International Trade Administration Bill Discussion; Patents Amendment Bill & Merchandise Marks Amendment Bill: briefing & finali

Meeting report

ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
6 November 2002
INTERNATIONAL TRADE ADMINISTRATION BILL DISCUSSION; PATENTS AMENDMENT BILL & MERCHANDISE MARKS AMENDMENT BILL: BRIEFING & FINALISATION

Chairperson: Mr MW Moosa (ANC)

Documents handed out:
International Trade Administration Bill [B38B-2002]
Patents Amendment Bill[B64-2002]
Merchandise Marks Amendment Bill [B 63B-2002]
Proposed Amendments to B38B-2002 (see Appendix 1)
Briefing on Patents Amendment Bill & Merchandise Marks Amendment Bill (see Appendix 2)

SUMMARY
The meeting dealt with the proposed amendments to the International Trade Administration Bill, particularly the definition of 'person'. The Committee were briefed on the Patents Amendment Bill and the Merchandise Marks Amendment Bill. They adopted both bills.

MINUTES
International Trade and Administration Bill
Mr J Strydom the Senior Legal Advisor to the Department of Trade and Industry
(DTI) started the meeting with the proposed amendments to the International Trade and Administration Bill. The amendment causing the most discussion was the legal definition of 'person'. The debate centred around whether 'person' include trusts.

The Chair, Mr M Moosa, explained the discussion to the rest of the committee in the following manner. He said that the word 'person' includes natural persons, companies, organisations, associations and a host of other entities. This is a standard word and interpretation that has been used in many laws previously. In this case the drafters of the bill were concerned whether 'person' fully covers all trusts.

The Chair and Mr J Strydom agreed that the courts have often interpreted 'person' to include trust.

Mr G Lever DP (North West) stated that whether or not a trust is included in 'person' depends to a large degree on the nature of the trust.

After a brief discussion on the wording to ensure that no unintended interpretation or inference could be made therefrom, the final wording of the amendment simply read "person shall include trust" as recommended by the Chair.

The Chair agreed with Mr G Brink, Director of Dumping Policy of the DTI (who assisted Mr J Strydom in the discussion) that the word 'firm' accordingly had to be deleted throughout the whole bill. The Bill will be so amended. The Committee Secretary was charged with preparing the revised Amendments document.

Patents Amendments Bill
Ms Astrid Ludin, Deputy Director General: Consumer & Corporate Regulation Division, and Mr Macdonald Netshitenzhe, Director of Intellectual Property Legislation & Policy Unit, DTI presented this matter to the Committee. After the clearing up of certain technical amendments, the substantive discussion focused on section 69A.

According to Astrid Ludin, South African legislation currently forces parties to wait until the patent period expires before they can even begin research or other related activities into a generic product. This has the consequence of extending the patent by "up to 3 to 10 years".

The Bill would allow for the non commercial exploitation of a patented product, during its patented period. This would bring South African legislation in line with many other countries, she mentioned specifically India, the United States of America and Israel. This amendment would promote the local pharmaceutical industry in particular as well as provide South Africans access to cheaper medication.

Discussion
Mr G Lever DP (North West) said that Pharmaceutical companies spend vast sums of money on research to come up with innovative new drugs, we should be careful not to take the profit incentive away from these companies as that would negatively impact research into new drugs. He asked whether this was in line with the TRIPS (Agreement on Trade Related aspects of Intellectual Property Rights) Agreement and, if so, specifically which section makes this allowance.

Mr Macdonald Netshitenzhe (DTI) stated that it is indeed in line with the Trips agreement referring to section 39.3.

Ms Ludin noted that the Pharmaceutical Industry is in support of this amendment.

Mr K Durr (ACDP, Western Cape) was concerned with the impact this would have on foreign investment in South Africa. He said that "in a climate where eighteen major pharmaceutical companies had recently left South Africa, we should be encouraging foreign investment".

Mr G Lever DP remarked that one should also consider the international pharmaceutical industry, it is not accurate to assume that the problem is entirely South African. He also stated that other nations like India may possibly flood the SA markets with their generic products adequate steps are not taken. Mr Lever said that the DP chose to abstain from approving Clause 16. This was a matter of policy for his party.

Adoption of Patents Amendments Bill
The Bill was approved by the Committee without amendment.

Merchandise Marks Amendment Bill
Ms Astrid Ludin and Mr Macdonald Netshitenzhe presented the amendments for this Bill.

Ms Ludin stated that South Africa has already made provision against Ambush Marketing by Association but has so far failed to deal with Ambush Marketing by Intrusion.

Ambush Marketing by Intrusion is when a company places its own brand or logo at a public event in order to gain from the publicity created by said event without having sponsored or contributed to the event (or alternatively been given proper authorisation from those who have).

Only events designated by the appropriate National Minister will fall under this legislation. The criterion for designation are:

- the event must be in the public interest and
- the minister must be satisfied that sufficient opportunity was given to small businesses to benefit from the event.

Ms Ludin reiterated that traders will not generally be affected unless they "in a concerted manner try to gain publicity from such an event".

Mr K Durr ACDP (Western Cape) said that this is a provincial matter and it should be dealt with as such.

However Mr J Strydom and Chairperson Mr M Moosa ANC responded to the contrary.

Adoption of Merchandise Marks Amendment Bill
The Bill was unanimously approved by the Committee without amendment and the Chairperson concluded the meeting.

Appendix 1:
POSSIBLE AMENDMENTS TO THE INTERNATIONAL TRADE ADMINISTRATION BILL, 38B OF 2002

CLAUSE 1
1. On page 5, after the definition of 'confidential information' to insert:
"countervailing duty" means a customs duty imposed to off-set the benefit conferred by a subsidy;

2. On page 5, in line 22, to omit "a" and to substitute "an export".

3. On page 5, in line 22, after price, to insert "contemplated in section 32 (2)(a)".

4. On page 5, from tine 26, to omit the definition of "firm". ~

5. On page 5, from line 52, to omit the definition of "person" and to substitute:
"'person' includes a natural person, a firm, a juristic person, a trust or an association".

6. On page 6, from line 13, to delete all the words after "remedy' up to and including "other" in line 14 and to substitute "or procedure for use in response to".

CLAUSE 4
1. On page 7, in line 4, after "duties", to insert "or other measures

CLAUSE 5
1. On page 7, in line 14, after "procedures" to insert "and requirements".

CLAUSE 6
1. On page 7, in line 32, to omit 'or'.
2. On page 7, after line 33, to insert:
(g) the methods or processes by which they are produced: or
(h) the use of non-renewable natural resources in their production, and their life-cycle impact on the natural environment.

3. On page 7, in line 34, after "firm" to insert or "organ of state"
4. On page 7, in line 42, after '(d);" to insert "or".
5. On page 7, from line 44, to omit paragraphs (g) and (h).

CHAPTER 3
I. On page 8, in line 2, to omit "Commission
2. On page 8, in line 2, after "Administration" to insert "Commission".

CLAUSE 14
1. On page 11, from line 9, to omit subdause 5 (a) and (b) and to substitute:

(5) A committee decision is effective only if the decision is subsequently ratified by the Commission, unless the notice establishing the committee expressly authorises the particular decision to be effective without such ratification.

CLAUSE 21
1. On page 2, in line 31, to omit "agency" and to substitute "authority"

CLAUSE 32
1. On page 6, in line 52, to omit "referred to in section 6(4)".
2. On page 6, in line 57, to omit "(4)" and to substitute "(5)".

CLAUSE 38
1. On page 19, from line 26, to omit all the words after "(b)" up to and including "certificate" in line 28 and to substitute: "show that certificate to any person who is
affected by the investigation, or where such a person is not present, affix a copy of the certificate to the premises in a conspicuous manner.

CLAUSE 45
1. On page 22, in line 28, to omit "(4)" and to substitute "(3f'.

Appendix 2:
BRIEFING NOTES FOR PATENTS AND MERCHANDISE MARKS AMENDMENT BILL, 2002

A. PATENTS AMENDMENT BILL
A1 Introduction
The Patents Act, 1978 as it stands, is compliant to the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the Patent Co-operation Treaty (PCT) dealing with the international registration of patents. Since South Africa is a member of these international treaties, there is a need to update national legislation, and such an update may involve substantive, procedural and technical adjustments. Certain amendments are required in order to create a conducive and enabling environment for researchers, and innovators to work on a patent, which is still in force. This will inter alia, create competitiveness, technology transfer and access to cheaper and affordable health care medicines or drugs.

Below follows a detailed exposé of each and every clause:

1. Clause 2(xii)
When a person applies for "international patents", there is still a need for these "international applications" to be governed by national legislative requirements of various designated countries. This is referred to as entry of international applications into national phase(s).

Entry into "national phases of international applications" is governed by sections 43B and 43E of the Patents Act and therefore the proposed amendments are clarifying and defining these concepts.

2. Clause 32(b) and (c)
An applicant of a patent may apply for a provisional patent (12 months -provisional protection), and within three months after the twelfth month, an applicant must provide all necessary information (complete specifications) to enable the registrar of patents to grant a complete or final patent. Section 32 as it stands requires that a complete specification must fully describe… the invention… and disclose the best method of performing the invention known to the applicant at the time when the specification is lodged. In terms of section 61(e) a patent may be invalidated if the provisions of section 32 (best mode requirement) are not complied with.

However, article 29(1) of the TRIPS Agreement provides that whenever a member state chooses to include a best mode requirement in its patent legislation, the relevant date for disclosure should either be the filing date or the priority date where such is claimed.

The present wording of sections 32 and 61 are not complying with the wording of article 29(1) of TRIPS Agreement and therefore the recommended amendments are to effect the desired compliance.

3. Clause 43D
When South Africa ratified the PCT, it never renounced sovereignty over the processing of international applications of patents when they enter into a national phase. The current section 43D creates an impression that an international application is processed by the Companies and Intellectual Property Office (CIPRO) before it enters into a national phase. When an international application enters a national phase, it is treated as an ordinary (national) patent application and therefore CIPRO should treat it as such.

The recommended amendment therefore seeks to clarify that CIPRO will process the national phase of an international application.

4. Clause 43E
There are three amendments, which are to be effected in this regard, namely:

4.1 the amendment is necessary to show that compliance with the clause has to be effected within a prescribed period in the regulations;

4.2 that the amendment relate to the designation or election pertains to the Republic which is deemed to be abandoned (not of any other member state); and

4.3 the amendment also wants to empower the registrar to extend the time before or after expiry, but not by a period of more than three months. Some commentators are of the view that a period of three months is too little. This is being proposed after surveying best practices in 115 of the PCT member states.

In view of the above, it is recommended that the proposed amendments be effected.

5. Clause 43F
The amendments concerns inter alia the following:

5.1 insertion of the words "the national phase of" before the words "an international phase";

6. Clauses 45(1), 48(b) and 49(a)
The extent of the recommended amendments is to enable the purchaser of the patented article the right to dispose of or offer to dispose of any such patented article.

7. Clause 45A
Section 45A of the Patents Act as it stands overly protects the patentee or holder of a patent. This is so because no person has a right to conduct an early work on a patent before it expires after 20 years. This practice of excluding even researchers and innovators has an adverse effect to innovation, competition, research and development.

In other jurisdictions such as India, Canada, Australia, certain member states of the European Union, United States, Israel and Jordan, the authorities have legislated in their patent laws that researchers and innovators should be allowed to conduct an early work on a patent which has not yet expired. A proviso is that nobody should commercially compete with the patentee when the patent is still in force.

The advantages from this practices are mainly obvious in pharmaceutical sectors. Immediately when a patent expires, generic companies are able to release their new products into channels of commerce. This also encourages competition, which mostly leads to the lowering of prices.

In this regard South African generic companies are disadvantaged as their competitors from other jurisdictions flood the South African market with new products as soon as a patent expires.

In passing, this practice (Roche-Bolar provision) is practiced differently in different jurisdictions. There is no international best practice in place and therefore "best practices" from foreign jurisdictions should be looked at with circumspection.

If this clause is approved, it means that South African researchers and innovators will have all information relevant for their work. This includes data, which is in the hands of third parties (regulatory bodies), for example, the Medicines Control Council (MCC). This should be so as long as such data or information is not to be used in a commercial competition with the patentee.

In the United States, for example, Roche-Bolar provisions is practiced as follows:

a) Regulatory review

A regulatory body such as the Food and Drug Administration (FDA), an equivalent of the South African MCC, allows generic firms to begin testing, before the expiration of the innovator's patent, without undertaking commercial activities;

b) Patent Term Restoration

The FDA takes a long time to conduct review process on clinical trials. In the main this takes 5 years and therefore the patent period is effectively 15 years. The lost time is compensated and therefore the period of a patent is extended by 5 years.

c) Data protection

The FDA is not allowed to give to third parties commercially valuable and confidential date in the clinical dossier, known as data exclusivity. Third parties are not allowed to directly or indirectly rely on the submitted data.

This exclusive data is protected as an intellectual property and the term of protection is 5 years.

The US has included this practice in bilateral agreement with Jordan.

Australia grants patent restoration provided the review process lasted more than 5 years. Israel allows patent extension limited to 14 years from the first marketing approval in any country belonging to the Paris Convention. The EU provides patent term restoration, through the use of Supplementary Protection Certificates (SPC) as a stand alone measure. SPCs provide an effective patent term of 15 years from the date of first marketing approval. The extension covers only the pharmaceutical product that is the subject of the regulatory process, not the entire scope of the original patent.

Article 39(3) of TRIPS also provides that members shall protect such data against disclosure, except where necessary to protect the public or unless if steps are taken to ensure that the data are protected against unfair commercial use.

It is clear from the above that there is no uniform approach to the Roche-Bolar-style system and each country or jurisdiction will have to take circumstances, which are close to its heart. In this regard it is proposed that the clause be approved as it is. The MCC should start to determine how it is coping with the review process and then determine whether restoration of patent should be considered. Data Protection in South Africa is catered for in many legislation, including the Constitution. Protection of data in this area should be addressed within the intellectual property law reform. All these issues should be addressed within the context of health needs, innovation, research and developmental and competition issues.

Recently, members of the Pharmaceutical Manufacturers' Association of South Africa (PMA) submitted that the Roche-Bolar provisions should be applied as in the US - Annexure A. However, it should be remembered that the amendments in this clause are intended to cover all disciplines of patents, i.e. beyond pharmaceutical and agro-chemical patents. There is no universal application of the Roche-Bolar-type system and it is recommended that the clause be approved.

B. MERCHANDISE MARKS AMENDMENT BILL 2002

B1 Introduction
Ambush marketing by "intrusion" is where a marketer who is not seeking an association or connection with an event, but rather gives his or her own brand or other insignia exposure through the publicity attracted by the event and without the authorization of the event organizer.

A good example of ambush marketing by intrusion is where advertisements for a product are placed inside or outside a stadium where a sponsored event is taking place - without authorization. The ambush marketer's objective is to use the event as a springboard to promote his or her brand or product, but without incurring the financial and other obligations of the sponsor. This suggests that the event organizer would have to enter into contractual arrangements with would-be intruders or they would be committing an offence.

As it may be recalled, in 2001/02 the Department of Trade and Industry (the dti) recommended that ambush marketing by association should be legislated for in the Trade Practices Amendment Act, 2001. Ambush marketing by intrusion is not the same as by association.

Ambush marketing by intrusion makes it possible for the Minister of the dti to enter into negotiation with event organizers with a view of determining whether the event is in the public interest or not. The Minister would consider, inter alia, whether or not the event would empower small, micro and medium enterprises and black empowerment.

1. Clause 1
a) This purports to define what an event is. Some commentators are of the view that the words "over a specified period of time" should be inserted after the words "a series of such happenings". The rationale is that clause 15A(a) contemplates a clearly defined termination period of any event. It is recommended that the insertion be considered;

Some commentators submit that since the role of the organizer of an event is central to the legislation, it (organizer) should be defined - Annexure B. It is recommended that the definition be considered;

b) A mark does not include a trade mark but for the purpose of section 15A, it shall include a trade mark;

c) Protected event has to be designated by the Minister in terms of section 15(A)(1); and

d) Trade mark is as defined in section 15A, and in terms of section 1 of the Trade Marks Act, 1993, and includes a well-known mark as defined in section 35 of the Trade Marks Act;

2. Clause 15A
In the main, it is recommended that section 15A be inserted in Act 17 of 1941. The purpose for such is to enable the Minister to apply his mind in designating an event as a protected event. The riding factor is that the designation should be guided by issues, which are in the public interest.

Any person who contravenes such prohibition shall be guilty of an offence.

Clause 15A(2) also apply to the use of a trade mark in relation to visual representation of such a trade mark as well as to trade marks which are capable of being audibly reproduced.

In view of the above, it is recommended that Clause 15A be approved.