Uncategorized

The Public Funded R&D Bill: Does India Need a Bayh Dole – II



“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.

5 comments.

  1. AvatarJ. Sai Deepak

    Hi
    Under the Department of Biotechnology proforma (Annexure IV), “asset” means (a)immovable property and (b) movable property of capital nature, where the value exceeds Rs.1000.
    So is the definition of asset in grant conditions of the Ministry of Chemicals and Fertilizers, ICMR, Ministry of water resources. Since the word “asset” has been used in GFR Forms 19 and 19A, it has to be imputed the same meaning as intended in the forms. For instance, even in DSIR research grant guidelines, the same definition has been used with the only difference being that the value of movable property of capital nature has to exceed Rs.10,000/-.

    I am not sure of other forms of IPR, but s.50(5) of the Patents Act says that patent may be treated as movable property. Can this be categories as movable property of capital nature under the aforementioned guidelines?

    Also, under the income tax act,1961 , the term “asset” has not been defined, but it defines “block of assets” in s.2(11). Under this definition, it says block of assets means a group of assets falling within a class of assets comprising Intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed.

    Reply
  2. AvatarMrinalini Kochupillai

    This is fantastic analysis Sai – the above definitions certainly suggest that the terms in the AICTE and other such guidelines dealing with “assets,” would in all probability apply to IPRs as well. This means that only those funds agencies that come under the DST guidelines confer rights to own and transfer IPRs generated using the funds to the grantee institution. To this extent, the current situation in India is similar to the situation in the US prior to the passage of the Bayh-Dole.

    However, I am not convinced that the presence of different rules and regulations vis-a-vis funding from different agencies is good enough reason to have a Bayh-Dole type legislation in India. The primary investigation at this stage of India’s growth ought, in my opinion, to be whether a uniform rule giving the grantees the right to own the IPRs would really contribute to technology transfer. Of course, one may ask – how would technology transfer happen if the government were to keep holding the IPR? Paradoxically, the government holding on to the IPR may be better for commercialization in some instances because of the low awareness of IPRs (as well as low amount of available capital and resources necessary to actually transfer the technology) in a number of educational institutions in India. The DIT annual report for example, lists a number of instances of technology transfer.

    On the other hand, a number of government funded Universities (such as the IITs) and government funded R&D institutes such as the CSIR for example, get, in most cases, to hold on to (or atleast share) the IPR created by them, no matter what the source of the funds. However, the CSIR as well as the IITs are also very successful and ardent licensors. According to a recent discussion I had with Dr. Brahmachari, the % of patents that are licensed by the CSIR is far greater than the current world average. (CSIR itself is a government lab that gets funds from the government for all its R&D – but it also gives a small amount of funds to Universities and private entities for R&D).

    Reply
  3. AvatarJ. Sai Deepak

    Dear Mrinalini,
    Can you please confirm from a person who’s good at taxation as to what exactly comes under “movable property of capital nature”? Because i am not sure if IPR falls under this category. There seems to exist a distinction between Movable property and movable property of capital nature. I’l get back to you after i go through the literature. Palkhivala on Taxation has a section on this. But the one which i have is a very old edition. I dont know the current position.

    More importantly, all these rules for grant-in-aid schemes have been formulated subject to the “General Rules for Grants-in-Aid” which are listed in part 1, page 181 of volume 5 of the financial handbook. Rule 369 A says ” The payment of various classes of grants to local bodies and institutions, e.g. contributions to hospitals and dispensaries, educational grants-in-aid, contributions for the maintenance of roads, etc., will be regulated, subject to the following instructions, by the general or special orders of Government sanctioning each class of payment.” and here’s where the definition of asset is given.

    Reply
  4. AvatarMrinalini Kochupillai

    Thanks Sai for all the excellent research. I remember reading a decision of taxation and IPRs by Justice Jeevan Reddy – I dont remember the name of the case. (If any of our readers know about this, we would be grateful if you could point us in the right direction).

    It would also be interesting to get to the bottom on how the terms and conditions for each grant/loan by any ministry or govt funding agency is determined. As we had discussed in the first post in the series, the DST guidelines are very different from those of other govt funding bodies/departments and I am keen to know the process that is followed in finalising the terms and conditions. There are many un-answered questions…

    I am hoping, through these posts to involve the public in this debate… any inputs or information from our readers would help the larger cause.

    Reply

Leave a Reply

Your email address will not be published.