A question that has received some attention and has elicited some debate recently, particularly since South Africa has joined the BRIC group of countries to form BRICS, is whether or not the South African Patent Office should implement substantive examination as part of its patent prosecution process. The motivation of this article is not to participate actively in that debate or exhaustively to discuss all of the issues relevant to it, but rather to provide some context for it and raise selected thoughts on some of the issues that may have to be taken into account in taking a decision on implementation.
For the layman, some background is necessary: In terms of Section 25 of the South African Patents Act, a patent may be granted for any subject matter the nature of which is not such that it is explicitly excluded from patentability under the Patents Act (intrinsic patentability) and which, moreover, complies with the requirements of substantive patentability (extrinsic patentability), these being novelty, inventiveness and applicability in trade, industry or agriculture. In practice at the South African Patent Office, however, the subject matter of a patent application is not examined as to the intrinsic or extrinsic patentability thereof before a patent is granted therefor. All that the Patent Office does is to examine whether or not the formal requirements set by the Patents Act have been completed by the applicant within the time periods set by the Act, upon completion of which the Patent Office accepts the patent specification in which the subject matter is described and, within three months thereafter, grants a patent on the application. In practice, therefore, one can effectively obtain a patent in South Africa for reinventing the wheel (naturally, though, ethical considerations would preclude pursuing this).
Does it therefore follow that there is no remedy for a person confronted with an infringement action instituted against him/her on the basis of a patent that has been granted for unpatentable subject matter? Certainly not, since whilst South African patents are regarded as prima facie valid and enforceable, the Patents Act provides explicitly that a patent may be revoked on application to the Commissioner of Patents by any interested person, inter alia on the basis that a patent should not have been granted for the subject matter of the patent under Section 25.
Whilst (hopefully) a case can be made out for the substantive patentability of the subject matter of most patent applications filed at the Patent Office (and therefore of most patents granted by the Patent Office), it is of course so that there are cases in which patents are granted for unpatentable subject matter or where the case to be made for the patentability of particular subject matter is weak. Naturally, the granting of exclusive rights of making, using, exercising, disposing or offering to dispose of and importing subject matter that was, in the first place, not entitled to be protected by such exclusive rights cannot, in principle, be supported. The problematic nature thereof that unwarranted granting of such rights does, in some instances, occur, is exacerbated by the fact that these rights that are granted are, as has been stated above, regarded as prima facie valid and enforceable, leaving a person confronted with an infringement action on the basis of such a patent in an undeserved position. In principle from this perspective, therefore, it would appear that practicing substantive patent examination would be supportable.
It is worth bearing in mind that the ideological basis of the patent system is to cultivate and stimulate research and development, desiring to have to effect competition between businesses not only on the basis of business models and brands, but more prominently on the basis of technology. The manner in which the patent system seeks to achieve this is by offering an exclusive monopoly for subject matter of a particular (substantively patentable) quality in exchange for contributing that subject matter to the public (through the publication of an enabling description thereof as part of the patent prosecution process). The monopoly that is granted is, from a business perspective, anti-competitive as it excludes competitors in the same subject matter field from using the subject matter for which the monopoly was granted. However, the existence of the monopoly necessitates from competitors confronted with the patented technology to employ their own ingenuity to remain competitive, possibly on the basis of further enhanced, and patentable, technology. And so the wheel should turn. From this perspective, it can be said that the granting of patents is supportable and, in fact desirable. Necessarily, however, there is a qualification in what has been said in relation to the desirability to safeguard the integrity of the patent system by ensuring that the quality of the subject matter for which a patent is granted is such that it qualifies for the available monopoly, suggesting an even stronger desirability for substantive examination of the subject matter of patent applications to ensure that the available monopoly is not granted lightly.
There are, however, other (circumstantial) factors to consider. Before concluding, from what has been said thus far, that substantive patent examination appears to be warranted, it is worth taking into consideration and investigating the decrease, and in fact the sharp decline, in South African patent applications filed by South African residents and companies. Statistics evidence this decline, with the number of such patent applications in 2010 being about 55% of the number filed in 1990 (keep in mind that a portion of the applications filed by South African residents are ‘provisional’ applications, which do not lead directly to the grant of a patent; the actual number of patents granted to South Africans is therefore likely to be even lower). Obviously, this trend cannot be ascribed to difficulties in getting a granted patent in South Africa. This begs the question of what the practical effect of the implementation of a substantive examination practice would be on the utilisation of the patent system by South Africans themselves. Take into account that the costs associated with pursuing patent protection in South Africa would escalate in such a case, as would the duration for finalising the patent process. The risk associated with the filing of a patent application would also increase, since the outcome of the prosecution process would, in a substantive patent examining environment, be uncertain. In light of the already existing trend and these concerns, it seems reasonable to suggest that the implementation of a patent examination practice could have a seriously negative effect on the South African patent system insofar as its benefit to the local trade, industry and agriculture is concerned, which benefit is already under-exploited. In an environment in which our percentage of GDP spent on research and development is low compared to that of some of our BRICS counterparts and in which the news headlines recently claim that economic growth in South Africa has ‘hit the brakes’, one can argue that we can hardly afford to knee-halter the intended usefulness of our patent system, even if it means that there are cases in which ‘improper’ subject matter slips through the cracks. We should perhaps rather look into ways of increasing patenting activity.
As an example of how an examination system can have a negative effect on the usefulness of a country’s patent system (insofar as its ability to grant patents within a reasonable time frame goes), one can look at the situation at the patent office of one of our BRICS partners, namely Brazil. Brazil’s patent office seems to be having difficulty finalising the prosecution of patent applications within less than between 5 and 10 years from the date of application. Obviously, it is difficult to support any practice that would result in the duration of patent prosecution approximating a patent term (20 years), considering that the reward offered by the patent system for contribution to the pool of public knowledge would thereby become diluted and, eventually, could become extinguished. The unduly long pendency of the realisation or refusal of the granting of rights to applicants could also result in their business interests being prejudiced.
Remaining with Brazil, for interest, statistics of the World Intellectual Property Organisation show that the number of patent grants Brazil’s patent office finalises per year is, on average, about 16% compared to the filings in Brazil in the same year. In the case of our other BRICS partner, China, which is also a country that practices substantive patent examination, this figure is significantly better at about 30%. South Africa, being a non-examining country, achieves an average of about 65%. Naturally, there is a lag between the filing of a patent application and the grant of a patent on that application which was not compensated for in the above statistics, but any variance in this regard should even out through time and, regardless, the point appears to be supported that South Africa (like Brazil if you assume comparable capacity and skills shortages) is in danger of experiencing a significant decline in its rate of granting patents and of quickly accruing a significant backlog if it implements a substantive patent examination practice. This could naturally affect the attractiveness of the patent system, both from the perspective of local and foreign industries. Such a situation could also, one could argue, have a negative effect on foreign investment and foreign technology exploitation in South Africa, as foreign investors would be uncertain of whether or not they would be able to rely on expediently granted prima facie valid (see below) patent rights to protect their investments, at least insofar their prima facie validity can be upheld. In a developing economy one should surely favour a practice that attracts investors and not one that obstructs them. Arguments to the effect that such a practice is undesired by reason thereof that it has situations to effect where exclusivity is granted for unpatentable subject matter, with competition in the market on the basis of such unpatentable subject matter then being unfairly limited, are valid, but proponents of such arguments should consider that the option remains for third parties to challenge such rights if they feel that it was granted undeservedly from a substantive perspective. Undue limitation on the market for the duration of the patent term would therefore only realise if the industry allows it to.
From the abovementioned perspective, and taking into account the nature of South African industry and the suggestion that technology competing is second to business model and brand competing, as well as a supposed desire to change the weighting in this regard, the practice of granting patents only on the basis of formal examination is not so nonsensical. This does, of course, not at all imply that South African industry cannot develop (and is not in the process of developing) to a level at which broad based substantive patent examination could become a necessity, but it would appear at present, particularly from the local patent application filing statistics, that the local South African industry patent output (and the static activity in local patent litigation) does not justify the introduction of substantive patent examination. From the perspective of the local industry therefore (discounting any effect that the granting of low-quality South African patents on applications originating from foreign countries might have on the local economy) it may well be worth considering delaying any talk of substantive patent examination pending further economic and industrial development, at least up to a point where it becomes apparent that technology competing would reach a level at which it can reasonably be anticipated that the economy, and particularly healthy competition in industry, could be negatively affected by the present examining practice.
What should also be borne in mind in assessing the question of whether or not to implement substantive examination is that we are confronted in South Africa with some sectors of industry that are further developed than others by being more active in and, in remaining competitive, relying more extensively on technological development. For different sectors there may therefore be different answers, which would make it difficult to take a decision on whether or not broad based substantive examination must be implemented, avoiding a negative impact on the patenting / technology development trend in some less active sectors. The sectoral impact of public interest and public policy can also not be ignored, referring in particular to the health sector, considerations pertaining to which are briefly discussed next. It can be appreciated at this stage already, however, from the perspectives discussed thus far, that the question of whether or not to implement a substantive examination practice is not answered with reference only to legal principles, but also with reference to economic, and necessarily also socio-economic, considerations.
At this stage, in order to provide yet a further, and influential, perspective on the matter, it is worth alluding to the arena in which the abovementioned debate on substantive patent examination is most actively conducted, being that of the pharmaceutical industry. To understand this debate, one must firstly understand nature of the players. Pharmaceutical companies can, generally speaking, be divided into two groups, namely the so-called ‘originators’ and the so-called ‘generics’. The business of generic companies is, again generally speaking, the manufacture and distribution of generic medicines. These medicines are comparable in their constitution, dosage form, administration and effect to corresponding ‘original’ medicines that are developed through research by originator companies. Thus, where the originator company conducts the research and testing to develop the original medicine (being the ‘originator’ or, for patent purposes, ‘inventor’ of the medicine), the generic company avoids to a large, if not complete, extent such research and testing (and the associated costs) and merely bases its corresponding product on the original medicine, commercialising it as a generic medicine. As most of us would know, generic medicines are generally somewhat cheaper than original medicines, arguably at least partly by reason thereof that the generic companies do not have to recover, through their commercialisation, any research and development costs (which the originator has, and on economic principles should be allowed, to do).
Naturally, an original medicine would, in most cases at least, be the subject of a patent, typically insofar its active chemical agent is concerned. In some cases, such an initial patent for an original medicine could be followed up by further patent applications (and, in South Africa, routinely by granted patents) directed to additional aspects of the active agent, chemical variants and/or particular formulations and/or uses thereof (within limits of formal allowability at least, but also, one would hope, on the basis of bona fide prima facie patentability). Such additional aspects may have resulted from further refinement, research and development, and the like. The argument is, however, then that patents granted on such subsequent applications could serve further to protect essentially the same original medicine, extending the period over which it is protected beyond the 20 year period that is/was granted by the initial patent (for interest: this practice is generally labelled ‘evergreening’ of patent rights). Whilst, in effect, evergreening might be occurring in some cases, one must keep in mind that if the subject matter of such a subsequent application satisfies, prima facie, the requirements for patentability, it would be difficult to argue that it would be unethical, purely from a patenting perspective, to pursue patent protection for such subject matter and, in South Africa, obtaining a patent for it. It would of course be improper, where the subject matter of such subsequent patent applications is not patentable over that of the first patent, to allow the subsequent application to proceed to grant and give the proprietor thereof a footing for protecting subject matter that does not prima facie qualify for the protection that is regarded, in turn, as prima facie valid. Similarly, it would be frowned upon to pursue, in the first place, patent protection for subject matter for which a prima facie case for substantive patentability cannot be made out. This is particularly relevant in a sector as essential as the health sector. The argument is then that public health and economic considerations related to public health (manifesting particularly in the cost of medicines) necessitates substantive examination of the subject matter of patent applications, at least in the pharmaceutical sector, to ensure that the public is protected against undeserved ‘evergreening’ practices. One should keep in mind, however, that if the differences in subject matter between the initial and subsequent patents are so trivial that these differences are unpatentable, the subsequent patents would in any event be unenforceable when tested in a court of law, or even during the pre-litigation phase considering that it would be questionable to proceed to attempt enforcement where a dangerously vulnerable argument in favour of patentability is to be advanced. However, if a prima facie sustainable argument of patentability can be sustained, however, the filing of a patent application for related though different subject matter would, arguably, be justified.
Necessarily, there are conflicts between the various perspectives that have been advanced in this article, in that where one perspective supports a case for the implementation of patent examination on the basis of public health interests, the other makes out a case less in favour of such implementation on the basis of economical interests. More particularly, where the economics of public health may suggest justification for implementing substantive patent examination, the potential for prejudice to other technology areas (particularly those in which research and development actively occur in the absence of technological competition, the existence of which would, arguably, have justified implementation) due to foreseeable difficulties in effecting implementation suggests otherwise, for the moment at least.
What can be said then is that the debate surrounding patent examination is clearly one that is multi-faceted and complicated and not one which can be approached and concluded superficially. Each of the perspectives advanced herein has been so advance merely superficially and necessarily much more detailed attention must be paid thereto in deciding on the implementation of patent examination, or not. If the decision is eventually (and hopefully not prematurely) taken, in principle, that South African patent applications should be subjected, in some form or another, to substantive examination of their subject matter, it would be wise to tailor the practice according to which such substantive examination is carried out such that it sits comfortably with the interests of as many sectors as is practically possible and that the patent system itself is not sacrificed on the altar of the considerations of one sector at the cost of other sectors. There are various models to consider in this regard, which are not discussed here. Overall, it is necessary to appreciate that a patent system must still serve its ideological basis to the benefit of its territorial economy.