This is the second of three articles that we’ve written on the Intellectual Property Rights from Publicly Financed Research and Development Act 51 of 2008 (‘the Act’), which came into effect on 2 August 2010. The first article gave a general overview of the Act, and pointed out that it’s intended to ensure that intellectual property emanating from publicly financed research and development at institutions remains in South Africa. The Act lays down rules regarding the ownership and commercialisation of such intellectual property, and it requires all research institutions to create technology transfer offices. The Act also provides for the creation of a National Intellectual Property Management Office (NIPMO). In the article we mentioned that NIPMO issued a first guideline (‘the Guideline’) under the Act in December 2012, and that this clarified some of the issues that weren’t clear.

In the next article we’ll discuss in more detail just how this legislation affects academics and researchers who generate intellectual property. As the general rule is that the recipient of the public funding is the owner of the intellectual property that emanates from the research and development, we’ll start off by looking at the meanings of the terms ‘intellectual property’, ‘publicly financed’ and ‘research and development’. We’ll look at the concept of a university employee acting with the ‘course and scope’ of their employment with the university. And finally, we’ll look at various scenarios and work out who owns the intellectual property.

The term ‘intellectual property’ is defined broadly in the Act as ‘any creation of the mind that is capable of being protected by law from use by any other person, whether in terms of South African law or foreign intellectual property law, and includes any rights in such creation, but excludes copyrighted works such as a thesis, dissertation, article, handbook or any other publication which, in the ordinary course of business, is associated with conventional academic work’. The Guidelines say that this definition includes all creations of the mind, whether protectable by statute or common law and, although certain copyrighted works are excluded, the Act still applies to other copyrighted works.

How about ‘publicly financed’? This expression has been interpreted in the Guideline to include money that has been allocated for research and development by National Treasury or within the budget of a funding agency, and therefore includes money allocated for research and development by a recipient of public funds. Notably, money obtained from the IDC is excluded from the definition of publicly financed, since the IDC funds research and development with money obtained from its previous investments. Furthermore, any money received in terms of the Section 11D tax incentive of the Tax Act (Act 58 of 1962 as amended in 2006) for research and development is excluded. On the other hand, finance obtained for research and development from a funding agency such as SPII or THRIP is included.

More particularly, public financing not only includes money used for performing the research and development per se, but also money budgeted for salaries, facilities, overhead costs etc. that are borne by the recipient. However, monies budgeted for bursaries and scholarships are excluded. This means that, for example, in the event that a researcher is paid a salary that is derived from public money, or uses university facilities that were funded with public money, the Act will apply, unless the research and development is performed on a ‘full cost’ basis where the university is reimbursed pro rata for the researcher’s salary and/or use of the facilities.

How has the Guideline defined ‘research and development’? The Guideline has used the Frascati Manual published in 2002 as a basis for this clarification. What this means is that any activity that solves a problem, has an element of novelty and is not an obvious solution to a person skilled in the field would be considered a research and development activity. On the other hand, activities such as:

  • education and training;
  • research and development-related scientific and technological activities including collecting samples, feasibility studies, and scientific validation and standardisation;
  • other industrial activities including acquisition of technology, preproduction and production; and
  • administration and other supporting activities not directly related to research and development, including transportation, storage, cleaning, repair, maintenance and security activities are excluded.

In terms of ownership of patentable inventions, the Act goes on the provide that all South African universities (and any other recipients of public funding) must set out in their intellectual property policy that any invention which arises from research and development that was financed from public funding received by the university is owned by the university. This must be enforced, either in terms of a general policy which is acknowledged by staff and students and/or by means of specific employment contracts for staff. But does this bring the Act into conflict with the Patents Act (Act 57 of 1978)?

Section 59(2)(a) of the Patents Act provides that a contract of employment which requires an employee to assign to his employer an invention which was created ‘otherwise than within the course and scope of his employment’ shall be null and void. There is a two-fold enquiry in order to determine whether this has been the case. First, it must be determined whether the invention was in fact made during the course and scope of employment and second, it must be determined whether there is a contractual relationship between the employer and employee in terms of which the employer has the intellectual property rights to the employee’s invention. The second part of this enquiry is a question of fact. The first is a bit trickier.

There is no South African case law on what is meant by ‘course and scope’ of employment in relation to a patent. The textbook writer Burrell 1 suggests that the term ‘sphere’ may best describe the meaning of these terms, ‘that is as meaning, broadly speaking, related to his work’. Burrell further suggests that a practical test for determining whether an invention is within the course and scope of an employee’s employment would be to ask the question whether, if the employee was directed by his employer to direct his energies to performing the work giving rise to the invention but he did not do so, would he have been in breach of his contract of employment or in breach of his duties. If the answer is yes, then one can say that the invention was made in the course and scope of employment. Burrell goes on to say that where a person is employed for the purpose of developing a specific invention, or to develop a particular process, apparatus or product, generally the employer has the rights to this invention. In the King2 case with respect to the question of ownership of an employer to copyright of an employee, the court held that ‘it would be dangerous to formulate generally applicable rules to determine whether or not a work was authored in the course and scope of an employee's employment’, and that it was a factual issue depending on the employment contract and the particular circumstances in which the particular work was created.

Now that we have provided some background to the issues, in our final article we’ll do some scenario planning.