New IP legislation on publicly financed R&D enacted

The new Intellectual Property Rights from Publicly Financed Research and Development Act (51/2008) (Government Gazette 31745 of December 22 2008) was enacted at the end of 2008. It will come into force on a date to be proclaimed by the president.

The act evolved from a protracted consultation process and was preceded by:

a policy framework issued by the Department of Science and Technology in July 2006;
a first draft bill published in the Government Gazette in June 2007; and
a revised bill published in the Government Gazette in June 2008.

The underlying reasons for the act are sound, namely that intellectual property constitutes an important component of the assets of a business enterprise, reflecting the rewards to be gained from investment in research and development (R&D). This principle also applies to educational and research institutions in the public sector, such as universities and research councils.

Where public funds are used to fund R&D at such institutions, it is appropriate that the government should:

take an interest in the outcomes of such R&D; and
set up systems to take account of the intellectual property created in the course of such R&D, as well as the potential for and actual commercialization of the technology inherent in the intellectual property.

Therefore, it is not surprising that the act expressly applies to all South African universities and to 10 research bodies listed in Schedule 1 of the act. These universities and research bodies are all recipients of public or state funding and are referred to as 'the recipients'.

Section 2 (which set out the objectives of the act) states that the act seeks to ensure that a recipient of state funding will:

report on the benefit to society of publicly financed R&D;
protect intellectual property emanating from such R&D;
identify commercialization opportunities for such intellectual property; and
give access to commercialization opportunities to small enterprises and Broad-Based Black Economic Empowerment (BBBEE) entities.

Section 6 of the act requires that recipients set up an IP management structure referred to as a 'technology transfer office', but charged with a much wider range of responsibilities (Section 7), including the implementation of a policy for disclosure, protection, development and commercialization of intellectual property, with benefit-sharing arrangements.

As regards the ownership of intellectual property emanating from publicly financed R&D, Section 4 of the act provides that ownership will, in the first instance, vest in the recipient concerned. Should the recipient prefer not to retain ownership, a prescribed procedure must be followed in terms of which the National IP Management Office (established under the act) will have the first right to acquire ownership.

Creators of intellectual property employed by the recipient are granted a specific right to a percentage of the income that accrues from the exploitation of the intellectual property (Section 10). The balance of the revenue generated through the intellectual property must at least partly be applied to:

fund further R&D;
fund the operations of the technology transfer office; and
obtain statutory IP protection.

The act also regulates the manner in which intellectual property emanating from publicly financed R&D will be exploited. Generally speaking, the recipient determines the nature of and conditions for IP transactions (Section 11). However, certain factors must be taken into account, including:

preference must be given to non-exclusive licences, BBBEE entities and small enterprises;
optimal benefits to the economy of South Africa must be pursued;
where feasible, manufacture must take place within South Africa; and
the state must be given a royalty-free licence.

Furthermore, offshore IP transactions must be in accordance with regulations to be prescribed (Section 12).

Under Section 15, a private entity may become an exclusive licensee of intellectual property emanating from publicly funded R&D only if it has the capacity to manage and commercialize the intellectual property to the benefit of the country. It may also become the co-owner of such intellectual property if it contributed resources and there was joint IP creatorship.

Finally, any R&D at an institution funded by a private entity on a full-cost basis will not fall under the act (Section 15).

Esmé du Plessis, Adams & Adams, Pretoria

New IP legislation on publicly financed R&D enacted

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