October 2008 Archives

This is the second post from a series on the Spicy IP Blog by Mrinalini Kochupillai "The Public Funded R&D Bill: Does India Need a Bayh Dole?". Mrinalini Kochupillai who is an Adjunct Professor at Franklin Pierce Law Centre has worked extensively on technology transfer in India, here she looks into the terms and conditions under which various government agencies in India grant funding for R&D and the impacts of a Bayh Dole like legislation.

To read the post from Spicy IP chick here.

"What are the constitutional obligations on the State when it takes action in exercise of its statutory or executive power? Is the State entitled to deal with its property in any manner it likes or award a contract to any person it chooses without any Constitutional limitation upon it?" What are the parameters of the statutory or executive power in the manner of awarding a contract or dealing with its property?"
--- Justice Bhagwati in R.D Shetty v. Airport Authority ('79) ASC 1628.

After a long break, I continue with the series of posts on the Public Funded R&D Bill. At the outset, I must confess that I got carried away with researching the various policies of the numerous funding agencies of the Government of India. Unfortunately, most of the websites do not provide updated information of their IPR policies. I did however manage to dig out some "spicy" information. I discuss some of it here and reserve some for later posts:

Department of Information Technology

The Department of Information Technology's (DIT) policy from a contact in a government funded institute.

As it turns out, the DIT's "Terms and Conditions governing Grant-in-aid" are very different from DST's guidelines (discussed in the previous post of this series). The interesting bits (i.e. those pertaining to intellectual property) state (the numbering of the paragraphs here is not the same in the terms and conditions):

1. The know-how generated by the project shall be property of DIT. Any receipt by way of sale of know how, transfer, royalties training etc., shall accrue to DIT. DIT may, in its discretion, allow or direct a portion of such receipts to be retained by the grantee organization.

2. DIT will have the right to call for drawings, specifications and other data necessary to enable the transfer of know-how to other parties and the grantee shall supply all the needed data at the request of the DIT

3. The grantee institution will first make all efforts to protect intellectual property generated out of the project. The grantee institution will examine IPR protection issues in consultation with IPR Cell, DIT to file patents, register the copyrights etc. before making it public by publishing in the technical journals and books, presenting findings in Conferences etc.

4 The intellectual property and the rights associated with it shall be assigned to DIT. In cases where the fundings have been done jointly with other organizations, the IP rights would be appropriately shared.

If India were to pass a Bayh-Dole, the DIT type terms and conditions of grant would be the first to require modification. What I do not understand is, what does the DIT do with all the know how that it collects? Are there any instances of licensing? If anyone from the DIT reads this space, we would be grateful for any information. If there are very few or no instances of licensing of know-how/patents, it may indeed be a good idea to reconsider their policies.

More importantly, the question to consider is - what are (or what have been) the instances when the DIT has exercised "its discretion, [to] allow or direct a portion of such receipts to be retained by the grantee organization." (See clause 1 of the DIT terms above). In this regard, I had the good fortune of discussing the Bill with Justice MN Venkatachaliah, one of India's most respected Supreme Court judges (now retired). He quoted the Constitution of India and stated that under Article 14 (right to equality), the government is under an obligation to distribute its largess on fair and equitable terms. Similarly placed persons cannot be treated differently unless there is a rationale for the classification. (See the famous RD Shetty v. Airport Authority case cited above.)

Having read the RD Shetty case, it is clear that this rule of reasonableness and equity is also applicable to the government when it acts like a private entity and enters into commercial contracts.

This got me thinking - is the discretion envisaged by clauses such as clause 1 Constitutional? I have my doubts. If some grantee institutions are permitted to retain part or whole of the royalty and some not, there must be some guidelines that are open for all to scrutinize that are applicable to the exercise of such discretion. Undoubtedly, government has the right to frame any policies, but these policies must be readily accessible (and not left to the grantee institutions' imagination or good luck) and uniformally applied. If I am missing something here (which I sincerely hope I am... because if not, there is a good chance that the DIT guidelines can be struck down as unconstitutional!)please do let me know. This may indeed be one of the most important reasons why India needs a Public Funded R&D Bill - to make the policies of the government more clear, uniform and non-arbitrary!

AICTE Schemes

Another "interesting" clause I found is in the Terms and Conditions of the "Research Promotion Scheme (RIS)" of the All Indian Council for Technical Education AICTE which states:

"10.The assets acquired out of the grant shall be the property of the Institute. No assets acquired out of the grant shall be disposed off without the prior permission of the Council."

Another version of this clause is in the AICTE's Scheme For Modernisation And Removal Of Obsolescence In Technical Education (MODROBS), which states:


"23. Assets Acquired.- As per Government of India's Decision (7) (b) under Rule 149 (3) assets created/procured out of the project grant should be submitted to the funding agency. The assets thus Created/procured out of the grant should be maintained and submitted to AICTE, as per the Format as given in Annexure- X, along with the project completion report."

In furtherance of the mandate of this clause, the RIS and MODROBS guidelines also require the agency receiving the funds to fill out FORM GFR-19 "Assets acquired wholly or substantially out of government grants."

Again, I discussed the applicability of Rule 149 to IP assets with Prof. NS Gopalakrishnan, an eminent IP academic in Cochin University. He was of the view that the said Rule was drafted keeping in mind only assets such as land or machinery (i.e. tangible assets) and not intellectual property. He said that in relation to intellectual property, each funding agency has separate rules that need clearance from the concerned Ministry.

However, given that the "terms and conditions" of the AICTE schemes are silent on who owns any IPR that may be created using the funds, and given that IPRs are "assets," it seems logical to presume that clauses 10 and 23 reproduced above, suggest that all IPR would belong to the AICTE. However, it is pertinent to note here that Decision (7) (b) was under Rule 149 (3) of the General Financial Rules, 1963. These rules have now been replaced by the GFR 2005, under which FORM GFR-19 has been deleted. I am now confused... can GFR 1963 continue to rule in the AICTE terms and conditions despite the rules having been replaced in 2005? More interestingly, the RIS scheme encourages the applicants to apply for funding for R&D that has a patentable element. If this is the case, wouldnt one expect there to be a specific provision mentioning what exactly the do's and donts are vis-a-vis the IPR generated? I would like to reiterate here that absent a provision detailing who owns the IPRs, I would imagine that the Patents Act would kick in and the "inventor" would be the owner of the IPRs. Is it just me or is it truly most likely that in such a situation, the government will immediately quote clauses such as clause 10 and clause 23 of the AICTE terms to demand rights over all/any IP created??

From having reviewed a number of terms and conditions under which various government agencies grant funding for R&D, I think I can safely say that India is currently in a place of transition - from being a country that was completely oblivious or indifferent to the existence and importance of IP, it is now a country that is semi-aware of IPRs (as is obvious from the half baked provisions of the AICTE guidelines). If this is the current state of affairs, from a practical point of view, will having a Bayh-Dole type legislation at this stage truly lead to increase in innovation? More interesting statistics and arguments both for and against in the forthcoming posts... till then, please keep your comments coming.

Dr. Stanley Kowalski the Director of International Tech Transfer Institute @ Pierce Law joins the Blog as the Expert Blogger. This adds to the International tech transfer Blog team that aims at providing analysis, views, global and international policy developments and management tips in various areas of of Technology Transfer and University IP Management.

It is perhaps of interest, and likely somewhat confounding, that MTAs are a mix of property (i.e., bailment) and contract (i.e., the "agreement") law. This point seems to often be misunderstood and unappreciated. Hence, an MTA represents a somewhat complex instrument. A question that presents itself is that if the agreement aspect of the MTA is lacking, insufficient or even absent, then will the MTA obligations by default be goverened by the common law of bailment?
In this regard, see the following, from "Intellectual Property Managment in Health and Agricultural Innovation, A Handbook of Best Practices".
"MTAs delineate the terms under which tangible biological materials will be transferred between two or more parties. Technically, MTAs are bailments because they involve the transfer of possession but not of title. In other words, the party that transfers the materials retains full ownership over them, and the party that receives the materials holds them "in trust"; an analogy for such a transfer might be the act of leaving a watch at a watch-repair shop or a suit at a drycleaner. Ideally, the MTA specifies the term of the transfer, delineates how the materials may and may not be used, and other related issues, such as confidentiality. An MTA may also contain licensing provisions for the transfer of embedded intellectual property (IP) rights (such as patent rights). Thus, an MTA can be a hybrid instrument, covering the transfer of both tangible property (via bailment and contract) and intangible intellectual property (via licensing of patent rights). Unsurprisingly, MTAs are increasingly complex documents."
See: http://www.iphandbook.org/handbook/ch07/p03/eo/index.html

The article "Academic Patents and Materials Transfer Agreements: Substitutes or Complements?" by Arvids A. Ziedonis & David C. Mowery published in Journal of Technology Transfer, Vol. 32, No. 3, pp. 157-172, 2007 focuses on U.S. universities and academic medical centers long have been important performers of research in the life sciences, but their role as a source of patented intellectual property in this field has changed significantly in the late 20th and early 21st centuries. The expanded presence of formal intellectual property rights within the academic biomedical research enterprise has occasioned numerous expressions of concern from scholars, policymakers, and participants.

The paper talks about "One widely expressed fear involves the effects of patenting on the conduct of the scientific research enterprise. There is also considerable concern over the possible role of Material Transfer Agreements "MTAs" in raising research transaction costs." On the other hand, others suggest that the contractual structure provided by MTAs may reduce transaction costs and facilitate exchange."

This paper undertakes a preliminary analysis of the role of MTAs in the biomedical research enterprise at the University of Michigan, a significant patenter and licensor of biomedical intellectual property.

The authors state "We examine the relationship among invention disclosures, patenting, licensing, and the presence or absence of an MTA. Although data limitations make any conclusions tentative, our analysis suggests that the increased assertion of property rights by universities through MTAs does not appear to impede the commercialization of university research through patenting and licensing."

To read the article click here.

Simon Winston Brinsmead in his article "Intellectual Property Enforcement, Technology Transfer and Innovation in China's Semiconductor Industry " look into the observations of several commentators that analyse the fact that China has enacted laws that give formal protection to intellectual property rights but that, to date, it has struggled to enforce these laws effectively. This is to some degree reflected in the recent decision of the United States Government to institute proceedings against China in the World Trade Organization regarding intellectual property issues.

The paper evaluates China's current protection of the intellectual property embedded in semiconductor chips, as well as the intellectual property of semiconductor manufacturing processes. Having reached a view regarding the effectiveness with which China's intellectual property laws, as they relate to its semiconductor industry, are currently being enforced, this paper then assesses the implications of this situation for technological progress by Chinese semiconductor firms.
The author examines the link between the protection of innovations via an intellectual property law regime, and the speed of technological progress. In particular, two issues are examined. The first is whether concerns by multinational firms about intellectual property enforcement might dissuade them from transferring leading edge technology into China. The second is whether enforcement concerns might be exerting a negative effect on the capacity of Chinese semiconductor firms to innovate.

The paper finally considers other government policies which, in conjunction with better enforcement, should encourage increased firm-level innovation.

To read the article click here.

The article by Wendy D. Streitz and Alan B. Bennett points out that the transfer of materials between researchers has become more difficult, and it appears that the days of open exchange of materials, particularly from researchers in industry to academic researchers in the life sciences, are over. It also points out that "some domains of free exchange continue to thrive and funding agencies, such as the NSF and the NIH, are actively promoting open exchange of materials, these are becoming exceptions rather than the rule."
Universities and private companies each have very legitimate interests that they are trying to support when engaging in material transfers and when these interests collide it can be very difficult to find common ground. However, the mutual interest of both research-based private companies and of universities is to support research advances and when both parties keep this overarching objective in mind, most material transfers are possible.
To read the entire article click here.

This piece comes from a series on Spicy IP Blog by Mrinalini Kochupillai "The Public Funded R&D Bill: Does India Need a Bayh Dole? ". Mrinalini Kochupillai is an Adjunct Professor at Franklin Pierce Law Centre and is presently at Marx Planck, Munich on a Research Fellowship. She is also a consultant to the International Technology Transfer Institute at Pierce Law and has worked extensively in the issues surrounding Technology Transfer in India and The Public Funded R&D Bill.
Having also worked under her supervision as a Research Assistant (Pheew) on one of the projects at ITTI, I truly believe that she happens to be one of the best to talk about Indian Technology Transfer Laws. The current piece looks at some of the history and some of the present of Bayh Dole.

To read the entire post from Spicy IP Blog click here.

Given the Bill's nick name: the "Indian Bayh-Dole", I started with looking at the history of the US Bayh-Dole to determine how well deserved the nick name is. ☺ I plan a series of posts to (a) compare the situation surrounding the passage of the Bayh Dole Act (BDA) in the US with the current situation in India, and (b) compare the provisions of the now available (albeit from unofficial sources) drafts of the Indian Bill with the provisions of the BDA. Alongside, as ever, I hope to highlight some issues (legal, social, scientific and economic) and raise questions to which I hope the government, and policy makers will provide answers/comments. I also hope that our diverse and very well informed readers would supplement the posts with their own knowledge.

So lets start with a history lesson (I love history and look at it often!). Prior to the passage of the BDA in the US, intellectual property in inventions resulting from R & D funded by government agencies, vested in these agencies. In fact, according to sources, there were 26 government funding agencies in the US, each with its own set of policies (pertaining inter alia, to ownership and use of IP generated from funded research activities). As a result, the transfer of know-how from Universities/laboratories to the industry was rare. The situation was such that prior to the enactment of the BDA, even though the U.S. government held approximately 28,000 patents, only about 5% of these patents were licensed to the industry for commercial development. (See Jennifer A. Henderson, J.D., M.P.H.1 and John J. Smith, M.D., J.D.2 Academia, Industry, and the Bayh-Dole Act: An Implied Duty to Commercialize, October 2002; See also the Wiki page on Bayh-Dole here). It appears therefore that there was a definite and strong patenting trend in the US at the time the BDA was passed and the Government itself perceived creation and protection of intellectual property as important.

In the light of this history in the US, I thought it would be interesting to investigate what the current IPR ownership and licensing climate in India is like. While up to date statistics are not readily available, I did come across a very interesting and comprehensive (albeit a little dated) WIPO document prepared by Dr. P Ganguli in 2003 [See P Ganguli, Industry-Academic Interaction in Technology Transfer and IPR: The Indian Scene -----An Overview. Available here : "the WIPO report"].

The report notes that the total number of patents in force in India (as of 2003) was about 10,000 (see page 37 of report). This is roughly 1/3 the number of patents held by the Government of the US (alone) at the time the BDA was passed. While the patenting activity by multinational corporations and the Indian industry may well have shot up after the 2005 amendments, it would be interesting to see whether the number and frequency of patent filings from Government funded labs/universities has gone up over the past 5 years.

Whats more interesting in this context is the general guidelines (issued by TIFAC) on ownership of IPR resulting from projects funded by the DST. The WIPO report summarizes these guidelines and I reproduce them (with a few edits) here: (Please note that the comments in the brackets relate to what will be discussed next week)

"1. The terms of the projects funded by the technology development board (TDB) are to be a bilateral contractual matter between the technology provider and the enterprise receiving the funds. However, the TDB is permitted to retain a royalty free license and the holder of the IP (namely, the enterprise receiving funds) may be required to license to others on advice of TDB in mutually agreed circumstances.

2. Title over know how generated during Home Grown Technology (HGT) projects would jointly held by the funding agency and the industry partner. The industrial partner will have full rights to commercialize the technology without having to pay any royalty to the funding agency. However, if the know-how is licensed to a third party, the revenue is to be shared. (See Section 6 of the Patents Act)

3. Grants of exclusive rights are not encouraged but are permitted in limited circumstances for limited period.

4. IP rights over inventions emanating from projects funded by the Ministry of Science and Technology and Department of Ocean Development at publicly funded Institutions (such as the AIIMS and the IITs), may be owned by the institutions. However:

(a) Inventors must assign the invention to the institute. (See section 6 of the Patents Act)
(b) Institutions can undertake technology transfer on exclusive/ non-exclusive basis and retain all the revenue. (Contractual matter)
(c) Institution may determine share of inventors and other persons. (Contractual matter)
(d) Such share will be limited to 1/3 rd of the actual earnings. (The Bill now seeks to codify this - proposed Section 8, as detailed by Shamnad)
(e) Government will have a March-in-Right and shall have a royalty free license for use of the property by the government in public interest. (See Government Use and Compulsory Licensing provisions under the Patents Act.)
(f) IPR generated through joint research by institutions and industry can be owned jointly by them on mutually agreed terms.(See section 6 of the Patents Act).
(g) Each institution should establish a Patent Facilitating Fund by setting aside 25% of such earnings. (The Public Funded R & D Bill seeks to codify this requirement)
(h) The institutions shall submit information relating to the details of patent obtained, benefits and earnings arising out of IPR and turnover of the products. (Contractual matter)
(i) The institution and industry may transfer technology to third party for commercialization. (Contractual matter + see section 50 of the Patents Act)
(j) The third party must manufacture the product in India. The revenue sharing arrangements for inventors remain the same. (See provisions on Compulsory licensing under the Patents Act.)

As summarized by the AUTM (The Association of University Technology Managers), the major changes brought about by the BDA in the US were as follows:

# Non-profits, including universities, and small businesses were permitted to elect to retain title to innovations developed under federally-funded research programs
# Universities were encouraged to collaborate with commercial concerns to promote the utilization of inventions arising from federal funding
# Universities were expected to file patents on inventions they elect to own
# Universities were expected to give licensing preference to small businesses
# The government retains a non-exclusive license to practice the patent throughout the world
# The government retains march-in rights.
# The Bayh-Dole Act was especially instrumental in encouraging universities to participate in technology transfer activities.

Interestingly therefore, the guidelines of the DST pertaining to IPR ownership in public funded R&D seem already to "encourage" a number of things that the BDA sought to encourage in the US. The one thing that the policy does not do (and probably cannot do) is mandate applications/filing of patents. However, as Shamnad notes in his post, this mandate may not be the best idea - there could always be situations where the inventor wishes to put his invention in the public domain.

Furthermore, while "guidelines" do not have the force of law, (and policies and guidelines are subject to change with each government) it seems that even without a Public Funded R & D Act, the current government policies permit academic institutions, laboratories and small businesses to own and license out technologies created by them, even if the research resulting in these technologies is funded by government agencies. The guidelines also appear to be consistent with the Patents Act (look out for details in the coming week).

In fact, the government may wish to focus its attention first on creating a balanced awareness about IPRs amongst various Universities and public funded laboratories. As pointed out by Dr. Ganguli in his report, "the concept of Institutional IPR Policies in academic institutions in India is in its nucleating stage with only a handful of institutions such as CSIR, IIT Bombay, IIT Kharagpur, IIT Delhi, Pune University formally announcing their IPR Policies and guidelines for interactions with other institutions, industries etc."

Indian government has released a draft version of the National Innovation Act, 2008.
The Knowledge Commission had recommended that there is a need for a comprehensive campaign to address these issues and to spur efforts to make India a global leader in Innovation and an Innovation Law was a part of it.
As per previous news reports the India Innovation Act was likely to be modelled on the America COMPETES Act.
Government of India had proposed an Innovation Act the would focus on three primary areas of importance to maintain and improve innovation in the 21st century which are :
1. Increasing research investment,
2. strengthening education opportunities in science, technology, engineering, and mathematics from elementary through graduate school, and
3. developing an innovation infrastructure.

The draft version of the National Innovation Act, 2008 is available here.

Julie Sammons in her article "Collaboration Is the Key to Green Success" refers to recent initiatives towards more sustainable development by going green. She has made reference to advantage of Open source R&D. Some of the interesting parts are reproduced below. To read the entire article click here.

"Governed by the Bayh-Dole Act, technology transfer between universities and the corporate world is undergoing a radical transformation in the age of wikinomics and crowdsourcing communities like Innocentive. On the business end, corporate titans IBM, Nokia, Sony and Pitney Bowes joined forces earlier this year to launch the free Eco-Patent Commons initiative. From the academic side, efforts like the Association of University Technology Managers' Better World Project promise to rapidly accelerate R&D partnerships between university research powerhouses and forward-thinking corporations."

The author talks about accelerated growth of new markets saying that:
"Building on a track record of industry-leading telecommunications and biotech hubs launched from campus spin-offs, the University of California, San Diego is at it again, this time targeting the clean tech sector. Campus leaders are developing the nation's largest university-based sustainable energy program by pairing student research teams with solar, biofuel and IT companies to form living laboratories focused on tomorrow's technology."
Interesting reading as it looks into the current trends of innovation movement involving both the Universities as well as the Industry.

The New York Times piece "When Academia Puts Profit Ahead of Wonder" by Janet Rae-Dupree reflects on University's and Academia's focus on more immediate market potential research and the neglect of kind of basic experimentation that leads to a greater understanding of how the world works has set a wrong trend and the Bayh-Dole Act of 1980 is largely responsible for such a trend.

To read the entire article click here.

Janet Rae-Dupree points towards the purpose of the Bayh-Dole Act of 1980 that is

"It is the policy and objective of the Congress to use the patent system to promote the utilization of inventions arising from federally supported research or development" and "to promote collaboration between commercial concerns and nonprofit organizations, including universities."

And then the development that is evident since the act was passed which the author points out by stating

"University "tech transfer" offices have boomed from a couple dozen before the law's passage to nearly 300 today. University patents have leapt a hundredfold. Professors are stepping away from the lab and lecture hall to navigate the thicket of venture capital, business regulations and commercial competition."

Janet Rae-Dupree also points out that "The primary concern is that its original intent -- to infuse the American marketplace with the fruits of academic innovation -- has also distorted the fundamental mission of universities."

The big question that the article attempts to look into is the most troublesome aspect of campus commercialization being research decisions are now being based on possible profits, not on the inherent value of knowledge and is this approach the right one for Academia?