SA legal reform vital for global trade

Jon Tullett
By Jon Tullett, Editor: News analysis
Johannesburg, 18 Feb 2014
SA's IP policy will help the country "dodge bullets", says IP specialist Andrew Rens.
SA's IP policy will help the country "dodge bullets", says IP specialist Andrew Rens.

South Africa is changing its intellectual property legislation in an attempt to strengthen local business.

Spearheaded by minister Rob Davies and the Department of Trade and Industry (DTI), these efforts could have profound effects on local business, and the technology sector, in particular.

Last year saw the publication of the draft National Policy on Intellectual Property, calling for sweeping reform of all areas of IP, notably patents and copyrights, but extending to numerous other areas of law such as pharmaceuticals, sporting events, agriculture and more.

Since then, we've seen the first result: the recent amendment of copyright laws, attempting to tackle the specific issues surrounding indigenous knowledge. That amendment was panned by critics, but opinion of the overall draft National Policy on IP remains broadly positive. SA is at the conjunction of rapidly evolving technology, with IP laws strained beyond breaking point, and frantic IP reforms taking place in other countries.

'Dodging bullets'

The draft IP policy, if it delivers its promises, could be hugely important to the country. "SA is dodging multiple bullets," says Andrew Rens, a South African lawyer specialising in intellectual property.

"There is ongoing external pressure for SA to commit to a number of treaties, and change its laws to suit multinational corporations." Failing to stand up to pressure could be disastrous for the country, he says.

Internationally, entities such as the World Intellectual Property Organisation (WIPO) and the World Trade Organisation (WTO) are working to coordinate discussion around IP, as a facilitator of innovation and fair trade. But the efforts have been strongly influenced by commercial interests, such as the wrangling over the Anti-Counterfeiting Trade Agreement (ACTA), which sparked widespread protests, prompting the EU to reverse its original decision to accept the treaty. The controversial and secretive Trans-Pacific Partnership (TPP - of which SA is not a member) is another.

SA vs the world

SA's IP policy is setting the country up as a leader in progressive IP protection, observers note. Dr Tobias Schonwetter, who teaches copyright law at the University of Cape Town, noted in a response to the draft policy that "we believe that the intention of the Draft National Policy on Intellectual Property is good: it is grounded in a developmental approach appropriate to our country, and seeks to eliminate the many perverse outcomes of IP protection which are detrimental to the broader society".

The draft policy is good, but may be too vague to bring real change, says Dr Tobias Schonwetter, copyright lecturer at UCT. Photo by Paul Scott
The draft policy is good, but may be too vague to bring real change, says Dr Tobias Schonwetter, copyright lecturer at UCT. Photo by Paul Scott

Schonwetter told ITWeb he was optimistic that the DTI "fully understands the implications of international law and policy-making".

"SA has been a leader, together with Brazil, Argentina and India at the WTO and WIPO in efforts to make international IP law more friendly to developing countries," Rens says. "The US trade representative has responded to the developing countries by going outside of WIPO and the WTO to try and conclude treaties. ACTA, which was thoroughly rejected by the European Parliament, was one of those treaties, the Trans-Pacific Partnership is another. In the US, Congress is currently refusing to give the authorisation that will be necessary to conclude the TPP."

Emerging markets have a particular interest in taking a strong stance in IP. National interests must be protected against international corporate giants, while not deterring those corporations from conducting business here. Difficult areas, like allowing local pharmaceutical manufacturers access to generic antiretroviral medication for AIDS treatment, put national interests directly at odds with big international businesses and their lobbying might.

"SA may find itself under immense pressure from other countries and regions (usually the US and Europe) to ratify and implement treaties that are not in the national interest, or to agree to bilateral trade agreements that contain similar provisions," Schonwetter says. "Resisting such pressure is very difficult and may appear costly if the refusal can lead to the termination of trade negotiations or - as is often threatened - the exodus of IP-based industries.

Earlier this year, health minister Aaron Motsoaledi reacted with fury after leaked documents showed international pharmaceutical companies proposing a coordinated attack on IP reform in SA. "SA is now ground zero for the debate on the value of strong IP protection," the leaked document states. "It may also provide the model for other developing nations, inside and outside Africa, including such important aspiring economies such as India and Brazil."

The latter two have been making major strides in their own IP reform, particularly around pharmaceuticals, and the industry is clearly uncomfortable. The South African groups named as partners in the leaked documents hastened to distance themselves from it, saying they had rejected the proposal.

With some firms threatening to pull out of the country entirely if a favourable IP regime is not implemented, Schonwetter says the country should call their bluff. "I simply don't buy the argument that private companies would leave SA if we did not strengthen out IP protection further. SA is too important a market to leave behind (and competitors would quickly fill the gap) and offers exemplary infrastructure for conducting business."

Patent reform

Patents are a key enabler of innovation, and SA has traditionally lagged in its protection for inventors. The draft IP policy attempts to correct, at long last, many of the areas of concern. "The South African patent system currently does not examine patents," Rens says.

"Anyone can patent anything, provided that he pays a patent lawyer to submit the documents. Then he can send you a letter telling you that your product or service violates his patent and you must stop what you are doing or pay up. If you don't he could sue you. If you have R2 million to spare you could go to court and argue that the patent is invalid, or you could pay up. Examination, pre- and post-grant opposition will reduce, even if they don't eliminate, abuse of the patent system."

In the technology world, software patents are the elephant in the room, with billion-dollar lawsuits and patent trolls becoming de rigueur. That is one of the bullets SA is dodging, Rens says.

The US opened Pandora's Box in 1972, with landmark decisions allowing software patents to go forward. The result was a flood of patents, and then a flood of litigation. "In the US, a government report found 'software-related patents accounts for about 89% of the increase in defendants between 2007 and 2011, and most of the suits brought by PMEs [patent monetisation entities - colloquially known as patent trolls] involved software-related patents'. In the US, there is a heated debate about the appropriate response to the problem created by software patents, but that there is a problem is no longer disputed."

The US is now desperately trying to get matters back under control - with some success. The "America Invents Act" passed in 2011, and included several key legislative changes intended to encourage innovation, while throttling back abuse.

In SA, software patents are explicitly forbidden, though Rens notes that some may have sneaked through. The proposed reforms should clamp down on those further, and will bring SA into accordance with other nations taking similar action. "New Zealand, like SA, has prohibited software patents in principle for decades, but last year amended its law to prevent abusive attempts to get software patents. SA should take note," Rens says.

And in that regard, SA can join other developing countries in taking bold strides in IP innovation, he adds. "India's reform of its patent legislation is the most innovative in the world. Brazil is currently engaged in a patent reform process which builds on the Indian example. The draft policy indicates that SA will adopt many of the features of the Indian patent reform. It will also be possible for SA to go beyond these features, learning from Brazil and others."

Copyleft, copyright

In the copyright arena, the draft IP policy also makes clear note of the need for balanced reform. Dominant creative industry bodies, such as the RIAA and MPAA, have been instrumental in the passage of US-based legislation such as the DMCA, which attempted to stamp out piracy through wide-reaching provisions, such as a ban on reverse engineering. US trade officials have pushed hard for similar provisions in other countries.

The draft policy makes explicit mention of this, though it mislabels the relevant legislation as "the DCMA". "SA... should not follow the path of the DCMA and EU database directive as these instruments are restrictive and, therefore, bad models for copyright legislation of a developing country like SA," the draft policy says. It also calls for specific allowance to be made for software reverse engineering, to "allow software to be adapted to local needs", and makes provision for fair use in Internet works. This is a growing area of dispute, locally and abroad - it is, for example, the central issue in the current legal fight between Moneyweb and Fin24 over reuse of content.

"Fair use", though a vague term, allows for flexibility in copyright issues, and can underpin innovation, Rens argues. "Fair use has enabled US courts to adapt copyright law to fast-changing technology. For example, Google uses thumbnails of images to show the results of an image search. It's simply impossible to write a law that will predict that kind of innovation and allow it. Instead, the law has to have open-ended provisions that allow the courts to adapt to changing technology. South African copyright legislation, which dates to 1978, does have some exceptions, but research has found these to be inadequate. The draft policy approves fair use, but there is no suggestion of any timetable or urgency to enact a fair use provision in South African law. The current copyright act could be easily amended by copying the US fair use provision. A major advantage would be that no country would dare claim that it's contrary to SA's treaty obligations."

Lingering concerns

Although the draft policy is a good start, there are lingering concerns. Schonwetter notes that some areas are unclear and may fail to achieve change without clarity. "It is too vague in some places to effectively promote any policy's key objective of harmonising legislative activity," he says.

"The policy itself states that currently 'departments that deal directly or indirectly with IP approach the system differently. To ensure coherence, there is a need for a coordinated approach'. But a coordinated and harmonised approach becomes impossible if a policy is too vague on crucial issues - then we are essentially back at square one and can save ourselves the efforts of formulating a policy altogether."

Intellectual property is the central concept of the information age, and SA's ability to formulate, and enact, clear IP policy will be a major factor in SA's place on the stage. All eyes will be on the DTI as it proposes further amendments, with plenty of sabre-rattling expected from foreign governments and industry bodies.