Tag Archives: Muhammed Vally

Bridging the functionality divide: Chespak v MCG

An earlier report by the writer in respect of a Supreme Court of Appeal decision (BMW AG v Grandmark International (Pty) Ltd 2014 (1) SA 323 SCA) adopted a cautious view on the effect of that judgment on the OEM industry seeking to compete in the South African market. Happily, a further decision (August 2014) on similar subject matter (Chespak (Pty) Ltd v MCG Industries (Pty) Ltd 2014 JDR 1734 (GP)) is now to hand which brings much needed certainty on the question of functionality as this may apply to registered South African designs.

The case concerned an appeal from an a quo decision that granted an interdict against infringement of a registered aesthetic design by a local manufacturer. Two main issues drove the appeal, namely that if any feature of the aesthetic design registration performs any function, that feature is functional in nature and has to be excluded in determining aesthetic design right merit. This applies the moreso, so the argument went, if the design rights holder opted to use a so-called omnibus type definitive statement in defining its monopoly. This type of claim typically reads:

“the features of the design for which protection is claimed reside in the shape and/or configuration and/or ornamentation and/or pattern as applied to article X, substantially as shown in the accompanying illustrations”

The appellant’s contention was that the use of an omnibus type definitive statement identified no specific feature to enable the general public to identify what the scope of protection is, thereby making the right itself a nullity. Further, the appellant contended that the absence of certainty in relation to the claimed monopoly meant that it had to consider every feature resident in the design, which in its view afforded it a basis on which to pry open its argument on functionality of each individual feature.

A three bench sitting of judges of appeal disagreed. In disposing of the appellant’s criticism of the use of omnibus type definitive statements, reference was made to the dictum of Laddie J (as he then was) in Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 422, which was applied with approval by a sitting of the Full Bench in the Supreme Court of Appeal in Clipsal and Another v Trust Electrical 2009 (3) SA 292 at 7, which accepted the omnibus type statement in local practise. Laddie J’s reasoning which was accepted by the present judges included that the omnibus type statement does not isolate any aspect of the design with the object of claiming novelty or originality in any particular feature and that the proprietor can choose to assert the design right in respect of the whole of the design or part thereof. This is as broad as one can permissibly construct the monopoly under the South African Designs Act 193 of 1995.

The Court then turned to deal with the functionality argument. Accepting that any court in determining the scope of a design right, must not consider solely functional features of a design in the context of an aesthetic design registration, the Court put paid to the argument by casting a light over the use of the word “solely” by the Legislature. The Court reasoned that the scope of functionality exclusion within the aesthetic context does not extend to features serving a functional purpose but also having aesthetic appeal. The mere fact that a feature of a design or the design itself performs some function is not decisive. The real test is whether the function which the design or the article to which the design is applied performs, dictates or necessitates its shape or configuration. In other words, the Court in deciding the question must have regard to whether the feature is included as part of the article (or the design) solely or purely for the reason that it performs a function, or if that article or feature has added aesthetic appeal. The fact that the mentioned feature could have been manufactured to look differently added to the Court’s reasoning in finding against the functionality argument.

On the question of infringement, the Court re-stated earlier authority (Brudd Lines v Badsey (2) 1973 (3) SA 975 (T)) that the criterion is one of an impact made on the eye by the whole of the design. A minute analysis for such differences as there may be between the design and the infringing product (in the context of omnibus statements) is inappropriate. No doubt there would be differences in the infringing product as any infringer would attempt to camouflage plagiarism by introducing a difference here or there. If the design, when viewed as whole, shows unmistakeable similarity beyond argument, infringement would be established.

The present decision should bring comfort to the workshops of OEM designers in that it has provided certainty, albeit where such certainty already existed under the cited authorities, in a convenient manner that strings together relevant considerations of the functionality v aesthetic designs argument in a single case. One would indeed be hard pressed to find an aesthetic design that is not completely free of the performance of any function, whether such function is to provide support, embellish or merely look pretty. It is a good decision and in line with our comments made in the BMW case supra.

For more information please contact:

Muhammed Vally
Director
Department: Patent
Tel: +27 (0)11 324 3080
Email: muhammedv@dmkisch.com

Author: Muhammed Vally

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

Patents: Misrepresentation and revocation

Does an amendment made to a patent application cure an earlier false statement that was made by the patentee? This was the issue that the court had to decide in the 2013 South African case of Gallagher Group Ltd v IO Tech Manufacturing (North Gauteng High Court, Judge Kollapen, still unreported).

The case dealt with section 61(1) (g) of the Patents Act. This section says that a patent can be revoked if the prescribed declaration that the patentee must file ‘contains a false statement or representation which is material and which the patentee knew or ought reasonably to have known was false at the time when the statement or representation was made.’ The prescribed declaration (P3) reads as follows: ‘To the best of my/our knowledge and belief, if a patent is granted on the application, there will be no lawful ground for the revocation of the patent.’

The facts were that a company that had allegedly infringed a patent counterclaimed for revocation of the patent. When the company amended its Particulars of Claim to add – as a further ground for revocation – the claim that the prescribed declaration that the patentee had made contained a false statement or declaration that was material and which it knew to be false (it related to the identity of the inventor), the patentee objected by way of a legal exception. The patentee’s argument was that the proposed amendment did not set out any cause of action for revocation because – even if it had known that the patent was invalid at the time when it was filed – certain amendments that it had made to its patent application after the signing of the declaration cured the invalidity with retrospective effect.

Not so said Judge Kollapen. He gave two reasons for his finding. The first was that the present (1978) Patents Act differs significantly from the old (1952) Patents Act on the issue of revocation – whereas under the old act a patent could be revoked if the application contained a material misrepresentation, under the present act a patent can be revoked if the declaration contained a false statement that the patentee knew or should reasonably have known was false when it was made. As a result, the judge felt that a number of well-known cases that dealt with amendments to patents filed under the old act were of limited value.*

The judge said that Section 61(1) (g) ‘signalled a significant departure in the approach to material misrepresentation as a ground for revocation…. (it) fixes with inflexible rigidity, the timeline in assessing the falsity of a misrepresentation…the operative words are “at the time when the statement or representation was made”…the legislature, in moving beyond the provisions of the 1952 Act, sought to provide a basis for revocation where: a) The patentee knew or ought reasonably to have known of the falsity, and b) Had such knowledge at the time when the misrepresentation was made.’

The judge said that the change introduced culpability, and drew a clear distinction between innocent and culpable misrepresentations. The effect of the change is that innocent misrepresentations no longer serve as a ground for revocation. ‘It must therefore follow that the 1978 Act did in fact represent a significant change in approach to false representations in patent declarations, and while on the one hand it narrowed the scope on which a revocation could be launched by excluding innocent representations, on the other hand it created a higher bar in order to successfully invoke a claim for revocation, namely knowledge of falsity.’ It followed therefore that an ex post facto amendment could not solve the problem: ‘Under those circumstances it would be difficult to convincingly argue in view of the deliberate change of stance by the legislature in isolating and dealing with knowingly making a false representation as a basis for the revocation, that simply amending the patent specification can have the effect of removing the basis for revocation.’

The judge also felt that there were public policy reasons for such an interpretation: ‘From a public policy perspective ensuring that an amendment does not have the effect of curing an invalidity that was knowingly made would go a long way in ensuring that patentees only file patents for inventions which the patentee honestly believes are valid, thereby protecting the system against abuse by dishonest patentees.’

The judge rejected the patentee’s argument that the effect of such a finding would be to remove the right to amend patent applications: ‘The right to amend is left intact… (however) the consequence of such a right can never be to validate a knowing falsity.’

It’s a decision that has serious implications for both existing patents and patent applications that are filed in the future. It’s important to realize that the P3 declaration does not need to be filed together with the patent application and can be filed late. It’s also possible to uplift a P3 that has been filed and replace it with a fresh one. A patentee will, in future, need to consider the filing of the P3 very carefully, taking account of corresponding or international applications that it has filed. For example, although the patentee will need to rectify invalidity that it knows about before it signs the P3, if it signs the P3 before the invalidity comes to light the P3 will be fine, although it will still be necessary to amend the application. This is, of course, an issue that the patentee must discuss in detail with its attorney.

*Cases such as Dresser Industries Inc v South African Inventions Development Corporation 1982 BP 317 (CP), Bendz Ltd and another v South Africa Lead Works Ltd 1963 (3) 797 (A) and Rotaque (Pty) Ltd v General Mining and Finance Corporation and Chamber of Mines of South Africa 1986 BP 534 AD.

For more information please contact:

MUHAMMED VALLY
Director
Department: Patent
Tel: +27 (0)11 324 3080
Email: muhammedv@dmkisch.com

Author: Muhammed Vally

Comments on the South African Draft National Policy on Intellectual Property

The good, the bad and the ugly

South Africa does not (yet) have a formalised policy framework regarding intellectual property (IP) to guide different government departments in their approaches to IP. In a recent attempt to codify a consolidated national approach to IP, Mr Rob Davies, the current Minister of Trade and Industry, published a long-anticipated Draft National Policy on Intellectual Property, 2013 (‘DIPP’) in the South African Government Gazette of 4 September 2013. Public comments on the document were invited to be submitted within 30 days from the date of said publication. The IP fraternity was suddenly sent aflutter, and various efforts were made to comment on the DIPP within the brief time provided. Commentators on the (very polarising) DIPP included, amongst others, individuals, law firms, retired judges, pharmaceutical companies (both innovative and generic) and Non-Governmental Organizations, such as the Treatment Action Campaign, Médecins Sans Frontières and Section 27.

Although the initial aim of the DTI was to present a final IP Policy to Cabinet for approval before the upcoming general elections on 7 May 2014, it has recently come to light that this somewhat optimistic deadline will in all probability not be met. This is an encouraging development, and provides an opportunity for the significant feedback received from industry role-players to be tabled for consideration. The added time available for acceptance will hopefully avoid undue expedition of the DIPP through parliament. This article touches briefly on the parts of the DIPP that are welcomed, as well as those parts that are (or ought to be) open to discussion.

The ‘Good’

The DIPP cites various admirable objectives such as:

“to develop a legal framework on IP that should empower all strata of the citizens of South Africa” and to “engender confidence and attract investment”.

Although all forms of IP are addressed in achieving these objectives, the main focus of the DIPP seems to be the initiation of patent law reform, in the main directed towards the promotion of access to medicines and the improvement of public health.

According to the policy, the current patent deposit system that is used in South Africa is allowing grant of a number of “weak patents”. The main reason cited for the existence of these “weak patents” is the lack of substantive examination infrastructure in South Africa. According to the DIPP, the formal, non-substantive examination of a patent application by the South African Patent Office is being exploited by those seeking to prolong patent monopolies granted in respect of their inventions. The DIPP has singled out pharmaceutical inventions as a prime source of concern. It also leaves no doubt in its vociferous support for the inclusion of flexibilities (such as compulsory licensing and parallel imports) which has basis in the Agreement on Trade Related Aspects of Intellectual Property Rights (‘TRIPS’) (of which South Africa is a signatory). These flexibilities are sought to be included in South African legislation to purportedly prevent patents barring access to health. It is interesting to note that the Patents Act 56 of 1978 (“the Act”) in fact makes provision for compulsory licensing under section 56, and that the Medicines and Related Substances Act 101 of 1965 was specifically (and controversially) amended in 1997 to include section 15C which allows for parallel imports. Neither of these provisions, as far as the authors are aware, have been locally invoked in a pharmaceutical context to date.

An example cited by the DIPP on how the depository patent system is being abused is in the form of the concept of so-called “patent evergreening”, which has emerged from foreign jurisdictions (incidentally where patent examination infrastructure does exist). Parties guilty of patent evergreening, so the argument goes, seek to have several patents, filed in succession and usually close to a preceding patent expiry, granted and which covers the same product, albeit with minor changes to overcome obvious patent invalidity. Another example cited in the DIPP is where pharmaceutical patentees are filing patent applications directed towards second medical indications of known pharmaceutical compounds. According to the DIPP, these actions are frustrating access to generic and more affordable medicines that can be used to combat rampant spread of diseases such as HIV/AIDS, tuberculosis and cancer. The debate at international level rages on, where the opposite side of the evergreening debate argues that such a concept is impossible, given that any person may utilize the technology disclosed under an expired patent. Be that as it may, what is clear is that this debate has reached South African shores and is as topical as it is mired in controversy. In South Africa, patent evergreening is not a ground for the revocation of a patent.

The ‘Bad’

One of the main and recurring recommendations of the DIPP towards achieving its objectives is the establishment of a substantive examination system, the introduction of pre- and post- grant patent opposition proceedings, and the prevention of patents for inventions that involve the new use of a known substance that is not “sufficiently inventive”. Currently, lack of inventive step is one of the grounds for launching post-grant patent revocation proceedings under the Act.

The ideals of a substantive examination system and opposition proceedings during the prosecution of a patent application are generally supported by role-players in the industry. However, pragmatic causes for concern include the need to recruit proper expertise, in a sufficient number, of qualified patent examiners to process approximately 10,000 annual patent applications (both foreign and local) filed in South Africa. It is interesting to note that by comparison, South Africa is ranked 26^th on the list of the world’s largest populations, geographically is 1/8^th the size of the United States, just over 1/3^rd the size of the European Union, is twice as big as France and four times as big as Germany. According to 2013 filing statistics released by WIPO, the USPTO had in the year under review received just over 144 000 PCT national phase entries (not necessarily including local applications), Germany just under 57 000 applications and France just under 28 000 applications.

It is also important to note that patent examiners in foreign patent offices are generally PhD graduates with some level of formal training in patent law. Local cost implications associated with the employment the right number of suitably qualified patent examiners is likely to be a factor holding the prospect of higher official filing fees on the cards (and by implication prosecution fees as a new cost centre). This eventuality could spur on an announcement of substantial increases in patent office official fees, the likely end of which could be placing patent protection beyond the reach of ordinary South Africans, as well as SMME’s and start-up companies. In relation to medicines, the South African market size generally pales in comparison to US and European markets. Raising the cost of patent entry in the local sphere may well discourage foreign investors from placing South Africa on its list of eventual patent filing destinations. As patent filings are sometimes viewed as a measure of a company’s trust to compete within the South African territory, any reduction of patent filings locally may well be accompanied by diminished foreign direct investment.

The ‘Ugly’

Unfortunately, the predominantly noble objectives of the DIPP are completely overshadowed by the disorganised, and factually and legally flawed document that it is presented in, bearing in mind the nearly six years taken for its publication. Unsurprisingly, an overwhelming reaction of criticism to the DIPP is not aimed at the stated objectives, but rather at the apparent lack of sufficiency in the understanding of both local and international IP laws, and the seemingly careless drafting errors that the document displays.

Inherent contradictions present in several places, the most obvious one being the negation of the stated objective of

“engendering confidence and attracting investment”

as against a background statement that reads

“this IP Policy needs to take into account the fact that South Africa is a developing country with the bare minimum of a technological, economic and social base”

a mere two paragraphs later. Not only is such a statement not true, it is seen as an admission that the South African government has no confidence in local talent. This militates against any move to engender confidence in South Africa as a patent filing destination.

Concluding remarks

The objectives of the DIPP towards improving the health of the poorest of the poor are admirable, especially where human rights issues, such as the access to medicines for the treatment of HIV/AIDS and other diseases are prevalent. The implementation of these objectives is however problematic. Honourable Judge LTC Harms (retired Deputy President of the Supreme Court of Appeal) sums up the general feeling of the IP industry in his commentary on the DIPP, where he states

“…the real issue from a legal perspective is not so much the ‘what’; it is the ‘how’… ”

The stated objectives could well be achieved in time, but only if the final IP Policy reflects an understanding and consideration of the concerns towards the DIPP raised by various participants and commentators in the industry. Without substantive industry involvement, the policy will be remembered as a wasted opportunity to develop our law under an avoidable cloud of perceived intransigence. Considering that the DTI spent in excess of six years to formulate the DIPP, it would be beneficial to all interested parties if the DIPP is not rushed from draft format to final format. The importance of the subject justifies a thorough review of feedback received.

For more information, please contact:

JACO THEUNISSEN
Director
Department: Patent
Tel: +27 11 324 3154
Email: jacot@dmkisch.com

MUHAMMED VALLY
Director
Department: Patent
Tel: +27 (0)11 324 3080
Email: muhammedv@dmkisch.com

Author:

Jaco Theunissen

Muhammed Vally