New IP management regime for government-funded projects

For many years the IP management of government-funded projects in Mexico was non-existent. Mexican law was silent regarding both the ownership of such projects and the agreements governing how grant money was spent. Nevertheless, recent changes in innovation policy have mandated changes in the management of such projects in order to prepare for future innovation opportunities in Mexico.

Absence of regulation in government-funded projects

The US Bayh-Dole Act – which resolved the problem that IP policy for government-funded projects was previously so restrictive that it inhibited technology transfers from universities or R&D centres to companies – is well known. Bayh-Dole and similar laws around the world have addressed the same restrictive landscape by allowing for the exploitation of government-funded inventions by private parties.

In the 1970s and 1980s Mexico had a restrictive technology transfer policy controlled by the government, which had to approve the terms and conditions of the corresponding agreements. This led to much debate, as government-owned companies used the technology transfer framework intensively and widely. However, private companies became complacent and unskilled in negotiating terms and conditions for technology, and technology providers had no incentive to provide technology to such companies under the restrictive policies – which led to stagnation in the development of technology. With the liberalisation of the Mexican economy, in 1991 the laws were abolished and since then technology transfer has been left to the parties, without any government intervention except for antitrust legislation.

In spite of the criticism levelled at the law, the restrictive regulation did not cover government-funded inventions, and historically Mexico has not regulated government-funded projects. Therefore, unlike many countries, Mexico did not need a law allowing private parties to exploit government-funded inventions – similar to Bayh-Dole – because no restrictions applied.

Case-by-case approach

In 2006 a new innovation policy was implemented in Mexico, emphasising the importance of intellectual property for innovation, in particular for projects funded through the National Council of Science and Technology (CONACyT). Under this policy, the rules related to the grant of funds included patent expenses as eligible expenses and increasingly tried to promote patenting by entities benefiting from the fund with no restrictions on the use of intellectual property.

Nevertheless, along with the establishment of the Hydrocarbon Sector Fund – which comprises 0.4% of the gross sales of Mexican state-owned oil company PEMEX – the need to ensure that innovations supported by the fund would return to PEMEX was clear. Therefore, in 2009 it became the first fund to include a specific IP policy, which considered different variables for each project and resulted in the signature of IP agreements on a case-by-case basis.

The government has promoted the establishment of technology transfer offices in universities, thus increasing the importance of managing the intellectual property of government-funded projects. However, in terms of the general policy of transparency for government expenses, the need to know how, when and why government funds are spent, including R&D expenditure, has been part of the national debate.

Such debate has led to the enactment of a new law on the results of R&D carried out by government-funded projects.

New law

On May 20 2014 changes to the Law on Science and Technology were published in the Official Daily of the Federation. There was little debate over the changes as they were perceived to address only a strategy for access to scientific information. The changes added new Chapter X – About Open Access, Access to Scientific, Technological and Innovation Information and the National Repository. The title and discussions suggested more of a statistical and transparency exercise in the context of the availability of information through the Internet as a government communication strategy. The law is relevant to IP management only because it expressly addresses intellectual property in Articles 64 and 65:

Article 64. CONACyT shall design and promote a national strategy in order to democratize Scientific, Technological and Innovation information, in order to strengthen the country’s capabilities such that the universal knowledge is available to students, teachers, academics, researchers, scientists, technologists and people in general. The strategy shall seek to broaden, consolidate and facilitate access to national and international scientific, technologic and innovation information, in full text, in digital format.

Higher education institutions and research centres shall constitute Repositories by scientific or technological disciplines, or by other topics to be determined, in order to disseminate scientific and technological information derived from their educational and academic products, and in general to disseminate all kinds of research performed, regardless of its presentation, according to quality criteria and technical standards issued by CONACyT. Such Repositories may be established at the level of the institutions or research centres or through the creation of networks or associations with other institutions by disciplines, regions or other criteria. CONACyT shall issue rules to which such Repositories referred to by this law shall be subject.

Article 65. By Open Access it shall be understood access through a digital platform and without requirement for subscription, register or payment, to research and educational, academic, scientific, technological or innovation materials, that were financed through public funding or that have used public infrastructure in their development, without prejudice to the provisions related to patents, protection of industrial or intellectual property, national security, copyrights, amongst others, as well as of such information that, by reason of its nature or by decision of the author, is confidential or reserved.

Thus, the law goes far beyond what was expected and contains further provisions relating to materials developed by students who obtain scholarships to study abroad, which might lead to copyright conflicts with the institutions that the students attend for master’s or doctorate degrees. Fortunately, the law contains a provision that appears expressly to privilege intellectual property and confidentiality. However, CONACyT has 18 months to issue rules implementing these provisions, so their impact remains to be seen.

Transitional recommendations

The new law is historic in the sense that hitherto, no law has contained express provisions related to use of the knowledge developed through government-funded projects.

Accordingly, although only one article refers to intellectual property, the law has dramatically changed IP management in government-funded projects in Mexico by requiring project organisers to develop and document an IP strategy before commencing work whenever government funds or infrastructure are involved.

Until CONACyT issues its rules, the applicability of the law to ongoing projects without an IP strategy in place or that are carried out in government facilities (even without government funding) remains unclear.

Further, there may be unintended consequences for activities that were previously straightforward – for example, R&D projects that are privately funded but performed in government facilities, or R&D projects carried out abroad by students that receive support from the Mexican government through scholarships. According to the latest CONACyT statistics on R&D in Mexico, in 2012 more than 4,000 students were supported by the Mexican government through scholarships, mainly in the United States and the European Union. Accordingly, there might be a conflict between this new law and the policies applicable to such students.

In the meantime, companies or institutions that have relationships with Mexican entities or researchers should take the following measures:

• A company or institution employing Mexican researchers should:
  • identify whether the Mexican government supported them in order to work there, including whether their institutions used public funding to support the researchers;
  • ensure that there is proper paperwork stating that the Mexican researchers will respect the institution’s IP policy in accordance with Mexican law and will disclose to the government any duty that is inconsistent with such policy; and
  • ensure that the Mexican researchers have confidentiality obligations in place.
• A company or institution collaborating with a Mexican institution should:
  • identify, when the project is carried out in Mexico, whether the project is taking place at a government facility;
  • ask the Mexican institution whether it has used government funding for any aspect of the project, and, if so, check the grant agreement;
  • ask the Mexican institution to protect the project from publication under the Law on Science and Technology by documenting the exception for intellectual property and confidential information;
  • ensure, if independent intellectual property is being used for the project, that it is correctly identified upfront and separated from any non-independent intellectual property; and
  • ensure that patents are filed in Mexico in order to ensure the project’s IP position in relation to the Mexican government.

Finally, the management of know-how and confidential information in collaboration agreements must specifically address the obligation to keep the results of the collaboration confidential.

Work to be done

Mexico has good safe harbour provisions for research in every technology area. These provisions include clear rules for the assignment of employee inventions, an experimental use exemption for patents and a grace period for non-patent publications from inventors.

Mexican researchers are renowned internationally for the quality of their work; however, at the same time, the market conditions and the country’s level of development make it an interesting jurisdiction in which to undertake R&D activities.

As the total number of patent filings has never surpassed 20,000 – with only around 1,000 patents filed by Mexicans – it is evident that the risk of infringing patents in Mexico is much lower than in other countries with more patenting activity. Yet Mexican publications are generally well ranked in scientific indexes and Mexican researchers are prolific in the publication indicators.

All of these opportunities must be considered by Mexican policymakers as they develop the rules for the Law on Science and Technology. The 18 months following this historic new law will be key in order to establish clear rules for investment in innovation projects and to foster the collaboration and open innovation activities of Mexican institutions in the international arena.

The existing rules respect IP rights and seem to be consistent with the Mexican legal framework. However, it is important to keep track of developments, as further formalities or conditions for applying the IP provisions may force those involved in these projects to focus on IP management more intensively.

The Mexican IP system is evolving and, along with other changes to economic policy (eg, the opening up of the energy sector to private investment at the constitutional level, as well as the development of a corresponding law), the government has clearly signalled its intent to provide the right tools to increase investment and innovation However, the results of the policy changes remain to be seen as the implementation of policies advances and specific rules are developed.

Becerril, Coca & Becerril, SC

Leibnitz 117 PH1, Col Anzures

Del Miguel Hidalgo, Mexico City

DF 11590

Mexico

Tel +52 55 5263 8730

Fax +52 55 5263 8731

Web www.bcb.com.mx

 

Hector E Chagoya

Director of patents and technology

[email protected]

Hector E Chagoya is a chemical engineer. He joined Becerril, Coca & Becerril in 1997 and became a partner of the firm in 2010. As director of patents and technology, he is responsible for all of the firm’s patent work.

Since 2012 Mr Chagoya has been included in the IAM Patent 1000: The World’s Leading Patent Practitioners. He has held leading positions at the Licensing Executives Society International and its Mexican chapter, and is an active member of other organisations in the IP, technology transfer and chemical engineering fields.

The first Mexican to obtain the Certified Licensing Professional certification, Mr Chagoya regularly contributes to recognised publications in the IP field.