The Conundrum of Intellectual Property and PPP Innovation Requests

Intellectual property (also called industrial property) includes patents, copyrights, industrial design rights, trademarks, trade secrets and database rights.

The Innovation Context of Intellectual Property

Increasingly, PPP procurements are calling for innovation in bidders’ submissions.??The specific motivation for this call is that the public sector is looking for innovative partnerships that can leverage public sector institutional insights with private sector acumen and knowledge to ensure that projects obtain “value for money” and the benefits that conventional procurements cannot provide.

Innovative bidders on pioneering PPPs that demand innovation, are generally willing to share innovative intellectual property - that they have developed at their cost - only if they are compensated for their intellectual property or if there are guarantees that it will not be shared with competitors without prior agreement on the terms of this possibility.?

Innovative Enabling Environments?

Unfortunately, PPP enabling environments generally offer little protection for intellectual property which bolster the specific innovations that are being sought in procurements. Reasons for ineffective intellectual property rights include: misguided efforts to protect transparent and competitive procurements; avoidance of appearing to give unjustifiable advantage to individual bidders; and an imprecise understanding of who continues to own the innovation once it is procured.

The juxta-positioning of intellectual property rights with transparency and competition therefore creates a conundrum for both procurers and bidders that needs to be addressed with astuteness and caution.

Any PPP enabling environment that hopes to attract innovative partners needs to address intellectual property rights head-on and ensure that there is no ambiguity regarding the interests of both the public and private sector.??Additionally, uncompensated recognition of private sector intellectual property by the public sector will deter flows of innovation, while unrealistic expectations and demands of private sector bidders could lead to disqualification of a preferred bidder during procurement negotiations.??Lack of protective intellectual property rights and rules for both parties is particularly relevant in unsolicited PPP proposals where the private sector approaches the public sector with an innovative idea that is often not fully understood.??This could place both parties at legal risk should a scenario occur where a private sector innovator might lose their competitive edge if information is shared with other parties without their prior knowledge, permission or compensation.

Protection of Intellectual Property Benefits

Measures need to be put in place that encourages the creation and sharing of intellectual property by the private sector and the protection of intellectual property rights for a reasonable and specified period of time.?Additionally, a harmonized and equitable environment (legal framework) needs to be created where the PPP procuring agency benefits (obtains value for money) from the innovation which it is essentially “purchasing” and where the originating private sector innovator benefits financially from its innovation and it sufficiently compensated for research and development costs at the same time with the caveat that at times fair and adequate financial compensation of an innovation could be a stumbling block and be difficult to determine if there are no market thresholds to test the value of the innovation against.

During the completion of a mutually unnegotiated procurement, the private sector needs to realize that once its innovation is adopted (with mutually agreed to conditions) there could be a process where the innovation becomes mainstreamed by the public sector’s use.??Mainstreaming is more likely in innovative engineering designs and construction materials, for example, and less likely in digital products and data base information which would remain the property of the private sector provider.??In the case of the latter, it is more likely that the public sector would acquire a user’s license, and not the intellectual property that drives the innovation. Therefor it is also necessary that an understanding is developed between both parties whether “absolute” or “partial” intellectual property rights are being agreed to during the procurement negotiations.

Because of this, PPP procuring agencies need to have a very clear understanding of what they are acquiring and their users’ rights.??On the other hand,??the private sector needs to clearly articulate what innovative user rights it is “selling”, and that they might lose their competitive edge, once their idea is mainstreamed.?

Important Intellectual Property Rights Questions

There are tangible intellectual property related questions which need to be answered during a PPP procurement.??They include:

• Is the required innovation defined and clearly articulated?
• Have the innovation and intellectual property procurement ground rules been set (either in the procurement documents or by the PPP enabling environment)?
• Who will own the intellectual property (innovation) after the procurement?
• With whom can intellectual property be shared with during a procurement, if at all?
• How are transparency and competition procurement best practices protected without giving “undue” advantage to a highly innovative bidder?
• How will intellectual property that is shared be compensated, especially in unsolicited procurements which are turned into competitive procurements?
• Will serious demands for innovation deter serious bidders?
• Will the cost of proposed innovations result in a truly innovative bids being rejected because they are costlier than less innovative bids?
• How can the innovations of unsuccessful bidders be incorporated into projects that are implemented by the preferred bidder?

Conclusion

Innovation only flourishes in a trusting environment that protects the interests of both the public and private sector. Therefore, it is critical that the conditions for the procurement of innovative intellectual property be clearly articulated and that competitive procurement risks are mitigated.??The private sector is fiercely protective of its intellectual property that it has often developed at considerable cost.??If it believes that its competitive edge will be undermined, it will not bid on projects.??If this happens, one of the particular reasons for PPPs - the attainment of innovative partnerships – will be undermined and mediocrity will prevail at the expense of successful PPPs. There should be no conundrum if both parties expectations on intellectual property are harmoniously aligned.