Article by Ashish Bharadwaj on "A robust IPR regime is necessary for growth" -

May 05, 2017

Innovators and entrepreneurs must trust the patent system for intellectual property rights (IPR) if they are to embark on risky innovation gambles.

The good news is that intellectual property rights (IPRs) have greater public visibility these days. The bad news is that a lot of it is misguided scepticism.

IPRs are critical to incentivising innovation, which, in turn, is key to sustaining economic growth and increasing living standards. Scholars around the world have found this statement to hold true based on rigorous empirical testing across a cross-section of countries and time periods. In India, there is still a dearth of evidence-based research that can inform our laws, practice and policymaking pertaining to IPRs. Officials, academicians, industry experts and other commentators continue to debate whether and how strict enforcement of IPRs, and putting in place a more stable and certain IPR regime, can induce economic growth, human development and the overall prosperity of societies.

Patents can even be efficiently used as bargaining chips in the electronics industry and can be used for defensive purposes to avoid being torpedoed. Photo: Aniruddha Chowdhury/Mint

The theme of 2017 World IP Day—which fell on Wednesday last week—was “Innovation: Improving Lives”. The World Intellectual Property Organization is focusing on the role of IP in “driving renewable energy”, “creating better healthcare”, “shaping new ways of learning”, “helping feed a growing world”, “enabling safer transport” and “producing smarter material”. IP matters a lot. One way to celebrate the day would be to start thinking about changing our perception of IP before it’s too late. After all, what’s the use of running if you are not on the right road?

It is often said that patents restrict competition and, because they are negative rights, they confer a “licence to sue”. This is fundamentally flawed. Patents, in fact, are meant to structure competition in the market. We tend to forget that there is free entry into the innovation race to obtain patents. This is one of the major benefits of the system—to get the latest and useful technologies in time to solve collective problems.

There is uncertainty about the role patents can play and the benefits they potentially confer. The possible role of patents can cover a wide spectrum, depending upon sectoral specificities. While a strict appropriation strategy might be appropriate in the pharmaceutical industry, the chemical industry might rely more on exclusive licensing models. Patents can even be efficiently used as bargaining chips in the electronics industry and can be used for defensive purposes to avoid being torpedoed. They are a proven solution to the traditional incentives-diffusion paradox that was presented more than 50 years ago by Nobel prize winning economist Kenneth Arrow (who died few months ago). Apart from excluding infringers, they are a credible way to signal and certify competencies; they attract valuable finance, they are useful bargaining chips in cross-licensing negotiations; they facilitate trade in technologies; help manage new knowledge; and expedite diffusion of existing knowledge.

With perennial instability in IP rule-making added to the general scepticism towards IPR that Indian policymakers seem to have, they do not adequately appreciate the fundamental reality that IP laws and policies are meant to incentivise innovation by establishing enforceable boundaries to protect new products, processes, and original works of expression. Just because a handful of sectors in India have tasted (limited) success and partially fuelled the Indian engine of growth in the recent past does not mean that policymakers can afford to be complacent. Adopting new technologies to solve an array of problems will require policymakers to devote a higher level of attention to IPRs than they are used to giving.

The clamouring we witnessed from all quarters in the run-up to the launch of India’s national IPR policy last year raised our expectations of how well India would incentivise, secure and enforce IPRs. It is safe to say that challenges still abound in most sectors, despite soft initiatives taken by the government.

The International IP Index 2017 released by the US Chamber of Commerce, appropriately titled “The Roots Of Innovation”, compares India’s intellectual property environment with that of 44 other world economies. The index ranked India at a dismal 43rd position out of 45 countries. This shows that challenges to innovation continue to exist in India and, therefore, the government needs to build upon the positive rhetoric of its IPR policy with the substantial legislative reforms that innovators need.

Multiple problems are still faced by pharmaceutical, software, biotechnology, automotive, movie, music and other technology-led, IP-intensive industries. Beliefs, attitudes and approaches towards IPRs in India must change for the sake of the ambitions articulated in this government’s many initiatives—from Make In India to Startup India and Smart Cities.

Due to a variety of factors, governments have always been constrained in taking the tangible and intangible benefits of innovation to different sections of society. As science historian James Burke once said, “You can only know where you’re going if you know where you’ve been.” We must remember that thus far in India, the benefits we have derived from breakthroughs in medicine, communication, computing, automation, security, engineering and entertainment are, in large part, because of the sustained efforts of innovators over a long period of time. Innovators and entrepreneurs must trust the patent system if they are to embark on risky innovation gambles.

The value of legitimate IPR embedded in the resulting technology must be paid for and it needs to be separated from the IPR holder (just like in litigation it is imperative to take the adversary out of the adversarial). If the trust—the bedrock of the innovation ecosystem—is lost, the system is at risk of crumbling. Moreover, repeatedly using the tattered shield of compliance with global standards does not eliminate the need to further strengthen the IP system to build trust and confidence in innovators and investors.

Dr. Ashish Bharadwaj teaches law and economics in Jindal Global Law School and is Director of JIRICO. Views are personal.