Examining examination in a developing country

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Pieter Visagie examines the examination practice in South Africa and arguments to keep in mind in considering moving to substantive examination.

A question that has elicited some debate in South Africa recently, particularly since we joined the BRIC group of countries (or Brazil, Russia, India and China) to form BRICS, is whether or not the South African Patent Office should implement substantive examination. 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.

Background

Whilst, in terms of the South African Patents Act, a patent may be granted for any subject matter which is not explicitly excluded from patentability and which complies with the requirements of substantive patentability (novelty, inventiveness and industrial application), the subject matter of a patent application is not examined as to patentability before a patent is granted therefore. Examination is only as to form. A granted patent is also regarded as prima facie valid and enforceable, although it is possible for any person to apply to the Commissioner of Patents for the revocation of a granted patent, inter alia on the basis that the patent should not have been granted in the first place, eg, on the basis that its subject matter is, in fact, not patentable.

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 it), 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 patentability is weak. Naturally, granting exclusive patent rights vis-à-vis subject matter that was, in the first place, not entitled to such rights cannot be supported in principle. 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, it would appear that practicing substantive patent examination would be supportable.

From another perspective, it is worth bearing in mind that the ideological basis of the patent system is to cultivate and stimulate research and development, desiring to effect competition between businesses not on the basis of business models and brands alone, but more prominently on the basis of technology. Thus, whilst the monopoly that is afforded by a granted patent 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, the existence of the monopoly necessitates from competitors confronted with the patented technology to employ their own ingenuity to remain competitive. Looking at it this way, 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. This suggests an even stronger desirability for substantive examination of the subject matter of patent applications to ensure that the available monopoly is not granted lightly.

Patent applications

There are, however, additional 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 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 utilization 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 finalizing 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.

The Brazilian experience

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 finalizing the prosecution of patent applications within less than between five and ten 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, 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 realization or refusal of the granting of rights to applicants could also result in their business interests being prejudiced. Surely, this would not benefit, but could in fact seriously impede economic progress in a developing country, at least insofar as such progress could have been assisted by a properly functioning patent system, albeit one that does not practice substantive examination.

Remaining with Brazil, for interest, statistics of the World Intellectual Property Organization show that the number of patent grants finalized by Brazil’s patent office 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%.

These statistics appear to support the point 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 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 patent rights to protect their investments, at least insofar their prima facie validity can be upheld.

In a developing economy one should surely favor 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 be realized if the industry allows it.

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 appears 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.

Résumé

Pieter Visagie,

Partner in the Patent Prosecution Department at Adams & Adams

Pieter is a registered patent attorney and a partner in the patent prosecution

department at Adams & Adams. He holds a technical degree in chemical engineering, dealing with the local and foreign patent portfolios of a number of prominent South African companies in the chemical, chemical engineering, nuclear fuels and mining explosives fields. Pieter’s practice further includes conducting due diligence and freedom to operate searches and analyses in regard to patents. His biography can be found at http://www.adamsadams.com/index.php/about/our_people/pieter_visagie/