Nigeria: Monetising and licensing patents

Since the dawn of the industrial revolution, the use of patents has been one of the valuable tools used for the protection of inventions, particularly inventions that are considered to have commercial value and appeal.

Owning a patent gives you a valuable property right, it allows an inventor to commercially make, use, and sell inventions for a specified period.

A patent grants its proprietor the right to exclude others from utilising the patented invention, as it also allows inventors to profit from their rights of inventions. This article examines the provisions of the law regarding patent granting in Nigeria, the rights conferred by a patent, contractual licences, and its limitations under the act.

Patents under the Act

In Nigeria, the primary legislation that governs the grant of patents is the Patents and Design Act (PDA) Cap P2 LFN 2004, while the patent rules regulate the procedures adopted at the patent Registry.

Patent is an exclusive right granted for an invention, this invention can be a product or a process that provides a new way of doing something or offers a new technical solution to a problem. It is a grant from the government, as it confers on an inventor, the right to exclude others from making, using, selling an invention for a fixed period.

According to section 1(1) of the PDA, an invention is considered patentable if it meets the following conditions:

1. It is new, results from inventive activity and is capable of industrial application. Or
2. If it constitutes an improvement upon a patented invention, and is new, results from inventive activity and is capable of industrial application.

Under the PDA, patents cannot validly be obtained in respect of the following:

1. Plant or animal varieties, or essentially biological processes for the production of plants or animals (other than microbiological processes for their products) or,
2. Inventions the publication or exploitation of which would be contrary to public order or morality merely because its exploitation is prohibited by law) (section 1(4)(a) & (b) of the PDA).

Furthermore, the Act states that any publication made available to the public by oral disclosure, a document or a prior use will destroy the requirement of novelty and ultimately make an invention non-patentable (section 1(3) of the PDA).

However, an invention is not deemed to have been made public merely because, within six months preceding the filing of a patent application in respect of the invention, the inventor or his successor in title has exhibited it in an official or officially recognised international exhibition.

Rights conferred by patent under the Act

The right to a patent in respect of an invention is vested in the statutory inventor ie, first to file, or validly claim foreign priority for a patent application in respect of the invention, whether he is the true inventor (section 2(1) of the PDA).

However, the true inventor is entitled to be named in the patent. Where two or more people are involved in the making of an invention, they may apply jointly for a patent right in respect of that invention. However, the person who has merely assisted in doing work connected with the development of an invention without contributing any inventive activity is not considered to be the inventor (section 2(5) of the PDA).

The rights conferred on a patentee are not automatic, they require the statutory formality of registration as provided in section 2 PDA to bring them into effect. A patentee is entitled to the sole ownership and profits arising from his invention during the patent’s lifetime. A granted patent will confer certain legal rights on the inventor.

A patent confers upon the patentee the right to preclude any other person from doing any of the following acts:

1. Where the patent has been granted in respect of a product, the act of making, importing, selling or using the product, or stocking it for the purpose of sale or use; and
2. Where the patent has been granted in respect of a process, the act of applying the process or doing, in respect of a product obtained directly by means of the process (section 6 (1) of the PDA).

"Patents are big capital investments for businesses, by acquiring rights to a patent, a licensee can gain a competitive advantage over rivals, and create new products, services and market opportunities for themselves."

Procedure for patent application

Section 3-5 of the PDA lays down the procedure to be complied with in order to secure patent protection in respect of an invention. The Registrar is charged with the duty of examining patent applications in order to determine the suitability or otherwise of a grant.

The patent applications are to be made to the Registrar and shall contain:

• The applicant(s) full name and address, and if the address is outside Nigeria, there should be an address for service within Nigeria.
• A description of the relevant invention with any appropriate plans and drawings.
• A claim or claims for any number of products or applications.
• The application is to be accompanied by the prescribed fees as may be determined by the registry from time to time.
• A declaration by the true inventor of the product supplying his name and address and requesting that he be mentioned as such in the patent where applicable.
• Where the application is submitted by an agent, a power of attorney.

Upon the satisfaction of the Registrar that the application conforms to the requirements of the Act, the patent will be granted and the patent Registrar shall issue, on behalf of the president of Nigeria, a certificate. In Nigeria, the grant of a patent is valid for a period of 20 years from the date of issuance (section 7 (1) of the PDA).

License of rights (contractual licences)

The patent grant gives an inventor monopoly rights for a limited period to make, use or apply the process or product of his inventive ingenuity. The rights of a patentee can be transferred by succession, assigned, or held in joint ownership with other people once such an arrangement is in writing, signed by the parties, and registered in the Register of Patents (section 24 of the PDA).

However, an assignment or transfer by succession shall have no effect against third parties unless the patent has been registered and the prescribed fee paid (section 24(3) of the PDA).

A patentee may by a written contract signed by the parties grant a licence to any person to exploit the relevant invention and in the absence of any contrary provision in the contract between the parties, the licensee shall be entitled to do anywhere in Nigeria in relation to the patent, all things covered by the rights of the patent holder (section 23 of the PDA).

The purpose of a contract effecting a patent licence, therefore, is to authorise the licensee to exploit an invention protected by a patent. Since a patent affords exclusive rights to use, to manufacture, to sell or put the invention in the market, a licence generally provides an authorisation for the licensee to carry out some or all of these acts.

Regarding the form of such a contract, in practice, the patent involved is identified by stating the name of the country in which it has been granted, together with its identification number, the technical subject matter of the innovation is briefly stated in the preamble or in the articles defining terms used in the contract and the main licence terms are stated.

It is important to note that, in the absence of any provisions to the contrary in a contract for a licence, the grant of the licence shall not prevent the licensor from granting further licences to other entities or himself exploiting the relevant patent.

Also, section 23(4)(b) and (c) of the PDA provides that a licence is not assignable by the licensee and the licensee is not to be entitled to grant a further licence. Therefore, depending on the potential licensee’s business model for exploiting the patent, it could be advisable for him to ensure that powers enabling him to do these things are expressly provided for in the contract.

Compulsory licenses

As an exception to contractual licences, a compulsory licence is one that can be granted to third parties for the use of a patented product or a product whose patent application is pending, without the approval or consent of the patentee or potential patentee.

Under the first schedule of the PDA (section 1 of part 1 of the PDA) a person may apply to the court for the grant of a compulsory licence, after the expiration of a period of four years after the filling of a patent application or three years after the grant of a patent, whichever period last expires, on one or more of the following grounds (first schedule part 1 section 1 of the PDA):

I. That the patented invention, being capable of being worked in Nigeria, has not been worked;

II. That the existing degree of working of the patented invention in Nigeria does not meet reasonable terms and demand for the product;

III. That the working of the patented invention in Nigeria is being hindered or prevented by the importation of the patented article; and

IV. That by reason of the refusal of the patentee to grant licences on reasonable terms, the establishment or development of industrial or commercial activities in Nigeria is unfairly and substantially prejudiced.

"A compulsory licence may also be granted if the invention serves industrial purposes different from those served by the invention which is the subject of the earlier patent or constitutes substantial technical programs in relation to the last invention (first schedule part 1 section 1 of the PDA)."

The Act does not define what would amount to reasonable terms or reasonable time in the context that a contractual licence should have been granted by the patentee to a third party.

This notwithstanding, it can be argued that the incidence of reasonability in all cases would have to be determined by the courts and each case has to be decided on its own merits.

Under part two of the first schedule of the PDA, provision is made for the use of a patented invention by government agencies through a compulsory licence.

Section 23 of the first schedule to the Act defines a government agency to mean a federal or state ministry or Department of Government and includes a voluntary agency hospital, local authority, statutory corporations, and any company which is owned or controlled by the government.

A compulsory licence may also be granted if the invention serves industrial purposes different from those served by the invention which is the subject of the earlier patent or constitutes substantial technical programs in relation to the last invention (first schedule part 1 section 1 of the PDA).

A compulsory licence would not be granted in respect of a patent if the patentee satisfies the court that his actions in relation to the patented invention are justifiable in the circumstances. However, he would not be held to have so satisfied the court if he merely shows that the patented article is freely available for importation (first schedule part 1 section 4).

The applicant for a compulsory licence must therefore satisfy the court that he has asked the patentee for a contractual licence but has been unable to obtain one on reasonable terms and within a reasonable time. He must also make a guarantee to the court that he would work the relevant invention sufficiently to remedy the deficiencies (or to satisfy the requirement) which gave rise to his application.

A compulsory licence has the same rights conferred on the patentee except that he cannot import or grant further licences over the patented invention. He is also not an exclusive licensee. It is important to note that a patentee may apply to the court to cancel a compulsory licence if the licensee fails to comply with the terms of the licence or if the conditions that necessitated the grant of the licence have ceased to exist.

Conclusion

Patents are big capital investments for businesses, by acquiring rights to a patent, a licensee can gain a competitive advantage over rivals, and create new products, services and market opportunities for themselves.

Patent licensing affords inventors the opportunity to profit from the rights of invention, introduce the inventions to a bigger market, and maintain rights to the inventions.

This is a co-published article, which was originally published in the World Intellectual Property Review (WIPR).