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IP and the Proposed Law on Government-Funded Projects

By Hector E. Chagoya-Cortes - Consultora Mextrategy
Founder and General Director

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Hector E. Chagoya-Cortes By Hector E. Chagoya-Cortes | Founder and General Director - Tue, 03/21/2023 - 12:00

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A General Law on Humanities, Sciences, Technologies and Innovation (GLHSTI) was proposed on Dec. 13, 2022, in the Mexican Chamber of Deputies (Lower Chamber) of the Mexican Congress. The law is a work in progress from 2019, soon after the current government took office. Since then, the announced principles and contents of the proposed law have been severely criticized and even opposed by wide sectors of the academic and scientific community.

The new GLHSTI is now initiating its legislative process. Opposing arguments can be boiled down to one main concern: a perceived exacerbated centralization and opacity of the decision-making process in the assignment of grants and other benefits, and in the rules for leadership transitions in public research centers, perceived as no longer driven mainly by merit.

But, beyond such concerns, the GLHSTI has the merit of including specific provisions on intellectual property that are worthy of an analysis on their own.

Government-Funded Projects and Intellectual Property

Mexico does not have rules for intellectual property obtained through the help of government funds. At this time, IP is administered case-by-case in the agreement where the grant is assigned in the best cases, or not administered at all.

In contrast, the US, throughout almost the entire 20th century, had rules that assigned to the government itself the intellectual property resulting from government-funded projects with poor results on deploying such technologies to society. In 1980, the so-called Bayh-Dole Act was an inflection point in the management of IP from government-funded technologies. It enabled mechanisms that allowed beneficiaries of the government funds to own and grant licenses to private entities, while retaining a right for the government itself to use such intellectual property, if and when necessary. Bayh-Dole is also perceived as the cause of the blooming of Technology Transfer Offices (TTOs) as a specialized administrative structure needed to manage intellectual property rights.

In most European countries, the landscape was different, but in the end, it converged toward the same structure of TTOs, as opposed to a system where the rights were given to the researchers, who could transfer technology freely to third parties on their own, and government rights are secured through provisions related to compulsory licensing.

The trend toward avoiding ownership by governments is based on the observation that governments do not have the capacity to bring the owned inventions to society themselves.

The IP Provisions in the Proposed GLHSTI

Historically, science- and technology-related laws in Mexico have been silent about intellectual property rights. The current law on science and technology only establishes that intellectual property rights protection is an exception to an otherwise inevitable obligation to publish results where public funds were involved. No other rules for IP have ever been enacted in the law.

Article 9 section XXIII of the proposed GLHSTI includes protection of intellectual property and traditional knowledge among the principles for the design of the science and technology innovation policy. In turn, Article 33, Section IX of the proposed GLHSTI contains benefits for Mexicans as a general principle to follow in implementing rules for government grants and funding at federal, state or municipal levels. The sole mention of intellectual property within such principles is noteworthy in the proposed law.

The key provision related to intellectual property in the GLHSTI is found in Article 36, which notably dictates that the principle of benefit to the well-being of the Mexican people must be executed while respecting applicable laws and treaties of which Mexico is part. The article assigns to the National Council the financed IP (like in the US prior to Bayh-Dole) but establishes the possibility of an agreement where the ownership may be negotiated differently. Finally, the article also establishes proportional co-ownership as the rule for projects where resources of third parties or the beneficiaries are used in addition to the National Council resources.

The proposed GLHSTI includes provisions relating to the management of IP rights by the National Council in Articles 52, 53, 60 fr. II, 74 and 86. Under such articles, intellectual property remains an exception to the general rule of making publicly available all government-funded knowledge, the National Council and public R&D centers are given faculties to manage intellectual property and royalties, and the benefits to inventors are also regulated expressly.

Conclusion

The proposed GLHSTI law is, perhaps, the most comprehensive proposal regarding intellectual property of government-funded projects in Mexico in a century.

The proposal does leave open a lot of issues related to the implementation of such a policy in practice. Just like other aspects that have been criticized about the proposed GLHSTI, the law is too vague or discretionary with regard to the actual rules on ownership, royalties and benefit-sharing arising from the potentially funded projects, but it is also a good framework to build clearer rules in the regulation of the law, the internal policies of the research centers and for negotiations with the private sector.

Because nobody has an obligation to receive money from the government for a project, it does make sense to have rules on ownership of intellectual property, and the fact that the proposed law has a space for negotiating a different ownership than the general rule is definitely a good policy starting point. There is still room for improvement or deterioration of this proposal. As the study by the Mexican Congress advances, the outcome is yet to be seen.

However, in practice, the most challenging issue is the actual management of intellectual property at the National Council because, at this time, there is not an administrative body within such a council fully empowered to manage the intellectual property. Without that, the result may be catastrophic and lead to a poor or even destructive implementation of the proposed law.

Photo by:   Hector E. Chagoya-Cortes

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