INTELLECTUAL PROPERTY RIGHTS FROM PUBLICLY FINANCED RESEARCH AND DEVELOPMENT BILL

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INTELLECTUAL PROPERTY RIGHTS FROM PUBLICLY
FINANCED RESEARCH AND DEVELOPMENT BILL
Briefing to the Portfolio Committee on Science
Technology on the occasion of the Public
Hearings on the IPR-PFRD Bill 29 30 July 2008

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CONTENTS

• Policy direction
• OECD review of the SA NSI
• 10 Year Innovation Plan
• Innovation challenge a chasm
• Unlocking technology potential in SA
• The establishment of TIA
• The IPR-PFR Bill
• Concluding remarks

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POLICY DIRECTION

• Innovation as a national imperative informed by
• White Paper on ST (1996)
• RD Strategy (2002)
• OECD Review of SAs NSI (2007)
• DST 10-Year Innovation Plan (2008 2018)
• Objectives of the NIPF and other government
  initiatives

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IP AT CENTRE OF ST POLICY

• The ST White paper
• Entrenched knowledge as an important component of
  national development
• Improved support for innovation
• The RD Strategy
• IP as an instrument of wealth creation in SA
• Dedicated fund towards securing IP rights
  resulting from publicly financed research and
  development (RD)
• Creation of a framework and enabling legislation
  for the management of IP arising from publicly
  financed RD

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THE SA INNOVATION CHASM
COMMERCIAL ACTIVITIES
IMPORTS
SALES
SYSTEM-WIDE IP LEAKAGE

KEY
TECHNOLOGICAL DISCONTINUITY (New Knowledge)
RETURN ON INVESTMENT IN RD NOT REALISED
SEED
IP GENERATION
START-UP
EARLY
EXPANSION
MATURITY
MANUFACTURING
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RESEARCH OUTPUTS(an international comparison)
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Data courtesy of WIPO
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THE CHALLENGE FOR PUBLICLY FINANCED RD IN SA
INVESTMENT OF PUBLIC FUNDS IN RD ACTIVITIES
RETURNS ON INVESTMENT
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PROGRESSION IN FUNDING INTERVENTION
TIA
Production Commercialisation
Knowledge Production
Development
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THE TIA PLATFORM
Competency Centres
Tech. Nursery
Enterprise Develop Support
The Fund
Venture Capital
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IPR FRAMEWORK LAGISLATION

• South Africas patent system is dominantly used
  to secure intellectual property for inward
  patenting
• Analysis of the patent patterns for South African
  institutions shows very low levels of patenting
  by institutions that are publicly financed
• The clear implication is that South Africa is
  falling behind in this important aspect of the
  knowledge economy and that a better framework and
  legislation is required

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PROCESS MILESTONES 1/2

• Process milestones
• Cabinet approval of Principles in the Draft IP
  Policy Framework, December 2005
• Public consultation phase and revision of IP
  Policy Framework, Feb 2006 May 2006
• Draft IPR Bill based on revised IP Policy
  Framework
• Consultation with relevant government departments
• Revised IPR Policy Framework approved by Cabinet
  (May 2007)
• Draft Bill approved by Cabinet for public comment
  (May 2007)
• Revision of draft Bill in light of public comment
  (December 2007)

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IPR BILL PROCESS
Public Comments
APPOINTMENT OF AN INTERNATIONAL EXPERT REVIEW
TEAM
IPR STAKEHOLDER WORKSHOP
BENCHMARK EXERCISE
FEBRUARY 08
MARCH 08
JANUARY 08
DEC 07
PUBLIC COMMENTS WERE NEGATIVE AND NECESSITATED A
RE-THINK ON KEY ISSUE
REVIEW EXPERTS CANADA Marcel Mongeon INDIA
Prabudhaa Ganguli SOUTH AFRICA Adi Paterson USA
Todd Sherer Joe Allen
INTERNATIONAL BENCHMARKING STUDY USA CANADA
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PROCESS MILESTONES 2/2

• Appointment of Expert Review Panel Reports
  (11th Feb 2008)
• International Benchmarking Exercise (3 8
  February 2008)
• Further Revisions to IPR Bill (in light of Expert
  review Panel input and Benchmarking Exercise)
  (22nd February 2008)
• Further consultation with relevant government
  departments
• Stakeholder workshop (7th March 2008)
• Final revisions to the IPR Bill (14th March 2008)
• Parliamentary Process (July 2008)

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MAIN THEMES OF BILL

1. IP OWNERSHIP AND PROTECTION
2. AGENCY FUNCTION
3. INSTITUTIONAL ARRANGEMENTS
4. IP TRANSACTIONS
5. BENEFIT SHARING ARRANGEMENTS
6. RIGHTS OF STATE
7. CO-FINANCED RESEARCH

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IP OWNERSHIP AND PROTECTION

• Publicly financed RD recipient owns the IP
• Obligation on recipients employees to disclose
  IP
• If recipient elects not to take title, then
  NIPMO may, after considering reasons provided by
  recipient, elect to take title and obtain
  statutory protection in national interest
• If both decide not to protect, then private
  sector funder and then IP creator(s) could take
  assignment

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AGENCY FUNCTION (NIPMO) 1/1

• National IP Management Office (NIPMO)
• a DST function initially to be managed within the
  Department
• Minister may assign operational management to
  public entity whose objects are consistent with
  NIPMOs functions (e.g. TIA, CSIR etc)
• Facilitating, co-ordinating and capacity
  development and assistance to institutions in
  establishing capacity
• Guidelines in respect of disposal of IP
  transactions
• Provide measure of standardisation uniformity
  in the approach to dealing with IP and
  flexibility for solutions in certain circumstances

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AGENCY FUNCTION (NIPMO) 2/2

• Administrative functions under the Bill
• Database of publicly funded IP
• Operations of IP Fund

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INSTITUTIONAL ARRANGEMENTS - OTTs

• Designated function of Office of Technology
  Transfer (OTT) at Institutions
• In consultation with DoE based on research
  intensity
• Where institutional OTTs not viable, Regional
  OTTs may be established
• OTT staff - mix of skills and interdisciplinary
  knowledge, qualifications and expertise in IP
  protection, commercialisation, and
  entrepreneurship
• Various aspects relating to identification,
  protection and commercialisation of IP
• Disclosure of institutional IP to NIPMO

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IP TRANSACTIONS

• Recipient
• Power to negotiate / conclude transactions
• Preferences South Africa, BBBEE, SMEs
• Provisions for IP to revert to institution in
  case of liquidation where equity transaction
• Regulations Guidelines to be provided by NIPMO
  in respect of off-shore transactions and
  assignment of IP
• Advise NIPMO on off-shore transactions
• Approval required in case of deviations from
  regulations and guidelines

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IP TRANSACTIONS 1/2

• Recipient has power to negotiate / conclude
  transactions
• Preferences South Africa, BBBEE, SMEs
• Provisions for IP to revert to institution in
  case of liquidation where equity transaction
• Off-Shore IP Transactions
• Regulations
• Guidelines to be provided by NIPMO in respect of
  off-shore transactions and assignment of IP

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IP TRANSACTIONS 2/2

• Assignment of IP possible as an exception rather
  than a rule
• Regulations to provide circumstances and
  conditions where IP can be assigned
• In general anticipate
• licensing transactions
• Spin-out formations
• Off-shore IP Transactions
• Advise NIPMO on off-shore transactions
• Approval required in case of deviations from
  regulations and guidelines

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BENEFIT SHARING 1/2

• Benefit sharing for IP creators at institutions
• Benefit sharing at 20 of gross revenues
• Benefit sharing to continue for as long as there
  are revenues from IP
• estate entitled to benefit in case of death
• For as long as IP creators are South African
  citizens or ordinarily resident in the Republic
• First Call on revenues to Institution
• Balance to be used at discretion of institution
  including funding of additional RD OTT

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BENEFIT SHARING 2/2

• Limitation to SA citizens and residents would not
  be in spirit of international collaborations and
  hence propose that remove this limitation
• Benefit sharing at 20 of gross revenues
• Need to protect rights of IP creators and also
  need to ensure that Institutions recover costs
  associated with commercialisation
• Proposed amendment
• Initial payment based on gross revenues, and
  propose either set lump sum or 30 of first
  R500,000 of gross revenues
• Thereafter, 33 of nett revenues, with
  prescribed costs to be deducted to be defined in
  regulations

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RIGHTS OF STATE

• Each IP Transaction to include a clause giving
  the State
• Non-exclusive, royalty-free, non-transferable,
  licence for use by State for health, security,
  strategic and emergency needs of Republic
• Walk-in rights - in following circumstances
• Non-use specific process with NIPMO
• Consultation process between NIPMO and recipient
• May require grant of licence to third parties
• Failure to disclose
• Result would be a requirement to assign IP to
  State

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CO-FINANCED RESEARCH 1/2

• Private Sector partner may obtain an Exclusive
  License where has
• Capacity to manage and commercialise the IP in a
  manner that benefits the Republic
• Performance clauses in the licence agreement
• Co-ownership possible where there has been
• joint IP creatorship and
• contribution of resources (e.g. include
  background IP) and
• appropriate benefit sharing arrangements for IP
  creators and
• agreement for commercialisation of IP

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CO-FINANCED RESEARCH 2/2

• Non-publicly financed research and development
• not regulated by legislation except in so far as
  it is necessary to define
• Full cost
• full economic cost of undertaking RD
• determined in accordance with generally
  acceptable accounting practices
• includes all applicable direct and indirect cost
• regulations will be developed through
  consultation process

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CONCLUDING REMARKS

• Present draft Bill has the achieved the following
  
• A less prescriptive legislative framework
• Provides certainty in respect of rights and
  obligations
• Provides a measure of uniformity whilst allowing
  institutions to exercise their independence
• Provides mechanism of support and capacity
  development in respect of IP management
• Considers the South African environment
  development agenda
• Has more carrots than sticks