Stop the ransom demands: compulsory licensing in the patent arena

The scope of the monopoly granted to a patent proprietor is defined in the patent claims and the effect of a patent in this respect is to grant to the patentee, in the Republic of South Africa, for the duration of the patent, the right to exclude others from making, using, exercising, disposing of, offering to dispose of or importing the invention, so that he or she shall have and enjoy the whole profit and advantage accruing by reason of the invention. In the event that anyone else performs any of the above, they will be in breach of the patentee’s rights and the patentee will have recourse against them for patent infringement.

The patent system, as explained above, seems clear-cut. However, technology and technological developments are not always so. Technology grows by means of development and improvement; improvements in many instances comprising small modifications to the existing technology, which may itself be the subject of a patent or patents.

These improvements, provided they meet the basic requirements for patentability, may themselves be the subject of a patent (the requirements for patentability being that the improvements are new—in other words that they do not form part of the state of the art immediately before the priority date of any claim to that invention—and inventive, implying that the invention is not obvious to a person skilled in the art, having regard to any matter which forms part of the state of the art immediately prior to the priority date of the invention).

Technology often grows by the taking of small steps to produce improvements on existing technology and thus it may happen that such improvements, in order to function, are reliant on such existing technology. Hence, in the instance that the existing technology is under patent, a relationship of dependency may arise as regards the working of the patented improvement. This occurs in instances where the improvement (the dependent patent) cannot be worked without infringing the patent covering the existing technology (the prior patent).

Therefore, to avoid infringing the prior patent, the patentee of the dependent patent is required to obtain a licence under the prior patent and is therefore obliged to enter into negotiations with the patentee of the prior patent in this respect.

"it would appear that the owner of the prior patent is in a situation of immense power, being able to negotiate a licence on whatever terms are suitable to them."

As is immediately evident, in instances of dependency it would appear that the owner of the prior patent is in a situation of immense power, being able to negotiate a licence on whatever terms are suitable to them or, alternatively, to withhold the licence entirely and essentially hold the patentee of the dependent patent to ransom.

The Patent Act 57 of 1978 foresees this situation and provides recourse to the patentee of the dependent patent in the case of just such a licensing deadlock, under compulsory licensing provisions that are set out in Section 55 of the Act.

In order to access this relief, the owner of the dependent patent must bring an application to the Court of Commissioner of Patents for a compulsory licence. This application is to be served on the patentee and any other person who appears from the register to have an interest (most likely recorded licensees).

The Commissioner will not be entitled to grant such a compulsory licence unless the following conditions exist:

(a) The invention claimed in the dependent patent involves an important technical advance of considerable economic significance in relation to the invention claimed in the prior patent;

(b) The proprietor of the dependent patent granted the proprietor of the prior patent on reasonable terms a cross-licence to use the invention claimed in the dependent patent; and

(c) The use authorised in respect of the prior patent is not assignable except with the assignment of the dependent patent.

The Commissioner is also entitled to include a condition that the licence will be used only for the purpose of permitting the dependent patent to be worked and for no other purpose. It is important too that the dependent patent is valid and not liable for revocation.

Compulsory licensing can therefore be used to deal with licensing deadlocks in respect of dependent patents, allowing the patentee of a dependent patent recourse in situations where they are being held to patent licensing ransom, thereby facilitating the growth of technological innovation in situations such as these.

Robyn Merry is an associate at DM Kisch Inc. She can be contacted at: robynm@dmkisch.com