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Microsoft vs You First Mobile: Security for Costs Under the South African Patents Act and Compelling Discovery of Foreign Search Reports

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  7. Microsoft vs You First Mobile: Security for Costs Under the South African Patents Act and Compelling Discovery of Foreign Search Reports

Published Date: November 8, 2021

You First Mobile (Pty) Ltd instituted an action against Microsoft (Pty) Ltd for infringement of its South African patent.  Microsoft in turn brought an interlocutory application against Your First Mobile to (1) compel You First Mobile to furnish it with the prescribed particulars of search reports issued in foreign jurisdictions in respect of foreign patent applications corresponding to the South African patent in terms of section 43(4) of the South African Patents Act 57 of 1978, and (2) to furnish security for costs in the event that an adverse cost order is made against You First Mobile in the action.

The Court of the Commissioner of Patents handed down judgment in the interlocutory application in favour of Microsoft on both counts.

Section 43(4)

South Africa has a non-examining patent system which means that provided formal requirements are complied with, a patent will be granted on a South African patent application regardless of the validity of the patent.  The grant of a South African patent is therefore no guarantee of its validity.

Section 43(4)(a) provides that after the expiry of five years following the date of application for a patent, any person may apply to the registrar for the patentee to supply the applicant with the prescribed particulars of any search report issued in another country in respect of an application for a patent relating to the same subject-matter which has been lodged in that country.  The registrar then passes on the application to the patentee.  Section 43(4)(c) provides that if the patentee fails to supply the applicant with the particulars, the applicant may apply to the Commission of Patents for an order requiring compliance.

Microsoft duly made application for the particulars in terms of the above provision.  You First Mobile declined to comply with the application citing that it was prohibited from doing so in terms of a settlement agreement.  After Microsoft launched the interlocutory application in issue to compel You First Mobile to provide the particulars, You First Mobile furnished the particulars of search reports in the USA only.  Microsoft maintained that a patent application had been filed in Australia and, accordingly, demanded that You First Mobile ought to state on oath that there were no further search reports in order to comply fully with the request.   You First Mobile refused to do so stating that it had fully complied.

Mokose J, sitting as the Commissioner of Patents, considered the rationale of Section 43(4) and stated that it is an important provision in the context of a non-examining patent system as it allows parties interested in the validity of the patent to assess the validity of a South African patent without necessarily incurring the costs of obtaining their own search reports.  Search reports issued in foreign jurisdictions, on the other hand, are issued by examiners who carry out substantive examination.  The provision therefore assists third parties in seeking the revocation of a patent if it is appropriate to do so.

In support of its stance, You First Mobile further argued that foreign search reports were in any event public documents.  Mokose J held that You First Mobile had not fully complied with Section 43(4) by failing to go on oath regarding the position in Australia and jurisdictions other than the USA and ordered compliance with Section 43(4).

Security for Costs

Microsoft applied for an order that You First Mobile furnish security for costs in terms of Section 17 of the Patents Act, alternatively, under the common law.  Section 17(2) confers a discretion on a court to require any party in proceedings before it to furnish security for any adverse costs that may be ordered.  Mokose J reaffirmed that ‘any party’ includes an incola plaintiff and that an order to furnish security for costs was a reasonable and justifiable limitation of the Constitutional right to have a dispute resolved in a fair and public hearing, provided it was reasonable and justifiable to do so in the circumstances.

Mokose J goes on to state that in exercising its discretion the court must consider various factors including You First Mobile’s inability to pay any adverse cost order against it. You First Mobile’s prospects of success and the extent to which the right of access to court would be curtailed by an order that security be furnished would also have to be considered by the court.

Mokose J confirmed that a litigant must lead evidence to show that it cannot put up security for costs.  It does not follow that because there is reason to believe that a litigant cannot meet an adverse cost order, there is reason to believe the litigant cannot put up security for costs.  The litigant may be receiving funding while the prospects of success are reasonable but not once the case has been lost.

Mokose J noted that the discretion conferred by the Patents Act is broader than that under the common law in that the applicant does not have to show that the plaintiff’s claim is vexatious, reckless, an abuse of process or even doubtful.  Ultimately the court needs to exercise its discretion based on its assessment of You First Mobile’s ability to meet an adverse cost order, the merits of the case and the extent to which an order, if granted, would bring the litigation to an end.

You First Mobile averred that when it instituted the action it had the financial backing of an individual which had since withdrawn the backing owing to the covid-19 pandemic.  It followed that You First Mobile was not in a position to put up security for costs.  You First Mobile did not disclose the identity of the individual, why it could not provide further backing nor did it set out a plan for securing alternative financial backing.  Furthermore, the inventor of the patent, litigated on the corresponding US patent against Apple and Sony which presumable was an expensive process.

Mokose J found that there was insufficient evidence to show that an order for security would bring the litigation to an end.

Microsoft, via its South African patent attorney, provided evidence as to why You First Mobile’s patent is invalid on the grounds of lack of novelty and material misrepresentation.  The evidence was not contested and You First Mobile merely argued that the patent attorney was not a qualified expert and thus the evidence as to lack of novelty should be disregarded.  Mokose J confirmed that the question of novelty was for the court to decide and is not for an expert to decide.  You First Mobile also did not contest evidence led by the patent attorney to show that the South African patent application contained a material misrepresentation, in that the inventor who signed the prescribed declaration knew that a patent granted on the application would be invalid due to lack of novelty.

Mokose J also held that to the extent that the provision for security for costs in the Patents Act is inconsistent with the common law or the Companies Act, it is of no consequence as the Patents Act is not subordinate to the latter. Mokose J therefore also ordered that You First Mobile furnish security for costs.

Microsoft was represented by Adams & Adams attorneys.

Danie Dohmen
Partner | Patent Attorney
Russell Bagnall
Partner | Patent Attorney
Sophia Smallbones
Senior Associate | Patent Attorney

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