President Cyril Ramaphosa announced a 21-day nationwide lockdown on March 23, starting from March 26 until April 16. The lockdown has now been extended until April 30. The steps taken by the government to protect South Africans from the virus have been bold, and we expect a significant impact on businesses and our economy.
The lockdown has an impact on IP enforcement and protection in South Africa.
The Heads of Courts in South Africa have imposed minimum safety precautions and limited the court’s capacity to hear matters during the lockdown, mostly to urgent criminal matters. Each court has issued directions on how they intend to operate; they include prioritising urgent matters and conducting case management via electronic means.
In some cases, it has been directed that abuse of the urgent roll will lead to punitive costs awards for the culpable counsel. The likely outcome of this is that the enforcement of IP rights, other than the most urgent matters, will be suspended until the lockdown is lifted.
Administrative bodies that are not providing essential services are either fully or partially closed during the lockdown. The Companies and Intellectual Property Commission (CIPC) notified its customers that it would stop transacting from March 24 and will reopen at the end of April, with limited electronic services from April 1. All deadlines have been suspended until the CIPC has reopened.
From a practical point of view, the issue arises where one would like to register certain IP rights immediately; in such instance, it is likely that South Africans will use IP Offices abroad to preserve priority dates. This is particularly important in respect of patent applications for inventions which may be disclosed during the lockdown and design registrations where the six-month grace period from the date of public disclosure is coming to an end.
Several regulations and directions to address the pandemic have come into effect, resulting in vast changes to the legislative landscape in South Africa. The legal amendments have also restrained the court’s capacity to hear matters and this will affect an IP holder’s ability to enforce their rights. This is a concern as the disruption in the economy typically leads to a rise in opportunists trading in counterfeit and illicit grey goods.
Like in other countries such as the UK and the US, the government has also launched an initiative for the manufacture of ventilators, a project that will involve IP rights (read more here). It has not been necessary to amend South Africa’s IP laws in order to deal with the pandemic because certain statutes already provide for situations where the government can interfere with IP rights.
State acquisition of patents
The Patents Act 1978provides for the State to acquire, on terms and conditions that may be agreed upon, any invention or patent. If there are patents in South Africa that would be of use in dealing with the pandemic (and if they are enforced), the State may acquire such patents.
Supply of affordable medicines
The Medicines and Related Substances Act 1965 allows the health minister to prescribe conditions for the supply of more affordable medicines in certain circumstances in order to protect public health.
Reverse engineering under the Copyright Act
The Copyright Act 1978 provides that the reverse engineering of a work is permissible if it has a utilitarian purpose and made by an industrial process. Accordingly, provided no South African patents or designs protect an apparatus (e.g. ventilator), it is possible to manufacture and dispose of such apparatus in South Africa without fear of copyright infringement.
Surrender of IP rights
Notably, during this pandemic, we have experienced a few patentees surrendering their patents for certain medicines that may be useful in treating the symptoms of the virus. Once surrendered, any party is free to exploit the invention.
Corporate and commercial law
Competition laws have been amended by introducing measures to protect consumers from price gouging and stockpiling as well as providing exemptions for the healthcare, banking and retail property sectors. Dominant firms now have a responsibility to avoid charging excessive prices to the detriment of consumers and need to ensure that essential goods are distributed equitably. The exemptions applicable to healthcare, banking and retail property sectors enable collaboration, communication and even agreements between competitors to mitigate the impact of COVID-19.
Businesses may be unable to fulfil their contractual obligations on time or at all. This of course extends to employment contracts. The extent to which the company is affected may require the board of directors to present COVID-19 mitigation strategies to the shareholders. Companies listed on the Johannesburg Stock Exchange (JSE) should ensure that they are compliant with the JSE’s listing requirements, and they may be required to make disclosures to the public due to amplified risk factors and price sensitive information.
While the South African Revenue Services (SARS) have announced certain tax relief schemes, extensions and deferrals, they have emphasised that taxpayers should not use the pandemic as an excuse for non-compliance with the law.
The restriction on movement of persons and goods has resulted in a complete disruption of supply chains and distribution channels and as a result many businesses have been unable to trade at all. To mitigate the difficulties, financial relief and support packages have been made available to businesses and individuals. There are relief packages from government, statutory bodies, the private sector, and public-private partnerships.
For example, the Department of Small Business Development has established the Debt Relief Finance Scheme, the Business Growth/Resilience Facility and the Spaza Shop Support Scheme for small, medium and micro enterprises directing R500m (~$27 million) in government support to this hard-hit sector. The Industrial Development Corporation ("IDC”) have offered trade finance for the importation of essential medical products of up to R500m (~US$27 million). It is unlikely that any of the financial support packages will be available to IP firms.
COVID-19 has also affected IP in South Africa, but the government has not yet taken any measures that would affect IP rights. One may anticipate a rise in counterfeiting and increase in filings where growth is expected and a decrease where it is not.
IP-centric businesses in those sectors where economic activity is set to rise (such as healthcare, telecoms, online marketers, food and beverage, and social enterprises) will likely have opportunity for growth.
Brand development in almost all sectors can do well through appropriate leadership and responsibility. Innovation, in times like this, is generally abundant as firms and businesses are forced to come up with new solutions, cost-cutting exercises, and drive toward new revenue streams. All this creates both stress and opportunity.
To fully understand the effects of COVID-19 on the South African IP industry, one should consider the economy in general as each restriction, stimulus, change and challenge has a potential knock-on effect on IP. In general, the plight of the industry (as generally reflected in filing statistics) follows economic trends such as global GDP forecasts and movements in financial indices and currencies.
It will be interesting to see if IP outsourcing will once again become vogue as opportunities for currency arbitrage exist as well as digital transformation that erodes physical borders.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, any other of its practitioners, its clients, or any of its or their respective affiliates. This article is for general information purposes only and is not intended to be and should not be taken as legal advice. Please contact the author(s) if you have any questions about this article.
Alexis Apostolidis (Partner)
Darren Olivier (Partner)
Nicholas Rosslee (Associate)