Intellectual Property Rights from Publicly Financed Research and Development Act: briefing by Department of Science and Technology

Science and Technology

07 November 2012
Chairperson: Mr N Ncgobo (ANC)
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Meeting Summary

The Department of Science and Technology briefed the Committee on Intellectual Property Rights from Publicly Financed Research and Development (IPR PFRD) Act (Act 51 of 2008). The Committee was provided with background on the evolution of the national policy to the point of it becoming the Intellectual Property Rights from Publicly Financed Research and Development Act.  The Act and Regulations came into effect on 2 August 2010. The National Intellectual Property Management Office (NIPMO) and the Intellectual Property (IP) Fund were established in terms of the Act. The Fund was to be managed by NIPMO and would provide financial support to institutions for statutory protection and maintenance of intellectual property. Challenges in the functioning of the National System Innovation necessitated the need for NIPMO. 90% of DST’s annual budget 2010/11 of R4.5bn was given to public institutions for research and development (R&D). The problem was that the socio economic returns to SA from this R&D were limited. Only 5% of SA’s patents in the USA and Europe were from public research institutions, and intellectual property (IP) was lost to foreign institutions. The situation was further exacerbated by the predominant focus on publications by academics due to current R&D incentives. Only 1% of SA’s Gross Domestic Product went towards R&D. Whilst R&D subsidies specifically those from the Department of Higher Education had increased and research outputs had shown growth the intellectual property output growth had not been commensurate. SA was paying other countries more in patent royalties than what SA was earning in patent royalties.

The Committee was given insight into the establishment of the NIPMO interim office. In 2011/12 a NIPMO interim office was established and incubated within the DST to deliver on the objects of the IPR PFRD Act and to monitor its implementation. NIPMO’s legislated mandate and functions were also elaborated upon. Promoting the objects of the Act by way of providing statutory protection, management and commercialisation of IP referred by recipients of public R&D funds and providing incentives to recipients and IP creators were amongst the functions of NIPMO. NIPMO’s key challenges relating to stakeholders were IP awareness and entrepreneurial experience. A challenge relating to itself was independence from the DST in respect of oversight and compliance functions. Members were provided with a multitude of statistics on the Act and NIPMO’s impact to date.

The Committee mostly asked questions of clarification due to the technical nature of the briefing. Members were not too impressed that only 1% of SA’s GDP was spent on research and development. Members agreed that the issue of indigenous knowledge systems needed further discussion as much of it had already been lost in the past. The fact that academics were doing more research for publication purposes than for patent purposes needed to change. The Department needed to find a balance between the two.

Meeting report

Briefing by Department of Science and Technology (DST)
The Department of Science and Technology briefed the Committee on the Intellectual Property Rights from Publicly Financed Research and Development Act (Act 51 of 2008). The delegation comprised of Mr Jonathan Youngleson Head: National Intellectual Property Management Office (NIPMO), Dr Val Munsami Deputy Director General: Research Development & Innovation and Ms Shama Nathoo Parliamentary Liason Officer for DST.

Mr Youngleson undertook the briefing. The Committee was provided with background on the evolution of the national policy to the point of it becoming the Intellectual Property Rights from Publicly Financed Research and Development Act.  The Act and Regulations came into effect on 2 August 2010. NIPMO and the Intellectual Property (IP) Fund were established in terms of the Act. The Fund was to be managed by NIPMO and would provide financial support to institutions for statutory protection and maintenance of intellectual property. Challenges in the functioning of the National System Innovation (NSI) necessitated the need for NIPMO. In 2010/11, 90% of DST’s budget of R4.5bn was given to public institutions for research and development (R&D). The problem was that the socio economic returns to SA from this R&D were limited. Only 5% of SA’s patents in the USA and Europe were from public research institutions, and intellectual property (IP) was lost to foreign institutions. The situation was further exacerbated by the predominant focus on publications by academics due to current R&D incentives. There was also limited utilisation and commercialisation of R&D outputs for public benefit.  Only 1% of SA’s Gross Domestic Product went towards R&D. Growth in subsidised R&D outputs per annum were publications 15%; Masters-14% and Doctorates-10%. Total academic staff numbers for 1996 was 13 449 and it increased to 16 684 in 2010. Whilst R&D subsidies, specifically those from the Department of Higher Education (DHET) had increased and research outputs had shown growth the IP output growth had not been commensurate. SA was paying other countries more in patent royalties than what SA was earning in patent royalties.

The trend was that there was a steady decline in the value of fixed assets of corporations whereas there was an increase in their intangible asset value. SA was in need of a knowledge economy strategy.
NIPMO’s vision for NSI was a peer-reviewed system of evaluation and possible selection of projects, principle investigators, units and institutions. 

For the period 2000 – 2010 the number of Masters Degree holders had increased by 46%, Doctorates increased by 48% and peer reviewed publications had increased by 64%. It was reiterated that only 5% of SA’s IP outputs were derived from higher education institutions and science councils.
The Committee was given insight into the establishment of the NIPMO interim office. In 2011/12 a NIPMO interim office was established and incubated within the DST to deliver on the objects of the IPR PFRD Act and to monitor its implementation. NIPMO’s legislated mandate and functions were also elaborated upon. Promoting the objects of the Act by way of providing statutory protection, management and commercialisation of IP referred by recipients of public R&D funds and providing incentives to recipients and IP creators were amongst the functions of NIPMO. The Regulations attached to the Act also made provision for the establishment of an advisory board to advise NIPMO and the Minister of Science and Technology. Provision was also made for the establishment of a dispute panel by the Minister to hear and make determinations relating to administrative decisions made by NIPMO. One of NIPMO’s key challenges relating to stakeholders was IP awareness and entrepreneurial experience. A challenge relating to itself was independence from the DST in respect of oversight and compliance functions. Members were provided with a multitude of statistics on the Act and NIPMO’s impact to date.

Discussion
Mr P Smith (IFP) referred to the table on page 7 of the briefing document and asked whether it was correct that local business research and development expenditure was 4%. He also referred to page 9 which stated that the number of permanent academic staff had increased from 13000 in 1996 to 16000 in 2010. He felt the increase in the number to be disappointing. The increase should have been greater.
On page 18 he noted the increase of R&D expenditure to being 1% of SA’s Gross Domestic Product and that it was considered to be good. He felt the 1% to be moderate to poor.

Mr Smith referred to page 21 where mention was made to Offices of Technical Transfer (OTT) and asked what the OTTs’ relationship was with institutions. Who did the OTTs report to? Were OTTs paid by institutions? In addition, he pointed out the table on page 35 which provided figures on invention disclosures and on startups. Were startups successful and did the Technology Innovation Agency (TIA) have a role to play.

Mr smith continued with his questioning and asked what the envisaged role of NIPMO was. How much staff would it have? What was its budget? Were targets set that it had to achieve? What were NIPMO’s outputs? He also asked what the size of the IP Fund was. Was there a role for NIPMO and the whole IP setup to benefit the private sector?  How did NIPMO intend to deal with the issue of perverse incentives where persons doing research preferred to get published rather than securing patents? The discrepancy between the number of patents and the number of publications was wide. In addition there were increases in disclosures but patents did not increase. How real were efforts to increase patents?

Mr Youngleson agreed that page 8 was a bit confusing. The information had been taken from a survey and to fully understand the information one needed to read the survey. What the information was trying to illustrate was that government had made a contribution to R&D in SA. More than 12bn had been invested by industry in R&D but the investment by industry abroad was much higher at R18bn. A more innovative focus was needed on the R&D strategy.
Permanent academics were an output of the National Department of Higher Education and Training. The situation with academics was not very encouraging. Academics were being used as teachers at institutions instead of doing R&D. The low numbers of academics was also having a negative effect on R&D. R&D expenditure was less than 1% of GDP at 0.92%. The hope was for it to increase beyond the 1% mark. It was a matter of perspective how one saw the 1%. He personally felt the figure to be encouraging. Internationally SA was ranked mid way in terms of its R&D expenditure.

The Chairperson did not agree with Mr Youngleson that the 1% of GDP expenditure figure on R&D was encouraging.

Mr Youngleson continued that the IPR Act provided that all institutions had to have an OTT or be part of a regional OTT. An OTT provided people and expertise to institutions. All researchers at institutions should have access to the OTT research. The employer was the university. NIPMO would also provide funding.
On the issue of startups, TIA funded 100 projects. The number of potential startups was over a 100. He stressed that there was no reason why a university or a council could not do startup projects themselves. The DST could check on which ones were funded by TIA.

Mr Youngleson explained that NIPMO was the first SSDU established in government. The employees of NIPMO were on the DST payroll. NIPMO would become an independent entity. Advice had been received to go the SSDU route as National Treasury was inclined not to oppose it. NIPMO had 19 staff members- 11 were in the establishment and 8 were on short term contracts or were interns. The final staff complement would be under 30. NIPMO had submitted a three-year MTEF Budget to DST. He was not sure whether National Treasury had approved the budget. NIPMO’s expenditure in the first year was R55m. The budget for the present year was R70m. Funds were received from Programme 2 of the DST.
On the point of specific projects, three strategic planning sessions had taken place. NIPMO had strategic targets which fed into Programme 2’s strategic targets. These in turn fed into the DST’s strategic targets. There was no backlog in reaching targets.
On the issue of the IP Fund, R20m was given to institutions for IP support. Institutions claimed R40m from NIPMO but only half of the funds were granted. The IP Fund was a fledgling fund but it was expected to grow. Indicators were needed to drive IP benefits.
The IPR Act did not make provision for funding to assist the private sector. It was however important that within 6-18 months time the support for intellectual property should generate benefits to the industries taking the risks. He was not too sure how it would be done.
He conceded that perverse incentives were a problem. The rating system of the National Research Foundation (NRF) drove academics to publish in order to improve their rating. NRF funding was not much in any case. Academics liked the NRF rating system. He pointed out that the Department of Higher Education’s subsidy was 2.5bn and 65% of it went to the big six institutions which produced the most research output.
On the issue of patentable research versus other types of research, he noted that patentable research was much more difficult. Academics might have the tendency to publish without patentable research.
 
Mr M Nokonyama (ANC) stated that indigenous knowledge systems (IKS) were mentioned as one of the innovators. How were indigenous persons to benefit? Were possessors of IKS the recipients of the incentives mentioned? 

Mr Youngleson pointed out that SA was a signatory to World Intellectual Property Organisation (WIPO). WIPO had a unit which looked at indigenous systems research patentability. The problem was that most of the indigenous knowledge had been in the public domain for a long time. Indigenous knowledge not in the public domain could be protected by patents. The DST had a IKS Office to inform and advise on indigenous knowledge systems.

Mr Munsami said that there were two programmes in Programme 2 on IKS. Efforts were made to realign within the DST in order for NIPMO to deal with intellectual property issues in an optimal manner.

The Chairperson agreed that the issue of IKS needed to be looked at.

Mr Youngleson said that IKS were leaking from SA for the past 300 years. The IPR Act tried to control the leakage. There was a need to ensure that there was local benefit from intellectual property. The issue of IKS was a worldwide phenomenon. There needed to be greater cooperation.

Ms S Plaatjie (ANC) referred to page 6 and said that there was little accountability in public sector institutions. What was the reason for it being so? On page 13 mention was made that more money was spent on paying for foreign patents than what SA’s income was on patents. What was the problem?

Mr Youngleson noted that the lack of accountability was a historical trend in higher education. The trend in present times was for greater accountability on how public funds were spent. A huge amount of money was being spent to pay royalties overseas where the innovation could have been done in SA itself. In this way money could be generated for SA.

Mr Munsami noted that an innovation survey had been done. 

Mr Youngleson said that industry saw greater value in foreign research than research in SA. A strategy was needed to encourage more research to be done locally.

The Chairperson said that academics were doing more research for publication purposes than for patent purposes. The DST needed to find a balance.

The Chairperson pointed out that the 1% of GDP mark had not even been reached as yet where expenditure on R&D was concerned. Was the figure the actual or the target?  He further questioned the patenting of IKS and asked whether NIPMO was tasked with it. SA needed to develop its capability to patent and needed to balance it with the NRF requirements. The NRF requirement to obtain funding was to have publications. Publications were given more weight than having patents.
 
Mr Youngleson said that industries should be encouraged to spend more on R&D in SA than abroad. It was a better option than having government increasing its spending on R&D.

The Chairperson said that there was the New Growth Plan in place to encourage greater investment in industries. Funding was however key and without it things were difficult.

Mr Munsami explained that what the briefing document was saying was that the money in R&D in SA was being spent well even though the investment in R&D was not good. Significant levels of funding were needed to get innovation.

Mr Smith responded that the figure on R&D expenditure was not yet at 1% of GDP. It remained flat for the past 10 years below the 1% mark.

Mr Munsami stated that the DST tried to develop a commercialisation framework to address the issues raised.

The meeting was adjourned.

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