Member Article

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 two articles 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 Burrell1 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.

References

1 Burrell’s South African Patent and Design Law 3rd Ed. (1999) Butterworths, Durban 

2 King v SA Weather Service (716/2007) [2008] ZASCA 143

OWNERSHIP OF PATENTABLE INVENTIONS AT ACADEMIC INSTITUTIONS (PART 3)

This is the last of three articles dealing with the Intellectual Property Rights from Publicly Financed Research and Development Act 51 of 2008 (‘the Act’)  and the guideline (‘the Guideline’) that has been issued by the newly created National Intellectual Property Management Office (NIPMO).  The first article was simply a general overview. The second looked at the meanings of the terms ‘intellectual property’, ‘publicly financed’ and ‘research and development’, in the context of the general rule which is that any intellectual property that flows from research and development which has been publicly financed belongs to the recipient of the funding.  In this article we made the important point that the concept of public financing includes not only direct funding, for example a research grant, but also indirect funding, for example a university employee’s salary. We also looked at the concept of a university employee acting within the ‘course and scope’ of their employment with the university and whether the Act may conflict with the provisions of the Patents Act (Act 57 of 1978). In this article we’ll apply what we’ve discussed thus far to particular scenarios.

 

The research and development was publicly financed

It seems clear that if the requirement of falling within the course and scope of employment has been met and the research and development was directly or indirectly financed by public funding, then the university will be the owner of the intellectual property.  This will be the case whether the researcher is a part-time employee, a researcher on sabbatical at the university, or a visiting researcher or student.  In the case of a contract worker, the university must ensure that the contract stipulates that intellectual property arising from the contract belongs to the university where the research and development contracted was directly or indirectly financed by public funding.  The contract should also set out the specific course and scope of the research and development to be performed by the contact worker.

But what if the research and development was publicly financed but fell outside the course and scope of the employee’s employment? It is probably rare that where a university has received public financing for the direct costs of the performance of research and development undertaken by a researcher that a researcher could argue that the research performed with the means of this funding is outside of the course and scope of his employment.  However, in regard to the use of public money to pay indirect costs for salaries, facilities or overheads etc. it is possible that a researcher might be able to argue, depending on the circumstances, that the actual research and development that was performed with the use of those resources was in fact not within the course and scope of his or her employment.  In this case, the requirement that the intellectual property emanating from this research and development by virtue of the indirect costs that were publicly funded belong to the university may be in conflict with the Patents Act.  

Take for example, a case where a researcher is being paid a salary by the university to teach full-time in the surgery department of the university.  There is nothing in his employment contract precluding him from performing research and development outside of his teaching position.  He performs certain research and development activities using publicly financed university facilities, outside of the hours that he is required to lecture, and in so doing, generates a patentable invention.  In terms of the Act, the university owns the invention, since indirect costs of the research and development were covered by public financing.  However, it might be argued that since he was employed for a specific purpose, that is to lecture, and not to innovate, the invention falls outside of his course and scope of employment.  In terms of the Patents Act, he cannot be required by contract to assign his rights in the invention to the university.

The research and development was not publicly financed 

Obviously, where a researcher develops intellectual property outside of the course and scope of his employment (i.e. in his or her own time) and without the use of any publicly financed resources, direct or indirect, the researcher will own the intellectual property and the Act does not apply.  On the other hand, in a case where there has been no public funding to perform the research and development, direct or indirect, the Act does not apply either, and the question of whether the university as the employer owns the patentable invention depends on whether the invention was made during the course and scope of employment and on 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 research and development cost is reimbursed on a ‘full cost’ basis

In a situation where a researcher employed by the university is also employed by a spin-off or start-up company of the university, then if the company funds the research and development on a full-cost basis, the Act does not apply.  However, where the research is within the course and scope of employment of the researcher and where public finance from the university has been used, whether direct or indirect, then the university may be owner, or co-owner of the intellectual property. 

The research and development is co-financed

Where there has been co-financing, part public and part private, of the research and development of a researcher where the research and development is within the researcher’s course and scope of employment at an institution, then in terms of the Act there may be co-ownership of the intellectual property by the institution and the private entity funding, if certain additional requirements have been met.  The additional requirements are fairly onerous and are as follows:

• the private entity must have contributed resources of some kind, for example background intellectual property;

• there must have been joint intellectual property creation (i.e. an intellectual input is required from the private partner into the creation of the intellectual property and not merely provision of finance);

• appropriate benefit sharing arrangements for the intellectual property creators at the institution must be in place; and

• The institution and private entity must conclude a commercialisation agreement pertaining to the intellectual property.

The researcher personally receives public funding

What about inventions emanating from public financing received directly by the researcher and not through the university?  The wording of the Act does not specifically address this situation.  The ambiguity arises from the definition of the term ‘recipient’, which is defined as ‘any person, juristic or non-juristic, that undertakes research and development using funding from a funding agency and includes an institution’.  The word ‘undertakes’ is defined in the Oxford dictionary as follows: to ‘commit oneself to and begin’ or to ‘take on’.  If the researcher receives the public funding directly and undertakes the research and development, according to this definition the researcher is the recipient and not the university.  Furthermore, in such a case, the invention may also not be considered to fall within the course and scope of employment of the researcher and therefore if a university tried to lay claim to ownership of these inventions they would fall foul of the Patents Act.  At a recent NIPMO workshop on ownership of intellectual property in terms of the Act in preparation for the publication of Guideline 4, it was proposed that where a researcher receives public funding directly and undertakes the research and development, the researcher, and not the university, is the recipient.

There are many different scenarios that may arise in respect to ownership of intellectual property by a researcher.  Although we hope that the discussion provided here will be of assistance, we are available to advise on ownership of inventions in particular circumstances that may not be covered in these articles.

JOANNE VAN HARMELEN: Patent Attorney in ENS’ IP Department ([email protected])