INTELLECTUAL PROPERTY RIGHTS FROM PUBLICLY FINANCED RESEARCH AND DEVELOPMENT BILL

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

…CONTENTS

1. Policy direction • OECD review of the SA NSI• 10 Year Innovation Plan

2. Innovation challenge: a chasm

3. Unlocking technology potential in SA • The establishment of TIA• The IPR-PFR Bill

4. Concluding remarks

…POLICY DIRECTION

Innovation as a national imperative informed by:– White Paper on S&T (1996)– R&D Strategy (2002) – OECD Review of SA’s NSI (2007)– DST 10-Year Innovation Plan (2008 – 2018)– Objectives of the NIPF and other government

initiatives

…IP AT CENTRE OF S&T POLICY

The S&T White paper:• Entrenched knowledge as an important component of

national development• Improved support for innovation

The R&D Strategy:• IP as an instrument of wealth creation in SA• Dedicated fund towards securing IP rights resulting from

publicly financed research and development (R&D)• Creation of a framework and enabling legislation for the

management of IP arising from publicly financed R&D

IP GENERATION

KEYKEY

START-UP EARLYEXPANSIO

NMATURITY MANUFACTURINGSEED

SA

LES

IMPORTS

RETURN ON INVESTMENT IN R&D NOT REALISEDTECHNOLOGICALDISCONTINUITY

(New Knowledge)

…THE SA INNOVATION CHASM

COMMERCIAL ACTIVITIES

SYSTEM-WIDE IP LEAKAGE

…RESEARCH OUTPUTS(an international comparison)

Data – courtesy of WIPO

PCT INTERNATIONAL APPLICATIONS ORIGINATING FROM SELECTED DEVELOPING COUNTRIES

0

500

1000

1500

2000

2500

3000

3500

4000

1998

1999

2000

2001

2002

2003

2004

1998 485 322 0 127 114 67

1999 790 240 281 61 144 126 51

2000 1514 579 386 156 225 161 71

2001 2324 1678 419 316 288 173 104

2002 2520 1017 384 525 330 201 132

2003 2951 1293 355 764 282 220 131

2004 3521 1782 416 784 415 280 137

R.Korea ChinaSouth Africa

India Singapore. Brazil Mexico

PCT Applications: SA vs S Korea

0

500

1000

1500

2000

2500

3000

3500

4000

Year

No

. A

pp

licati

on

s

SA

S Korea

INVESTMENT OF PUBLIC FUNDSIN R&D ACTIVITIES

RETURNS ON INVESTMENT

…THE CHALLENGE FOR PUBLICLY FINANCED R&D IN SA

KnowledgeProduction

Development

Production &Commercialisation

TIA

…PROGRESSION IN FUNDING INTERVENTION

The Fund

CompetencyCentres

VentureCapital

EnterpriseDevelopSupport

Tech. Nursery

…THE TIA PLATFORM

…IPR FRAMEWORK & LAGISLATION

• South Africa’s 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

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)

PROCESS MILESTONES … 1/2

…IPR BILL PROCESS

Public Comments

DESKTOP STUDY OF

BEST PRACTICE

S

APPOINTMENT OF AN

INTERNATIONALEXPERT REVIEW

TEAM

BENCHMARK EXERCISE

IPR STAKEHOLDE

R WORKSHOP

FEBRUARY 08 MARCH 08

INTERNATIONAL BENCHMARKING STUDY: USA & CANADA

REVIEW EXPERTS

CANADA – Marcel Mongeon INDIA – Prabudhaa GanguliSOUTH AFRICA – Adi PatersonUSA – Todd Sherer & Joe Allen

PUBLIC COMMENTS WERE NEGATIVE AND NECESSITATED A RE-THINK ON KEY ISSUE

JANUARY 08 DEC 07

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)

PROCESS MILESTONES … 2/2

…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

IP OWNERSHIP AND PROTECTION

Publicly financed R&D – recipient owns the IP Obligation on recipient’s 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

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 NIPMO’s 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

AGENCY FUNCTION (NIPMO) … 2/2

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

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

…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

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

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

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 R&D & OTT

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

…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

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

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 R&D• determined in accordance with generally

acceptable accounting practices• includes all applicable direct and indirect cost• regulations will be developed through

consultation process

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 agendaHas more carrots than sticks

…CONCLUDING REMARKS