South Africa

Telkom Innovation Challenge: A mega sting in the tail

By Simon Hartley 4 November 2013

On 28 August this year, Telkom sent forth the call for submissions to the Open Innovation Mega Challenge. Staged under the auspices of the SA Innovation Challenge, Telkom's competition offers cash, product and services prizes of R200,000 for what the company calls "innovative proposals for technologies and solutions" in the broadband industry. The closing date for submissions is 30 November 2013, and all small-to-medium businesses, universities, research institutes, not-for-profit organisations, start-ups, individual inventors and innovators are invited to "collaborate" with Telkom. Except in this case, collaboration with the telecoms behemoth requires ceding all intellectual property rights pertaining to a submission to Telkom upon registration and entry. Come again? By SIMON HARTLEY.

As the founder and CEO of the Shuttleworth-funded publishing rights start-up, Paperight, Arthur Attwell is a typical entrant to the Open Innovation Mega Challenge. Entrepreneurs like Attwell are attracted to competitions like the Open Innovation Mega Challenge because winning competitions typically generates small amounts of extra capital, creates valuable free media coverage, and builds team morale.

Having recently tasted success at Frankfurt Book Fair Contec Startup Showcase in Germany and at the local Accenture Innovation Index Awards, Attwell was in the process of entering Paperight into Telkom’s competition when he came upon four paragraphs in the terms and conditions that convinced him to abandon the endeavour, and post a note to his Google+ profile, warning industry associates not to enter.

Specifically, those paragraphs were Rule 15, and clauses 1, 3 and 4 of Appendix 2 to the Open Innovation Mega Challenge Terms and Conditions.

Rule 15 reads:

“The Competition participants shall, on registration and entry to this Competition, and in terms of the attached deed marked Appendix 2, waive, cede and assign any of their Intellectual Property Rights (IPR) resulting from their solution or proposals which are created before or during the competition. You acknowledge that Telkom has a right to use and enjoy the equipment and own any intellectual property right contained and resulting from the solution, submission or proposal for the purpose of this Competition.”

Dr Audrey Verhaeghe, the Chair of the SA Innovation Summit and a director at the Da Vinci institute said it was “a first” for the summit to represent a client that asked for the cession of an entrant’s IPR as a condition for participation.

Paul Jacobson, a legal strategist and Director at Web.Tech.Law, said that the effect of the cession would be to transfer ownership of participants’ entries to Telkom, with the result that any companies formed to develop inventions submitted to the competition would be out of business.

“Essentially participants would be giving up an invention which could launch a new business in exchange for the hope of winning a prize.”

In the case of Paperight, Attwell claims that entry to Telkom’s competition would have exposed him and his funders to the possibility of losing control of the company.

“Much of our IP, including the trademarks we have pending in the US and South Africa, could have become the property of Telkom. Insofar as Paperight can be considered an invention, it would belong entirely to Telkom.”

Jacobson believes that a more even-handed approach would have been for Telkom to structure a clause limiting cession of intellectual property rights, and not all entrants, and calls the current parameters “excessive”.

“I believe the cession as it is framed goes far further than it should, given Telkom’s rationale for the cession. There are less restrictive options which could include a cession that is conditional on winning a prize; a broad and exclusive license to use the invention if the participant wins a prize or even something more akin to a joint venture with the winning participants to develop their ideas and benefit both parties.”

Telkom don’t see it that way. According to Telkom spokesperson Leigh-Ann Francis, they’ve probably already thought of your idea.

“Telkom does believe that there is an enormous possibility that entries received may resemble, wholly or in part, ideas and products that are already in development or existence within the organisation but not yet implemented or registered. Also, the likelihood that our group of experts would have already conceptualised many of the ideas that will come forth from participants in this competition is quite high.

“The rule pertaining to the ceding of the IP rights is required “to prevent a situation where a person, group, or organisation submits an idea that we [Telkom] already have thought of, claims ownership, and then expects to be paid for it.”

Of course, ideas alone cannot be protected by intellectual property law, which makes Telkom’s rationale for the cession clause all the more confusing.

“Processes can be patented; illustrations, text and code are automatically protected by copyright when they are created; and names and logos can be trademarked. Many ideas may go into their creation, but the ideas alone cannot be protected. So, if the competition is indeed just a ‘brainstorm’ for ideas and not for inventions, then there is no need for an IP assignment at all, since there would be nothing to assign. The fact that there is an IP assignment in the rules is evidence that Telkom expect more from entrants than just ideas.”

All of which is to ask, should you enter the Open Innovation Mega Challenge?

Not according to Paul Jacobson.

“If a prospective participant has an invention which could have the impact Telkom hopes they could, participants may be better off developing their solutions independently or in concert with Telkom’s competitors without the requirement that they give up a lucrative opportunity.”

Dr Verhaeghe is slightly more hypothetical in her conclusion.

“If I had an idea but no intent to develop it myself, I think the competition gives me an opportunity to win a prize and bandwidth.”

Tempting. But then, Telkom has probably already thought of the idea, anyway. DM

Photo: Road to Beaufort West tower by smee.bruce


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