Home > Topics > Evaluation and Valuation of Technologies > Valuation of Bioprospecting Samples: Approaches, Calculations, and Implications for Policy-Makers > Editor's Summary, Implications and Best Practices

Bioprospecting is defined as the use of biological resources, typically from the wild, for medicinal and other applications (such as energy production and cosmetics). It can give developing countries an incentive to preserve their own natural resources if the money they receive from developed-country institutions for the right to bioprospect on their soil is greater than what they would receive from destructive activities such as logging. The Convention on Biological Diversity (CBD) proposes “sharing in a fair and equitable way the results of research and development and the benefits arising from commercial and other utilization of genetic resources … upon mutually agreed terms” (Article 15(7)). The CBD does not attempt to define how payments should be made or how genetic resources should be valued.

This chapter discusses the methods that can be used to calculate royalty rates and collection fees for germplasm prospecting. It does NOT give approximate market values for germplasm but walks through examples on how value may be calculated. Examples used in this chapter apply to pharmaceutical prospecting for medicinal products, the basis of the famous 1991 agreement between Merck and the National Biodiversity Institute (best know through its Spanish acronym INBio (Instituto Nacional de Biodiversidad) of Costa Rica. The authors show that the principal factors include the uncertainty of finding marketable products and the value of these products. Negotiation factors are finding a good balance between collection (initial) fees as opposed to royalty (delayed) payments. Emphasizing collection fees reduces total payments except when national interest rates are very high. Reducing the risk of failure through in-country screening, including the use of indigenous knowledge, is a potentially valuable activity. Issues for contract negotiators are outlined and the implications for biodiversity conservation discussed. Conceptually, the highest valuation approach, royalties, will most encourage conservation, but as the future is typically heavily discounted, collection payments may get more attention and be most effective.

The chapter further discusses how payments to countries that provide biological resources could be structured and the effects on national capacity and investments. Payments can be divided between collection fees (which are paid at the time of collecting) and royalties (which are paid in the future when a product is marketed). Fees can be “shifted forward” by increasing the collection fee and reducing royalty payments; this is more risky for the collecting company, since it will have to pay the same amount of money regardless of whether or not successful commercial products are developed from the collected material. “Shifting” fees forward or backwards can affect conservation incentives.

The chapter also briefly discusses the valuation of indigenous (traditional) knowledge and the role of indigenous knowledge conserving biological resources. Indigenous knowledge of plants can help identify biological material that is worth investigating, but it is only cost-effective to interview locals if doing so will cost less than indiscriminately screening all biological materials collected.

Policy considerations for national governments, nongovernmental organization (NGOs), and development agencies are reviewed and it is concluded that grants/loans and training/equipment for in-country screening should be given a high priority as a potentially viable activity in the long term. In a national policy context, the authors discuss several policy considerations involving both the allocation of payments between collection fees and royalties and in-country screening. If the examples used herein are substantiated at all by actual cost figures, in-country screening is attractive financially as well as for its effects on development and skills improvement. However, considerable investment will be required before such efforts are possible. With adequate in-country funds lacking, international donors should seriously consider loans or grants for training and equipment purchases since in-country screening will be economically rewarding in the long term. Unlike numerous potential projects, there appears to be a ready market for the product, a preliminary-screening service.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policymakers

• By allowing bioprospecting in a given country, the value of conserving biological resources become more evident to many and can lead to increased conservation efforts.
• National policies that facilitate access to biological resources under fair and equitable terms are important. Equally important is to streamline and facilitate access. Access mechanisms have to the transparent, predictable, and managed by experts.
• Such policies should also encourage the building of domestic R&D capabilities. Governments should remember that there is a strong interaction between allowing bioprospecting and national scientific capabilities. In countries where scientific capability is high, bioprospecting activities, generally, are much higher also. Such capacity increases the negotiating strengths and benefit sharing stipulated in contract agreements.
• The responsibilities of governments go further and include the provision of legal, institutional and political support. For prospecting to succeed, macro policies have to be put into place and that includes clear rules about the “bioprospecting framework,” which requires biodiversity inventories, information systems, business development, and technology access, a current biodiversity inventory, clarity on systems of land and property ownership, and more.

For Senior Management (university president, R&D manager, etc)

• Clear and transparent institutional policy governing the criteria in prospecting contract negotiations is essential. Such a policy may include the stipulation of minimum requirements for initiating negotiations, how the interface with local communities is to be structured, and the possibility (or impossibility) of patenting certain elements, and so forth.
• Public-sector institutions that hope to negotiate bioprospecting deals should invest in capacity-building and infrastructure so that they can accurately valuate genetic resources. Accurate valuation will make sure that all parties feel that they are getting a fair deal, and can help avoid political downsides
• Political backing is important as no deal with be perfect. With hindsight, every deal could have been better. Hence the head of public institution that engages in bioprospecting deals should be aware that criticism will come and have an effective communication plan.
• Knowledge of operational norms and of the changes and transformations taking place in the business sector, as well as the scientific and technological innovations that underlie these transformations, helps to define access and benefit sharing mechanisms. As a consequence, it equally important to invest in “business intelligence” as it is in bioprospecting per se. This requires interdisciplinary teams.
• Encourage your licensing groups to develop innovative and creative ideas for obtaining compensation. Everything is not in the money. An ample spectrum of potential benefits exists (for example, fees for visiting gene banks, collecting material, donations of research equipment, training of national scientists, and so forth).

For Scientists

• Your knowledge can help your institution accurately valuate genetic resources.
• Any bioprospecting deal must be based on a thorough understanding of the national and local needs in terms of technology, training, and joint research. International strategic alliances must be struck. Even when an institution or community possesses adequate resources to face a concrete demand, knowing the national situation and the strategic needs will permit it to reach better agreements and fulfill a mission that goes beyond merely satisfying the institution’s interests. You are perhaps the best positioned to ensure that such elements are incorporated into agreements. Work closely with your licensing personnel.
• Similarly, your networking at conferences, particularly international ones, can bring in collaborations to your institutions and countries. Never underestimate the personal connections based on trust.

For Technology Transfer Officers

• Work with your institutional leadership and administration to make sure that your office has the capacity to manage IP, obtain licenses, and negotiate deals.
• Familiarize yourself with the various ways that your institution can pay for the rights to bioprospect and collect germplasm.
• In contracts, pay particular attention to key clauses such as IP rights, the importance of warranties for legality, clauses on ways to estimate benefits (net, gross, etc.), requirements and restrictions on third party transference of material (especially to subsidiaries), the obligations of such parties receiving material or derivatives thereof, precise definitions of key terms that condition and outline other important obligations (products, extracts, material, chemical entity), precise determination of property and ownership (IP rights and others) of the research results, joint relationships, confidentiality clauses in the agreements and how to balance them in relation to the need for transparency in the agreement, termination of obligations and the definition of the survivor of some obligations and rights (royalty, confidentiality), conflict resolutions, and more.