On 15 May 2012 the Board of Healthcare Funders of Southern Africa (BHF) succeeded in the North Gauteng High Court in a copyright infringement case against Discovery Health Medical Scheme and Discovery Health Administrators (Discovery) in a dispute which had the potential to create significant problems in the payment of claims by medical schemes to health service providers and health facilities.

The Practice Code Numbering System (PCNS), which formed the subject of this case, is a compilation of numbers which relate to and uniquely identify all medical practitioners and service providers in private practice in South Africa. Each number (PCN) comprises 13 digits. The PCNS comprises all the PCNs and the personal data of medical practitioners and service providers, including names, addresses, contact details, bank details and issues such as preferred method of payment. The PCNS is used by all medical aid schemes to deal with claims processing.

The BHF is a non-profit organisation constituted as a representative association for the majority of medical aid schemes in South Africa. It manages and is responsible for the creation, administration and use of the PCNS in terms of the Regulations to the Medical Schemes Act 31 of 1998. In terms of an agreement between the BHF and the Council for Medical Schemes, all users of the PCNS are required to contribute towards the running and maintenance of the system.

Discovery, despite its resignation as a member of the BHF in 2010, continued to use the PCNS (numbers and data) in the course of its business and, in doing so, daily reproduced substantial portions of the PCNS without authority. As a result, the BHF claimed that Discovery infringed its copyright in the PCNS.

Discovery’s defences included that:
1. no copyright existed in the PCNS as a work entitled to protection under the Copyright Act because it lacked the necessary originality;
2. if copyright did exist in the PCNS, the BHF had not proved that it was the author or owner of the work;
3. if copyright did exist in the PCNS, the State was the owner of that copyright;
4. if copyright did exist in the PCNS, Discovery remained entitled to use the PCNS on the grounds of an implied perpetual licence, alternatively, a continued licence because Discovery had paid fees to use the PCNS when it was a member of the BHF; and
5. in the event that it be found that the BHF was the owner of the copyright in the PCNS, Discovery had not infringed the copyright.

The North Gauteng High Court held in favour of BHF, rejecting these defences and finding that the PCNS was an original work in which copyright subsisted and that Discovery had infringed the copyright.

The High Court’s reasoning is briefly summarised below.

Subsistence of copyright in the PCNS

A literary work, entitled to protection under the Copyright Act, includes an original compilation and the PCNS was such a compilation consisting of the combination of a series of digits to form the PCN, coupled with the personal data of medical practitioners and service providers. The Court referred to Payen Components SA Ltd v Bovic CC and Others 1995 4 SA 441(A) in which the Appellate Division of the Supreme Court upheld a claim for copyright infringement in relation to a parts numbering system.

Discovery also disputed the originality of the work, claiming that the PCNS consisted solely of a compilation of numbers and data already in the public domain so that the PCNS could not be said to be original and therefore entitled to protection under the Copyright Act. The Court, however, held that as a result of the work and effort put into the development of the system over many years, the system was, in its totality, original.

BHF as author and owner

Having taken assignment of the copyright in the original PCNS from its predecessors-in-title and having itself directly supervised and controlled the expansion of the system thereafter since 2000, BHF was indeed the author of the PCNS and the owner of the copyright subsisting in it.

State the owner of the copyright

Discovery contended that the PCNS had been developed under the direction of the State and that its content was determined by the Regulations to the Medical Schemes Act. This resulted in the copyright vesting in the State in terms of Section 5(2) of the Copyright Act.

The Court disagreed, finding that, while the BHF had to develop the PCNS in compliance with the Regulations to the Medical Schemes Act, it had done so ultimately under its own control. In line with the Supreme Court of Appeal’s decision in Biotech Laboratories v Beecham Group Plc & Another 2002 4 SA 429 (SCA), the Court held that the development of the PCNS was not the principal object of State control and direction. For this reason, Discovery had not proven on a balance of probabilities that the copyright vested in the State.

Implied perpetual or continued licence

Having established that each member of the BHF paid a user fee for access to and use of the PCNS data and to enable the functioning of the system, the contention that Discovery had an implied perpetual licence went against the architecture of the membership agreement and Discovery’s own prior conduct.

The Court also disagreed that the payment of Discovery’s membership fees before it resigned as a member of the BHF entitled it to make ongoing use of the PCNS for an indefinite period after it ceased to be a member. It held that the concept of a continuing licence was misplaced and unsupported by the facts of the case.

Infringement

The Court held that Discovery had used a substantial portion of the data which it had received from the BHF and had extracted much of this information and imported this into its own system. The extent of this was unclear from Discovery’s answering papers but Discovery’s failure to answer a specific written request from BHF’s attorneys in this regard led to the conclusion that a significant portion of the PCNS had been reproduced. Discovery was therefore held to have infringed the copyright.

Relief

An interdict was granted against Discovery restraining it from infringing the BHF’s copyright in the PCNS. The Court also made an award for the payment of a reasonable royalty to the BHF in specified amounts and, in doing so, found that it was not necessary to direct that an enquiry be held to determine the amounts payable.

Adams & Adams represented the BHF in this case.

Written by Chris Job and Kim Maharaj, Adams & Adams Attorneys