COLLABORATION KEY IN ESTABLISHING INNOVATION PROJECT

We should warmly welcome the recent opening of the US$44 million innovation center built by United States tech giant Apple in BSD City, Tangerang, Banten. Even though research and development (R&D) were not designed for manufacturing and engineering hardware components, the innovation center enables young local generations to acquire necessitated digital skills, in particular, encoding apps and various kinds of software developments. This will create 200 new local developers that address the digital skills deficit to build nationwide digital infrastructure.

According to data provided by UNESCO, the number of researchers and/or innovators in Indonesia is only 89 persons per million people, far lower than in Singapore (6,729), Malaysia (2,029), Thailand (964) and Israel (8,250) (data.uis.unesco.org, 2018).

Another intriguing finding was purported by economists from the Institute for Development of Economics and Finance (Indef) Jakarta, an independent research and policy studies institution, in May that patent applications registered by non-resident (foreign nationals) significantly affected gross domestic product (GDP) growth (0.999 %), but domestic patents do not, as most patent registrations were from abroad (8,538) compared to domestically (residents), which totaled only 1,058.

Indef, accordingly, concluded that patents and investment, especially in the information and communications technology (ICT) sector, has partly contributed to higher economic growth in Indonesia, and needs to be supported and encouraged through, inter alia, offering more attractive fiscal incentives for private R&D, especially for collaboration with international researchers.

The Global Innovation Index ranked Indonesia 90th out of 129 countries in 2018 and 87th out of 127 countries in 2017 (globalinnovationindex.org). Developing its position in the innovation competitiveness index and ecosystem can be addressed using various strategies, inter alia, by providing better model collaboration agreements between industry and academic institutions.

Collaboration is key. A single undertaking can be unable to provide financial support for R&D, or innovation projects that require technical expertise, plus commercialization of research results likely needed to involve industry.

R&D collaboration between industry and academia raises several important legal issues. Most disagreements revolve around, inter alia, the ownership and exploitation of IP by industry and academia (Mobley, Harrison, et al, 2018).

For instance, the industry seems to be less convinced that universities seemingly enable the commercialization of inventions, or they may devalue IP rights in the light of commercial realities. For industry, IP rights can indeed confer a completive advantage, whereas universities may argue that industry IP ownership would tear down valuable IP rights due to industry fragmentation. Universities, further, may contend as a neutral entity to objectively valuate the IP exploitation merits of competing companies.

Those barriers to research collaboration were initially resolved by redefining common negotiation terms (Lambert, 2003). Universities own any resulting IP, with industries free to bargain license terms to exploit it. Industries, however, potentially own such IP rights only on conditions that they construct significant contributions. But Lambert, a former director of the Confederation of British Industry (CBI), who wrote a dedicated report and recommendation re “Business-University Collaboration”, apparently did not delineate a mechanism to ascertain significant matters for that purpose.

Nonetheless, the United Kingdom government, which was ranked sixth in world in R&D spending, published several model research collaboration agreements developed from Lambert’s report (the Intellectual Property Office, 2016). We could learn from the UK that those contesting issues re-addressed by the several model collaboration agreements on the ownership and exploitation rights of collaborator industry and academic institutions.

One model proposed that the collaborators do not own IP rights, or only have non-exclusive rights, but collaborators may negotiate further licensing terms. Alternatively, collaborators own the IP in the results of innovation projects, and the academic counterparty has the right to use it for non-commercial purposes, plus no there will be no publications by academics unless granted permission by collaborators.

Otherwise, both entities and each member of the consortium collectively own the IP, and they grant each other a non-exclusive license. Further, whenever IP is created in projects, inventions or works directly relevant to the core business of the consortium member or counterparty, they have right to exploit it (of course, after negotiation).

In addition, not all R&D collaborations may result in IP rights. Even the fruit of research may possess less commercial values for the industry. Hence, the collaboration agreements can exert only parties that are mostly appropriate to enjoy the results as such. For both parties, here, confidentiality agreements are still essential as mitigating leakage of pre-invention ideas, caring about culture of confidentiality and in some cases, to resolve non-employment relation where persons involved in the R&D project have unclear non-disclosure obligations. This confidential agreement could delineate which part of information is publicly accessible and which part of confidential technical information is supplied by parties (Mobley, Harrison, et al, 2018).

Another issue may arise in the R&D collaboration concerning competition laws. In brief, formulation of collaboration agreements should be avoided to hinder an unfair entry barrier to non-participating competitors and other situations that fall under the scope of prohibited agreements and activities (e.g. abnormal pricing and overwhelming dominant positions that could restrict technological development or market deterrence) pursuant to Regulation of the Commission for the Supervision of Business Competition No. 2 of 2009 about guidelines on derogation Article 50b of the act concerning agreements linked with IP rights.

All in all, R&D collaboration should align with government R&D policies to enable greater impact for Indonesian prosperity and the well-being of individuals and society in general. Government apparatuses at all level and collaborators from any stakeholders (e.g. foreign governments and business entities) are suggested to mutually take into account the national research agenda 2017 to 2045 (Presidential Decree 38/2018).

The writers are attorneys in the technology law practice at BAHAR law firm. The views expressed are their own.

Collaboration key in establishing innovation project Published in The Jakarta Post, 10th September 2018