A Question Of Balance In IP Rights In South Africa

DURBAN, SOUTH AFRICA – There are human rights issues with intellectual property, Mmboneni Muofhe, deputy director-general for international cooperation and resources at the South African Department of Science and Technology, said at an industry-driven conference here this week.

“Science has to be accessible to everyone who needs it,” he said. “The best thing” countries can do, not only South Africa but every nation, is “to make sure the quality of life of our people is improved.”

Muofhe spoke at the 17-20 November conference in Durban entitled, “Creating and Leveraging Intellectual Property in Developing Countries.” This was the second such conference, the first having been held in 2011. The conference will be followed this week by an entrepreneurial management of IP “bootcamp” providing basic training on use of IP for business and investment purposes.

Other related issues that arose during the week were industry and investor concerns that South Africa might follow India’s lead on patent policy, and encouragement that patent “evergreening” be allowed.

The conference comes at a relevant time, as South Africa is actively working on a new national IP policy, expected to be completed sometime next year. The draft IP policy has recently become public, and has drawn applause from public interest advocates and concern from foreign business, which fear some provisions aimed at ensuring access might discourage investment.

South African Trade Minister Rob Davies told the conference the IP policy will give South Africa an overall framework, and that the policy is about “striking a balance.” It balances between the rights of innovators and social rights, such as the rights of communities, he said.

In his remarks, Muofhe highlighted the many basic needs of society, such as clean water, transport and telecommunications, and said that as the country talks about IP rights and asks how to balance it with societal issues, it must ask how “that particular spot on the equilibrium can be found.”

“Sometimes when we engage on issues of IP,” he said, “it gets emotive because it is emotive. It gets rough because it is rough.”

Globally, he said, the amount of money that has been poured into research is “so huge” that just one or two companies alone have spent more than the GDP of many countries. It’s all in the quest for knowledge, he said, but in the end it is about how to help people.

“There are a lot of realities” in both developed and developing countries, and “we cannot close our eyes on them.”

Earlier in the week, Muofhe said it is important to think about IP for the benefit of all mankind, and to “make sure when you say you’ve got a patent, you’ve really got a patent.”

The economic value of IP was strongly promoted during the conference, and the question of when a patent is the best option came up at times, as some described concerns with high costs, complexity of process, uncertainty of value, and limits on access that patents can present.

South African Science and Technology Minister Derek Hanekom told the conference IP rights are vital in the country’s shift to from a resource-based economy to a knowledge-based one. And, he said, “The challenge for developing countries is to reform their IP regimes, while limiting the potentially adverse effects of improved protection, and to facilitate the access of local entrepreneurs to the IPR system.”

“The greatest level of economic efficiency occurs with the widest possible dissemination of new knowledge,” Hanekom said, but added that making new knowledge openly accessible reduces the incentive to produce that new knowledge.

“It is therefore crucial to ensure that the fine balance between research, knowledge dissemination and exploitation is maintained,” he said. “Many new life-changing products, especially pharmaceutical and biotech products, would simply not have made it to the market without adequate IP protection.”

Hanekom noted that patenting is not the only IP management tool, and said traditional or indigenous knowledge “plays an important role in South Africa’s intellectual property.”

Yonah Seleti, chief director of the Indigenous Knowledge System in the South African Department of Science and Technology, said on a panel that the country emphasises human rights because it is at the highest level in its Constitution, above economic and social rights. This has led to the imperative that marginalised communities be treated equally, including in relation to their indigenous knowledge, he said.

Sherry Knowles, a consultant and former pharmaceutical industry lawyer, played the role of patent evangelist, arguing that as countries (like South Africa) consider ways to make the IP system work for them, “don’t throw the baby out with the bathwater” by undermining the patent system. “If you want new drugs, you have to have laws on patents,” she said, as it costs a lot to develop a drug. For Knowles, access to medicines can be addressed in a separate system.

India as Model?

A recurring topic during the week related to India’s treatment of patents. South Africa’s new IP policy is seen as reflecting aspects of the India law, leading northern industry to actively encourage it to consider alternatives.

India has come under fire from the developed country pharmaceutical industry for several actions over the past 18 months that they view as unfavourable to them.

The event featured panel after panel on how developing countries – and South Africa in particular – can use IP rights better, with a primary focus on patents. The event was organised by several South African government and quasi-government agencies, with private sector sponsors such as Pfizer.

Prof. Stephen Sammut, a senior fellow at Wharton School of Business (Pennsylvania) and Burrill venture partner, said countries with the best intentions of establishing IP laws have to face many hurdles, and may end up creating a lot of exceptions to the rules they are trying to create.

He said India has been a template for South Africa’s effort to revise its national IP policy, but that India put in “a way of discriminating” against patents related to pharmaceuticals. India expected an explosion of innovation after implementing its patent law in 2005 to comply with its World Trade Organization commitments. And around 2005-2007 there were some 70 venture capitalists making investments in India.

But, Sammut said, the way the law was written and the way courts have interpreted it, has led to patents being overturned, denied, and a compulsory licence being issued. Now there are only two companies doing discovery research in India, and the foreign investment funds have dropped from 70 to five, he asserted.

“I’m just here to wave the flag: Be careful what you are trying to accomplish,” Sammut said. “If you are trying to accomplish things that undermine patent rights, you are probably going to do harm you’re not expecting.”

He also said he could not think of “anything more destructive” than a court order overturning a patent on something investors were counting on.

There did not appear to be any Indian officials or civil society at the conference to offer a counterpoint, as there was at an industry event last week in New York (IPW, Developing Country Policy, 18 November 2013).

Sammut will lead the entrepreneurial IP “boot camp” at the conference this week.

Mark Guetlich, senior counsel for international policy and government affairs at the US Patent and Trademark Office (USPTO), said the right to IP is in his country’s Constitution, but that accessibility and affordability “are vigorously defended.”

World Intellectual Property Organization Deputy Director General James Pooley, who is responsible for patents, spoke about the importance of foreign direct investment, enforcement and quality of patents. Now that capital flows freely around the world, investors need assurances on IP rights, he warned.

Enforcement must ensure value will be protected and will be examined by a judiciary that understands how to assess IP issues. “We want patents to issue for national systems that achieve what we’re after but don’t interfere with other social obligations we have – so quality really matters,” he said.

But there is no one size fits all approach to an IP system, and it is necessary to take local issues into account, said Prof. Tobias Schonwetter, director of the Intellectual Property Unit at the University of Cape Town Department of Commercial Law. India’s legislation is aimed at increasing access to expensive medicines, and should be judged based on whether it has increased access to medicines, he said.

Sammut retorted, “If people in India were getting all the drugs they need from their companies, I would concede your point.” But, he claimed, people in India pay more for Indian generics than Americans pay for Indian generics sold in the US. The law has “driven innovation out of India,” he said, and there must be indigenous research on the disease burden affecting each particular population.

Todd Dickinson, executive director of the American IP Lawyers Association (AIPLA) and former director of the USPTO, cautioned: “You need to look carefully at other countries’ experience than India.”

Evergreening Debate

A key issue in the India court decision that the conference attempted to address was “evergreening,” that is, allowing patents on follow-on variations of existing drugs. India’s court ruled in the case of one drug that it was not patentable because it was not a genuine innovation (and therefore didn’t meet the criteria for a patent). Examples of evergreening are changes to the form of the medicine or a new combination of existing medicines.

Pfizer Chief Patent Counsel Roy Waldron said opposing this activity is counter-intuitive if a country wants innovations on existing medicines.

“I think if you have a drug that has new uses, you want to encourage that as much as possible,” he said, and encourage modifications on discoveries that came before. “That’s just as valuable and … can make the difference between life and death.”

Waldron said the term evergreening “has been used to tarnish a whole group” of innovations. The patent system should encourage that activity, he said, and it is a “little bit of a malignment of what clinicians do every day.”

But a Cape Town representative of Médecins Sans Frontières (MSF, Doctors without Borders) countered from the audience, “If you doing something that is already known by industry, it is evergreening.” For instance, she said there is a repurposed drug for tuberculosis being used in Cape Town that costs 660 South African rand (about US66) per day, and MSF has asked for a price reduction.

“Just because you have a patent, don’t think that you have a right to charge exorbitant prices and affect the lives of people,” she said.

Waldron came back to say that “the only thing being protected is the new formulation. The basic compound is off-patent.” He said the company supports repurposing of drugs and asked to sit down and discuss off-label reproduction, but that they must be careful with safety authorities.

The MSF representative said they have tried to sit down with Pfizer, and asked if Pfizer is working to repurpose this particular drug, which Waldron said he could not answer.