Salient Features of the Indian Bayh Dole Act

This post was first published on April 26, 2011.
To keep up with the global competition it is necessary to promote creativity and harness innovation at the domestic level.  Over the years the government has been funding a number of academic and research institutions for the purposes of research and development but most of such funding fail to yield any revenue to the research institution or the government due to lack of interest towards protecting and utilising the resultant intellectual property. This lack of interest is due to a number of reasons such as lack of IP awareness, insufficient incentive mechanism to the inventors and non-institutionalised accountability system on part of the research institutions availing grant. The legislature, through the proposed bill entitled ‘PROTECTION AND UTILISATION OF PUBLIC FUNDED INTELLECTUAL PROPERTY BILL, 2008′, aptly seeks to address these issues to maximise the advantages of government funding to the institutions and to promote innovation at the academic and research institutions.
The Bill is inspired from and based largely upon the Bayh Dole Act in USA. While borrowing the major portion of the US enactment, the Bill seeks to address the current Indian circumstances. Here we present an account of salient features of the Bill that is being introduced in Rajya Sabha for discussions.
1. Definitions and interpretation: The Bill, under Clause 2, seeks to define important terms under it. ‘Intellectual Property’ (IP) has been defined to mean  “any right to intangible property, including trade mark, patent, design, and plant variety as defined under the Copyright Act, 1957, the Patents Act, 1970, the Designs Act, 2000, the Semiconductor Integrated Circuits Layout-Design Act, 2000, and the Protection of Plant Varieties and Farmers’ Rights Act, 2001”. Though one has to invest some effort to understand the scope of the definition due to its illogically arranged phrases, the definition is wide enough to cover all forms of intellectual property.
The term ‘recipient’ has been defined to cover universities, higher educational institutions established for research purposes, an organisation established by an Act of Parliament or a non-profit scientific or educational organisation registered under the Societies Registration Act, 1860. ‘Utilisation’ has been defined to mean the manufacture of a composition or product, the practice of a process or method, operation of a machine or system, or commercialisation thereof.
2. Mandatory agreement with the government: According to clause 3 of the Bill, a recipient has to compulsorily enter into an agreement with the Government in order to avail grant of funds. The form and manner of such agreement may be prescribed by the central government. The government in question cannot release the funds unless the agreement is entered into and the other obligations of the recipient under the Bill have been complied by the recipient.
3. Obligation to disclose public funded Intellectual Property and vesting of title: Clause 4 obligates the recipient to disclose to the concerned government, any and all IP that may arise out of such government’s grant within sixty days of actual knowledge of such IP. the recipient shall further intimate to the government its intention to retain the title over such IP. If the recipient fails to make such intimation of its intention to retain title the title over the IP will vest in the government.
4. Bar on public disclosure: The Bill imposes restrictions on publication and disclosure of details of the IP before an application is made to the competent authority for its registration.
5. Duties of the recipient retaining title and the creator of the IP: Clause 7 of the proposed Bill imposes certain duties on the recipient choosing to retain title over the IP resulting out of government funding. The duties include applying for protection of IP and bearing all expenses in relation to the same having regard to its financial capabilities. The recipient then has to initiate process for utilisation of such IP after filing for its protection and maintain meticulous accounts in relation to the same. The recipient also has a duty to share with the creator, the revenue so generated from the said IP.
The creator of the IP is put under an obligation to disclose to the recipient upon creation of such IP and to cooperate with the recipient in protecting the same.
6. Conditions for assignment: The recipient is barred from assigning any IP generated out of such government funding to any third party without the prior government approval in the prescribed form.
7. Formation of IP Management Committee: Every recipient has an obligation to constitute an intellectual property management committee within its organisation within 180 days of receiving funds from the government. The committee so constituted shall be vested with following functions:
(a) identify, assess, document and protect public funded intellectual property having commercial potential;
(b) perform market research and market such public funded intellectual property;
(c) create an intellectual property management fund;
(d) monitor the process of licensing and assignment;
(e) manage revenues from licensed public funded intellectual properties for the organisation;
(f) within one hundred and eighty days of its constitution, establish mechanism to promote the culture of innovation and public funded intellectual property generation within the organisation; and
(g) create mechanisms to govern the relations between the recipient and the creator of public funded intellectual property.
8. Sharing of royalties and income: The Bill for the first time in India provides for monetary incentives for the creator of an IP in the form of sharing of royalties and other income arising out of IP. The Bill also prescribes the share of the creator in absolute terms. In absence of any agreement between the creator and the recipient, the income out of the IP shall be shared in the following manner:
Not less than thirty per cent of such income or royalties, after deducting the expenses incurred in protection and utilisation, shall be given to the creator of intellectual property:
Provided that where the agreement between the creator and the recipient has a provision for a lesser amount than thirty per cent of the net income, the provisions of this Bill will prevail; out of the remainder, thirty per cent shall be paid into the fund created by the intellectual property management committee. Rest of the income or royalties shall be retained by the recipient for their utilisation in any further research and to meet other expenses for the protection and maintenance of public funded intellectual property.
9. Government’s rights and duties: The Bill through a non-obstante clause seeks to vest the government with rights to practice and assign the public funded IP for the benefit of the public. In case the recipient does not fulfil any of the conditions in the Bill, the government has a right to stop or withhold the funding and recover the grants already released. Where the title vests with the government, the government will have the same duties as that of the recipient with respect to the public funded IP.
10. Penalties: If the recipient or the creator fails to perform the obligations, the Bill prescribes stringent penalties. If the creator fails to intimate the recipient of the IP created from the public grant, he will be responsible to pay up to 25% of the public grant and he also has to renounce his share in the royalties and income. If the recipient fails to fulfil any of the requirements under the Bill, the recipient may be punished with a fine of up to 50% of the grant.
11. Miscellaneous Provisions: The Bill also provides for other important provisions such as preference to national industry, reference of disputes to arbitration, stringent audit and accounts, protection of action taken in good faith etc.
The Bill comes with a duel objective of promoting innovation while regulating the grant of public funds for research. A few changes and clarifications are still required in the Bill before it gets through both the houses of the Parliament. However, having regard to the positive changes the Bill seeks to bring into the existing system, it is in the best interest of the general public that it is brought into effect.
Authored By: Sandeep Hegde M.
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