A business's intellectual capital, particularly its patent portfolio, is one of many factors which should be thoroughly evaluated prior to entering into a licensing agreement or undertaking a merger or acquisition. During such an evaluation, the following matters should be considered in view of the Patents Act (57/1978).

Patents are territorial in nature and only granted patents bestow exclusionary rights in an invention on its owner. No international patent exists (no international treaty or national law provides for it); rather, separate patent applications describing an invention must be filed in each jurisdiction where exclusionary patent rights are sought. Patent applications filed outside South Africa can be filed in South Africa via the Paris Convention for the Protection of Industrial Property (within 12 months of the date on which the first patent application describing the invention is filed) or the Patent Cooperation Treaty (within 31 months of the date on which the first patent application describing the invention is filed). These periods are non-extendible.

Further, all granted patents must be maintained and annual renewal fees are payable; a granted patent will lapse if a renewal fee is not duly paid. The Patents Act provides for a procedure whereby a patent which lapses due to the non-payment of renewal fees may be restored and a formal application to this effect must be filed with the Registrar of Patents. However, it is by no means a foregone conclusion that an application for the restoration of a lapsed patent will be granted and both the application and the circumstances surrounding the lapse must comply with certain peremptory provisions of the Patents Act. If a lapsed patent is not restored, a third party can make, use, exercise, dispose of, offer to dispose of or import the invention described therein. Here, the ex-patentee will have no recourse against the third party (insofar as patent law is concerned).

In addition, the exclusionary rights afforded by a patent are defined by and limited to its claims. The extent of these rights is affected by other granted patents or known technology (ie, the prior art) and a qualified patent attorney would be best placed to construe the claims of the patent in order to determine the true extent of the monopoly claimed.

Lastly, a thorough evaluation of a business's patent portfolio should also include a detailed technology landscape report on the patent portfolios of its competitors and the state of the technological field in general. A technology landscape report can, among other things, identify key players and emerging trends in a technological field and a party privy to this information will have a competitive advantage over its competitors.

Although this article highlights important points to be considered in a commercial transaction involving patents, it is by no means exhaustive. Every commercial transaction is unique and merits a thorough evaluation of the parties' patent portfolios.

For further information please contact Pieter Lombard at KISCH IP by telephone (+27 11 324 3000) or email (pieterl@kisch-ip.com). The KISCH IP website can be accessed at www.kisch-ip.com.

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