Biotech Laboratories (Pty) Ltd v Beecham Group Plc and Another (494/2000) [2002] ZASCA 11 (25 March 2002)

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[2002] ZASCA 11
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Biotech Laboratories (Pty) Ltd v Beecham Group Plc and Another (494/2000) [2002] ZASCA 11; 2002 (4) SA 249 (SCA); [2002] 3 All SA 652 (SCA); 2002 BIP 174 (SCA) (25 March 2002)

Reportable
Case No 494/2000
In
the matter between:
BIOTECH LABORATORIES (PTY) LTD
Appellant
and
BEECHAM GROUP PLC
First Respondent
SMITH-KLINE
BEECHAM PHARMA
-
CEUTICALS
(PTY) LTD Second Respondent
Coram: NIENABER, HARMS, ZULMAN, NAVSA and NUGENT JJA
Heard: 4 MARCH 2002
Delivered: 25 MARCH 2002
Subject: Copyright; State copyright;
s 5(2)
of the
Copyright Act 98 of 1978.
JUDGMENT
HARMS JA/
HARMS
JA:
[1] The battle about generic drugs is fought on many
grounds – usually ethical, political, commercial or patent law
considerations.
In this particular case the ground happens to be
copyright law. All turns on the copying of an approved package
insert for a medicine.
The copyist, the appellant (‘Biotech’),
seeks to justify its admitted plagiarism on two grounds namely (a)
that the respondents
have failed to prove that the package insert was
‘original’ and (b) that, if original, the copyright therein vests
in the State
by virtue of the provisions of
s 5(2)
of the
Copyright
Act 98 of 1978
. In the court below, Swart J, holding that the insert
was an original work and that second respondent (‘Smith-Kline
Beecham’)
is the author and owner of the copyright therein,
interdicted Biotech from infringing the copyright. The appeal is
with his leave.
[2] Smith-Kline Beecham markets Augmentin, a medicine
consisting of two substances: amoxycillin (a semi-synthetic
penicillin) and
potassium clavulanate. Amoxycillin is an antibiotic
and potassium clavulanate protects it against penicillin resistant
organisms.
Augmentin is registered in the name of Smith-Kline
Beecham under the Medicines and Related Substances Control Act 101 of
1965.
This Act prohibits the sale of medicines that are subject to
registration unless registered (s 14 (1)). Applications for
registration
have to be submitted to the registrar appointed under
the Act in the prescribed form and have to be accompanied by the
prescribed
particulars and samples (s 15(1)). If the application
complies with the Act and regulations and the Medicines Control
Council (the
‘MCC’) is satisfied that the medicine in question is
suitable for its intended purpose, it ‘shall approve of the
registration
thereof’. If it is not so satisfied, the applicant is
notified and given the opportunity of responding to the reasons of
the MCC.
If the MCC is ultimately not satisfied, it rejects the
application. (S 15(3).) Regulations may, amongst other things,
prescribe
the particulars in regard to the use of medicines, which
have to be furnished when they are sold, and the manner in which the
particulars
have to be furnished (s 35(1)(viii)).
[3] The general regulations
1
under the Act require that a package insert must accompany each
package of medicine sold. They also provide that package inserts
must be in the prescribed format and must contain certain particulars
such as the scheduling status of the medicine, its proprietary
name
and dosage form, composition, pharmacological classification and
action, indications and contra-indications, warnings and so
forth
(reg. 10). A proviso permits the MCC (a) to allow an applicant to
omit a prescribed heading, (b) to authorise the applicant
upon
application to deviate from the prescribed format or content or (c)
to authorise upon application the inclusion of additional
material.
[4] An applicant for registration has to submit with its
application a package insert in the format stipulated (reg. 15). The
MCC
considers the insert in the course of the registration process
and more often than not proposes to the applicant amendments or
changes,
some material and others insignificant. A lengthy debate
may ensue and the applicant, unless it convinces the MCC, is in
practice
obliged to accept the suggestions in order to obtain
registration although on ordinary principles the MCC may not reject a
package
insert that complies with the regulations. The facts of this
case are illustrative of the process. During July 1980, Smith-Kline
Beecham lodged a concept submission with an insert leaflet. The
concept was approved and the application was submitted with the
original leaflet in September 1980. Someone discovered that with the
drafting of the leaflet a prescribed section had been omitted
and the
leaflet was resubmitted during January 1981. Since the MCC was not
satisfied with part of the clinical evidence, another
leaflet was
submitted during November omitting any reference to the objectionable
material. During January 1982, a discussion took
place between
Smith-Kline Beecham and the MCC and as a result a further leaflet was
prepared to ‘include recommendations requested
by the Council and
an introduction discussed with Prof. Botha [a member of the MCC]
regarding the activity of Augmentin against sensitive
organisms’.
So the process continued until the product and the insert were
finally approved. Thereafter, as data became available,
the insert
was further amended upon Smith-Kline Beecham’s request.
[5] The patents that covered Augmentin have lapsed. The
product is consequently freely marketable by others, provided they
also obtain
the necessary registration under the Act. Biotech
applied for the registration of the same chemical composition but
under the name
Bio-Amoksoklav. As a latecomer it was not subjected
to the same stringent registration requirements as was Smith-Kline
Beecham and
was entitled to rely on the fact that the scientific and
technical data generated and supplied by the latter to the MCC had
established
the acceptability of the drug. However, Biotech had to
submit a package insert for approval. Probably at the behest of the
MCC,
it copied Smith-Kline Beecham’s package insert and obtained
registration. Bio-Amoksoklav is sold with this package insert.
[6] ORIGINALITY: The issue is whether the insert, which
is a literary work as defined in the
Copyright Act, was
‘original’.
Works are only eligible for copyright if they are ‘original’
(s
2(1)).
2
The genesis of the work was as follows. The first respondent
(‘Beecham’) is Smith-Kline Beecham’s parent company and,
presumably,
the inventor of Augmentin. It prepared a master data
sheet relating to Augmentin and also a uniform data base sheet for
use by its
subsidiaries in different countries. This was done in
order to ensure standardisation in relation to the content of package
inserts.
At a later date Beecham prepared a further data base sheet
comprising additional data that had been generated. Dr Kritzinger,
Smith-Kline
Beecham’s erstwhile medical director and the person
responsible for the registration of medicines, made copious use of
these documents
in preparing the different inserts, first by
compiling summaries and then by preparing synopses that ultimately
comprised the insert,
sometimes taking extracts verbatim from them.
Drafts were also sent to other entities for comments and those
received were incorporated.
What cannot be gainsaid is that, in
spite of this, he and his staff used their own language and skill to
prepare the insert as a
whole. He was able to identify particular
paragraphs he had drafted personally but, in the light of the lapse
of time, was no longer
able to identify the lineage of each sentence.
The work is essentially a compilation, something included within the
definition of
a literary work in the Act.
[7] The argument of Biotech on this issue amounts to
this: a party claiming copyright has the evidentiary duty to identify
those parts
of the work for which originality is claimed; Smith-Kline
Beecham had failed therein. Biotech relied upon a passage from
Jacana Education (Pty) Ltd v Fransden Publishers (Pty) Ltd
[1997] ZASCA 109
;
1998 (2) SA 965
(SCA) 969E where it was pointed out that the
existence of prior material tends to limit the scope of originality
and requires more
proof of its existence than would be the case with
truly original works.
[8] Under the Act the inquiry is whether the ‘work’,
in this case the compilation as embodied in the insert, was original.
The
inquiry is not whether its parts are original. A work may even
be original if its making involves the infringement of copyright
in
some other work (s 2(3)). A second version of any work is entitled
to its own copyright provided it differs in substance from
the first
(i. e. is not a copy).
3
Where, as in
Jacana
, a defendant does not copy the
plaintiff’s ‘work’ but takes from it parts that are primarily
commonplace, the plaintiff’s
burden of proving originality in and
infringement of his work may be more difficult than otherwise. In
this case the position is
different. It is common cause that Biotech
substantially copied the ‘work’. Had it copied only part of the
document the position
may have been different.
[9] The argument can be disposed of by means of an
extract from
Ladbroke (Football) Ltd v William Hill (Football) Ltd
[1964] 1 All ER 465
(HL). Lord Reid said (at 469B-E):
‘Broadly, reproduction means copying, and does not include cases
where an author or compiler produces a substantially similar result
by independent work without copying. If he does copy, the question
whether he has copied a substantial part depends much more on
the
quality than on the quantity of what he has taken. One test may be
whether the part which he has taken is novel or striking,
or is
merely a commonplace arrangement of ordinary words or well-known
data. So it may sometimes be a convenient short cut to ask
whether
the part taken could by itself be the subject of copyright. But, in
my view, that is only a short cut, and the more correct
approach is
first to determine whether the plaintiff’s work as a whole is
‘original’ and protected by copyright, and then to
inquire
whether the part taken by the defendant is substantial. A wrong
result can easily be reached if one begins by dissecting
the
plaintiff’s work and asking, could section A be the subject of
copyright if it stood by itself, could section B be protected
if it
stood by itself, and so on. To my mind, it does not follow that,
because the fragments taken separately would not be copyright,
therefore the whole cannot be. Indeed, it has often been recognised
that if sufficient skill and judgment have been exercised in
devising
the arrangements of the whole work, that can be an important or even
decisive element in deciding whether the work as a
whole is protected
by copyright.’
[10] STATE COPYRIGHT: The second issue, namely whether
the copyright in the insert vests in the State, depends upon an
interpretation
of s 5(2) of the Act. The whole of s 5 may be quoted
for contextual reasons –
‘
Copyright
in relation to the state and certain international organizations
(1) This Act shall bind the state.
(2) Copyright shall be conferred by this section on
every work which is eligible for copyright and which is made by or
under the direction
or control of the state or such international
organizations as may be prescribed.
(3) Copyright conferred by this section on a literary or
musical work or an artistic work, other than a photograph, shall
subsist
for fifty years from the end of the year in which the work is
first published.
(4) Copyright conferred by this section on a
cinematograph film, photograph, sound recording, broadcast,
programme-carrying signal,
published edition or computer program
shall be subject to the same term of copyright provided for in
section 3 for a similar work.
(5) Section 3 and 4 shall not confer copyright on works
with reference to which this section applies.
(6) Copyright which vests in the state shall for
administrative purposes be deemed to vest in such officer in the
public service as
may be designated by the State President by
proclamation in the Gazette.
[11] The crisp issue is whether the insert was ‘made
by or under the direction or control of the state’, it being
accepted that
the MCC is an organ of State. Smith-Kline Beecham in
an argument that found favour with Swart J relied for purposes of
interpretation
upon a philosophy allegedly underlying the Act, namely
that it seeks to create a system whereby the creator of an original
work is
afforded a qualified exclusive right to compensate him for
the effort, creativity and talent expended and to act as an incentive
for the creation of further and better works. It is convenient to
give some background in order to assess the validity of the argument.
In this regard Frank Muir’s irreverent social history
4
provides a useful introduction.
‘The biggest difficulty facing a would-be professional author at
the opening of the eighteenth century was his lack of legal right
to
royalties on the sale of his books. Under the Romans, and well into
the medieval period, the copyright in a manuscript belonged
to
whoever owned the piece of material it was written upon; it was a
simple matter of owning a lump of tangible property. When printing
came to England the government made haste to censor it by giving the
Stationers’ Company a monopoly on publishing, thus making
the
Stationers’ Company the holder of all copyrights.
Pressure built up during the latter part of
the seventeenth century against the Stationers’ Company monopoly,
and strong pleas were
made to successive governments to end it. The
campaign eventually succeeded and in 1709 an Act, Statute 8 Anne,
c
.
19, was passed, the first in the world to give an author a right to
his own property.
The booksellers who were behind the Act had no thought of bringing
prosperity to the trade of author; it was a monopoly-breaking
move
for the benefit of the bookselling trade and authors were merely the
excuse for it. By the wording of the act an author owned
the
copyright of his work, but the action of having it published gave the
bookseller fourteen years exclusive rights in the work,
after which
the rights were supposed to revert to the author. In effect this
meant that once the booksellers had paid the author
a few guineas for
the copyright, they could exploit the property, or barter it among
themselves, for a period of fourteen years without
necessarily paying
anything more to the author:
What Authors lose, their Booksellers have won,
So Pimps grow rich, while Gallants are undone.
Alexander Pope (1688-1744)’
[12] The present Act, in its original form, attempted to
be kinder to authors. The concept of ‘copyright’ was replaced
with an
author’s right, the ‘ownership’ of which vested
principally in the author. In this and other regards the object was
to move
in the direction of Continental law where the emphasis is on
the rights (moral and other) of the author and not on the economic
rights
of employers and entrepreneurs. The good intentions did not
last and hardly a year had passed when the Legislature (by amending
s
21) reverted, as far as ownership was concerned, to the
Anglo-American model where commercial rights tend to reign supreme.
The
definition of ‘author’ in s 1 also covers a large number of
persons who, in the ordinary sense of the word, are not authors but
persons with financial interests in the end result. For instance,
the author of a computer program is the person who exercised control
over its making. One consequently does not have to be a cynic in
order to be sceptical about the philosophical premise.
[13] It is likewise difficult to establish historically
any philosophy behind the recognition of State copyright. As Frank
Muir made
clear, copyright was initially nothing more than the right
to copy and that right related to the right to print, something the
Crown
by divine intervention had or approbated. For instance, the
Crown had the prerogative of printing and publishing statutes.
5
The Crown also laid special claim to the perpetual copyright in the
Authorised English Translation of the Bible and the Common
Book of
Prayer. The Copyright Act of 1842
6
made no reference to Crown copyright and it was then open to doubt
whether the Crown could have enforced a perpetual copyright in
works
compiled by its servants, or whether it could only have claimed the
term of copyright granted by that Act.
7
It is probably against that backdrop that s 18 of the British
Copyright Act of 1911, which became law in South Africa by virtue
of
the
1916 Act,
8
was enacted. It provided that where any work was –
‘prepared
or published by or under the direction and control of His Majesty or
any Government department, the copyright shall, subject
to any
agreement with the author, belong to His Majesty, and in such case
shall continue for a period of fifty years from the date
of first
publication of the work.’
[14] Pursuant to the wording used in the 1956 UK
Copyright Act, the Copyright Act 63 of 1965 provided for vesting of
copyright in
the State if the relevant work was ‘made by or under
the direction or control’ of the government or State (s 39). This
is the
antecedent for the wording used in the present Act. The
change from ‘prepared’ to ‘made’ does not appear to be of any
significance.
[15] The general structure of the 1978 Act, excluding
detail, is the following. Conferral of copyright and ownership of
copyright
do not necessarily coincide. Copyright can be conferred
under three alternative circumstances: first, on a work made by a
‘qualified’
author (s 3); second, if the work is not made by a
qualified author, by first publication (s 4); and third, on a work
made by or
under the direction or control of the State (s 5(2)). The
initial ownership of copyright conferred by s 3 or 4 vests in the
author
unless the work was made in the course and scope of an
employment contract or was commissioned (s 21(1)). If conferred by s
5, it
vests in the State and not in the author (s 21(2)).
[16] Smith-Kline Beecham argued that it can be deduced
from this structure that State copyright under s 5(2) is only
conferred upon
works that are ineligible for copyright under s 3 or s
4 because the State is not a ‘qualified person’ (qualified
persons must
either be individuals or incorporated juristic persons).
I disagree. A work falling under s 3 or 4 and authored by an
employee
of the State in the course and scope of an employment would,
irrespective of s 5, vest in the State under s 21(1)(d). In
addition,
as far as ranking is concerned, it should be noted that a
work qualifying for State copyright is not entitled to copyright
under
either s 3 or 4 (s 5(5)). This implies that one has first to
consider whether the work was made under the circumstances of s 5(2)
and only if not, under s 3 or 4 but that does not mean that s 5(2)
should not be interpreted restrictively. Allowing the State without
more to reap what it did not sow does not appear to be in the spirit
of our constitutional values.
[17] The UK provisions were the subject of two
judgments;
9
neither of which is of material assistance in the present case.
Textbook writers generally only touch on the topic. Copyright no
doubt vests in the Crown irrespective of whether the actual author
was under a contract of service with the Crown.
10
The provision is broad and may in certain circumstances apply to
works made by a person under contract with the State.
11
Some argue that works made by State employees in the course of their
duties are made under the ‘control’ of the State and that
works
made by independent contractors are made under the ‘direction’ of
the State.
12
Whether a commissioned work falls under either appears to be open to
debate.
13
[18] It is not that clear whether the phrase ‘by the
state’ was intended to cover works of organs of State only or also
the works
of employees. All the statutes since 1911, when dealing
with employees generally, used the hackneyed phrase ‘in the course
of
the author’s employment’ (or something similar). Why a
different wording should have been used in relation to State
employees
is unclear. It is fortunately not necessary to consider
the scope of that expression because Biotech, rightly, did not submit
that
the work was made ‘by’ the MCC. Smith-Kline Beecham,
however, argued that the use of the preposition indicated that State
copyright
could only arise where a work is made ‘for or on behalf
of’ the State. The argument loses sight of the fact that the ‘by’
does not govern either ‘direction’ or ‘control’. They are
governed by the preposition ‘under’. Clearly, an important
pointer in assessing whether State copyright vests or not may be
whether the work was made for or on behalf of the State but that
is
not the conclusive indicator.
[19] There was some argument on whether the work was
made ‘under the direction’ of the State. In my judgment the
State did not
direct the making of the insert because it did not
initiate its making and it did not prescribe the manner and means to
be employed
therein. The provision is consequently inapplicable.
That leaves the question of ‘control’. In this regard Biotech
relied
heavily on a number of decisions that deal with the meaning of
the word in other statutory contexts, especially those that held that
the power to control an activity may include the power to restrain
and even veto it;
14
consequently, since the MCC had the power to approve or disapprove
the insert, it was made under its control.
[20] Apart from the fact that the ultimate decision
whether or not to accept the MCC’s recommendations or to use the
insert is that
of the applicant, the major problem with the approach
is that it focuses on the meaning of a word in isolation.
15
The issue is not whether the MCC had the power to approve or
disapprove the insert but whether the insert was
made
under
its control. This appears to be a factual rather than a legal issue.
An insert is of the utmost commercial importance to
a pharmaceutical
company. Not only is it required for purposes of registration of a
medicine but it is also the ‘passport’ of
the medicine because it
is the document that prescribing medical practitioners will have
regard to in deciding whether or not to
prescribe any particular
medicine. In this case Dr Kritzinger prepared the draft insert in
his capacity as employee of Smith-Kline
Beecham. As soon as it was
completed, s 3 conferred copyright thereon as a literary work of
which Smith-Kline Beecham was the owner
by virtue of s 21(1)(d).
Thereafter the draft was submitted to the MCC for its approval.
During the approval process Smith-Kline
Beecham amended the document,
sometimes upon the suggestion or request of the MCC but, as conceded
by Biotech, the MCC did not change
the substance of the insert nor
did it co-author the end result. Copyright once conferred in any
particular work cannot again be
conferred on the same work and
copyright once vested in a party remains so vested unless transmitted
under s 22.
[21] In order to meet this consequence Biotech submitted
that once Dr Kritzinger conceived of the idea to prepare an insert he
thenceforth
acted under the control of the State. The proposition
merely has to be stated to be rejected. The anomalies abound. It
would for
instance mean that if Smith-Kline Beecham had decided not
to submit the insert to the MCC, the copyright therein would still
have
vested in the State, it being blithely unaware that it had
controlled the making of the work. If Beecham had prepared the
leaflet
in the UK for use in its UK application and had submitted it
to the UK authorities, copyright would have vested in either Beecham
or the UK government. Beecham would then have required the UK
government’s licence to submit the insert to the MCC and upon
submission
to the latter, copyright would have been transferred to
the South African government.
[22] I prefer to adopt and adapt Ricketson’s
16
approach: the production of the work needs to be the principal object
of State direction and control and not merely an incidental
or
peripheral consequence of some generalised governmental licensing or
monitoring power; the direction and control should be directly
and
specifically expressed with respect to the work in question, and
should not be inferred from the fact of some residual or ultimate
government veto. On the facts of this case, the MCC did not
‘control’ the making of the work or the intellectual effort
involved
in its genesis; it controlled its fate to the extent that it
had to determine administratively whether the insert complied with
the
regulations. Its statutory function is to control the sale of
medicines and not to be the controlling mind behind the creation of
the insert. An editor is not an author and even if ‘the meaning of
a word is always another word’,
17
control does not mean cooperation or consultation, at least not in
the present context.
[23] I therefore agree with Swart J that the copyright
in the insert vests in Smith-Kline Beecham and the appeal must
consequently
be dismissed. It would not be out of order to say
something about the concerns of the MCC. It joined the Biotech team
by claiming
through its deponents that the ‘whims’ of copyright
law should not interfere with its policies. It insists that the same
medicines
should have identical inserts. That may be a commendable
ideal but it does not entitle it to disregard other parties’
proprietary
rights, in this case based upon statute. The evidence
also establishes that identical inserts are not necessary and that at
least
one other competitor was able to produce an insert acceptable
to the MCC that was not a copy of Smith-Kline Beecham’s insert.
This is not a case where the information can be presented in only one
format, for instance, a mathematical formula, the batting list
of a
cricket team or an alphabetical list of the members of a society and
it was thus unnecessary to consider whether or not this
factor may
affect the conferral of copyright.
[24] The appeal is dismissed with costs, including the
costs consequent upon the employment of two counsel.
__________________
L T C HARMS
JUDGE OF APPEAL
AGREE:
NIENABER JA
ZULMAN
JA
NAVSA
JA
NUGENT
JA
1
These were originally published under Government Notice R532 in the
Government Gazette 4594 (Regulation Gazette 2117) of 21 February
1975 and have since often been amended.
2
The meaning of the term is discussed in
Klep Valves (Pty) Ltd v
Saunders Valve Co Ltd
1987 (2) SA 1
(A) 22H-23B.
3
Warwick Film Productions Ltd v Eisinger and Others
[1969] 1
Ch 508
presents an illuminating example.
4
The Frank Muir Book
141-142.
5
The Attorney-General for New South Wales v Butterworth & Co
(Australia) Ltd
[1937-1938] 38 NSW State Reports 195.
6
5 & 6 Vict. c. 45.
7
MacGillivray
A Treatise upon the Law of Copyright
(1902)
59-61.
8
Patents, Designs, Trade Marks and Copyright Act 9 of 1916, Third
Schedule.
9
British Broadcasting Company v Wireless League Gazette Publishing
Company
[1926] 1 Ch 433
;
Ironside v HM Attorney-General
[1988] RPC 197
(Ch D).
10
Skone James
Copinger on the Law of Copyright
6
th
ed (1927) at 248-249
11
Alan Smith
Copyright Companion
11.
12
Laddie, Prescott and Vitoria
The Modern Law of Copyright and
Designs
2 ed I par 22.10.
13
Ibid. Also
Lester and Mitchell
Johnson-Hicks on UK Copyright
Law (1989) 69.
14
E. g.
Van Rooy v Law Society (OFS) and Another
1953 (3) SA
580
(O).
15
Commissioner, South African Revenue Service v Dunblane (Transkei)
(Pty) Ltd
2002 (1) SA 38
(SCA) par 13.
16
Ricketson
The Law of Intellectual Property: Copyright, Designs &
Confidential Information
par 14.180.
17
Harold Bloom
The Western Canon
63-64.