Philippines Enact Bayh-Dole Analogue

On March 23, 2010, the Philippines enacted a Bayh-Dole analogue known as "An Act Providing the Framework and Support System for the Ownership, Management, Use, and Commercialization of Intellectual Property Generated From Research and Development Funded by Government and for Other Purposes."  The Act covers IP rights that accrue from government funded research, with little attention given to the public interest but a heavy focus on commercialization.  However, there are two key portions (Sections 15 and 16) that could potentially be good safeguards--if public interest concerns are taken seriously and the regulations enacted ensure the protection of the public.  Key provisions of the Act appear below. 

The stated objective of the Act is to make technology transfer part of the "strategic mission" of research institutions that perform government-funded research.  The Act then goes on to define IP in a potentially overly-broad manner: "intangible assets resulting from the creative work of an individual or organization.  IP also refers to creations of the mind, such as inventions, literary and artistic works, and symbols, names, images and designs used in commerce."  By applying coverage so broadly, the Act does not differentiate between upstream research and applied research which could discourage effective collaboration and productive research activity.  

Additionally, the Philippines Bayh-Dole analogue appears overly focused on commercialization and does not acknowledge the other ways in which university knowledge contributes to society including, for example, dissemination of information, collaboration with other researchers, and the teaching of students.  Section 4(p) of the Act defines commercialization as "the process of deriving income or profit from technology, such as the creation of a spin-of company, or through licensing, or the sale of the technology and/or IPRs."  The focus on commercialization and lack of protection for the public is potentially worrisome.

With regard to actual IP ownership, Section 6(a) of the Act provides that the institution performing the government-funded research generally owns the IP rights to the innovation.  There are a few exceptions to this general rule of ownership, however, which include: 1) where the institution enters into a written agreement to share, limit, waive or assign its ownership in favor of the government-funding agency, but "may only be voluntarily executed by the [institution] to protect public interest . . ."; 2) where the institution fails to disclose potential IP rights to the government agency; 3) where the institution fails "to initiate the protection of potential IPRs within a reasonable time,"  but no more than three months from public disclosure.

Section 7(a) authorizes the government funding agency "to withhold from public disclosure, for a reasonable time, any information relating to" potential intellectual property rights in order to allow the research institution to pursue full protection.  The government funding agency is also charged with monitoring an institution's efforts to secure IP protection and commercialization "as well as provide alternative solutions and assistance in case of shortfall in the [institution's] performance."  It will be interesting to see what "alternative solutions and assistance" the government funding agencies come up with, how active they will be in monitoring, and what will be deemed a "shortfall."

Of particular interest, Section 7(c) states that government funding agencies shall "ensure adequate freedom to use the IP for further research to expand the knowledge frontier and requirements for publication of information as appropriate in accordance with government policy or academic policy, or institutional mandate of the" research institution.  The Department of Science and Technology has yet to implement the rules and regulations for the Act; hopefully a strong research exemption will be implemented to ensure that IP can be freely shared among researchers.  It may also be difficult for government agencies to ensure that adequate freedom is available for future research, particularly if research exemptions must comply with the academic policy or institutional mandate of a particular institution.

When public research institutions negotiate agreements for commercialization of IP, Section 8(a) requires the written recommendation from the Secretary of the Department of Science and Technology (DOST) in addition to a "fairness opinion report from an independent third party body composed of experts from the public and private sectors" as determined by DOST.  The opinion report must evaluate "fairness" to the research institution, "particularly its financial terms."  It seems unfortunate that, once again, the Act focuses on the financial implications to the research institution but does not include any requirements regarding fairness to the public. 

Other subsections of Section 8 requires research institutions to address shortfalls in its performance and make annual reports to the government funding agencies on the progress of its commercialization efforts, licenses granted, and revenues.  The Act encourages smaller research institutions to "pool and share resources" in an implicit acknowledgement that abiding by these requirements could be costly. (Notably, Section 20 of the Act states that institutions are "encouraged" to establish technology licensing offices"--while these offices are not mandatory, it is questionable how well research institutions would be able to comply with all the requirements without TLOs.)  The Act also explicitly allows research institutions to establish spin-off companies to pursue commercialization.

Furthermore, Section 8(g) requires research institutions to provide incentives to staff members "to sustain efforts in identifying valuable IP and in pursuing IP commercialization."  The Philippines Bayh-Dole Act provides does not provide any similar incentives for basic research or other important innovations that do not necessarily have commercialization potential or research tools that may be better disseminated using open source methods.

Pursuant to Section 11, all revenues from the commercialization of IPs under the Act accrue to the research institution unless there is a revenue sharing provision in the original research funding agreement.  In no case may the government funding agency's share exceed that of the research institution, though.  Furthermore, where research is partly funded by the government and partly by another source, the institution may enter into contraction agreements with the other entity providing the funding.  Notably, there is no language in Section 11 limiting the "other entity" to less than that of the research institution.

Section 12 attempts to manage conflicts of interest when researcher-employees want to commercialize the IP through creation or management of a company or spin-off, requiring researcher-employees to take a leave of absence of one to two years from the time he signifies in writing his desire to participate in a spin-off company.  It is commendable to try to reduce conflict of interest problems; does this section go far enough in ensuring that researchers are not too focused on working on the spin-off to do their jobs as researchers?

Similarly, Section 14 also governs conflicts of interests, mandating that research institutions "adopt appropriate guidelines for its researcher-employee" in order to manage potential conflict of interest problems.  The Act provides that institutions must ensure that commercial objectives do not divert researchers from the core research program and where researchers have financial interest in a spin-off, they must not act on behalf of the institution in transactions with that company.  Questions remain as how effective the guidelines enacted by institutions will be.  Furthermore, concerns still remain as to whether institutional conflicts of interest will be properly managed.  Nothing in the Philippines Bayh-Dole Act provides for the management of institutional conflicts.  

Sections 15 and 16 govern march-in rights, providing that the government funding agency may assume ownership of IP covered under the Act "in case of national emergency or other circumstances of extreme urgency, or where the public interest requires . . .  Such determination shall be made within thirty (30) days after the receipt of the recommendation of the Head of the GFA.  Such recommendation shall be made within thirty (30) days upon the discovery of the potential IPR by the GFA or the disclosure of the same by the [research institution] pursuant to Section 8(c) of this Act, or upon written notice or petition by other government agencies or other interested persons." The thirty day requirement seems like a very small window and the government funding agency may not be monitoring developments closely enough to make quick determinations as to whether to make such a recommendation.

Additionally, this clause seems slightly ambiguous and it is not completely clear whether the thirty day requirement applies only to the government funding agency or whether it applies to "other government agencies or interested persons" as well.  Potentially, these march-in rights could be good safeguards, provided that the DOST enacts regulations that allow these provisions to be used to the fullest and seriously takes into consideration the public interest.

Under the Act, DOST is charged with establishing a system for sharing and access to technologies developed from government funding.  Section 19 orders DOST to establish a regular national conference for all government funding agencies and research institutions to "(a) promote multi-disciplinary, joint, and cross collaboration in R&D; (b) coordinate and rationalize the R&D agenda; and (c) harmonize all R&D agenda and priorities."  Despite the stated desire to ensure sharing and access, it is unfortunate that DOST is charged with creating this system and public access is not guaranteed upfront in the text of the Act.  

Finally, Section 25 of the Act mandates the auditing of the funds of government funding agencies and public research institutions "to ensure transparency and accountability."  It does not, however, proscribe the manner or frequency of the audits.  

The rules and regulations for the Act have yet to be enacted, but are expected within the next few months.  Hopefully the regulations will address some of the shortfalls of the Act and strengthen public interest provisions.