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POTENTIAL FORCING OF PATENT LICENCES BY GENERIC COMPANIES IN SOUTH AFRICA

South African procedures relating to patents coupled with provisions in the South African Patents Act1 and the nature of legal proceedings involving patents can, if used correctly by manufacturers of generic pharmaceuticals, have the effect of forcing a license on a holder of a pharmaceutical patent under the patent. Given the commercial value to a generics manufacturer of being "the first generic in the market" the above are being used more extensively and with devastating effect.


POTENTIAL FORCING OF PATENT LICENCES BY GENERIC COMPANIES IN SOUTH AFRICA
By Llewellyn Parker

South African procedures relating to patents coupled with provisions in the South African Patents Act1 and the nature of legal proceedings involving patents can, if used correctly by manufacturers of generic pharmaceuticals, have the effect of forcing a license on a holder of a pharmaceutical patent under the patent. Given the commercial value to a generics manufacturer of being "the first generic in the market" the above are being used more extensively and with devastating effect.

Procedurally, South African patent applications are not subjected to a substantive examination as to the novelty and inventiveness of the invention they relate to and, if the application is formally correct, it is accepted and a patent granted within nine to twelve months after filing, long before corresponding applications in substantive examining jurisdictions are. If the claims of corresponding patent applications are amended because of prior art that affects their novelty and/or inventiveness adversely then the South African patent claims should be amended accordingly for the same prior art is equally relevant in South Africa. In almost all cases though they are not and, consequently, such patents are invalid and while they can be amended at any time to render them valid2 they are not enforceable until they are so amended3.

The nature and relatively low cost of legal proceedings involving patents and the inevitability of an appeal thereafter means that it can take upwards of three years for finality to be reached. In this time a judgment cannot be enforced4 and, if the patent sought to be enforced is invalid then the courts will not grant an interim interdict or injunction. Consequently a potential infringer has a three-year window within which to exploit the patent before an interdict stopping further infringements can be enforced. Furthermore, an interdict will not be granted after a patent has expired so the infringement occurs in the last three years of the patent term then an infringer cannot be stopped from marketing an infringing product and a patentee will be left with a claim for damages only and, depending on the nature of any amendments needed to cure an invalidity in the patent, damages may only run from the date on which the amendment was effected5 which could be after the patent has expired.

With regard to damages, in South Africa damages are awardable as either the actual damages suffered by a patentee as a result of an infringement or they are based on a calculation using a notional reasonable royalty6. The latter is more often than not preferred because of difficulties in proving actual damages particularly when competing products are already in the market place and where a patentee does not want to disclose its cost and profit structures.

The effect of the above is that a generics pharmaceutical manufacturer can, in the event that a South African patent for a particular, popular pharmaceutical has not been amended to conform to claims as allowed over prior art citations in substantive examining jurisdictions, enter the market in South Africa up to three years before the patent expires without fear of having to withdraw its product as a result of an interdict for patent infringement being granted against it. In addition the only sanctions the generic manufacturer is likely to face is having to pay damages to the patentee for all or part of the early entry period which are likely to be calculated on the basis of a notional reasonable royalty and legal costs which, in pharmaceutical patent cases involving infringement, an application for revocation of the patent on the grounds of its invalidity and opposing any application to amend the patent to restore its validity would amount to about 400 000 to 500 000. Given the value to a generics pharmaceutical manufacturer of being the first generic in the market, this is a small price to pay and could account for a recent tendency for generic pharmaceutical manufacturers to become increasingly aggressive in South Africa.

A patentee confronted with an attack on the validity of its patent during the last three years of the patent term has very few options open to it to counter the above scenario and, rather than opposing the application, applying to amend the patent and then enforcing it at a cost of between 400 000 and 500 000 a partial capitulation in granting the generics company a licence becomes a very real and sensible option. Alternatively patentees can take the initiative and ensure that where they have allowance of patent claims in a substantive examination jurisdiction like the European Patent Office or the United States and have a corresponding South African patent the claims of the South African patent are amended to conform to the European or United States claims. The effect of this is to render it difficult if not impossible for a generics pharmaceutical manufacturer to attack the validity of the South African patent and it will also increase substantially the chances of a patentee obtaining an interim injunctive relief in the event of patent infringement.

Footnotes:

   

1

Act 57 of 1078

2

s51(1) of the Patents Act

3

s68(a) of the Patents Act

4

r49(11) of the Uniform Rules of the High Court of South Africa

5

s68(b) of the Patents Act

6

Ss65(3)(c) & 65(6) of the Patents Act

 

 

 

 

 

 

 

 
 
   

 

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