terms of the 20% stipulation, the intellectual property creator would receive 20% of the first million which would be R200 000. Thereafter, if the costs deductible by the institution amounted to I million rand, then the IP creator would be entitled to R300 000, that is, 30% of the nett revenue (which would be the remaining balance of 1 million rand).

Mr Oliphant asked what would happen where the first million came this year and then there was a waiting period for the balance to come. He asked whether clause 10(3) would not open the door for institutional policy to determine the benefit-sharing issue.

Mr Sibanda replied that clause 10(3) was intended for a situation where there was more than one IP creator and the question of how they then share that 20% and 30%. He pointed out that most institutions would have policies to say that benefits would be shared according to contribution towards the development of IP. Mr Sibanda pointed out that in clause 10(3) the aim was to provide for a situation where there was no institutional policy or agreement with IP creators. This was, in the Department’s view, meant to preserve the IP creator’s right to benefit-sharing in terms of those minimums stipulated and the independence of IP creators to decide how to allocate benefits amongst themselves in the case where the was more than one IP creator.

Mr A Ainslie (ANC) asked why there was distinction in terms of nett revenues and gross revenues in clause 10(2)(b) and (a). He was concerned that these provisions might put institutions at a disadvantage in terms of costs.

Dr Mehlomakulu reiterated the legislative intention behind the Bill which was to strike a balance between incentivising and regulating the management of IP emanating from publicly financed research and development. The people at the core of research and development were the IP creators who required protection from exploitation at the hands of the institutions providing funding for research. She expressed the concern that institutions usually take a long time in calculating their costs in order to share benefits and that these subsection were ways of ensuring that the IP creator was assured certain minimum benefits before costs were calculated to avoid possible delays.

Mr Sibanda added that institutions stood to benefit from subsidies from the state through the Intellectual Property Fund. This was the assistance it would provide for costs related to IP protection.

Ms Maloney (ANC) asked whether it would always be certain that IP creators got this benefit as intended by the Act.

Mr Sibanda replied that the combination of legislative and policy frameworks and continuous education and awareness of IP creators would assist in ensuring that benefits were received by the IP creators.

Mr J Blanche (DA) asked if it would be possible to put in a place a time-frame within which benefits should have been shared between IP creators and institutions. His concern was that the IP creator could die before acquiring all the benefits.

The Chairperson was of the opinion that the law of succession adequately dealt with that concern.

After a little more debate on the issue of commercialisation and the disbursement of IP proceeds, and further adjustments to the amendments to the satisfaction of the Committee, the Chairperson reviewed the final amendments made to the A-list.

The Committee agreed that these were in order.

Voting on the Bill
The Chairperson forward a motion of desirability and the Committee formally adopted the Bill with the amendments agreed to.

Meeting adjourned.



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