It’s a problem with a specialist field like IP – every now and then a judge who doesn’t know his ®'s from his elbow gives a judgement that stuffs things up completely. It’s something that lawyers love, of course – a new revenue stream that’s quickly shrouded in mystery.
So it came to pass that in 2004 a judge in a case that is generally known as the Reddot case held that a patent is a form of ‘capital’ because it has a monetary value. The result of this finding was dramatic – every time that a South African patent (or trade mark, design or copyright) was transferred to a foreigner there was an export of capital, something that required Treasury approval. If there was no Treasury approval, the whole deal was void from the outset. Not exactly in sync with the whole free trade / globalisation thing. Within no time law firms had created entire divisions to help their clients to get Treasury approval for transfers of IP to foreigners.
Eventually these matters do come up before judges who know about IP and things are sorted out. So it came to pass that in March 2011 the Supreme Court of Appeal handed down a decision in a case that will be known as the Oilwell case, a case that involved the transfer of a SA trade mark registration to a foreigner. The judge, Louis Harms, made it very clear that a trade mark (or a patent, design or copyright for that matter) is not capital. There are various reasons for this said the good judge, one of these being the fact that if everything with a monetary value is capital, it must mean that Treasury approval is needed if an income-producing movable object is sold to a foreigner. Something the judge – who in one fell swoop dispelled the cruel myths that judges are out of touch and incapable of levity – said ‘would surprise many, not only those who hawked vuvuzelas during the Soccer World Cup.’ He went on to hold that even if an agreement does require Treasury approval a failure to do so does not make it void as the Treasury can approve it after the fact.
So sanity has returned to the gentle world of IP – trade marks and other IP rights can be transferred to foreigners without Reserve Bank approval. If the foreign owner enters into a licence agreement with a local, however, Treasury approval will still be needed before royalties can be sent abroad. Nice and simple!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.