The Effect of the South African Patent Act on Access to Healthcare

Independent Research Essay
Athisten Cooper
321883
9/22/2014
The Effect of Patent Laws on the Access to Healthcare:
a Comparative Legal Analysis of Government Practice
in South Africa
Word Count: 8176

Table of Contents
Abstract 1
Preface to Independent Research Essay 2
Introduction 2
Chapter 1: Patent Laws and South Africa 3
 A Brief History On Patents 3
 A South African Context 5
 TRIPS 6
 The Doha Declaration 7
Chapter 2: Access to Healthcare 8
 The Constitution 8
 Social Movements 8
Chapter 3: A Legal Measure Available to Government 11
 Compulsory Licensing In South Africa 11
Chapter 4: Foreign Precedents On Licensing 14
 India- The Natco Case 14
 The United Kingdom 15
 The United States of America 17
Chapter 5: The Position Today 18
 'This is Genocide' 18
Conclusion 19
Bibliography 21

1
Abstract
Statistics South Africa's latest causes of death report highlights that the leading cause of
death in South Africa is TB, more than three times the death rate of HIV.1
TB has held the
position of leading cause of death in South Africa since 1997. These and other alarming
occurrences are what is fuelling the calls from civil society2
and other interest groups to
amend the South African patent system. The resultant pressures for patent reform have led to
the release of the Draft National Policy on Intellectual Property3
. This government policy
places at its epicentre the rights of citizens to access to healthcare. The publishing of the
Draft Policy brings to the fore concerns that highlight the position of many developing
nations. In particular, the barring of access of many underprivileged citizens to unaffordable,
or otherwise inaccessible healthcare, has been the focus of the patent amendment movement
since the inception of the agreement on Trade Related aspects of Intellectual Property
("TRIPS").4
The Draft Policy highlights many concerns facing South Africa as a developing
nation, both internationally- within the confines of the TRIPS agreement, and domestically by
way of the subsequent amendments to the Patent Act no 57 of 19785
in compliance with
TRIPS. These concerns show that the South African government is faced with a conflicting
task of balancing the rights of its citizens with its commitments under the TRIPS agreement.
Nevertheless the Draft Policy firmly enforces that South Africa should pursue a patenting
system that places its sovereignty above international pressures.6
Through this green paper
government openly argues that the need for compulsory licensing as a tool for providing
access to healthcare has never been greater.7
1
Statistical Release P0309.3 death report states that 10.7% of the total deaths 505 803 in 2011 were caused by
TB whilst 3.4% were caused by HIV.
2
see Joint Submission on the Draft National Intellectual Property Policy, 2013. 'MSF's, TAC's and SECTION
27's Interests, p.7.
3
notice 918 of 2013
4
The TRIPS agreement was concluded at the end of the Uruguay Round of the General Agreement on Tariffs
and Trade (GATT) in 1994, TRIPS was enacted into South African legislation by virtue of the 2002 amendment
to the Patents Act No. 57 of 1978)
5
Act 57 of 1978 as amended by the Patents amendment act, No. 59 of 2002
6
Chapter 7: Notice 918 of 2013 (Patent reform).
7
Chapter 2: notice 918 of 2013 (IP and Public Health) p. 20- 21

2
Preface to Independent Research Essay
In January of 2014 the Mail & Guardian headlined it's weekly newspaper release with an
article boldly titled 'This is genocide'.8
The minister of Health, Dr. Aaron Motsoaledi, stated
that a document had been leaked, revealing the Innovative Pharmaceutical Association of
South Africa's' (IPASA) attempts to launch a campaign to change public perception about
patent laws. The campaign 'is aimed at indirectly convincing the South African government
to strengthen, rather than weaken, patent protection for crucial drugs.'9
Should the campaign
succeed, Motsoaledi believes that South Africa would not be able to afford a planned
expansion of its antiretroviral provision to people living with HIV.10
Furthermore the minister
states that drugs effective against cancer and tuberculosis would remain too expensive to do
any good, and other countries, such as 14 others intent on following South Africa's lead on
ARV's, would likewise suffer.11
“There is nothing more difficult than waking someone who is only pretending to be asleep.”
- Desmond Tutu
Introduction
Entrenched in law is the existence of negative and positive rights. A negative right is the right
to inaction of others whilst a positive right enforces an obligation of action.12
The rights of
access to healthcare will always have a corollary- the interests of the proprietary rights
holder, and vice-versa. Whilst the rights of citizens to access to healthcare takes the form of a
positive right, the rights of proprietary interest holders takes the form of a negative right. The
discourse that exists in the South African healthcare context occurs when attempting to strike
8
This is Genocide. (2014) Mail & Guardian, 17-23 January, p.1
9
Ibid p.2-3
10
Ibid
11
Ibid
12
R. Lippke, The elusive distinction between negative and positive rights', p335-337

3
a balance between the rights afforded by the Constitution13
and those afforded by the Patent
Act.14
This Independent Research Essay ("IRE") will explore the competing relationship of the
Pharmaceutical Industries proprietary interests, and the individuals right of access to
healthcare as afforded by the Constitution.15
This paper places the patent-healthcare debate in
its original context under TRIPS flexibilities and inflexibilities. The paper looks at the legal
measures taken by government in ensuring that these competing interests, both positive and
negative, are satisfied. This IRE then analyses the legislative measures available to
government when enforcing the rights of its citizens. Many of whom are inevitably forced
upon the reliance of the 'access to health care' section in the Bill of Rights16
in order to realise
healthcare rights and services.
Chapter 1: Patent Laws and South Africa
A Brief History On Patents
A patent is a state legalised mechanism that affords a patent holder certain exclusive rights in
respect of the patented product or process.17
These rights range from allowing the patent
holder to prevent other people from making, using, exercising, disposing, offering to dispose
of or importing the patented product in the Country in which the patent is granted.18
The
requirements for granting a patent in South African are that a product or process in respect of
which the patent is sought must be novel and capable of application in trade, industry or
agriculture.19
13
The Constitution of the Republic of South Africa, Act 108 of 1996
14
The Patents Act, Act 57 of 1978
15
Section 27(1)(a) of the Constitution stipulates that "everyone has the right to have access to health care
services..."
16
Section 27 of Act 108 of 1996 (the constitution).
17
Patent Protection: Patents. (2005) Personal Finance Issue 292 March, p.8
18
Ibid
19
Chapter V, section 25 (1) of the Patents Act no. 57 of 1978

4
De Carvalho20
explains that historically there are two dominant theories on the function of
patents- the Reward Doctrine and the Prospect Theory. The Reward Doctrine explains that
patents are government rewards that are granted to inventors who contribute to either an
economic or technological progress by inventing and thereafter disclosing their invention.21
This is perhaps a theory developed from the earliest emergence of patents. The Reward
Doctrine explains the position on patents at the time of the enactment of the earliest patent
legislation- the Venetian Senate patent legislation of 1474.22
The Venetian Senate granted the
maker of any "new and ingenious device... reduced to perfection so that it can be used and
operated" an exclusive license of 10 years to practise the invention.23
The second theory on patents to emerge was the Prospect Theory by Edmund Kitch. 24
This
theory takes up a different position to the Reward Doctrine. It states that the function of a
patent is not as much about the reward received by the granting of a patent, but it is rather
about the potential that can be derived once a patent is granted. The prospect theory explains
that upon a government's granting of a patent, an inventor may not be aware of the usefulness
of the patent, and so it operates as a legal security that enables the inventor to prospect the
market for commercial opportunities.25
What transpired from the earliest forms of patents until the industrialisation periods and post
world market trade movements, is the granting of a government issued legal tenure to an
inventor, which allowed an exclusive monopoly over any benefit derived from such an
invention. The globalisation of intellectual property rights ("IPR's") was driven by
industrialized countries that had superior technological and industrialized capabilities.26
Patents had given their bearers a legal tool to monopolise trade in foreign countries.
20
NP De Carvalho. The Trips regime of Patent Rights. (2005) 2
21
Ibid
22
PS Menell. Intellectual Property: General Theories. (1999) 131
23
Ibid
24
EW Kitch, The Nature and Function of the Patent System. (1977) (20) J.L. & ECON 265-266
25
NP De Carvalho. The Trips regime of Patent Rights. (2005) 2
26
CM Correa. Intellectual Property Rights, the WTO and Developing Countries. (2002) 3

5
A South African Context
The Patent system of today's South Africa is as a result of the influence of the Agreement on
Trade-Related Aspects on Intellectual Property Rights. The South African Patent act27
under
the TRIPS regime, allows for pharmaceutical manufacturers to patent many essential
healthcare medications and lifestyle medications. Patents are granted for inventions that are
novel and inventive and furthermore these novel and inventive inventions must comply with
the administrative requirements for registration under the South African Patent Act.28
The
duration of patent protection under this act is 20 years.29
The effect of a granted patent during
its subsistence is to: exclude other persons from making, using, exercising, disposing or
offering to dispose of, or importing the invention, so that he or she shall have and enjoy the
whole profit and advantage accruing by reason of the invention.30
While this 20 year period of patent protection affords an exclusivity to dominate the market,
this dominance can in certain circumstances be extended under patent laws. This occurs
particularly in pharmaceutical patented products when old compounds are found to possess
new uses. This leads to patents being granted to compounds post patent expiration. Since the
law allows for the patenting of new uses for old compounds and furthermore South Africa
does not have a patent examination system that evaluates patents in detail, the dominance
afforded by the granting of a patent can be extended.
Ever-greening is another term used to explain pharmaceutical companies getting the
maximum out of a patent. Ever-greening describes a number of situations pharmaceutical
companies exploit to obtain new patents for improvements on existing drugs.31
The method
of prohibiting ever-greening, in practise, occurs through opposition proceedings of generic
companies, who are then required to apply for revocation of the "ever-greened" patent once it
is granted.32
These abovementioned practises, mostly prevalent in the case of pharmaceutical patents,
inhibit generic competition which is required to provide more affordable medication. A
generic medication is a medication made by a pharmaceutical manufacturer that copies the
27
The Patent Act, No 57 of 1978
28
Ibid
29
Ibid section 46(1) Duration of Patent
30
Ibid Section 45(1) Effect of Patent
31
B Matthewson Submissions in response to Draft National Policy on Intellectual Property (2013) (patenting
old compounds) p.19
32
Ibid (ever-greening) p.20

6
active ingredient of a lapsed patented product. Due to patent protection, a generic
manufacturer is obliged to wait for a patent to expire before it begins manufacturing the
medication, using the exact identical active ingredient as contained in the original patent.33
The difference between the generic and patented product is that the inactive ingredients of a
particular drug may vary and the trade name of the generic brand will be different to the
already established trading name of the previously patented medication.
TRIPS
At the end of the Uruguay Round of General Agreement on Tariffs and Trade ("GATT") in
1994, both developing and developed nations of the World Trade Organisation ("WTO")
concluded the agreement on TRIPS. TRIPS was to be the international standard in intellectual
property laws that all members of the WTO would adopt. At the time of the TRIPS
negotiations, the developing nations of the WTO were at best underrepresented and under
qualified.34
Only about ten developing nations sent intellectual property experts to the TRIPS
negotiations.35
These 'experts' were at times civil servants who were merely patent office
officials , even worse many of these officials were not capable of appreciating the impact of
the terms of the TRIPS agreement on their respective developing nations.36
The developed nations by contrast, were represented by leaders in technical fields of
intellectual property and influenced by the R&D-based pharmaceutical industry which is
almost exclusively reliant upon patents for its dominant global reach.37
This heavy-weight
backing led to the drafting and implementation of the most comprehensive international
agreement on intellectual property.38
At the negotiation table this agreement was presented to
developing nations by their developed nation counterparts, as a requirement to promote
innovation and to stimulate the transfer of technology and capital from developed nations to
33
M Jansen "Protecting the big names in medicine". 11 (4) The Quarterly Law Review for People in Business
212
34
D Matthews. Intellectual Property, Human Rights and Development, The Role of NGO's and Social
Movements. 1st ed. (2011) 1-2
35
Ibid
36
Ibid
37
Ibid, "Public health and access to medicines" 15
38
Ibid

7
developing nations.39
This proposition led the developing nations present at the Uruguay
round of GATT to believe that mutual benefit would be derived from legislative
implementation of the TRIPS agreement. 40
The Doha Declaration
The Doha declaration on the TRIPS Agreement and Public Health was adopted by the WTO
Ministerial Conference of 2001 in Doha on November 14, 2001. The Doha declaration was
enacted to reaffirm the flexibilities of TRIPS member states when attempting to provide
better access to healthcare. It sought to appease the developing world's concerns over the
TRIPS system through reiteration of the existing TRIPS agreement:
We agree that the TRIPS Agreement does not and shall not prevent Members from taking measures to
protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we
affirm that the Agreement can and should be interpreted in a manner supportive of WTO Members'
right to protect public health and, in particular, to promote access to medicines for all (paragraph
4).41
The Doha declaration attempted to change the perception about IPR's and how it was being
applied in practise. The message inscribed in the Doha declaration was that patent law
implementation must be aligned with Public Health needs of developing and developed
nations alike. What this declaration did was to introduce a corollary to proprietary interests of
pharmaceutical patents- the public need of accessible healthcare and medication. Paragraph 4
of the declaration42
created a measure of autonomy for member states of the TRIPS agreement
to interpret legislation in such a way that the rights of individual patent holders do not trump
the demands of public healthcare. Needless to say, this autonomy always existed in the
TRIPS Agreement.43
39
C M Correa. Intellectual Property Rights, the WTO and Developing Countries: the trips agreement and policy
options. 3 ed. (2002) 23
40
Ibid
41
Paragraph 4, Declaration on the TRIPS Agreement and Public Health, adopted 14 November 2001, DOHA
Declaration
42
The Doha declaration on the TRIPS Agreement and Public Health. 14 November 2001
43
NP de Carvalho. The Trips regime of Patent Rights. (2005) 149

8
Chapter 2- Access to Healthcare
The Constitution
Section 27 of the Constitution of the Republic of South Africa44
places a duty on the State to
take reasonable legislative and other measures within its available resources, to achieve the
progressive realisation of the right of access to healthcare for all South African citizens. What
this in practise means, and the position that the Constitutional Court held in Soobramoney
and Grootboom,45
is that the state is under a constitutional duty to comply with the positive
obligation imposed on it by section 27 of the Constitution.46
In the context of this IRE, access to healthcare for South African citizens implies medications
made available to the public. For Medications to be made available to the public it has to be
manufactured by pharmaceutical companies either manufacturing in South Africa or
exporting to South Africa. Furthermore, in the context of a South African majoritarian
discourse 'access to healthcare' refers to the ability of citizens to afford healthcare or for
healthcare to be made readily available by Government.
Social Movements
The role of NGO's campaigning for the rights of the impoverished worldwide has played a
significant role in furthering access to vital treatments such as antiretroviral medications.47
The practical effect of these NGO campaigns has been to bring down the price of essential
medications exponentially.48
44
Act 108 of 1996
45
Soobramoney v Minister of Health, KwaZulu-Natal 1998 (1) SA 765 (CC); 1997 (12) BCLR 1696 (CC);
Government of the Republic of South Africa and Others v Grootboom and Others 2001 (1) SA 46 (CC); 2000
(11) BCLR 1169 (CC).
46
Soobramoney op cite para 36, Grootboom op cite para 24 and 38
47
For examples see the MSF drop the case campaign (http://www.msf.org.za/msf-publications/about-novartis-
drop-case-campaign) and the antiretroviral victory in Minister of Health and Others v Treatment Action
Campaign and Others (No 1) (CCT9/02) [2002] ZACC 16; 2002 (5) SA 703; 2002 (10) BCLR 1075;
48
Ibid

9
Due to early democratic South Africa's official HIV/AIDS denialism,49
the Human
Immunodeficiency virus was allowed to grow to uncontrollable figures. During this period
treatment was inaccessible to those living with HIV and AIDS. As a result of the
government's failure to act, social movements began to mobilise. The Treatment Action
Campaign (TAC) is perhaps the most prominent social movement to be born out of this early
denialism era. The TAC successfully combined mobilisation, litigation and mass action to
improve access to healthcare for those living with HIV and AIDS.
Section (27) of the Constitution of South Africa50
recognises healthcare as a social right. It
states that government must enact legislation to give effect to this right. This is where the
Patent Pharma debate meets its biggest obstacle- Social movement.
In Minister of Health v Treatment Action Campaign and Others51
the TAC won a major
battle against the South African government's failure to provide pregnant HIV positive
mothers with Nevirapine, the mother to child transmission treatment that prevents children
from being born HIV positive. Government had prior to this case refused to make the
patented Nevirapine available to the public through public healthcare services. The TAC
relied on the constitutional provisions of sections 27 and 2852
, which affords healthcare
protection to everyone, and children in particular. The TAC relied on these sections to force
the government to provide the drug Nevirapine to mothers with HIV. The Constitutional
Court held that government must, according to the requirements of section 27(1)(2) put in
place a comprehensive program to realise the rights of pregnant women and their children to
have access to healthcare services to treat and prevent mother to child transmission of HIV53
.
Minister of Health v Treatment Action Campaign and Others represents the first real success
of an NGO-led social movement forcing government to provide the access to healthcare that
the constitution recognises. The TAC had furthermore proven that the Judicial system could
be successfully utilised to force government to provide healthcare rights for its citizens.
49
The Thirteenth International AIDS conference took place in Durban, South Africa, on 9-1 July 2000. The
conference was opened by Thabo Mbeki, who argued that extreme poverty rather than AIDS was the leading
killer in Sub-Saharan Africa. Juxtaposed against this view was a speech by South African High Court Justice
Edward Cameron who argued that such complacency was comparable to supporting a system as wrong as Nazi
Germany or Apartheid South Africa"- D Mathews Intellectual Property, Human Rights and Development, the
Role of NGO's and Social Movements 1st Edition (2011) p. 99
50
Act 108 of 1996
51
(CCT9/02) [2002] ZACC 16; 2002 (5) SA 703; 2002 (10) BCLR 1075 (5 July 2002)
52
of Act 108 of 1996
53
Minister of Health v Treatment Action Campaign and Others (note 51 above)

10
In 2003 the price of antiretroviral ("ARV") treatments were placed in the spotlight, this time
the forum was the Competition Commission in Hazel Tau and Others v GlaxoSmithKline and
Boehringer Ingelheim54
("Hazel Tau and Others"). In this matter the TAC, who were joined
by complainants from other civic organisations and interested parties, instituted legal
proceedings against GlaxoSmithKline and Boehringer Ingelheim. The focus of the litigation
was to drive down the prices of ARV medications that were placed out of the reach of those
dependant on it.
In Hazel Tau and Others v55
the TAC was joined in suit by a heavy weight team that matched
in size the financial backing of the pharmaceutical industry. The list of complainants
included members of the Congress of South African Trade Unions (COSATU), the Chemical,
Energy, Paper, Printing, Wood and Allied Workers Union (CEPPWAWU), persons suffering
with HIV/AIDS, healthcare workers and doctors. The legal mechanism used in mitigation of
drug prices was the Competition Act,56
in particular the complainants relied upon Section 857
which prohibits the abuse of dominance.
The competition commission unearthed GlaxoSmithKline's and Boehringer Ingelheim's anti-
competitive monopoly on the ARV market in South Africa. GlaxoSmithKline had awarded
Aspen, a local generic manufacturer, a voluntary license to produce ARV's. A voluntary
license conveys rights to patented subject matter and is issued by the patent holder on a
voluntary basis.58
GlaxoSmithKline held the patent for the ARV in question and had thus
given Aspen the right to inter alia make use, sell or import the ARV.59
It transpired that the
royalty agreement between the two meant that Aspen had to pay a 40% royalty to
GlaxoSmithKline. This royalty agreement inadvertently ensured that Aspen would inflate
their drug prices in order to recoup a profit. Thus leading to little or no damage to
GlaxoSmithKline's dominance in the market.
54
Tau and Others v GlaxoSmithKline and Boehringer Ingelheim case No 2002 Sep 226.
55
At the time the case was formerly known as Hazel Tau et al. v. GlaxoSmithKline, Boehringer Ingelheim, et al.
& Aids Healthcare Foundation et al v. GlaxoSmithKline, Boehringer Ingelheim, et al. Case Numbers:
2002sep226 & 2002jan357.
56
Act No 89 of 1998
57
Section 8 of Act 89 of 1998 states- "It is prohibited for a dominant firm to-
(a) charge an excessive price to the detriment of consumers;
(b) refuse to give a competitor access to an essential facility
when it is economically feasible to do so;
(c) engage in an exclusionary act, other than an act listed in
paragraph (d), if the anti-competitive effect of that act outweighs
its technological, efficiency or other pro-competitive
gain..."
58
MP Pugatch. The Intellectual Property Debate. 1st Ed. (2006) 154
59
Ibid

11
The complainants in Hazel Tau and Others successfully gathered momentum from many
social movements worldwide, eventually leading to a settlement agreement between the
parties. This settlement was strengthened by the unfortunate death of Matomela Paul
Ngubane, a complainant in the matter that suffered with AIDS. Ngubane had died shortly
after the referral of the matter to the Competition Tribunal. The settlement agreement
resulted in a drastic reduction in the price of ARV's that GlaxoSmithKline and Boehringer
Ingelheim manufactured and supplied to the South African public.
The TAC released a newsletter publication in which it explained the practical effect of the
settlement on the price of ARV medications: before the settlement, Nevirapine (the treatment
used to prevent mother to child transmission of HIV manufactured and patented by
Boehringer Ingelheim) was priced at R360 for a month supply. After the settlement
Nevirapine was R55-R80 per month.60
A drop in price of 84.72%.61
Before the settlement, AZT, the most common antiretroviral in South Africa at that time
(manufactured and patented by GlaxoSmithKline) had a monthly cost of R582. After the
settlement a months' supply of AZT was R85-R100.62
A drop in price of 85.4%.
The result of the Hazel Tau case was that the social movement for access to healthcare in
South Africa had successfully utilised the Competition Act63
to lower the price of ARV
medication, subsequently making anti-retroviral treatment available to more people. This
action did not make use of any of the TRIPS flexibilities such as Compulsory Licensing or
Parallel Importations to provide greater access to healthcare. Instead, it explored and utilised
other available legal means to break the barriers to accessible health care in South Africa.
60
Ibid
61
Competition Commission Settlement Agreements Secure Access to Affordable Life-Saving Antiretroviral
Medicines. (2003) http://www.tac.org.za/newsletter/2003/ns10_12_2003.html (accessed: 6 June 2014)
62
Ibid
63
Act No 89 of 1998

12
Chapter 3: A Legal Measure Available to Government
Compulsory Licensing In South Africa
A compulsory license serves as a tool to reduce the price of patented invention such as a
patented pharmaceutical medication.64
Compulsory licenses do this by authorising a third
party to manufacture or import lower-cost generic versions, thereby encouraging competition
in the market for the respective invention, whilst concurrently driving the price of that
product down.65
In an attempt to balance the rights of private citizens with the rights of the
public article 31 of the TRIPS agreement empowers governments to compel a patent-holder
to license his or her rights to generic manufacturers in exchange for monetary
compensation.66
The TRIPS agreement articulates that compulsory licensing may be used by
member states when patents cause certain deficiencies as a result of it being granted.67
These
deficiencies relate to a non-exhaustive list of inter alia national emergency and circumstances
of extreme urgency68
Paragraph 6 of the Doha declaration sought to unearth a contradiction in the TRIPS
agreement- that compulsory licensing could not solve the problem of abuse of monopoly
created by pharmaceutical and other patents. 69
This because many developing nation's were
at this time seen to lack the manufacturing capacity that the concept of compulsory licensing
relied upon. 70
This meant that were a pharmaceutical company to hold a patent on an
essential medication in a developing country, and circumstances existed that necessitated the
granting of a compulsory license, it would not have been possible because of the lack of
manufacturing capacity of the developing nations.
However, in the South African context the option to issue compulsory licenses has always
been viable.71
At the time of the TRIPS agreement, until present, South Africa has always had
64
TJ Bollyky "Balancing private rights and public obligations: Constitutionally mandated compulsory licensing
of HIV/AIDS related treatments in South Africa" (2002) (18) SAJHR 535
65
Article 31 of TRIPS, Other Use Without Authorisation of the Right Holder
66
Ibid
67
Ibid
68
Ibid Article 31(b)
69
The DOHA declaration on the TRIPS Agreement and Public Health (2001) paragraph 6
70
Ibid
71
of HIV/AIDS related treatments in South Africa" (2002) (18) SAJHR

13
a reputable pharmaceutical industry.72
Through Adcock Ingram and Aspen Pharmacare, the
biggest generic pharmaceutical manufacturers in South African, South Africa has ample
manufacturing capacity to fulfil most pharmaceutical needs.73
Although South Africa has adequate pharmaceutical manufacturing capabilities, it's courts
have yet to be tasked with deliberating on the issuing of a compulsory license for a
pharmaceutical-based patent.74
Sections 55 and 56 of the Patents act75
allow for compulsory
licensing when a license is needed in the case of a dependant patent (section 55) and in the
case of abuse of patent rights (section 56). Section 56 (c) of the Patents act is of particular
importance because it allows for a compulsory license to be granted if "the demand for the
patented article in the republic is not being met to an adequate extent and on reasonable
terms".
If the circumstances mentioned in Section 56(c) prevail, and furthermore if this section is
interpreted in line with the Constitutional provisions of section 27- everyone has the right to
have access to- (a) healthcare services..." 76
government would be within its rights to institute an
application for compulsory licensing for medications under protection of patent. Article 31 of
the TRIPS on the other hand lays down five grounds for granting compulsory licenses: 1)
Refusal to Deal 2) Emergency and Extreme Urgency 3) Anti-competitive Practises 4) Non-
commercial use 5) Dependant Patents. 77
Furthermore, the TRIPS agreement does not limit
the member states right to establish further or other grounds for the granting Compulsory
licenses, such as in the 'public interest'78
which is a ground for issuing a compulsory license in
German Law79
.
By contrast the South African Patent Act falls short in delivering sound enabling provisions
to allow for compulsory licensing. It falls short in the substance of the laws which give
72
of HIV/AIDS related treatments in South Africa" (2002) (18) SAJHR 538
73
S Woolman and C Sprague "Aspen Pharmacare: How a Major Pharmaceutical Company Created a
Sustainable supply of Low Cost Generic ARV's for South Africa.", Aspen Pharmacare case Study (2008)
74
T Govender "Compulsory pharma licensing - getting a delicate balance right : intellectual property." (2012)
(12) (5) Without Prejudice 34-36
75
Act No 57 of 1978
76
Act No 108 of 1996
77
Carlos M. Correa, Intellectual Property Rights, the WTO and Developing Countries, 'Compulsory Licenses',
89 (2002)
78
Section 24(1) of the German Patent Act states: A non-exclusive authorization to commercially exploit an
invention shall be granted by the Patent Court in individual cases in accordance with the following provisions
(compulsory license) if 1. the applicant for a license has unsuccessfully endeavoured during a reasonable period
of time to obtain from the patentee consent to exploit the invention under reasonable conditions usual in trade;
and 2. public interest commands the grant of a compulsory license.
79
Ibid

14
succinct circumstances or scenarios for the granting of compulsory licensing. The five
abovementioned circumstances for granting compulsory licenses , afforded by TRIPS, are far
more flexible than that contained in the South African patent act. Perhaps this inflexibility of
the South African Patents act, in particular its inability to fully incorporate TRIPS
flexibilities, is the reason compulsory pharmaceutical licenses have yet to be issued.
Section 15(c) of the Medicines and related Substance Control act80
provides for 'Measures to
ensure the supply of more affordable medicines'. Section 15(c) gives the Minister of health
legislative powers to issue compulsory licenses of patented pharmaceutical products in order
to increase availability of medications and lower their cost.81
However, this section falls short
of the trips requirements that, 1) the issuing of compulsory licensing be made subject to
judicial review and 2) that negotiations be entered into between the two parties, to remunerate
the patent holder once the compulsory license has been granted.
Were the provisions on compulsory licensing in the Patents act82
and the Medicines and
related Substances Control act83
combined, then perhaps a compulsory license of a
pharmaceutical patent would by now have been granted. In the current South African
healthcare diaspora the supply of affordable medication to protect the health of the public
would definitely be framed as being compliant with the flexibilities of the TRIPS agreement.
However, the Medicines and Related Substances Control act falls short of writing out the
remaining requirements which would bring this act in line with TRIPS prerequisites for the
issuing of compulsory licenses. Furthermore, if the South African government were to act out
of the TRIPS agreement then it would be an act contrary to international law and the WTO's
requirements.
The uncertainty in the legislative text then surely must be the reason that no compulsory
license has been issued by either the Minister of Health or the government as a whole. The
failure of the legislature to adequately provide for Compulsory Licensing is a hindrance to the
access to healthcare provisions of the Constitution.
80
Act 101 of 1965
81
D Mathews Intellectual Property, Human Rights and Development, the Role of NGO's and Social Movements
1st Edition (2011) 98
82
Act 57 of 1978
83
Act 101 of 1965

15
Chapter 4: Foreign Precedents On Licensing
India- The Natco case84
In March 2012, the Indian Patents Office granted its first compulsory license to Natco
Pharma Limited for the manufacture and sale of Bayer's patented cancer drug Nexavar.85
The
Indian Patent Act86
contains TRIPS compliant provisions that allow for a compulsory license
to be issued on the following grounds: (i) that the reasonable requirements of the public with respect to
the patented invention have not been satisfied; or (ii) that the patented invention is not available to the public at
a reasonably affordable price; or (iii) that the patented invention is not worked in the territory of India.87
The controller of the Indian Patents office concluded that all three grounds on which a
compulsory license could be issued had been satisfied, and a compulsory license was issued
to Natco with a resulting 6% royalty payable to Bayer.88
The result of the compulsory license
granted to Natco was that a price war ensued.89
Natco reduced its prices far below what
Bayer was offering and Bayer was subsequently forced to follow suit. This all happened in
the midst of a failed Bayer appeal against the issuing of the license. The appeal
unsuccessfully going all the way to the Indian Supreme Court.
Despite healthcare problems in India, a compulsory license had yet to be issued in respect of
medications until the Natco case. This decision signifies the utilisation of government
flexibilities compliant with TRIPS regulations in a manner that facilitated the improved
access to healthcare for its citizens.
84
Natco Pharma Limited v Bayer Corporation, Indian Patent Office, C.L.A. No.1 of 2011( known colloquially
as the Natco case)
85
Ibid
86
The Indian Patent Act of 1970
87
Ibid section 84
88
NS Chopra and D Muthappa, "The Curious Case of Compulsory Licensing in
India" (2012) (l 8)(2) Competition Law International 4
89
Ibid

16
The United Kingdom
The United Kingdom Patents act of 1977 allows for compulsory licensing to be granted in
specified circumstances, and in a detailed manner the act sets out the process involved
therein.90
Section 48(1) of the act91
states that at any time after the expiration of three years
from the grant of a patent, the comptroller of patents may be approached by any person for:
(a) a license under the patent
(b) for an entry to be made in the registry to the effect that licenses under the patent are to be available as of
right: or
(c) where the government is a government department, for the grant of any person specified in the application
of a license under the patent. 92
If the comptroller is satisfied that any of the relevant grounds are established, the controller
may make any order as applied for or that the comptroller deems fit in the circumstances. The
United Kingdom Patent act states different reasons for the granting of a compulsory license,
this being if the proprietor of the patent is a WTO member or not a member of the WTO. One
of the grounds for such an application, which holds relevance to the access to healthcare
debate in South Africa is that a compulsory license may be applied for if "demand for the
patented product is not being met in the UK".93
Importantly, the UK patent office recognises
that grounds for a compulsory license will exist when the monopoly conferred by way of the
patent in question is operating against the public interest.94
Perhaps the most significant part of the United Kingdom Patent act95
is the use of patented
inventions for service of the Crown (the British Monarchy).96
Section 55(1) states that any
government department or person authorised in writing by such department, may for the
service of the crown, do the following acts in the United Kingdom without the consent of the
proprietor of the patent, in respect of specified drugs and medicines or the production or
90
48(1)(a)-(c) of The United Kingdom Patents act of 1977
91
The United Kingdom Patents act of 1977
92
Section 48(1)(a)-(c) of the UK Patents Act 1977
93
Section 48(1)(1) of the UK Patents Act 1977
94
Section 52.2 of the Manuel of Patent Practice, the Intellectual Property office
95
Act 1977
96
Section 55-59 of the UK Patents Act 77 stipulates the circumstances in which the Crown may exploit a patent
for purposes of the Crown.

17
supply of such- "make, use, sell or dispose of for any purposes whatsoever".97
This section
creates a unique category for compulsory licensing- in the interest of the crown.
The controversial element of the use of patented inventions for the service of the Crown is
that the abovementioned acts regarding specified drugs and medicines, may be done without
the consent of the proprietor of the patent, and furthermore this act by law does not amount to
infringement of the patent in question.98
The Crown Use provision has however been utilised by the National health Service in the
provision of generic medicines.99
The Minister of Health ordered medicines to be bought
through tender and required the supplier to disregard patent rights in the interest of public
health. 100
In Pfizer Corporation v Ministry of Health [1965] RPC 261 (HL) this practise was
challenged when the Minister of Health authorised the use, sale and importation of Pfizer's
antibiotic drug tetracycline in order to supply patients through the National health System.
Pfizer unsuccessfully argued that the use of the drug to treat hospital patients was not 'use' for
the Crown. The case was eventually dismissed by the House of Lords.
The United States of America
The United States of America does not have a rich history in granting Compulsory Licenses,
although it does possess the legislative means to do so.101
During the 1950's and 1960's the
US utilised government use powers similar to that of the UK Crown Use.102
It did so by
exploiting the cheaper price of medicines available from European countries.103
During the October 2001 Anthrax scare, the United States Government expressed a
willingness to set aside the Bayer patent- Ciprofloxacin, if solutions to the shortage and high
97
Section 55(1) (a)-(e)
98
Section 55.04 of the Manuel of Patent Practice, the Intellectual Property office
99
EFM 't Hoen, "UK Crown Use." in The Global Politics of Pharmaceutical Monopoly Power
www.msfaccess.org (accessed: 04 September 2014) 42
100
Ibid
101
see Title 28 USC 1498 (2006)
102
103
Ibid

18
price of ciprofloxacin were not found.104
This period exposed countries like the United States
to the threat of being prisoners to their own patent systems.105
Enacted in 2006, Section 1498 of the United States Code106
provides measures for the United
States Government to provide licensing relief in emergency situations. Section 1498 of the
United States Code gives any employee of the US government, or any contractor,
subcontractor or firm, acting for the US government with its consent, the right to use or
manufacture any invention described in or covered by any patent. The use or manufacture of
an invention covered by a patent of the United States shall be construed as use or
manufacture for the United States.107
The purpose of section 1498 is to grant the US Government the right to issue a compulsory
license for the benefit of the US Government. Section 1498 provides for adequate
compensation to the patent holder. Such patent holder is entitled to "reasonable and adequate
compensation", as well as compensation for the ensuing suit that follows as a result of the
governments use in section 1498.108
Reasonable and adequate compensation has been
interpreted to mean the lost profits that the patent holder would have received had the
infringement not taken place.109
Chapter 5: The position today
'This is genocide'
In January of 2014 the Mail & Guardian headlined its' weekly newspaper release with an
article boldly titled 'This is genocide'.110
This eye-catching article brought to the fore a tug of
war battle that has ensued between the government of South Africa and the pharmaceutical
104
105
Ibid
106
Section 1498 in the 2006 Edition of Title 28- JUDICIARY AND JUDICIAL PROCEDURE , Supplement 5.
107
Ibid
108
Amanda, Mitchell, Tamiflu, the Takings Clause, and Compulsory Licenses: An Exploration of the
Government' Options for Accessing Medical Patents. California Law Review, Vol 95 Issue 2, April 2007, p 542
109
Ibid
110
This is Genocide. (2014) Mail & Guardian, 17-23 January, p.1

19
industry since the release of the Draft National Policy on Intellectual Property (Draft Policy)
for public comment on 4 September 2013.111
When used in an African context, the word 'genocide' typically resurfaces memories of the
1994 Rwandan Genocide in which 600 000 - 800 000 of the Rwandan Tutsi minority were
killed by a Hutu majority.112
However, rather than expressing the killing of one's own
countrymen by another, the article expresses the concerns of the Minister of Health, Dr Aaron
Motsoaledi, over the resistance that government has encountered since the release of the
Draft Policy
The Draft policy had been in development for 6 years prior to its release. In terms of the
Draft Policy, government seeks to amend Intellectual Property laws to allow for amongst
other aims-greater access to healthcare.113
The policy seeks to identify holistically, problems
encountered through existing Intellectual Property laws and then to create an end destination
for Intellectual Policy laws to develop towards.
Chapters 1 and 2 of the draft policy gives light to the pharma patent debate. Chapter 1-iii)114
states that patent flexibilities can easily alleviate access to medicines. It recommends that
South Africa must change the patents act to incorporate flexibilities contained in the TRIPS
agreement. It further recommends that the act should be amended to be amenable to issues
related to access to Public Health.
Chapter 2 is on IP and Public Health, it makes many unsubstantiated statements such as "
South Africa seems to be having a problem with manufacturing and capacity, whether for generic or
innovative medicines, and should be enabled to resort to compulsory licensing and parallel
importations.115
It recommends that "compulsory Licensing should be introduced in South Africa in
line with International Treaties, such as the Doha Decision 6 of the WTO negotiations on Trade and
Public Health. 116
A staunch opposition of government in light of it publishing the Draft Policy comes from the
Innovative Pharmaceutical Association of South Africa (Ipasa). The Mail & Guardian
reported that Ipasa, in light of the release of the Draft Policy, selected a US based lobbying
111
Ibid
112
E Staub 'The Origins and Prevention of Genocide, Mass Killing and Other Collective Violence." (1999)
(5)(4) Journal of Peace Psychology 310
113
Ibid
114
of the Draft Policy on intellectual Property Notice 918 of 2013
115
Draft Policy on intellectual Property Notice 918 of 2013, Chapter 2: IP and Public Health, p. 20
116
Ibid p.21

20
firm Public Affairs Engagement to undertake a public lobbying campaign.117
The campaign
'is aimed at indirectly convincing the South African government to strengthen, rather than
weaken, patent protection for crucial drugs.118
However, no public campaign from IPASA began. Perhaps the reason for this being that for
Pharmaceutical manufacturers in South Africa, this Draft Policy contains no real threats to
pharmaceutical manufacturers and their enacting licensing. The Draft Policy does not
stipulate practically through which government arm, a compulsory license must be issued. It
stipulates that legislation must be enacted to allow for such to happen although current
legislation already contains provision to facilitate the granting of a compulsory license. It
furthermore overlooks the TRIPS safeguards which have to be complied with and places
emphasis on the Doha declaration which is of no relevance for legislative-enforcement, as the
Doha declaration is not international law.
Conclusion
It has become apparent that developing countries in general, and South Africa in particular,
are to the detriment of their own people, not fully utilising the TRIPS flexibilities.119
In considering the 'patent- access to healthcare debate', the most pertinent question is whether
current patent legislation hampers the realisation of socio economic rights, such as the right
to healthcare afforded by the Constitution. 120
The existing Patent act121
and Medicines and Related Substances Control Act122
, although
very ambiguous in interpretation and lacking in technicality, do provide for compulsory
licensing. However, the failure of government to utilise existing compulsory licensing
legislation as allowed by article 31 of TRIPS is purely a lack of action and will by
government. It is a lack of action that has repercussions for the access to healthcare
provisions of the Constitution.
117
Phillip de Wet, This is Genocide, Mail & Guardian, January 17-23, Vol 30, No 3.
118
Ibid
119
De Villiers et al "Legalising parallel Imports under intellectual property law" (15)(3) (2004) Stellenbosch
Law Review 552
120
Section 27 of the constitution Act 108 of 1996
121
Act 57 of 1978
122
Act 101 of 1965

21
Amendments to legislature should compensate for the ambiguous and incomprehensive
positions regarding compulsory licensing conditions. This should include lucid remuneration
and review terms to be expressly included in Section 15(c) of the Medications and Related
Substances Control Act and the provisioning of added flexibilities in the patents act, as
allowed for in TRIPS.
The South African Government must draw inspiration from the India's Natco123
case. The
compulsory licensing of essential medications such as cancer, TB and ARV medications that
remain high-priced, must take place if government is to prevent further Constitutional
infringements. South African Generic Pharmaceutical Manufacturers should be approached
by government and incorporated into a national framework to reduce the cost of medication
through voluntary licensing provisions. And only thereafter, upon the failure to enter into
licensing agreements with pharmaceutical patent holders, should compulsory licensing be
enforced through the Patent Office and Judicial avenues of South Africa.
In observing the manner in which South African Social Movement has effected reduced
prices of ARV medication through the Competition Commission, and the access of mother to
child ARV treatment through the Courts, one can only come to the conclusion that legislation
does exist to effect greater access to healthcare. Now more than ever, government must
spearhead the access to healthcare movement rather than sitting-by complacently and letting
others do so in its stead.
123
Natco Pharma Limited v Bayer Corporation, Indian Patent Office, C.L.A. No.1 of 2011

22
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'The Origins and Prevention of Genocide, Mass Killing and Other Collective Violence,
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Protecting the big names in medicine, Marlize Jansen, The Quarterly Law Review for People
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Balancing private rights and public obligations: Constitutionally mandated compulsory licensing of
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Legalising parallel Imports under intellectual property law, De Villiers Roux and Rippel,
Kerstin Maria. Stellenbosch Law Review Vol 15 2004 issue 3 p550-573
Tamiflu, the Takings Clause, and Compulsory Licenses: An Exploration of the Government'
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Issue 2, April 2007.
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Constitution of the Republic of South Africa Act 108 of 1996

23
Competition Act, No 89 of 1998
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Medicines and Related Substances Control Act 101 of 1965
Patents Act 57 of 1978
Treaties, International Declarations and Agreements
The Doha declaration on the TRIPS Agreement and Public Health, November 14, 2001
The Agreement on Trade-Related Aspects of Intellectual Property
Newspaper & Internet Articles
Phillip de Wet, This is Genocide, Mail & Guardian, January 17-23, Vol 30, No 3.
Competition Commission Settlement Agreements Secure Access to Affordable Life-Saving
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24
Intellectual Property Debate, Meir Perez Pugatch, 1st Edition (2006)
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Policy Options, Carlos M. Correa, 3rd Edition (2002)
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Movements Duncan Matthews, 1st Edition (2011)
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Natco Pharma Limited v Bayer Corporation, Indian Patent Office, C.L.A. No.1 of 2011
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Aspen Pharmacare: How a Major Pharmaceutical Company Created a Sustainable supply of Low
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Matthewson
The Global Politics of Pharmaceutical Monopoly Power: Drug patents, access, innovation
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The MSF's Drop The Case Campaign- http://www.msf.org.za/msf-publications/about-
novartis-drop-case-campaign.
The United kingdom Manuel of Patent Practice, Intellectual Property Office

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