South Africa: IP And Publicly Financed R&D

Last Updated: 25 February 2013
Article by Rachel Sikwane

Most Read Contributor in South Africa, September 2018

In 2008 the government introduced important intellectual property (IP) legislation. The Intellectual Property Rights from Publicly Financed Research and Development Act 51 of 2008 - which only came into force on 2 August 2010 – governs the ownership and exploitation of IP which flows from publicly financed research and development (R&D). In essence the Act provides that IP that is created in South African universities and research institutions should remain in South Africa, and that it should be used for the benefit of South Africans. The Act makes it clear that government sees IP as an important driver of economic growth. 

The Act achieves its aims in certain ways. It defines IP in very broad terms and it clearly goes beyond patents and designs to unregistered rights like confidential information or trade secrets. The Act creates a powerful National Intellectual Property Management Office (NIPMO), as well as a National IP Fund to help with the cost of IP protection. To make sure that the individual institutions identify, protect and commercialise IP, the Act requires them to establish their own technology transfer offices.

Insofar as IP ownership is concerned, the Act provides that, as a general rule, the recipient of the funding will be the owner of any IP that flows from the R&D. If the institution doesn't want to protect or exploit the IP, however, it must notify NIPMO, which will then have the right to acquire the IP.  Alternatively, if the R&D was partially funded by a private entity, the entity can be granted an option to acquire the IP. The Act does also make provision for co-ownership in cases where a private entity has contributed both resources and to the creation of the IP, and where it has agreed to share the benefit with the individual/s that co-created the IP, and agreed with the institution on how to commercialise the IP. Lastly, the Act provides that where the private entity funds the R&D on a full cost basis, it alone will own the IP.

The Act then goes on to provide how such IP can be commercialised.  When it comes to licensing local companies, the Act provides that preference must be given to BBBEE companies. It also provides that the state must have a perpetual and royalty-free licence to use the IP anywhere in the world if the country's health, security or emergency needs require it, and that the state can acquire the IP if it isn't   commercialised for the benefit of the people of SA.  As for offshore transactions, the Act provides that NIPMO must be given notice of an intention to enter into such an agreement, that NIPMO must be convinced that the IP cannot be adequately commercialised in SA and that the agreement must comply with NIPMO's requirements.  

In December 2012 NIPMO issued Guidelines on the Act, seemingly in response to the many queries that had been received.  The Guidelines deal with some practical issues. For example, on the issue of just what public funding is, the Guidelines say that money that comes from any of the national, provincial or local government departments or from bodies like the Small Enterprise Development Agency (SEDA) and the Technology Innovation Agency (TIA) is public funding. The Guidelines give some specific examples:  if Eskom funds R&D at institutions this is not public funding because it uses income from electricity sales and not funds received from National Treasury; similarly the IDC uses income derived from investments; yet the Support Program for Industrial Innovation (SPII), which is managed by the IDC, does use public funds. 

On the issue of R&D, the Guidelines acknowledge that the term is not defined in the Act, but say that it is generally understood to refer to the sum of three distinct activities – basic research, applied research and experimental development. They go on to provide a list of activities that should be excluded from R&D. These include   education and training (excluding post graduate research); scientific and technical information services; testing and standardization; patent and licence work; policy related studies; routine software development; R&D financing activities; and indirect support activities.

As to which institutions are affected by the Act, the Guidelines list all the universities in South Africa, as well as ten statutory institutions. These are the following - Agricultural Research Council (ARC), Council for Geoscience (CG), Council for Mineral Technology (MINTEK), Council for Scientific and Industrial Research (CSIR),   Human Science Research Council (HSRC),   National Research Foundation (NRF), South African Bureau of Standards (SABS), South African Medical Research Council (MRC),   South African Nuclear Energy Corporation (NECSA) and Water Research Commission (WRC).

The Guidelines end with a number of scenarios intended to show just how the Act will apply.  These are far too long to discuss, but they all make the point that, as the Act is not retrospective, it doesn't apply to any IP that was created prior to 2 August 2012, although it might apply to further or follow-on IP created in consequence of IP that was created before that date.

This may be dry stuff, but the Act is likely to become increasingly important.

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.

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