What the IP Act means for the Silicon Cape

Guest post by Joanne van Harmelen, Spoor and Fisher

The Intellectual Property from Publicly Financed Research and Development Act came into effect on 2 August 2010 when the regulations were promulgated.

The Act should be interpreted in terms of South Africa’s National Research and Development Strategy, which creates a framework for encouraging research, development and intellectual property (IP) protection. The strategy also aims to encourage government investment to close the innovation gap in scientific research and development.

Given these strategic goals, the objective of the Act is to ensure that IP developed from publicly financed research is used and/or commercialised for the benefit of all South Africans.

The Act applies to any creation of the mind that is capable of being protected by any law from use by any other person, where public funding has been received for the research. As a starting point, the Act views the funding recipient as the owner of the IP; it also provides for co-ownership in cases where there are partnerships between private and public entities. In these situations, certain requirements must be met, including benefit sharing provisions for the inventors and that a commercialisation plan must be in place. Private entities will retain full ownership of IP if they have provided research funding on a full-cost basis.

The Act contains provisions that aim to ensure that IP from publicly financed research is identified and commercialised. Institutions such as science councils and universities must set up technology transfer offices to do this. A National Intellectual Property Management Office (NIPMO) has been established to assist with these requirements.

The Act recognises and rewards human ingenuity and creativity, in that a share of the royalties received from publicly funded research IP must be given to the inventors. The inventors in an institution are entitled to 20% of the gross revenues accruing to the institution for the first R1 million, and thereafter 30% of the net revenues.

The Act also recognises the importance of publication for researchers; but before findings can be published, researchers must disclose any IP to the funding recipient to assess whether the IP warrants protection, and if so, to apply for protection prior to publication.

The Act has a number of provisions that aim to ensure that all South Africans benefit from publicly funded research. For example, the Act provides that there should be a preference for licensing agreements with SMEs and BBBEEs, and for commercialisation and manufacturing to be in South Africa. Although private entities can become exclusive licensees or assignees of IP from public financed research, it must be shown that they can manage and commercialise the IP in a manner that benefits South Africa. In addition, in the case of an assignment, it must be shown why an alternative agreement, such as an exclusive license, would not suffice. Furthermore, if the IP is to be assigned locally or offshore, or exclusively licensed offshore, approval must first be obtained from NIPMO, and it is necessary that the benefit to the country arising out of such an agreement be shown. In the case of such offshore agreements, it must also be shown why the commercialisation cannot occur locally. Where agreements are entered into by a recipient of public funding that are contrary to the requirements of the Act, these agreements will be null and void from the start.

Finally, the State has a non-exclusive, royalty-free right to use the IP developed with public funding, as long as this is necessary and in the interests of South Africans.

The team at Spoor & Fisher has an excellent knowledge of the Act and working with the public sector. Members have variously facilitated public consultation workshops held during the drafting of the Act, worked for the Department of Science and Technology, and have experience with public policy documents and legislation pertaining to R&D. Please do not hesitate to contact us if you need any further information or clarification about the Act.

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Comment by Hilary Albutt on December 3, 2010 at 18:13
I agree this legislation, although well intended is flawed. It will be abused and will have the opposite effect it was intended to have.
Comment by Roger Norton on November 26, 2010 at 10:32
Hi Duncan. The basic idea of the new Act (as are as I understand it) is was 1) to allow the state to make sure that more of the IP created with public funds was being used to make money for the country. 2) that the people who developed the IP would get rewarded for their efforts.

However, although these intentions are good, the actual wording in the Act is far too vague and open ended. The result is that only time (and the NIPMO) will be able to dictate how this is to be enforced. Unfortunately as it currently stands there it is very difficult to get sole rights to your IP if you have used any form of assistance from public funds. (Like using a university computer lab for an evening) The IP has to first be declined by the University and NIPMO before you can buy sole rights. This could be 1) lengthy 2) denied all of which you have no control over. It is left far too much down to opinions and interpretations. Lets hope NIPMO is more efficient than CIPRO.
Comment by Duncan Drennan on November 25, 2010 at 22:14
Would it be correct to say that the idea (unintended consequences aside) is for the state to be able to commercialise underutilised IP? What are the measures for "s long as this is necessary and in the interests of South Africans."?

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