Signing all your legal documents with electronic signatures? Be warned – these are not always effective in concluding valid intellectual property (IP) transactions.
The Covid-19 lockdown saw a sharp rise in the use of electronic signatures as a means of signing documents. Now that the lockdown is over, using electronic signatures is still prevalent, given how efficient, cost-effective and environmentally friendly they are when compared to their ‘wet ink’ counterparts. However, an electronic signature must satisfy specific legislative requirements in certain circumstances for the signed document to be validly executed.
How confident are you that your IP transfer and licensing agreements are legally valid and enforceable? To assist you in assessing this, we set out below the requirements for the use of electronic signatures in relation to transfers and exclusive licences of copyright.
Copyright is a category of IP rights granting creators of original works (such as software, books, musical and artistic works) the exclusive ability to reproduce, alter and exploit those works, and to allow third parties to do so.
Requirements for a valid transfer or exclusive licence of copyright
In South Africa, electronic signatures are governed by the Electronic Communications and Transactions Act 25 of 2002 (ECTA), which generally provides that data linked to or associated with other data may serve as a form of signature and will not be invalid simply because it is in electronic form. ECTA recognises different kinds of electronic signatures with an ordinary electronic signature being sufficient to validly execute contracts in most circumstances.
However, where a signature of a person is required by law and such law does not specify the type of signature, section 13(1) of ECTA provides that the requirement in relation to an electronic signature is met only if an advanced electronic signature is used.
Section 22(3) of the Copyright Act 98 of 1978 (Copyright Act), for example, requires an assignment of copyright (i.e. a transfer of ownership rights in copyright) and the grant of an exclusive copyright licence to be recorded in writing and signed by the relevant assignor, licensor, or sub-licensor (as the case may be) in order to be valid.
The Copyright Act does not specify what type of signature is required. For an assignment of copyright or the grant of an exclusive copyright licence to be valid, it must therefore be signed by the assigning or licensing party by way of a wet-ink signature or an advanced electronic signature. Where these requirements are not met, the assignment or exclusive licence will be invalid and unenforceable.
What is an advanced electronic signature?
An advanced electronic signature (AES) is a type of digital signature that results from a process that has been accredited by the .za Domain Name Authority as provided for in section 37 of the ECTA. Currently, only the services offered by the South African Post Office Ltd and Law Trusted Third Party Services (Pty) Ltd (LAWTrust) have been accredited to generate advanced electronic signatures.
Electronic signatures generated, recorded or affixed by other service providers are not accredited and accordingly would not be sufficient to meet the signature requirement under the Copyright Act.
Unfortunately, if you used the services of any other e-signature service provider for the purpose of effecting copyright transfers and exclusive copyright licences, you are in for a nasty surprise.
How have our courts dealt with AESs?
The use of AESs to effect the assignment or exclusive licensing of copyright has not been tested by our courts. However, some interesting case law has emerged in relation to section 13 of the ECTA.
For example, our courts have noted – albeit in the context of land alienation to which ECTA does not apply – that, given the requirements of section 13(1) of the ECTA, an ordinary electronic signature (e.g. an email signature) may be sufficient where a signature is required by agreement between the parties, but may not be sufficient if the signature was required by statute (see Aarifah Security Services CC v Jakoita Properties (Pty) Ltd and others 2020 4 All SA 730 (GJ)).
While this view is not legally binding, particularly within the context of the Copyright Act, it provides an indication of the direction that jurisprudence could go on this topic. Our view is that the courts are likely to follow a similar approach when deciding disputes regarding the use of ordinary signatures in the context of assignments or exclusive licensing of copyright, given that the legislation is unambiguous. Therefore, it is best to err on the side of caution and ensure that an AES or wet ink signature is used when concluding these types of IP transactions.
If copyright or other IP forms a material part of a business but has been developed by a third party, the lack of a valid assignment or exclusive licence in favour of the business may materially impact its ability to fully benefit from such IP. Without owning or holding sufficient rights to use and exploit this IP, the business will not be in a position to freely commercialise its products or services without the risk of third-party IP infringement or royalty claims. The business may also experience challenges in raising capital or securing investments.
There are various other aspects to be considered when ensuring that legal effect may be given to thoughtfully crafted assignments and licences relating to copyright and other forms of IP.
NOTE: This information was correct as at August 2023.
By Kate Beretta, Partner, Michael Wilter, Consultant, and Kayla Odendal, Associate
11 Alice Lane, Sandton, Johannesburg
P O Box 785812, Sandton, 2146, South Africa