Keeping Up With The Kylies

Doing the locomotion to Kylie in 1986 is so far removed from applying the nail varnish Wear Something SPAR-Kylie in 2016. Which Kylie does the locomotion and which Kylie offers nail varnish? Is it Kylie Minogue or Kylie Jenner? That is the problem that the US Patent and Trade Marks Office (USPTO) now faces because Kylie Minogue (pop Kylie) has filed a Notice of Opposition to Kylie Jenner’s (reality Kylie) attempts to trade mark variations of her name Kylie in the battle of Kylie vs Kylie.

“What’s in a name?” one can ask… The Notice of Opposition filed by pop Kylie has listed the many ways in which her variations of the name KYLIE have been trade marked since 2003 and the many products produced by her. Her trade marks allegedly cover musical recordings, clothing, wallets, wristwatches, perfumes, body oil, essential oils, skin moisturizers, candles, bubble bath, bath salts, hand soap, hair gels, hairsprays and hair colours.

On the other hand, reality Kylie is seeking protection for the term KYLIE in connection with entertainment services. The application was published for opposition in August last year.

In opposing the application pop Kylie has claimed that if the USPTO approved reality Kylie’s application it would cause confusion amongst consumers between the two Kylies and dilute pop Kylie’s brand. In the opposing papers pop Kylie said that reality Kylie is a “secondary reality television personality”. This statement surely shows that pop Kylie hasn’t really been keeping up with the Kardashians, now has she?

So, who should own the name Kylie?

If you start typing Kylie into Google will you first be met with Kylie Minogue or Kylie Jenner?

Pop Kylie has been in the entertainment industry since 1979 and launched her first album “KYLIE” in 1988. Her hit “The Locomotion” went to No. 3 on the Billboard Hot 100 and she won a Grammy for the song “Come Into My World”. She also owns and has sold more than 80 million records.

Reality Kylie is one of the most followed individuals on social media and has brought out new nail varnish named “Wear Something Spar-kylie” and “Rain in the S-kylie”. And of course she stars in the reality series Keeping Up With The Kardashians.

It is open to question as to whether the name or likeness of a famous person can be capable of distinguishing in relation to goods. The merchandise is bought not because it comes from a particular source but simply because it carries the name or likeness of a famous person. It is submitted however that if the person concerned has embarked upon his/her own programme of licensing his/her name or image in relation to goods and through use of the mark has established an extensive character of his/her name or likeness to the mark it will in fact be capable of distinguishing and be registrable as a trade mark.

Pop Kylie has had many years of use of the mark KYLIE and the goods and services that she offers thereunder have become synonymous with the word Kylie. However, should reality Kylie be given the benefit of the trade mark and her own name and the rights attached thereto in relation to the services i.e. entertainment with which she has become associated?

The USPTO has a difficult task before it, considering the notoriety of the two Kylies. We’ll let you know the outcome as soon as we do, in the next episode of Keeping up with the Kylies.

Kim Rademeyer – Partner

Want to know more about the author? Read her “Me in a Minute” blog post.

No Pets Allowed

Sectional title living has grown in popularity for a number of reasons, including a heightened sense of security and affordability. Buying into a sectional scheme, however, has its advantages and disadvantages.

Unlike full-title ownership, where the owner is in complete control and is financially responsible for the property in its entirety, a person who invests in a sectional title scheme will own a part of the scheme. As a result, the person will need to comply with management and conduct rules as determined by a body corporate and, importantly for some, the body corporate may adopt rules relating to the keeping of pets.

The conduct rules annexed to the Sectional Titles Act, state the following;

  • An owner or occupier of a section shall not, without the consent in writing of the trustees, which approval may not unreasonably be withheld, keep any animal, reptile or bird in a section or on the common property.
  • When granting such approval, the trustees may prescribe any reasonable condition.
  • The trustees may withdraw such approval in the event of any breach of any condition prescribed in terms of sub-rule (2).

In other words, the ‘no pets’ rule is the default position for sectional title schemes, provided the trustees do not unreasonably withhold their approval if an owner or tenant applies for permission to keep a pet. Conditions under which that pet must be kept can be imposed and permission to keep the pet may be revoked if these are not met.

The conduct rules pertaining to a particular sectional title scheme can be altered from the standard rules by the body corporate. These new rules are filed with the Registrar of Deeds and all owners and tenants must comply. This enables, for example, absolute ‘no pets’ policies.

The following comments by Adam Civin and Ramon Pereira in the February 2015 issue of de Rebus clarify what this means:

In Body Corporate of the Laguna Ridge Scheme no.: 152/1987 v Dorse 1999 (2) SA 512 (D), the court held that where the conduct rules have not been amended by the body corporate (e.g. the default position applies), the trustees must apply their minds in considering an application from a pet owner. If the refusal is based on the application of a general policy or the desire to avoid creating a precedent, the court may set aside such a refusal. The reasoning is that, in applying their minds to the circumstances of each individual request, policy considerations does not come into play and the creation of a precedent cannot, in itself, be a concern.

On the other hand, if the conduct rules have been amended to include, for example a “no pet” policy, the matter becomes contractual.

Upon purchase of a sectional title unit, or signing a lease agreement to rent a sectional title unit, the purchaser, or tenant, agrees to these rules and is contractually bound to abide thereby. In this case, the Trustees are not obliged to consider an application by a pet owner.

In simple terms, a prospective buyer who would like to keep a pet should find out what the situation is before commiting to a purchase in any particular scheme.

If you are already an owner or occupier of a sectional title unit, it is wise to apply for written consent from the trustees to keep a pet prior to bringing the pet onto the property.

Robynne Zevenster – Practitioner

Monty Rademeyer – Partner

Want to know more about the author? Read her “Me in a Minute” blog post.

How to cancel your Lease Agreement

Gone are the days when the term “fixed” in “Fixed Term Contract” actually meant fixed.

Section 14 of the Consumer Protection Act (“CPA”), which came into effect in 2011, changed the way fixed term lease agreements are regulated.[i] The CPA, as the name suggests, protects consumers and gives them rights, which they did not have before. Explained below are some practical aspects of how the CPA will be applicable in your everyday lease agreements.

Duration of a fixed term agreement

The maximum duration that a lease agreement can be is 24 months. If a lease is for more than 24 months the agreement will be null and void, unless it is expressly agreed upon and the landlord can prove that a longer agreement is beneficial to the tenant. This means if your lease agreement is for more than 2 years it could be unenforceable.

Cancelling your lease agreement

In terms of section 14 of the CPA a consumer may cancel the lease agreement:

  • upon expiry of the lease, without penalty or charge; and
  • at any time during the contract by giving 20 business days written notice, subject to a reasonable cancellation penalty.

This means that irrespective of signing a 12 or 24-month lease agreement, the tenant may cancel the agreement for any reason by simply giving notice to the landlord, subject to a reasonable cancellation penalty.

What is a reasonable cancellation penalty?

The CPA does protect a landlord to some extent in that, when the tenant cancels a lease agreement prematurely, the landlord may impose a reasonable cancellation penalty. The question is what is a reasonable penalty?

Firstly, the penalty may not have the effect of negating the tenant’s right of cancellation. Thus it cannot be an amount equivalent to all the remaining monthly rent.

Regulation 5(2) to the CPA gives the following guidelines in determining a reasonable cancellation penalty, applicable to a lease agreement:

  • the amount for which the tenant is still liable to the landlord, up to the date of cancellation;
  • the value of the transaction up to cancellation;
  • the duration of the agreement as initially agreed;
  • losses suffered or benefits accrued by the tenant as a result of the tenant entering into the lease agreement;
  • the length of notice of cancellation provided by the tenant;
  • the reasonable potential for the landlord, acting diligently, to find an alternative tenant; and
  • the general practice of the relevant industry.

If the tenant cancels the agreement, the following costs would be claimable as a reasonable penalty:

  • the loss in rent income due to the property being unoccupied;
  • advertising cost in order to get an new tenant; and
  • any other actual loss suffered by the landlord.

The Regulations state the landlord must act diligently. The landlord must make a reasonable attempt to find a new tenant; he can’t just sit back and claim loss in rent income.

In determining a reasonable penalty all the above-mentioned factors will be taken into account and a value judgment would have to be made on what is reasonable in the circumstances. If the reasonableness of the penalty is in dispute the onus would be on the landlord to prove that the penalty is reasonable in the circumstances.

A tenant who exercises his cancellation right should insist on the landlord giving him a breakdown of how the cancellation penalty was calculated in order to assess the reasonableness of the penalty.

Minimizing the penalty

The problem is if you want to get out of your lease you might be liable for a cancellation penalty. There is however a way to prevent/minimize the cancellation penalty. This can be done by being proactive and helping the landlord find another tenant or giving a longer notice period, in order for the landlord to minimize his loss. It is thus possible to cancel the lease agreement without paying any penalty or, at worst, paying a small penalty.


The CPA protects the tenant, where in the past if a tenant signed a fixed term lease agreement he would have been bound to fulfill that agreement. The CPA has paved the way for tenants to escape out of their unwanted lease agreement, without suffering a substantial financial loss. Although the CPA is not a “get free out of jail card” it does provide the modern tenant with far more protection than they had in the past.

[i] Section 14 is only applicable where the consumer is a natural person.

Kim Rademeyer – Partner

Debt (Co)llection against a deregistered close corporation or company

According to the Companies Act 71 2008, and the Close Corporation Act 96 1984, a company, or close corporation (“CC”), which fails to file its annual return for two or more consecutive years or if the Registrar has reasonable cause to believe that it is not carrying on business or is not in operation, may be deregistered by the Registrar.

The Registrar must give notice to the company or CC that it will be deregistered unless good cause is shown. The effect of deregistration is that a company or CC is deprived of its legal personality. All its property, movable or immovable, corporeal and incorporeal, passes into ownership of the state as bona vacantia (Miller and Others v Nafcoc Investment Holdings Co Ltd and Others 2010 (6) SA390 (SCA).

There is no provision made to inform potential creditors of the pending deregistration. A debt due to a creditor of a company or CC that has been deregistered is not extinguished, but rendered unenforceable.

Under the previous Companies Act 61 of 1973 if a company or CC had assets against which a creditor wished to execute, but it was in the process of being deregistered or had finally been deregistered, an application to court to restore the company or CC could have been made. However, according to Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd the reinstatement of the registration of a company, which had been deregistered, falls within the powers of the CIPC and not a court.

Also, in ABSA Bank Limited v Voigro Investments 19 CC the Western Cape High Court delivered this judgment: “if a close corporation has been deregistered for failing to file its annual returns, the registration thereof can be reinstated only by the commissioner in terms of section 82(4) of the Companies Act of 2008. No provision is made for the restoration of a deregistered company or in this case a deregistered close corporation, by order of court.”

This later judgment was set aside in ABSA Bank Limited v The Companies and Intellectual Property Commission of SA. It found that section 83(4) of the Companies Act 2008 allowed the liquidator of a company or any other interested person to apply to court for an order declaring the deregistration to be void. This applies to cases where a company or CC’s name has been removed from the register due to deregistration or liquidation. An interested party may apply to the CIPC for restoration in terms of section 82(4) or to the court in terms of section 83(4).

Both these processes are expensive and the CIPC has placed a number of obstacles in the path of a creditor wishing to apply to it to have a company or CC restored.

The procedure to apply to the CIPC to reinstate a company or CC includes submitting the required forms and payment of all the outstanding annual returns as well as a restoration fee.

Some of the required documentation for an application to reinstate a company or CC, such as certified copies of identification documents of the directors/members, letters from National Treasury and Public Works, and  an affidavit indicating the reasons for non-filing of annual returns, make the process cumbersome, if not impossible, as such information is not readily available to creditors.

It would seem, in these circumstances, as if a creditor is not afforded its right  to just administrative action.

Another option for a creditor is to enforce its rights against the members of the Corporation.

Section 26(5) of the Close Corporations Act provided that if a close corporation was deregistered while having outstanding liabilities, the persons who were members at the time of deregistration would be jointly and severally liable for those liabilities. This provision has been repealed by the coming into law of the new Companies Act.

This is not good news for creditors, who previously were able to use section 26(5) as an effective tool for debt recovery. The provisions of section 26(5) still, however, apply to close corporations deregistered prior to 1 May 2011.

Close corporations and companies are now governed by the new Companies Act which provides that deregistration does not affect the liability of any former director, shareholder (or member) or any other person for any act or omission which took place before the company was deregistered. Members/ directors who knowingly are a party to reckless or fraudulent dealings of the close corporation will still be personally liable for debts of the close corporation, since the provision of the Close Corporations Act providing for this liability remains unchanged.

Does the action of a member or director who allows deregistration of its corporation or company, while having full knowledge of an outstanding debt to any third party, not amount to reckless or fraudulent behaviour?


Could you patent the sun?

12 April 1955 history was made when the National Foundation for Infantile Paralysis announced: “The vaccine works. It is safe, effective and potent”.

This announcement came as a welcome relief to millions of American parents after a nationwide trial using an experimental polio vaccine was conducted.  More than 1.8 million children were signed up by frantic parents to be part of the trial. Kids were injected with either the vaccine or a placebo. It was a double blind study, neither the child nor the caregiver knew who was receiving the vaccine or a placebo. A nationwide trial of an experimental vaccine using school children as virtual guinea pigs would be unthinkable today.

A polio-survivor said it shows how much people feared polio that mothers and fathers were willing to accept the word of researchers that the vaccine was safe.

One year after the trial started, the National Foundation announced that the Salk vaccine proved 80 to 90 percent effective in preventing polio. In 1961 the rate of polio had dropped by 96% in the United States.

In an interview Edward R. Murrow asked Salk who owned the patent to the polio vaccine. Salk replied “Well, the people, I would say. There is no patent. Could you patent the sun?” Over the last half-century, Salk’s rhetorical question has become the cry for those who rally against pharmaceutical patents.

Dr Salk might have believed that personal gain is secondary to helping mankind and meant every word. He did, however, not mention that the National Foundation for Infantile Paralysis looked into patenting the Salk vaccine and concluded that it could not be patented because the vaccine did not meet the novelty requirements and would not be considered a patentable invention by the standards of the day.

This raises the interesting question of the distinction between a discovery, which is not patentable, and an invention. Should a vaccine be considered a natural occurring substance i.e. a discovery, or a product of human innovation and engineering i.e. an invention?

A vaccine contains live or dead cells from a pathogen itself, or genetically modified versions of the virus or bacteria. When considering that the flu vaccine has to be made anew every year and involves months of work by highly trained scientists, it would be considered a stretch to say vaccines are naturally occurring.

The US Supreme Court in 1980 made a clear distinction between a discovery and an invention. Products of nature, like the sun, are not patentable; however isolating and purifying a product of nature may render it patentable if it fullfils all the other requirements for patentability. Despite the Supreme Court not specifically addressing the patentability of vaccines, thousands of patents relating to vaccines have been issued in the United States.

Even though the decision not to apply for a patent for the polio vaccine was a purely academic one, it might be said that morally it was the right one. The vaccine trial was made possible by volunteers. No money was received from federal grants or pharmaceutical companies. The trial was financed by donations made to the National Foundation for Infantile Paralysis. David Oshinsky wrote: “It’s the incredible organisation involved, with tens of thousands of mothers and families coming together to save their children. And it was all done privately.

It could therefore be said that Salk was correct in saying that the “patent” belongs to the people.


Food for Thought

Earlier this year the Department of Health published draft amendments to the Regulations relating to the Foodstuffs, Cosmetics and Disinfectants Act, 1972, which regulates the labelling and advertising of foodstuffs.

The purpose of the amendment is to reduce the prevalence of non- communicable diseases, to provide consumers with factual information so that they can make healthier choices as well as to rectify certain loopholes in the current legislation.

What does this all mean for you as the consumer and how might it impact your weekly trip to the supermarket? Some of the changes include:

  • Nutritional information is mandatory on all food labels, subject to some exceptions e.g. small packaging or home industry products. For the health conscious, this is a welcome change as healthier choices can be made.
  • No health claims can be made about added fructose, non-nutritive sweeteners, fluoride and added aluminium and, in particular, that these substances may make a positive contribution to, or may improve, health. While in the short-term these substances do have health benefits, the motivation for such an amendment is that the long term effects of these substances are not yet known.
  • No health claims may be made for foodstuffs which naturally contain the claimed properties. Bottled water is one example of this – it will not be allowed to claim that the water is low in energy as this is the natural property of all water. Claims that vegetable oils are low in cholesterol will also not be allowed as all vegetable oils are low in cholesterol.
  • It is no longer allowed to make claims in the negative – instead of stating that a product is 98% fat free, the label will have to state that it contains 2% fat.
  • Health claims in general have been limited, and can only be made if the stipulated criteria have been met. Words such as “healthy” and “wholesome” are not allowed. Furthermore, words such as “rich” and “pure” must comply with certain standards before such a claim can be used. The use of misleading pictures for example, a slim lady with a measuring tape around her waist, is also not allowed as it deceives a consumer into thinking that the product has slimming benefits.
  • Welcome changes for consumers are the amendments which deal with certain loopholes in the current legislation which gave rise to the horsemeat and brining of chicken scandals. In this regard, the indication of the type of animal, fish or bird must be present on the label. So, for those who are partial to a bit of horse or donkey meat, just look for it on the label. Furthermore, brined chicken cannot be slipped into the market under the premise of the umbrella term “enriched” as only foods that contain essential nutrients may claim to be enriched – salt water not being one them. Brined chicken has also been defined as a processed meat and therefore manufacturers who choose to brine their chicken will have to identify it as such on the label.
  • More controversial provisions include the religious endorsements of foods. The endorsements by specific religious entities are prohibited unless food business operators give consumers their constitutional right to freedom of choice by making such food without any religious endorsement available on the shelf at all times. So manufacturers or importers of foods bearing of “Halaal” or “Kosher” marked products must make similar products bearing no such religious endorsement available for consumers who do not wish to purchase marked products. The motivation for the amendment provided is to allow all consumers to exercise their constitutional rights; however, it will be interesting to see whether this provision is upheld.
  • The advertising of food and non-alcoholic beverages to children (defined as being below the age of 18) is also to be regulated. “Unhealthy” foods may not be marketed to children and in particular the use of child actors, sports stars, celebrities, or cartoon type characters is not allowed. One provision also states that food business operators shall not abuse positive family values such as portraying any happy, caring family scenario in order to advertise healthy foods.

Many of the provisions are aimed at providing a consumer with factual information free from deceptive or misleading marketing terms in order to enable the general public to make healthier food choices.

What recourse does a consumer have if he is subject to misleading or deceptive marketing or labelling of foodstuffs? The Foodstuffs, Cosmetics and Disinfectants Act makes it an offence to describe for purposes of sale, any foodstuffs in a manner which is false or misleading in respect of, among others, the origin, nature, substance, composition and quality. Furthermore, section 41 of the Consumer Protection Act prohibits false, misleading, deceptive representation or to falsely state, imply, or fail to correct an apparent misrepresentation that goods have ingredients or qualities that they do not have.

An aggrieved person can also lodge a complaint with the Advertising Standards Authority, should the advertising of the foodstuff be misleading or deceptive. In particular, the Food and Beverages Code provided by the ASA specifically deals with misleading presentations in advertising for food and products. The complaint is lodged with the ASA who after receiving submissions from the opposing party, adjudicates on the matter.

It remains to be seen whether the more controversial provisions of the Regulations will be maintained. Perhaps our little darlings’ calls for Ronald McDonald’s treats will be a thing of the past.

Hillary Brennan – Practitioner

Monkey Business

According to the South African Copyright Act No. 98 of 1978 the owner of the copyright in a photograph is defined as the person responsible for the composition of the photograph.

However, what happens if an animal, rather than a person, is responsible for the composition of the photo? Who is then considered the owner of the copyright?

In 2011 a British wildlife photographer, David J Slater, left his camera unattended in a national park in North Sulawesi, Indonesia. A female crested black macaque monkey, got hold of the camera and managed to take a rather spectacular self-portrait, or rather a “selfie”.

The photo was published in numerous magazines and websites and was eventually placed on a website named Wikimedia Commons, which contains a collection of photographs which are open for public use. Slater, considering himself the rightful owner, requested the removal of the photo from the website. However, his request was denied.  Wikimedia Foundation argued that the monkey took the photograph and since monkeys can’t hold copyright, the image is in the public domain.

Since in most, if not all countries, the right to copyright ownership is limited to human beings, the  argument of Wikimedia Foundation seems to be valid. According to the UK’s Copyright, Designs and Patents Act 1988 the copyright in a photograph is owned by the person who creates it. The US Copyright Office has advised that, for work to be copyrightable, it must “owe its origin to a human being”.

Subsequently a legal battle between Slater and the Wikimedia Foundation ensued. Slater argued that he owns the rights to the image and the royalties which comes from the publishing thereof, because he set up the equipment which enabled the monkey to press the button and take the photograph.

However, The US Copyright Office settled the matter. It said that images taken by animals, including the 2011 primate self-shot, could not be registered for copyright by a human. Likewise the Office said that it will not register works produced by nature, animals or plants. The image therefore forms part of the public domain.

Slater might have had a reasonable argument, if the monkey had taken the photo on a command from Slater, that the artistic expression of the photo belonged to him and that the monkey was merely his assistant. However, since the monkey took the photo of her own volition, this argument was not tested.

It would seem that there is no space for so-called monkey business when it comes to copyright.

Monty Rademeyer – Partner

Reality Bites


In about 2006, Brian Wade and Geraldine Perry conceived an idea for a reality television programme. The show, to be called “The Real Deal”, was to be a music talent show featuring artists who write and perform their own material. The key element was that the original track performed by the artist on the show would be available for download after the show and eligible for inclusion in the national chart. The winner of the competition would receive a contract with a major record label.

Wade and Perry pitched their idea to various major record companies and BBC but all were uninterested, particularly in light of the fact that the show featured original music. Wade and Perry adjusted their concept so that contestants would sing covers as well as original material. Wade and Perry prepared a slide show in order to pitch their concept to British Sky Broadcasting Limited (Sky). After Sky expressed interest in the concept, Wade and Perry forwarded their slide show to Sky in order for a final decision to be made. However, Sky ultimately decided not to commission The Real Deal.

In 2010, it transpired that Sky was developing a new music talent show called Must Be The Music. Like The Real Deal, this show would incorporate downloading and original music. When Wade and Perry confronted Sky, it argued that, although the two shows contained similar elements, they were actually very different.

Must Be The Music aired later that year and the show as well as the acts enjoyed some success. However, the audience ratings were poor and Sky cancelled the show in January 2011. However, the show did achieve more success abroad, reaching its sixth series in Poland in September 2013.

In July 2012, Wade and Perry instituted formal legal proceedings in the High Court of Justice of England and Wales against Sky based on misuse of confidential information. They contended that Sky misused the confidential information in their slide show by taking ideas from The Real Deal and using them to create Must Be The Music. Sky’s defence was that, regardless of any similarities, its programme was independently created and that Wade and Perry’s ideas were too vague to attract the protection of the law of confidence.

The court identified three requirements for liability for breach of confidence:

  1. Information in respect of which relief is sought must have the “necessary quality of confidence about it”;
  2. The information must have been imparted in circumstances importing an obligation of confidence; and
  3. There must be an unauthorised use or disclosure of that information.

Wade and Perry’s case was that ideas within their slideshow had been copied. Therefore, the judge indentified and considered 14 elements in the slideshow, 8 of which the claimants relied on (relating to the format, use of downloads, original material etc). However, on their own, these ideas were not original as they were all known in the industry and had been used before in other music talent shows. The judge was even convinced that the combination of these elements enjoyed the necessary quality of confidence to be protected by law. It didn’t help that the ideas were expressed as a pitch rather than a fully worked out show. Therefore, the judge found that the ideas were not sufficiently detailed to be protected.

Sky’s witnesses gave a complete version of events which explained that Must Be The Music came from other sources than the person at Sky who had seen Wade and Perry’s pitch and the slideshow and confirmed the independent creation of Must Be The Music. Birss J concluded that “There are similarities between the show and some ideas in the deck but the evidence explained their origin. The inference that the ideas which Must Be The Music embodies in common with The Real Deal must have been derived from the deck is not strong enough to leave me in any real doubt about the right conclusion in this case. I accept Sky’s evidence. I find the Must Be The Music was created entirely independently of The Real Deal”.

Judgment: Brian Wade and Geraldine Perry v British Sky Broadcasting Limited [2014] EWHC 634

Kim Rademeyer – Partner

The ‘Money’ Genes


While patent offices around the world have been granting patents which lay claim to human gene sequences for decades, the matter was famously decided in the US case of the Association for Molecular Pathology v Myriad Genetics. Myriad owned the rights to two genes, BRCA1 and BRCA2. Any mutation to these genes dramatically increases a woman’s chance of developing breast and ovarian cancer.

Does this mean that if you are sitting with a BRCA1 or BRCA2 gene that Myriad could now lay claim to it? The simple answer is no. A gene patent is one that includes one or more claims over an isolated or purified genetic sequence. It is this isolated gene sequence and not how it would occur naturally in the human body that can be patented.

The grant of such patents has caused much controversy. It is widely believed that the existence of a patent covering isolated biological material might inhibit research and development, thereby depriving society of advances in medicines and diagnostics. Furthermore, as in the Myriad case, the presence of the patent means that the high cost of carrying out the test for this gene mutation prevents many from seeking such care and bars them from the benefits of early detection. There is also a perception that patents hinder competition and without competition firms are at liberty to charge seemingly exorbitant prices for their products. However, is the impact of gene patents purely negative and what factors can be used in determining the economic impact of these patents?

In order to assess the possible economic impact of these gene patents, it is necessary to return to basics – what exactly is the economic rationale behind a patent? A patent provides an inventor with a limited period of exclusive control over the invention. During this time nobody is allowed to make use of the invention without obtaining permission. It essentially encourages people to innovate and to share the knowledge behind the innovation by granting them a legally enforceable right to exploit the invention for a set period. A patent is therefore a trade-off between innovation on the one hand and competition on the other.

The commercial barrier involved in bringing an idea to the market can be vast. Inventions in the medical field typically take 12-15 years and billions of dollars to become products on the market. Even then, such inventions are not always successful. Before a product or diagnostic test can even reach the market, research is conducted, clinical trials are carried out, the necessary regulatory permission is obtained and only then is the product manufactured and launched. An invention based on a human gene patent is no different. Companies, both private and public, spend hundreds of millions of dollars every year in research and development. The gene sequence is then applied to diagnostic testing such as in the Myriad case or for the development of medicines. Without the promise of a possible financial benefit, there would not be an incentive for such an investment. Companies rely on the added cash flow created by the patent rights due to licensing agreements and the bargaining strength in the market place.  Patents are therefore one way in which to recoup high development and commercialisation costs, which enables the transfer of technology between the researchers and companies.

The belief that patents grant a monopoly and therefore supress competition is not entirely correct. It is arguable that a partial monopoly is created as technical and economic substitutes can serve as competitors. In the same way, while the monopoly might delay testing as in the Myriad case, and does hinder research to a certain extent, it is arguable that the sole purpose of a patent is to incentivise innovation and spur the innovation of others. It creates a market for innovation as rival firms or researchers “design around” the innovation. The patent process disseminates information providing tools for fellow researchers or rival firms to seek new innovations. Often, as new innovations are developed, the patented innovation slowly becomes more expensive to maintain than the financial gains it provides, thereby causing the market to look towards alternatives, thus driving the cycle.

While South Africa is not a key player in the field of genetic research and in particular, gene patents, it is interesting to note that economic impact is not necessarily all bad. The purpose of patents is essentially to create incentives for new developments and advances in technology, ultimately to benefit society as a whole. However, as with most things in life, it doesn’t come without pitfalls and trade-offs.

Hillary Brennan – Practitioner

Monty Rademeyer – Partner

Anti-(biotic) Resistance


There is a fundamental conflict between a desire to maximise profits by selling a patented antibiotic and public health threats.

The worldwide use of antibiotics in hospitals, by family practitioners and in husbandry (to fatten animals) has created a problem whereby millions of people are hospitalised each year for multi-drug resistant bacterial infections. Every dose of antibiotics creates selective evolutionary pressures, whereby bacteria survive to pass on genetic mutations.

It is possible that we are at a stage were human innovation is no longer capable of outpacing bacterial mutation which is possibly a result of abusing incentives for producing antibiotics.

A survey which was done in 2004 of fifteen major pharmaceutical companies, including Merck, Pfizer and Johnson & Johnson showed that of 506 drugs undergoing research and development, only five were antibiotics. It has been noted that in the last 30 years no significant new antibiotic has been put on the market.

A major cause for the decline in antibiotic development is the poor return made by the companies. This is because antibiotics are short-term therapies that completely cure their target diseases. The costs of developing a novel antibiotic is also extremely high, and is not considered a good investment.

One way in which pharmaceutical companies try to mitigate against this poor return is to push the sales of a specific antibiotic during the drug’s patent lifetime.

According to Horowitz JB  the resistance to a specific antibiotic tends to increase when the patent on the antibiotic reaches its expiry date. This could be due to the sales which were pushed during the lifetime of the patent and because, upon expiry of the patent, there is a significant decrease in price and an increased availability of the specific drug.

The international intellectual property regime provides an environment which encourages pharmaceutical companies to develop and market drugs to maximize private profits, rather than benefit public health. Thus a pharmaceutical company is not generally willing to preserve the efficacy of a patented drug by limiting the use thereof, before the patent of the drug expires and generics can enter the market.

One way in which to increase the longevity of existing drugs (i.e. the effectiveness) might be to reduce the use of medically relevant antibiotics and to use new drugs only when they become absolutely necessary. This, however, directly impacts on the incentive to develop and produce new antibiotics.

The Infectious Diseases Society of America (“IDSA”) has strongly advocated the extension of patent protection for novel antibiotics to allow pharmaceutical companies to enjoy exclusive markets for longer. The belief is that the companies will have a longer period to generate profits to recoup investments and they will be encouraged to reserve antibiotics for future public health threats.

The downfall to this suggestion is the fact that prices will remain higher for longer and poor countries will be negatively impacted.

According to the World Health Organisation, the world is entering a “post antibiotic era” and if a solution is not found this could represent the greatest threat to public health in the twenty first century.

Monty Rademeyer – Partner

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