The sale of New Zealand medical software maker i-health to a foreign buyer has raised the question of whether companies that receive Technology New Zealand grants should pay them back if acquired by an overseas entity.
Last month i-health was bought by iSOFT, which also makes applications for the health sector, for a sum i-health director Brian Allen (pictured) won’t disclose.
In 2001 i-health received a $350,000 grant from Technology New Zealand to assist with its participation in the British National Health Service’s electronic health record project.
Since then it has gone on to sign a deal with UK firm Sysmed, under which Sysmed bundles i-health’s web-enabled lab results reporting system with its own lab information management product.
I-health has also clinched a deal with SeeBeyond that will see i-health products combined with SeeBeyond’s application integration platform.
Closer to home, i-health has sold software to Dunedin Hospital, the Waikato District Health Board and the Royal Melbourne Hospital.
The sale of i-health invites comparisons with GPS maker Navman, 70% of which was sold to US company Brunswick last year for $US56 million, following a $1 million Technology NZ grant in 2001.
Technology NZ chief policy adviser Peter Morton says the question of whether grant recipients should be made to pay them back if they’re acquired by an overseas entity has been discussed by TNZ and other stakeholders twice in recent years.
Both times, the outcome was “that you shouldn’t put a clause like that into a contract unless you can enforce it”.
Clawback contracts are very easy to evade, he says.
“If you say ‘company X has to pay the New Zealand taxpayer back if acquired by a foreign entity,’ then the company could be sold to a New Zealand holding company and then to an overseas entity.”
He says an Australian co-operative research centre once attempted to enforce an intellectual property clawback clause “and took it to court, but it turned into a feast of lawyers, went on for years and they gave up in the end”.
The only country he could think of that had a successful record in enforcing such clauses is Israel, “which has a fortress economic policy”.
If a firm decided, upon acquisition by a foreign buyer, to pay back its TNZ grant, “we wouldn’t say no — I’m sure the means could be found”.
He says of all the firms funded by TNZ, only a small minority get sold overseas. In many cases, people, intellectual property and revenues remain in New Zealand.
There are different shades of overseas ownership, Morton says.
“Some stay in New Zealand and continue to add value, while in other cases the firm’s production goes overseas but the research and development stays here.”
In cases where the company goes lock, stock and barrel overseas, TNZ would stop any funding still due to be paid, Morton says.