Reflection of Indian Economy: A Rise in Overseas Patents

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May 25 – The number of patents approved for Indian nationals is less in number than it is to foreigners, according to statistics released by the Indian government. The number of patents granted to Indian applicants was 17 percent in 2009-10. So, of the 7,486 patents approved last year, the Indian contribution was only 1,272 with the rest belonging to overseas players.

Government officials have said that a new framework and fundamental changes needs to be done to help promote Indian innovation. In the meantime, India’s Industry Ministry has proposed a discussion paper to scrutinize the feasibility of introducing utility models into the intellectual property rights regime. Utility models are a framework for providing limited protection to those innovations, which may not meet the standards of the Patents Act and yet are commercially exploitable and socially relevant. The patent shield for the home-grown products will be officially called the “Utility Models.” Such a practice is common in 55 countries like China, Japan and Germany.

One of the reasons for low patenting activity could be a lack of responsiveness about IPR and also absence of institutional systems. Patents are not the only measure of innovations as many innovations may not be patentable because the criteria of novelty, inventiveness and usefulness are not fulfilled. There may be other constraints originating from agreements on technology transfer which do not allow patenting, but patents do help in differentiating between a more innovative firm and a less innovative firm.

India’s patent policy highlighted balancing developmental concerns with the need for promoting originality. India analyzed patents as a device for economic development and limited the scope and term of patents.

Patent policy has a long narration in India going back to 1856, but the genuine awareness of policymakers towards patents began right after Independence. Two specialist committees were set up in independent India to learn patents and offer propositions on the kind of patent scheme that India should execute. These committees conducted an extensive survey on patents in India.

The Patent Enquiry Committee (1948-50) stated that, “the Indian patent system has failed in its main purpose, namely to stimulate inventions among Indians and to encourage the development and exploitation of new inventions for industrial purposes in the country so as to secure the benefits thereof to the largest section of the public.”

The second committee known as the Ayyangar Committee (1957-59) noted that foreign patentees were acquiring patents not “in the interests of the economy of the country granting the patent or with a view to manufacture there but with the object of protecting an export market from competition from rival manufacturers particularly those in other parts of the world.” As a result India “is divested of getting, in many cases, goods…at cheaper prices from alternative sources because of the patent protection granted in India.” The reports ended that foreigners held 80-90 percent of the patents in India and were exploiting the system to achieve monopolistic control of the market.

The patent law of 1970 (the current law) restricts the field of patentability, only grants process and not product patents in food, pharmaceutical and chemical fields, restricts the term of patents and has an involved system of licenses to ensure that patents are worked in India. The act found support among domestic firms and various political parties in India.

As one of the “BRIC” countries (the others being Brazil, Russia and China), India has practiced positive changes in both its market size and technological capabilities in recent years. As a result, overseas patent applications filed in India have amplified as more applicants identify its potential as a manufacturing and consumer center.

Following are some of the reasons for the increase in foreign patent applications. In terms of industry, India was among the top four destination countries for the mechanical/engineering, electrical/electronic, and chemical/materials-related applications.

 Patent cooperation treaty – national stage deadline for India is 31 months after the earliest priority date
 Applications can be filed in English or Hindi
 Powers of Attorney and Assignments are required
 Excess claims fee: INR 800 (or INR 200 for individual inventors) per claim over 10
 Request for examination due within 48 months of priority date or date of filing, whichever is earlier
 Patent term is 20 years from application filing date
 Opposition period of one year after date of publication of grant of patent in the Patent Office Journal

All the above reasons are some of the key factors of foreign patents growth in India apart from booming Indian economy.

The amendments of the patent law
It is generally whispered that the 2005 amendments were made mainly due to international pressure from organizations such as the World Trade Organization. The new law, amending India’s 1970 Patent Act, affects everything from electronics to software to medicines, and has been expected for years as a stipulation for India to join the World Trade Organization. However, many of India’s innovative companies have welcomed the stronger patent protections saying that these changes have made India more aggressive on the global scale and will generate further investment and innovation in India. Therefore, with stronger patent protection, more multinational corporations have tapped India’s relatively inexpensive engineers, scientists and computer programmers for product design, drug development and clinical testing. In fact, multinational corporations such as General Motors, Microsoft and Nokia already have research facilities in India.

As India opens its markets and its companies venture abroad, companies are seeking to ensure that they profit from their own innovations. The list of top applicants in 2004 shows the importance of patents in global competition. Among the top applicants are Sony, Procter & Gamble and DaimlerChrysler AG – all with more than approximately 300 applications each last year. From the Indian side, the top applicants include Dr. Reddy’s Laboratories and Ranbaxy Laboratories – both of which have more than doubled their research and development spending to about 10 percent of revenue.

It also states that India is no longer a protective nation about its domestics companies, but instead a country with a global competitive mindset where each company has an equal chance to succeed.