1. Intellectual Property Rights: New policy may power R&D, national growth

Intellectual Property Rights: New policy may power R&D, national growth

The announcement of the new IPR policy has been a much sought after reform considering the unfavourable regulatory environment prevalent in the country. The new policy is expected to encourage the IPR regime, making it more efficient.

By: | New Delhi | Published: May 17, 2016 3:54 PM
At last count, a total of 2.37 lakh patent applications and over 5.44 lakh trademark registrations were deemed as pending, some of these hanging fire for years. At last count, a total of 2.37 lakh patent applications and over 5.44 lakh trademark registrations were deemed as pending, some of these hanging fire for years.

At last count, a total of 2.37 lakh patent applications and over 5.44 lakh trademark registrations were deemed as pending, some of these hanging fire for years. The main reason for these pendency figures (updated March 10, 2016) has been attributed to the shortage of manpower in the country’s intellectual property offices. The unclogging of the pendency and quality examination are at the heart of improving the robustness of India’s Intellectual Property Rights (IPR) system, something that the government has moved towards by announcing the country’s first IPR policy.

The new National Intellectual Property Rights policy seeks to put in place a legal framework that will encourage the IPR regime and reduce the time taken by the government to approve a trademark to a month by 2017. Currently, the process takes more than 12 months on an average. The policy, approved by the Cabinet last Thursday, nominates the Department of Industrial Policy and Promotion (DIPP) as the nodal agency for regulating intellectual property rights in the country.

For those in industry, the government’s move to streamline the IP related laws under a single department is a big positive, considering that this will help in streamlining of the intellectual property framework in the country. As of 2014, India’s spend on research and development (0.8 per cent of GDP) significantly lagged global counterparts such as China (1.9 per cent), Korea (3.8 per cent) and the US (2.7 per cent). In 2015, India ranked a dismal 29th out of 30 countries in the International IP Index released by the Global Intellectual Property Center of the US Chamber of Commerce, a ranking that measures the overall IP environment in a country. China was ranked 19th in the same list.

A major factor behind the lag in India’s country-level performance over global counterparts, according to a January 2016 PwC-Assocham study on ‘Innovation-driven growth in India’, has been the lacklustre performance of its enterprises. For instance, India has just five companies among the leading 500 brands worldwide, while China has 32. In terms of creating global businesses, only three Indian firms were listed on the NYSE International 100 Index as of 2013, as compared to 22 Canadian firms and 16 from the UK.

The IP issue is even more compelling in the context of the state of India’s SME (small and medium enterprises) sector, which employ 40 per cent of India’s overall workforce but contribute only 17 per cent to the nation’s GDP. This is mainly due to an unfavourable regulatory environment, marked by the need for multiple procedures and high paid-in capital to start a new business, according to PwC. As a result, a whopping 94 per cent of SMEs are currently unregistered, which leaves them struggling with issues such as shortage of skilled workers, limited market exposure and restricted access to capital. Of the total number of SMEs, only 0.2 per cent are medium-sized firms, employing between 100 and 1,000 people. The lack of access to funds results in limited technology adoption within these firms, leading to system inefficiencies that lower national productivity. On the other hand, the German Mittelstand (GM), comprising SMEs is an example that highlights the potential within this segment to contribute to national growth. GM firms account for almost 60 per cent of the employment within Germany and contribute more than 50 per cent to the national economic output.

In India too, there are exceptions. The Indian telecom industry, for example, has leapfrogged to mobile telephony, skipping fixed-line technology and within a space of 20 years (1995-2014), the sector recorded 910 million mobile-phone subscriptions —18 times the number of landline connections in 2006 (50 million), the year when landline subscriptions reached their peak.

In India, these innovations, according to the PwC paper, could be categorised into three broad categories:

* Technology-driven innovation, which involves the development of new advanced technology systems, such as the Aadhaar platform, Bajaj Auto’s DTS-i technology or Vortex Engineering’s solar powered ATMs.

* Market-driven innovation, which includes products that create innovative value propositions for new customer segments. Examples include Tata Ace one-tonne commercial vehicles and GE India’s low-cost ECG machines.

* Operations-driven innovation, which includes innovations in processes achieved by adopting cost-efficient practices or by creating new supply and distribution channels, Examples include companies such as the Narayana Health Group and Aravind Eye Hospital that have lowered the cost of heart and eye surgeries through operational efficiencies achieved from volume-driven business models.

The objectives of the government’s new IPR policy, officials said, focus on strengthening the legal and legislative framework of IPRs, their commercialisation; and reinforcing the enforcement and adjudicatory mechanisms for IPR infringements.

This has been a work in progress. In the run up to the policy, the government has sanctioned 481 additional posts in the office of Controller General of Patents Designs and Trademarks under the Twelfth Plan as part of the Plan Scheme for Modernisation and Strengthening of Intellectual Property Offices. The selection process to fill up 458 vacant posts of Examiners of Patents and Designs has already been completed and the approval of competent authority for appointment to these posts has been accorded, officials said. Besides, as a short-time measure, 263 contractual posts of Examiners of Patents and Designs and 100 contractual posts of Trademarks Examiners have also been created.

Incidentally, India’s IPR policy comes at a time when developed economies are trying to force it to put in place even stronger IPR frameworks through mega-regional trade agreements, including the WTO’s agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In April, the US Trade Representative kept India, China and Russia on its “Priority Watch List” for inadequate improvement in IPR protection.

According to the government, the new policy will try to safeguard the interests of rights owners keeping in mind the wider public interest while combating infringements of IPRs. Finance minister Arun Jaitley, while announcing the new policy, said that the country would retain the right to issue so-called compulsory licences to its drug firms, under “emergency” conditions, and would not immediately need to change patent laws that were already fully WTO-compliant. “Compulsory licences are already provided in our patent law. That existing provision will continue,” Jaitley said. Compulsory licences enable a domestic drug manufacturer to produce patented drugs that are not available to the public at a reasonable price.

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