Nexus: South Africa

Does South Africa want public interest considerations for copyright limitations and exceptions at the WTO?

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A few days ago (29th January 2020), the South African Government issued a Communication to the World Trade Organisation’s (WTO) Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council). The Communication titled “Intellectual Property and the Public Interest: The WTO TRIPS Agreement and the Copyright Three-Step Test” was issued to consult WTO Member States on the flexibilities available to Member States in crafting copyright limitations and exceptions within the principles and objectives of the TRIPS Agreement.

The crux of the Communication from South Africa
The South African Government posed specific questions for Member States’ consideration thus:

1) Does the three-step test constitute an indivisible whole to the extent that each of the three steps are to be considered together and as a whole in a comprehensive overall assessment?
2) What approaches have Members taken to reflect limitations and exceptions in their IP laws?

...communication for clarification?

Essentially, South Africa wants to know how far it may go in fulfilling the principles and objectives of Articles 7 and 8 of the TRIPS Agreement when it is crafting copyright limitations and exceptions. While Article 7 of the TRIPS Agreement require copyright protection to contribute to the promotion of technological innovation… in a manner conducive to social and economic welfare…”, Article 8 envisages that Member States formulate or amend their laws and regulations to “promote the public interest in sectors of vital importance to their socio-economic and technological development…”.

Comments
The Communication emphasises that limitations and exceptions such as fair use and fair dealing are not in conflict with the three-step test requirement under Article 13 of the TRIPS Agreement. [The three-step test requires that Members "confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder”]. The Communication also mentions the WTO Panel’s interpretation of the three-step test in resolving the dispute between the EU and the US over section 110(5) of the US Copyright Act. The WTO Panel in that case held that the three-step test requests 3 separate, independent, cumulative tests for copyright limitations and exceptions.

Given this interpretation, it may be puzzling to see South Africa posing the question again to Member States through the TRIPS Council. Granted, many scholars (as acknowledged in the Communication) have disagreed with the WTO Panel’s interpretation and found it unduly focused on economic interests. It may therefore be helpful to hear what Member States think of the boundaries of the three-step test vis-à-vis public interest considerations. Also, this Africa Correspondent is of the opinion that the underlying issue that South Africa wants addressed is the question of whether the three-step test under the TRIPS regime admits a public interest approach - “in sectors of vital importance to (national) socio-economic and technological development…”.

But, why issue the Communication now?

As readers may recall, South Africa’s National Council of Provinces (NCOP) had in 2019 concurred with the redrafted version of South Africa's Copyright Amendment Bill, and sent same to the President for his assent. One of the contentious (if not the most contentious) provisions of the Bill was the “fair use” provision (Katpost here). Given this, why did South Africa not seek this clarification before adopting the Copyright Amendment Bill? This Kat can only say things: (1) the much-awaited Presidential assent to the Bill will not be coming anytime soon and at least, until the clarification sought in the Communication is received; (2) despite the Communication coming after the Bill has been adopted, it is as they say, better late than never.

Another “but”: Should there be international minimum standards for copyright limitations and exceptions? Or, are Member States better off with policy space enabled by general statements (like the three-step test) to craft copyright limitations and exceptions? In October 2019, WIPO held the International Conference on Copyright Limitations and Exceptions for Libraries, Archives, Museums and Educational & Research Institutions. The Conference was the end of the fact-finding and information gathering phase of the quest to provide for minimum standards in crafting limitations and exceptions for the specific institutions. Perhaps, South Africa wants to push for some minimum standards for copyright limitations and exceptions, generally? Which leads this Kat to another question: should the WTO (a trade regime) be the forum for such public interest “expedition”? That said; responses to the Communication might provide tips for the negotiation of the IP Protocol in Africa’s regional trade agreement –the African Continental Free Trade Area (AfCFTA).

It is expected that the Communication will come up for discussion at the next TRIPS Council meeting in early February 2020. This Kat can only hope that South Africa (and indeed, every Member States) takes cognisance of differences in development stages of Member States as it/they consider(s) “national approaches and experiences”.

Readers should stay tuned…

South Africa’s Constitutional Court rules on whether patent validity can be used as both a sword (revocation action) and a shield (infringement action) in patent proceedings

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Late in October last year, the Constitutional Court of South Africa (the ConCourt) handed down its decision on the appropriate default position in patent proceedings in Ascendis Animal Health (Pty) Limited vs Merck Sharp Dohme Corporation and 2 Others [2019] ZACC 41. The appeal raised the question of whether a defendant who has unsuccessfully challenged the validity of a patent in revocation proceedings may be permitted to raise the issue of patent validity as a defence in infringement proceedings.

...a sword or shield or both?

The decision is significant because it involved the appellate jurisdiction of the ConCourt and the first time it was deciding on the subject of patent prosecution. The ConCourt assumed jurisdiction on the matter because the appeal raised a “constitutional issue” (i.e. the applicant’s constitutional right to fair hearing as guaranteed by Section 167(3)(b) of the South African Constitution) and “an arguable point of law of general public importance” (i.e. interpretation of section 61 of the South African Patents Act, which not only affected the parties in the dispute but also future patent litigants). [Paragraph 32].

Background
In 2011, Ascendis Animal Health (Pty) Limited (the applicant) instituted revocation proceedings at the High Court seeking to invalidate the patent held by Merck Sharp Dohme Corporation and Merial Limited (the respondents) on grounds that the patent was not new (novelty) and lacked an inventive step (obviousness) under section 25(5), (6) and (10) of the South African Patents Act. [Paragraph 7].

While the revocation action was pending, the respondents instituted proceedings against the applicant for patent infringement.

The parties agreed to stay the infringement proceedings and proceed with the revocation proceedings to finality. Also, the applicant informed the respondent of its decision to argue only the novelty claim and to present oral evidence regarding the obviousness claim, should the novelty claim fail. The respondents opposed this approach as untenable in law and procedure but the applicant proceeded as it planned and there was no ruling on this during the revocation proceedings. [Paragraph 10]

The High Court revoked the respondents’ patent for lack of novelty and on appeal to the Supreme Court of Appeal, it was held that the novelty claim had no merit and that the patent was valid. [Paragraph 14]

The applicant returned to the revocation proceedings at the High Court and filed an application to amend its application thus: remove the novelty claim; retain the obviousness claim and introduce a new defence of inutility under section 61(1)(d) of the Patents Act. The respondents opposed this application and sought to amend their pleadings to plead res judicata based on the Supreme Court decision. The respondent also sought an interim order to restrain further infringement pending the outcome of the suit. [Paragraphs 15-16].

The High Court refused the applicant’s amendment application holding that it amounted to piecemeal litigation as the intention to proceed with the invalidity claim on grounds of obviousness was not raised before the Supreme Court. The High Court also granted the claim for interim order sought by the respondents. [Paragraphs 17-19].

At the High Court for the infringement proceedings, the applicant presented a similar application and argument to amend its pleadings. It argued that each ground of patent revocation is a separate cause of action and as such, the obviousness ground may be introduced by way of an amendment. See paragraph 21. The High Court rejected this argument and dismissed the amendment application. The High Court also granted the respondents’ amendment application and upheld the res judicata argument.

The applicant then sought leave to appeal against the decision refusing the amendment of its pleadings in the infringement action. The High Court refused leave to appeal and likewise, the Supreme Court refused leave.

The applicant then appealed to the ConCourt challenging the decision of the High Court refusing its application to amend its pleadings in the infringement action.

The decision
10 justices of the ConCourt sat on the appeal and unanimously granted the applicant leave to appeal. However, while 5 of the justices upheld the appeal and ordered the amendment of the applicant and respondents’ respective pleadings, the other 5 dismissed the appeal. In the absence of a majority decision, the judgment of the High Court remained valid and in place. [Paragraphs 1-2].

The ConCourt justices were split on two issues:
(a) Are the grounds for challenging patent validity single or separate causes of action?
Justice Khampepe held (with the concurrence of 4 other justices) held that the grounds on which the validity of a patent may be challenged under section 61 of the Act (novelty, obviousness and inutility) constituted separate and independent causes of action. [Paragraph 49]. Also, the facts needed to prove each ground differ. While the novelty ground requires proof that the patent is not new or different than what existed before, the obviousness ground and the inutility ground respectively require proof that the so-called inventive step is in fact obvious to anyone versed in the prior art and proof that “the blueprint of the patent itself does not lead to the claimed usefulness or result”. See paragraphs 54 and 55.

Justice Cameron (with the concurrence of 4 other justices) took the opposite view holding that the validity of the patent was the sole subject matter of the dispute both in the revocation proceedings and in the infringement action.

(b) Is the defence raised in the infringement proceedings res judicata because it borders on validity of patent?
On this issue, Justice Khampepe and 4 others held that the defence was not res judicata as the grounds of patent validity were separate causes of action. The justices considered the “scheme of the Act” and distinguished between revocation actions and infringement proceedings. See paragraphs 44-48, 85-86 of the judgment. The differences between revocation and infringement actions meant that the legislature intended the proceedings to be separate and distinct such that failure of one cannot preclude the other. A claim of res judicata on revocation proceedings could not be applied to foreclose defence on infringement proceedings. See paragraphs 47, 68, 74 and 75.

Moreover, the amendment should have been permitted under Rule 28(1) of the Uniform Rules of Court, which allow parties to amend their pleadings unless good cause is shown to the contrary. [Paragraphs 87-89]

Justice Cameron and 4 other justices were of the view that the defence was res judicata based on several considerations:
a. The dispute between the parties is based on the validity of the respondents’ patent. Once the Supreme Court rebuffed the applicant’s attempt to revoke the respondents’ patent, the applicant was estopped from bringing the same issue of patent validity (no matter the ground) in the infringement proceedings. [Paragraph 110]

b. While res judicata forbade same parties from re-litigating the same cause of action and seeking the same relief, the concept of “same cause of action” may be interpreted widely to accommodate and forbid a party from demanding the same thing on the same issue. The issue in the instant appeal being on the validity of the patent. [Paragraphs 112-113].

c. Each jurisdiction has its own method of ensuring a fair and efficient patent enforcement system. For example, Germany and Japan had a patent examination system, which acts as a safeguard for their respective strictly bifurcated systems for validity challenges and damages claims [paragraphs 125 and 127]. The US, which had a unitary system similar to South Africa, had patent examination as a safeguard to address duplication of litigation. [Paragraph 126]. The broad interpretation of the res judicata principle may be South Africa's own safeguard.

Comment
To the extent that the defence proposed for the infringement proceedings bordered on the validity of the patent, it appears to make sense that a defendant that has failed as applicant in revocation proceedings should not be allowed to re-litigate the validity of the patent as a defence to infringement. But in this Kat’s opinion, that should depend on the nature of the challenge regarding the patent validity.

While it may not be proper to allow the same applicant to bring multiple revocation proceedings against the same patent on different grounds, an applicant that unsuccessfully challenges the validity of a patent for lack of novelty should be able to rely on obviousness as a defence to an infringement claim. This is in the public interest particularly for jurisdictions that have no patent examination system. Otherwise, as Justice Khampepe pointed out, there would be no opportunity to test the strength of patents in a non-examination jurisdiction such as South Africa. [Paragraph 100]. [Even in cases where a patent licensee is sued for infringement, such licensee may defend the action by arguing that the patent was invalidly granted as happened in the Ethiopian teff patent case. It would not matter that the licensee had previously acknowledged the patent by procuring a license to use]

To this Kat’s mind, the appeal should have failed, not because the amendment sought was res judicata but because of the timing of the amendment application. The High Court had a discretion under the Rules of court to decide whether or not to grant an application for amendment of pleadings. The ConCourt may then decide whether the High Court’s discretion was exercised judiciously vis-a-vis constitutional rights. The point in time at which the defence was raised is a strategic issue that the applicant failed to explore appropriately. There appears to have been no acceptable reason why the applicant failed to plead all the defences available to it at the inception of the infringement proceedings.

In closing, this Kat is of the opinion that the issue of whether failure of revocation proceedings (made on any ground) would foreclose a validity defence in infringement proceedings may not be conclusively settled in South Africa. The simple reason for this as far as this Kat is concerned is the fact that 10 justices (an even number) sat on the appeal. It may be advisable to ensure an odd number quorum for the Concourt when sitting in appellate capacity, as this is the only way to guarantee a majority decision and a judicial precedent.

ZADNA in action; Latest IP&T

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The IPKat's IP/IT savvy friend Daniel Greenberg (daniel@greenberg.co.za) writes:

"I wanted to bring to your attention the implementation of the ADR for .co.za domain names. The link to the administrative body ZADNA is http://www.zadna.org.za/adr/. Ironically ZADNA have not registered zadna.co.za. It is available at present but I am sure its registration has been blocked by Uniforum (http://co.za), the Registry for co.za.

The ADR is unique in that is defines "rights" and "registered rights" to include IPR, commercial, cultural, linguistic, religious and personal rights protected under SA Law, but is not limited thereto. It appears at first glance that they have incorporated constitutional elements into the ADR".

Thanks, Daniel, for keeping the IPKat informed. And well done, ZADNA (says Merpel), in coming up with such a bright, cheerful and seriously effective logo.

The May 2007 issue of the IPKat's black and shiny Intellectual Property and Technology Cases, published by LexisNexis Butterworths as a paper-based handmaiden to its electronic service, has now reached his rain-saturated letterbox. There are five cases in this issue, drawn from a wide range of topics. They include

* Northern Foods plc v DEFRA (Queen's Bench Division, England and Wales), a 2005 decision of Mr Justice Crane on an application for judicial review of the government's designation of a disputed territory as the sole zone within which pork pies might be termed "Melton Mowbray".

* Phones 4U Ltd v Phone4u.co.uk Internet Ltd, an extremely confusing Court of Appeal decision in a passing-off action that (among other things) clarified the scope of the One in a Million "instrument fraud" doctrine that has enabled trade mark owners to pounce on (mainly but by no means always) naughty aliens registering those marks as parts of domain names. The court also affirmed the limits to trade mark protection where the owner has limited its registration to a specific set of colours only.

* Nokia Corporation v InterDigital Technology Corporation, a more recent Court of Appeal decision relating to the jurisdiction of the courts to entertain an application for a declaration that certain patent licences were not essential for compliance with internationally-agreed technical standards.

Nexus

Does South Africa want public interest considerations for copyright limitations and exceptions at the WTO?

South Africa’s Constitutional Court rules on whether patent validity can be used as both a sword (revocation action) and a shield (infringement action) in patent proceedings

ZADNA in action; Latest IP&T

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