Many of our clients ask us whether they need permission to licence their intellectual property outside of South Africa. This is always a big concern if you are planning on going international. You can read more about what makes up intellectual property and more about transferring IP offshore.
In the past
Regulation 10(1)(c) of the Currency and Exchanges Act requires you to get permission from the Reserve Bank to export ‘capital’, or ‘any right to capital’, from South Africa. The SCA decided that Regulation 10 did not apply to intellectual property in the Oilwell case, because intellectual property was not capital. This meant that you did not need to get permission to export intellectual property.
However, the President amended the Currency and Exchanges Act regulations on 8 June 2012 by inserting Regulation 10(4). This specifically defines:
- ‘capital’, as including any intellectual property; and
- ‘export’, as the ‘transfer’ of any intellectual property outside of South Africa.
The word ‘transfer’ makes this amendment confusing. It can be used in the context of intellectual property to mean the assignment or the licensing of intellectual property from one person to another. It is clear that you now have to get permission to assign intellectual property to someone resident in another country. You may be charged with a crime or fined if you fail to do so. But, it is unclear whether you now also have to get permission to license intellectual property to some one resident in another country.
After proposals made by the National Treasury at the 2017 National Budget Review and lengthy lobbying by Webber Wentzel the National Treasury implemented amendments to the Currency and Exchanges Manuel for Authorised Dealers. This change now allows Authorised Dealer to approve the transfer of intellectual property instead of having to go to the South African Reserve Bank. It has also given the Authorised Dealer the ability to approve the licensing of intellectual property by South African residents to non-resident parties.
We asked SARS whether ‘transfer‘ includes licensing. They said that it didn’t and that you do not need to get permission to licence intellectual property to some one resident in another country. However, they do not administer the Currency and Exchanges Act.
We would argue that ‘transfer‘ does not include non-exclusive licensing to people outside of South Africa, because the rights-holder keeps their rights to the intellectual property and merely gives third parties in other countries the right to use it.
Despite this, the situation remains unclear and there will be no more certainty unless a court interprets the amendment.