Ofwat has launched a new consultation on its proposal to test a change to intellectual property rights (IPR) policy for the second Breakthrough Challenge competition.
Since January 2021 the regulator has run two innovation competitions as part of Ofwat’s £200 million innovation fund and is planning to run multiple competitions up to 2025.
In April 2021 Ofwat announced the 11 winning entries for the Innovation in Water Challenge 1 which made approximately £2 million available for entries up to the value of £250,000 each.
The winners of the second competition - Breakthrough in Water Challenge 1 - which opened in May 2021, will be announced at the end of September 2021. The competition was aimed at attracting longer term, more strategic projects and made approximately £40 million available for entries valued at between £1 million and £10 million.
However, the regulator’s current IPR policy has been consistently cited as potentially limiting the types of entries that are submitted and therefore the impact that the fund may have.
According to Ofwat, the feedback from both competitions has suggested that the current IPR policy, particularly in relation to royalty-free access to background IPR, is a disincentive to some innovators.
This applies particularly to very small and early-stage innovators, and those proposing digital, data-driven and AI-focused innovations, where revenue is often closely tied with IPR.
The upcoming second round of the Water Breakthrough Challenge will bring together elements from the first two competitions to provide a unified and streamlined process for water companies in England and Wales to access the funding through two streams:
- Catalyst stream will be available for projects seeking funding of between £100,000 and £1 million;
- Transform stream will be available for projects seeking funding of between £1 million and £30 million.
Ofwat’s proposed change will enable owners of background IPR to charge a licence fee at a fair, reasonable and non-discriminatory rate for the use of the background IPR - solely to the extent necessary for water companies to receive the benefit of the foreground IPR.
The regulator’s IPR policy currently differentiates between background IPR and foreground IPR:
- background IPR - the rights to preexisting IPR, which exists prior to the submission of any projects to the innovation fund, which the policy states should be retained by the participants that developed it
- foreground IPR - new intellectual property that is created through a project funded by the innovation fund
The existing policy states that foreground IPR must be made available royalty-free and in perpetuity to all 17 water and wastewater companies and new entrant water and wastewater companies.
Ahead of the Breakthrough 2 competition which opens on 11 October 2021, Ofwat is now proposing to trial a change to the background IPR licencing position to encourage broader participation in the fund. The regulator will also use the pilot period to test different approaches and obtain evidence to inform future policy decisions.
Deadline to submit comments on Ofwat’s proposed change is 9:00am Monday 6th September 2021 - click here to access the consultation paper.
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