The Role of Intellectual Property Rights in Technology Innovation

Mr Manoj Poonia, Vice President Effectual Services.

Intellectual Property (IP) is a term which refers to intangible creations that arise from human intellect. There are many types of IP recognized by law, and each type provides some form of protection to a person who has made the creation. The basic idea behind various types of IP is to provide an incentive to the owners to disclose the idea to public, so that others can further develop the technology, and therefore, it leads to an overall growth of science and technology. As logical as this may be, it has been criticized by many – people who follow an opposing school of thought propose that IP rights serve as a tool to provide monopoly to large corporations, and it’s difficult for smaller players to invest in R&D as much as bigger companies, eventually, strict implementations of IP laws kill the innovation and thus it defeats the sole purpose. Let’s examine this with help of history –

The Indian Pharma sector –

The Indian Patent Act was enacted in 1970, at that time, the lawmakers did not allow protection to pharmaceutical products (i.e. medicines) under the act, but only afforded protection to “methods” of making pharmaceutical products. This allowed the Indian pharma industry to reverse engineer the drugs made by international companies, and manufacture them using alternate methods, i.e. they could make same API (Active Pharmaceutical Ingredient) using different methods. Needless to say, that the exercise of researching an API is more capital intensive, than researching for an alternate method to produce the same API – and thus, came the rise of Indian generic drugs.

Looking back, it seems like the lawmakers might have done this intentionally, to preserve and promote the domestic pharma industry, as they knew that the domestic pharma industry probably did not have the necessary means to innovate back then. The result – India became the world’s largest provider of generic drugs, and we primarily became “imitators”and not “creators”.

The laws have since then been amended multiple to be TRIPS compliant, and since year 2005, India allows patenting of Pharma products. The industry reacted to this positively and domestic firms, since then and even prior to that, have slowly been investing more money into their R&D programs or have formed alliances to tap into these opportunities. Back then, when the patent law was enacted, the Indian pharma companies might not have been very capable of innovating and competing against international pharma giants, but today, we have companies like Biocon and Dr. Reddy’s – who rely heavily on R&D and have filed numerous patents across the globe, and are already competing against international pharma giants.

The Chinese example –

China is without doubt the manufacturing base of the globe, and Chinese products are synonyms for counterfeit for many. However, like India, Chinese patent laws are evolving and are moving towards a stricter IPR regimen – a brief review of the history of IP laws in China reveals this fact. Chinese patents act was enacted back in 1984 and thereafter, there have been three main amendments – the 1992 amendment, the 2000 amendment and the 2008 amendment. The 1992 amendment was made in accordance with “Memorandum of Understanding between the Government of the United States and the Government of the People’s Republic of China on the Protection of Intellectual Property.”. The 2000 amendment was made in anticipation of China becoming a member of World Trade Organization (WTO). Both these amendments aimed to create a stricter IP regime, which was more in compliance with the developed countries across the globe. However, the 2008 amendment, which was also directed to creating a stricter IPR regimen and to promote patent filings, was purely voluntary and was done without any external pressure. 

The result – China overtook US in 2011 in terms of patent filing, which was the leading country in patent filings till then. Since then, the China patent filings have remained more than double of US (Source: WIPO IP Statistics Data Center).

By encouraging the patent filings, and imposing a stricter IP regime, China aims to move from being a manufacturing hub to more of a research hub. It is not surprising to note Huawei among the top companies conducting active research and filing patents in 5G space.

The case of Robert Kearns –

Innovation not only stems from R&D labs of big companies but also from companies that start from a garage –key examples being companies like Apple and individuals like Robert Kearns. Robert Kearns was an inventor made famous by his patent war against automobile companies in US during 1978-1992. He was an inventor of intermittent windshield wiper, which was useful in light rain or mist, and held a patent for the technology. He tried to license his technology to General Motors, Ford, and Chrysler but each rejected his proposal. Even though the proposal was rejected, Ford and Chrysler went on to implement his technology in the cars they manufactured. Thus ensued the most interesting patent infringement cases that ran years, and finally the courts decided in favor of Robert, and the auto giants had to pay damages to Robert.

Conclusion –

From the standpoint of IP, the countries across the globe can be divided into two broad segments – Developed & Innovating and Developing & Imitating. The Developed and Innovating have well defined and well understood IP laws that impose a stricter IP regimen, which leads to innovation. Then comes the second segment – of which countries like India and China are a part, which are gradually moving to an ever stricter IP regimen, albeit with some temporary intentional delays recorded in India.

Stricter IP laws do seem to have a positive impact on driving innovation, at least in a longer run, and in the countries in which the industry has potential, and is capable of innovation. It seems that the hypothesis – “strict implementations of IP laws kill the innovation” might not be correct after all, and is more focused in short sighted goals. In fact, if it were not for a solid IPR regimen, it become easier for bigger companies to steal the idea from a genuine individual inventor – as we see from the case of Robert Kearns.

It is safe to assume that India does have a lot of potential of innovation, and with initiatives like “Make in India” every industry in India will react to become more and more innovating, and eventually, the legislation and the courts will enforce a stricter IP regimen in India as well.