Module II: The Fundamentals of Bioprospecting Negotiations
Constructing a Contractual Agreement for Benefit Sharing

The particular combinations, types, and allocations of rights and benefits comprising a bioprospecting agreement are limited only by the imaginations of the contracting parties. Workshop faculty provided an overview of some basic options based on existing experience.

Access Rights

As noted above, access rights and limitations are specified by permits. The details of the times, places, methods, quantities, and assignability of collection are all subject to negotiation between the parties. Applications can also be subjected to peer review prior to issuance of a permit.

Intellectual Property Rights

The subject of intellectual property rights is dealt with in greater detail in Module III; in this context it may suffice to note that rights associated with innovations resulting from research on biological materials can be subject to negotiation. The inclusion of IPR considerations in the bioprospecting agreement is optional, and is dependent upon the nature of the rest of the agreement, e.g., whether the agreement is limited to transfer of materials or whether there is a shared research component, and the extent to which resulting innovations draw from existing traditional knowledge. There may also be other pertinent IPR questions. For example, can a newly discovered and useful but naturally occurring and unaltered microbe be patented? If so, should rights belong to the bioprospector alone or shared with the owners or inhabitants of the source area? These are battles that are now being fought at the negotiating table as well as in the courts.

Economic Benefits

Economic benefits can include such varied items as license fees, royalties, milestone payments, ethnobotanical premiums, contract fees, and research budgets, each of which is discussed briefly in turn below.

• License fees: License fees are attached to the transfer and use of collected material only; they do not include any provision for benefits from any subsequent products of research on the material.
  
  
• Royalties: Royalties are a percentage of revenue from sales of a product derived from research on the collected biological material. One of the most important subjects for negotiation here is how to determine the amount on which the percentage is based, i.e., gross or net revenues. If net, what categories of expenses will be allowed as deductions before calculating the royalty payment? In particular, will the considerable R&D expenses be deductible? The company will most likely want to deduct R&D, and these are legitimate expenses, but as a counter-argument there are also the conservation and maintenance costs of the state to consider. The decision about calculating the base amount can also affect the negotiated royalty rate, but in general it is probably true that the less that is deducted from the gross, the higher the royalty payments will be. As noted above, royalty payments are a long-term consideration, and are not likely to be seen sooner than 10-15 years down the line, if ever.

• Milestone Payments: In a milestone payments system, certain "success points" that trigger fee payment obligations are identified, such as the point at which bioassays confirm activity, or when the particular active molecule is identified, or the stage of patent application or pre-clinical trials, etc. Therefore if the process is cut off at some point for any reason, e.g., the compound is found to be toxic to humans, the payments will also stop. Milestone payment obligations will tend to reduce the amount of up-front payments (see below), but by reducing risk may amount to a greater total payment if all goes well.
  
  
• Ethnobotanical Premium: An ethnobotanical premium is some form of payment that reflects the value of traditional, indigenous knowledge, as such knowledge can provide valuable clues that significantly shorten and simplify the drug discovery process.
  
  
• Contract Fee/Up-front Capital Contribution: An up-front fee of this kind is not necessarily tied specifically to anything in particular, but can be included in a contract as a payment to move the project forward. Typically, companies are not eager to pay such fees.
  
  
• Research Budget: A payment towards the research budget is another form of up-front payment. Using the research budget to identify specific costs, it is possible to request payments in advance for necessary items, e.g., new equipment, materials, training, travel, and so forth. Companies are likely to agree to such dedicated fees more readily than to non-specific up-front fees.

Capacity Building

Companies are often quite willing to invest in capacity-building, i.e., technology transfer and training, as it is in their interest to ensure that samples are handled properly. Support for capacity-building can come in various forms, such as by direct transfer of technologies, payments to support acquisition of tools or knowledge, support for training programs, joint research activities, and so on.

Scientific Benefits

There should be inherent scientific benefits to the bioprospecting agreement, including provisions for the sharing of research information and other data, expanding the scope of species inventories and other types of ecosystem knowledge, et cetera. Improvements to the knowledge base can also contribute to the improvement of education at all levels. Another related benefit is the promotion of conservation itself. Indeed the scientific and educational effects may well turn out to be the primary benefit of the bioprospecting agreement, far outweighing any monetary gain.

Promise of Future Supply

The promise of future supply is a two-way benefit by which the company is guaranteed that the source material will continue to be available in the event that successful research results occur. This condition can be linked to the economic benefits and involve up-front or milestone payments, or both.