On implementing Technology Transfer Act of 2009

Republic Act 10055, “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,” otherwise known as the “Technology Transfer Act of 2009” (TTA), which was approved on March 23, 2010, took effect on May 8.

The TTA seeks to promote the commercialization of intellectual-property (IP) technology and knowledge resulting from research and development (R&D) to ultimately benefit national development. To achieve this, the TTA addresses, among other things, issues of ownership of intellectual property in research and development institutes (RDIs); rights and responsibilities of government funding agencies (GFAs) and RDIs; management of intellectual property derived from R&D performed by government RDIs through their own budget; revenue sharing; and commercialization through spinoff companies.

Almost two years ago in this column (Spurring Growth through Technology Transfer, On Firm Ground, August 12, 2008), I referred to 2003 DOST figures that the Philippines allocates only .14 percent of its gross domestic product on R&D (already constituting the combined spending of the government and the private sector), compared with what developed and rapidly developing countries spend. South Korea, Japan and the US, for example, allocate 2.82 percent, 2.80 percent and 2.61 percent, respectively. Rapidly developing India and Brazil allocate at least 1.2 percent and 0.91 percent, respectively. It is hoped that the TTA will give us the framework and the tools to catch up with these countries.

Salient Provisions

1. Coverage—The TTA applies to: (a) all R&D activities carried out on behalf and for the interest of the Philippine government by RDIs receiving grants directly from GFAs; (b) all IP rights derived from R&D activities funded by government; (c) all government agencies that fund R&D activities, as well as provide financial, technical or material support to such R&D activities; and (d) all institutions that implement government-funded R&D.

2. Ownership of intellectual pro-perty and intellectual-property rights—In general, ownership of IP and IPRs generated from research funded by a GFA is vested in the RDI that actually performed the research, except when: (a) the RDI and the GFA concerned have entered into public, written agreement to the contrary; (b) the RDI failed to disclose potential IPRs to the GFA; (c) the RDI has failed to initiate the protection of potential IPRs within a reasonable time from confidential disclosure to the GFA; and (d) the RDI ceases to become a Filipino corporation.

3. Commercialization by GFA—When the GFA assumes the commercialization of the IP, it shall be allowed to directly negotiate agreements, provided that it obtains from the Department of Science and Technology (DOST) a fairness opinion from an independent third-party body composed of experts from the public and private sectors containing a statement as to the fairness to the GFA of the transaction, particularly of its financial terms.

4. Commercialization by RDI—When the RDI assumes the commercialization of the IP, it shall be allowed to directly negotiate agreements, provided that it obtains from the DOST a fairness opinion from an independent third-party body composed of experts from the public and private sectors containing a statement as to the fairness to the RDI of the transaction, particularly of its financial terms.

5. Revenue Sharing—All revenues from the commercialization of IP by the GFAs shall accrue to the RDI, unless there is a revenue sharing agreement in the research funding agreement, provided that in no case shall the share of the GFA be greater than the RDI.

6. Spinoff companies—An RDI shall allow its researcher-employee to commercialize the IP generated from R&D funded by a GFA through the creation of a spinoff company, provided that its researcher-employee takes a leave of absence for a period not exceeding two years.

7. Emergency power provisions—As a safeguard mechanism against private monopoly, the GFA and/or the parent agency may assume ownership of any potential IPRs in cases of national emergency or other circumstances of extreme urgency, or where the public interest requires, and in particular concerns for national security, nutrition, health, or the development of other vital sectors of the national economy, as determined by the head of the parent agency.

8. Technology information access facility and public access policy—The DOST shall establish a system for the cost-effective sharing of and access to technologies and knowledge generated from government-funded R&D by developing appropriate policies and procedures on public access which shall be made known to the public.

9. Commercialization capacity-building—The DOST, the Department of Trade and Industry (DTI) and the Intellectual Property Office (IPO), in consultation with the GFAs such as the Commission on Higher Education, the Department of Agriculture, the Department of Health, the Department of Energy, the Department of Environment and Natural Resources, and the Department of National Defense, shall undertake activities geared toward building the capacity of the GFAs and RDIs in commercializing IPs.

Drafting and implementation of the IRR

Now that the TTA is in place, the greater challenge lies in the public sector-private sector collaboration in crafting the implementing rules and regulations (IRR) and its actual implementation. The drafting of the IRR itself is a huge challenge as they will fill in the details with respect to IP commercialization, IP valuation and the mechanics for implementing Sections 7 and 8 which require “fairness opinions,” among others.In the ongoing consultations on the drafting of the IRR, among the specific issues being raised are the following:

1. The concept of commercialization requires a clarification of the intent of the law, i.e., whether the benefits of technology transfer and commercialization to the national economy and taxpayers will necessarily be measured in terms of the income or revenue generated. In view of the concern from academe, in particular, that their primary mission is to teach and conduct research, and not to generate revenue, it has been noted that Section 2 of the TTA itself provides that the RDIs shall translate results of government R&D into useful products and services that will redound to the benefit of Filipinos, “notwithstanding the income generated from intellectual-property rights ([PRs] and technology transfer activities.”

2. There is a need to establish commercialization guidelines that favor qualified Filipinos and small and medium-scale enterprises.

3. There is a preference for modes of technology transfer that will confer the least amount of rights as is necessary, such as licensing, to facilitate public access to the commercialized technologies.

4. To aid GFAs and RDIs in capacity-building, private stakeholders will be asked to assist by providing model provisions or to the commercialization guidelines.

5.  It is indispensable for GFAs, RDIs and other stakeholders to have the capability to undertake IP valuation in order to effectively perform technology transfer/IP commercialization.

It is widely known that our TTA is largely patterned after the United States’ Bayh Dole Act which has enjoyed success since its enactment in 1980. The Bayh Dole Act is credited for the strong national infrastructure supporting technology transfer in US academic institutions and the almost tenfold increase in US patents granted to US universities and over approximately $30 billion of economic activity from the commercialization of new technologies from academic institutions annually.

Given its success in the US, Asia-Pacific countries, in particular, have followed suit in adopting their own versions of the Bayh Dole Act with varying degrees of success. In comparing their experiences with ours, it is apparent that, in technology transfer regimes, “one size does not fit all,” and the government and the universities-GFAs-RDIs must agree why and how technology transfer fits into our national development strategy. The TTA is clearly not a magic wand, but a useful road map that we must maximize.

Patricia A. O. Bunye is a senior partner at Villaraza Cruz Marcelo & Angangco (www.cvclaw.com), immediate past president of the Licensing Executives Society (LES) Philippines and currently chairman of the Asia Pacific Committee of LES International. She heads CVC Law’s IP Commercialization practice, as well as its Mining and Natural Resources and Power and Energy practice groups, and may be reached at po.bunye@cvclaw.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it . –Patricia A.O. Bunye / On Firm Ground, Businessmirror