Intellectual Property in the Indian auto industry and why it’s critical

Indian automakers and their suppliers are innovating new technologies today at a pace faster than ever. However, this race is also leading to violation of Intellectual Property(IP) rights, which is detrimental for the entire Indian automotive industry. Ranojoy Mukerji explains the importance of IP for the growth of the industry in this article.

By: | Published: June 14, 2019 1:35 PM

The automotive industry is innovating like never before. From the time there were the first cars which had only rear wheel brakes and primitive transmissions, today’s vehicles boast of cutting-edge driver and passenger safety stuff like crash avoidance, automatic braking, radar-based cruise control, multiple cameras and a myriad of sensors to make sure that vehicle occupants stay as safe as possible. Today, mere engine performance is not the sole criterion for buying a car – it has to offer innovative technologies as well. Like all major tech stuff, what started out with only the biggest and more expensive cars, has today permeated down to even basic cars. Airbags, anti-lock braking systems (ABS), rear parking sensors – these are all things which are being taken for granted today. Innovation also leads the way for vehicles to perform better.

While most cars in the market offer similar features, most manufacturers have to ensure that the proprietary technologies they develop are not simply emulated by others. Innovation is essential for the motoring industry in India, but at the same time, there should be no copying. Smart auto components should not be killed by restrictive practices but should thrive for the betterment of the industry. By this, I mean that Intellectual Property Rights (IPR) can today be the tool of all manufacturers to make sure that innovation is in place and a strong legal framework can check the loss of propriety technology in favour of sub-standard copies.

Currently, sales are slow and the automotive industry is going through the doldrums. This does not mean that innovation in the industry has slowed down. In fact, technology is leap-frogging like never before. With the imminent introduction of BSVI standards by April 2020, all companies are working very hard for emission compliance. The auto component industry in India is witnessing a boom in the fields of IT, utilization and proliferation of advanced techniques. In this race to technology supremacy, significant disputes ranging from patents to industrial designs and respective company copyrights are increasing almost daily, with each manufacturer claiming sole propriety over a particular advancement. These fears are not unfounded - a Federation of Indian Chambers of Commerce & Industry (FICCI) report estimated total losses of Rs. 10,501 crores borne by the industry due to counterfeiting activities in FY 2013-14.

Interestingly, the auto components industry in a bid to garner more and more orders from OEMs is fighting many demons from within, wherein many unscrupulous manufacturers are fraudulently copying others’ patents or doing an intentional imitation, overriding IPR laws.

Counterfeiting of auto components, indeed, is an intellectual property theft as it can infringe any, or all, of the main intellectual property rights, namely trademarks, patents, designs, and copyrights. It leads to a loss of revenue to the OE manufacturer. But, more importantly, consumers are deceived into buying a cheap alternative, which may be counterproductive, as it will reduce performance and even endanger the longevity and proper function of the vehicle. Today, auto components contribute more than 2.3 per cent to India’s GDP, making them a significant player and if the industry wants India to be seen globally in a good light regarding investments and R&D work, then IPR implementation needs to be more stringent.

The ambit of an IPR framework is broader than just financial losses from its theft. From innovation generating the need for IP laws and its protection to enforcing and commercialization of IP, the framework provides a holistic solution to safeguarding financial as well as the intellectual aspect of a product. But administrative loopholes such as red tape, complex patent filing, and costly litigations, could end up tarnishing a brand’s image as well as result in the loss of revenue. Let’s look at this way. Loss of revenue for manufacturers due to counterfeiting activities discourages them from investing any further in a market that thrives on its grey economy. Loss of investments would translate into hindering innovative products entering the Indian market. In such a situation, the loss is not only financial, but it could prevent the latest tech from coming into the market. This would lead to the same situation of some years ago, where the latest tech from Western countries in the automotive would come to India only after a significant gap. In cases of essential products like air-conditioning in cars, whilst most of the US adopted it in the 1950s, in India air-con in cars entered the mass market only in the late 1980s!

Innovation is the key to the success and survival of any business. A strong IPR can control the loss to the economy as well as consumers. As the Indian economy is set to become the world's third-largest economy, efficiency enhancers like innovation will play an increasingly important role. It will likely be the distinguishing factor between economies that continue to grow and those that stagnate after a certain level of development. However, counterfeits and a booming grey economy can stall this progression. This is where stringent IPR laws should be incorporated into the auto component industry with a long-term vision. For sustaining innovation in the domestic market, policymakers need to create an enabling environment conducive to innovation, transfer of technology, knowledge, and practices between Indian and multinational companies. Such policy measures will actualize IP as the mantra for Indian auto components industry, driving India’s competitive advantage in this space.

Author: Ranojoy Mukerji is an automotive writer, analyst and hedonist with over 20 years of experience in motoring journalism. He is also a passionate Car collector and his hobbies include fine single malt whiskies and cigars.

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or any employees.


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