The Convention on Biodiversity and the Nagoya Protocol: Intellectual Property Implications Chapter 7 Private Contract Law I. Introduction Ultimately, genetic resources and associated traditional knowledge (TK) are transferred for R&D and other purposes from provider to users through private contracts which are legally binding documents between the two parties. Such contracts can take a number of forms, including bioprospecting agreements, material transfer agreements (MTAs) and collaborative research agreements.296 These contracts may be considered benefit sharing agreements under the Nagoya Protocol provided they contain the terms for the sharing of benefits that may arise from the access and removal of the genetic resource and its utilization. The keepers of those genetic resources in the provider countries, whether they are the national ABS authority or an indigenous group, must therefore negotiate the terms of such contracts carefully in order to safeguard their interests. Recent trends in ABS agreements show that “natural product discovery is found largely in smaller discovery companies, semi-governmental or governmental entities and universities around the world. Elements of large pharmaceutical natural products programs have been spun off into non- profits or semi-governmental entities, and compound libraries have been given away or sold off cheaply.”297 The International Federation of Pharmaceutical Manufacturers Association (hereafter IFPMA) estimates that of 19 pharmaceutical multinationals that previously had natural products programs, only 7 currently have such programs, most of them Japanese.298 Laird and Wynberg point out that there is greater use of genetic resources and TK by the cosmetic industries, while ABS principles are not always understood in other industries such as botanicals and food/beverages.299 Negotiating contracts using knowledge of the law takes time and practice. Moreover, developing country negotiators often face informational and other disadvantages when entering into contract negotiations. A major factor limiting the ability of parties to freely agree to the terms and conditions in an MTA, which is the focus of this chapter, is that these contracts must respect applicable provisions in the respective IP and ABS laws, among other relevant legislation. It is for this reason that the bulk of this handbook is spent discussing these policies and regulations. While good negotiation will not overcome all inherent handicaps in negotiations, knowledge of policies, laws and some foresight will enable negotiators to come up with fairer MTAs that respect international and national ABS rules, and hopefully ensure outcomes that more adequately preserve and support provider interests. This chapter is therefore written, like the other chapters, from the provider country perspective, and is designed to deepen understanding of issues which the provider country negotiator will want to bear in mind when negotiating such contracts. The chapter provides a concise guide to key points that developing country providers will want to bear in mind when negotiating an MTA, focusing on provisions that have a particular relationship to IP-related ABS issues. IP represents an issue that 296 Some of the salient differences between various contracts are discussed in section II of this Chapter. 297 Laird and Wynberg (2012), p. 7. 298 Presentation of Mr. Andrew Jenner, Director of Innovation, Intellectual Property and Trade at UNCTAD’s Ad Hoc Expert Group Meeting on the Development Dimensions of Intellectual Property: Biological Diversity and Access and Benefit Sharing, 16 April 2013. On file with the authors. 299 Laird and Wynberg (2012), p. 7. 153 The Convention on Biodiversity and the Nagoya Protocol: Intellectual Property Implications potentially cuts across a number of the terms and conditions contained in an MTA. The references to PIC and MAT requirements herein are therefore discussed in this context. Key Points A variety of contracts could come up in the course of ABS procedures including bioprospecting agreements, material transfer agreements (MTAs), joint research agreements, among others. They are benefit sharing agreements only to the extent that their terms contain a potential or actual benefit to the provider. Genetic resources are often transferred from provider to user through private contracts called Material Transfer Agreement (MTAs). Providers in developing countries may be at a disadvantage when negotiating contracts, and will want to know how to negotiate MTAs to safeguard their interests. II. MTAs and other Private Contracts A brief digression on terminology will help to focus the discussion of this chapter. First, an MTA needs to be distinguished from a general license. An MTA is the contract that underlies the physical transfer of a genetic resource from the provider to a user. It will be used to specify terms and conditions when, for example, a plant is provided to a botanical garden in a user country or when a monkey specimen is provided to a primate research center. An MTA will also be used when an actual virus sample is provided from a provider to a user, as in the case of the WHO SMTAs in Annex II. The MTA will embody the conditions attached to that physical transfer, including what the user will be able to do with the genetic resource obtained, including, for example: . what R&D the user will be able to undertake using the genetic resource; . the extent to which replication, alteration or breeding of the genetic resource is permitted; . how the benefits would be shared from any commercialization of the fruits of R&D on the biological resource being transferred; . limitations on third party transfer, if any; and . prohibition or permission to commercialize the transferred resource and associated TK, including the results of R&D. The contract will also specify what ought to happen in the event that a party fails to honor the terms of the contract. By contrast, a license is, under contract law, broadly speaking a legal agreement that embodies permission.300 For example, a driver’s license grants permission to drive, and a fishing license grants the licensee permission to fish in a given geographical area. These licenses basically grant 300 Black’s Law Dictionary, ed. 1999. 154 The Convention on Biodiversity and the Nagoya Protocol: Intellectual Property Implications certain privileges by the government to the licensee. In the context of IP, a license refers to the permission to make or utilize certain intangible property that is owned by a licensor. 301 Such contracts set out the terms and conditions for the license, including how the licensee can utilize the intangible property, in what jurisdiction, for how long, and for how much (i.e., royalties). Patents, trademarks and know-how, in addition to other forms of IP, can all be licensed, and sometimes, depending upon the terms of the license, sub-licensed. Underlying the notion behind an MTA and a license is that under both types of contracts the owner of the subject matter does not change. Licensors remain the owners of the intangible property in a license; the CBD makes clear that States have sovereign rights over their own biological resources. The underlying contracts simply set out the terms and conditions that bind the use of the underlying subject matter. Notwithstanding the use of the possible confusion created by the use of the term “deed”, which is used to describe the model MTAs used by Australia, neither the MTA nor the license contract is considered a sales contract, which calls for a change in ownership and allows the new owner to freely dispose of the subject matter once title has passed. In this regard, MTAs may also be understood as a variation on a loan contract, where a physical object (the genetic resource) is leased without any change in ownership. The distinguishing feature of the MTA, as compared to an IP license is that the subject matter involves a physical transfer (i.e., the genetic resource). In many cases, an MTA will permit certain R&D on the genetic resources being transferred. The fruits of R&D on the genetic resource under an MTA may, therefore, give rise to intangible property that forms the subject matter of a later license agreement (for example, patents, plant breeders’ rights or trade secrets). In this regard, the Organization for Economic Co-operation and Development (hereafter OECD) has promulgated in 2006 guidelines for the licensing of genetic inventions, which provides advice to, inter alia, developing countries on how to negotiate licenses.302 Sample MTA contracts can be found at the websites for the Secretariat of the CBD (http://www.cbd.int/abs/resources/contracts.shtml), which provides model agreements from Argentina, Australia and Switzerland; the WHO’s SMTAs under the Pandemic Influenza Preparedness Framework (http://whqlibdoc.who.int/publications/2011/9789241503082_eng.pdf); and the ITPGRFA SMTA (http://pgrc3.agr.gc.ca/itpgrfa/smta_e.html). In this regard, the NGO Biodiversity International has developed a guide to the ITPGRFA SMTA, which is available online.303 The SMTAs will need to be used for transfers of genetic resources under the ITPGRFA or in the context of the WHO network for the sharing of pandemic virus samples, respectively. The WHO and ITPGRFA SMTAs are included in Annexes II and III of this handbook, respectively. One final note is that provisions contained in a typical MTA may also form part of larger agreements intended for joint R&D activity, or where permission is granted to locate biological material within a specified area and to extract it for research. Such provisions are contained in so- called ‘bioprospecting’ agreements where, according to the definition utilized by the Association of Southeast Asian Nations (hereafter ASEAN), the user is permitted to access territory of the provider in order to search for wild species with genes that produce better crops and medicines, or the exploration of biodiversity for commercially valuable genetic and biological resources. 304 The bioprospecting agreement is in essence a permit to look for and remove a defined set of biological 301 Ibid.