Current functioning of Intellectual Property system; report-back from Intellectual Property task team

Meeting report

Companies and Intellectual Property Commission (CIPC) briefing
Ms Astrid Ludin, Commissioner: CIPC, gave a background to the work of CIPC.

Adv Rory Voller, CIPC, said that CIPC had developed into a full-scale regulator. The Companies and Intellectual Property Registration Office (CIPRO) had been purely an administrator and register, and had merged with the Office of Companies and Intellectual Property Enforcement (OCIPE) to form CIPC. A new Companies Act had come into force on 1 May. CIPC was now fully functional. It would act independently. It had a mandated function to inform the public about company law. It had many tools at its disposal.

Adv Voller described the structure of CIPC. The division tasked with registration had two wings, namely Corporate Entities and Intellectual Property (IP). IP had three areas, namely trade marks, copyright and Patents & Designs.

Ms Fleurette Coetzee, CIPC Senior Manager: Trade Marks, outlined the legislative framework. The most important was the Trade Marks Act of 1993. There were some relevant international agreements such as the Paris Convention. A trade mark was a mark used for certain goods or services to distinguish that manufacturer's product from that of rivals. It must be able to be reproduced graphically. It could include sounds and smells. There were 45 different classes based on the Nice Classification.

Ms Coetzee said that trade marks were applied for by or on behalf of merchandisers by legal representatives. After the application there was a period for examination for possible conflicts. This process lasted up to seven months. There was a procedure to appeal against a decision not to allow a trade mark. Once a trade mark was registered, it had to be renewed after ten years. The fee for registration was R590 per trade mark per class, and there was a renewal fee of approximately R250. Applicants had to be a resident of the Republic of South Africa (RSA) or must have a South African legal representative. If RSA became a member of the World IP Organisation (WIPO), it would subscribe to the Madrid Protocol. Provision would then be made for international registrations. This would require an amendment to the Trade Marks Act. She said that business names were included in a separate register.

Ms Coetzee said there had been an increase in the number of applications. The number of certificates to be issued had been reduced.

Mr Kadi Petje, Senior Manager: Copyright, CIPC, said that the Copyright Act of 1978 was the main act relevant to the work of CIPC. Other relevant acts were the Cinematography Films Act of 1977, Performers Protection Act of 1967 and the Counterfeit Goods Act of 1997. RSA subscribed to the Berne Convention and the TRIPs Agreement. Copyright was the exclusive right granted to the author of a literary or musical work for a limited time period. Except in the case of cinematographic works, copyright could not be registered. Copyright applied for a period of fifty years after the death of the author and could not be renewed or extended, after which the works would enter the public domain.

Mr Petje said that the owner had the duty to enforce a copyright. Different classes of copyright were literary and musical works, artistic works, sound recording, cinematographic films, broadcasts, published editions and computer programs. CIPC was also responsible for the accreditation of collecting agencies. Policy direction was still needed. Such a society would apply to CIPC after which it would be accredited and supervised. Royalties had to be collected and distributed correctly. 80% should go to the rights holders and the balance to administrative fees.

Mr Petje said that R510 was the price of registering a film. Once the certificate was granted the applicant could make amendments, after which the application would be published. If no opposition was received within one month, the certificate would be issued and there would be a copyright period of fifty years. The certificate should be issued to the applicant within three months of application. This could not be renewed. There had been 71 applications in 2010. Currently local producers received a 35% rebate while international producers received 12% of production costs.

Ms Elena Zdravkova, Senior Manager: Patents and Designs, CIPC, said that the governing acts were the Patents Act of 1978 and Designs Act of 1993. RSA was a signatory to the Patent Cooperation Treaty, Paris Convention, TRIPs Agreement and Budapest Treaty. There were a number of criteria for the granting of a patent. The concept had to be novel, inventive and be applicable to the industry. It should be possible to reproduce the device in unlimited numbers. All formal requirements had to be settled before the issue of a patent. The applicant could be a natural or juristic person, or a trust. The patent had to be renewed every three years up to twenty years, after which no further renewals were possible.

Ms Zdravkova said that there were additional requirements regarding applications relating to the use of indigenous biological resources, genetic resources or traditional knowledge. The Biodiversity Act of 2004 covered many of these requirements. RSA was a signatory to the Convention on Biological Diversity. The Patents Act had been amended as a result to ensure fair and equitable benefits for the use of genetic patents. Adequate compensation should be given to the community which was the source of indigenous biological or genetic resources. This applied to patents sought in RSA. Applicants had to state whether or not indigenous knowledge had been used in the development of the product. The application should include copies of the permit issued in terms of Chapter 7 of the Biodiversity Act, proof that prior consent had been obtained, the material transfer agreement or of the benefit sharing agreement.

Ms Zdravkova said that patents could be filed nationally or internationally. On average 10 000 patents were filed in RSA annually. An electronic database was available through both the CIPC and WIPO websites. At present only patents filed from 1988 to 2008 were captured but CIPC was backdating this to 1917. There was an outreach program in conjunction with WIPO.

Ms Zdravkova said that two design criteria were examined. The first was aesthetic design. This was renewable from the third year after being granted up to fifteen years. Functional design was evaluated on novelty and uniquess. It was also valid for three years and renewable up to ten years. The average number of design applications was 1 900. A monthly patent journal was being distributed in electronic form.

Ms Ludin said that the Bill needed to be as clear as possible. The accountability for different things must be clearly defined. CIPC was responsible for registration. She did not see CIPC as having a role in approving traditional character of an IP right. CIPC would register the right once it was approved. Where there was no provision for a right then CIPC would record it. It was important that there should be a clear distinction between the two processes. The Council should consider the application. Once the application was granted then CIPC would follow the registration or recordal procedure. It would also handle objections. She did not think that CIPC would have the capacity to deal with trust funds. This was a specialised function.

Ms Ludin said she was concerned that if an application was made to CIPC which it had to refer to the Council, it might take some time. It would be better if the application was made directly to the Council for evaluation. CIPC had made an input about this to the Department of Trade and Industry (dti).

Ms Zodwa Ntuli, Deputy Director-General: Consumer & Corporate Regulation, the dti, said that a thorough consideration of the role of CIPC was needed. There was a process of looking at IP policy in the RSA. The legislation was old and not aligned to international imperatives and the country's development needs. This would inform on the resources needed. While there were implementation challenges, these were not at the same level as under the Companies Act. More efficiency was needed in some areas. People needed to be reminded of the opportunities contained in the rights. Government would have to look at this role carefully. Other countries gave more support to small companies developing a business idea.

Ms Ntuli said that the Commission needed to think carefully about the collection societies. There would be a report to the dti in July from the Palm Commission. It was clear that the interface with IP was natural but there would be challenges. There were questions of ownership and authorship. These issues could be ironed out by legal experts. The proposed amendment dealt with other areas of IP. There would be implementation challenges, particularly around beneficiary payments. A dispute resolution mechanism was needed. The role of the Council in the processing of applications should simplify the process. It would be less expensive to use a single point of entry. The model used in New Zealand was a guideline being looked at.

Discussion
Mr N Gcwabaza (ANC) needed some clarity on the presentation. He was delighted to see an increase in trade mark trends. He asked what was meant by the reduction in registration certificates. There were three sub-areas in terms of copyright where the RSA was not registered. There was a general outcry from musicians that a lot of what they produced was taken by other people. He asked if anything would be done about this. Except for films it seemed it was not possible to copyright musical works. He asked what could be done to protect the music industry.  There was a similar downward trend in terms of patent applications. He did not follow the registration procedure for patents.

Ms Coetzee said that in January 2010 certificates were issued 22 months after being advertised in the patent journal. By June the waiting period had been reduced to six months. There had been a concerted effort to reduce the backlog. The six month delay included a three month opposition period, and was in line with international norms.

Mr Petje said that members of the WIPO convention only registered copyright in films. Other works enjoyed automatic protection once it was reduced to written form. Computer programs were not registered but ownership could be traced.

Mr G Selau (ANC) said that the copyright did not belong to the author of the work but to a person with a commercial interest. He understood this to mean that the publisher of a book assumed the copyright and the author was left with nothing. If someone had registered a copyright while in exile, and RSA did not recognise the treaty under which it was registered, would that person have to re-register the copyright?

Mr Petje said that it was possible that the author could transfer the economic right to someone like a publisher while retaining the moral right to a work.

Mr J Smalle (DA) asked for clarity on the difference between trade mark and copyright registration periods. Two different Acts were relevant. Company names were not protected. He said that the Madrid Protocol was not in place. He asked what the reasons were. There were only three staff members in the copyright section, and yet CIPC foresaw a difficulty in dealing with trust funds and related matters. He asked how such a small staff could deal with the whole film and sound industry. He asked if only the film industry had some form of incentive. He asked if there were specific criteria, or if the rebates were available to all. He asked if rebates were on total costs or specific operations within the making of a film. Had all 72 movies benefited from the rebate? On the expansion of the electronic database for patents to 1917, he asked if there was a time frame for completion of the project. He asked how the current electronic system was operating. He knew of legal proceedings in this regard. He agreed fully on the recommendations on the registration process.

Mr Petje said that granting of rebates was dependent on a threshold level of spending. He could not analyse the statistics. He could not explain the rationale behind the different time frames for copyright and patent applications. There was a dilemma in the interpretation on collection societies. Two had been accredited to date, but could not distribute funds due to uncertainty in the legislation. A two page document had been compiled. The detail was limited and did not differentiate between local and international royalties. The CIPC had not been able to approve the distribution plan. It had gone to court and the trial would be heard shortly. The text of the agreement had to be improved. It might be time to look at the incentive criteria for local film makers. The qualifying threshold of a minimum of R2.5 million production cost might be too high. By lowering the threshold, the rebate would be available to more producers. Most locally produced films were being funded by overseas companies.

Ms Coetzee said that copyright for films was not as substantive a process as the registration of trade marks. Third parties had to be confirmed. There could be objections from international companies and applications under the common law. There were two sets of legislation regarding trade marks. The registration system for the names of companies fell under two different Acts. She understood that the Madrid Convention was to be considered by the dti in its IP review process.

The Chairperson thought that modern integrated technology (IT) would enable the faster capture and sharing of data. The system should be able to highlight problems rather than leaving officials to wait for complaints.

Ms Ludin said that the IP considerations had fewer challengers as a new IT system had been installed. There was a problem with seriously outdated systems regarding company registration. There were three different registers. CIPC was looking at technical and legal issues regarding the integration of the registers.

Ms Zdravkova said that the slow database was due to limited bandwidth. The CIPC had data for patents at various stages of application, while that of WIPO was only for patents that had been granted.

Mr B Radebe (ANC) said the proposals would make it easier for the Committee to play an oversight role. He asked for more clarity on how copyright holders could enforce their rights. He thought that the law enforcement agents would enforce the law. The collection of royalties was crucial. There were many grey areas. He asked what would be done differently in the future. Many South African films were being made due to the rebates. However, the distribution was also a major cost and there was no assistance in this operation. There was far too little distribution for local films. Regarding the WIPO outreach program, he asked if this would involve traditional and rural communities who could not access electronic resources.

Ms Zdravkova said that information to holders of traditional knowledge would be done through the Congress of Traditional Leaders of South Africa (CONTRALESA).

Mr Petje said it was most likely that the owner of a sound recording copyright would be the recording company. The company would be better resourced to take action. There could be an enforcement from the OCIPE element of CIPC in conjunction with customs and other organisations. The onus, however, remained with the copyright holder to enforce the right.

Mr Radebe said that some artists had taken to confiscating illegal copies of their music on the street corners where they were being sold. He asked if they were breaking the law.

Mr Petje replied that some artists did own their own labels and studios.

The Chairperson said that some companies purchased the rights for a stipulated time. She asked if there would be such a clause in the RSA law.

Mr Petje said that in the RSA, a singer went into a studio and made a recording. That recording belonged to the record company. The only entitlement that an artist would have would be to share royalties with a company when the song was played on air. The artist would only own the sound recording if he or she made the recording.

Mr T Harris (DA) had read of some initiatives in the field of IP. The Department of Science and Technology (DST) had established an IP Management Office. He asked if there was duplication. He had read a figure of 91 patents, which was far different to the figures quoted by CIPC. Patents would be handled separately for developments arising from traditional knowledge. He asked if the policy review would cover legislation. WIPO was working on a model law, and he asked if there was any update in this regard. The dti was trying to distance itself from the way in which traditional knowledge was recognised, while a fund was being established to assist holders of traditional knowledge.

Ms Zdravkova said that there were statutory requirements for the submission of a patent. This process lasted six months. CIPC then did a formal investigation without considering the contents. The applicant had to ensure that the device was practical. The applicant had to advertise a notice of acceptance in the Patent Journal. Once this was done the patent was granted. RSA law did not make provision for opposition to patents. She said that the decline in patents was due to the global economic recession. Most patent applications came from overseas companies that had been affected by the slump. She expected an increase as the global economy recovered.

The Chairperson said that sound would be covered entirely, but not the writing of music. She asked how this would be captured.

Mr Selau said that a deeper understanding of IP was needed. The artist was part of a system that was owned by a third party. The interpretation of a musician was that of a tool, with no more status than a guitar. This could not be the case.

Mr Radebe was not satisfied with the enforcement aspect. The rights holders should not have to go to the streets themselves. He recalled a singer who was shot while trying to combat piracy. He was happy that CIPC would include an enforcement element. All pirated recordings must be removed. New artists were the ones being exploited. Their contracts were skewed in favour of the studios. A retrospective application of the law would be needed. Many artists died as paupers.

Mr Harris said Members were touching on a critical issue. He understood that the writer and recorder of an original song owned the copyright. The Bill was aimed at traditional knowledge. The work would not be original, as the song might have existed for centuries. He quoted the example of a song by Solomon Mbube.

The Chairperson said that a number of issues were being raised that might require a further visit by CIPC.

Mr Petje said that the writing of a musical work enjoyed its own form of copyright. The recording of a work and the public performance were separate issues. The composer had the right to the written work, the recording company to the recording and the artist for the live performance. A single song could encompass all three areas. The position of artists had to be recognised by law.

Ms Zdravkova said that the CIPC fee for a patent was R590. Most applications were drawn up by patent attorneys who charged high fees, running into thousands of Rand. The use of traditional knowledge regarding genetic resources was already protected. Benefit sharing agreements had to be in place and royalties had to be paid to the indigenous people. It was not included in the new Bill as it was already in place. The number of patents issued in RSA were in proportion to the United States of America. She explained the role of the two offices.

Ms Ntuli asked that questions related to the Amendment Bill be held over to the meeting the following week. The dti was not distancing itself from the trust funds. Recommendations should come from the Committee. There would be a review process on IP which would take all international treaties into account. RSA legislation might need to be reviewed in some cases. The extent of protection for IP had to be considered. It was a private right, so people should enforce their rights themselves. Large organisations such as recording companies were in a better position to do this than a private individual. If the information was captured in a public database, it would be cheaper to access it. The way in which the courts handled cases should also be considered together with the Department of Justice and Constitutional Development. Protection was limited. Anti-piracy had been taken up forcibly. Many artists did not know how rights were applied. Artists had no leverage and signed their rights away too easily. Recommendations would be made on contracts.

The Chairperson wondered how many of the films enjoying rebates, were local productions. She asked for more detail when CIPC appeared next before the Committee. When the Amendment was started, the issue of science and technology and musicians' rights had come up. Members now understood what challenges they faced. The issue of biodiversity was not clear. The Act was already in place. There was an issue about herbs and plants of different kinds. Overseas companies had offered to look into the different species and had used the plants to create medicine with no compensation for the traditional knowledge providers. She asked if there would be any back-dating. Two years had been lost already. Another angle involved South African Breweries (SAB). Particular aspects of research were taken overseas, and were brought back as foreign products. She noted that other forms of collection and distribution had not been in line with the aims of the legislation. The problem was identified, but there was still a question of how to deal with it. There was a perception that people were not getting what was rightfully theirs. She felt that CIPC had engaged with the requirements of the Committee. She had a much better understanding of what was happening in this field. They were well advanced with the process.

Ms Ludin thanked the Committee for the opportunity to present.

Committee program
The Chairperson said that the second draft of the Committee program had been prepared. She went through the schedule of meetings. Only half an hour had been allocated for the debate on the Amendment Bill but she had requested that this be increased to an hour. There were many amendments to be considered.

Mr Harris said that the Task Team had a meeting scheduled for the following Tuesday.

The Chairperson said that it was important to be well prepared for the legislation. The Committee tried to work on a consensus basis. She would join, but not lead, the task team. The team leader was Ms S van der Merwe (ANC). The Committee had been asked by the House Chair to have the oversight visit earlier. No decision had been taken yet. There was no quorum so the Minutes could not be approved.

The Committee Secretary said that all the information for the IP Resource File had been distributed. A pack could be prepared for Members.

The Chairperson instructed the Secretary to produce a file for Members containing all the required information.

The meeting was adjourned.