The dti’s draft IP policy and the pharmaceutical industry

dti draft_IP_policy_and_the_pharmaceutical_industryIn the wake of the Department of Trade and Industry’s draft IP policy, Janusz Luterek, patent attorney and director of Hahn & Hahn, sheds light on the current patent law framework in South Africa and the impact the draft policy may have on the pharmaceutical industry should it eventually come into effect. 

The Draft Policy on Intellectual Property (IP) was published on 4 September 2013. Comments were invited by 17 October during the same year and a number of comments were submitted. To date, however, neither a reply to comments nor an updated policy document has been published. Furthermore, no draft amendment to any IP Law has come to light to put the policy into effect. 

Currently, patents are issued, enforced and challenged under the Patents Act 57 of 1978, whereas the ownership and exploitation of patents from publicly financed research is further governed by the Intellectual Property from Publicly Financed Research and Development Act 51 of 2008. The latter of which has frequently been overlooked.  

Pharmaceutical and agro-chemical companies would also be wise to note the provisions in the Biodiversity Act 10 of 2004 in terms of which benefit sharing with local communities of IP derived from South Africa’s biological resources is enforced. 

The Draft IP Policy seems to have been prepared without a clear understanding of the framework, which already exists. The aspirations set out therein are in many cases already clearly and adequately covered by the abovementioned legislation. For example, the compulsory licensing of patents that are not exploited or where there is insufficient supply of products covered by patents. 

The draft policy caused alarm among IP owners, especially in the pharmaceutical, foodstuffs and agro-chemical industries as it appears to attack the pillars of IP ownership, allegedly in the public interest and to ensure South Africans have access to affordable medicines and food security. This fear was caused largely due to the poor manner in which it was drafted without an understanding of our current IP laws and South Africa’s commitments under the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to protect and enforce IP laws. 

However, what has frequently been overlooked when reviewing the draft policy are the many aspirational, yet legitimate policy concerns of South African government regarding how IP, and patents in particular, could be used to limit public access to life saving medicines and foodstuffs, while also limiting access to business opportunities for the majority of South Africans. 

Too many goal posts

The draft policy seems to have the following objectives, most of which are already provided for in existing laws:

The Patents Act, like any other law, needs to be updated from time to time to keep it in line with current trends and needs. In South Africa, other purpose made laws can also be introduced such as the Intellectual Property from Publicly Financed Research and Development Act and the Biodiversity Act – which both already address most of the objectives in the draft policy. Together with the provisions in the Patents Act on invalidity of patents and compulsory licensing, these acts could be used to achieve the objectives of government without upsetting the apple cart and possibly being in breach of South Africa’s TRIPS obligations.

Access granted

It appears that one of the biggest concerns for government, and a key responsibility of pharmaceutical industry, is creating access to affordable medicines for the people of South Africa. However, Section 56 of the Patents Act already has had, for several decades, provisions for compulsory licensing. Anyone, including the Department of Health, may apply to the Commissioner of Patents for a compulsory licence to stop any abuse of patent rights if: 

  1. the demand for the patented article in South Africa is not being met to an adequate extent and on reasonable terms
  2. by reason of the refusal of the patentee to grant a licence or licences upon reasonable terms, the trade or industry or agriculture … or the establishment of any new trade or industry in the country, is being prejudiced, and it is in the public interest that a licence or licences should be grantedthe demand in South Africa for the patented article is being met by importation and the price charged by the patentee, its licensee or agent for the patented article is excessive in relation to the price charged therefor in countries where the patented article is manufactured by or under licence from the patentee or its predecessor or successor in title. 

This section could be used to apply for a compulsory licence under a patent that is important for public health. 

Another existing but unused Section of the Patents Act is Section 4 which grants the government walk-in-rights for public purposes on such conditions as may be agreed upon with the patentee, or in default of such agreement on such conditions as are determined by the Commissioner of Patents, for example, in the case of a public health crisis. 

There are already examples of royalty-free licenses being granted for life saving drugs, such as the 2009 license from GlaxoSmithKline to Aspen to produce ARVs as well as early agreements to supply ARVs at low cost for public health use. 

However, if the above is believed to be inadequate, Sections 4 and 56 as well as other sections of the Patents Act could be amended to include further TRIPS compliant grounds for a compulsory license thereby to extend the flexibility of the Patents Act to that allowed for under the Doha agreement. 

Parallel imports

South African law already allows importation of the original product sold by the patent owner or its licensee in another jurisdiction under Section 15C of the Medicines and Related Substances Act.  However, this provision has never been invoked. In addition, it seems that Section 45 of the Patents Act may also allow for parallel importation by providing that once a patentee has sold a product it cannot control further sales activities thereof. There is some debate over the interpretation of Section 45 and it could be amended while maintaining compliance with South Africa’s TRIPS obligations. 

Examination issues

The Draft Policy indicates that a patent examination system should be introduced in South Africa mainly to prevent invalid patents being granted and to prevent evergreening of patents i.e. where a basic patent on a pharmaceutical compound (which lasts 20 years) has expired and a subsequent patent with a small change is used to obtain a new patent for another 20 years. 

There are two problems with this proposition. Firstly, any patent has to comply with the novelty and inventiveness requirements under the Patents Act, whether this be an evergreening patent or not. Secondly, the South African patent office, and South Africa as a whole, does not have the skills and expertise required to examine patents for validity. The present system places the onus on a challenger, and results in experts reviewing patents with a fine tooth comb and presenting the evidence to the Commissioner of Patents, who makes a decision on the validity thereof. 

Quo Vadis pharma IP?

The draft policy seems alarmist; however it was drafted without a clear understanding of the present IP framework and South Africa’s TRIPS obligations. Although the present framework can be tweaked and improved in line with international and local developments, the overall structure is sound and public health and government policy concerns regarding the development of local industry are already addressed in present legislation, which should be used robustly where required. 

Is the pharmaceutical industry at risk? The tussle between generic manufacturers and patent holders will continue and government policy may tilt the balance towards the generics sector, yet the wholesale destruction of pharmaceutical IP is unlikely. Industry would be well advised to keep an eye out for developments in this sphere and to intervene with comments and interaction with government sooner rather than later.


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