Treatment of IP under Exchange Controls further confused...
Previously, case precedent has meant that we have always had to treat IP as if it were cash in terms of our SA Exchange Control regulations, the ruling being that for the purposes of Reg. 10 (1)(c) of ExCon Regs, IP constituted capital.
However I have recently heard about a new judgement in the case of "Oilwell v. Protec" where the following rulings were made:
- IP does not consitute capital for the purposes of Reg. 10 (1)(c);
- the assignment of IP to a foreigner does not require SARB approval to be valid;
This would seem to be the total opposite ruling. In both cases they are High Court judgements. None are binding judgements on High Courts and can only be referenced in subsequent cases for consideration.
So this leaves the matter more confused than before, and SARB has yet to weigh on in the matter itself.
Personally, I believe that we need IP to NOT be treated as capital for the purposes of ExCon, and we need to allow the free flow of IP across our borders in both directions, or we'll continue to see a free flow of our entrepreneurial minds, leaving our country, and plenty of obstacles to raising venture investment in SA.
Views: 13
Replies to This Discussion
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Permalink Reply by Tony Mallam on -
When was the judgement, how relevant are the facts and can we get more detail or comment from one of our legal members please? Brendan? Would be very interesting to expand on this one.
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Permalink Reply by William Kleynhans on
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Permalink Reply by Tony Mallam on
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Thanks William.
William Kleynhans said:
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Permalink Reply by William Kleynhans on
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I am not an expert so the question in my mind is:
The previous ruling re: reddot was for patents and that those are subject to exchange control, but this was for copyright and that is not subject.
Now my limited understanding is that software and source code is considered copyright materials, so does this mean then that source code / software is excluded from exchange controls.
Anyone any better insight?
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Permalink Reply by Vishen Pillay on -
I see that William and Tony have already referred to the article on our website written by my colleague Chris Bull about the Protec judgment.
http://www.spoor.com/home/index.php?ipkMenuID=&ipkArticleID=295
Exchange control restrictions on the transfer of patents and intellectual property are acting as a disincentive on investment in early stage technologies. As things stand though the Protec judgment only deals with trade marks. It doesn’t overturn the earlier Reddot judgment which requires exchange control approval for any international transfer of patent rights. As a result international transfer of patents require exchange control approval, whereas transfers of trade marks do not.
This leaves an inherent inconsistency which may be resolved by either the Protec decision being taken on appeal or the Reserve Bank amending the Exchange Control Regulations to make it clear that the transfer of intellectual property do/don’t require exchange control approval. Until this issue is resolved you are well advised to get Exchange Control approval on these sort of transactions.
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Permalink Reply by Justin Stanford on -
Vishen, has there even been predecent set on the transfer of actual IP itself (as in actual software code) as opposed to any associated patents or trademarks?
J
Vishen Pillay said:I see that William and Tony have already referred to the article on our website written by my colleague Chris Bull about the Protec judgment.
http://www.spoor.com/home/index.php?ipkMenuID=&ipkArticleID=295
Exchange control restrictions on the transfer of patents and intellectual property are acting as a disincentive on investment in early stage technologies. As things stand though the Protec judgment only deals with trade marks. It doesn’t overturn the earlier Reddot judgment which requires exchange control approval for any international transfer of patent rights. As a result international transfer of patents require exchange control approval, whereas transfers of trade marks do not.
This leaves an inherent inconsistency which may be resolved by either the Protec decision being taken on appeal or the Reserve Bank amending the Exchange Control Regulations to make it clear that the transfer of intellectual property do/don’t require exchange control approval. Until this issue is resolved you are well advised to get Exchange Control approval on these sort of transactions.
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Permalink Reply by Vishen Pillay on
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As far as I am aware, our courts have yet to consider the Exchange Control implications of the international transfer of software or source code, more particularly the copyright in the software or source code. It will be noted that whilst the Protec judgement deals with trade marks and the Reddot judgement deals with patents, copyright in software or source code is a potential “grey area” in light of the present discussion. So until this issue is resolved it is advisable to rather be safe than sorry and to seek Exchange Control approval on transactions involving international transfer of copyright in software or source code.
Vish
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