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New public-funded research rules to have far-reaching implications

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New public-funded research rules to have far-reaching implications

3rd September 2010

By: Terence Creamer
Creamer Media Editor

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The introduction of the Intellectual Property Rights from Publicly Financed Research and Development Act will have implications for South African companies that contribute to research projects that benefit from public funding and could compel such companies to reconsider their approach to such programmes.

Bowman Gilfillan director Llewellyn Parker tells Engineering News that, with the introduction of the legislation, private institutions will no longer be able to exploit a university research base to access “cheap research” when public funding is also involved.

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Therefore, companies wishing to secure their position as sole beneficiaries of such research will not only need to fund it in full, but also ensure that no public funding is used. This is because the new legislation has put in place safeguards to ensure that benefits for publicly funded research flow to taxpayers rather than to single corporate entities.

There are, nevertheless, potential positive spin-offs for research-supporting companies owing to the fact that, in instances where a university or individual researchers refrain from applying for intellectual property (IP) protection, private enterprise will be offered the opportunity to apply for such protection.

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But companies will be obliged to enter into benefit sharing agreements with the creator – a significant departure from the current position, whereby the inventor may lose the right to monetary compensation through the operation of a contract.

“Where universities choose to have research outside of the publicly funded area, they should run these projects as separate businesses and not involve public funds . . . which will certainly be a requirement from the investors in such projects and will be paramount to maintaining good relationships and incoming funding from such investors,” Parker argues.

As a consequence, probably unintended, a sharp distinction could be created between publicly funded and privately funded research, which could lead to less funding and less research and development occurring.

In other words, the Act has significant implications for all involved in the research value chain, from universities and com- panies through to individual researchers and licensee holders.

The legislation specifically states that a recipient of public funding should formally report societal benefits and that any IP arising should be made available to “the people of the country”, Bowman Gilfillan associate Robyn Merry explains.

Where public funds have been used, the recipient of such support is also obliged to inform the National Intellectual Property Management Office, or Nipmo, on a biannual basis, whether or not there is an intention to seek IP protection.

Universities will also be obliged to establish offices of technology transfer, which will be responsible for implementing policies for disclosure, identification, protection, development, commercialisation and benefit sharing arrangements.

Merry believes that technology transfer offices will need to draw on the services of patent attorneys. But, given that there are only about 100 patent attorneys in South Africa, she is concerned about capacity.

Further, the Act places constraints on the nature of corporate transactions that can arise should commercial benefits be identified. It specifically states that deals with black economic-empowerment entities, or small businesses, will be favoured, while local manufacturing will be encouraged.

These offices, Merry says, will be responsible for analysing the commercial potential of a creation and determining the appropriate form of IP protection, as well as determining the geographical territories in which protection should be sought.

“This also implies that, where public funding has been used, institutions relying on such public funding will not be entitled to elect to retain the IP in relation to such creation and keep it as a trade secret from which they could derive income so long as the trade secret remains a secret,” Parker says.

He argues, therefore, that universities should be encouraged to apply for IP registrations as often as possible and to license as much as possible. This, he says will provide a continual revenue stream which can be redirected back into research and development, management of the technology transfer offices and applications for IP protection.

The Act will also have implications for licensees, which should undertake to manufacture in South Africa, to provide reasons why they should be entitled to retain exclusivity when they are unable to continue commercialising the invention, or face losing the IP.

“This Act may also lead to fewer licensees licensing the technology developed using public money as the conditions for licensing such technology are onerous,” Parker warns, adding that this could, in turn, result in reducing the commercialisation of inventions developed using public money, which could lower the commercial con- version rate for such research.

He warns that it is too early to say whether the Act will either encourage private entities to get involved in funding projects so as to share in the IP ownership, or whether it will discourage private entities from funding research where public money is involved.

“If private entities adopt the provisions of the Act in a positive light, the research and development base could grow. But, if they choose to withdraw their funding, that base could decrease and, where there is private funding, it is more likely that such private entities will try to retain such research in the form of trade secrets,” Parker concludes.

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