Section 56(2)(e) of the South African Patents Act sets out circumstances in which the rights under a patent are deemed to be abused, and on the basis of which a compulsory licence may be granted.
The existence of section 56(2)(e) in the light of the provisions of Article 27.1 of the TRIPS Agreement is justified on the following basis:
(a) Section 56(2)(e) does not result in the forfeiture of the patent concerned, so that patent rights continue to be available to the patentee; nor does it results in the patentee being deprived of the right to exploit the patent, so that patent rights continue to be enjoyable by the patentee, as provided for in Article 27.1 of the TRIPS Agreement.
(b) In terms of section 56(5) as amended by Clause 45 of the Intellectual Property Laws Amendment Bill No. B1/97, any compulsory licence granted will be non-exclusive, so that the patentee is not deprived of his right to exploit the patent, by importation of patented products or otherwise.
(c) In terms of sections 56(4) and (7) any compulsory licence granted may be subject to conditions, including a condition precluding the licensee from importing patented products into South Africa in competition with the patentee, and including the terms and conditions (e.g. appropriate remuneration) usually stipulated in voluntary licences to ensure appropriate reward to the patentee. Accordingly, the patentee will continue to enjoy benefits under the patent.
(d) Mere importation of patented products by the patentee does not provide a ground for section 56(2)(e) to be invoked; the fact of importation has to be coupled with the fact of excessive pricing in comparison to the price in the country of manufacture. Section 56(2)(e) does not entail discrimination on the basis of mere importation; the abuse being addressed by section 56(2)(e) is importation coupled with excessive pricing.
(e) Once the abuse addressed by section 56(2)(e) ceases to exist, e.g. if the local pricing of imported products is no longer excessive, the compulsory licence shall be terminated in terms of section 56(4)(c) as amended by Clause 45 of the Intellectual Property Laws Amendment Bill.
(f) Section 56(2)(e) is in line with the provisions of Article 5 of the Paris Convention, in particular Article 5(2).
(g) Imported patented products are not dealt with less favourably than domestically produced patented products. Section 56(2)(c) provides that patent rights are deemed to be abused where the demand in South Africa for the patented product is not met to an adequate extent and on reasonable terms. This subsection is applicable to domestically produced patented products; if the demand for such articles is not met on reasonable terms (e.g. as regards price), the patent rights will be deemed to be abused.
