Customers invest and benefit: intellectual property rights for the Innovation in Water Challenge.

The Innovation in Water Challenge (IWC) is an exciting opportunity for organisations to win up to £250,000 to kick-start, scale or grow innovative initiatives. We’ve had a lot of interest in the competition, and with it a number of questions. Some of those have been on the rules on intellectual property rights in the terms and conditions – and how they might work in reality.

Why have terms and conditions on intellectual property rights?

The IWC exists to accelerate innovation that will enable the water sector in England and Wales better meet the needs of customers, society and the environment for generations to come, funded by water customers themselves. Between them, the two innovations competitions could see £200 million invested by 2025.

It’s important that customers in England and Wales receive the benefits of their collective investment into the fund, without having to pay several times for these benefits.

This is why, for the Innovation in Water Challenge, we have some requirements:

• Intellectual property developed through entries funded by the IWC needs to be licenced royalty-free to all water companies and new entrant water companies (NAVs) in England and Wales in perpetuity (forever). If a customer who lives in Portsmouth funds a project in Bangor – they should also get the benefit of this.
• There are different requirements on where royalties need to be shared depending on who shares them and where they are earnt. For example, royalties earned outside the water sector in England and Wales may be kept by all participants.

How can I benefit from my innovation in practice?

Fictional organisations ‘Water Innovations Inc’., a third party innovator, and ‘The Saesneg Water Co. (SWC)’, a water company, receive funding through the Innovation in Water Challenge to pilot a new approach to reservoir management, ReservoirX. The new approach could significantly improve biodiversity and reduce operational costs.

SWC provides three test sites, understanding of the site-specific challenges and strategic insight around regulatory requirements and implications. Water Innovations Inc. bring their understanding of different approaches to reservoir management and an innovative new approach to pilot. There will be jointly created IPR, funded through the Innovation In Water Challenge. Water Innovations Inc. execute the pilot with support of the on-site teams from SWC.

This partnership really accelerates the development of ReservoirX. By the end of the pilot, they have proof that ReservoirX both improves biodiversity and reduces operational costs in large water bodies. It’s ready for scaling.

Using this example, below we shed some light on how the relationship between the partners may work. However each partnership and project is different and so arrangements between partners may differ as appropriate.

Ownership of IPR

Based on the terms and condition for the Innovation in Water Challenge, where a project funded through the Challenge involves more than one participant, then any jointly created IPR should be shared proportionately as agreed by the project participants.

Water Innovations Inc. and SWC agree as part of their contractual arrangements, that considering what each of them are bringing to the partnership, the intellectual property they develop through the pilot will be 85% owned by Water Innovations Inc. and 15% owned by SWC

Royalties earned and the relationship within the partnership

The overall approach to what happens with royalties may differ, as set out in the example below.

Based on the impressive results and case studies at the three SWC reservoir sites, Water Innovations Inc. now go out and sell ReservoirX to:

• 7 other water companies in England and Wales,
• a reservoir fishery in Wales, and
• 1 water company in Scotland and 2 in France.

Here we take a look at what may happen in each case.

The price Water Innovation Inc. provide to the water companies in England and Wales covers execution costs, but all the new (‘foreground’) IPR is provided royalty-free.

Water Innovation Inc. sell ReservoirX for a fee to the reservoir fishery in Wales. Royalties are shared by the partners in line with their partnership terms and the Fund’s terms and conditions:

• Water Innovation Inc. include a fee for all of the IPR that is included in ReservoirX. They may keep the royalties earnt here with water company customers.
• Water Innovations Inc. pays a small royalty dividend to SWC for the 15% of the IPR ownership that they agreed. SWC ensures that the dividend goes back to water customers (in proportion to the funds that customers have contributed to the project).

Water Innovation Inc. sell ReservoirX for a fee to the water companies in Scotland and France. Royalties are shared by the partners in line with their partnership terms:

• Water Innovation Inc. include a fee for all of the IPR that is included in ReservoirX.
• Water Innovations Inc. pays a small royalty dividend to SWC for the 15% of the IPR ownership that they agreed.
• Both Water Innovation Inc. and SWC may retain this dividend as it was earned outside of England and Wales.

Can I propose different IPR arrangements as part of my entry?

We would expect partners to discuss in detail what happens to any intellectual property that may be created through their entry. Where relevant to the project, we would expect details of this to be included in the IWC entry form.

Entrants into the Innovation in Water Challenge may propose alternate IPR arrangements as part of their entry. This will be considered on a case-by-case basis to ensure the arrangements benefit all customers of water companies in England and Wales, present value for money and do not result in additional costs.

The Innovation in Water Challenge provides an additional route to get initiatives out in the market or rolled out more broadly. There’s also the potential to sell the IPR outside the water and wastewater sector in England and Wales. The competition is an exciting opportunity to play a part in paving the way for a resilient and sustainable future – and get the chance to partner with organisations you may not ordinarily have the opportunity to partner with.

We will be keeping our policies under review for future competitions. You can find out more on IPR in our terms and conditions. You can find out the background in Ofwat’s August decision document.