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[May 11, 2007]

Nigeria: Licensing and intellectual property

(EIU Viewswire Via Thomson Dialog NewsEdge) COUNTRY BRIEFING

FROM THE ECONOMIST INTELLIGENCE UNIT

Foreign companies seeking to launch businesses in Nigeria often prefer to enter the market through licensing agreements with locally controlled companies rather than by establishing their own subsidiaries in the country. Thisis because of the difficulty of coping with frequent government policy shifts (usually implemented at very short notice) and the significant overhead costs to maintain a local subsidiary. Licensing is most prevalent among multinational pharmaceutical companies but is also becoming customary in the high-tech sector where numerous international brands are partnering with locally established firms to penetrate this new and rapidly growing market for information technology and communication products.


Multinational companies that have established local subsidiaries or affiliates also enter into licensing agreements to extend the local use of their trade names, trademarks and the manufacture of their products. These include Mercedes-Benz (Germany), Procter & Gamble (United States) and Unilever (Netherlands/UK). Notable local licensees include the following: Boulos Enterprises, which imports, assembles and distributes various products for Suzuki (Japan); Cadbury Nigeria, which manufactures beverages under licence from Cadbury Schweppes (UK); General Motors Nigeria, which also imports, assembles and distributes various products (for instance, Chevrolet and Lumina cars); Nigerian Bottling Company, which bottles Coca-Cola, Fanta, Sprite and Five Alive brands of soft drinks under licence from Coca-Cola (US); and SCOA Nigeria, which assembles light pick-up vehicles under a licence from Peugeot (France).

Patents, trademarks, copyrights and industrial designs are legally recognised. However, enforcement of intellectual-property rights in the courts is generally very slow. According to the Business Software Alliance and IDC, retail losses from software piracy totalled US$82m in 2005, an increase from US$54m in 2004. Nigeria was among the 20 countries with the highest piracy rates.

Most companies consider the damages awarded by the Nigerian courts to be far too small to be an effective deterrent. Sometimes, the most important victory is simply obtaining an official injunction, which is subsequently advertised in the local newspapers. Injunctions have been issued in the past to protect Araldite (Novartis, Switzerland); Betnovate products (GlaxoSmithKline, UK); Bic ballpoint pens (France); Butterfly sewing machines (China); and Exhars Maloxine brand malaria tablets (Belgium). Offenders who breach injunctions can be jailed for contempt of court. Even with an injunction, however, the complainant must pursue a lengthy judicial process to determine the substantive issues in the case.

The situation is, however, beginning to change. In 2005, the Nigerian Copyrights Commission (NCC) launched the Strategic Action Against Piracy (STRAP), a campaign designed to combat piracy and to establish a suitable environment for the management of the copyright system. The NCCs STRAP officials have embarked on a campaign to prosecute offenders for copyright infringements. A landmark case in this regard is the prosecution in March 2007 of the chief executive officer of Multichoice Nigeria Limited, Nigerias largest cable-television company, for broadcasting European league matches without the consent of the copyright owners, Entertainment Highways Limited.

The Copyright Optical-Discs Plants Regulations (2006) for the first time empowers the NCC to exercise administrative and enforcement measures over the production processes of optical-discs manufacturers and replicating plants engaged in the replication and or duplication of copyrighted works.

Property-right infringements are most common in the music, video and pharmaceutical industries, and they are fuelled by the availability of reproduction equipment, raw materials and a vast informal sector operating out of unlicensed premises and in some extremely remote parts of the country. The NCC estimates that 9 out of every 10 CDs, VCDs and DVDs sold in Nigeria are pirated.

Once conferred, a patent gives the patentee the right to prevent the making, importation, sale or use of the patented product; the stocking of the product for sale or use; and the application of the patented process. However, the scope of protection conferred by a patent is determined by the terms of the claims. This is interpreted by the descriptions (and plans and drawings, if any) that are included in the patent.

The courts review any opposition to a patent. If they declare a patent null and void, they may also order that royalties be returned. Although the courts tend to uphold patent rights, the judicial process is slow and awarded damages are not substantial; hence, relatively few companies bother to secure judicial protection.

Most brand-name manufacturers have registered their marks in Nigeria. Nevertheless, trademark theft is not uncommon, and trademark owners have recourse only to the slow processes of the congested courts.

Although the government has come under increasing pressure to act against patent and trademark piracy, the authorities have not yet responded with legislative revisions. Any eventual legislation would probably be based on the recommendations of government officials (specifically, the Nigerian Law Reform Commissions working draft of a proposed law) in co-ordination with the United Nations Industrial Development Organisation (UNIDO) and the Intellectual Property Law Association of Nigeria, a local pressure group of intellectual-property practitioners.

Enforcement of legal provisions on copyrights is similar to that on patents and trademarks, that is, an action in court. As with patents and trademarks, the most powerful weapon appears to be a court injunction restraining the other party. When the substantive suit is finally determined, however, the courts award of damages often barely covers the legal costs. This acts as a disincentive, preventing rights owners from seeking to enforce their rights.

Conventions. Paris Convention; Universal Copyright Convention; Bern Convention; World Intellectual Property Organisation (WIPO) Convention; WIPO Copyright Treaty; WIPO Performance and Phonographic Treaty; Rome Convention.

Basic laws. Patents and Designs Act (1970) Cap 344 LFN 1990; Trade Marks Act (1965) Cap 436 LFN 1990; Copyright Act (1988) Cap 68 LFN 1990 (amended by the Copyright Amendment Decree 96 of 1992); Copyright Optical Discs Plants Regulations (2006).

Patents

Duration. Twenty years from date of application. Patents cannot be renewed but must be maintained by paying annual maintenance fees.

Priority claims. Because Nigeria is a Paris Convention country, foreign priority can be claimed if the application for the same was made not more than 12 months before the filing date in Nigeria.

Novelty. An invention is considered new if it does not form part of the state-of-the-art and if it has not been made available to the public anywhere at any time prior to the date of application (or the foreign priority date, if not more than 12 months earlier). The invention may have been displayed at an official internationally recognised exhibition within six months prior to application date.

Fees. Around US$60 for official fees; US$300500 for attorney and other fees.

Unpatentable. Plant or animal varieties, biological processes, inventions contrary to public order or morality, and scientific principles and discoveries.

Compulsory licensing. Application may be made to the courts for a compulsory licence if, after four years from the patent application date or three years from the grant date (whichever is later), a patent is not worked in Nigeria, is insufficiently worked, work is prevented by importation or the patentee refuses to grant a licence on reasonable terms, thus prejudicing development of industrial and commercial activities in Nigeria. Compulsory licences may also be granted if necessary to work a patent capable of being worked but which has not been so worked.

Industrial designs and models

In accordance with the Patents and Designs Act (1970) Cap 344 LFN 1990, industrial designs may be registered and protected for five years, and protection is renewable for two additional five-year terms.

Fees. Around US$35 for official fees; US$300500 for attorney and other fees.

Trademarks

Types. Only goods may be registered. Services may not be registered, though the proposed Industrial Property Law would allow such registration (when promulgated). The international classification of goods now applies. Goods registered under the old classification are to be reclassified as soon as possible on payment of the necessary fees.

Duration. Seven years from application, renewable for additional periods of 14 years thereafter.

Legal effect. Registration confers legal rights.

Fees. US$55 for official fees; US$300500 for attorney and other fees.

Not registrable. Marks that are similar or identical to a prior registered mark or a pending application; deceptive or scandalous matter; names of single chemical compounds.

Copyrights

Types and duration. The Copyright Act of 1988 covers six broad groups: (1) literary works, which encompass computer software; (2) musical works; (3) artistic works; (4) cinematographic films; (5) sound recordings; and (6) broadcasts. Performers rights and folklore are protected as neighbouring rights.

For the first three types, protection is for a period expiring 70 years after the end of the year in which the author dies (or for a corporate author, 70 years after the end of the year in which the work was first published). However, protection for photographs (classified under artistic works) expires 50 years after the end of the year in which the work was first published. Protection for types 46 expires 50 years after the end of the year in which the work was first published, recorded or broadcast. Copyrights cannot be renewed.

Legal effect. Copyright generally confers the exclusive right to control use of the work in Nigeria. Reciprocal extension of copyright protection is possible where Nigeria is a party to a relevant international agreement. The copyright owner has the right to claim authorship of the work, except when it is included incidentally or accidentally when reporting current events by means of broadcasting. The owner can also object and seek relief in connection with any distortion, mutilation or modification of the work, and any other derogatory action in relation to the work, where such action would be prejudicial to the authors honour or reputation. Publishers, printers, producers or manufacturers of works in which copyright subsists must keep a register of all works produced by them, showing the name of author, title, year of production and the quantity produced.

Any qualified person may apply to the Nigerian Copyright Commission (NCC) for a licence to produce and publish a translation of a literary or dramatic work that has been published in printed or analogous forms of reproduction for teaching, scholarship or research. The NCC also maintains a databank on authors and their works. Notification to the NCC by the rights owner is necessary to obtain protection for the work. There are no fees for this service.

Applications for patents, trademarks and industrial designs are submitted to the Patents and Trademarks Registry.

Patents. Patent applications in Nigeria must include the applicants full name and address and, if that address is outside the country, a Nigerian service address; a description that is sufficiently clear to enable a skilled person to put the invention into effect, with any relevant plans and drawings; a claim or claims; signed power of attorney (if the application is made by an agent); information on prior foreign application (if any); and, where desired, a declaration by the true inventor requesting to be mentioned as such in the patent and stating the holders full name and address. The official fees (around US$60) must be paid on submission of the application. The governing law does not provide for examination for novelty or patentability of an invention. Patent examinations are conducted for formal correctness only; patents are granted at the patentees risk as to existence of a prior patent. After the patent is granted, the registrar publishes notification of the grant, including a description of the patent. This process generally takes 24 months and is finalised with the certificate of registration (Letters Patent). Besides the official fees, other costs are generally US$300500. The registration procedure is usually straightforward since there is no substantive examination process.

Grant of a patent is not conditioned on its publication in the Federal Government Gazette; publication merely serves as notification to the public of the details of the patent as granted. In the past, the registrar published notifications of grant of patent in the gazette, usually 16 years after the grant. Because of administrative lapses, however, the Patents and Trademarks Registry has not published details of any grant in the gazette in more than ten years. Nevertheless, the absence of publication does not affect the validity of such patents.

A provision for priority registration allows for filing an application to register a patent (within six months for a design and 12 months for an invention) after the same patent has been filed overseas. This confers on the registrant the same rights that would have applied if the patent were filed in Nigeria on the same day it was filed overseas. For example, a design patent filed in London on January 1st 2006 and then filed in Nigeria no later than July 1st 2006 enjoys protection in Nigeria with effect from January 1st 2006 if eventually registered.

Priority is defined by the Paris Convention, to which Nigeria is a signatory. The provisions of the convention are incorporated into Nigerian law under the Patents and Designs (Convention Countries) Order of 1971. This order declares the 75 countries and jurisdictions listed as convention countries.

Trademarks. A trademark application, which must be accompanied by a signed power of attorney, states the name, description, address and nature of the business of the proprietor of the mark and gives an address for the service of all correspondence on the applicant (usually the agents address). The application is examined for registrability and to confirm that the trademark does not conflict with any other registered trademark or pending application. If the results of the search are positive, the registrar will issue an acceptance notification to the application (usually within three weeks of filing the application), and the mark will be forwarded for publication in the trademarks journal. Upon being advertised, any party wishing to record an opposition to the registration of the mark has two months to do so. If no objection is raised, the Patents and Trademarks Registry will issue a Certificate of Registration. The official fee to register a trademark is US$55; other costs, including attorney fees, are US$300500. Registration lasts for an initial term of seven years and is renewable for consecutive 14-year terms.

Ordinarily, the trademark-registration process should take no more than 1218 months. However, because of the largely irregular publication of the trademarks journal and frequent disruption to staffing at the Registry, the procedure has been known to last much longer even when no opposition has been lodged against the application. The certificate of registration provides conclusive evidence of the registration of the trademark.

Industrial designs and models. Registration for these applications are filed with the Patents and Trademarks Registry, and designs are published in an official gazette. The process usually takes about three months. Official fees are around US$35; other costs run US$300500.

Copyrights. The Copyrights Act of 1988 (Cap 68 LFN) created the Nigerian Copyright Council on August 17th 1989. The council became known as the Nigerian Copyright Commission in 1996. There is no formal registration procedure for copyrights in Nigeria, since a copyright attaches automatically to a work on its creation. For evidentiary purposes, however, it is prudent for a rights owner to notify the Nigerian Copyrights Commission of ownership of the work, which is then noted by the commission in its records. There are no charges for this service. Obtaining absolute protection for copyright can be difficult. The high costs incurred in trying to curb the activities of pirates, even when ownership rights are clear, usually deter rights owners from pursuing remedies.

Johnnic Communications, a South African media and entertainment group, opened the Nu Metro Media Store in Lagos in June 2005 to sell books, music, CDs and DVDs. Nu Metro is entering into partnerships with Nigerian producers to create a structured distribution network that aims to curb piracy. According to Israel Edjeren, marketing manager of Nu Metro, We are here in Nigeria primarily to legitimise the distribution of the Hollywood movies and strengthen the hands of our brothers here [the local producers] by joining our forces together to create an enduring modern and effective movie-distribution structure. The companys first product release in Nigeria is the Celebration Collection, a series of 12 of the most popular Nigerian home movies. Anthony Ward, director at Johnnic Communications, noted that Nu Metros entry into Nigerias home-entertainment market, estimated to be worth more than N5bn, would elevate the industry and make it more viable for practitioners and stakeholders.

The fast-food industry in Nigeria is rapidly expanding, especially in the commercial and wealthy capitals of Lagos, Abuja and Port Harcourt. Debonair Pizza, Steers Steak House and Nandos, of South Africa, launched franchises in 2004.

Nigerian Breweries began local production of the Heineken brand of beer in 2004, under licence from its majority shareholder, Heineken Breweries of the Netherlands. Prior to this, Heineken had been entering the Nigerian market strictly as an import. To meet local preferences, Nigerian Breweries unveiled a new big (60 cl) bottle of the beer.

New licensers typically identify the potential of local partners by assessing their handling of products with similar marketing characteristics. The existence of long-established trading companies and business conglomerates has substantially simplified this task for new licensers. Many simply approach all the major trading houses, then list those interested in the product that do not already distribute, manufacture or market competing brands. Other relevant factors may be the prospective licensees existing branch network, available transport for distributing products around the country, and financial and human resources. Good sources for information are bilateral chambers of commerce and Nigerian consulate offices in home countries.

Local conglomerates are chosen most frequently as licensees for international brands. The following are some examples: AG Leventis Nigeria (Mercedes-Benz, Hoover); CFAO Nigeria (Otis Elevators, Mitsubishi and Renault); Mandilas (Electrolux, Carrier and Volkswagen); Paterson Zochonis Industries (Thermocool, Cussons Imperial Leather); SCOA Nigeria (Peugeot); John Holt (Yamaha); UAC of Nigeria (General Motors); and UTC Nigeria (Kenwood household products).

The Patents and Trademarks Registry, the Designs Registry and the National Office for Technology Acquisition and Promotion are other avenues for interested parties to gather relevant information, particularly on terms of similar agreements.

Licensers may not restrict their licensees freedom of action, except as necessary to safeguard patent rights. For example, limitations are permitted on the scope, extent, territory or duration of the agreement, but they may not go beyond what is necessary to protect patent rights. Tie-in clauses presumably would be allowed if patents could not operate without them.

Although the Trade Marks Act does not use the term licensing, it makes provision for registering a person other than the registered proprietor of a trademark as a registered user. This provision has been interpreted to permit the licensing of a trademark and to allow the registration of such licensee as a user of the mark.

Under the Patents and Designs Act of 1970 (Cap 344 LFN 1990), licensing agreements must be registered with the Registrar of Patents to be effective against third parties. But only the licenser can institute civil proceedings; licensees may sue in their own name only after the licenser has unreasonably or negligently ignored a request tosue. Nevertheless, the licensees right does not prejudice the licensers right to intervene at any time in the court proceedings.

The National Office of Industrial Property (NOIP) Act of 1979 set out requirements for companies to register any contract involving the right to use trademarks or patented inventions or covering the supply of any form of technical assistance. This includes technical expertise in the form of plans, diagrams, operating manuals or detailed engineering drawings; plant and machinery; and operating staff, managerial assistance or personnel training.

The National Office for Technology Acquisition and Promotion (NOTAP), successor to NOIP, approves management contracts and technical-service agreements covering training, research and the transfer of technical know-how for all industries, including manufacturing, engineering and agriculture. According to central-bank guidelines, a maximum of 5% of project cost is now allowed for consulting fees, but this is limited to projects with very high technology content for which indigenous expertise is not available. NOTAP reports to have licensed 3,000 patent-rights agreements to date between Nigerian enterprises and foreign companies across all sectors.

NOTAP was given the mandate in 1998 to commercialise locally developed research-and-development findings, inventions and innovations from research institutes, universities, polytechnics, private laboratories and workshops. The office has undertaken some initiatives to help small and medium-sized enterprises (SMEs) in Nigeria to make effective use of intellectual property through NOTAPs Patent Information and Documentation Centre.

Management service agreements also can be registered with NOTAP, which issues a certificate of registration. Approval is granted to transfer fees only for technology-based projects for which indigenous expertise is not available. Service agreements for such joint ventures should include a programme for training Nigerians for eventual takeover. A company seeking to register its technology-transfer agreements must go through NOTAP, which is empowered to deny registration for agreements it finds unacceptable.

Royalty and fee payments require prior permission from NOTAP. Permissible limits for licence or technical-service charges/royalties are 15% of net sales value. Approval for management service agreements is limited to 15% of the Nigerian companys net profit before tax. If the Nigerian company is not expected to generate a profit for some years (which is known as the gestation period and usually applies to agriculture), this is limited to 12% of net sales for the first 35 years.

NOTAP charges a presentation fee of N10,000 and a registration fee of N35,000 for contracts valued at N1m10m; N50,000 for contracts valued at N10m20m; N100,000 for contracts valued at N20m50m; N200,000 for contracts valued at N50m100m; N300,000 for contracts valued at N100m250m; N400,000 for contracts valued at N250m500m; N500,000 for contracts valued at N500m1bn; and N750,000 for contracts valued at N1bn and above. There is a penalty fee of N20,000 for every agreement that is not registered within 30 days after its effective commencement date.

The banks will not facilitate remittances of foreign-currency payment for royalty or fees due to a licenser without proof of NOTAP registration.

Copyright 2007 Economist Intelligence Unit

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