1. 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

2. …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

3. …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

4. …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

5. IP GENERATION KEY START-UPEARLYEXPANSIONMATURITYMANUFACTURING SEED SALES IMPORTS RETURN ON INVESTMENT IN R&D NOT REALISED TECHNOLOGICAL DISCONTINUITY (New Knowledge) …THE SA INNOVATION CHASM COMMERCIAL ACTIVITIES SYSTEM-WIDE IP LEAKAGE

6. …RESEARCH OUTPUTS (an international comparison)

7. Data – courtesy of WIPO

9. INVESTMENT OF PUBLIC FUNDS IN R&D ACTIVITIES RETURNS ON INVESTMENT …THE CHALLENGE FOR PUBLICLY FINANCED R&D IN SA

10. Knowledge Production Development Production & Commercialisation TIA …PROGRESSION IN FUNDING INTERVENTION

11. The Fund Competency Centres Venture Capital Enterprise Develop Support Tech. Nursery …THE TIA PLATFORM

12. …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

13. 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

14. …IPR BILL PROCESS Public Comments DESKTOP STUDY OF BEST PRACTICE S APPOINTMENT OF AN INTERNATIONAL EXPERT REVIEW TEAM BENCHMARK EXERCISE IPR STAKEHOLDE R WORKSHOP FEBRUARY 08MARCH 08 INTERNATIONAL BENCHMARKING STUDY: USA & CANADA REVIEW EXPERTS CANADA – Marcel Mongeon INDIA – Prabudhaa Ganguli SOUTH AFRICA – Adi Paterson USA – Todd Sherer & Joe Allen PUBLIC COMMENTS WERE NEGATIVE AND NECESSITATED A RE-THINK ON KEY ISSUE JANUARY 08 DEC 07

15.  Appointment of Expert Review Panel & Reports (11 th Feb 2008)  International Benchmarking Exercise (3 – 8 February 2008)  Further Revisions to IPR Bill (in light of Expert review Panel input and Benchmarking Exercise) (22 nd February 2008)  Further consultation with relevant government departments  Stakeholder workshop (7 th March 2008)  Final revisions to the IPR Bill (14 th March 2008)  Parliamentary Process (July 2008) PROCESS MILESTONES … 2/2

16. …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

17. 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

18. 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

19. AGENCY FUNCTION (NIPMO) … 2/2  Administrative functions under the Bill  Database of publicly funded IP  Operations of IP Fund

20. 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

21. …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

22. 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

23. 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

24. 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

25. 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

26. …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

27. 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

28. 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

29.  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 …CONCLUDING REMARKS