Intellectual Property Rights from Publicly Financed Research Development Bill: Department of Science and Technology responses to public submissions & South African Space Agency Bill Departmental Briefing

NCOP Education and Technology, Sports, Arts and Culture

19 August 2008
Chairperson: Mr B J Tolo (ANC, Mpumalanga)
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Meeting Summary

The Department of Science and Technology presented its response to the submissions made during the public hearings on the Intellectual Property Rights from Publicly Financed Research Development Bill (the Bill). The objectives of the Bill were summarised as including the need for a harmonised framework for intellectual property (IP) emanating from publicly financed research and development (PFRD), and to address problems of improper IP management by institutions, and IP leakages out of South Africa. IP must be used for the benefit of South Africa and it hoped to ensure that the generators of IP were rewarded and that IP was commercialised. South Africa had a low patenting rate compared to other jurisdictions. The Department summarised the development process. The submissions had broadly covered issues around regulations, definitions, international research and development collaboration, benefit-sharing, public good, dispute resolution and classification of institutions. The Department agreed that stakeholder workshops would be convened around development of regulations. Some of the suggestions to amend definitions were accepted, but the submissions on technology transfer and defensive use were not accepted. Clause 5 now allowed for greater flexibility. The use of terminology such as “throughout the world” was retained, but references to South African citizens and ordinary residents had been removed from benefit sharing clauses. The provisions on benefit sharing were substantially amended to take care of the concerns.  Clauses 2(1) and (2) had been enhanced to respond to submissions around the “public good” and now made it clear that IP would be identified, protected, utilised and commercialised for the benefit of the people of the Republic. The Department did not accept suggestions on the dispute resolution process as this was already adequately covered under the Promotion of Administrative Justice Act. The classification of institutions was clarified. Members noted that the Bill had received its first reading in the National Assembly, with the second due in two days time. They questioned the comments around “defensive use”, benefit sharing, and expressed concern about the tax implications, and asked that further research on these should be carried out by the drafters and legal advisers.

The Department then briefed the Committee on the context and purpose of the South African Space Agency Bill. Its objective was to establish a Space Agency to deal with satellite imaging. The applications of satellite imaging technology were explained, noting that it could be used for urban planning, water-use monitoring, environmental monitoring, disaster management, communication, navigation and defence and national security. Details of the legal and regulatory framework that governed the Space Agency, South Africa’s space capabilities in terms of the capacity to design and develop space systems, a comparison of the country’s budget on space programmes with other countries globally and the proposed structure and key responsibilities of the Agency were set out. Members raised questions whether this Bill could encourage skills development and human capital investment and educational policies. Further questions were asked on appointment of board members and the scope of Ministerial powers under clause 7 and clause 8 of the Bill, the affordability of a space programme, and the need to call for written submissions on the Bill from the public.

Meeting report

Intellectual Property Rights from Publicly Financed Research Development Bill (the Bill): Responses by Department of Science and Technology (DST) to submissions at the public hearings
Dr Boni Mehlomakulu, Deputy Director-General, DST, provided an outline of her briefing, which included a list of the documents that had been given to members and the major areas that it would cover.

Mr McLean Sibanda, Patent Attorney, National Research Foundation Innovation Fund, recapped on the objectives of the Bill. He stated that the Bill had come about in response to the need for a harmonised framework for intellectual property (IP) from publicly financed research and development, as a result of improper management of IP by institutions. South Africa had also experienced leakages of IP out of the country. There was a need to ensure that IP was used for the benefit of South Africa, and that the public had access to these benefits, by ensuring that IP was commercialised and that the generators of IP were rewarded. Mr Sibanda referred the Committee to the Innovation Fund’s report on the state of patenting in South Africa. The highlights of the report included the finding that South Africa experienced a low patenting rate of only 10 000 applications per year, compared to its major global trading partners. Figures for publicly financed patents were at an even lower rate than those of privately financed ones, as indicated by only 5% of patent applications by publicly financed institutions. The report also revealed the incidence of IP leakages by giving an example where important infrared technology had been sold off-shore.

Dr Mehlomakulu took the Committee through the Department’s response to the submissions at the public hearings. She noted that that questions that were raised in the public hearings related to the following issues; regulations, definitions, international research and development, benefit-sharing, public good, dispute resolution and classification of institutions. In relating the progress of the Bill throughout its development process, Dr Mehlomakulu told the Committee that when the Bill was first published for public comments, the initial feedback had been negative with general comment that the Bill was too prescriptive. This had resulted in a re-thinking of the key issues, and the Department had then conducted a desktop study of best practices that led to the appointment of a panel of international experts to form a review team. The Department had also conducted a benchmarking exercise on specific clauses and issues before an IPR stakeholder was convened.

Dr Mehlomakulu stated that the Department had agreed with the Portfolio’s Committee’s position that that the law preceded regulations, not the other way around, as had been suggested by SAPI. It was necessary however, to convene stakeholder workshops around the development of the regulations to the Bill. The input by stakeholders had also been taken into account in providing a level of flexibility in terms of time lines in the provisions on implementation and disclosure (clause 5), and in revisions to the definitions of key terms in the Bill, including “funding agency”; “nett revenue” and “intellectual property. The Department did not accept suggestions for the inclusion of definitions of terms such as “technology transfer”, and “commercialisation” to include “defensive use”.  The use of terminology such as ‘throughout the world” was retained on the basis that when IP was created with public funds this was not limited to the Republic of South Africa. Government should have a right to exploit this IP for emergency needs of the Republic.

As result of concerns that the Bill might create disincentives to foreign researchers, references to “South African citizens and ordinary residents” had been removed from the benefit sharing sections.  The provisions on benefit sharing had been substantially amended. There was insertion of a staggered benefit sharing clause, according to which at least 20% of the revenues accruing to institutions from IP would be set aside for the IP creator. Thereafter another 30% of the nett revenues would belong to the IP creator. This amendment was intended to deal with common mischief whereby institutions had a habit of waiting for lengthy periods to ensure that every conceivable cost was included, so that IP creators would eventually be left with nothing. The purpose of a minimum on gross revenues would give IP creators an incentive. The concern over costs by institutions would be addressed by the 30% stipulation in clause 10(2)(b).

Another amendment made by the Department had been a revision of the objects of the Bill in clause 2, to address the issue raised at the public hearings about the “public good”. Stakeholders had expressed the concern that that it was not clear in the Bill how the ordinary man on the street would benefit from the Bill. Clause 2(1) and 2(2) had therefore been enhanced and now clarified that IP emanating from publicly financed research and development would be identified, protected, utilised and commercialised for the benefit of the people of the Republic. Clause 2(2) further included new provisions that would also ensure that a recipient of funding from a funding agency would assess records and reports on the benefits for society of publicly financed research and development. They would also ensure that a recipient protected IP emanating from publicly financed research and development from appropriation, and ensured that it was available to the people of the Republic.

Coming to the issue of the need for a dispute resolution process, Dr Mehlomakulu reiterated the Department’s position that sections 3 and 4 of the Promotion of Administrative Justice Act (PAJA) already provided for adequate dispute resolution procedures.

On the subject of classification of institutions, the Department set out the criteria for inclusion in terms of Schedule 1 of the Bill, by stating that public entities would be classified as “institutions” inasmuch as they were established by an Act of Parliament, were funded by the State and undertook their own research and development. They would be classified as “funding agencies” or “private entity or organisation” inasmuch as they funded research and development at an Institution.

In conclusion, Dr Mehlomakulu remarked that the amended Bill had successfully met the challenge of providing a good balance between the interests of institutions and IP creators, and the interests of the State and recipients of public funds. The amendments effected provided a good law from which appropriate regulations would be developed.

Mr M Sulliman (ANC, Northern Cape) asked how far the Portfolio Committee (PC) had progressed with the amendments to the Bill.

Dr Mehlomakulu responded that the PC had deliberated on these amendments and had adopted them in its report to Parliament

The Parliamentary Legal Adviser added that although the PC had made its report, the Bill was yet to be adopted formally by the House.

Dr Mehlomakulu responded that it was more or less a question of formality, and that the second debate would be held in the House on the coming Thursday.

Mr M Thetjeng (DA, Limpopo) requested clarification on the issue of “defensive use”

Dr Mehlomakulu explained that the issue had been raised by SASOL who were involved in coal and gas-to-liquid manufacturing technology. There were instances when SASOL could elect to patent certain manufacturing processes or technologies and keep the patents without commercialising them, so that their competitors would not have access to them, hence the phrase ‘defensive use’.

The Chairperson commented that in the benefit-sharing provisions of the Bill, it was not evident whether the 20% would be deducted before tax had been levied on the institution, or whether it would be levied on the IP creator. He added that there was a need for clarity on the tax implications, and that the law must not be ambiguous. He also questioned whether this would not also affect the issue of non-monetary benefits.

Mr Thetjeng requested the Department to check on the implications of tax on these issues. He was worried about the possibility of circumvention of tax obligations.

Responses from Dr Mehlomakulu and Mr Sibanda were to the effect that the Department had not foreseen any problems, since there was legislation in place that would determine the tax implications of the benefit-sharing between institutions and IP creators. They would nonetheless look into the matter to provide further clarity.

Mr Sibanda responded to the concern about non-monetary benefits by distinguishing between funding for IP and consideration for IP. He stressed the importance of determining this distinction as that would clarify whether, by way of example, a donation for a library to be built constituted a benefit or if it was in fact simply a donation. He suggested that the issue of tax could be dealt with in regulations in a more specific way.

The Chairperson asked the Department if it was satisfied that all the concerns had been addressed, and if there was a need to consult with stakeholders

Dr Mehlomakulu responded that all the documents pertaining to stakeholder feedback had become a part of public record. They had been put up on a website belonging to the Parliamentary Monitoring Group (PMG). Stakeholders therefore had the opportunity to come back to the Department if there was anything that had not been addressed to their satisfaction in regard to the submissions that had been made to the Portfolio Committee. 

South African Space Agency Bill (SASA Bill): DST Briefing
Ms Pontsho Maruping, Chief Director: State Funds and Technology, DST, briefed the Committee on the SASA Bill. The Bill was proposed to give effect to the establishment of a National Space Agency. This was because of a number of uses of space technologies that would benefit the country. The briefing itself would provide a context on the issue of space, the key elements of the Bill and the feedback received from consultations with the public.

Ms Maruping used a powerpoint presentation that displayed slides containing different satellite images and other illustrations. She showed a slide of a satellite image of the Mpumalanga fires, which tracked the progress of the fires in that region. Ms Maruping explained that with this type of technology it would be possible to contain such fires, to analyse which part of the region had been affected, and to categorise these regions according to where the fires had burnt for longer or any other variables. Satellite imaging could also be used for urban planning. Ms Maruping pointed to a satellite image of Pretoria and explained that this would assist government in working out where, for instance, to place access roads and determine urban growth or the availability of government services in a specific area. This technology could also be used to determine disease risk, since it would further allow for investigation of environmental factors such as humidity or pollution, and then analyse them to determine the specific conditions under which specific diseases existed. This could in turn present the possibility of pre-empting the need for vaccinations,  or alerting communities about potential health hazards. It was also possible to enforce water regulations, such as the new regulations that require farmers to declare the amount of land watered. If any of the farmers under declared that amount, satellite images could be used to verify such declarations.

Other applications of the technology included the ability to monitor population growth and assist census data collection, crop monitoring in agriculture, disaster monitoring, exploration for valuable minerals, infrastructure planning and management using 3D city modelling to determine utility provision, for example, as well as geographical mapping and national security. These applications could be achieved using Earth Observation Satellites. Communication satellites in space would enable live coverage of sporting events such as the Olympics, which would be especially important in view of South Africa’s successful bid to host the World Cup in 2010. Another key application of communication satellites lay in navigation in air traffic control and safety.

The benefits of using satellite technology were that satellites had the capability to observe wider areas. Satellites were also non-intrusive and could therefore allow the observation of areas that were inaccessible or were hostile environments. Satellite technology also enabled continuous observation over longer periods of time, which was important in resource management and environmental issues.

Ms Maruping the set out some specific details about the Space Agency Bill and its relationship to the Space Affairs Act. The Bill would regulate the conduct of the Republic’s space programmes by establishing a legal and regulatory framework. The Committee was given an indication of the Republic’s space capabilities as further justification for the Bill. The Department also brought to the Committee’s attention the fact that South Africa had significant space design and development capabilities. The proposed Space Agency would see these capabilities develop and flourish to benefit the Republic. The key responsibilities of the Space Agency were then spelt out, with reference to the clauses of the Bill.

The Chairperson asked if there was a need for public hearings, and whether there might be any controversy in future if these did not take place. He also asked if there were controversial aspects to the Bill.

The Parliamentary Legal Adviser responded that there had been no controversies raised by this Bill, except on the issue of the relationship between Parliament and the Executive with specific reference to the appointment of a Board. The issue had been whether the Minister would exercise his discretion without consultation with other parties. A compromise position was eventually agreed upon, whereby Ministerial powers would be exercised “in consultation” with others, although the Minister would have the final say.

Mr Thetjeng wanted to know why reference was being made to the Space Affairs Act (SAA) when it affected another department.

Ms Maruping confirmed that the DST was in close consultation with the Department of Trade and Industry (DTI). She mentioned that the SAA had been established to deal with commercial issues and international trade obligations and thus fell under the administration of the DTI. However, there was a value to separation of implementation and regulation responsibilities between the DTI and the DST.

Mr Thetjeng wanted to know how the Bill would encourage skills development through the implementation of educational standards to promote skills availability.

Ms Maruping responded that the Department had certain human Capital Development Projects in certain schools and there was evidence that many schoolchildren were interested in the field of space sciences. Geographic information systems had become a key part of the curriculum in many schools. The Department had also implemented programmes to improve scholar performance in Maths and Science subjects.

Mr Thetjeng queried the term of office of the Board. He was worried that, because of the highly specialised nature of the field, it may be necessary to give the Minister discretion to retain the Board so that experience was not lost.

Ms Maruping confirmed that a Space Advisory Committee had been established to include non-citizens to improve capabilities and to enable knowledge transfer.

Mr Sulliman asked whether, in view of what other countries were spending on their space programmes, any costing had been done to determine if such funds were available in the national treasury.

Ms Maruping responded that that the Department had conducted an analysis, and had submitted its recommendations to National Treasury. She pointed out that in the long run it was more cost-effective to develop South Africa’s space capabilities, given that the cost of relying on outside capabilities was much higher. For example, a micro satellite could be developed locally at a cost of R30 million. If this same satellite was imported from the USA, it would cost US$ 30 million.

Dr Mehlomakulu added that the issue went beyond the economic argument, and included matters of national security. She pointed to the dual capabilities of space science technology, as was the case with the nuclear industry. There were powerful nations that used various space capabilities for surveillance of the activities of other nations. South Africa would thus be able to manage the information given out to such nations while at the same time developing its own capabilities. If no capabilities were developed, then the Republic would have to rely on these powerful states to service the utility aspects of such technologies such as communication and navigation. These countries would actually be given more power to monitor, own and control the geographies of the world. It was essential to develop local capabilities to prevent such intrusions.

Ms Maruping provided an example of what Dr Mehlomakulu had said. For instance, if a person was wanting up to date information on South Africa’s agricultural productivity, more reliable information could currently be obtained from the US Department of Agriculture than from local sources. USA had information available for every part of the world and already knew who to negotiate with well in advance, in terms of what to access by way of which product from which country. This was to some extent the disadvantage that Dr Mehlomakulu had referred to. By the time the USA had decided who its business associate would be, it already had all the intelligence it needed.

Ms Maruping said that another consideration would be the instance where South Africa might send out a peace-keeping mission. Until now, defence forces could sometimes be sent to areas where it was impossible to assess exactly what activity was taking place in those areas. If another country was requested to access the information, it would know immediately what, and the reasons why, was being sought. It would be a disadvantage to South Africa if it did not have its own capabilities to enable it to make strategic decisions.

The Chairperson asked a question on the provisions of the Bill that set out the criteria of eligibility to membership of the Board. He wanted to know what the rationale was in separating the National Assembly (NA) and the National Council of Provinces (NCOP) in clause 8 of the Bill, instead of referring to them in simple terms as “members of Parliament”.

The Chairperson also requested clarification on the options available to the Minister in the event of the death of a member of the Board, and what procedure must be followed. He requested a proper interpretation of this provision.

The Chairperson queried the clause in respect of the issue of remuneration of the Board in the case of those members who were ordinarily employed by the State.

Ms Maruping responded that those persons who were in the employ of the State and who had been appointed as Board members would hold positions on the Board as representatives of their respective Departments. The expectation was that those Departments would be responsible for whatever expenses they incurred.

The legal advisers were asked to respond to the questions around the board appointments.

The Committee debated the issue of remuneration of Board members who were civil servants, and raised some concerns that this might be unfair on them, as opposed to the situation of board members drawn from the public sector.

Members though that written submissions should be called for, since there had not been any public hearings on the SASA Bill.

The meeting was adjourned.

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