As proud owner of an SMME, there are some essential contracts that you will encounter, and we will be discussing four of them today.
Shareholders’ Agreement A shareholders’ agreement is a contract that regulates the relationship between the shareholders and the business. Amongst other things, the shareholders’ agreement will detail how the shareholders will work together, outline the basic rights and obligations of the shareholders, how the profits or dividends will be divided, outline voting rights, and detail the selection procedure for the board members of the business.
An Employment Contract According to South African labour law, all employees must get a written contract outlining the terms and conditions of the job within 3 months of working for a company. The terms and conditions to be listed include job description, working hours, pay, time off, and notice period. There are different types of employment contracts ranging from temporary, fixed term, and permanent contracts.
Section 29 of the Basic Conditions of Employment Act no. 75 of 1997 states that:
(1) An employer must supply an employee, when the employee commences employment, with the following particulars in writing— (a) the full name and address of the employer; (b) the name and occupation of the employee or a brief description of the work for which the employee is employed; (c) the place of work, and where the employee is required or permitted to work at various places, an indication of this; (d) the date on which the employment began; (e) the employee’s ordinary hours of work and days of work; (f) the employee’s wage or the rate and method of calculating wages: (g) the rate of pay for overtime work; (h) any other cash payments that the employee is entitled to; (i) any payment in kind that the employee is entitled to and the value of the payment in kind; (j) how frequently remuneration will be paid; (k) any deductions to be made from the employee’s remuneration; (l) the leave to which the employee is entitled; (m) the period of notice required to terminate employment, or if employment is for a specified period, the date when employment is to terminate; (n) a description of any council or sectoral determination which covers the employer’s business; (o) any period of employment with a previous employer that counts towards the employee’s period of employment; (p) a list of any other documents that form part of the contract of employment indicating a place that is reasonably accessible to the employee where a copy of each may be obtained.
Service Level Agreement When your business is operational and you have clients, more than likely, you will conclude a service level agreement (SLA) with said client. Essentially, an SLA is a contract between service provider and a client, and it outlines the service to be provided and the level of performance to be expected. An SLA also describes how performance will be measured and approved, and what happens if performance obligations are not met.
Non-Disclosure Agreement You have developed a new cutting-edge innovation and now your company must decide on how to best take the innovation to market. You realise that there is a company that is well known in the field, and they can help you to market your product and take it to the end user. You decide that you will approach this company and outline your idea. However, before divulging your innovation and business methods, it is prudent to request the party you will be negotiating terms with to sign a non-disclosure (NDA)/confidentiality agreement. A non-disclosure agreement is an agreement between parties that certain information will be kept confidential. This agreement prevents any party who has signed it from divulging the confidential information to an unauthorised party. An NDA is used to protect trade secrets and other IP that must be kept confidential. It may seem like a rather expensive exercise but before divulging your innovation, invest in obtaining an NDA, it may work out cheaper in the end.
At Tshaya Mashabela Attorneys, we have the skills and expertise to draft these contracts on your behalf. Contact us to learn more about any of the listed contracts or others that are not listed but still have a significant impact on how you conduct business.
Collaboration is one of the key pillars for the survival of small businesses. However, collaboration between businesses in some areas may lead to the violation of competition laws. For this reason, former Minister of Competition, Trade and Industry at the time, Ebrahim Patel, introduced new regulations that would enable small businesses to collaborate and subsequently, have the opportunity to grow and contribute more to the economy.
On 23 May 2024, Minister Patel signed the Small, Micro and Medium-Sized Business Block Exemption Regulations 2024 (SMME Block Exemptions) into law. These exemptions were to permit SMMEs to conclude certain agreements and conduct certain practices that would otherwise be prohibited by the Competition Act 23 of 2021. Sections 4 and 5 of the Competition Act state that:
“4. Restrictive horizontal practices prohibited
(1) An agreement between, or concerted practice by, firms, or a decision by an association of firms, is prohibited if it is between parties in a horizontal relationship and if—
(a) it has the effect of substantially preventing or lessening competition in a market, unless a party to the agreement, concerted practice, or decision can prove that any technological, efficiency or other pro-competitive, gain resulting from it outweighs that effect; or
(b) it involves any of the following restrictive horizontal practices—
(i) directly or indirectly fixing a purchase or selling price or any other trading condition;
(ii) dividing markets by allocating customers, suppliers, territories, or specific types of goods or services; or
(iii) collusive tendering.
(2) An agreement to engage in a restrictive horizontal practice referred to in subsection (1)(b) is presumed to exist between two or more firms if—
(a) anyone of those firms owns a significant interest in the other, or they have at least one director or substantial shareholder in common; and
(b) any combination of those firms engages in that restrictive horizontal practice.
5. Restrictive vertical practices prohibited
(1) An agreement between parties in a vertical relationship is prohibited if it has the effect of substantially preventing or lessening competition in a market, unless a party to the agreement can prove that any technological, efficiency or other pro-competitive, gain resulting from that agreement outweighs that effect.
(2) The practice of minimum resale price maintenance is prohibited…”
According to the Competition Act, a horizontal relationship is a relationship between competitors.
With Minister Patel’s remarkable strides in signing the block exemption regulations, the following categories of agreements and practices are exempted from sections 4 and 5 of the Competition Act:
9. Subject to regulation 10 and 11, the Minister hereby exempts the following categories of agreements or practices among SMMEs from the application of sections 4(1) and 5(1) of the Act:
9.1. Research and development (R&D) agreements which include outsourcing R&D to third parties or cooperation agreements to conduct R&D.
9.2. Production agreements for production of a good or the provision of a service, or toll manufacturing by one firm for another (standalone or on a reciprocal basis) which do not result in the removal of a competitor from the market.
9.3. Joint purchasing agreements which may include collective purchasing by a subset of firms in a market.
9.4. Joint selling of goods or services to and through intermediaries or other business customers by a subset of firms in a market.
9.5. Commercialisation agreements which include co-operation between firms relating to the selling, distribution or promotion of their products. Agreements may cover all commercial aspects or may be limited to onespecific function, such as distribution, after-sales service, or advertising.
9.6. Standardisation agreements which include setting the technical or quality requirements with which current or future products, production processes, services or methods may comply. These agreements may cover technical specifications, environmental performance, grades or sizes of products, or the terms of approval by a regulatory body.
9.7. Collective negotiations with large buyers or suppliers on the terms and conditions for purchasing or supply.
These exemptions are monumental and will make a world of difference for SMMEs that rely on collaboration for growth.
Individuals enter into marriages (civil marriages, customary marriages and civil unions) for a number of different reasons. For example, some enter into marriages for love, camaraderie, the aspiration to build families and/ or social security to ensure financially stable households, while some individuals just enter into marriages solely for financial benefit.
In light of this, there is a need for the South African justice system to protect the genuine and innocent individuals from any marital misconduct from their partners at the end of the marriage. Concurrently, the South African justice system ought to ensure that no individual and/ or partner, benefits from a marriage that he or she has wrecked through marital misconduct at the expense of another.
THE PURPOSE OF FORFEITURE
Section 9 of the Divorce Act 70 of 1979 (hereinafter referred to as the Act), provides for forfeiture of patrimonial benefits. A spouse will forfeit a benefit if, in relation to the other spouse, he or she will unduly benefit if an order of forfeiture is not made.
A patrimonial benefit is one that accrues to a party because of the marriage, thus excluding what a party has contributed to the marriage. As a result, a person cannot forfeit what he or she contributed to the marriage.
SECTION 9 OF THE DIVORCE ACT 70 OF 1979 (THE “ACT”)
Section 9 of the Act states that when decree of divorce is granted on the ground of irretrievable break-down of a marriage the court may make an order that the patrimonial benefits of the marriage be forfeited by one party in favour of the other, either wholly or in part, if the court, having regard to the duration of the marriage, the circumstances which gave rise to the break-down thereof and any substantial misconduct on the part of either of the parties, is satisfied that, if the order of forfeiture is not made, the one party will in relation to the other be unduly benefited.[1]
In laymen’s term, this section simply means a court is empowered to order partial or complete forfeiture of patrimonial benefits having regard to the duration of the marriage, circumstances which gave rise to the break-down and any substantial misconduct on the part of either of the parties.
Forfeiture of benefits in divorce proceedings refers to the legal mechanism that allows a court to deny one party any financial benefits from the marriage if deemed unjust. This may include property, pension interests, or any other assets accumulated during the marriage.
DIVORCE AND FORFEITURE
In South Africa, there are three matrimonial property systems as stipulated by the Matrimonial Property Act, namely, marriage in community of property, marriage out of community of property with accrual, and marriage out of community of property without accrual.
The general rules are that where a marriage is in community of property, the spouses share equally in the joint estate. In the accrual system, the spouse whose estate shows a smaller accrual or growth acquires a right to claim from the spouse whose estate shows the most accrual.[2] If the parties exclude the accrual system, the general rule is that they are not entitled to a share in the estate of the other. However, despite the exclusion of the accrual, parties may still voluntarily benefit each other in the form of a spousal donation in the antenuptial contract or in a will. A spouse may also benefit through intestate succession if the deceased spouse died without a will.[3]
However, section 9 of the Act, where applicable, negates the general rules above. Parties who are married in community of property may not necessarily share equally in the joint estate.[4] The court may order that a blameworthy spouse forfeit the patrimonial benefit to which he or she may be entitled by virtue of the chosen matrimonial property systems referred to herein.[5]
UNDUE BENEFIT
There are two forms of contribution in a marriage, most common are financial and non-financial contributions. By financial we mean of money and/ or payments, and of a non-financial nature we would mean anything else, such as childcare, homemaking and generally looking after elderly relatives and discharging household duties (cooking, cleaning, and so on).[6]
Undue Benefit is a benefit (being property subject to the joint estate) accruing to a person whose conduct does not justify such a person receiving such a benefit.[7] In Molapo v Molapo, the court held that undue could be described as disturbingly unfair.[8] Undue benefit refers to something that one acquires in the absence of a legal or moral entitlement. For example, an unfaithful spouse is not morally entitled to any benefit of the marriage. Equally, a spouse who kills another ought not to benefit from the estate. Otherwise, such will constitute an undue benefit. A spouse who fails to contribute to the estate in circumstances where he or she can contribute should also not benefit.[9] The concept of a contribution must be interpreted to include both monetary and non-monetary contribution as envisaged in Beaumont v Beaumont.[10] In order for a court to make a proper determination of whether a benefit is undue, the nature and extent of the benefit must be proved before it.
FACTORS TO BE CONSIDERED TO DETERMINE UNDUE BENEFIT
Despite the absence of clarity on what is meant by undue benefit, it is clear that the question of whether a person has unduly benefited must be determined having regard to these three factors, namely, the duration of the marriage, the circumstances that gave rise to the break-down, and any substantial misconduct on the part of either of the spouses.[11] In Singh v Singh, the court noted (with authority) that two of the three factors show the lingering influence of the guilt or fault principle.[12] These three factors need not all be present[13] and none of these factors should be considered as ranking above others.[14] In T v R, the court awarded partial forfeiture -relying solely on the short duration of the marriage, which marriage had only lasted for 20 months.
A court may not look beyond these three factors. In Wijker v Wijker,[15]the trial court had regard to fairness. The Appellate Division disagreed with this approach and held that section 9(1) of the Act could not be used to depart from the consequences of the parties’ chosen matrimonial property system just because the court considers it fair and just to do so.[16] Therefore, the court is confined only to the factors listed in the section. Beyond that, the court has no competency.[17]
THE APPLICATION OF THE FACTORS
The manner in which the factors are to be applied is now settled law. Though not voluminous, the literature on these factors is rich. Initially it was thought that the factors were to be applied cumulatively.[18] In other words, the thinking was that in order to succeed in an application for an order of forfeiture, a spouse was required to allege and prove all the factors.[19]
DURATION OF THE MARRIAGE
The court may consider the duration of the marriage. In Singh v Singh, the court held that this is the only morally neutral factor that a court may have to consider.[20] Furthermore, this is the only factor that serves as a reminder that our divorce jurisprudence has, to a certain extent, moved away from the fault system. It is accepted that where a marriage has been of a long duration, a court is less likely to grant an order of forfeiture. The reason for this is because it is highly probable that both the spouses have made contributions to the joint estate or the growth of the estate of the other. A shorter marriage increases the chances of the court granting a forfeiture order.[21]
That being said, it must be asked as to what constitutes a short or long marriage? In T v R, the court accepted that 20 months was a short duration.[22] In JW v SW, 17 years was regarded as a long duration.[23] In an earlier decision in Botha v Botha,[24]the Supreme Court of Appeal seems to have accepted that 10 years was a short, but not very short duration.[25] In arriving at this decision, the court took into consideration that the parties were in their twenties when they married and that had their marriage endured, they would have been married for a very long period.
Ten years may not be very long but it is certainly not short. Many things may happen in 10 years. For instance, a child may be born of the marriage and that child may progress as far as the third or fourth grade of their school career. Perhaps the solution lies in ascertaining the average duration of marriages in South Africa. If a marriage reaches and exceeds the average duration, it should be regarded as a long marriage for the purposes of section 9.[26]
THE CIRCUMSTANCES GIVING RISE TO THE BREAKDOWN OF THE MARRIAGE
There are a number of reasons that could lead to an irretrievable breakdown of a marriage. In Wijker v Wijker, the breakdown was caused by the respondent’s refusal to return shares to the appellant and the appellant’s unrelenting demand thereof.[27]
In JW v SW, the marriage broke down because of physical abuse by the husband.[28] In Botha v Botha, the cause of the breakdown was the meddling of the defendant’s family in the marriage.[29] In Molapo v Molapo, the defendant attempted to burn down the family home, assaulted the plaintiff, and failed to take care of the family.[30] In T v R, the marriage broke down because the parties were constantly away from home on account of employment.[31]
Section 9(1) of the Act requires the courts to have regard to the reason for the breakdown of the marriage. Once the reason has been established, the court must decide whether that reason is sufficiently serious to justify an order of forfeiture. The court may not make an order of forfeiture citing the reason for the breakdown of the marriage if this reason does not establish blameworthiness on the part of the defendant. This approach was adopted in Wijker v Wijker, Botha v Botha and T v R. If the reason for the breakdown is so serious that it renders any benefit given to the defendant undue, then the court must make an order of forfeiture. This approach was followed in JW v SW and Molapo v Molapo. If the reason for the breakdown is not so serious that it renders any benefit given to the defendant undue, the court may not make an order of forfeiture. The reason for the breakdown of the marriage is important and is central to the decision to award forfeiture. In this regard, the provision cannot be faulted.[32]
ANY SUBSTANTIAL MISCONDUCT
While fault no longer plays a part in arriving at a decision about whether to grant a decree of divorce, remnants of the fault principle clearly lingered in section 9 of the Act. Misconduct in this context includes marital fault. Marital fault includes adultery, imprisonment and malicious desertion.[33] The concept of substantial misconduct is wider than marital fault. It goes on to include issues such as assault,[34] late-coming, socialising, lack of intimacy, burning of wedding photographs,[35] and financial deprivation.[36] However, substantial misconduct does not include a single or isolated occasion.[37] Moreover, the mere existence of substantial misconduct does not, on its own, justify an order of forfeiture.[38]
The above does not suggest that in addition to proving substantial misconduct, the plaintiff must prove any of the other factors in section 9 of the Act. As has been pointed out above, it is trite in our law that the plaintiff does not have to prove all the factors in section 9. However, what must be proved is that as a result of the substantial misconduct, the defendant will be unduly benefited.[39] In JW v SW, the plaintiff managed to prove substantial misconduct in the form of an assault.[40] However, the court held this did not justify an order of forfeiture, because the defendant had contributed more than the plaintiff.[41] A person cannot forfeit what they brought into the marriage.[42]
Misconduct still does and should continue to play an important role in forfeiture. Although fault is no longer a requirement for a divorce, it is difficult to think of the application of forfeiture provisions without the question of fault. In this regard, the provision also cannot be faulted.
FORFEITURE AND DISSOLUTION OF A MARRIAGE THROUGH DEATH
It is clear from section 9(1) of the Act that the power of a court to order the forfeiture of benefits arises only as an adjunct to a decree of divorce. Moreover, a claim for the forfeiture of benefits can only be made by one party to a marriage against the other in divorce proceedings. It is not open to an outsider to claim that relief.[43]
CONCLUSION
Although parties can marry in community of property (with the aim of sharing equally in the joint estate), out of community of property (wherein one party is not entitled to share in the estate of the other) or out of community of property with accrual (the spouse whose estate shows a smaller accrual or growth acquires a right to claim from the spouse whose estate shows the most accrual), it is important for people to note that a court of law has the discretion to alter the proportion of the estate that spouses may share, despite what the marriage contract says. A court can, after granting a decree of divorce, decide whether or not to grant a forfeiture of patrimonial benefits order having regard to the circumstances of the particular case, the nature of the evidence led and the facts proven before the court. If you need assistance regarding your divorce matter, please do not hesitate to contact our legal experts at Tshaya Mashabela Attorneys.
Authors: Tumelo Mashabela |Director and Bonga Dlulisa |Associate
[13] See headnote in Klerck v Klerck supra 265J and Binda v Binda 1993 (2) SA 123 (W).
[14] See Wijker v Wijker supra 728-729. In this appeal decision, counsel for the appellant argued that the court could not make an order of forfeiture without a finding of “substantial misconduct”. By so doing, counsel had sought to put “substantial misconduct” above other factors. The court rejected this argument.
Have you ever heard the phrase “piercing the corporate veil” and wondered what it means? This is a legal doctrine wherein the owner of a corporation loses the limited liability that having a corporation affords them. When the corporate veil is pierced, the assets owned by the business owner can be used to pay the debts and liabilities of the corporation. Initially, this doctrine was not codified in South African law however, the Companies Act 71 of 2008 was amended to include section 20 (9) which provides a statutory basis for piercing the corporate veil. It states that: “If, on application by an interested person or in any proceedings in which a company is involved, a court finds that the incorporation of the company, any use of the company, or any act by or on behalf of the company, constitutes an unconscionable abuse of the juristic personality of the company as a separate entity, the court may-
( a) declare that the company is to be deemed not to be a juristic person in respect of any right, obligation or liability of the company or of a shareholder of the company or, in the case of a non-profit company, a member of the company, or of another person specified in the declaration…”[1]
In essence, what lifting the corporate veil does is to ignore the separation between the company and the natural person behind said company.[2] This will be done in instances where the natural person abused the corporate personality of the corporate entity. The relevant case that shows application of this principle is Department of Agriculture, Forestry and Fisheries and Another v B Xulu and Partners Incorporated and Others [2022] 1 All SA 434 (WCC).[2] In this case, the first respondent was a firm of Attorneys (BXI) as well as the owner (BX), who was listed as the fifth respondent. The court found that BX, the sole director of BXI, appropriated funds from BXI under the guise of settling liabilities of the corporate entity. He then channeled the funds to himself, friends, and family instead of paying said liabilities. The owner, BX, was found to have assumed the persona of the company and did not act as an agent of the company. There were sufficient grounds for piercing the corporate veil and BX was held jointly and severally liable with BXI for repayment of the funds.[2]
What came first, the chicken or the egg? Do intellectual property rights promote more innovation and technological advancements or is necessity indeed the mother of all invention? In other words, with or without the incentive of Intellectual Property Rights (IPR), would we still have rapid advancements in technology and other fields?
These questions become even more pertinent in these times of COVID-19 pandemic. Should COVID-19 vaccines and other related technologies be protected by patents thus making them potentially unaffordable for low-income countries? On the other hand, should there be a patent ban on these vaccines and related technologies to enable more access to much needed resources in low-income countries?
The justification for IPR is that “…the IP system is required to incentivise new inventions of vaccines, diagnostics, and treatments, which might dry up in its absence.”1 However, poor countries argue that “…rich countries will benefit from new technologies as they come onto the market, while poor countries continue to be devastated by the pandemic. The proposal states that IP rights such as patents are obstructing affordable COVID-19 related products. A temporary ban would allow multiple actors to start production sooner, instead of having manufacturing concentrated in the hands of a small number of patent holders.”1
Rich countries such as the UK, USA, Canada, Norway and EU are of the opinion that there are ways to ensure equitable access to the COVID-19 vaccine where IP will not create a barrier for poor countries to gain access to it. The ways in which the poor countries propose to create equitable access is through:
voluntary licensing,
technology transfer arrangements, and
the donor-funded COVAX Advance Market Commitment for vaccines.1
We understand that South Africa and India are however, of a different view. The two countries have called for the World Trade Organisation (WTO) to ban IPR relating to COVID-19 vaccines and related technologies. This they say, is to ensure that not only rich countries but poor countries too would gain access to much needed COVID-19 vaccines and related technologies.
They argue that with IP systems in place, rich countries will benefit from COVID-19 vaccines and related technologies whilst poor countries will continue to be ravaged by the pandemic due to lack of access. They posit that IP rights especially patents, impede the development of affordable medical products to help fight the pandemic in poor countries. They suggest that the ban will increase the opportunity for collaboration, allowing more producers to enter the space and increase scalability within a short period.
It is important to note the following existing measure available to the South African government, compulsory licensing. According to the South African Patents Act 57 of 1978 section 56:
“(1) Any interested person who can show that the rights in a patent are being abused may apply to the commissioner in the prescribed manner for a compulsory licence under the patent.
(2) The rights in a patent shall be deemed to be abused if—
(a) the patented invention is not being worked in the Republic on a commercial scale or to an adequate extent, after the expiry of a period of four years subsequent to the date of the application for the patent or three years subsequent to the date on which that patent was sealed, whichever period last expires, and there is in the opinion of the commissioner no satisfactory reason for such non-working;
(c) the demand for the patented article in the Republic is not being met to an adequate extent and on reasonable terms;
(d) by reason of the refusal of the patentee to grant a licence or licences upon reasonable terms, the trade or industry or agriculture of the Republic or the trade of any person or class of persons trading in the Republic, or the establishment of any new trade or industry in the Republic, is being prejudiced, and it is in the public interest that a licence or licences should be granted…”2
According to the Patents Act, the government has a solution to exorbitantly priced pharmaceuticals or cases where the patent holder is not able to meet the country’s demand. Pharmaceutical companies have already expressed a willingness to offer voluntary license agreements.
It is understandable why pharmaceutical companies, especially those in the rich countries are opposed to the IPR ban. Developing new drugs is a lengthy, complicated and highly costly exercise. With every new and complex disease that is discovered, more money is spent attempting to develop a cure or treatment.4 Pharmaceutical companies spend a whopping 17% of their revenues on research and development (R&D), this is the highest expenditure in any industry.4
To put it into perspective, on average, a pharmaceutical company spends about $4 billion to develop new medication, sometimes, it can be as high as $10 billion.4 So, which came first, the chicken or the egg? Will pharmaceutical companies continue to invest so much into R&D if they have no chance to recoup their expenses or will they continue to innovate?
On the other hand, millions of people living with HIV/AIDS have died due to lack of access to treatment. Access is defined by the WHO as: “…having medicines continuously available and affordable at health facilities that are within one hour’s walk of the population…”.3 The majority of African countries spend a disparate amount of their scant resources on procuring medication. “Africa imports 70% of its pharmaceutical products, with India alone accounting for nearly 18% of imports in 2011. Pharmaceutical imports in Africa include up to 80% of the antiretroviral drugs (ARVs) used to treat HIV/AIDS.”3
In 2001, 39 pharmaceutical companies took the South African government to court for their plans to manufacture and import more affordable and generic HIV/AIDS medication.3 They claimed that the government undermined their IP rights by the government’s planned actions. The case was later withdrawn. Evidence shows that local production of medicines increase access and reduces the cost of these medicines. The WTO, in recognition of this, permitted a waiver of 10 years for poor countries to manufacture generic drugs using IPR from big pharmaceutical companies.3
With this history in mind, what is fair? Do we ban IPR of pharmaceutical companies relating to COVID-19 vaccines and related technologies, despite the costs of R&D that these companies plowed into development of these technologies? Or do we put the health of people first and promote equal access especially to people in poorer countries? This would help prevent the “HIV/AIDS” mistake and prevent unnecessary deaths. Can we find a middle ground that will make both low-income governments and big pharmaceutical companies happy?
An EU spokesperson maintains that there is no evidence that IPR limit access to COVID-19 medicines and technologies.1 The Chair of the WHO Solidarity Trial of COVID-19 treatments, John-Arne Røttingen, is in agreement with the voluntary licensing route as the best one.1 The reason being that IPR is the least of poor countries’ worries in terms of access. The biggest barrier according to John-Arne Røttingen is infrastructure, production facilities and know-how especially since COVID-19 vaccines and therapeutics are “complex biological products”.1 For this reason, non-exclusive licenses and technology transfer of products would enable a faster establishment of production lines as was the case with the agreements established between AstraZeneca and Novavax with the Serum Institute of India.1
It is difficult to imagine the big pharmaceutical companies continuing with their rigorous R&D without the prospect of recouping even half of those costs. It is also difficult to imagine the loss of lives simply because medicines are too expensive, and access is limited to the lucky few that can afford it.
Written by: Tumelo Mashabela, Managing Director and Registered Patent Attorney
For all your IP, commercial and corporate law services, please contact us on 012 942 8710 / info@tm-attorneys.africa. You can also find us on social media platforms with the handle @TshayaMashabelaAttorneys.
Puma® has recently lost a case before the European Union’s General Court. The dispute revolved around the validity of a design of the Avanti trainer. The sportswear manufacturer registered a design at the European Intellectual Property Office (EUIPO).
This design was declared invalid on the grounds of lack of novelty because popstar, Rihanna, had posted a picture on her Instagram account showing the trainer, more than one year before the design application was filed. For this reason, the judge ruled that the “photos clearly showed that the essential features of the shoes were visible before the design was registered.” Puma® tried to argue that no one was interested in the shoes shown in Rihanna’s post and thus, the design was not noticed.
However, the judges disagreed and stated that Rihanna was already a world-renowned singer in 2014, when the Instagram post was published. As a result, her fans as well as fashion enthusiasts had a keen interest in the shoes and their design.[1]
A registered design protects features of an article. These features can be a pattern, a shape, configuration, ornamentation, or a combination of any of these. Think of the countless designer handbags out in the market, Versace dress, and sneakers with distinctive designs.
In South Africa, there are two types of designs, that is, an aesthetic design and a functional design. These are all considered aesthetic designs. Protection of an aesthetic design is valid for 15 years. The holder of design rights will have the exclusive right to exclude other persons from making, importing, using, or disposing of an article to which the registered design is applied.[2]
Remember that if you have an idea of a new design for shoes, dresses, handbags or other items that can qualify for registration of a design, do not share it before you protect your idea. Contact Tshaya Mashabela Attorneys, we are able to assist you with registration of designs and maintenance thereof.
As social media continues to take the world by storm, TikTok has emerged as a powerhouse, engrossing users with its creative short-form videos and becoming a popular platform for viral content creation. Part of what captivates users and makes the videos interesting, is the music or sounds paired with the videos.1 For this reason, it is not uncommon for videos to be copied and posted by other users, when a particular style of video becomes popular.
The success of a TikTok video is dependent on the content and song choices that the user makes.1 The belief is that if a certain sound or content type has seen success or “trended” on the platform, a replication or duplication of the post should similarly see the same results.
This belief has proven correct, in that sounds and content that have been replicated, in different videos posted by different users, have gained thousands of likes and shares on the platform. As the app continues to gain traction, it has sparked conversations about copyright, copyright infringements, and the use of copyrighted content.
Copyright infringement on TikTok (and other interconnected platforms such as Instagram) takes place when users create and share material that contains copyrighted content without the necessary authorisation or licences from the original creator. Unauthorised use of copyrighted content, such as incorporating a sound or a song as background music, or using copyrighted visuals in a video can result in infringement.
The term ”copy” is defined in the Copyright Act 98 of 1978 (hereinafter referred to as “the Copyright Act or “the Act”) as ”a reproduction in written form or in the form of a recording or a cinematograph film or in any other material form.”2 The Copyright Act also governs and provides protection to original works, including literary, artistic and musical creations.2 Almost all components that make up a short-form video on TikTok are protected by copyright.
The original creator of a work automatically holds ownership and copyright of the content material.2 In cases where a creator’s video is replicated whether through the music, dance, or text, TikTok states that it does not permit the posting, sharing, or sending of any content material that may violate another’s copyright.3 Additionally, the use of copyrighted content without authorisation or a legal reason may lead to a violation of TikTok’s policies.3
However, TikTok’s terms and conditions also state that while the user creating the content is the owner of the copyright on the content, by posting the content to TikTok, the user grants TikTok a broad licence to use the content, and to distribute and permit other users to use the content.3
Therefore, when users create posts that use the content of an original user, the original user retains the copyright in the content, but cannot institute claims against another user for using the content. This strategy enables TikTok to protect its users from direct copyright infringement claims.
On the other hand, platforms such YouTube, run preliminary checks to identify any possible copyrighted content before publishing a video, in order to mitigate potential copyright infringements.
YouTube checks that a video is subjected to before publishing.
The Copyright Act recognises the concept of fair dealing where internet users may reproduce copyrighted works for the purposes of reviewing, criticising or reporting, as long as it is done fairly and lawfully.2 Furthermore, Section 15 of the Act, states that the reproduction of artistic work will not constitute a violation of copyrights if the artistic work is in public view on a permanent basis. This means the reproduction of well-known statues, pictures and paintings permanently located in a public place (a street, square or similar public place) does not amount to copyright infringement.2 There has been no ruling from South African courts determining whether social media platforms meet the criteria of public place display according to the Act.
With the rapid developments of technology and therefore social media, it seems that South African intellectual property (IP) legislation has fallen behind. The Digital Millennium Copyright Act (DMCA) in America, was passed by Congress, to strengthen and modernise America’s existing copyright law, and address issues related to copyright and the internet.4 The purpose of the DCMA is to protect digital material that can be reproduced or manipulated easily.4 Deriving inspiration from the DMCA, South African IP legislation would do well to develop and modernise our laws to deal with issues relating to the ever-changing digital space.
The rise of TikTok has led to many interesting developments regarding copyright protection in the digital era. If you need assistance regarding your intellectual property rights, contact our legal experts at Tshaya Mashabela Attorneys.
Authors: Tumelo Mashabela | Director and Kutlwano Mokgoro | Candidate Attorney
Moonlighting is the act and/or practice of holding a second job or engaging in additional work outside of your regular employment, without informing your employer. With the prevailing cost of living crisis in South Africa attributed to, inter alia, inflation, it is common practice for individuals to have more than one source of income to survive.
However, as an employee and in the absence of an agreement to the contrary, one owes one’s employer a duty of good faith, by disclosing material activities that may result in a conflict of interest. This duty entails that as an employee, you are obliged not to work against your employer’s interests, and not to place yourself in a position where your interests are conflicted with those of your employer.
In the matter ofBootes v Eagle Ink Systems KwaZulu-Natal (Pty) Ltd, the Labour Court stated that “good faith requires employees to work honestly and faithfully, to work in and not against the employer’s interest, to avoid conflicts between their own interests and those of their employer and not to derive a secret profit for themselves.”1
Such contractual obligation could result in one’s dismissal by their employer, more especially if holding a second job, or engaging in additional work outside of one’s regular employment conflicts with one’s current job.
In the case of Bonfiglioli SA (Pty) Ltd v Panaino , the Labour Court stipulated that “at common law, the employee owes the employer a duty of good faith.”2 In the case of Ganes & Another v Telecom Namibia Ltd, it was stated that “the duty of good faith entails that an employee is obliged not to work against the interests of his/her employer and not to place himself/herself in a position where his/her interests conflict with those of the employer.”3 It is well established that the relationship between employer and employee is in essence one of trust and confidence and that, at common law, contrary behaviour entitles the employer to cancel the agreement.
Moonlighting may present several challenges, such as, conflicts of interest, a lack of focus resulting in a lack of productivity in the main employer’s business, the risk of burnout, poor time management, and legal implications.
In the matter of National Union Of Metalworkers of SA and Another v Commission for Conciliation, Mediation and Arbitration and Other, the Court held that “an employee is obliged to act to protect the interests of the employer and where an employee fails to do so and the failure constitutes serious misconduct, the sanction of dismissal will be fair, as an employer is entitled, as an operational imperative, to rely on its employees to act in good faith and to protect the interests (which include property) of the employer. In such a case, dismissal becomes an operational imperative and way of managing risk.”4
In essence, what the Courts take into consideration when the issue of moonlighting arises is firstly, whether there is an agreement or policy in place, within the company which prohibits moonlighting. Should such an agreement or policy exist, the Courts shall assess what the parties agreed upon and make a decision based on the breach of said agreement. In conjunction with such agreement (and even in the absence of an agreement), the Courts also take into consideration the issue of good faith.
Therefore, moonlighting, as a matter of principle, is unacceptable, and a breach of an employee’s fiduciary duties towards their employer. It must always be the sole prerogative of an employer to decide whether to allow this to take place, and on what terms it may be allowed. The employee can assume nothing; it is vital for the employee to exercise transparency, and make full disclosure to the employer beforehand, so the employer can exercise its prerogative in an informed manner.
To make disclosure to an employer after the fact effectively confronts the employer with a fait accompli, and cannot undo the breach of the duty of good faith that has already taken place.5 There is only one way which one can validate such practice, and that is by the free consent of the main employer following upon a full disclosure by the employee. Upon disclosure, only the employer can assess and determine what may constitute a conflict of interest that places its own interests at risk, having due regard of all the interests of the employer.
With the complexity of our South African labour laws, as an employee or employer, seek legal assistance from our legal experts at Tshaya Mashabela Attorneys.
Authors: Tumelo Mashabela | Director and Bonga Dlulisa | Associate Attorney
New Year’s resolutions are common practice as we embrace the new year, and as such, many businesses set goals and make resolutions. An aspect that is often overlooked but is important to consider is intellectual property (IP). Properly managing and protecting your business’ IP can assist in maintaining a competitive edge, safeguarding your brand and reputation, and maximising the value of your assets.
A New Year’s resolutions that all businesses should include, is conducting an IP audit and due diligence investigation. This is a comprehensive assessment of all IP assets pertaining to your business, including both registered and non-registered IP. An IP audit can assist your business in identifying gaps in your IP protection and highlight any potential IP related risks. IP audits should be a continuous exercise to ensure that an organisation properly manages its IP and avoids matters falling through the cracks.
The benefits of IP audits include:
Having an overview or dashboard of all IP assets used and/or owned by the business.
The assessment of the commercial value of the IP assets and their potential for generating revenue.
Ability to formulate a suitable IP strategy that can be used to support the business’ strategic objectives.
Enable management to generate appropriate negotiation terms for a particular transaction.
Avoid potential litigation.
Identification of potential infringements and/or mitigate the risk of the business infringing other third party’s IP.
Cost reduction through the removal of unnecessary expenditure associated with payments of maintenance fees on IP assets that are no longer fit for purpose.
To help ensure the success and longevity of your business, resolve to make IP a priority this year. Our Firm, Tshaya Mashabela Attorneys can assist you with conducting IP audits and due diligence investigations, and the development of IP strategies.
Oh, it’s so sad to think about the good times. You and I…’Cause, baby, now we got bad blood. You know it used to be mad love. So take a look what you’ve done. ‘Cause, baby, now we got bad blood, hey!
Without having to even wonder where the words from the above paragraph come from, you already know that these are lyrics from a Taylor Swift song. So powerful is her marketing and branding that she hardly needs any introductions (nor do her songs). Taylor was not able to obtain ownership of the masters for her first six albums. In her own words, “she was robbed of her rights”.
Failing to obtain these masters, Taylor didn’t give up, she embarked on an ambitious project to re-record these albums and marked them as “Taylor’s Version”. She created new versions of the songs from her old albums and in so doing, leveraged her brand identity. Intellectual property (IP) rights play a very significant role in this re-invention of Taylor Swift.
She started protecting her trade marks during 2008, her new albums have been re-recorded under the trade mark “Taylor’s Version”. These trade marks are owned by Taylor’s company, TAS Rights Management. Other trade marks that she protected include her name, signature, albums, jewelry, clocks and doll houses amongst others. Taylor did not stop there, she also registered marks relating to expressions and catchy phrases from her songs.
She has also trade marked the name of her latest tour “Taylor Swift the Eras Tour”. This strategic protection of her brand has resulted in thousands of videos being removed from TikTok on the basis of trade mark infringement. Any person or company that wants to use any of her trade marks must first obtain authorisation and in all likelihood, pay for the use of same. In this way, Taylor has control of her artistic endeavors.
Taylor Swift’s use of trade marks to protect her brand and legacy shows just how important IP is not just for a famous person but for a company too (big or small). Intellectual property rights should always play a key role in the strategy of a business.
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