[Guest Post] A shotgun revocation? Did the South African court jump the gun in Regents of the University of California v Eurolab & Dis-Chem?

IPKat keeping a watchful eye over
South African PIs

The IPKat has received and is pleased to host the following guest contribution by Katfriend Adanna Onah on a recent South African decision on patent entitlement and interim relief in the pharma sector:

"You hold what seems to be a rock-solid patent for a blockbuster prostate cancer drug, your competitors are knocking at the door with a generic, and you walk into court, demanding an interim interdict (injunction) to stop them. You expect a swift victory, only to watch in horror as your patent is unraveled. This is what happened in The Regents of the University of California & Ors v Eurolab & Dis-Chem & Ors (Case No: 2024-039643). What started as a seemingly routine request for an injunction quickly became a high-stakes battle over priority rights and assignments.

This case posed a central question: must a patent applicant already own the right to apply at the filing date, or can ownership be retroactively patched together? The court answered yes to the first question - entitlement must be established at the filing date. The ruling not only resulted in the revocation of University of California’s (UC) patent but also restated the importance of clear and timely assignment of rights under South African patent law. 

Yet, one aspect of the decision raises eyebrows: the fact that a revocation ruling was made at this stage of the proceedings - an unusual development in an application primarily concerned with interim reliefs.

Background

UC’s plea was simple. They sought an interim interdict to restrain Eurolab and Dis-Chem from selling their generic, Enzutrix, a direct competitor to a UC patent called Diarylhydantoin Compounds. The patent concerns a pharmaceutical compound known as Enzalutamide, which had been marketed and sold in South Africa under the name Xtandi. To succeed, they needed to establish:

• A prima facie right (i.e., a valid patent, which is usually satisfied by showing a registered patent);

• A reasonable apprehension of harm;

• That the balance of convenience favoured them; and

• That no alternative remedy (such as damages) would suffice.

But there was one major problem: a particular aspect of South African patent law made the patent’s validity shaky at best. The law required patent applicants to have ownership rights of the patents at the date of filing a patent application.  As the case unfolded, it became clear that this was not just a case of minor technical errors.

Statutory Interpretation: What Does “Acquiring” Really Mean?

Section 61(1)(a) of the Patents Act, No. 57 of 1978 (“the Act”), provides that a patent is liable to be revoked if it can be shown that the patentee was not the person entitled to apply for a patent in terms of Section 27. Section 27 states that “an application for a patent in respect of an invention may be made by an inventor or by any other person acquiring the right from him the right to apply or by both such inventor and such other person.”  

UC argued that “acquiring” in Section 27 should be read as allowing an applicant to obtain entitlement at any time, even after filing. The court firmly rejected this interpretation, stating as follows:

• The present participle “acquiring” does not mean “may acquire in the future”; ownership must be established at the filing date.

• Regulation 22 requires an assignment to be presented at filing, reinforcing that entitlement must already exist.

• The Court also relied on the text “Burrell’s South African Patent and Design Law” to confirm that “on the date on which the application is filed, the assignee applicant must be entitled to apply”.

The court further stated that by attempting to argue that entitlement could be acquired post-filing, UC was effectively advocating for a system where any applicant could file first and sort out ownership later - a position the court found untenable.

Citing Burrell’s South African Patent and Design Law, the court warned: “The least that an applicant can do, to entitle it to a 20-year monopoly, is to adhere to the provisions of the act which grant such a monopoly. If an applicant fails to do so the right to the monopoly stands to be revoked, at the hand of any person, through a remedy specifically created for that purpose, the resorting to it which cannot be classified as opportunistic or highly technical.”

A Timeline That Did Not Add Up

UC’s loss was rooted in a series of conflicting assignment documents that failed to establish a continuous chain of title:

1. In 2003, three key inventors assigned their rights to HHMI, not UC.

2. Between 2005 and 2006, UC purportedly acquired assignments but from inventors who no longer held the right to assign.

3. In 2009, years after the PCT filing, UC attempted to fix the ownership gap through an “Agent Assignment” from HHMI. However, the court saw this as a retrospective attempt to paper over a fatal flaw.

The court reiterated that a patent applicant cannot claim ownership retrospectively. If an entity lacks entitlement at the time of filing, subsequent assignments cannot cure the defect. 

However, UC raised an interesting argument stating that third parties (Eurolab and Dis-Chem) cannot “contest the existence of a contract or its terms if the contracting parties themselves are ad idem thereto.” UC relied on Hillock v Hilsage Investments and Aussenkehr Farms v Trio Transport, which establishes that third parties cannot challenge a contract if the contracting parties themselves do not dispute it. However, the court rejected the argument. The court opined that mutual assent requires validation by the contracting parties, and since HHMI was not a party to the proceedings, no such validation had occurred. 

Patent Revoked, Interdict Denied, and a Lot of Legal Bills

Eurolab and Dis-Chem argued that UC was never entitled to apply for the patent because it had not lawfully acquired the right from HHMI at the time of filing. This is where the case took a decisive turn.  Their interim interdict was denied. No valid patent meant no case for infringement.  The patent was officially revoked, although the court did not consider the challenges of novelty and non-obviousness raised by the defendants. UC was ordered to pay costs, including legal costs.

Commentary

This decision raises procedural red flags and may set a troubling precedent for future cases. A closer look at the implications of this decision reveals why such an approach is a cause for concern. By conceding that: 

1. HHMI was not a party to the proceedings;

2. there was no direct evidence confirming or disputing HHMI’s stance on the assignment, and 

3. the chain of title involved multiple documents requiring interpretation,

the court acknowledged unresolved factual and legal questions requiring proper evidentiary scrutiny. This raises the question: was it appropriate for the court to go this far at this stage?

Ordinarily, revocation proceedings are conducted separately in full trials where evidence can be properly tested. In most cases, a challenge to validity at the interim stage merely raises doubts sufficient to deny the injunction, leaving the question of revocation for later determination.

Perhaps this should have granted UC some relief and delayed a revocation order. However, the longstanding rules of evidence still apply. Once Eurolab demonstrated, on a balance of probabilities, that no assigned right existed, the burden shifted to UC to refute this. The fact that UC did not or could not provide evidence to address the validity of the assignment was fatal to its case.  

The court also made significant inferences about the validity of the assignment without allowing UC an opportunity to present full evidence as to HHMI’s consent. The Court concluded that “the various purported assignments, rather indicate that Swayers, Tran, and Wongvipat could not get HHMI to re-assign the rights, which they assigned to it in 2003, to UC and instead attempted several times to do so themselves…without having proper authority from HHMI.”

By deciding at this early stage that the purported assignments were invalid, the court assumed facts that should have been determined through a full trial. Even if one accepted the court’s skepticism about the assignment, its decision to revoke the patent outright at this stage of proceedings may be considered an extraordinary step. Instead of treating the matter as an interim relief application, where the primary question should have been whether there was a prima facie right that warranted granting or refusing an interim interdict, the court effectively turned the hearing into a de facto trial on revocation, without the procedural safeguards of a full trial.

Nonetheless, the court’s decision may be attributed to some peculiarities within the South African patent system. One such issue is the lack of a substantive examination process for patent applications. In the current framework, patents are granted based primarily on the fulfillment of formal and administrative criteria without assessing whether the substantive requirements for patentability (such as novelty and inventive step) are satisfied. As a result, patent rights are conferred almost automatically upon application, granting the applicant a prima facie enforceable right without verifying the underlying merits of the invention. 

This leads to a further negative, one particularly affecting competitors in the market, who find themselves drawn into litigation. A patentee, intending to institute action for patent infringement, launches application proceedings (almost invariably on an urgent basis) for interim relief. In interim application proceedings, all issues are decided on affidavits, pending the trial action, which is to finally determine the validity of the patent. The patentee, fortified by its prima facie right and having had the luxury of time to prepare its expert witnesses, has to satisfy only requirements such as urgency, an apprehension of irreparable harm, a balance of convenience favouring it and the absence of another remedy. It is for the respondent to establish or credibly challenge invalidity, which is done by establishing at least one of the grounds in section 61(1) of the Act. The further difficulties besetting such a respondent, apart from having to scramble to find experts, analyse issues, and prepare affidavits, is that the interim application, determined on motion, is not geared towards determining the weighty issues raised in the affidavits.

This means that a dispute between the experts will almost invariably be determined (albeit provisionally) in favour of the applicant. Courts are not inclined to determine esoteric bio-chemical disputes on affidavit and are frequently swayed by the power of the granted patent, even when such patents stem from routine administrative approval.

Once an interim injunction is granted against a respondent, that party could be out of the market for years until determination of the action that follows the application. There is no appeal against the grant of an interim order and, thus, no way of avoiding its effect.

This inherently shifts scrutiny to the court during any litigation brought post-grant. It also creates a judicial obligation to prioritise revocation counterclaims to prevent the enforcement of potentially invalid patents.

Consequently, to refute interim relief, a respondent must persuade the court that, on the undisputed facts, the applicant has failed to meet the necessary requirements. In this case, Dis-Chem sought to go further by instituting a counterclaim for revocation within the motion proceedings. Because it did so on motion, it had to demonstrate entitlement to relief on the common cause facts.

In conclusion, while the case may have yielded an undesirable outcome for patentees, it is a wake-up call for holders of South African patents. Assignments must be crystal clear. If you are filing a patent, ensure you have documented proof of ownership before filing. For generics manufacturers like Eurolab and Dis-Chem, it represents a significant victory. It sets a clear precedent that patents with unresolved ownership issues can be successfully challenged and revoked, even if parties to the agreement seem to have no objection or are ad idem thereto."