In 2018 the Constitutional Court of South Africa ruled that personal and medical marijuana use in South Africa was deemed to be legal, with the Court directing the South African government to put in place the necessary legal framework to give effect to the Court's decision within 24 months of the judgement. Unfortunately, the government has been slow to implement the necessary legal framework, which was naturally placed on the back burner whilst managing the recent worldwide coronavirus pandemic. As we slowly return to normal life the topic has been placed back on the table for discussion and action. Currently, however, South Africa is in legal limbo as far as commercial cannabis exploitation for the personal use of cannabis is concerned despite companies already having invested heavily in the eventual implementation of the legal framework.
Interestingly, companies like Holy Basil (https://holybasil.co.za) have begun implementing collective growing strategies which they believe are compliant with the Constitutional Court ruling as they are within the legal quota but still allow for the distribution of cannabis products to members (consumers) for personal use. Recently, other companies with a similar strategy have come under fire from local authorities which has also spurred several cases seeking to clarify whether the Constitutional Court judgement would allow companies to grow cannabis on behalf of individuals for their personal use.
In September 2020 parliament published the Cannabis for Private Purposes Bill, which has subsequently been updated and is currently receiving submissions in relation thereto. In addition, the President of South Africa mentioned the "huge potential for investment and job creation" offered by the cannabis industry in his state of the nation address in 2022. These smoke signals appear to indicate that the four-twentieth hour has arrived, and that the government is poised to take advantage of the tax revenue windfall that comes with an emerging industry brought in from the foggy wasteland of the illicit marketplace.
The potential tax revenue numbers are not insignificant. Recently, the state of Massachusetts in the United States indicated that the tax revenue obtained from cannabis exceeded tax revenue from alcohol, joining other US states where cannabis has been legalized, with California seemingly topping that list with over US $1 billion dollars in cannabis tax revenue in 2020.
Notwithstanding the above, tax revenue should not be the sole basis for legalising cannabis as it will prove more difficult for a nascent legal industry to compete with an already thriving illegal industry where prices will naturally be lower without taxes. With this in mind, it will be important for those in the legal industry to unlock value elsewhere and arguably this can be obtained from leveraging intellectual property protection to establish South Africa as a dominant player in the market.
In terms of South African patent law, plants obtained through a micro-biological process, for example, transgenic manipulation of a plant genome, can be protected. Plants produced using biological means, for example, crossbreeding, are, however, specifically excluded from patent protection.
Plants generated from traditional biological means can still be protected using a lesser-known branch of intellectual property law rights, aptly referred to as plant breeders' rights, which provide for certain monopoly rights to the breeders of new plant varieties. In terms of the Plant Breeders' Rights Act No 15 of 1976 protection may be obtained in South Africa in respect of a new, distinct, uniform and stable variety of any kind of plant that is prescribed. In order to be registerable, a plant must thus be prescribed, i.e. named in the list of "kinds of plant" which is set out in Table 1 of the Regulations under the Act. This list is varied from time to time. Examples of kinds of plants that are currently registerable are:
- Agricultural crops, such as rooibos tea or tobacco.
- Vegetable crops, such as spanspek (sweet melon).
- Fruit crops, such as granadilla (passion fruit).
- Ornamental crops, such as proteas.
- Trees, such as milkwood.
- Grasses, such as blue buffalo grass.
It may also, depending on the kind of plant, be necessary to apply for varietal listing under the Plant Improvement Act, simultaneously with applying for Plant Breeders' Rights, in order to exploit a new variety commercially in South Africa.
When a plant breeders' right is granted, any person intending to undertake the production or reproduction, conditioning for the purpose of propagation, sale or any other form of marketing, importing, exporting, or stocking for any of these purposes of propagating material or harvested material (including plants) obtained through unauthorized use of propagating material of the variety protected, must obtain authority by way of a licence from the holder of the plant breeders' right. The holder of a plant breeders' right thus has the sole right in South Africa to produce, sell, import, export, etc the propagating or harvested material. The duration of a plant breeders' right is 25 years for vines and trees, and 20 years for all other cases, calculated from the date of issuance of the registration certificate.
An application in another country can claim convention priority from a basic South African plant breeders' rights application if the country is a UPOV Convention Country or a so-called Agreement Country, and provided the foreign application is filed within one year of the basic South African application. In practice, this Convention period is seldom relied upon. Interestingly, plant breeders' rights in the USA can only be obtained for sexually produced plants obtained from seeds. Plants obtained asexually by grafting can only be protected by a plant patent in the USA.
For an applicant validly to file a plant breeders' rights application in South Africa for a cannabis variety, the Minister of Agriculture, Land Reform and Rural Development must amend the Regulations of the current Plant Breeders' Rights Act to include cannabis as a "kind of plant" able to be afforded protection in terms of the Act. This is in line with the 1978 UPOV Act but different to some other countries which have legalised cannabis use but, in line with the 1991 UPOV Act, do not necessarily require a plant to be listed in order for a plant breeders' right to apply. For example, Canada, which is party to the 1991 UPOV Act, has a broadly inclusive list where plant breeders' rights are afforded to all plants.
Although the Cannabis for Private Purposes Bill is unfortunately silent on the topic, the Minister of Agriculture, Land Reform and Rural Development did, on 20 May 2022 by publication in the Government Gazette, amend Table 1 of the Regulations of the Plant Breeders' Rights Act to include Cannabis L. as a kind of plant that is prescribed. Table 1 is however currently limited to hemp varieties.
The Minister of Agriculture, Land Reform and Rural Development also published amendments to the Regulations issued in terms of the Plant Improvement Act No 53 of 1976, in the Government Gazette of 8 October 2021, declaring hemp an agricultural product subject to the provisions of the Plant Improvement Act. The amended Regulations allow the holder of a valid, untransferable Hemp Permit, issued by the Registrar of the Plant Improvement Act upon payment of an official fee and valid for two years, inter alia to import hemp plants or propagating material for breeding, research or cultivation, to propagate plants for purposes of developing new hemp varieties, to sell hemp seed, seedlings, plants or cuttings, to cultivate hemp, and to export hemp plants and propagating material for cultivation purposes.
Hemp and marijuana are not distinct species but rather two of many different names for cannabis, a type of flowering plant in the Cannabaceae family. Legally, the difference is the concentration of (-)-transdelta-9-tetrahydrocannabinol (THC) in the leaves and flowering heads of Cannabis sativa L. Interestingly, in terms of the amended Regulations issued for the Plant Improvement Act, "hemp" means low THC plants or parts of plants of Cannabis sativa L. cultivated for agricultural or industrial purposes, of which the leaves and flowering heads do not contain more than 0.2% THC (presumably this is percentage by weight), whereas in the Agricultural Improvement Act of 2018 and other laws in the USA, a limit of 0.3% on a dry weight basis is used.
It is believed that although it is now possible to file a plant breeders' rights application in South Africa for a new cannabis variety, such a plant breeders' rights application will however have to be accompanied by a certificate stating that the THC content of the leaves and flowering heads does not exceed 0.2%. It is not yet clear who can issue such a certificate.
An excellent example in the cannabis community of the opportunity which could have been afforded to a budding entrepreneurial South African breeder, had the possibility existed earlier to obtain plant breeders' rights, is the internationally recognized strain referred to as "Durban Poison" which is a South African landrace variety. This hypothetical South African entrepreneur could have realised the value in the South African strain but noted its low comparative yield and decided to rather crossbreed the South African variety with another higher yield variety (such as the "Skunk" cannabis variety), which would have resulted in a higher commercial yield (this is apparently what was done by a breeder in Amsterdam). This hypothetical entrepreneur could then have registered the new variety using the Plant Breeders' Rights Act (assuming the new variety complied with the requirements of the Act) and subsequently filed corresponding applications in other international markets where cannabis has also been legalised.
We also briefly mention that a complete intellectual property strategy for cannabis companies looking to take advantage of intellectual property rights would necessitate trade mark considerations. For example, the above hypothetical entrepreneur would register the plant breeders' rights with a specific varietal name or denomination complying with the requirements of the Plant Breeders' Rights Act whilst simultaneously filing a trade mark application for the new variety (e.g. "Durban Skunk"), to protect the brand name they would be using to sell the particular strain. The denomination of the variety as registered would then have to be included with the packaging in which seed of the new strain is sold, but which can also include the brand name. The advantage of registering a trade mark is that it provides a perpetual monopoly over the brand name, provided the trade mark registration is renewed as prescribed. So, once the plant breeders' right has expired (after 20 years) the brand identity, "Durban Skunk", associated with the particular strain would already have been established with consumers and the entrepreneur could continue to reap the benefit through that brand loyalty.
Interestingly, trade mark protection in some countries has also been extended to scents, which form a large part of the sensory experience related to the purchase of cannabis. It is unclear, however, how this may play out in the cannabis industry but as strains are known to have distinct scent profiles this form of protection may become more important as the industry develops further.
As more and more countries proceed to legalise cannabis so the global industry will continue to expand, bringing with it new opportunities for budding entrepreneurs. There is a natural push for larger players in the market to seek the protection afforded through traditional patents as these rights are viewed as strong. With this emphasis in place these larger players are focusing on the extracts, isolates and transgenic forms of cannabis, all of which form suitable subject matter for patent applications, potentially leaving a gap for smaller traditional breeders to obtain monopoly rights in new varieties by means of plant breeders' rights.
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