Precismeca Limited v Melco Mining Supplies (Pty) Limited

In 1975, Precismeca granted Melco an exclusive right to manufacture certain items known as 'rollers and idlers' under a licensing agreement, in return for payment of royalties. The agreement required Melco to account on a half-yearly basis for payments due. The agreement's preamble indicated that Precismeca had applied for registration of the trademark 'Precismeca' and wished to grant Melco an exclusive right to manufacture the product 'in accordance with the Patents applied for'. Precismeca undertook to apply diligently for registration of patents and the trade mark, and to license Melco under the patents once granted. Clause 3.5 provided that until the licences were granted, the licensing agreement itself would operate as a licence in respect of the patents applied for. No licences in respect of patents were ever granted and the trade mark user agreement was not concluded. The patents referred to in the agreement had expired at the time of action - two before the conclusion of the agreement and one thereafter. The parties performed under the agreement for over 20 years. Precismeca (having taken cession of all rights under the agreement) sued Melco for disclosure of the number of items manufactured and for payment of royalties. Melco filed a special plea of absence of jurisdiction, which was upheld by the High Court (Mlambo J).

• Whether the jurisdiction of the High Court to determine the right to a statement and debatement of account, and payment of licence fees under the contract, is ousted by section 18 of the Patents Act 57 of 1978
• Whether the agreement was a patent licensing agreement falling within the exclusive jurisdiction of the Commissioner of Patents, or a common law licensing agreement within the jurisdiction of the High Court
• Whether the claims for payment of royalties and accounting were dependent on the validity of patents and therefore fell within the Commissioner's exclusive jurisdiction

The appeal succeeded with costs, including those of two counsel. The order of the High Court upholding the respondent's special plea was set aside.

The jurisdiction of the High Court is excluded by section 18(1) of the Patents Act 57 of 1978 only where the proceedings relate to 'any matters' under the Patents Act. An agreement is not a patent licensing agreement falling within the exclusive jurisdiction of the Commissioner of Patents where: (1) the reference to patents is merely descriptive of the product rather than constitutive of the parties' rights; (2) the agreement can operate and has operated independently of the existence or validity of any patents; and (3) the agreement is properly construed as a common law technology licensing agreement. Where rights under an agreement for accounting and payment of royalties arise at common law, the High Court has jurisdiction to enforce them, even if patents may be incidentally mentioned or referenced in the agreement. The proper construction of the agreement determines whether it is a patent licensing agreement or a common law licensing agreement.

The court noted that various other features of the agreement were argued to be indicia that a patent licensing agreement was not intended, including obligations that were not patent-related but exigible in return for payment of licence fees. However, the court stated it was not necessary to consider the correctness of the apparently different approaches in earlier cases (Buckingham v Doyle, Helios Ltd v Letraset Graphic Art Products, and Maxicorp Holdings v Pearman) in light of the view taken that the agreement was clearly a common law licensing agreement. The court also noted that there was apparently a dispute as to whether patent applications were ever in fact made, but stated that this question was not before the court.

This case is significant for clarifying the distinction between patent licensing agreements falling within the exclusive jurisdiction of the Commissioner of Patents under section 18 of the Patents Act 57 of 1978, and common law licensing agreements that fall within the ordinary jurisdiction of the High Court. It establishes that where the substance of an agreement is a technology licensing agreement for the manufacture of products, and the reference to patents is merely descriptive rather than constitutive of the parties' rights and obligations, the agreement is enforceable as a common law contract. The case affirms that the High Court retains jurisdiction to grant common law remedies (such as accounting and payment of royalties) even where patents may be incidentally in issue, provided the relief sought is not dependent on rights arising solely under the Patents Act. The judgment provides important guidance on contractual interpretation in the context of technology and intellectual property licensing agreements.