THE KING IV CODES | INSIGHTS

INTRODUCTION

The Institute of Directors in Southern Africa (IoDSA) published the draft King IV Report on Corporate Governance on 15 March 2016 and Sector Supplements on 11 May 2016 for public comment. These new draft codes are the next phase in the series of corporate governance codes produced by the IoDSA to guide and benchmark the required standards for corporate governance in South Africa. The latest draft codes are the fourth iteration of the codes since the King Committee was formed in 1992, led by former judge, Mervyn King, and are arguably one of the most drastic reinventions of the codes since their first publication in 1994. Download King IV™ Report

The King III Codes, the King IV’s predecessor, which came into effect on 1 March 2010, was published two years after the Companies Act, 2008 (the “Act”) was promulgated, but before the Act came into effect or its regulations adopted. The King III codes thus lacked insight regarding subsequent developments. In addition, whilst the King III Codes are progressive, they still followed a rule-based model of compliance and the controversial “comply or explain” approach. There have also been numerous global developments since the 2010 codes, such as the publication of the Codes for Responsible Investing in South Africa and the shift towards integrated thinking and reporting and the publication of the IIRC guidelines for integrated reporting and the work of the IRCSA.

The King IV codes aim to address these and other gaps and expand on the successes achieved in the King III, as well as bring the codes in line with global developments. As a proud partner and sponsor of this Report, Adams & Adams hosted a commentary session in Sandton recently. SEMINAR VIDEOS ARE AVAILABLE ON YOUTUBE

THE NEW DEVELOPMENTS 

One of the main goals of the King IV committee was to increase the accessibility of the codes and the simplicity of its principles. This can be seen in the consolidation of the previous 75 principles into 16 succinct outcomes (17 if counting institutional investors). In an effort to move away from compliance governance or the ‘box-tick approach’, the new codes also differentiate between principles and recommended practices and how these can be used to achieve sustainable outcomes. The maxim ‘comply or explain’, has been replaced with the new ‘comply and explain’. In this way, the new codes seek a more qualitative approach regarding compliance and disclosures, with adherence to the basic outcomes being assumed.

In respect of sustainable development, the King III made use of the ‘triple context’ or the ‘triple bottom line’ framework for reporting, the areas of reporting being the economy, society and natural environment. The new codes aim to steer away from the rigidity that this brought about. Rather, the new codes makes reference to the ‘six capitals model’ as the basis for sustainable development, adopting the recommendations of the IRCSA and the work of the IIRC. These six capitals areas are financial, manufactured, intellectual, human, social and relational and natural (environmental). Although not all will be applicable to every organization, to be relevant for reporting they simply need to be used, transformed or provided.

One of the major shifts the King IV aims to bring about is greater stakeholder inclusion in corporate decision making. This is in an effort to reinterpret who the directors in a body corporate serve. In the context of a Company, has largely been accepted to be the company itself (i.e. the shareholders as a whole) however, in doing so, directors were previously required to consider other stakeholders as well, such as employees, customers and the community. This has come to be known as the enlightened shareholder model. The King IV committee distinguish the new code’s position from this model, requiring that directors in the shareholder-inclusive model consider other stakeholders, not merely as instruments to serve the interests of shareholders but as having intrinsic value for board decision-making.

Director remuneration has been a long been a worldwide corporate governance problem, particularly in the post-2008 economic environment. Remuneration of directors is a key area which the King IV committee focused on. The previous codes required any remuneration policy be approved by a non-binding advisory vote of shareholders. The new codes require that both the policy and its implementation be approved by shareholders and where less than 75% approval is achieved for either the policy or the implementation plan, compulsory shareholder engagement is triggered. In addition, with a view to address the endemically large wage gaps between directors and employees, the new codes introduce the requirement that the remuneration committee, social and ethics committee and governing body consider and disclose measures put in place to attain fair remuneration, in the context of overall employee remuneration.

The social and ethics committee was a concept first introduced under the Act and the implementation into corporate governance structures has been slow. Currently, under the Act, this committee is voluntary for most private companies. The King IV codes argue that the committee’s functions goes beyond the statutory duties specified in the Act and extend into all aspects of ethics management in an organization, and beyond mere compliance. Rather than a ring-fenced ethics committee, the King IV codes also argues for greater integration and powers of the social and ethics committee in other areas of policy-making (such as the remuneration committee).

With the publication of the rule by the Independent Regulatory Board of Auditors on 4 December 2015, the King IV committee sought to align the King principles with the increased requirements for auditor independence. King IV therefore recommends that the audit committee oversee and disclose the appointment date of a company’s auditing firm, however does not go as far as recommending audit rotation. The codes also recommend that the audit committee disclose significant audit matters and how these were addressed.

The King IV recognize the evolving risks encountered by modern globalized corporations and codes and that the traditional view that risks are ‘the effect of uncertainty on objectives’ is outdated. Mindfully taking risks into account makes it possible to identify opportunities that can be captured. The King IV codes argue that risk alone is not to be discouraged in business, but rather excessive risk taking, and the duty to identify what would be excessive rests with the governing body. The new codes therefore introduce the concept of ‘risk and opportunity governance’.

The previous King III codes came into effect six years ago, the same year as the unveiling of the first generation Apple iPad. In the space of time between the King III codes and the new draft codes, tech companies have boomed and gone bust and countless technology trends have emerged and disappeared. Whilst the King III codes already addressed some of the issues caused by this ‘fourth industrial revolution’, the King IV codes recommend greater technological pro-activity in body corporates and business model innovation to cope with technology changes and challenges. The codes also recognize information as a growing resource in business and the opportunity for capitalizing on internal information and data to increase intellectual capital. However, the codes also recognise the growing threat of cyber-security risk with more business’ resources going on-line, and require specific oversight and management of these risk areas.

Globalisation coupled with the strategic tax planning by multi-national enterprises (MNE’s) have led to huge savings in tax for MNE’s as a result of profit shifting, and correspondingly massive losses for revenue collectors. This has had devastating fiscal effects, particularly in developing nations, as was recognized in 2000 when global political leaders agreed that developing countries needed to strengthen their tax systems. The practices employed have, however, continued, which some describing these practices as tax ‘avoision’, being tax evasion (which is legal) of such a nature that the outcomes achieved are akin to tax evasions (which is illegal). Recent public reactions, such as the outcry in reaction to the Panama papers, have shown that these practices are no longer morally accepted by the public and are regarded as linked with corporate citizenship and reputation. The King codes recognize this and argue that the audit committee should be responsible for the tax strategy of an organization and go beyond mere compliance to take into account corporate citizenship, stakeholder considerations and reputational repercussions. In respect of group governance, the new codes also place greater responsibility on holding company boards for implementing group governance policies and frameworks.

 

COMMENTARY ON THE KING IV CODES

The developments recommended in the King IV are very commendable and innovative. The scalability and accessibility of the new codes (beyond large companies to SMME’s and other body corporates, such as municipalities) will set the tone for governance standards as a whole. Some of this had led to comments that the codes reach too wide and will be difficult to apply in all the intended circumstances. Whether or not this is correct will be determined, in part, by the application and uptake in use of the sector supplements.

The codes also build on the previous codes identification of IT governance as a key area of risk. However, the lines drawn in the new codes do not yet, arguably, reflect the reality of IT governance and the variety of risks that have emerged. It is argued that, rather than recommending that governing bodies find these tools themselves, that more robust recommendations are made in respect of IT risks, as was done with cyber-security risks. Other risks areas that could be introduced are change control, repetitional risk and social media and informational compliance (with the Protection of Personal Information Act – PoPI – looming).

It is also argued that the codes do not adequately address intellectual property as an area requiring specific attention. Although intellectual capital forms part of the six capitals model, it is given little voice in the codes, with its primary mention being in the technology and informational governance portion of the new codes. It is argued that intellectual property risks extend wide enough to require greater mention and recommendation in the codes, particularly in light of the corporate governance consequences which arose in the matter of Makate v Vodacom (Pty) Ltd 2016 (4) SA 121 (CC), where agreements entered into by directors resulted in potentially massive liabilities for Vodacom, which outcome could have been avoided.

Lastly, the new codes do not yet fully address the growing need for corporate transformation, with the only provision which tackles this definitively being principle 3.2, which prescribes this as one of the factors to consider in ensuring governing body diversity. It is argued that corporate governance codes present a unique opportunity to advocate for transformational outcomes and a forum (such as a transformation committee) that substantively and address the risk, both economical and reputational, of failing to achieve such outcomes, together with the opportunities that would arise from effectiveness in this area.

 

THE CURRENT PROCESS

A draft version of the King IV codes was made available to the public for comment on 15 March 2016. A copy of these codes can be accessed here. The deadline for public commentary was on 15 May 2016, and this has not yet been extended.

A draft version of the King IV Sector Supplements was made available to the public for comment on 11 May 2016. A copy of these codes can be accessed here. The deadline for public commentary on the Sector Supplements is 11 July 2016 and those wishing to comment will be able to access the document via an electronic portal, which will also provide a mechanism for submitting comments.

The commentary process is open and transparent and all comments submitted are made public on the IoDSA’s website.

 

BOTSWANA (June 2016)

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Eugene Honey, Menzi Maboyi (MenM), Farzana Rassool (FR) and Shakes Mashaba (SM) travelled to Botswana during June 2016, in order to meet with the Registrar of the Company and Intellectual Property Authority (CIPA), Mr Tim Moalusi, and Registry officials to discuss outstanding matters and current developments and to assess the operations of A&A’s associated office.

The visit coincided with the sub regional intellectual property workshop for young innovators organised by WIPO, the Africa Innovation Forum (AIF) and the Japan Patent Office (JPO). The Workshop coincided with the annual Africa Innovation awards. Eugene Honey was invited to present a paper and sit as a panellist for the session on valuation of IP assets, commercialisation and monetization.

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Image L – R: Eugene Honey, A&A, Mr Tim Moalusi, Registrar of CIPA & Menzi Maboyi, A&A.

THE IMPACT OF BREXIT ON INTELLECTUAL PROPERTY RIGHTS

In the aftermath of the Brexit referendum outcome, another consideration in the matter is what the implication will be for Intellectual Property rights – specifically for those that have had trade mark’s registered in the EU. Joining CNBC Africa to discuss this is Darren Olivier, Partner at Adams & Adams.

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DJIBOUTI – ACCESSION TO THE PATENT COOPERATION TREATY (PCT)

On 23 June 2016, the Minister Delegate to the Ministry of Economy and Finance, Hassan Houmed Ibrahim deposited Djibouti’s instrument of accession to the PCT with WIPO. The Treaty will enter into force in Djibouti on 23 September 2016. With the accession of Djibouti, the PCT has reached the milestone of 150 member states. Prior to Djibouti’s accession to the PCT, patent protection was only available by way of a convention application or a non-convention application. The accession of Djibouti to the PCT provides applicants with the opportunity to enter the PCT international phase, thereby receiving the benefits of search and examination reports and patentablity analysis issued by WIPO which will assist applicants in making informed decisions about entering the national phase.

For more information in respect of this development or for further updates, information and queries on copyright law, trade mark, patent and design filings in Djibouti and across Africa, please contact africaip@adamsadams.com

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BREXIT | IMPLICATIONS FOR SOUTH AFRICANS’ CONTRACTS?

The United Kingdom has voted to leave the European Union. Will this have implications for contracts between South African businesses and parties in the UK or the EU? It should be noted that nothing has changed yet. The UK must still formally exit the EU. In the meantime, EU law will still apply to the UK. However, many changes are on the horizon. South African businesses will have to keep this in mind when contracting with parties in the UK or EU.

For example, if a South African manufacturer appoints a distributor for “all countries in the European Union”, this area might not include the UK in future. Therefore, one must specify whether this area will cover all countries that are part of the EU when the contract is signed or whether the area will cover all countries that are part of the EU from time to time. The second option will mean that the UK will be excluded from the contract’s area at some point in the future.

The ‘Brexit’ will lead to many regulatory changes. In future, if a manufacturer will supplies to the UK and EU region, the products will have to comply with separate laws and regulations in the EU and UK. One would hope that the laws will not be too different. Customs and tariffs challenges will arise as well, and one will also have to try and deal with currency volatility in contracts.

Many transborder contracts are governed by the laws of England and Wales. Although EU law has been incorporated in English law in many respects, the UK’s exit from the EU will not necessarily cause an immediate and dramatic change to English law. It is possible that English law clauses will remain popular and parties may continue to choose to resolve their disputes in the UK’s courts or arbitration forums.

The future is uncertain and one will have to monitor developments closely, particularly when contracting with parties in the UK. However, drastic contractual ramifications might not yet be likely. For further advice contact our Commercial Law Department.

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THE TRADE MARK IMPLICATIONS OF THE UK DECISION TO LEAVE THE EU

On 23 June 2016, the United Kingdom voted to withdraw from the European Union. In the short term, a UK exit from the EU will have no effect on existing EU Trade Mark Registrations. Once the UK’s withdrawal from the EU has been ratified, we believe that current EU Trade Mark Registrations would no longer cover the United Kingdom.

We expect, however, that appropriately enacted legislation will be implemented to ensure that such rights continue to have force in the UK. We also understand that there will be provisions available to partially convert existing EU registrations into UK national registrations. These registrations may also enjoy the same filing dates.

It is important to remember that until such time as the UK’s withdrawal from the EU has been formally recognised, (which may take several years), existing EU registered Trade Marks remain valid and enforceable in the UK.

Should you have any concerns or wish to secure Trade Mark Protection in the UK or the EU, please contact our Trade Marks Department on mail@adamsadams.com.

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HIGH COURT FORCES TSHWANE RATES REGIME U-TURN

The High Court in Pretoria has set aside an unlawful rates regime implemented by the City of Tshwane Metropolitan Municipality, which had adversely impacted the owners of vacant property situated in an area that previously fell within the jurisdiction of the former Kungwini Local Municipality.

The unlawful property rates regime arose following the amalgamation of the former Kungwini Municipality into the City of Tshwane. Upon compiling a supplementary valuation roll in 2012, the City of Tshwane incorporated properties which previously fell within the Kungwini Municipality into its jurisdiction, but in so doing, it categorised as ‘residential’ properties those that had previously been categorised as ‘vacant’. The impact of this re-categorisation was that owners of the re-categorised properties were no longer invoiced at the considerably lower residential tariff, and were instead charge the vacant land tariff (which is some 4.5 times higher than the residential rate). To make matters worse, the increase date was applied retrospectively to July 2011, being the date upon which the properties in question were incorporated into the City of Tshwane.

The result was that certain owners who had received a monthly invoice in the amount of R843.43 in August 2012, received a rates invoice in the amount of R75 939.64 the very next month. Other owners went from paying a monthly amount of R491.16 to R4 009.33 as a result of the re-categorisation (a staggering increase of 716%).

Lombardy Development (Pty) Ltd, the developer of Lombardy Estate & Health Spa in Pretoria East, together with other property owners in the area launched a review application to set aside the City of Tshwane’s decision to re-categorise the affected properties.

Lombardy and the other applicants based their case primarily upon the City’s failure to have complied with its mandatory notice obligations in terms of the Municipal Property Rates Act, which required the City of Tshwane to have given the owners of the affected properties individual notification of the fact that their properties were to be re-categorised in terms of the supplementary valuation roll. In consequence of this failure, the Pretoria High Court declared invalid and set aside the 2012 supplementary valuation roll insofar as it re-categorised the properties in question from ‘residential’ to ‘vacant’. The Court also declared invalid and set aside the City of Tshwane’s 2013 general valuation roll and all subsequent valuation rolls which perpetuated the unlawful re-categorisation introduced by the 2012 supplementary valuation roll.

In addition, the court declared unlawful and set aside item 5.1.5(d) of the City of Tshwane’s Rates Policy on account of its absolute exclusion of any right to seek exemptions, reductions or rebates by the owners of vacant land, holding that such exclusion fails to treat the rate payers equally.

In terms of the order granted by the High Court, the City of Tshwane is prohibited from further implementing any of the decisions mentioned above to the extent that they were set aside. This means that the City can no longer issue rates in respect of the affected properties according to the vacant land rate and, instead, that it must apply the rate applicable to residential properties.

Andrew Molver of Adams & Adams, the law firm representing Lombardy and the other applicants in the matter, stated, “The outcome is a major victory for the owners in question who, without this court order, would have had no way of escaping the exorbitant rates imposed upon their respective properties,” and added, “The ruling also, again, demonstrates the faith which can be placed in the judiciary and judicial processes in invalidating unlawful and prejudicial conduct by the state”. The firm was also recently involved in the Nkandla ConCourt judgment as legal representatives of the Public Protector, Adv. Thuli Madonsela.

Note: Since the date of publication of this article, the City of Tshwane has applied for leave to appeal the judgment.

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SOUTH AFRICA JOINS GLOBAL ANTI-SPAM INITIATIVE

The National Consumer Commission is a member of the London Action Plan, which is a coalition formed by a number of regulators to combat spam, phishing and online ills. According to a statement, the members of the London Action Plan have concluded a memorandum of understanding (MOU) relating to unsolicited communications. The purpose of the MOU is to record the various regulators’ intention to cooperate in the fight against unlawful spam as well as malicious messages.

At present, spam is regulated on an opt-out basis in South Africa. This means that a marketer can send unsolicited communications, but must allow recipients to opt out from receiving further communications. When the Protection of Personal Information Act (POPI) comes into force, this will change to an opt-in system of regulation. Under such a system, marketers will not be allowed to send unsolicited communications without recipients’ consent unless one of POPI’s specific requirements are met.

The London Action Plan’s MOU might bolster South Africa’s regulation of unsolicited communications. However, it is hoped that the MOU will provide aid in the battle against phishing and fraudulent messages in particular.

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NEW PROCUREMENT REGULATIONS UNLAWFULLY EXCLUDE BIDDERS BASED ON B-BBEE STATUS

Commentary by Andrew Molver [As published on BDLive]. On 14 June 2016, National Treasury published new draft Preferential Procurement Regulations [View Here] in terms of the Preferential Procurement Policy Framework Act 5 of 2000 (“the Procurement Act”). The draft regulations, once finalised, will replace the 2011 Preferential Procurement Regulations.

Arguably the most notable and controversial of the draft Regulations is Regulation 10, which purports to grant organs of state an entitlement to apply “pre-qualifying criteria in the evaluation of a tender”. Without limiting the nature of such pre-qualifying criteria, Regulation 10 specifically permits an organ of state to apply a pre-qualifying criterion which requires a tenderer to have “a stipulated minimum B-BBEE status level”. A tender that fails to meet a pre-qualifying criterion will not be an acceptable tender.

The effect of Regulation 10, specifically its creation of an entitlement to exclude bidders which do not have a stipulated B-BBEE status level, stands to cause various bidders to be excluded from tender processes right at the very outset, and even before such bidders are evaluated in respect of the functionality of their respective bids. This appears to contradict the provisions of the Procurement Act (in terms of which the draft Regulations have been published), which specifically provides that a maximum of 10 or 20 points out of 100 (depending on the value of the tender) may be allocated for so-called “specific goals” (such as contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability), while the remaining 90 or 80 points (as the case may be) must be allocated for assessing price. Moreover, in terms of the Procurement Act, the scoring of tenders on price and preference according to the aforementioned 80/20 or 90/10 ratios must be conducted in respect of all bidders which meet the minimum functionality threshold.

By permitting organs of state to apply a pre-qualification criterion which requires all tenderers to have a minimum B-BBEE status level, the draft Regulations circumvent the limitations imposed by the Procurement Act as to what weighting is to be attached to a tenderer’s B-BBEE status in evaluating and awarding a tender. Whereas under the Procurement Act it is expressly indicated that a maximum of 10 or 20 points (depending on the value of the tender) can be allocated for B-BBEE status, the draft Regulations elevate the importance of B-BBEE status to the extent that it can preclude certain bidders from tendering at all, irrespective of how functional and cost effective such bidders might be. This flies in the face of the Procurement Act’s clear intention to promote price as the most determinative factor in awarding government tenders, with the matter of “preference” playing a substantially smaller role.

Entities which in the past have managed to win substantial tenders notwithstanding their B-BBEE status, based simply on account of the quality of their product/service offering and their competitive pricing, may now find themselves automatically precluded from competing for government tenders where a minimum B-BBEE status level is imposed as a pre-qualification criterion. This will obviously come as a concern to many.

The draft Regulations are open for comment until 15 July 2016, following which the final draft Regulations (taking into account public comments) will be submitted for parliamentary approval and, thereafter, promulgated by the Minister of Finance.


Andrew Molver and Michael Gwala are both partners at Adams & Adams, and specialise in administrative law and constitutional litigation. Their teams routinely advise clients, and lodge submissions, in respect of draft legislation and regulations.

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INCREASED PENALTIES INTRODUCED FOR CARTEL CONDUCT

Section 13 of the Competition Amendment Act, 2009 came into operation on Thursday, 9 June 2016, by virtue of Proclamation no. 36 of 2016. The aforementioned Section amends Section 74 of the Competition Act, 89 of 1998 (“the Act”) to provide for the following penalties in respect of a contravention of Section 73A of the Act (which Section has criminalised cartel conduct) – a fine not exceeding R500,000 or imprisonment for a period not exceeding 10 years or both.

For further details regarding the Competition Amendment Act, contact Misha van Niekerk | 012 432 6370

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NATIONAL LIQUOR POLICY | UP FOR DISCUSSION BY CABINET

South Africa’s National Liquor Policy, which was gazetted on 20 May 2015, has realised much controversy, most notably in the alcohol and advertising industries – for a variety of reasons. The National Liquor Policy, if accepted in its entirety, may see criminal liability levied against bartenders who serve already intoxicated patrons; an increase in the minimum drinking age from 18 to 21; and the end of Castle Lager’s sponsorship of South Africa’s national sports teams.

Although the period for comments has already ended, Cabinet reported that, in the week commencing 6 June 2016, it will debate only the proposal that seeks to amend section 9 of the Liquor Act, 59 of 2003, which relates to the advertising and marketing of alcohol products in South Africa.

The National Liquor Policy seeks to amend those provisions of the Liquor Act that relate to the advertising and marketing of alcoholic beverages by empowering “the Minister of Trade and Industry to determine the restrictions and parameters for advertising and marketing of liquor products in line with the Control of Marketing of Alcoholic Beverages Bill”. Although Cabinet has already approved the Control of Marketing of Alcoholic Beverages Bill, the bill has not yet been published for public comment. According to the National Liquor Policy, however, “the bill is calling for the restriction of advertisement of the alcoholic beverages, prohibition of sponsorship and promotion associated with alcoholic beverages”. Should this amendment be accepted into law, the Minister of Trade and Industry will be in a position, for example, to prescribe when adverts featuring alcohol may be flighted. The suggestion that has been made is that advertisements featuring alcohol products may only be flighted between 22h00 and 06h00.

The current position prevents advertisements pertaining to alcohol beverages from being flighted between 14h00 and 17h00 on Monday to Friday and only after 12h00 on Saturdays and Sundays. During the permitted advertising hours, the 70/30 rule also applies, which provides that “programmes with a verifiable 30% or more viewership of persons under the age of 18 may not contain alcohol beverage advertisements” (see Appendix A – Alcohol Advertising – ARA). This applies also to the flighting of sporting events where the main sponsor is an alcohol beverage company.

It will certainly not only be in the public’s interest to hear the outcome of Cabinet’s views.

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MADONNA WINS IN ‘VOGUE’ COPYRIGHT CASE

World IP Review reports that pop star Madonna has prevailed in a copyright lawsuit centring on her 1990 song “Vogue” after a US appeals court rejected claims that a short snippet of the song infringed an earlier track.

In a ruling handed down on June 02, the US Court of Appeals for the Ninth Circuit said the segment was small enough to be considered trivial.

The sample of music, which lasted an alleged 0.23 seconds, came from the song “Love Break”, released in the early 1980s.

The plaintiff, record label VMG Salsoul, owns the copyright to the track and claimed that Shep Pettibone, a producer on the track who went on to work with Madonna, sampled the snippet from “Love Break” and added it to “Vogue”.

“Defendants copied, at most, a quarter-note single horn hit and a full measure containing rests and a double horn hit,” Judge Susan Graber wrote, according to Reuters.

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SCA CONFIRMS LAWFULNESS OF BIDDING ON TRADE MARKS AS GOOGLE ADWORDS

On 27 May 2016 the Supreme Court of Appeal handed down a landmark judgment dealing with the lawfulness of bidding on a competitor’s trade mark as a Google Adword. It confirmed that bidding on an unregistered trade mark of a competitor (without more) as a Google Adword does not amount to passing off or unlawful competition.

The Supreme Court of Appeals decision brings South Africa into line with the majority of other jurisdictions (including the United Kingdom, the USA, France, Germany, Spain, Canada, Australia and New Zealand) which have adopted a similar approach to the issue. In most overseas decisions keyword bidding will only be unlawful in certain situations such as where there is a likelihood of confusion or dilution can be shown to exist.

The Court reached its decision in considering a number of factors including giving recognition to the fact that the purpose of the law of passing off is not to create monopolies; and that the necessity to show confusion in passing off cases is important in striking the correct balance between protecting the rights of traders and promoting competition. For this reason court declined to recognise that the use of trade marks as an Adword justified the recognition of a broader unlawful competition remedy which dispensed with this requirement. The Court also held that consumers are used to having to “sort the wheat from the chaff” in internet search results and therefore are not likely to be confused by use of a trade mark as an Adword, provided that the text of the advertisement displayed is not confusing and enables consumers to correctly determine the source of the goods or services on offer.

The decision was handed down in a dispute between Cochrane Steel Products (Pty) Ltd and M-Systems Group (Pty) Ltd, who both provide security fences. For previous commentary on this case, click here

Media Queries may be directed to Mark Beckman (Communications) 

Mobile (SA) 074 263 5664 / mark.beckman@adamsadams.com

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AFRICA IP ROADSHOW 2016

The Adams & Adams team is at the INTA 2016 Annual Meeting in Orlando, Florida, after the first Africa Roadshow in New York recently. The roadshow provided an economic overview of Africa; as well as sessions and panel discussions on pitfalls and strategies in protecting your IP rights in Africa; transfer pricing and IP; innovation in Africa; competition law, South Africa’s IP policy and substantive examination; and effective anti-counterfeiting strategies.

Africa Nicky

9.15: Nicky Weimar, senior economist, Nedbank South Africa, begins the day with an economic overview and some surprising stats: did you know the Seychelles has the largest GDP per capita in the continent, while Ethiopia’s economy grew 10.5% a year from 2005 to 2015, and consumer spending in Mozambique grew 15% in 2015?

Nicky explains how Chinese investment fuelled this growth, but notes that there has been a drop since 2012. She predicts “three tough years ahead”, but says beyond that there is great potential in the continent – partly due to under-utilised arable land and reserves of commodities. “But there is also more to Africa,” she says, as many governments are seeking to diversify their economies, for example by investing in manufacturing.

Conflicts and corruption still present challenges, she says, but things are improving. “We’ve seen significant improvements in places like Rwanda where you can now start a business online at virtually no cost.” Telephone and internet use are growing rapidly.

There are lots of questions, many asking Nicky to expand on some of the many charts she has presented on African economic data.

11.00: In our webcast session, Simon Brown of Adams & Adams begins by stating that all but two African countries have functioning IP systems (the exceptions are Somalia and Eritrea). Even in South Sudan, it is possible to obtain trade mark protection, he adds.

Africa TM panelThis panel is taking the form of a Q&A, with Charles Macedo of Amster Rothstein & Ebenstein playing the role of a US counsel, asking about protection in Africa. Brown tackles topics including trade mark examination, registration and opposition (including in the regional OAPI and ARIPO systems) while his colleague Jenny Pienaar addresses enforcement questions. Regarding the 17 countries of OAPI, she says: “You would have to sue for infringement in each country.”

There’s an interesting discussion about well-known trade marks. Pienaar says there is “substantial case law” in South Africa, and stresses the need to show that a mark is well known in the country where it is applied for. What about spillover reputation and goodwill? “You can show free flow of products between the two countries, but you would need substantial evidence,” says Pienaar.

Turning to enforcement, the speakers emphasise inconsistency, partly due to the lack of specialist IP courts. But she says there have been some positive decisions, notably in Kenya.

Kevin Curran of Ascensia Diabetes Care asks about packaging and labelling, and Pienaar emphasises the different regulatory requirements in each country, for example NAFDAC in Nigeria.

12.10: What is transfer pricing? asks Ashlin Perumall of Adams & Adams in today’s third session. “It’s the intersection between tax and intellectual property,” he explains: about 45% of export trading relates to subsidiary trading, and that leads to conflicts between revenue agencies. “IP is the most important area of transfer pricing today,” he argues.

Perumall-Ashlin

Perumall introduces us to the Double Irish Dutch Sandwich, the arm’s length principle and the OECD guidelines. Many African countries have put transfer pricing measures in place, he adds, emphasising advance pricing agreements, fixed margins and safe harbours: “The trend will be to move to the arm’s length standard across Africa.” He stresses that “many countries are new to the party” and the lack of comparables increases the risk.

He then takes us on an epic tour of the TP regimes in South Africa (a high-risk country), Angola, Botswana (no TP legislation at this time), Egypt (very robust legislation), Ghana, Kenya, Mauritius, Mozambique, Namibia and Nigeria (a strong player with robust exchange controls).

Jac Marais adds some comments regarding the first two transfer pricing cases now pending in South Africa.

1.45: After lunch (left) we move on to “innovation in Africa”. The ever-smiling Fernando dos Santos of ARIPO talks about the “lack of awareness” of IP in the region, and how ARIPO can promote IP for the benefit of the continent. Activity is focusing on universities and research institutions, he says.

Lucinda Longcroft of WIPO expands on this theme, talking about how innovation from Africa can benefit the rest of the world. “There is enormous wealth of creativity and innovation in African countries,” she says, pointing to the call for innovations for the sustainable development goals, announced yesterday. Longcroft also sets out the November 2015 Dakar Declaration.

Andrew Hirsch of IIPI makes today’s first mention of the Big Five – not wild animals in Africa, but the five biggest patent offices. He adds that the top 15 countries in the world account for 95% of patents filed.

Hirsch introduces the Technology Bank for least-developed countries (LDCs), which he says will empower people and is feasible. “It will change the way people think about how they fit in with the world. It can change the debate,” he says. “The developed world needs to develop Africa. That’s in everybody’s interest.”

Moving to a micro level, Bonnie Nannenga-Combs of Sterne Kessler Goldstein & Fox describes her firm’s recently established pro bono practice, which is focused on economic, social and cultural rights. “We are looking for inventors that are disenfranchised either themselves or due to their region,” she says, adding that the IP system does not always function well in areas of poverty.

Nannenga-Combs gives some examples including: (1) obtaining patent rights for a tribe that harvests the genipa americana blue fruit in the Colombian rainforest, giving them a sustainable way to monetise and control their rights; (2) a patent application for a Native American individual who had developed a hydroponics system. If you can identify a potential innovator who may need help with the patent system and who is disenfranchised, says Nannenga-Combs, let me know!

2.50: Antitrust is a growth area in Africa, says Adams & Adams commercial partner Jac Marais, saying it is driven partly by consumer protection and partly by a means to control big business. “There is no one-size fits all approach in Africa,” he says. “That makes compliance in Africa always a bit tricky.”

Marais-Jac

Despite that, he says there is harmonisation partly thanks to COMESA. The latest news is that Comoros adopted antitrust legislation in the past few weeks, without any notice period: penalties are up to 5% of global turnover.

Kenya (a COMESA member) is an active antitrust jurisdiction, says Marais, with a Competition Act passed in 2010. Notably, in a fertilizer case, investigators from South Africa, Kenya and Zambia launched coordinated actions. By contrast, Nigeria has no antiturst law at present – but Marais says the country is “a huge risk” as it could adopt legislation overnight and target existing cartels.

In South Africa, there were six dawn raids in March alone. Among the targets of competition enforcers are providers of professional services (including attorneys) who have minimum prices.

Marais concludes with three antitrust trends: criminalisation, cooperation and the rise of regulation.

lunch-Africa

3.45: The next session is on IP policy in Africa. Fernando dos Santos says the laws are in place, but implementation and enforcement remain a challenge. Lucinda Longcroft connects IP policy with economic development, and points out that IP is controversial for many people, and those within the IP system need to spread the word about its benefits: “IP is a great tool for development.”

What is the status of the Pan-African IP Organisation (PAIPO), asks moderator Danie Dohmen. Dos Santos says it is a high-level initiative, but will take a long time to develop and must be driven by national IP policies.

Dohmen provides an update on South Africa’s IP policy, which is of particular interest to the pharma industry. The latest draft is close to being finalised, he says, but any legal changes will take five to 10 years. “A big thing we expect is the use of the TRIPs flexibilities,” he says. “We think there will be a big attempt to balanced IP rights with public interest/socio-economic needs.”

Witney Schneidman of Covington & Burling agrees it is important to “get the right balance”. One of the changes under discussion is a stricter invention threshold, but Schneidman says he’s “optimistic” the right balance can be found. Richard Parr of Merck is also on the panel and discusses access to medicines: he too is optimistic that things will be worked out.

Another expected change is the introduction of oppositions. Parr says he personally favours a post-grant system such as that in the EPO.

Compulsory licensing is discussed and Longcroft refers to the WIPO database on flexibilities in the IP system. Dohmen says a substantive search and examination system is likely to be introduced, based on the Malaysian system.

Godfrey Budeli5.00: The final session of the day is on Effective anti-counterfeiting strategies in Africa.

Godfrey Budeli from Adams & Adams kicks us off with a thorough look at the extent of the counterfeiting problem in Africa. “The sale of counterfeit goods in Africa is extremely high,” he says. “The mind set of the African people is generally one of acceptance of counterfeit goods as result of ignorance and poverty.”

Budeli noted a number of challenges in countering this problem including limited resources, insufficient manpower, lack of knowledge of IP and inexperience in IP offices, widespread corruption, and outdated and/or no legislation at all.

However, companies can make use of a number of strategies. Two obvious ones are to register your trade marks and record that registration with customs. Not all countries have formal recordal systems in place, but Algeria, Morocco, Tunisia, South Africa, Zimbabwe, Ethiopia and North Sudan do. “The last three are in theory,” noted Budeli.

Budeli also strongly urged customs training. “Once an application made to customs or border police it is important to engage in customs training on regular basis,” he said. “Explain there is a problem with this particular brand, and could you please be on the lookout for these goods. You may think this training is unimportant but it is extremely useful!” Officials often get rotated to avoid bribery, for example.

Civil and criminal remedies are available but unlike EU brand owners required to take proactive steps. There is no designated counterfeit goods depots and no controlled destruction facilities.

Voluntary surrenders are also quick and cost effective. “This is efficient where small quantities are involved,” said Budeli. “It guarantees the destruction of goods, and no storage costs are applicable.”

Budeli gave some real life examples of manufacture locations for counterfeit goods. On one building in South Africa, Budeli commented: ‘Ladies and gentlemen, if you raid this building in the morning, if you go back in the afternoon it will look the same as before the raid.”

Anti-counterfeiting panel

Andrew Hirsch, director general of the International Intellectual Property Institute, gave a presentation which included a number of factors that can help tackle the theft of IP. These include: connectivity and clusters; capacity of law, institutions, markets, educations; customers; culture; capital, human and other; traditional knowledge; genetic resources; and traditional and cultural expressions. On culture Hirsch noted: “You cannot even communicate properly if you don’t have a respect for culture.”

Lastly, Douglas Graham from Ideation started his presentation by revealing 30% of medicines in Africa is counterfeit. He noted three categories for stopping counterfeiting: local, central and global.

“For local, many come from currency. The kind of things you see here is global recognition, taggants in ink, paint, hidden indicia, holograms, serial numbers and check digits, and RFID chips. But all of these can be defeated by sophisticated counterfeiters and a lot of them are these days.”

This leads to central solutions such as DRM and central registries. But the problem is these can be hacked.  “So you need a registry globally available, massively redundant and cryptographically concerned. So what do you get? A block chain.” Story by Michael Loney and James Nurton (Managing Intellectual Property)

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KENYA | PARALLEL IMPORTATION & TRADE MARKS

In the recent case of LRC Products Limited v Metro Pharmaceuticals Limited [2016] eKLR, the Kenyan High Court dismissed an application by the Plaintiff for an interim interdict restraining the Defendant from, inter alia,  importing DUREX products. The Plaintiff is the registered proprietor of trade mark no. KE/T/1987/0036294 DUREX in class 3 in Kenya.  The Plaintiff had also sought orders to enter the Defendant’s premises and seize all products or packaged products bearing its DUREX trade mark, or similar trade marks, and further seize records of purchases and sales, invoices and any other documents which constitute or would constitute evidence necessary to substantiate its cause of action, being trade mark infringement.

In considering the plaintiff’s application, the two issues for determination were:

  • is there infringement of the Plaintiff’s DUREX trade mark?; and
  • did the Plaintiff establish a prima facie case with probability of success?

The Defendant admitted that it was neither a manufacturer, nor a proprietor of the DUREX  trade mark. However, it claimed that it is an importer of the DUREX products belonging to the Plaintiff, and that it has never refuted or disputed the Plaintiff’s ownership of the products. The Defendant further submitted that, as a mere importer not being in direct or indirect competition with the Plaintiff, it could not have infringed the Plaintiff’s rights in the DUREX trade mark.

The cornerstone of the Defendant’s case was that there is no factual or legislative bar to its importation and distribution of  DUREX products, and that, in essence, it was licensed to import parallel DUREX products , from any of the Plaintiff’s other distributors who distributed the Plaintiff’s DUREX products under its authorisation. In this regard, the Defendant relied on the case of Lord Healthcare Ltd v Salama Pharmaceuticals Ltd [2008] eKLR where it was held inter alia;

“Neither the Plaintiff nor the Defendant is a manufacturer of the product “Budecort-200 Budesonide Inhaler”. The product sold by the Plaintiff is manufactured by Cipla Ltd India who has given the Plaintiff exclusive rights of distributorship of the product in Kenya. The Defendant is selling the same product manufactured by Cipla Ltd India under license from the International Registered Owner Fujisawa Deutschland GmhH who has international protection under the Paris Convention. The Defendant contends that the “Budecort” products are supplied by Cipla Ltd in more than one country and parallel importation allows for importation of the same product from such other markets. All these are contentious issues which can only be determined at the trial after the Court has had the benefit of hearing full evidence.”

In finding in favour of the Defendant, the court agreed that the facts of the present case are similar to the facts of the Salama Pharmaceuticals Ltd case supra, save that the Defendant  in this case claims simply to be an importer of the Plaintiff’s genuine products from third parties who may have a distributorship agreement with the Plaintiff. On this basis, the Court found that the Plaintiff had not established a prima facie case of infringement which warranted the issuance of an interdict against the Defendant.

This ruling confirms that a trade mark will not be infringed by the importation into or distribution, sale or offering for sale, in Kenya of goods to which a trade mark has been applied by or with the consent of the proprietor.

by Kim Rampersadh | Senior Associate 

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ZIMBABWE | ARIPO Patents, Designs and Trademarks

Harare

Adams & Adams attended the 5th Session of the Working Group on the Improvement of the Banjul, Harare and Swakopmund Protocols held in Harare on 3-4 May 2016. The Working Group was attended by delegates of the member states as well as users of the Banjul, Harare and Swakopmund Protocols. The ARIPO Secretariat  highlighted its mandate to maintain and adapt the Protocols to the changing environment so as to be better suited for use by the member states as well as users of the Protocols. Discussions held related, amongst other things, to:

  • renewals of ARIPO patents, designs and trademarks;
  • domestication of the Protocols by the member states as well as more effective application  of the Protocols by the member states;
  • a proposal for an increase in fees for prosecuting ARIPO patent applications
  • the improvement to the ICT infrastructure to enhance effectiveness of the office and interaction between ARIPO and its users.

EGYPT | RULES GOVERNING EXPORT

The decree (Decree No. 43 of 2016) provides that a record shall be created at the General Organisation for Export and Import Control (“GOEIC”) for factories and companies eligible to export their products into Egypt. This amends Decree 992 of 2015 and all previous contradicting legislation and changes the position for exporters of products into Egypt substantially. The purpose of the legislation is to act as a safeguard against counterfeit products entering the Egyptian market with a view of protecting the interests of both consumers and trade mark owners.

In order to be registered on the record, owners of trade marks are required to submit the following authenticated documents to the GOEIC:

  • a power of attorney from the company owning the trade mark duly legalised up to the Egyptian Consulate;
  • a certificate with the registration of the trade mark and the products produced under it;
  • a certificate from the owner of the trademark listing the distributors or distribution centers allowed supplying the items bearing such trademark; and
  • a certificate the owner of the trademark proving that the company applies a quality control system issued from an recognized body certified by one of the accredited bodies from the International Laboratory Accreditation Cooperation (“ILAC”) or the International Accreditation Cooperation (“IAF”) or an Egyptian or Foreign governmental entity approved by the competent Minister of Foreign Trade.

In order to be registered on the record, factories are required to submit the following authenticated documents to the GOEIC:

  • the legal identity of the factory and the license issued for it;
  • list of the products emanating from the factory and its trade marks;
  • a product trade mark and the trade marks produced under license from their owners; and
  • a certificate endorsing the fact that the factory applies a quality control system issued from an recognized body certified by one of the accredited bodies from the International Laboratory Accreditation Cooperation (“ILAC”) or the International Accreditation Cooperation (“IAF”) or an Egyptian or Foreign governmental entity approved by the competent Minister of Foreign Trade.

It must be noted that not all products are subject to the decree. For a copy of Decree No. 43 of 2016 can be downloaded from Egptian Governments’ GOEIC website here.

For more information in respect of this decree or for further updates, information and queries on copyright law, trade mark, patent and design filings in Egypt and across Africa, please contact africaip@adamsadams.com

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NEW TRADE MARK PROVISIONS FOR DAIRY PRODUCTS

On 28 March 2016, the new Regulations relating to the Classification, Packing and Marking of Dairy Products and Imitation Dairy Products Intended for Sale in the Republic of South Africa (“the Regulations“) came into effect. The Regulations were issued by the Department of Agriculture, Forestry and Fisheries (“DAFF”), and repeal the previous Dairy Products and Imitation Dairy Products Regulations. The Regulations bring about a number of changes in the classification and marking of dairy products and imitation dairy products that are sold in South Africa, and industry members have had to review their product packaging, to ensure that the packaging complies with the new requirements.

From a trade mark perspective, one of the changes brought about by the Regulations relates to the allowable letter size of certain elements on the container of a product, in proportion to the class designation that appears on the product pack (the “class designation” refers to the type of product, for example “Low Fat Milk”, “Unsalted butter”, “Full fat cheese spread”, etc). Regulation 25(7)(a) provides that no word or expression that appears on the container of a dairy or imitation dairy product may be bigger than the letter size of the class designation that appears on the main (or front) panel of that product, unless it is a registered trade mark or trade name. This provision is stricter than the previous corresponding provision of the repealed Dairy Products and Imitation Dairy Products Regulations, which allowed for both registered and unregistered trade marks to be displayed on pack in a letter size bigger than the letter size of the class designation.

Against this background, in terms of Regulation 25(7)(a), the only words that are allowed to be displayed bigger than the class designation on pack, are registered trade marks. Other elements that are not registered trade marks, for example descriptive words (such as “Chocolate flavoured”, “1 litre”, or “Shake well”) and unregistered trade marks, must be displayed in a letter size that is smaller than, or equal to, the letter size of the class designation.

The packaging of some products on the market currently indicate unregistered trade mark elements in a letter size that is bigger than the letter size of the class designation of the specific product on pack. In the circumstances, and in order to comply with Regulation 25(7)(a), industry members affected by this provision are required to amend non-conforming product packaging to be in line with Regulation 25(7)(a), by appropriately reducing the letter size of those elements on pack.

An alternative approach would be to obtain registered trade mark rights in the package elements that are affected by Regulations 25(7)(a), where appropriate. Although some manufacturers may prefer this option, in order to allow their product packaging to remain unchanged, this route it is not without its difficulties, and may not be a suitable approach in all instances, as discussed below.

In terms of the Trade Marks Act of 1993, in order to be registrable, a trade mark must be capable of distinguishing the goods of a person, in relation to which it is registered or proposed to be registered, from the same goods of others in the trade (i.e. that mark must not be descriptive of the goods in relation to which it is used or proposed to be used, and for which registration is sought). It follows, therefore, that dairy product manufacturers will not be able to obtain registered trade mark protection for wholly descriptive elements that appear on pack. Consequently, those elements must be displayed in a letter size that is smaller than, or equal to, the letter size of the product class designation on the main panel of the pack, in order to comply with Regulation 25(7)(a).

Another issue, assuming that a certain product package element that is affected by Regulation 25(7)(a) is capable of registration in terms of the Trade Marks Act, is the fact that it takes, on average, about two to three years to obtain registered trade mark protection for a trade mark, from the date of filing a trade mark application with the Trade Marks Registry. Many dairy product manufacturers who have started aligning their product packaging to be in line with the Regulations, by filing trade mark applications for relevant unregistered trade mark elements that are affected by  Regulation 25(7)(a), are still waiting for the Trade Marks Registry to examine those trade mark applications for registrability. Consequently, for many businesses in the industry, compliance with Regulation 25(7)(a) at this stage poses practical difficulties, as a result of the delays at the Trade Marks Registry.

Against this background, and in order to accommodate the industry, DAFF has issued a dispensation in respect of Regulation 25(7)(a). In essence, the dispensation provides that the letter size of trade marks that are still in the process of registration and that have not yet proceeded to registration (i.e. marks that are the subject of pending trade mark applications) may be displayed on pack in a letter size bigger than the letter size of the class designation that appears on the main panel of the product, provided that:

  • in the case of products that are already on the market, it can be shown that an application to register the trade mark was filed prior to 28 March 2016, and that the trade mark does not contravene any other provision ofthe Regulations; and
  • in the case of new products to be launched in the trade, an application to register the trade mark was filed prior to the launch of the productand that the trade mark does not contravene any other provision of the Regulations.

The dispensation also stipulates that, in the event that a trade mark application is unsuccessful (i.e. the Registrar of Trade Marks is unwilling to register the relevant mark as a trade mark), the label of the product must be amended to be in accordance with the Regulations (and, specifically, Regulation 25(7)(a)), as soon as possible. The effect would, therefore, be that the relevant product label would have to be amended to make the relevant unregistrable element the same size as, or smaller than, the letter size of the class designation that appears on the main panel of the product.

It should be noted that the dispensation is not absolute. DAFF may withdraw permission, in terms of the dispensation, to use a trade mark which is the subject of a pending application in a letter size bigger than that of the class designation on pack, should it receive a valid complaint which justifies the withdrawal of such permission. Furthermore, the dispensation will be in force for a limited period only, and will terminate when the next amendment to the Regulations is published in the Government Gazette. This date is uncertain, and the period that the dispensation will be applicable is, therefore, also uncertain.

by Jeanette Visagie | Associate

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MOZAMBIQUE | PATENT COOPERATION TREATY SEMINAR

On 20 & 21 April 2016 the Mozambique Intellectual Property Institute (IPI) held a Patent Cooperation Treaty (PCT) seminar, in cooperation with WIPO and ARIPO in Maputo. The event was sponsored by Adams & Adams Mozambique and was attended by 80 delegates comprising Intellectual Property agents, inventors and representatives from several Government agencies. The Mozambican Registrar, Mr. José Meque, officially opened the event. A similar seminar was held in Beira, the second largest city in Mozambique, on 18 and 19 April 2016.

For further updates, information and queries on copyright law, trade mark, patent and design filings in Mozambique and across Africa, please contact africaip@adamsadams.com

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Transfer Pricing

The term ‘TRANSFER PRICING‘ refers to the process by which related entities set up the prices at which they transfer goods and services between each other.

Transfer pricing between related parties in different tax jurisdictions has become a major issue for revenue collectors due to the varying corporate tax rates applied across such parties. Techniques used by multinational corporations to manipulate their taxable income across jurisdictions result in huge losses in domestic tax revenue for many countries.

This is particularly prevalent when dealing with intangible property, due to the difficulty and disagreement in attributing exact values and royalty rates to intangible property and the ease at which such values can be manipulated.

Transfer pricing control therefore refers to the mechanisms employed by revenue collectors to curb such pricing manipulation.

 

1 SOUTH AFRICA

1.1 In South Africa, such issues are dealt with by the South African Revenue Service (SARS) in accordance with section 31 of the Income Tax Act, 1962, introduced in 1995, which is based on the transfer pricing provisions provided by the Organisation for Economic Co-Operation and Development (the OECD).

1.2 According to the OECD guidelines on transfer pricing (the principles of which have been largely adopted into section 31 of the Income Tax Act) the main requirement is to ensure that a transaction is concluded at arm’s length and that the transfer pricing between group entities is also at arm’s length (also known as the ‘arm’s length principle’). The OECD guidelines prescribe methodologies for determining arm’s length pricing which have been adopted by many countries for their local transfer pricing regulation.

1.3 SARS controls transfer pricing through section 31 by enabling the Commissioner of SARS to adjust the price charged between multinational entities (where one of those entities is a tax resident) which are different to what would have been concluded at an arm’s length basis between unrelated persons and to tax the entity concerned according to the adjustment, as well as raise penalties and interest.

1.4 Section 31 is applied as follows: Where any transaction, operation, scheme, agreement or understanding constitutes an affected transaction and any term or condition thereof results or will result in a tax benefit for a party to that transaction, the taxable income of that person must be calculated as if that transaction had been entered into in arm’s length dealing.

1.5 In order to do this an international model of the arm’s length principle, as set out in the OECD guidelines, has been adopted. SARS promotes the use of the OECD guidelines for such a purpose and prescribes that these guidelines are to be used in interpreting what an arm’s length transfer price is in South Africa.

 

 2  SOUTH AFRICA: IMPORTANT CONCEPTS

2.1 An ‘AFFECTED TRANSACTION’ is any transaction, operation, scheme, agreement or understanding that is entered into directly or indirectly for the benefit of either or both: – a resident and a non-resident; – a non-resident and another non-resident that has a permanent establishment in South Africa to which the transaction, operation, scheme, agreement or understanding relates; – a resident and another resident that has a permanent establishment outside of South Africa to which the transaction, operation, scheme, agreement or understanding relates; – a non-resident and a controlled foreign company in relation to any resident and the persons are connected persons.

2.2 The meaning of ‘CONNECTED PERSON’ is distinguished in relation to four different types of persons, being a natural person, a trust, a company and a close corporation as follows:

2.2.1 in relation to a NATURAL PERSON, this is: – any relative; – any trust (other than a portfolio of a collective investment scheme in securities or in property)

2.2.2 in relation to a TRUST (other than a portfolio of a collective investment scheme in securities or in property), this is: – any beneficiary of such trust; – any connected person in relation to such beneficiary

2.2.3 in relation to a COMPANY, this is: – any other company that is part of the same group of companies; – any person other than a company as defined in section 1 of the Companies Act, 2008 who individually or jointly with any connected person in relation to himself, holds, directly or indirectly, at least 20% of the equity shares of voting rights in the company; – any other company if such company is managed or controlled by any person that is a connected person in relation to such company or any person that is a connected person in relation to the first mentioned person;

2.2.4 in relation to a CLOSE CORPORATION: – any member; – any relative of such member or any trust (other than a portfolio of a collective investment scheme in securities or in property) that is a connected person in relation to such member; – any other close corporation or company that is a connected person in relation to any member of the close corporation, or the relative or trust as contemplated above.

2.3 A ‘TAX BENEFIT’ is defined in section 1 as including any tax avoidance, postponement or reduction of any liability for tax.

 

3 BASE EROSION AND PROFIT SHIFTING (BEPS)

3.1 Base erosion and profit shifting (BEPS) refers to tax outcomes that result in double non-taxation or reducing the tax base in high tax jurisdictions. Many jurisdictions have experienced that BEPS outcomes are difficult to regulate by way of unilateral actions by countries individually and a multinational approach was needed. The G201 countries requested that the OECD provide an international solution to this, which resulted in the OECD BEPS Action Plan (the Action Plan).

3.2 The Action Plan was first published in 2013 in order to address issues and flaws in international tax rules. The Final Action Plan was published in October 2015 and contains 15 separate action points with the goal of harmonising international tax and transfer pricing rules, and ensuring that profits are taxed where economic value is being created.

3.3 Importantly, actions 8 to 10 of the 2015 BEPS Final Report contain specific provisions for the aligning transfer pricing outcomes with value creation. Transfer pricing issues dealt with include transactions involving intangibles; contractual arrangements, including the contractual allocation of risks and corresponding profits and other high-risk areas.

3.4 The OECD BEPS project comes with strong international political support and significant changes in respect of international taxation in accordance with the report should be expected. As the report set its sights on transfer pricing as a key issue, it is very important to stay abreast of the developments any potential international taxation changes which lay ahead, including new compliance requirements such as country-by-country reporting for large multinationals. 1 Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the USA.

 

4 TRANSFER PRICING IN AFRICA

4.1 There has been significant debate in respect of the most appropriate transfer pricing regime for countries in Africa. This is largely as the sophistication of the revenue authorities in Africa vary and there are a number of unique challenges faced by African countries

4.2 A number of African countries, including Kenya, Egypt, Morocco and South Africa, have broad and robust transfer pricing systems which accord with the OECD guidelines. A number of other countries, such as Burkina Faso, Ghana, Cameroon, and Gabon have transfer pricing legislation based on the OECD documentation requirements.

4.3 Transfer pricing control is becoming increasingly important for African nations and is quickly becoming a priority area in the protection of local tax bases.

4.4 The African Tax Administration Forum (ATAF) was created in November 2009 with the aim to increasing voluntary tax compliance and curbing tax evasion and avoidance, with 37 African member states as at 2015. It has noted since its inception that there is an urgent need in Africa to develop the capacity of member countries in the area of transfer pricing.

4.5 In addition, the United Nations began an effort in 2009 to assist developing countries on how to draft transfer pricing legislation, how to set up specialised transfer pricing units and how to identify and work with transfer pricing databases and how to pursue simplified strategies for testing the arm’s length nature of related party transactions.

4.6 Together these efforts, along with the efforts of the OECD and the individual states, will result in critical changes in the African landscape and any cross-border multinational with a presence in Africa will need to stay abreast of the rapid developments and the nuances of the African transfer pricing regimes.

 

TRANSFER PRICING © ADAMS & ADAMS | MARCH 2016

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CRIMINALISATION OF COLLUSION AMONGST COMPETITORS

In yesterday’s budget speech, Minister of Economic Development, Ebrahim Patel announced that the Sections (Section 73A) in the Competition Amendment Act of 2009 which relate to the criminalisation of certain prohibited practices, will be in effect from 1 May 2016.

The relevant Section provides that it is a criminal offence for directors or managers of firms to cause the firm to engage in or knowingly acquiesce to the firm engaging in a prohibited practice in terms of Section 4(1)(b) of the Competition Act – the aforementioned Section prohibits colluding with competitors to fix prices, divide markets or collude in tenders.

The firm which is the subject of the prohibited practice, may not directly or indirectly pay any fine that may be imposed on a person convicted of such an offence.

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PATTERNING SUCCESS THROUGH STRONG IP STRATEGIES

Beyoncé may have drawn further attention to his name when she endorsed his luxury designs in a blog post on Saturday, but Laduma Ngxokolo says the brand boost is only one step in the right direction. These were his comments to John Robbie on 702 after being asked about the ‘shout out’ by the pop icon of Destiny’s Child fame.

MaXhosa, a fashion label that uses traditional bead work motifs and patterns of 702 & Cape Talk

Laduma Ngxokolo is already an internationally acclaimed and award-winning textile designer of ethnic-inspired knitwear. A young proudly African Port Elizabeth-based designer, Laduma’s talent was nurtured early by his late mother, Lindelwa Ngxokolo.

His journey to internationally recognised and highly sought-after designer is nothing short of spellbinding. “My passion for knitwear began when I used to help my mother machine-knit garments for sale,” says Laduma.  His first hands-on experience of textile design was during his high school days at Lawson Brown High School in Port Elizabeth.

In 2010, his design work titled ‘The Colourful World of the Xhosa Culture’, a translation of South African mohair and merino wool men’s knitwear inspired by traditional Xhosa beadwork, won the international Society of Dyers and Colourists (SDC) Design Award in London.

Laduma’s designs are unique and different in the world design arena. As a young designer and entrepreneur he is very aware of his intellectual property rights and the need to protect his design.  He filed applications to register some of his designs for his knitwear and the wall clock design.  He also filed trade mark applications to protect his brands LADUMA NGXOKOLO and MAXHOSA BY LADUMA.

“I see my designs as my assets and I am well aware that there are copycats all over the world who would happily knock off original designs. Young designers and creatives need to focus on protecting their brands and designs.  As an entrepreneur, you have to focus on both the creative and the business side.”

Laduma has worked with Adams & Adams on protecting his intellectual property.  Mariette du Plessis, senior partner, who has been involved in Laduma’s IP portfolio, says “It is refreshing to come across a young South African designer who realises the value of his creativity and the need to protect it.  Laduma’s designs are unique, yet very South African and have made an enormous impact wherever exhibited.  For that reason, Laduma is wisely taking the necessary steps to protect his brands in South Africa and we shall also assist him with his IP portfolio abroad.“

“Laduma will be a role model for young designers, as he has not only focused on the creative side, but is equally focused on his business, which will stand him in good stead in the long run,” says du Plessis.

AN IP PATTERN FOR YOUNG DESIGNERS

We asked Mariette du Plessis for advice for young creatives who want to learn lessons from Laduma’s success.

“My message to creatives is to learn from Laduma’s example. Do searches on the internet before you adopt your brand.  Then conduct searches at the Trade Marks Office to ensure that you do not infringe on anyone’s rights.  Register your brand as a domain name, on Facebook and as your Twitter handle to ensure that somebody else does not pinch it and, most importantly, apply to register your brand and design (or both). Design protection gives a very strong monopoly and there are 32 categories in which your design can be registered. This is especially important for jewellery, textile and wallpaper designers, as it is only relevant for designs that will be multiplied and not for once off art works. Those will qualify for copyright protection. Prevention is always better than cure and to protect your creative rights is the best way to ensure that only you benefit from your creations.“

Mariette_Du Plessis

Mariëtte du Plessis

Partner
Trade Mark Attorney

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HISTORICAL CONSTITUTIONAL COURT JUDGMENT ON 31 MARCH 2016

On 31 March 2016, the Constitutional Court of South Africa ruled unanimously in favour of the applicants in the matter regarding Nkandla, President Zuma’s private homestead, as well as on the powers of the Public Protector. The judgment was a fantastic outcome for the Public Protector, the country and the Constitution. Click here to view a copy of the JUDGMENT.

PRESS BRIEFING BY PUBLIC PROTECTOR, REFERENCING ADAMS & ADAMS

ANDREW MOLVER DISCUSSES THE JUDGMENT WITH BRUCE WHITFIELD OF 702 & CAPE TALK

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Andrew Molver

Partner
Litigation Attorney

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ANGOLA

Luanda

On 10 March 2015, the firm visited the Registry to meet with Ms Ana Bolivar, the new Registrar. The purpose of the visit was to discuss the situation at IAPI which continues to present challenges, particularly in respect of the delays in the processing and publication of patent applications. Although a record number of Journals were being published by IAPI in 2014, very few patent applications have proceeded to grant in the past 10 years. Another concern raised with the Registrar was the long delays experienced in the prosecution of trade mark applications, in particular, the second publication of trade mark applications in the journal and the issuance of registration certificates.  We are encouraged by her enthusiasm and plans to resolve these issues, which include employing more staff and providing comprehensive staff training. Both parties undertook to communicate regularly in resolving the areas of concern and we expressed our willingness to support any initiatives by the Registry in the development of IP in Angola.   

Patents Angola

 

Image:  Simon Brown, Nicky Garnett (A&A) with Ms Ana Paula Bolivar, Registrar, Jacinto Ucuahamba, local representative, and Mr Osvaldo Chitumba Kahilo, Deputy Registrar

UPDATE ON NEW IP CODE IN MOZAMBIQUE

The new Mozambique Industrial Property Code was approved by the Council of Ministers of Mozambique by Decree no 47 of 2015, on 31 December 2015 (“the New IP Code”).  It will come into force on 31 March 2016 and will replace the existing Industrial Property Code, Decree no 4 of 2006 (“the Old IP Code”).  Trade marks, patents and other IP rights filed in Mozambique up until 30 March 2016 will still be subject to the Old IP Code.

Most of the sections in the New IP Code have been re-worded with the bulk of the changes relating to procedural and administrative issues. In particular, various changes entail either a shortening or extension or clarification of the time periods within which to oppose the granting of the different forms of intellectual property rights or comply with formalities. For example, the time period within which to oppose a trade mark application has been reduced from sixty to thirty days while, in respect of all IP rights, the deadline to submit outstanding documents (such as a power of attorney) has been extended from fifteen days to thirty days.

The New IP Code also envisages a few substantive changes, however.  Insofar as trade marks are concerned, one significant development is that the New IP Code gives recognition to ARIPO registrations by way of “Regional Registrations”.  This is to prepare Mozambique for when it accedes to the Banjul Protocol.  The Mozambique authorities are still in the process of negotiating Mozambique’s accession to the Banjul Protocol.

With regard to the sections of the New IP Code dealing with patents, utility models and designs, these now make provision for the Director General to issue provisional refusals. Certain additional exclusions from protection have been incorporated into the New IP Code.

Geographical Indications and Designations of Origin (already recognised in the Old IP Code) now have a more comprehensive legal framework and the New IP Code makes provision for Industrial Property Rights to be pledged and given as security.   New (increased) official fees are expected to come into force likely between April and June this year, once approved by the competent Ministries.  A more detailed overview of the New IP Code is included below.

Industrial Property Rights provisions:

Definitions for “Franchise Agreements”, “Technology Transfer Agreements”, “Designations of Origin”, “Intellectual Property” and “Establishment Names (relating to the registration of Business Names)” have been incorporated into the New IP Code. The definitions for “Geographical Indications” and “Insignias of an Establishment” have changed.

A new section has been incorporated into the New IP Code relating to the “Effects of Registration of Industrial Property Rights”.  Regarding formal requirements, the deadline to submit outstanding documentation/information (such as powers of attorney) has changed to 30 days from the date of notification (as opposed to 15 days provided for in the Old IP Code).

If an applicant is deemed to have abandoned an application for an Industrial Property Right, the New IP Code provides that the IPI shall always notify the applicant of the abandonment.  Regarding the provision dealing with providing proof of an Industrial Property Right, the New IP Code provides that the relevant registration certificate should be provided within 15 days from the date of filing the request for proof.  The Old IP Code prescribed no time limit in this regard.

The New IP Code provides that with reference to the issuance of “registration certificates” (“certidoes” – see note below)* of Industrial Property Rights, the certificates shall be delivered within 5 days from the date that the request is filed.  No such time limit was imposed on the IPI (Industrial Property Institute) in terms of the Old IP Code in this regard.

The deadline to appeal against the Director General’s decision has changed to 30 days in terms of the New IP Code (as opposed to 60 days in the Old IP Code).  The New IP Code also makes provision for an appeal to the Minister of Industry and Commerce against decisions of the Director General of IPI.

The New IP Code provides that annulments of Industrial Property Rights may be raised within 90 days from the date of publication of the final grant or refusal of the right.  The Old IP Code, however, provided that the annulment may be sought within one year.

In the case of a third party wishing to lodge an opposition against the decision to restore an applicant’s Industrial Property Right, he must do so within 30 days of the publication of the notice of restoration, according to the New IP Code.  The Old IP Code provided that this should be done within 2 months of the said publication.

The New IP Code now provides that Industrial Property Rights can be pledged and given as security and are subject to seizure and attachment.

Provisions relating to Patents:

Regarding the protection of patents, the definition of “State of the Art” has been amended in the New IP Code.

An additional exclusion from patentability has been incorporated into the New IP Code, namely, “projects, whatever their nature or area of application”.

Regarding the provision dealing with the inventor needing to inform his employer of his invention in writing, this now needs to be done “as soon as possible” in terms of the New IP Code. The Old IP Code provided that this should be done within 6 months from the date the invention was completed.  The New IP Code provides that the employer now has 6 months from the date of communication of the invention by the employee to express his interest in the said invention and if he fails to do so within that time period, the employee shall have the right to assume ownership of the invention or transfer it to 3rd parties.

Regarding the supporting documentation to be filed for a patent, the New IP Code provides that this shall now be filed in triplicate, although this was always done in practice.

The New IP Code provides that the rights of a patent holder shall not extend to, inter alia, “acts done privately and on a non-commercial scale or for non-commercial purpose, provided that it does not significantly prejudice the commercial interests of the patent holder” and “acts relating to the preparation in a pharmacy of provisional medication for an individual in accordance with prescription given by a registered medical practitioner”.

The New IP Code provides for the provisional refusal of a patent application by the Director General.  A notification of such provisional refusal, including the grounds thereof, should be issued to the applicant within 5 days and the applicant will have 30 days within which to respond.  No response by the applicant will automatically result in the refusal being made final.  No provision is made for obtaining an extension of time.

Regarding the provision dealing with the licensing of patent rights and where the proprietor of the patent may request the IPI to place the patent on offer to the public for licensing in the Industrial Property Journal, the New IP Code provides that this must be done within no less than 12 months.  In terms of the Old IP Code, no such time limit was applicable.

Provisions relating to Utility Models:

Regarding the requirements for an invention to qualify as a utility model, the New IP Code has expressly excluded “pharmaceutical” and “agro-pharmaceutical” products from qualifying as a utility model.

The Old IP Code provided that the conversion of a utility model into a patent could be done at any time prior to examination stage of the application, however, the New IP Code provides that this may be done prior to publication of the application.  The New IP Code also makes provision for the provisional refusal of utility models similar to patents, mentioned above.

The New IP Code provides that the time periods relating to opposing the grant of a utility model, reply to the opposition and reply to notices of provisional refusal shall be 30 days. The Old IP Code merely provided that the procedural processes in respect of applications for utility models should be more simplified and faster than the procedures for patent applications and no time limits were imposed.  The New IP Code provides that if there is no opposition after 30 days of the date of publication, the utility model application shall be granted without any formalities as to substantive examination and this is not provided for in the Old IP Code.

Provisions relating to Industrial Designs:

The procedure relating to the opposition of industrial designs has now been clarified in the New IP Code. Any person who feels the grant of an industrial design would be detrimental to him may oppose the application within 30 days from the date of its publication in the Industrial Property Bulletin containing the notice of grant. The time period may be extended only once for a maximum period of 30 days. The opposition will need to be submitted in triplicate and substantiated by matters of fact and law. The applicant will need to respond to the opposition within 30 days, which period may be extended only once for a maximum period of 30 days. The Director General shall decide on the outcome of the opposition and shall notify the interested parties of his decision.

The New IP Code also provides for the provisional refusal of a design application by the Director General. The decision shall be made within 30 days and the applicant shall be notified of the provisional refusal within 5 days from the date of decision. The applicant is then required to reply to the notice of provisional refusal within 30 days, failing which, the refusal will become final.

Provisions relating to Trade Marks:

The New IP Code provides that the opposition period in relation to trade mark applications is now 30 days (as opposed to 60 days as provided in the Old IP Code).  As such, an opposition must now be lodged within 30 days after the advertisement of an application in the Industrial Property Bulletin. An extension for a maximum period of 60 days may be applied for.  No further extension is allowed. The applicant will need to respond to the opposition within 30 days and may seek an extension, only once, for a maximum period of 30 days.  The Director General shall decide on the outcome of the opposition and shall notify the interested parties of his decision.

The New IP Code provides that if the Director General provisionally refuses an application, that the applicant should be notified of the provisional refusal within 5 days from the date of the decision.  The Old IP Code provided that the applicant shall be notified “immediately” of a provisional refusal.  The applicant shall reply to the notice of provisional refusal within 30 days, failing which, the refusal shall become final.   The New IP Code provides that an applicant shall be notified of the final decision to grant or refuse the application within 5 days.

Entirely new sections (Articles 142 to 153) have been incorporated into the New IP Code regarding “regional registrations”, giving recognition to ARIPO registrations which amounts to a substantial amendment to the existing Trade Mark Law in Mozambique.  However, it is important to note that Mozambique has not yet acceded to the Banjul Protocol.

The New IP Code provides that the opposition period in relation to International Registrations is now 30 days (as opposed to 60 days as provided in the Old IP Code).  Another change specifically in relation to International Registrations is that the New IP Code now provides that the due date for submission of Declarations of Intention to Use (“DIU”) shall run from the date of notification of the International Registration.  The Old IP Code provided that the due date would run from the date of the International Registration (as opposed to the notification thereof).  The New IP Code also provides that the date of registration of an International Registration shall be the date that the International Bureau of the World Intellectual Property Organisation registers the application on its database.

Provisions relating to Designations of Origin and Geographical Indications:

Most of the “new” provisions incorporated into the New IP Code in relation to Designations of Origin and Geographical Indications were already foreseen in a separate Decree (no. 21 of 2009), but which has been revoked and replaced by the New IP Code.

In terms of the New IP Code, the IPI shall now keep an up-to-date register of registered Geographical Indications and Designations of Origin.  It sets out who would have legal capacity to apply for registration of a Geographical Indication and Designation of Origin.

Additional requirements have been created in terms of the New IP Code, namely, “a single document” must now be lodged at the time of filing the application which should contain the following information: the name, description of the product, including specific rules relating to its packaging and labeling and a concise description of the geographical area; a description of the link between the product and the geographical environment or the geographical origin including, if appropriate, the specific elements in the product description or production method that justify such a link.  If the application relates to a geographical area in a third country, the application for registration shall also comply with the conditions required and shall contain proof that the designation in question is protected in its country of origin. In addition, the application shall be written in Portuguese or if drafted in another language, it shall be accompanied by an official translation into Portuguese.

The New IP Code provides for additional specifications (in addition to that which was required in terms of the Old IP Code) to be complied with, namely, the specifications shall now also contain the description of the product, including raw materials, if any, and the main physical, chemical, microbiological or organoleptic characteristics of the product; the factors that prove that the product originates in the defined geographical area; the description of the method used to obtain the product and, if necessary, the unvarying and authentic local methods used as well as any information concerning its packaging. The specification shall also contain factors that justify the relationship between a specific quality or the characteristics of the product and the respective geographical environment/origin; the name and address of the authorities that check compliance with the provisions of the specifications and their specific responsibilities and any specific labeling rule for the product in question.

The New IP Code has created provisions to ensure that there is compliance with the specifications and provision has been made to apply for amendment of the specifications, particularly taking into account scientific and technical developments or to revise the demarcation of the geographical area.  Minor amendments will also be allowed subject to IPI approval.

The New IP Code provides that once all the requirements have been fulfilled, the IPI shall cause the application for registration of a Geographical Indication or Designation of Origin, together with the single document, to be published in the Industrial Property Bulletin.  In terms of the Old IP Code, Geographical Indications or Designations of Origin were not required to be published.  The New IP Code makes provision for provisional protection of Geographical Indications and Designations of Origin after publication, before they proceed to registration.  Some new grounds for refusal of Geographical Indications and Designations of Origin have been created in the New IP Code.

It is now possible to oppose an application for a Geographical Indication or Designation of Origin in terms of the New IP Code (which was not provided for in terms of the Old IP Code) within 30 days after the date of publication of the application in the IP Bulletin.  The IPI shall send a copy of the opposition to the applicant, giving him notice to respond to the opposition within 60 days.  The mentioned times periods may be extended only once for a maximum period of 30 days.

The New IP Code provides that when a Geographical Indication or Designation of Origin proceeds to registration, a registration certificate shall now be issued as proof thereof.  In terms of the New IP Code, it is now possible for any natural person or legal person with a legitimate interest to apply for cancellation of registration of a Geographical Indication or Designation of Origin, by providing appropriate grounds.

Provisions relating to Trade names, Establishment Names and Establishment Insignias:

The opposition period in relation to Trade names, Establishment Names and Establishment Insignias has also been reduced from 60 days to 30 days in the New IP Code.

General provisions:

The Old IP Code provided that Industrial Property Rights belonging to non-profit organisations shall be exempt from registration fees.  The New IP Code, however, provides that Industrial Property Rights belonging to such entities are subject to the formalities and charges provided for in the Code but the Director General may, upon a justified request by an interested party, decide on the exemption from payment of fees by non-profit organisations.

The New IP Code provides that the Industrial Property Bulletin shall be published on a monthly basis. The Old IP Code provided that the Bulletin would be published every 2 months by the IPI.

Conclusion:

The changes incorporated into the New IP Code are of importance to all practitioners and clients seeking to protect and enforce Intellectual Property Rights in Mozambique.  Some minor errors were contained in the New IP Code and the rectified document shall be published in the Government Gazette soon.  Watch this space.  If you have any queries, please do not hesitate to contact us.

CATHERINE WOJTOWITZ | ASSOCIATE

* Note: The Portuguese words “certidao” and “certificado” are each translated in English to mean “certificate”, however, “certidao” has its own legal meaning, referring to an authenticated copy or transcript recording the contents of an original document and should not be confused with the generic and more common term “certificado”.

ADAMS & ADAMS CROWNED AFRICA IP FIRM OF THE YEAR 2016

London | At the lavish MIP Global Awards banquet held at The Savoy on 10 March, Adams & Adams was confirmed as the leading law firm in Africa by Managing IP for 2016. Partners, Dario Tanziani and Danie Dohmen were on hand to accept the award and to celebrate the firm’s phenomenal achievements in uniting and advancing the business of good intellectual property in territories across the continent.

“We are immensely proud of the reprised validation by members of MIP of our firm’s dominance in Africa,” said current firm Chairman, Gérard du Plessis, of the award. “We are also grateful that our global clients continue to trust the legal strength of Adams & Adams as we continue to extend our reach to support commercial interests in Africa’s growing economies, and in so doing establishing strong Intellectual Property and Commercial services in key business hubs across the continent.”

Earlier, at the International Patent Summit, the Adams & Adams partners addressed visitors on the IP landscape in Africa and expounded on the firm’s experiences related to the scope and feasibility of patent searching, and the Madrid system in various jurisdictions in Africa. Danie Dohmen also provided analysis on recent case law developments impacting on patents, designs and trademarks strategies
in South Africa.

Best Law Firm in Africa

Adams & Adams Management Committee Partners with the MIP Awards

AFRICA EXPANSION

Adams & Adams continues to push the boundaries of its evolution and positioning. Africa’s largest intellectual property law firm established an Associate office in Egypt, in December 2015, that will also service the firm’s clients in the other North African territories of Algeria, Libya, Morocco, Tunisia as well as the north eastern territory of Sudan. This is a first for a South African law firm and brings to 15 the number of Associate offices in different African countries that form part of the Adams & Adams Africa Network (AAAN). These include offices in Mozambique, Angola and Cameroon which service important jurisdictions and the important regional IP organisations, ARIPO and OAPI.

“We are very excited by these recent developments. The addition of North Africa onto our Network places Adams & Adams in a unique position in terms of its IP offering on the African continent”, Simon Brown, Partner and Co-Chairperson of the Trade Marks Department.

Adams & Adams’ strategy has not only been to expand its network in Africa but to ensure that this expansion is beneficial to its clients by aligning workflows leading to greater efficiency and more advantageous pricing to its clients. The firm’s focus on Africa began many years ago and has gained traction and momentum with the emergence of the African economy’s growth potential and the consequential requirements of the firm’s global clients. In the past three years, Adams & Adams has also established Associate offices in Kenya (2013) and Nigeria & Ghana (2014).

“The central thrust of our Africa Network continues to be about sharing information, the exchange of knowledge, and establishing long lasting relationships. The platform that we have provided is bearing fruit, not only in the quality of the service that we are providing to our clients, but our increased involvement in assisting some countries with the drafting or amendment of their IP legislation,” said Brown.

Only an African firm with the heritage and legal pedigree of Adams & Adams is able to leverage local knowledge and world-class capacity to provide peerless support to clients in the rapidly developing regions of Africa,” added Megan Moerdijk. “We continue to assist, advise and receive instructions for projects and legal requirements of any scale in all territories of the continent. “

Adams & Adams will be partnering with MIP for the Africa Roadshow in New York on 6 April 2016. Professionals of this 108-year leader in African IP will be leading discussions with legal and brand professionals in laying the foundations for intellectual property success on the continent

Danie_Dohmen

Danie Dohmen

Partner
Patent Attorney

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Dario_Tanziani

Dario Tanziani

Partner
Patent Attorney

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Gérard du Plessis

Partner & Firm Chairman
Trade Mark Attorney

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Court Orders R2-Million Payout After Police Arrest Wrong Twin Brother

Mr Shane Smith, a father of two, is set to receive R2,145,464.00 in damages from the Minister of Police.

“On 1 March 2016 the Minister of Police was ordered by the Honourable Justice Legodi to compensate the ex receiving-clerk for the damages he suffered as a result of his unlawful arrest and assault by members of the Barrage Police Station”, says Jean-Paul Rudd – Partner – from the Commercial, Property and Litigation practice of law firm Adams & Adams, who is representing Smith.

On 11 March 2011, several members of the Barrage Police Station arrested Smith without a warrant. He was mistaken for his twin, whilst looking after his brother’s house, who was away for the weekend.

Despite Smith indicating to the police officers that they had mistaken him for his twin brother by presenting his identity document and driver’s license, the police officers proceeded to handcuff and assault Smith in front of his minor child and wife, who were in the house at the time of the incident.

Thereafter, he detained for a period of 29 days at the Leeuhof correctional facility before finally being released. He sustained a concussion, lacerations and a neck injury as a result of the assault. He was further subjected to additional “traumatic events” during his detention.

Smith was ridiculed by his colleagues upon his return to work and was given considerably fewer responsibilities. Prior to the incident, he was set to receive a promotion, but was thereafter informed that the position was no longer available. This prompted Smith to resign and take up a position in his father’s panelbeating business.

He is now suffering from behavioral problems, anxiety, a short temper, flashbacks, sleep disturbance, loss of self confidence, social withdrawal, which symptoms represent the typical sequelae of a severe, chronic Post-Traumatic Stress Disorder.

For information, contact:

Jean-Paul Rudd

Partner| Adams & Adams [jean-paul.rudd@adamsadams.com]

Tel. 012 432 6393 / 073 153 1683

Mr. Shane Smith may be contact on 079 739 3322

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Jean-Paul Rudd

Partner
Attorney

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ZIMBABWE 2016

Harare

Adams & Adams Mozambique representatives travelled to Harare in order to meet with the

ARIPO Director-General, Mr Fernando Dos Santos, and Registry officials. The purpose of the

meeting was to discuss, among other matters, practical aspects of the recent amendments

to the Banjul and Harare Protocols, current developments, and to assess the operations

at the Registry. Also present at the meeting with the Registrar was Mr Chris Kiige, Industrial Property Director (ARIPO).

Guide to IP in Africa

Adams & Adams Practical Guide to Intellectual Property in Africa

The compilation of a comprehensive guide to Intellectual Property Laws and Procedures in Africa has long been a goal for academics and practitioners alike. Over the years this encouraged Adams & Adams to produce handbooks on aspects of the intellectual property laws and procedures in Africa, on a fairly limited scale. However, the rapid development on both the economic and legislative fronts in Africa over the past 10 years prompted us to consider a more detailed publication. This has now been made possible through generous funding by the World Bank, facilitated by the University of Pretoria through the Faculty of Law and the Pretoria University Legal Press.

IPGuide3d

MOZAMBIQUE | NEW INDUSTRIAL PROPERTY CODE

The new Mozambique Industrial Property Code was approved by the Council of Ministers of Mozambique by Decree no 47 of 2015, on 31 December 2015. It will come into force on 31 March 2016 and will replace Decree no 4 of 2006.

For further updates, information and queries on copyright law, trade mark, patent and design filings in Mozambique and across Africa, please contact africaip@adamsadams.com

OAPI ACCESSION TO THE SINGAPORE TREATY

On 13 November 2015, OAPI deposited its instrument of accession to the Singapore Treaty on the Law of Trade Marks (“The Treaty”), which was adopted in March 2006. The Treaty will enter into force in OAPI on 13 February 2016.

Articles 6 and 19(2) of the Treaty will not be applicable to OAPI. These articles read as follows:

 “Where goods and/or services belonging to several classes of the Nice Classification have been included in one and the same application, such an application shall result in one and the same registration; and

19(2)   “A Contracting Party may not require the recordal of a license as a condition for any right that the licensee may have under the law of that Contracting Party to join infringement proceedings initiated by the holder or to obtain, by way of such proceedings, damages resulting from an infringement of the mark which is the subject of the license.”

The Treaty will bring about changes to the manner in which the change of names and addresses of proprietors of trade marks are recorded at the OAPI Registry, in that a single application form can now be used to record these changes in respect of several trade mark registrations.

The Singapore Treaty essentially supplements the Trademark Law Treaty which was adopted in October 1994.  The main aim of these Treaties is to standardise and simplify the national and regional trade mark application/registration procedures of the contracting parties.

For further updates, information and queries on copyright law, trade mark, patent and design filings in OAPI and across Africa, please contact africaip@adamsadams.com

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Jenny Pienaar

Partner
Trade Mark Attorney

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YOUNG RUGBY STAR TO RECEIVE R3-MILLION COMPENSATION FROM RAF

23 year old, Willem De Beer, seriously injured in a motor vehicle collision in Middelburg, Mpumalanga, on 30 November 2009 is set to receive in excess of R3,000,000.00 from the Road Accident Fund.

“The 23-year-old was awarded the amount in the High Court of South Africa, Gauteng Division, Pretoria on 3 February 2016 by the Honourable Justice Louw,” according to his attorney, Jean-Paul Rudd, a Partner – from the Commercial, Property and Litigation practice of law firm Adams & Adams, who is representing Mr De Beer.

The Road Accident Fund in earlier proceedings agreed to compensate De Beer for 80% of his proven or agreed damages.

De Beer, a Grade 10 scholar at HTS Middelburg at the time of the collision, sustained serious injuries including, a femur fracture, an ulna fracture, extensive scarring, shortening of the left leg, torn muscles and broken teeth.

De Beer excelled at rugby prior to the collision; representing and captaining the Pumas at various age group levels and was also selected for the SA Bokkie team in 2011. His rugby achievements drew the attention of foreign rugby scouts whilst still at school and his intention was to pursue a rugby career in Italy after matric due to the financial reward of earning in Euros and the quota system in South African rugby.

In preparation for the hearing, De Beer’s legal team travelled to Italy to personally interview, and consult with Marius Goosen (Treviso Rugby Club head coach and former player), Polla Roux (former Rovigo Rugby Club head coach and player), Roland de Marigny (former Italian National and Parma Rugby Club player), and Riaan Mey (former Parma Club player and current head coach).

During the two day hearing it became clear that although De Beer had the right pedigree, his injuries would prevent him from ever pursuing a professional rugby career abroad.

De Beer, now working full time for his father’s construction company, has continued playing rugby in his spare time after the collision and has managed to represent the Pumas U/19 and U/21 rugby teams. He was also recently selected for the South African Rugby League Team.

Queries can be directed to Jean-Paul Rudd | Partner

Tel. 012 432 6393

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Jean-Paul Rudd

Partner
Attorney

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AND THE CONSTITUTIONAL COURT FINALLY SETTLES THE POSITION

On 3 March 2015 the Labour Appeal Court (LAC) ruled that the Court’s prior interpretation of the validity of termination notices issued in violation of section 189A(8)(b)(i) of the Labour Relations Act (LRA) was incorrect.  On 22 January 2016 the Constitutional Court in Steenkamp & Others v Edcon Limited CCT 46/15 and CCT 47/15 (22/01/2016) confirmed the LAC’s judgment that dismissals which failed to comply with the specific time period imposed by section 189A were not rendered null and void and of no force and effect.

To recap, section 189A regulates large-scale retrenchments.  Read with section 189 which governs operational requirements dismissals in general, an employer is obliged to consult with appropriate bargaining agents and to engage in a meaningful joint consensus-seeking process aimed to reach consensus on appropriate measures to avoid, minimise, change the timing and mitigate the adverse effects of the dismissal as well as the method for selecting the employees to be dismissed and the severance pay to be paid.  This therefore invokes the section 189(3) consultative process.

With reference to large-scale retrenchments, section 189A allows for 2 procedures that may be followed after the section 189(3) notice has been issued:

(i)             Where in terms of section 189A(3) either the employer has requested a facilitator or where the consulting parties representing the majority of the employees who the employer contemplates dismissing has requested facilitation and notified the CCMA accordingly within 15 days of the section 189(3) notice.  In these circumstances where a facilitator is appointed, and 60 days have elapsed from the date on which notice was given in terms of section 189(3) the employer may only issue a notice of termination at the end of the said period and either the registered trade union or the employees who have received such notices of termination may either give notice of a protected strike or refer a dispute to the Labour Court based on substantive unfairness.

(ii)           Where a facilitator is not appointed a different process is followed in that the parties may refer a dispute to the CCMA after a period of 30 days have lapsed from the date on which notice was given in terms of section 189(3) and once the CCMA issues a certificate of outcome stating that the matter remains unresolved or a period of 30 days has lapsed since the referral was received by the CCMA, the employer may issue notices of termination.  Similarly as with the above, a registered trade union or the employees who have received such notices of termination may give notice of a protected strike or refer the dispute to the Labour Court based on substantive unfairness.

In terms of section 189A(10) a consulting party may not give notice of a strike in respect of a dismissal if it has referred a dispute concerning whether there is a fair reason for their dismissal to the Labour Court and likewise may not refer such a dispute to the Labour Court if it has given notice of a strike.  Whilst the amendments have removed the test for determining substantive fairness of a dismissal, an employee may bring an application to the Labour Court prior to dismissal alleging procedural unfairness in terms of section 189A(13) in which case the Labour Court may order the employer to follow procedure or restrain the employer from dismissing the affected employees until a fair procedure has been followed.

The LAC in Edcon were called on to interpret the provisions of section 189A(8) and in doing so held that the interpretation of same in De Beers Group Services (Pty) Limited v NUM [2011] 4 BLLR 318 (LAC) was incorrect.  In De Beers, the employer had similarly chosen not to use a facilitator and on 21 January 2009.  It issued section 189(3) notices inviting the employees to consult with regard to their proposed dismissals based on operational requirements.  On 13 March 2009, the employer issued notices of termination which would take effect on 22 March 2009 to 23 April 2009.  On 22 March 2009 the notice of termination began, some 60 days after the notices in terms of section 189(3) were given to the employees.  On 14 April 2009 the employees’ union referred the dispute to the CCMA for conciliation, some 3 months after the section 189(3) notices were issued, 30 days after the issue of the notice of termination and 9 days before the individuals were due to be retrenched.  On 23 April 2009 the employees were retrenched and on 19 May 2009 the conciliation meeting took place at the CCMA which issued a certificate of non-resolution.  The union had referred an unfair dismissal dispute to the Labour Court seeking an order declaring that the notices of termination issued to the employees on 13 March 2009 were invalid; alternatively, directing the employer to reinstate the employees pending compliance of a fair procedure and the requirement of section 189A(8) and the further alternative of voiding the employees compensation for procedural unfairness.  Both the Labour Court and the Labour Appeal Court held that if the employer fails to comply with the mandatory requirement of consultation in terms of section 189A(2) and moves to terminate the employment in breach of these provisions, then the dismissal must be considered to be invalid and accordingly of no force and effect.  A valid notice could only have been issued once a certificate of outcome had been produced.  This was because section 189A(2) was explicit in its language that an employer must give notice of termination in accordance with the provisions of section 189A.

In Edcon the employer had similarly chosen not to use a facilitator.  Edcon commenced with the process of restructuring during April 2013 which resulted in the termination of employment of approximately 3000 of its 40 000 employees.  In light of the fact that the facilitation route had not been followed the dismissals are government by section 189A(8) of the LRA.  51 referrals had been made to the Labour Court challenging the fairness of the dismissal and these referrals involved a total of 1 331 employees.  There was non-compliance with the time periods set in section 189A(8)(a) and (b).  The LAC sat as a Court of first instance.  The employees relied on a single cause of action namely that their dismissals were invalid within the meaning of that term as understood by the LAC in De Beers and accordingly having asserted their dismissals to be invalid and that they should be reinstated with full back pay.

The LAC in Edcon had relied on the following in the finding that De Beers was incorrectly decided:

(1)          The implicit acceptance by the AD in Schierhout v Minister of Justice 1926 AD 99 that a wrongful or invalid termination can in effect bring a contract of employment to an end is consistent in our labour law.  Employees therefore had to be either reinstated and/or receive compensation as recourse.

(2)          Sections 189A(8), (9) and (13) contemplates other remedies where there is non-compliance with the procedural provisions of section 189A(8).  The employees may embark on a strike and apply to the Labour Court to compel the employer to follow a fair procedure, interdict the employer from dismissing the employees before having done so, order the employer to reinstate the employees until it has complied with a fair procedure, or award compensation for any procedural unfairness.  Their aim is therefore to ensure that if the union or employees see a failure of procedure in the consultative process they should act immediately to rectify it as soon as the flaw is detected.  Remedies for procedural flaws should preferably be resorted to before the dismissal takes place or in its immediate aftermath.

(3)          In addition, the concept of an invalid dismissal is incompatible with what the legislator intended in terms of sections 189 and 189A respectively.  As such, the LAC were persuaded that non-compliance with section 189A(8) was not intended by the legislator to result in the invalidity or nullity of any ensuing dismissal and that the De Beers judgment would have the anomalous effect of removing conventional dismissals from the scope of Chapter 8 of the LRA and will not be assessed on the basis of fairness merely because it was procedurally premature and branded as invalid.  The Court held further that the categorisation of the dismissal as invalid leads automatically to reinstatement which is a sanction not in keeping with the purpose of the LRA with reference to section 193(2)(d).

The majority in the Constitutional Court as per Zondo J found that the LRA does not contemplate the concept of an “invalid dismissal” meaning further that a breach on the part of an employer in complying within section 189A(8) may result in the dismissals being unfair, but not invalid.  Section 189A(8), (9) and (13) referred to above contemplates appropriate remedies in these instances.

It is therefore incumbent on employers to ensure compliance with the procedural provisions of section 189A and in instances where there is a failure on the part of the employer in doing so will not result in the subsequent dismissals being rendered invalid.  The dismissals however may be challenged as ordinary procedurally unfair dismissal claims.

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Andre Visser

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AFRICA NETWORK MEETING 2015

3RD ANNUAL ADAMS & ADAMS AFRICA NETWORK MEETING HELD ON 17 SEPT 2015

Adams & Adams hosted its 3rd annual IP seminar, the biggest of its kind on the African continent, for its partners from across Africa. The meeting brought together 60 top IP practitioners and administrators representing most territories on the continent. This annual showpiece event on the Adams & Adams Africa calendar, follows after a year’s break in 2014 due to concerns over the threat posed by the outbreak of the Ebola virus in West Africa and the subsequent imposition of travel bans on some African countries.

The year’s break served to sharpen the anticipation for this year’s event which saw the support of a number of Registrars from around Africa including South Africa, Ethiopia and the Director General of the African Regional Intellectual Property Organisation (ARIPO), Mr Fernando Dos Santos, who was recently voted as one of 50 most influential people in IP by Managing Intellectual Property. The Director of Communication from the Mozambique Registry was also in attendance on behalf of the Director General of the Mozambique IP Office.

Each of the Registrars had an opportunity to share with the delegates the IP developments and challenges within their respective jurisdictions. This tied in with the central theme of the Network Meeting to provide a platform for engaging with other IP practitioners in Africa, sharing experiences and, in so doing, creating a network that will further enhance the development of IP on the continent.

This year saw an eye opening Afro optimistic presentation by Victor Kgomoeswana, a well known radio personality, public speaker and author of the well received book, “Doing Business in Africa.” Victor shared from his library of experiences travelling and doing business in Africa. He challenged the delegates to see Africa through new eyes and engage with one another. He also touched on the incredible stories of innovation that are coming out of Africa, the challenges of protecting aspects of indigenous knowledge and the link provided by intellectual property to economic development.

Victor lauded the platform created by this event which allowed people from across Africa to meet and engage with one another towards a common goal.

The Network Meeting was again held at our head office in Pretoria, South Africa. Simon Brown, Partner and Co-Chair of the Trade Marks Department, welcomed the guests and highlighted the importance of this event on the Adams & Adams calendar and the expectation that it will lead to a sharing of expertise and ultimately to continue to provide a quality service to all our clients.

Presentations on topical issues were made by Stephen Hollis, a senior associate at Adams & Adams, on the effectiveness and applicability of the Madrid Protocol in Africa, and two Partners from Adams & Adams, Darren Olivier and Eugene Honey, on traditional knowledge and the opportunities for commercialisation and on franchising and IP respectively.

The day ended with a cocktail function in the evening. The following day saw one-on-one sessions being held between some of the delegates and Partners and Departmental heads of Adams & Adams, to discuss specific issues within that country’s practice. This year saw a number of delegates going off to Sun City for a weekend excursion organised by Adams & Adams.

Plans are already in place to host the next edition of the event next year and to expand its scope and offering to continue to add value for the Adams & Adams African partners.

BOTSWANA | IP REGISTRY – HEARING DELAYS

The Registrar of Industrial Property in Botswana recently issued a communiqué stating that, due to a restructuring of the IP office and staff cutbacks, hearings for trade mark oppositions and cancellations have been suspended until further notice. According to the communiqué, the Companies and Intellectual Property Authority (CIPA) envisages a Trademarks Tribunal to handle such hearings in the future but is, in the meantime, working on an interim arrangement.

Interested parties can still lodge opposition and cancellation applications, but can expect delays in having their cases heard.

For further updates, information and queries on copyright law, trade mark, patent and design filings in Botswana and across Africa, please contact africaip@adamsadams.com

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Nicky Garnett

Partner – Head of Africa Patents
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Simon Brown

Partner | Co-Chairperson – Trade Marks Department
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I TWEET WHAT I LIKE

The events surrounding the controversial racial remarks published on the personal social media accounts of various well-known offenders serve as useful case studies illustrating not only the racial tensions which persist in modern-day South Africa, but also the influence of social media and the conflation of one’s professional life and social life. The recent spate of racist twitter and Facebook rants has not only caused a social media uproar but has also placed the spotlight on the wider employment law ramifications of an employee’s conduct on their personal social media accounts.

SOCIAL MEDIA MISCONDUCT

The dismissal of employees on the basis of their misconduct on social media platforms, is a some-what novel phenomenon in South Africa and the jurisprudence surrounding this area of the law, minimal. The Council for Conciliation Mediation and Arbitration (“CCMA”) and the Labour Court has grappled with employment issues relating social media misconduct and have confirmed the employer’s rights and interests in taking disciplinary action against employees on

that basis. The internet has caused for faster circulation and consumption of information and as such the misconduct of an employee on a social media platform can have far reaching consequences for an employer. These consequences may include loss of profits, reputational damage and the risk of being held vicariously liable for the actions of employees.

In Sedick & another v Krisray (Pty) Ltd [2011] 8 BALR 879 (CCMA), employees were dismissed for publishing derogatory comments on Facebook which were found to have brought the company’s name into disrepute. A commissioner in the case of Fredericks v Jo Barkett Fashions [2012] 1 BALR 28 (CCMA) confirmed the dismissal of an employee who had made disparaging remarks about the General Manager on Facebook. Other cases where a similar approach was adopted include Media Workers Association of SA obo Mvemve v Kathorus Community Radio (2010) 31 ILJ 2217 (CCMA) and Beaurain v Martin NO & Others (1) (2014) 35 ILJ 2443 (LC).

In the case of Beaurain it was held that “the internet, unlike the press, is not subject to an editorial policy and as such there is no prospect of a moderator contacting the employer to hear its side of the story.” This might be even more harmful to the employer in instances where the employee occupies a senior position as in the case of Chris Hart. Chris Hart is a senior economist at Standard Bank and is being subjected to disciplinary processes following a tweet in which he expressed that “ 25 years after apartheid ended, the victims are increasing, along with a sense of entitlement and hatred towards minorities.”

In other cases, the Gauteng Department of Sport, Arts, Culture and Recreation has suspended an employee with immediate effect for posting that he wanted to “cleanse South Africa of all white people”. Nicole De Klerk was dismissed just two days into her employment with an advertising agency following a racial slur she allegedly made at a horseracing event which subsequently went viral as those who were involved reported the incident to the Twitter masses including her employer.

The consequences of an employee’s unacceptable behaviour on social media have reportedly been harshly felt by the previous employers of Penny Sparrow. Sparrow published a post which referred to black beach goers as monkeys. Although she resigned from her post, her former employer has had to comment regarding being labelled as “racist” by the public following

Sparrow’s remarks which have, to a certain extant, caused her previous employers reputational harm. It is unknown whether any of the abovementioned dismissals or sanctions will be challenged formally by the relevant employees.

THE IMPORTANCE OF FOLLOWING A SUBSTANTIVE & PROCEDURAL FAIRNESS PROCESS IN CASES OF SOCIAL MEDIA MISCONDUCT

The interests of the employer, in these instances, do not necessarily override the rights of an employee as provided for in terms of the Labour Relations Act 66 of 1995 (hereinafter referred as “the Act”). It is still a requirement that the process adopted in instituting disciplinary action and/or the summary dismissal an employee, must be substantively and procedurally fair. The dictates of procedural fairness require that an investigation into whether grounds for dismissal exist must be undertaken followed the employee being afforded an opportunity to make representations as to why they should not be suspended pending an investigation for the alleged misconduct or why they should not be summarily dismissed, as the case may be. Upon receipt of such representations, the employer must notify the employee of the decision taken to either institute disciplinary proceedings, thereafter to be placed on paid suspension, or to summarily dismiss the employee.

Substantive fairness where social media misconduct is concerned, would require proof of the offence, knowledge of the workplace rule and the reasonableness thereof, consistency in application of the rule and the appropriate sanction to be adopted which could either result in summary dismissal or being placed on a final written warning.

Whether an employee can be dismissed on what is commonly referred to as “twitter rants” and unbecoming behaviour on their social media profile, will depend on the circumstances of the employee’s case. Therefore, a company is better positioned to defend its decided course of action against an employee where it has adopted and implemented a social media policy which clearly defines what would constitute “social media misconduct” and codifies the appropriate sanction which such conduct would attract. Effective education and communication of this policy enables employers to protect their interests and allows for employees to bring their behaviour in line with the policy.

On the other hand, it is not a hard and fast rule that a rule must be in a written form. In Fredericks v Jo Borkett Fashions [2012] 1 BALR 28 (CCMA), the CCMA had found that the employee’s dismissal was substantively fair despite the fact that the company had no existing policy which regulated the use of Facebook at the time. The generally accepted view is that there is certain behaviour which, by its nature, destroys the employment relationship and need not be reduced to writing before an employer can exercise its right to dismiss.

One might find it difficult to find the nexus between one’s employment relationship and a few racist remarks which were made off-duty and from a personal account. In the case of Custance v SA Local Government Bargaining Council & Othersthe Labour Court had to consider whether the dismissal of an employee who made racist remarks while he was off-duty was fair and held that “the derogatory terms used manifest a deep-rooted racism which has no place in a democratic society. Whether the word was uttered on or off duty was immaterial as it is the attitude that persists which, when on duty, affects the employment relationship.” As such, an employer may exercise its rights to summarily terminate an employee’s employment on the basis of conduct outside the workplace subject to having followed a substantive and procedurally fair process. Employees must be cautioned regarding the misuse of social media in that it is easily accessible and the public can link the views of an employee as being that of their employer based off the principles of brand association. Thus, an employee who has made racist and derogatory remarks on social media can still be disciplined for bringing the company’s name into disrepute even in instances where the employer has not adopted a formal social media policy.

The employer would have to show that the employers conduct has affected its interests. In the case of Tibbett & Britten (SA) (Pty) Ltd v Marks & others (2005) 26 ILJ 940 (LC) the court recognised that there are certain standards of ethics which employees do not need to be reminded of and as such do not have to be encompassed in a employer’s policies. Further, the Act’s Code of Good Practice also recognises the existence of standards that are so well- established that need they not be communicated. Consequently, the dissemination of racist and/or other derogatory remarks may well fall squarely within those standards.

Moreover, employers may find themselves under immense pressure to submit to the demands of third parties, such as the general public, to have those who utter racist remarks formally

dismissed. The case of Lebowa Platinum Mines Ltd v Hill and Mnguni v Imperial Truck Systems Pty) Ltd t/a Imperial Distribution discusses dismissal resulting from pressure from third parties and classifies this type of dismissal as classic dismissal for operational requirements. The reason for this being that the tension caused by the employee’s conduct cannot be alleviated even where the employee brings their behaviour in line with the company policy. Dismissal on these grounds, while considered valid, is however not exempt from the standards of substantive and procedural fairness.

In the UK, whilst their law in terms of social media misconduct is also in the development stages, the EmploymentTribunals take into account various factors in assessing whether a social media- related dismissal is fair. Such factors include:

  • the nature and severity of the comments made by an employee;
  • the subject matter of those comments;
  • the extent of the damage caused to an employer’s reputation;
  • whether there has been a breach of confidentiality;
  • whether the employer has a social media policy and whether employees have been given training in that policy;
  • whether the comments made by an employee were made during working hours and/or using the employer’s equipment; and
  • whether there are any other mitigating factors.It has been stated that “employers need to be aware that any decision to dismiss an employee for alleged social media misconduct should be based on a fair and unbiased consideration and assessment of these factors, in order to minimise the chances of being found guilty of an unfair dismissal” (Jennie Atefi: Facebook remarks that justify dismissal,24 October 2014).Furthermore, in the case of British Waterways Board v Smith (UKEATS/0004/15, 3 August 2015) the employer had a social media policy which prohibited any action which might embarrass it, including the posting of comments. It came to light that the employee had made various inappropriate comments on Facebook some two years earlier which included: “I hate my work” and “It’s not the work it’s the people who ruin it nasty horrible human beings”among other posts wherein he made reference to drinking on the job. The employee argued that some of the

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posts were made in jest and that someone had had changed his security settings on Facebook from being a private to a public account, amongst other things. The court found against the employee in this regard and stated that the comments were still made in the public domain irrespective of whether or not the account was private and that same had caused the employer harm in that the public also drew negative inferences surrounding his comments as whole, especially with regard to the posts of drinking on the job.

As such, the court held that the employer had not lost the opportunity to investigate the employee regarding comments made two years before the employee lodged his grievance as he made derogatory comments about fellow employees he had initially lodged a grievance against. Therefore, the Tribunal held that his dismissal was not unfair.

Although the case does stem from the UK, it does serve as a good example of the importance of having a social media policy in place at the workplace and it also serves a warning to employees that even old posts, which are derogatory in nature, may come back to haunt to you although only in limited circumstances.

THINK BEFORE YOU TWEET

Both the employer and employee should beware! Employers are best advised to adopt social media policies which can be used as a point of reference in instances where an employee has acted contrary to it. It is essential that employers ensure that their disciplinary processes produce substantive and procedurally fair results so as to avoid unnecessary concomitant costs of litigation. Development of the policy should be followed by effective communication and education to all employees as well as the dangers associated with the misuse of public platforms.

Similarly, employees should exercise caution before expressing their views, particularly those which are derogatory, on social media platforms and become well-acquainted with their employers social media policy bearing in mind the various repercussions which follow non- compliance with the policy and that they may be charged for bringing the company’s name into disrepute in instances where such a policy is not place.

Article by
Ayanda Shabalala | Associate Jnb
Nalo Gungubele | Candidate Attorney Jnb
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KING IV™ DRAFT REPORT RELEASED FOR PUBLIC COMMENT

The Institute of Directors in Southern Africa (IoDSA) and the King Committee has invited public commentary on the draft King IVTM Report on Corporate Governance for South Africa 2016. As a proud partner and sponsor of the King IVTM Report, Adams & Adams will be conducting commentary sessions in May. The King IVTM Report is the fourth edition, setting out the philosophy, principles, practices and outcomes which serve as the benchmark for corporate governance in South Africa. An update of the previous version became necessary as a result of various developments in corporate governance since King III came into effect in 2009.

Download King IV™ Report

The King III Codes, the King IV’s predecessor, which came int

The King IVTM Objectives

The intention of King IVTM is to:

  • promote good corporate governance as integral to running a business or enterprise and delivering benefits such as (i) an ethical culture; (ii) enhancing performance and value-creation by the organisation; (iii) enabling the governing body to exercise adequate and effective control and (iv) building and protecting trust in the organisation, and its reputation and legitimacy;
  • broaden the acceptance of good corporate governance by making it accessible and fit for application by organisations of a variety of sizes, resources and complexity of strategic objectives and operations;
  • reinforce good corporate governance as a holistic and inter-related set of arrangements to be understood and implemented in an integrated manner, and
  • present good corporate governance as concerned with not only structure and process but also an ethical consciousness and behaviour.

Some King III and King IVTM differences

  • The 75 principles in King III have been replaced with 17 principles in King IVTM.
  • The “apply or explain” requirement will now be “apply and explain”.
  • The test for the independence of directors has been widened.
  • Sector supplements have been included with specific corporate governance guidance to SMEs, non-profit organisations, public sector organisations and entities, municipalities and retirement funds.

View THE KING IV CODES | INSIGHTS – Article Published | 19 July 2016

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Andre Visser

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Commercial Attorney

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Jac Marais

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TANZANIA

Dar es Salaam

Representatives of Adams & Adams travelled to Dar es Salaam to conduct Customs training workshops and also took part in search and seizure operations conducted with members of Interpol, the Fair Competition Commission and Police. Focus was placed on formal stores as well as the main markets, including Ilala Kariakoo, Ilala Shurimoyo, Kurasini Bandari and Temeke Sudan.

ZAMBIA

Lusaka

Representatives of Adams & Adams attended the 39th Session of the annual ARIPO

Administrative Council and Council of Ministers Meetings held in Lusaka, Zambia.

The Meeting was well attended by representatives from 16 of the 19 member

states and Angola, as an Observer State. Also in attendance were representatives from

ARIPO’s Cooperating Partners such as the International Trade Mark Association (INTA),

the European Patent Office (EPO), the African Intellectual Property Organisation (OAPI) and

the World Intellectual Property Organisation (WIPO).

 

African innovation was a recurring theme for speakers at the meeting, who included the

Guest of Honour, Hon. Margaret Mwanakatwe, the Zambian Minister of Commerce, Trade

and Industry. The decrease in the number of patent and trade mark filings was directly attributed to the economic challenges being experienced by China. This led to a significant drop in the number of patent filings from China – a decrease from 110 in 2014 to 18 in 2015.

A number of amendments to the Harare Protocol on Patents & Industrial Designs,

including the Implementing Regulations, and amendments to the Banjul Protocol on Marks,

were tabled and adopted at the Meeting and ratified by the Council of Ministers.

 

ARIPO 1

 

Image: ARIPO DG, Mr Fernando Dos Santos and Nicky Garnett (A&A)

 

ARIPO 2

 

Image: Nicky Garnett, OAPI DG, Mr Paulin Edou Edou and Nolwazi Gcaba (A&A)

LESOTHO

Maseru

Menzi Maboyi travelled to Lesotho and met with members of our associate office and visited the Registry. The Registrar, Mrs Mohau, was unfortunately not available but we were able to meet with a senior Registry official to discuss Registry operations and follow-up on any long outstanding matters. We were able to meet with the Registrar a week later when she attended the ARIPO Administrative Council Meeting in Lusaka, Zambia from 16 – 18 November 2015. Positive discussions were held with Mrs Mohau and undertakings received to review the issues discussed.

 

Lesotho

 

Image: Menzi Maboyi (A&A) at the Registry with a Registry official, Mr Padime

 

Lesotho2

 

Image:  Registry office

SEYCHELLES

Victoria

In line with our continuing efforts to engage with Registries around the continent, we visited the Seychelles Registry and discussed various issues with senior officials. The ongoing efforts of digitising all records at the Registry is helping IP efficiencies in this growing island territory which adopted new IP legislations last year.

 

Seychelles

Image:  Simon Brown (A&A) outside the Seychelles Registry

MALAWI

Llilongwe

Adams & Adams representatives travelled to Lilongwe, Malawi in order to visit our Associate office, and meet with members of the Registry, including the Deputy Registrar, Mr Chiku Namelo and Mr Chifwayi MK Chirambo, the Principal Assistant Registrar General.

 

Malawi

Image: Charl Potgieter with Mr Chiku Namelo,

CAN YOU BID ON A COMPETITOR’S MARK AS A KEYWORD?

In this case Cochrane Steel Products sought an interdict against the M-Systems for bidding on its brand name CLEAR VU as a Google Adwords search keyword. The applicant did not have a trade mark registration for its mark and accordingly relied on unlawful competition. Specifically, it alleged passing off and a new species of unlawful competition, leaning on.

Judgment was delivered by Nicholls J on 29 October 2014.

This case is open for leave to appeal, but as yet not such application has not been filed.

Google Adwords and the conduct of the respondent

Google Adwords is a service offered by the search provider Google. In essence any person can bid on a keyword to increase the likelihood of a link to its website being displayed in the sponsored links section of the search results. This bid constitutes a price per click (which will be charged to the bidder every time the link is clicked.) Whether or not the link is displayed is determined by the ranking of bid. This ranking is determined by the price bid as well as a number of factors including the quality of the website linked and how frequently consumers visit the site.

The applicant alleged two grounds of complaint. The first, which formed the subject matter of the judgment related to the bidding on the key word CLEAR VU which generated an advert containing a link to the respondent’s website. This advert did not make any use of the mark CLEAR VU in its text.

The second ground of complaint related to a similarly generated advertisement which did include CLEAR VU in the text of the advertisement. However, this ground was not considered. The evidence of this conduct was not admitted into evidence for a variety of reasons.

Decision of the court

The Court considered whether the common law should be developed to recognise leaning on and whether the applicant has established the requisite confusion or deception to necessary for passing off. As a result of its answers to these issues the Court declined to decide whether the applicant had established a reputation in CLEAR VU.

Leaning on and dilution

The primary authority submitted to establish leaning on as a cause of action was academic argument in its favour by Van Heerden and Neethling. This species of unlawful competition is defined to occur when “one entrepreneur, in order to advertise his own performance, and in this way promote his goodwill, uses the advertising mark of another entrepreneur”. There is a substantial overlap between this remedy and passing off but leaning on extends beyond this in not requiring confusion. Therefore it would include dilution and misappropriation of advertising value as well as other conduct.

In considering whether the common law should be extend to include leaning on, the Court noted that South African law is generally opposed to monopolies not specifically provided by statute and that generally use of a name, where there is not likelihood of confusion, is not prohibited. The Court drew specific attention to the fact that the broad genus of unlawful competition is not intended to provide a remedy to a litigant who falls short of the requirements for passing off.

The Court concluded that leaning on, as proposed by the applicant, was not unknown to our courts and that it has, in fact, been considered (albeit under different descriptions) and rejected, often with criticism of the practice of relying on this doctrine.

The Court also noted that passing off (and the common law in general) protects goodwill not a trade mark per se, and on this basis concluded that passing off and other common law remedies to do not provide protection against dilution. Such protection, according to the decision, is to be found under the Trade Marks Act, 1993.

Passing off

The Court made extensive reference to foreign cases relating to Google Adwords. It made particular reference to InterCity Group (NZ) Limited v Nakedbus NZ Limited, Google France SARL v Vuitton Malletier SA, Interflora Inc v Marks and Spencer, and Cosmetic Warriors Limited and Lush Limited v Amazon.co.uk.

The Court noted that these cases do not provide authority for the submission that using the trade mark of another as a search keyword is prohibited or, as a general rule, likely to cause confusion but rather that such conduct is legitimate unless it can be shown that confusion is likely and that this will cause detriment to the ability of a trade mark to act as a source indicator. It noted that where a court accepts a likelihood of confusion, this must be done in light of the specific facts of that case.

The Court confirmed that the test for confusion applied in the foreign cases, which is that confusion will only be likely if, in light of the text of the advertisement, a reasonably well informed internet user cannot determine if the goods advertised originate from the brand owner or its competitor. It also took cognisance of the trend in foreign cases which holds that where an advertisement triggered by a sponsored link promotes alternative goods which are not simply imitations, this is likely to be fair competition. The Court noted that internet users are accustomed to sponsored advertisements and the need to filter their search results.

Nicholls J concluded that the consumers who were exposed to the respondent’s advertisements were highly unlikely to be confused or deceived into believing that the goods advertised were those of the applicant, particularly in light of the multiplicity of suppliers whose websites were returned in the search results. The Court specifically mentioned that this was particularly the case where the text of the advertisement itself did not make use of the mark concerned.

Accordingly the Court rejected the applicant’s claim on the basis of passing off, and dismissed the application. The Court did note that this case specifically related to a claim in the absence of a registered trade mark, which differs from the majority of the foreign cases. However, it pointed out that even a claim on the basis of a registered trade mark would only succeed if confusion could be shown. In the context of the judgment, this should not be read to limit the ability to bring such claim on the basis of dilution or unfair advantage in terms section 34(1)(c) as this remedy is recognised elsewhere in the decision, but rather a comment on the likely requirements for a claim for direct infringement on the basis of sections 34(1)(a) and (b).

Conclusion

This decision has brought much needed clarity to the legal position surrounding the practice of bidding on competitor keywords. It has confirmed that such conducted should conform with the general approach to passing off and trade mark infringement, which is that the core test is whether a likelihood of confusion exists. It establishes that the presence or absence of this must be evaluated on the basis of the advertisement itself, and the goods advertised, (in the context of appropriate surrounding circumstances) and that this is not altered by the fact that the advertisement is generated by the use of a keyword bidding service.

It indicates that advertisers who wish to bid on competitor’s trade marks as keywords may do so, provided that they are careful to ensure that these advertisements are clear and not confusing or otherwise do not take unfair advantage of the advertising value of a registered trade mark. As a result of this, traders will also need to adapt their marketing and brand protection strategies to ensure that they adequate deal with the risks such practices pose to their brands and market share.

by Darren Olivier & Ian Learmonth

(Attorneys acting for M-Systems)

darren_olivier

Darren Olivier

Partner
Attorney

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The Adams & Adams Annual IP Crammer

 

The Annual IP Crammer presented by Adams & Adams took place on 29 October at the Maslow Conference Centre. Close to a hundred in-house legal representatives and C-Suite VIPs attended the Intellectual Property event that focused on IP developments and updates relevant to corporates and individuals throughout Africa.

Partners and Senior Associates presented updates and commentary ranging from Copyright law to Patent developments and an enthralling keystone address was delivered by maverick radio personality and entrepreneur, Gareth Cliff. To view a copy of the speaker presentations, Click Here



 

SWAZILAND

Mbabane

Representatives from Adams & Adams travelled to Swaziland to visit our associate office and the Registry. The main purpose of the visit was to meet with Registry officials to discuss Registry operations and outstanding matters. The visit was productive and discussions were held with the Registrar, Mr Stephen Magagula, who updated us on the current status of the Patents Bill 2015 and the Trade Mark Amendment Bill 2015. There are a number of exciting IP initiatives in Swaziland and regular visits will continue to be made to the Registry to offer our support to any initiatives that assist with the development of IP in Swaziland.

 

Swaziland Aug 2015

Image: Menzi Maboyi (A&A) with Ms Sinethemba Khumalo, local representative, and  Mr Stephen Magagula, Registrar (right)

Algeria joins the Madrid protocol but not implementing legislation

On 31 July 2015 Algeria deposited its instrument of accession to the Madrid Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (“Madrid Protocol”). The Madrid Protocol will come into force in Algeria on 31 October 2015.

Algeria’s accession was accompanied by the declaration referred to in Article 5(2)(b) and (c) of the Madrid Protocol, whereby the time limit of one year to notify a provisional refusal of protection is replaced by 18 months, and a provisional refusal resulting from an opposition may be notified to the International Bureau after the expiry of the 18 month time limit.

Algeria acceded to the Madrid Agreement in 1972 and has now also acceded to the Madrid Protocol. WIPO has described Algeria’s accession to the Madrid Protocol as a “milestone for the Madrid System and its users”.

In theory, Algeria’s accession to the Madrid Protocol means that all international trade mark registrations will be governed by the Protocol. More importantly, it means that brand owners who are nationals of or domiciled in any Madrid member country (or who have real and effective places of business in any Madrid member country) can now obtain trade mark protection in Algeria and the 94 other territories that are party to the Madrid Protocol by filing a single trade mark application.

As mentioned above, the Madrid Protocol is due to come into force on 31 October 2015 in Algeria. However, the governing trade mark legislation has not been amended to effect to the provisions Madrid Protocol. At this stage, we understand that there are no immediate plans to amend the current legislation or implementing regulations to give effect to the provisions of the Madrid Protocol.

Whilst Algeria’s accession to the Madrid Protocol may be seen as a milestone, the effectiveness of the protection of international trade mark registrations in Algeria remains uncertain in the absence of implementing legislation. Algeria is one of many African countries, which has joined the Madrid System, but has not amended its national legislation to give effect to the system.

Algeria is considered to be a so-called First-to-File-jurisdiction where common law rights arising from use are not always respected and enforceable by the Courts. It is therefore of vital importance for brand owners who are commercially active in this jurisdiction to secure valid and enforceable registrations for their trade marks before unrelated third parties proceed to do so.

In light of the above, we urge trade mark owners to err on the side of caution and continue to file national trade mark applications in Algeria, until the governing trade mark legislation has been amended to give effect to the Madrid Protocol.

AlexisApostolidis

Alexis Apostolidis

Partner & Head of Competition Law Group
Patent Attorney

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TiffanyC

Tiffany Conley

Senior Associate
Trade Mark Attorney

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Africa Focus – July 2015

Welcome to the latest edition of the Adams & Adams Africa Focus – our quarterly publication that is produced exclusively for and tailored to the specific interests of you, our valued clients. In this edition, we begin with the usual updates on key economic, political and industry-specific developments across the African continent.

The featured article in this edition, authored by one of Africa’s leading commentators and analysts on issues pertaining to the continent, James Hall, provides an analysis of the current state of Africa’s transportation networks and the issues that need to be addressed in providing more efficient transportation across the cotinent.

This edition’s Sector in Focus examines transportation hubs which have emerged across Africa and how they have had an impact on development in the various regions.

We also provide our readers with an informative and topical interview with Dr. Pieter Oosthuizen, Chairman and Acting CEO of Namibia’s road and rail carrier: TransNamib. Transportation issues raised in the discussion include developments over the last decade, the key challenges to integrating Southern Africa’s railway network, introducing new forms of transport – such as South Africa’s Gautrain – and other ongoing intiatives in the Southern African transportation sector.

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  • Featured Article
    Transportation infrastructure investment is but one solution for moving Africa’s freight
  • Sector in Focus
    Development of transportation hubs in Africa
  • An interview with Dr. Pieter Oosthuizen
    The Southern African railway network: Infrastructure developments and challenges