While IT, telecom and electronics majors are the top patent-filers of 2010, accounting for 73% of the10 leading entities each from US, Japan and China, these sectors are missing on the corresponding Indian list. The Indian list is dominated by pharma firms where 80% of the top 10 patent-filing entities are homegrown drug makers. Patents have long been recognised as a proxy indicator of a country's innovative prowess.
Sector-wise cumulative filings of these countries during 1995-2009 confirm the trend. While World Intellectual Property Organisation data show the pharma and biotech sector claims the lion's share in Indian patent applications with over 31% of all filings in the last 15 years, comparable figures for the US, China and Japan are significantly lower at 9%, 8% and less than 3.5%, respectively. Experts say individual dynamics that have shaped these industries, commercial incentive structure and historical factors are behind this aberration.
For Indias generic drugs industry, it was indispensable to learn the tricks of the patent litigation game to survive in the US, the largest drug market, where it had to compete directly with global pharma giants. Quite the opposite for the domestic IT industry, which collaborated with global technology R&D companies from the US and Europe and depended on them for revenues.
Within the Indian IT industry, the spotlight on the service model (where we create software and IT products for others) partly prevents them from creating their own patented products. Most IT firms derive much of their business from R&D firms and are contractually bound to not own IPR even on products or solution of their development, said industry veteran Diwakar Nigam, co-founder, Nasscom and Newgen Software, one of the top five domestic applicants from the IT sector for patents.
In that sense, innovation within the IT industry may not be truly reflected through the number of patents filed. Also, this service orientation of Indian IT majors meant that inclination towards product innovation is missing, said Nigam.
Indian IT firms derive over 65% of their revenues from exports and 80% of their software exports revenues come from US and European markets, despite the slowdown.
For the Indian pharma sector, it works the other way. They make a substantial part of their money by proving in the courts of regulated markets that the innovator drug firm's patents are either invalid or that their drug wouldn't infringe upon the patents held by Big Pharma, for which they must have more than thorough knowledge of how the patent system works.
We are also very strong in developing novel drug delivery systems and those technologies are not only patented but licensed out for commercial incentives. Moreover, when generic firms reverse-engineer new drug molecules, they discover new cost-effective ways to develop existing drugs. These processes are patented to thwart competition from other generic peers. Finally, the rising interest of Indian players in the branded business and new chemical entities means a larger number of patents in the Indian kitty, said Sofiya Mumtaz who heads the global IP management at Lupin, one of the top patent filing companies from India.
In so far as 'innovative capacity' is concerned, our pharma sector is far ahead of the IT sector. The IT sector is still predominantly based on a services model, but that is rapidly changing and we see a number of Indian firms building IT products. However, when comparing numbers, it must also be borne in mind that software is not as easily patentable as pharma products in several jurisdictions, said IP expert Shamnad Basheer. The spurt in India's pharma patent applications is also partially attributable to the fact that India recognised product patenting only in 2005.
Nigam also blames the Indian patent filing system, which is not only perceived as tedious and complex but also restricts software majors from filing pure software patents as against simpler filing systems in say, US or the UK. For instance, the current filing system doesnt not allow a mathematical method or a business method or a computer programme per se or algorithm to be patented which leaves less scope for software companies in India, quips Nigam.
Still, patent filings in India has risen from 12,000 in 2003-04 to over 34,000 in 2009-10, says a Nasscom spokesperson. The full impact of this would be felt in the coming 2-3 years. The India Innovation Fund, with Nasscom as one of its key promoters, encourages innovation for early stage Indian firms in ICT and life sciences. The industry has also achieved a non-linear model through a mix of initiatives including development of intellectual property this includes usage of technical and domain capabilities to develop products, tools, technologies and processes that can be used for multiple clients, the Nasscom spokesperson said.