Convention on Biological Diversity (close)
An international agreement articulated at the 1992 Earth Summit in Rio de Janeiro, the Convention seeks to establish a comprehensive strategy for sustainable development, setting out commitments for maintaining the world’s ecological underpinnings in light of increasing business and economic development. The Convention established three main goals: the conservation of biological diversity, the sustainable use of its components, and the fair and equitable sharing of the benefits from the use of genetic resources.
Trade-Related Aspects of Intellectual Property Rights (TRIPS) (close)
An international agreement that was initiated under the forerunner of the World Trade Organization (WTO), the General Agreement on Tariffs and Trade (GATT), under the Uruguay round of trade negotiations. The TRIPS Agreement is the most comprehensive multilateral agreement on Intellectual Property covering all IP instruments. It was the first IP rights accord to legitimize the patenting of living organisms. TRIPS provides the guidelines for the harmonization of IP rights laws under the WTO. All WTO member countries have substantive TRIPS obligations.
UPOV (the Convention of the International Union for the Protection of New Varieties of Plants) (close)
An international treaty that guarantees to plant breeders in member nations national treatment and a right of priority. National plant variety protection statutes of member nations are brought into harmonization with the various UPOV provisions, for example, the requirements of distinctness, uniformity, stability, and novelty for new crop varieties.
The use of biological methods (often genetic engineering and related advanced-molecular-biology applications) to produce products, processes, and related services. Generally, these are patentable under U.S. patent law.
The section of the patent that defines an invention (the technology that is the exclusive property of the patentee for the duration of the patent) and is legally enforceable; that is, the claims set the metes and bounds of the patent rights. The patent specification must conclude with a claim, particularly pointing out and distinctly claiming the subject matter that the applicant regards as the invention or discovery. The claim or claims are interpreted as set forth in the specification: the terms and phrases used in the claims must be sufficiently described in the specification, that is, patent claims must read in the light of the specification. The specification discloses and the claims define the invention.
The process of taking an invention or discovery to the marketplace. It involves working the idea into a business plan, consideration of protection options, and determining how to market and distribute the finished product.
A second patent application containing a disclosure identical to one in a previous (parent or grandparent) application filed by the same applicant as the original application, while the original application is still pending, and that is entitled to the filing (priority) date of the original application.
disclosure of origin (close)
A requirement imposed on patent applicants to disclose in patent applications the geographic origin of biological material on which the invention (subject of the patent application) is based.
due diligence (close)
Investigations undertaken to assess the ownership and scope of one or more IP rights that are being sold, licensed or used as collateral in a transaction. This is done in order to identify business and legal risks associated with the IP rights being analyzed.
The term, or length of time that an IP right lasts. A U.S. utility patent on an invention, for example, has a duration of 20 years from the date on which the patent application was filed, as does a plant patent. The duration of a U.S. copyright is usually the life of the author plus 70 years (for works created after January 1, 1978). Protection of information as a trade secret lasts as long as the information remains secret. Duration of a trademark continues as long as it is used (as a source indicator) and properly maintained/protected.
intellectual property (IP) (close)
Creative ideas and expressions of the human mind that have commercial value and are entitled to the legal protection of a property right. The major legal mechanisms for protecting intellectual property are copyrights, patents, and trademarks. IP rights enable owners to select who may access and use their intellectual property and to protect it from unauthorized use.
The creation of a new technical idea and of the physical embodiment of the idea or the means to accomplish it. To be patentable, an invention must be novel, must have utility, and would not have been obvious to those possessing ordinary skill in the particular art of the invention.
Information that enables a person to accomplish a particular task or to operate a particular device or process. Refer to trade secret.
A grant of permission to use an IP right within a defined time, context, market line, or territory. There are important distinctions between exclusive licenses and nonexclusive licenses. An exclusive license is “exclusive” as to a defined scope, that is, the license might not be the only license granted for a particular IP asset, as there might be many possible fields and scopes of use that can also be subject to exclusive licensing. In giving an exclusive license, the licensor promises that he or she will not grant other licenses of the same rights within the same scope or field covered by the exclusive license. The owner of IP rights may also grant any number of nonexclusive licenses covering rights within a defined scope. A patent license is a transfer of rights that does not amount to an assignment of the patent. A trademark or service mark can be validly licensed only if the licensor controls the nature and quality of the goods or services sold by the licensee under the licensed mark. Under copyright law, an exclusive licensee is the owner of a particular right of copyright, and he or she may sue for infringement of the licensed right. There is never more than a single copyright in a work regardless of the owner’s exclusive license of various rights to different persons.
maintenance fees (close)
Fees for maintaining in force a patent. The fees typically have to be paid at irregular intervals, depending on the jurisdiction, and significantly increase over time.
patent (U.S.) (close)
A grant by the federal government to an inventor of the right to exclude others from making, using, or selling his or her invention. There are three kinds of patents in the United States: a standard utility patent on the functional aspects of products and processes; a design patent on the ornamental design of useful objects; and a plant patent on a new variety of a living plant. Patents do not protect ideas, only structures and methods that apply technological concepts. Each type of patent confers the right to exclude others from a precisely defined scope of technology, industrial design, or plant variety. In return for the right to exclude, an inventor must fully disclose the details of the invention to the public so that others can understand it and use it to further develop the technology. Once the patent expires, the public is entitled to make and use the invention and is entitled to a full and complete disclosure of how to do so.
plant breeders’ rights (close)
Plant breeder’s rights are used to protect new varieties of plants by giving exclusive commercial rights to market a new variety or its reproductive material.
plant variety protection (PVP) (close)
A form of patent-like protection for sexually propagated plants, as well as hybrids, tubers, and harvested plant parts. The Plant Variety Protection Act of 1970 is administered by the U.S. Department of Agriculture and not the U.S. Patent and Trademark Office (which does issue plant patents).
prior informed consent (close)
The consent given by a party with respect to an activity after being fully informed of all material facts relating to that activity. The Convention for Biological Diversity requires that access to genetic resources shall be subject to the prior informed consent of the country providing the resources.
traditional knowledge (close)
Tradition-based creations, innovations, literary, artistic or scientific works, performances and designs originating from or associated with a particular people or territory.
The usefulness of a patented invention. To be patentable an invention must operate and be capable of use, and it must perform some “useful” function for society.
Your source for expert commentary on IP management issues.
CHAPTER NO. 16.4
Costanza C, L Christoffersen, C Anderson and JM Short. 2007. Deal Making in Bioprospecting. In Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices (eds. A Krattiger, RT Mahoney, L Nelsen, et al.). MIHR: Oxford, U.K., and PIPRA: Davis, U.S.A. Available online at www.ipHandbook.org.
© 2007. C Costanza et al. Sharing the Art of IP Management: Photocopying and distribution through the Internet for noncommercial purposes is permitted and encouraged.
Deal Making in Bioprospecting
There is an upward trend in demand for intellectual property protection in agriculture. While international agreements exist to protect agricultural biodiversity, the specific rights, benefits, and responsibilities of parties entering into commercial agreements that involve the use of genetic resources still must be clarified. This chapter provides practical guidance for creating agreements around the use of biodiversity resources, as well as guidance that may provide valuable insights for creating similar agreements on the use of unique agricultural resources.
Intellectual property (IP) rights protection is increasingly available for many aspects of agriculture, particularly through utility patents and plant variety protection (PVP), known also as plant breeders’ rights. Globally, however, the kinds of intellectual property rights that can be exercised over living things vary greatly. This is especially true for the living things that make up the biodiversity of the planet—the millions of naturally existing species and their attendant gene pools—as well as for agricultural biodiversity—that subset of biodiversity involving cultivated crops used for food, materials, fertilizers, energy, and so on. It is useful to recall that the United Nations (UN) Convention on Biological Diversity defines bio-diversity as “ the variability among living organisms from all sources, including, inter alia, terrestrial, marine, and other aquatic ecosystems, and the ecological complexes of which they are part: this includes diversity within species, between species and of ecosystems.” With respect to IP rights, naturally occurring living organisms cannot be protected; nonhuman living things that have been modified by man can be protected. Bioprospecting is the exploration or screening of natural biodiversity or agricultural biodiversity in order to identify potential commercial applications from those genetic resources. Bioprospecting should not be confused with biopiracy, which is the unauthorized and uncompensated taking of biological or genetic resources.1
This chapter seeks to aid parties in creating biodiversity access agreements (BAA) for the use of unique genetic resources that require additional development to commercialize. There is considerable—although not widespread—experience to date in creating BAAs involving microbial genetic resources. This general discussion of bio-diversity access agreements will not encompass all of the factors necessary to create every kind of commercial agreement, but it may prove useful for the following:
2. Biodiversity and IP
2.1 The international agreements
Biodiversity is addressed by the UN Convention on Biological Diversity (CBD). The objectives of the CBD are:
By recognizing a national government’s sovereignty over all genetic resources within its borders (Article 15) and facilitating access to these resources based on “mutually agreeable terms” subject to the “prior informed consent” of the country of origin, the CBD provides firm conceptual grounding which can be adapted to guide commercial agreements.
Agricultural biodiversity in particular is governed also by the International Treaty on Plant Genetic Resources for Food and Agriculture (the Treaty). This agreement encourages open access to plant genetic resources and requires sharing the benefits of these resources through the exchange of information, access to technology transfer, capacity building, and the sharing of financial and other benefits of commercialization.2
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement of the World Trade Organization (WTO) provides minimal guidance on the issue of agricultural biodiversity, exempting both plants and animals that are not classified as modified microorganisms. Article 7 of TRIPS states that the protection and enforcement of IP rights should contribute to:
The TRIPS agreement requires that signatories either provide patent protection of plant varieties or devise an effective sui generis (a specifically dedicated and unique) system for plant variety protection.
Currently, there is an effort to standardize countries’ sui generis plant variety protection systems through the International Union for the Protection of New Varieties of Plants (UPOV) Convention, the purpose of which is to “ensure that the members of [UPOV] acknowledge the achievements of breeders of new varieties of plants, by granting them an intellectual property right, on the basis of a set of clearly defined principles.” 3,4,5
The CBD, the Treaty, TRIPS Agreement, and UPOV Convention provide general guidance for parties engaged in developing their own agreements for access to genetic resources. It is important to realize, however, that the existing (international) agreements are based on broad standards of conduct. The agreements provide overarching principals but not instructions on how to meet the requirements of every unique situation. The Bonn Guidelines, adopted by the COP in 2001, serve as a first step in bridging the gap between international agreements and the requirements of parties negotiating access to biodiversity resources. In 2005 the Biotechnology Industry Organization (BIO) developed and published its own guidelines for members engaged in the discovery of natural products such as enzymes, chemicals, and small molecules.6
From the perspective of two parties attempting to come to an agreement on providing or obtaining access to a unique genetic resource, which may or may not become a successful commercial product, the international agreements leave many questions unanswered. Parties must use common sense to strike a balance between protecting rights and providing fair compensation, on the one hand, and working within limits imposed by markets and legal frameworks on the other.7 In the case of commercializing biodiversity, the parties must agree upon ownership of the resource and the subsequent product, the amount of investment required to bring the product to market, and the distribution of benefits resulting from the sale of the product.
One commentator8 has noted a difference in negotiating access to agricultural genetic resources and nonagricultural (particularly microbial) genetic resources: whereas microbial biodiversity governed under the CBD has been seen as bilateral bargaining, the Treaty puts a premium on open access, seeking to keep access costs low and bolster global food security by encouraging breeding and research. The model provided in this chapter does emphasize sharing in a manner consistent with the Bonn Guidelines of the CBD and many of the financial and nonfinancial benefits outlined in the Treaty.
2.2 Beyond international agreements
Given the limited guidance on terms for biodiversity agreements, the private and public sectors have had to collaborate to create biodiversity access agreements (BAA) on a case-by-case basis. Over time, some companies have developed frameworks based on internationally accepted principles for creating BAAs. For example, Diversa, a publicly traded U.S. biotechnology firm (NASDAQ: DVSA), has entered into many BAAs with partners including Alaska, Antarctica, Australia, Bermuda, Costa Rica, Ghana, Hawaii, Iceland, Indonesia, Kenya, Mexico, Puerto Rico, Russia, the San Diego Zoo, South Africa, and Yellowstone National Park. The company, which is involved in the discovery and evolution of novel genes and genetic pathways from unique environmental sources, sees access to microbial biodiversity as critical to ensuring a greater diversity of genetic material; this access increases the chances of discovering a novel and unique gene for a new product or application. During a time when few or no models, guidelines, or requirements existed, Dr. Jay M. Short, then chief executive officer and chief technology officer of Diversa, and his team of intellectual property, commercial, and scientific specialists developed and refined a set of principles for selecting areas of the world in which to work, selecting partners, and creating agreements with governments, academic institutions, and private companies to help ensure long-term relationships based on the sustainable use of biodiversity.
Through its decade of experience with BAAs, the Diversa biodiversity team determined that there are three main factors that lead to a successful biodiversity collaboration:
Based on the experience of Diversa, the following characteristics have been useful for evaluating the best locations to establish biodoversity collaborations:
Once a collaboration partner has been identified, the terms of the BAA must be decided. Highlighted below are key issues that influence the success of BAAs. This list has evolved significantly both through the implementation of BAAs (based on assessments and guidance from companies and biodiversity collaborators9) and through monitoring and adapting to changes within international conventions. The main issues include:
Countries also must evaluate the potentially collaborating corporations, nongovernmental organizations (NGOs), or academic institutions to judge their suitability as partners. Criteria for evaluation include
3. Biodiversity Access Agreements
Once the parties have determined that they want to create a BAA, the challenge is to formulate a relationship that will provide access to a necessary stream of processed raw material (for example, novel genetic material) while ensuring the sustainability of that resource and compensating the party granting access by sharing benefits. BAAs contain basic elements that are common to all standard contracts, but they also contain very specific information that changes from agreement to agreement. This section discusses the necessary elements for a BAA.
3.1 Parties to an agreement
The most basic element of the BAA is to determine the appropriate parties to the agreement. It is critical to identify who has the proper authority to grant access to the particular biodiversity resource. In addition, it is important to identify all parties affected by access to the biodiversity resource, such as those people who live and work in proximity to it. Specifically, the parties need to identify the following:
The National Focal Point for Access and Benefit Sharing (ABS) is frequently a good starting point for clarifying issues of authority, jurisdiction, stewardship, and tenancy.10 As a practical matter, the company should request that the prospective biodiversity collaborator11 provide evidence that it has authority to enter into a BAA, collect samples from designated areas, and share in the benefits that may arise from such collaborative work.12
3.2 Duration of the agreement
The period of time that the BAA is in effect should be indicated in the initial agreement. It is important for this time horizon to be referenced in later sections regarding the future ownership and disposal of genetic or other material obtained under the agreement, as well as the future benefits that may be derived from the commercialization of a biodiversity-based product. It is advisable for the parties to:
Parties must agree on the legal framework within which the agreement will function. Doing so requires that the companies determine:
3.4 Contribution of each party
The parties must agree not only on what they propose to contribute to the deal but also on how to value the contribution. For the creation of BAAs, firms will see biodiversity as raw material for a biodiversity-derived product, the realization of which will require their processing, manufacturing, and marketing to make the collaboration commercially viable. Countries contributing the biodiversity resource must consider the many values of the genetic resource when creating the BAA. A variety of benefit-sharing mechanisms, both financial and nonfinancial, can be used to compensate parties for their contributions to the venture. Valuation of the biological or genetic resource and equitable benefit sharing are ultimately the responsibility of the parties to the BAA and must be detailed in the BAA.
As companies, research institutes, academic institutions, and government agencies cooperate on exploring biodiversity for commercial applications and products, they enter into agreements that govern access and also define a regime for sharing benefits. This requires the valuation of a genetic resource as an input into the development of the product. Significant effort in the form of, for example, processing, manufacturing, or marketing required to transform the microbial bio-diversity into a marketable product must also be considered. The market will determine the value of a biodiversity-derived product. Companies will know the commercialization costs and their target profit margin. For the company to see the project as economically viable, biodiversity access royalties, collection fees, and other benefits to collaboration partners would have to be covered by market value of the product less commercialization costs less target profit. The uniqueness of the biodiversity (that is, the fact that it has not previously been commoditized) will influence the value placed on it by a company, with a higher degree of “uniqueness”13 being more highly valued.
In practice, as this is a relatively new market in terms of the formation of such collaborations and formal agreements, it may be difficult to convince companies to recognize the full value of the biodiversity resource and the contribution of the biodiversity collaborator to the satisfaction of the international environmental community. Companies and biodiversity collaborators must find a middle ground where the negotiated benefits to the collaborator are not economically prohibitive to product development but do provide incentives to the collaborator to participate in the BAA. As the market matures, biodiversity collaborators should be able to increase the value of their contribution as they increase their capacities through training and the transfer of technology that they receive from companies. Moreover, as companies become more accustomed to these collaborations, the companies are likely to be more open to increasing benefits to their collaborators. Many BAAs have been abandoned due to ambitious demands for benefit-sharing terms that are economically unfeasible. Parties to the BAA, therefore, must carefully and collaboratively determine the value of their contributions to the overall development and marketing of the product as a percentage of the entire contribution.
Finally, financial benefits are finite and may not be realized immediately. They also may require significant, long-term investment to be realized. Fortunately, there are a number of non-financial benefits potentially available that could encourage participation in a deal, as described below in the section on benefit sharing.
3.5 Rights and responsibilities of each party
In addition to each party’s contribution, the BAA should provide specific information about the expectations of action and conduct that the parties have for themselves and one another.
The BAA will generate many questions about IP rights. Typically, the collaborator will provide access to the resource, and depending upon its scientific capacity, collection samples and isolated strains. These samples or isolates are then further developed by the company. Between the stages of granting access and the commercial sale of a product resulting from a BAA, there are intermediate stages, many of which create IP rights issues.
The parties must also determine their respective responsibilities. Examples of operational responsibility include sample collection and processing, regular reporting, communications, and administrative filings. Below is an excerpt from a BAA which outlines the responsibilities of the parties:
Collaborator will be responsible for the collection, processing and shipment to [the Company] of environmental samples from diverse habitats and/or DNA samples isolated from such environmental samples using the [the Company’s] technology. Collaborator shall further be responsible for planning and execution of collection trips with and without the participation of [Company] personnel. Collaborator will provide laboratory space for the collaboration activities. Environmental samples shall include, but not be limited to, soils, sediments, mire, earth, microbial mats and filaments, plants, ecto and endo symbiont microbial communities, endophytes, fungi, animal and/or insect excrement, marine and terrestrial invertebrates, air and water. Collaborator will provide to [the Company] a minimum of [number] environmental samples per year. 14
3.6 Benefit sharing
Once the parties have agreed upon the value of their contributions to the deal, they must discuss the sharing of benefits that encourage the sustainable use of the genetic resource. There are many options for sharing benefits, both financial and nonfinancial.15 Table 1 provides an extensive list of financial and nonfinancial benefit-sharing possibilities, and divides them into short-, medium-, and long-term categories. An appropriate, deal-specific mixture of financial and nonfinancial benefits will enable a company to provide incentives for biodiversity collaboration while working within international guidelines and remaining responsible to shareholders.
TABLE 1: SHORT-, MEDIUM-, AND LONG-TERM BENEFITS: NONFINANCIAL AND FINANCIAL
3.6.1 Sharing financial benefits
The short-term financial benefits listed in Table 1 deal with up-front access payments, sample collection fees, contribution to collaborator research budgets, and use-based contributions to funds set up to preserve biodiversity. In the medium term, financial benefits include milestone payments for the achievement of certain goals during collaboration and research funding. Longer-term benefits include a share in the profit from sales and increased opportunities to earn money for performing value-adding tasks in the production process.
Several observations can be made about the negotiation process for determining these benefits. For markets with relatively small potential payouts, biodiversity collaborators may favor receiving sure payments for performance up front versus some portion of unknown future royalties. Conversely, when there are many potential applications coupled with potentially large revenues, biodiversity collaborators may be interested in a larger share of royalties at the expense of up-front payments, hoping for a percentage of a larger payout. In this case, biodiversity collaborators would have to weigh the importance of receiving money sooner versus the potentially larger payout of up to 15 to 20 years or more later.16
In many cases, the market potential of the collaboration will be obvious at the outset; in other cases it will not. Where the potential is not obvious, graduated royalties could be used, which change the percentage of proceeds from product sales according to such variables as the sales volume or end-product market segment.
3.6.2 Sharing nonfinancial benefits
There are many nonfinancial benefits at the parties’ disposal. Many have noted that for access and benefit-sharing agreements for both microbial biodiversity and plant genetic resources, nonfinancial benefits may be more valuable to developing countries than financial benefits.17, 18 Nonfinancial benefits can be shared in the short-, medium-, and long-term as well. Over the life of the collaboration, these benefits will accrue to the biodiversity collaborator on all levels (national, regional, institutional, and individual). Professional development for individuals and capacity building and technology transfer at the country, regional, and institutional levels will enable the collaborator to perform more value-added work. As a result, the biodiversity collaborator can generate additional revenues and access more upside potential by contributing more to the development of products resulting from the BAA.
Short-term, nonfinancial benefits may include biodiversity collaborator access to facilities and proprietary databases that may otherwise be inaccessible. In the medium term, technical know-how, training in specific technologies, new equipment, and more reliable stocks of laboratory supplies can enhance the biodiversity collaborator’s scientific capacity. In addition, including biodiversity collaborators in planning and decision making increases their administrative capacity for additional projects. Longer-term benefits, aside from the cascading effects of the above, may include ownership of IP rights and access to technologies and products that result from the collaboration. Across all three time frames, the parties could consider pursuing grant opportunities to expand their research activities, as well as working together to produce publications. The biodiversity collaborator might consider asking the company to provide research support for a project that is important to the biodiversity collaborator and is more easily implemented by incorporating the company’s technology.
Box 1 contains an excerpt from a benefit-sharing section of a BAA and provides instances of both financial and nonfinancial benefits. While the actual percentages and dollar volumes have been removed (as they provide no useful insight without the details of the entire deal), this example illustrates a very specific royalty payment scenario in which sources of income have been separated and shared differentially. The agreement envisions revenue from both direct sales of the product by the company and from licensing to third parties. Proceeds from direct sales are shared on a graduated basis. The biodiversity collaborator receives a percentage of net direct sales up to a certain dollar limit. Should net direct sales exceed that amount the biodiversity collaborator will receive additional income. As an example, assume the net direct sales of US$150 million. If the agreement held that the biodiversity collaborator receives 0.5% of the first US$75 million in net direct sales, and 1.0% of net direct sales exceeding US$75 million, the biodiversity collaborator would receive US$1.125 million. For revenues derived from licensing, the agreement provides a similar graduated benefit-sharing mechanism.
The agreement presented in Box 1 has a royalty stacking provision. Royalty stacking occurs when there are multiple patents that affect the final product. It is often the case that a number of different patented items have been licensed for the development of a new product. The company developing the product may have to pay for the use of each of these patents, adding to the cost of commercialization. When multiple patents are held by third parties, the royalty structure may make a deal financially unattractive.20 When one company holds multiple patents involved in the process, determining final royalty allocation is simplified. For the purposes of this discussion, each patent owner’s rights to the product should be understood and considered in the business decision to proceed with the BAA. (For a more-detailed discussion on royalty stacking, see the World Intellectual Property Organization’s Web site.21)
In addition to royalties, which are based on the overall success of product sales and licensing efforts on the company’s part, the biodiversity collaborator also receives milestone payments. These payments are performance-based payments rewarding the biodiversity collaborator for competently executing its responsibilities. The milestone payment is pro-rated to the level of collaborator performance. In the example in Box 1, the maximum amount is established as a percentage of the annual funding that the biodiversity collaborator receives from the company and can be based on a range reflecting the degree of success or progress achieved by the biodiversity collaborator. Alternatively, the milestone can be based on the completion of stages toward product development. One of the drawbacks associated with this latter approach is that it is frequently predicated on the company’s success and leaves the biodiversity collaborator with little ability to influence the amount of payment received. Hence the former option is sometimes considered the preferred approach.
The excerpt in Box 1 also provides two examples of nonmonetary benefits. These non-monetary benefits address technology transfer and on-site training (both at the company’s and the biodiversity collaborator’s laboratories). In this case, the company is training the collaborator in both advanced scientific methods and in the use of its proprietary technology. In addition, the company encouraged the collaborator to send employees to the company for training. This not only improves the scientific capacity of the employees, but also gives the employees access to professional resources that may not be available in their own laboratories. The training that takes place in the biodiversity collaborator’s laboratory is critical. Often collaborator laboratory infrastructure requires updating, and lab protocols need to be changed, with the guidance of the company, to support different equipment and supplies. It is also not uncommon for the biodiversity collaborator to improve protocols for the company and provide training and education in the opposite direction. This further enhances the biodiversity collaborator’s probability for increasing its share of the benefits. While a superb example of a highly desirable and valuable nonmonetary benefit, it is not often available due to confidentiality requirements within companies.
BOX 1: TYPICAL BENEFIT-SHARING SECTION IN A BAA
Source: Excerpted and generalized from a redacted Diversa BAA that was submitted by the University of Hawaii to the Office of Information Practices in the State of Hawaii.
4. Potential Pitfalls of Biodiversity Access Agreements
The above guidance is meant to provide a practical framework highlighting the major issues for consideration when constructing a BAA. It has been distilled from more than a decade of experiences of companies and biodiversity collaborators. However, no discussion of BAAs could be complete without a cautionary note on the business and political circumstances under which the BAA will be created and implemented. These factors are as important as any listed above, and failure to adequately deal with them could prove fatal for the BAA. They can also add substantially to the costs of creating a BAA as they require significant time, effort, and resources to resolve. A brief discussion of these issues is presented below.22
4.1 Valuation versus negotiation
Given that there is no established market for bio-diversity resources or databases with details of other BAAs, valuation of the biodiversity resource will ultimately come down to discussions between the biodiversity collaborator and company. As with all negotiations, parties are well advised to understand the motivations and interests of their negotiation partners. Biodiversity collaborators and companies will need to have the overarching goal of making cooperation work, and will have to be flexible enough to incentivize their partners (and to respond to any incentives partners offer) fairly, in the context of the agreement.
From the collaborator’s point of view, the best knowledge to have when negotiating for monetary benefits would be the level of profit that the company expects. In practice, this figure would be very difficult for the collaborator to obtain. Companies will be reluctant to share projections for many reasons, not the least of which is their desire to maximize profit. Even the best projections of future profit are just that, projections, and subject to varying degrees of risk, only a portion of which can be mitigated. Moreover, a corporate proclamation of an attractive potential profit will provide incentive for other companies to compete, possibly reducing the value of their future profit. Regardless of the reasoning, collaborators are unlikely to get an accurate picture of the expected profits from the deal.
Companies, too, would do well to study the terms of any previous BAAs available, especially those concluded with the intended biodiversity collaborator. Information about which non-monetary benefits a collaborator would value would enhance the company’s position and relieve some of the pressure to negotiate away projected profit.
Ultimately, the parties will either identify the right mixture of monetary and nonmonetary benefits to be distributed in the BAA, or lose patience with or confidence in their partners and walk away from the negotiating table without an agreement.
4.2 Politics and perception
Although the mechanics and structure of negotiating BAAs have become somewhat clearer over the past decade, not much has been clarified when it comes to the difficulties in politics and perception that companies face when attempting to create BAAs with biodiversity collaborators. Although biodiversity permit systems may be in place, the proposal of a BAA almost always creates controversy. Once a company states that it would like to create a BAA and establish a new standard for securing genetic resources from around the world, the most common response is for the governing authority to move extremely slowly, fearing that it will be accused of authorizing an inequitable agreement that undervalues their biodiversity and does not support their country’s development. This problem can be further complicated by watchdog groups that consider the private sector to be inherently corrupt. No matter what benefits the company offers, such groups will criticize the deal as inequitable to the biodiversity collaborator. Ironically, this reaction reflects negatively on the very companies that are taking the lead in supporting the CBD. Unfortunately, those companies wishing to construct BAAs based on the principles of international conventions are seen in the same light as those companies that continue their research without any benefit-sharing arrangement and without permits. All of this has created an atmosphere in which life science corporations have been given every incentive to avoid engaging in bioprospecting and divulging or sharing any information about such endeavors. This actually makes it more important for biodiversity collaborators to seek out companies that are willing to take the step towards building a new approach to discovering products from nature, an approach that respects the economic interests and property rights of the nation providing the biodiversity (genetic resources).
Another complicating factor is that parties to the CBD have been slow to implement legal frameworks that facilitate legal access to their biodiversity and provide guidance on accepted or preferred benefit-sharing arrangements. Furthermore, the measures taken to date have been diverse in terms of their scope and their clarity. Compared to those countries that have created a simple, efficient approach, countries that have chosen a more cumbersome, comprehensive approach have generally had little participation from bioprospectors. Nonetheless, many countries remain without any legal frameworks to govern bioprospecting, allowing some companies to engage in bioprospecting without securing legal access to collect environmental samples and without providing associated equitable benefits.
The case of politics and perception is similar to that of benefit sharing in that both parties must demonstrate a willingness to make the BAA and successive agreements work. This requires each party to set aside short-term self-interest.
4.3 The shortcomings of business as usual
In addition to the practical challenges of negotiation and politics, there are several issues with current research sampling practices that will continue to grow in importance as more BAAs are concluded and the market for products developed as a result of the BAAs develops further. Often, samples collected for research purposes will be “contaminated” with types of biodiversity other than the target type. This unintended transfer of genetic material may constitute giving away potentially valuable (with respect to its potential for commercialization) biodiversity. Another issue that will become increasingly contentious is that limiting access to biodiversity may have a detrimental effect on scientific research. While these issues may not surface in a BAA between a company and its biodiversity collaborator in the near term, they will certainly have to be addressed in the longer term for the sake of scientific advancement and the conservation of global biodiversity.
4.4 Addressing the pitfalls
Many of the problems identified above could be mitigated or eliminated by improving the information available to parties to the BAA as well as to the larger pool of stakeholders interested in the outcomes of these agreements. Parties to the BAA want to know that they are being fairly treated. Collaboration partners want to understand the fair value of access and local value-added processing. Companies need to understand the amount and composition of compensation required to create the BAA. Companies can face higher commercialization costs in the absence of this information. The relative lack of standard information on BAAs can engender feelings of mistrust not only among the parties to the BAAs but also in stakeholders outside the agreement. Standards for creating BAAs, based on the experiences of many bio-diversity collaborators and companies, would give the parties to the agreement a reliable and acceptable framework to aid decision making, negotiations, and communications about the agreements. These standards could even extend beyond the terms of the BAA to include model legislation and regulations to provide consistency to the legal and administrative environments in which BAAs will be created. Standards for BAAs could address the longer-term issues as well by explicitly discussing the rights and responsibilities of researchers and providing guidance on accessing IP-protected biodiversity for noncommercial purposes.
Participation by NGOs may be one way to address these issues. The main benefit of NGO involvement would be credibility. NGOs operating independently as neutral third parties can build trust among partners on both sides of the BAA. This neutrality could satisfy stakeholders outside the BAA, concerned with broader issues of biodiversity conservation and continued access to biodiversity for scientific research. NGOs would be able to leverage the expertise and experience of governments, research organizations, other NGOs, and companies globally to provide standards that are broadly applicable.
An example of an NGO making progress in this direction is the E. O. Wilson Biodiversity Foundation. Through the creation of its BioTrust, envisioned and initiated by one of the authors, Jay Short, the foundation seeks to ensure fair terms between countries and companies for access to biodiversity while preserving the biodiversity resources. BioTrust consortium establishes strategic relationships predicated on the notion that all countries (especially developing counties) contain wealth in the form of biodiversity and that they should be compensated for its exploitation. Saddled with the burden of long-term steward-ship, most countries are currently without a financial incentive to continue.
By acting as an honest broker using a master agreement that binds the interested parties to a quid pro quo relationship, BioTrust ensures the fairness sought by the parties to the access agreement and the continuation of biodiversity conservation. Under this model, companies, as well as academic and research institutions, can sample and analyze genes, small molecules, and proteins, but a portion of revenues produced from any resulting products flows back to the country of origin for purposes of conservation. BioTrust participants agree to participate in capacity building through technology access and/or education for source nations.23
The experience of companies and countries in creating BAAs to share access to microbial bio-diversity offers lessons that can be adapted for use with agrobiodiversity. These lessons will help interested parties bridge the gap between broad international guidance on the commercial use of biodiversity and the practicalities of deal making. Just as important as any technical aspect of deal making is the commitment of both parties to a sustainable and rational use of biodiversity in a way that encourages commercial development and protects the unique resource. Both parties need to conduct the due diligence on each other to foster the trust required for cooperation.
Companies should devise a set of operating principles based on the CBD and provide partners with real incentives for cooperation, which should include both equitable monetary and nonmonetary benefits. Countries must develop, clarify, or streamline administrative and permit procedures to encourage the sustainable, commercial use of biodiversity. They must also have the resolve to operate in a principled manner, consistent with international consensus (CBD). Both parties should be willing to engage in open debate with domestic and international critics to demonstrate the value of making progress in this field, despite having limited knowledge about the market potential of biodiversity-derived products.
There are a number of practical challenges to concluding BAAs. Many of these challenges could be addressed by improving information available to all stakeholders. NGOs could play a critical role in facilitating fair access to biodiversity for commercialization while preserving scientific access to biodiversity for research purposes.
All referenced Web sites were last accessed between 1 and 10 October 2007.
1 Christoffersen LP and S Fish. 1999. Standing Up to Biopiracy: Fostering Sustainable Development through Bioprospecting. Resource Africa Issue 7, June 25.
2 Liebig K, D Alker, K Chih, D Horn, H Illi and J Wolf. 2002. Governing Biodiversity: Access to Genetic Resources and Approaches to Obtaining Benefits from Their Use: The Case of the Philippines. Reports and Working Papers, May, German Development Institute.
3 Smolders, W. 2005. Disclosure of Origin and Access Benefit Sharing: The Special Case of Seeds for Food and Agriculture. QUNO Occasional Paper 17, Quaker United Nations Office, Geneva. p. 3.
4 UPOV. 2005. What It Is, What It Does. International Union for the Protection of New Varieties of Plants, UPOV Publication No. 437(E), September 15.
5 Commission on Intellectual Property Rights. 2002. Integrating Intellectual Property Rights and Development Policy. Final Report of the Commission on Intellectual Property Rights, DFID: London. www.iprcommission.org.
8 See supra note 2.
9 For the sake of clarity, the term biodiversity collaborator is used to describe the country granting access, as well as its institutions, universities, and researchers. The term company is used to describe any corporation, NGO, university, or research organization that could commercialize biodiversity or genetic resources.
10 Contact information for the National Focal Points for Access and Benefit Sharing can be found on the CBD Web site at www.biodiv.org/world/map.aspx. Once at that Web site enter the name of the country for the list of the National Focal Points for each country. See, also in this Handbook, chapter 16.2 by C.G. Thornström.
11 See supra note 9.
12 There are 188 parties to the Convention out of a possible 195. The nation states that have yet to ratify the CBD and become members are 1) Andorra, 2) Brunei Darussalam, 3) Holy See (Vatican), 4) Iraq, 5) Somalia, 6) Timor-Leste, and 7) the United States.
13 Uniqueness in this chapter means a resource has not been commoditized in a particular place or situation.
14 This text was excerpted and generalized from a redacted Diversa BAA that was submitted by the University of Hawaii to the Office of Information Practices in the State of Hawaii.
15 Tides Center/Biodiversity Action Network. 1999. Access to Genetic Resources: An Evaluation of the Development and Implementation of Recent Regulations and Access Agreements. Environmental Policy Studies Working Paper No. 4. Columbia University School of International and Public Affairs, p. iii. www.biodiv.org/doc/case-studies/abs/cs-abs-agr-rpt.pdf.
16 See Supra note 7.
18 Thayer AM. 2003. Diversa Promises Products, Profits. Chemical and Engineering News 81, (14).
19 See supra notes 2 and 15.
20 Clark V. 2004. Pitfalls of Drafting Royalty Provisions in Patent Licenses. Bioscience Law Review.
22 The authors will address these issues and strategies for dealing with them in a forthcoming paper.
Costanza C, L Christoffersen, C Anderson and JM Short. 2007. Deal Making in Bioprospecting. In Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices (eds. A Krattiger, RT Mahoney, L Nelsen, et al.). MIHR: Oxford, U.K., and PIPRA: Davis, U.S.A. Available online at www.ipHandbook.org.
© 2007. C Costanza et al. Sharing the Art of IP Management: Photocopying and distribution through the Internet for noncommercial purposes is permitted and encouraged.