Transferring intellectual property offshore from South Africa to another jurisdiction might appear the obvious route to take your business global. But can you?
South African legal position: transferring intellectual property offshore
The regulations to the South African Currency and Exchanges Act prohibits anyone from directly or indirectly exporting capital or any right to capital from South Africa without the permission of the South African Reserve Bank. Capital includes any intellectual property rights whether registered or unregistered. The regulations broadly define what qualifies as exporting and includes assigning or transferring any intellectual property rights to or in favour of a person who is not a South African resident.
In 2017, the National Treasury made amendments to the Currency and Exchanges Manual for Authorised Dealers (Manual) which now permits Authorised Dealers (one of the major banks, for example), in certain circumstances, to approve the transfer of capital out of South Africa. Thus, if you are considering assigning and transferring intellectual property offshore you will need an Authorised Dealer’s approval.
Conditions for the approval of transferring intellectual property offshore
Authorised Dealers may approve the transfer of intellectual property offshore if it is:
- to an unrelated non-resident party
- at arm’s length
- at a fair and market-related price
In addition, the Authorised Dealers must be able to inspect the transfer agreements as well as an intellectual property valuation certificate confirming the basis for calculating the transfer price.
Licensing your IP to a non-South African resident
What if you grant a licence to a potential overseas partner to use your intellectual property rather than selling it outright? Does this constitute transferring intellectual property offshore? Yes, the latest Manual requires you to get an Authorised Dealer’s approval to license your intellectual property to a non-South African resident.
But does this also include non-exclusive licensing?
The Manual doesn’t draw a distinction between a non-exclusive and an exclusive licence.
A non-exclusive licence allows a rights-holder to keep their intellectual property rights. It merely gives third parties the right to use it. Therefore, a non-exclusive licence is, arguably, not a transfer of intellectual property offshore. Thus, it should not require approval from an Authorised Dealer. An exclusive licence, however, prevents you from using your intellectual property or licensing it to anyone other than the exclusive licensee. This type of licence would be regarded as a ‘transfer’ of ownership of your intellectual property. Therefore, if you want to grant an exclusive licence to a non-resident, it will require approval.
It is still unclear and there is no specific guidance on licensing intellectual property offshore. Thus, we recommend you get approval from an Authorised Dealer if you intend granting a licence (of whatever kind) to a non-South African resident.
How can we help?
We can help you:
- determine whether what you have is intellectual property by reading about what is intellectual property.
- protect and register your intellectual property by getting our advice and recommendations.
- go international by getting our guidance on how to structure your business from a South African perspective.
- get the information you need regarding South African exchange control regulations by asking us to connect you to experts in the field.
- apply for and obtain, where necessary, an Authorised Dealer’s approval for transferring intellectual property offshore by asking for our advise and our recommendations on people to speak to.
- conclude appropriate intellectual property assignment, licensing or other relevant agreements with offshore partners by asking us to drafting them for you.
We do not give tax, financial, exchange control advice but we can refer you to the right people.
If you are interested, please complete the form on the right or enquire now. We will contact you to find out more about your requirements and give you a quote.