Exchange control ruling on assignment of IP rights
A South African High Court decision in 2004, Couve and another v Reddot International (Pty) Limited and others, introduced exchange control requirements for the assignment of IP rights to foreign entities.
In the Reddot case, the court held that assignments of patent rights from South African exchange control residents to foreign entities are subject to Regulation 10(1)(c) of the Exchange Control Regulations, 1961. Hence, prior Treasury approval is required, failing which the assignments are null and void. It was interpreted widely to apply to all other forms of intellectual property.
Regulation 10(1)(c) provides that:
“No person shall, except with permission granted by the Treasury and in accordance with such conditions as the Treasury may impose...(c) enter into any transaction whereby capital or any right to capital is directly or indirectly exported from the Republic.”
In 2008, Oilwell applied to the South African Gauteng North High Court (court a quo) for an order declaring an assignment of IP rights invalid because prior Treasury approval had not been obtained. The court a quo held that:
