New IP Rights Law Could Boost SA's Economy

Private sector scepticism over South Africa’s new intellectual property rights law for universities may prove unfounded. Contrary to fears that it could result in the “nationalisation” of intellectual property, the new law could have positive – and profitable - implications for government, universities and the private sector.

Roux de Villiers, director at Werksmans Attorneys, says the Intellectual Property Rights from Publicly Funded Research and Development Act and its regulations, could be very beneficial for everyone, “if we all work together”.

The Act came into force in August 2010 and has been greeted with concern by some private sector commentators. Their main worry is that the new law could lock out private companies and enable government to control inventions emanating from South African universities.

“I don’t believe this view is justified,” de Villiers says. “The Act has very good implications and offers alternatives that could be better than the approach that has been followed up to now.”

To date, private sector funders have paid some of the costs of developing a new technology in return for having the intellectual property rights transferred to them. “The thinking was, ‘I paid for it so it’s mine’,” he says.  The flaws in this approach have mostly been overlooked.  

Traditional approach has drawbacks 

“When transferred to a private funder, intellectual property runs the risk of becoming sterile and even being lost altogether,” says de Villiers.

“Firstly, the intellectual property is often only used for the internal business of the private funder and then only for as long as it forms part of its business operations. This means that many other possible commercialisation exploitation opportunities are lost.”

The second drawback of transferring ownership is that it deprives the research institution of an incentive to further develop the technology. “There is little incentive since the institution would be unable to exploit any improvements that depend on the transferred intellectual property,” de Villiers says.

Thirdly, if the private sector funder ceases to trade, the intellectual property may well be lost entirely,” he says. “The result is that technologies transferred to private sector funders can easily be under-exploited or become sterile. This benefits nobody, and least of all the South African economy.”

Recognising this, the Publicly Funded Research and Development Act limits the transfer of rights from universities. “A fundamental principle of the Act is that any intellectual property that is not fully funded by a private sector entity must remain the property of the research institution,” de Villiers says.

This is the principle that has unduly alarmed some observers.

“What they forget is that the Act does not stop a company that has partly funded research from obtaining the right to use it,” he says. “You do not have to transfer ownership to be able to use the technology. 

“In addition, you may be able to negotiate certain exclusive rights – subject to the approval of the National Intellectual Property Rights Office (NIMPO) – that provide a competitive edge over your business rivals. You could, for example, ensure that the research institution only resells the technology in areas where it does not hurt your business.”

Opportunities to create new revenue

A less obvious but potentially lucrative benefit is that a private sector funder can share in any revenue generated by a research institution that commercially exploits the new technology (as it is now required to do by the new Act).

“This means a private funder can share in additional revenue that would not otherwise have been created,” de Villiers says. “Currently, however, it appears that private sector funders are seeing this form of exploitation as a threat rather than as an opportunity.”

He believes that the Act has the potential to realise similar economic benefits for South Africa as the famous Bayh-Dole Act has for the United States. That Act had the effect of substantially increasing patenting and commercial licensing activities in the US, with publicly funded research institutions seen as one of the principal drivers of the ‘knowledge-based economy’. 

“It is apparent that the South African government has recognised the need to develop our own knowledge-based economy,” de Villiers says. “If the proposed approach is successfully implemented, the end result should be a marked increase in revenue for all parties concerned, which clearly also stands to benefit the economy. In this way, our new Act may yet fulfil its intended role.”

Roux de Villiers

Roux de Villiers currently heads South African corporate firm Werksmans Attorneys’ Technology Law Practice. 

He specialises in advising on transactions involving the licensing of technology, both in South Africa and internationally, and has extensively practised in the area both in South Africa and in England. He acts for a wide range of clients, particularly in the areas of financial services, retail and education, and regularly advises international law firms on technology transactions involving South African entities. 

He is an expert in transactions involving software, communications infrastructure and patented technology, including in the areas of medicine, biochemistry, agriculture and engineering. Transactions range from the development, procurement and licensing of technology to technology-related service arrangements and corporate structuring to develop, protect and exploit technology.

Mr de Villiers has published widely on the legal and commercial aspects of technology licensing in books and academic journals. He has also been extensively involved in the teaching of law as it pertains to technology licensing, with a particular focus on the developing world. In this regard, he has acted as lecturer and examiner at a number of South African and international universities. 

Mr de Villiers holds degrees in engineering and law, including a master’s degree in computer and communications law from the University of London.