IP, exchange control and 'capital' in South Africa

Note: this post has also been posted on the Afro-IP weblog but, because of its subject-matter and given that very few IP Finance readers also follow Afro-IP, it seemed appropriate to repost it here.

Back in February 2010 a South African High Court ruled that a trade mark assignment entered into without prior exchange control approval from the South African Treasury did not contravene the South African Exchange Control Regulations. The South African Reserve Bank had previously required treasury approval from any South African entity wishing to transfer intellectual property offshore.Without approval the transfer of rights was null and void.

In Oilwell (Pty) Ltd v Protech International Limited (noted by Afro-IP here) the Supreme Court of Appeal (SCA) confirmed that foreign exchange approval was no longer required for an assignment of trade marks. The court based its decision on an interpretation of the term 'capital' in the Exchange Control Regulations, which provide that any transaction whereby capital is exported from the republic requires exchange control approval. The SCA held that a trade mark does not constitute 'capital' as envisaged in Regulation 10(1)(c) and that, accordingly, foreign exchange approval was not required to transfer trade marks offshore.

In response to this, the exchange control authorities have now amended the regulations specifically to state that 'capital' does include an IP right, whether registered or not, and that “exported from the republic” includes the transfer of an IP right to a person who is not resident in the Republic of South Africa. This means that it is again necessary for exchange control approval to be obtained when any intellectual property is assigned to an offshore entity.

Source: "Exchange Control Regulations amended in response to Oilwell decision" by Megan Reimers (Spoor & Fisher, Pretoria), Trademark Law Review, 30 July 2012

RSA Govt has turned down the music - Excon Approval

 Protecting the pot at end

The South African government has reacted to last year's Oilwell decision which had the effective of declaring that IP transfers did not require exchange control approval. In that case an attempt to void a trade mark assignment for lack of exchange control went all the way to the Supreme Court of Appeal - this blog carries the news here together with comment that celebration, for those who advocate a less restrictive environment, ought to have been nervous. And correct that turned out to be.

The government, without any consultative process, has unilaterally amended the exchange control regulations to include "intellectual property" within the definition of "capital" which has the effect of requiring all IP transfers to seek exchange control approval from the government. See Afro-IP report here.

The difficulty is that IP has not been defined and drafted to specifically include both registered and unregistered IP. This widens the scope of the regulations to possibly include amoebic concepts such as reputation, know-how and personality rights. This could mean, for instance, that a local talented footballer would need exchange control to move to join Manchester United because image rights are being "exported". There is also the question of whether IP can in fact be transferred in the sense of being moved from one country to another in the same way that other "capital" envisaged by the regulations ie money, can. The Oilwell judgement considered this at length.

The upshot is that this latest move is unlikely to be the end of the tussle. For those doing deals or creating IP in RSA, if you need to get IP out of the country, this requires the extra step of getting excon approval which, by the way, will be granted if the government is satisfied that value for value has been exchanged ie the price is fair.

RSA's TIA - the resurrector of innovation

South Africa's new Technology Innovation Agency (TIA), which has been formed to support the commercialisation of local research and development, was formally launched at the end of October with a budget of R410million (approx GPB 43mill) according to this report in Creamer Media's Engineering News. The news is hot off the heels of the enactment of RSA's legislation designed to commercialise innovation from public funding.

TIA chairperson Dr Mamphela Ramphele said that the agency would strive to turn "the valley of death" between research and product commercialisation into one of "resurrection"

The legislation and TIA have high ideals but borrowing from Tennyson's account of the famous doomed charge does sound ominous:

 Half a league, half a league,

  Half a league onward,

All in the valley of Death

  Rode the six hundred.

'Forward, the Light Brigade!

Charge for the guns' he said:

Into the valley of Death

  Rode the six hundred....

The Afro-IP LinkedIN Group has 99 members and is calling for its centurion. Details here.

South Africa: content war continues with hunger strike

Readers may recall a story that broke a few months back describing how the content industry in South Africa formed a coalition to protest against the national broadcaster's IP and payment policies. The coalition staged an uprising which played a big part in forcing SABC board resignations and them begging for a government bail out. The story continues with a hunger strike.

"Accusations, counter-accusations, hunger strike, protests, name-calling, defiance, denialism, late payments, delayed procurement, deferrals and axing. These are just some of the fundamental characteristics of the local content ‘battle for survival' currently being fought between the SABC and the TV Industry Emergency Coalition (TVIEC). And it is turning nastier day after day." (Issa Sikiti da Silva).

People have learnt how to fight for what they think is right in RSA. Whether a hunger strike is appropriate in this situation seems inappropriate to question.

South Africa: Content industry marches

Following on from an earlier post "Content Industry v SABC", the protest march took place earlier today with ScreenAfrica providing this report: Huge turnout for anti-SABC march

"During the march protestors wielded dozens of banners with slogans that read: “Pay up – it’s the right thing to do”, “Stop actors being cheated”, “Rest in Peace South African programmes”, “SABC squanders while film workers suffer”, “The shows must go on”, “No show with no dough”, “Programmes not perks”, “Lights, camera , no action”, “Stop pulling our strings”, “Where is South Africa’s best content?” “Our industry can’t survive on air” and “Bored with the Board”.


A banner representing the Independent Producers Organisation (IPO) read: “IPO fighting for sustainability and fair trade, quality local content, ownership of IP, and respectful relationships”.

A representative from the South African Scriptwriters Union (SASWU) talked about the issue of residuals to actors and musicians. She also said that intellectual property (IP) should reside with the creator. “We want a standard contract to protect writers. I’m standing here as someone wanting to make a living in this industry.”

South Africa is of course a country where mass action has, historically, been very effective in producing results. SABC's response is therefore eagerly awaited.

Content Industry v SABC

South of the equator almost an entire content industry is taking on a national television channel by staging a mass protest on 4 June 2009 over alleged unpaid fees and unfair business practices and terms, some relating to IP ownership. The South African Broadcasting Corporation (SABC) finds itself portrayed as a dysfunctional non paying bully by the Television Industry Emergency Coalition (TVIEC) a coalition of content providers who have banded together to address a problem they say threatens their very existence. Depending on which news source you read (egs here, here and here) the total amount allegedly unpaid ranges from $5 million to $7 million. The TVIEC and SABC have asked the government to intervene. Afro-IP's comments on the IP aspects of the TVIEC's open letter to government may be found here.  Since then news of the mass protest has surfaced. It seems that government has little choice but to intervene because a defunct SABC (SA's equivalent of the BBC) has significant implications for the South African public. One hopes that a bail out does not come at the expense of an independence the SABC has done well to achieve to date.   

Needletime rights introduced to South Africa

Needletime refers to a performer’s right to receive a royalty for the broadcast, to the public, of a sound recording embodying a performer’s performance. With the introduction of the Performer’s Protection Act, the amendment of the Copyright Act and the promulgation of the Regulations on the Establishment of Collecting Societies in the Music Industry, performers are now entitled to a royalty for their performance embodied in a sound recording. These royalties may be collected by the performer and/or copyright owner or, alternatively, on behalf of the copyright owner and performer(s) by a “collection society” who administers their rights. The latest development in this law is the recent accreditation of SAMRO (South African Music Rights Organisation) as a collection society for needletime rights royalties. Collecting societies collect royalties from broadcasters and distribute the monies to the performers and copyright owners as per an agreement between the parties. Previously, the SA Copyright Act protected only copyright owners (usually the recording company) and royalties claimed were paid to the copyright owner of the sound recording and not the performer.

Does anyone know what the applicable royalty rates are for needletime rights? Is it possible to benchmark?

For a short history of needletime rights click here.

Some tatoo artists have been arguing that their customers also deserve needle time compensation...

South Africa: Anne Pratt - latest decision on exchange control

The initial Anne Pratt case (Anne Pratt v First Rand Bank Limited [2004] 4 All SA 306 (T)) caused quite a stir amongst IP professionals in RSA dealing with the transfer and licensing of RSA IP assets with foreign based companies. The decision appeared to support an earlier decision in Couve (Couve and Another v Reddot International (Pty) Ltd and others 2004 (6) SA 425 (W)) that the transfer of assets (including IP assets - albeit that the subject matter of the Anne Pratt case was not IP) to a non-resident without the approval by the Exchange Control Department of the Reserve Bank was void. The Couve decision appeared to conflict with a 1981 decision (Barclays National Bank v Brownlee 1981 (3) SA 579 (D)) which concluded that a contravention would not result in a nullity. In the initial Anne Pratt case though the court held that exchange control had been granted. Anne appealed and, on 12 September, failed.

The decision goes into some depth on exchange control rulings and the practices relating to them in respect of the sale of securities. Of relevance to this blog appears to be the observation on "onus" which the court felt rests on the plaintiff ie to adduce and prove that exchange control approval was not obtained. Proving a negative is never easy and this may provide some comfort to those involved in IP transactions (perhaps even a simple trade mark assignment) where exchange control was not been obtained and who may fear the transaction void. Nonetheless, there now seems to be a SCA (Supreme Court of Appeal) decision in RSA which does not disapprove of the earlier Pratt cases (endorsing Couve) even though the SCA was not specifically asked, it appears, to adjudicate on the ramification of a failure to obtain exchange control approval.