1998 South Africa Court case on compulsory license of patent (request)

[James Love <love@cptech.org>]

Richard Wilder from WIPO has kindly brought to my attention a
1998 Supreme Court decision in South Africa, where a request for
a compulsory license was denied, under the South African Patents
Act.  The cite is:

Syntheta (PTY) LTD (formerly DELTA G SCIENTIFIC (PTY) LTD) v
JANSSEN PHARMACEUTICAL NV AND ANOTHER
Supreme Court of Appeal
Harms JA, Scott JA, Zulman JA, Plewman JA and Farlam AJA
1998 September 11, 21, Case No. 449/96

                        
The case involves a request by Syntheta, a subsidiary of
Sentrachem Ltd, a large chemical company, to license a patent for
Triazole Derivatives, apparently for use in agriculture.  The
patent was old, and had expired or not been filed in many
countries, but had been extended in South Africa.  The applicant
wanted to manufacturer for export markets, where the patent was
not in effect, but apparently would not be selling its product in
South Africa itself.  Syntheta made the patent owner an offer of
a royalty of six percent, and then applied for the compulsory
license under the South African Patents Act.  The court rejected
the application. 

The opinion of the court addressed several deficiencies in the
application by Syntheta, including the apparent lack of evidence
that the license would benefit South African consumers (the
product was intended for export only).  There was also a
discussion of the reasonableness of the 6 percent royalty.  Here,
citing an earlier 1973 case involving Hoffmann-La Roche, the
court said that the calculation of a reasonable royalty would
normally take into account three factors (a) the patentee's
expenditures on research and development, (b) the patentee's
expenditure on promotion; and (c) a servicing of the capital
element to allow a reasonable return on the capital employed in
(a) and (b).  The applicant for the compulsory license was
criticized for not providing any analysis in support of its claim
that 6 percent would be reasonable.

Richard Wilder notes that this opinion was based upon the South
African patent law before the 1997 amendments (Even though it was
decided in 1998).

I am not a lawyer, and others may have useful insights that they
may want to share with the list.  One message that I got from the
opinion is that the South African Supreme Court of Appeal expects
the compulsory licensing application to have a decent record for
the request.  Indeed, it seemed from the Court's opinion that the
applicant provided the court with little evidence of the abuse of
the patent right, which was the legal basis for the granting of
the compulsory license.  The issue of local working of the patent
was rejected, on the grounds that importing satisfied working
requirements.  On the issue of compensation, the Court did not
seem to set a particularly specific standard, but it did expect
the applicant to at least provide a rationale for the particular
royalty rate that it requested.  ("A bald assertion did not
establish facts necessary for a legal conclusion.")  Also, the
Court's finding was clearly influenced by the fact that the
application was for a license to export the product commercially,
and did not even involve any domestic use in South Africa.

The decision in this case was based upon the South African
Patents Act.  If the South Africa Medicines Act becomes law, it
would be possible to have a different framework for licensing of
medicines (Just as the US has many different approaches to
compulsory licensing, depending upon that particular legal
framework being used), but in any case, one imagines
applicants would need good record to sustain a court
challenge.   


  Jamie

-- 
James Love / Director, Consumer Project on Technology
http://www.cptech.org / love@cptech.org
P.O. Box 19367, Washington, DC 20036
voice 202.387.8030 / fax 202.234.5176