It may be necessary but is it empirical?

The long-awaited draft intellectual property policy from the Department of Trade and Industry contains several key reforms, including the introduction of a substantive search-and-examination system for patent applications. The department considers this shift from the current depository system to be necessary if it is to grant more robust patents. A criticism of the depository system has been that it encourages frivolous patents and allows weak patents to be issued. Any move towards a substantive search-and-examination system is a fine idea in principle, but several hurdles will need to be overcome.

A major constraint is the lack of professionals with the skills to handle a more intensive and extensive system. Louis Harms, retired judge and now professor of intellectual property law at the University of Pretoria, doubts that this could work in SA. “[SA] had an examination system in 1952, but had to abolish it in 1978 because we never had people to do [the job]. It’s highly specialised. You need a scientist and a lawyer who will do the job at a government salary”, he says. SA also lacks the necessary financial resources and without both technical and administrative skills or adequate funding to administer this system, delays in the process are likely, which could discourage future investment in the country.

Given that virtually all developed economies have examination systems and most patents registered in SA come from developed countries, it may be an uneconomical and unnecessary use of resources to duplicate these efforts. Based on international standards, it takes an experienced examiner about three days to process a patent application. About 8,000 patents are filed in SA every year, which suggests we would require at least 100 examiners to accommodate the new system. The government is currently training 20 examiners to effect the transition.

The draft intellectual property policy does recognise the capacity constraints and to overcome these suggests that the substantive search-and-examination system be phased in with a “range of strategic sectors” initially targeted for full substantive search and examination. However, this is clearly discriminatory and fails the test of general applicability, rationality and fairness. Large companies elsewhere in the world are well versed in substantive search-and-examination-type systems, since most advanced countries have adopted them and have the resources to navigate through the process. South African companies are not familiar with the process and will require time and resources to get it right. This will be difficult for small and medium-sized companies that do not have the time and resources to do so.

With the depository system and using a patent attorney, it costs as little as R20,000 to file a patent at the Companies and Intellectual Property Commission (CIPC). Contrary to the assertion that it encourages frivolous patenting, patent lawyers in SA undertake research when preparing to file a patent application with the courts. Adams and Adams patent attorney Alexis Apostolidis states: “Importantly, and what has gone largely unnoticed by detractors of the depository system, is that patents that have corresponding applications internationally are often voluntarily amended to be in line with the patents as examined in other jurisdictions, especially because one or more invalid claims in a patent will render it unenforceable until such invalidity is remedied.”

With the proposed new system, we can be sure that the fees associated with filing patents with the CIPC will escalate to accommodate the increased number of staff required. The costs for patents relating to complex subject matter could easily increase by R30,000 to R60,000, depending on the extent and number of interactions with the CIPC examiner. Large companies may well be able to absorb these costs, but small, upcoming enterprises will not. A local individual will probably not be able to afford to file a patent.

Moving towards a substantive search-and-examination system may sound like a good idea, but higher costs and long delays caused by an inadequate number of CIPC staff qualified to handle the increased complexity associated with the new system will be the unavoidable, yet foreseeable result, which will frustrate the entry of local innovators. For a country such as SA that suffers from a lack of financial and human resources, a depository system would be far more appropriate.

Author Jasson Urbach is a director of the Free Market Foundation and head of its Health Policy Unit.

This article was first published in ENT News on October 2017

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