Commercializing IP and benefit sharing under India’s BD Act

India has made substantial efforts to protect and conserve its biological diversity by implementing stringent laws and policies.

The patent applications in India that use and/or access biological resources need to conform to the provisions of the Biological Diversity (BD) Act 2002 for accessing biological resources. Section 6 of the BD Act requires an applicant to have prior approval from the National Biodiversity Authority (NBA) when applying for any intellectual property (IP) for any invention based on any research or information on a biological resource obtained from India. Pursuant to this, the Indian Patent Office (IPO) is also vigilant in taking cognizance of the requirements under the BD Act.

Another important provision of the BD Act is section 21, which provides for the equitable sharing of benefits arising out of commercializing an intellectual property rights (IPR) invention using biological resources originating from India. The legislative intent behind drafting this provision was to ensure that whenever the biological resources of India are exploited for commercialization, the benefit must reach out to the legitimate holders of these biological resources, which usually are the local communities.

Likewise any invention that exploits biological resources obtained from India for creating intellectual property must abide by section 6 of the BD Act and must share the benefits arising from the commercialization of such IP as per the requirements of the BD Act.

Although section 21 provides for the equitable sharing of benefits arising out of commercializing an IPR invention using biological resources originating from India, it fails, however, to address the manner through which the benefits must be shared, leaving this matter altogether ambiguous.

To keep the intentions of the BD Act alive, the central government recently issued a notification entitled Guidelines on Access to Biological Resources and Associated Knowledge and Benefits Sharing Regulations 2014. This notification resolves existing ambiguities while determining the quantum of benefit sharing between the contracting parties.

The guidelines provide that benefit sharing between the applicant and the NBA can be both monetary and non-monetary.

Monetary benefit sharing

Monetary benefit sharing includes where the contracting parties agree to share the benefits through the following ways:

• Upfront payment;
• One-time payment;
• Milestone payments;
• Share of the royalties and benefits accrued;
• Share of the licence fees;
• Contribution to national, state or local biodiversity funds;
• Funding for research and development in India;
• Joint ventures with Indian institutions and companies; and
• Joint ownership of relevant intellectual property rights.

1. Where the applicant itself commercializes the process/product/innovation, the monetary sharing shall be in the range of 0.2% to 1.0% based on a sectoral approach, which shall be worked out on the annual gross ex-factory sale minus government taxes; or
2. Where the applicant assigns/licenses the process/product/innovation to a third party for commercialization, the applicant shall pay to the NBA 3.0% to 5.0% of the fee received (in any form including the licence/assignee fee) and 2.0% to 5.0% of the royalty amount received annually from the assignee/licencee, based on sectoral approach.

Non-monetary benefit sharing

The non-monetary benefit sharing includes undertaking infrastructure and development work, strengthening capacity for technology transfer, educational/training collaborations, and contribution to income generation for local communities, setting up venture capital funds, providing scholarships/financial aid, etc.

Sharing accrued benefits by NBA

The guidelines also impart clarity on the sharing of accrued benefits by the NBA from the applicant. When the NBA grants approval, it is entitled to 5% of the benefits from the applicants, and out of 5% the NBA retains 50% of the share and the other 50% is passed on to the concerned state biodiversity boards (SBBs) for administrative charges. A total of 95% of the accrued benefits from the applicant go to the concerned biodiversity management committee (BMC) and/or benefit claimers.

The guidelines also clarify that in circumstances where the benefit claimers can be identified, this amount should go to them directly. If the benefit claimers are not identified, this fund should be used to conserve/sustain the biological resource and promote livelihoods of the local people from where the biological resource is accessed.

Likewise, the guidelines also provide the sharing of accrued benefits by SBBs, and when an SBB grants approval, the SBB is entitled to retain 5% of the benefits accrued for their administrative charges, passing 95% to the concerned BMC/benefit claimers. In a case where the benefit claimers are not identified, this fund shall be used to conserve/sustain the biological resource and to promote livelihoods of the local people from where the biological resource is accessed.

Conclusion

The objective of the BD Act is to ensure sustainable utilization of biological resources, and to ensure the fair and equitable sharing of benefits arising from biological resources. The guidelines as issued by the central government clearly establish the manner in which fair and equitable benefit sharing of biological resources can be ascertained in inventions that are commercialized. Thus the efforts and steps being taken by the government ensure the strict implementation of the BD Act to prevent exploitation of biological resources originating from India, and also safeguard the interests of the local communities who make judicious use of such resources for their subsistence.

Vivek Kashyap is a senior associate and Akriti Kapoor is an associate at LexOrbis