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International Evidence Suggests We Understand, Embrace & Protect IP Rights

The Financial Express
By Professor  
Punkhuri Chawla, ASHISH BHARADWAJ

Creation and protection of intellectual property has been the basis for profound technological developments of several industries across the world. Technological progress that can lead to prosperity of our society can be driven either by technology absorption/diffusion (international transfer of technology to India) or technology creation (domestic innovation in India). Indian policymakers consider harnessing technological progress as a key priority to boost economic growth and improve living standards. Encouraged by this, researchers have been trying to better understand—both from a theoretical and an empirical perspective—the socio-economic effects of strengthening IPRs in developing countries, specifically on various economic variables, such as FDI, trade, domestic innovation and public health.

India’s IPR Policy released in 2016 offered great hope that India would improve its IP regime. The optimism that the policy brought—along with hopes for a better IPR regime—must be maintained by follow up changes that are yet to be introduced. The efforts by DIPP and CIPAM to spread awareness of IPRs in Indian schools (the first objective of the national IPR policy) are commendable. While India has embraced much of the right rhetoric on IP, we seem to have resisted meaningful legislative reforms. Time and again, India has rightly declared that its IP laws are TRIPS-compliant. However, current global competitiveness standards require that India treat internationally agreed standards as a floor rather than a cap as it defines its goals in IPR protection and implementation.

We must realise that we have a lot of catching up to do and adhering to minimum benchmarks will delay our economic growth and social development. Several challenges that have been flagged time and again are yet to be resolved by proactive steps needed from the legislature. Some of these include patents in CRIs and life sciences and stringent enforcement of copyright. India must address concerns raised by industry in a timely and appropriate manner with the required clarifications or amendments to ensure that uncertainty doesn’t become a hindrance to long-term growth. One of the many concerns with regard to IPR raised by industry includes the scope and manner of implementation of the much talked about Section 3(d) of the Indian Patent Act. An environment that welcomes and better protects investments in life sciences can be created by empirically testing the effects and efficiency of Section 3(d) of the Act to see if it acts as a safeguard or as an insurmountable hurdle for patentability. The bright promise of an innovative biopharmaceutical industry in India will only be fulfilled if we work together to build, sustain and grow a scientific, economic and policy ecosystem that promotes and rewards medical innovation. With the leaps and bounds that medical research has made, it would be a pity if India is unable to reap its benefits and contribute to its progress, simply due to the fact that our IP framework has unaddressed pitfalls.

On the one hand, there is empirical evidence to suggest that stronger IPRs may positively affect the volume of FDI and exports, particularly in countries with strong technical absorptive capabilities where the risk of imitation is high (RAND Europe/UKIPO Report 2010). Studies show that stronger IPRs seem to (1) encourage FDI in production and R&D (rather than in sales and distribution); (2) encourage international technology transfer through market-based channels in developing countries; (3) encourage domestic innovation, at least in emerging industrialised economies. Strong IP standards can fuel the growth of domestic innovative industries, help attract greater foreign investment, and bolster India’s economic prosperity and global competitiveness.

On the other hand, there are robust cross-country studies that assess the performance of nations, over a period of time, in innovation capabilities and effectiveness of underlying IPR regimes. Scholarly work by Chen (2017), Duguet and LeLarge (2012), Eicher and Penalosa (2006), Sakakibara and Branstetter (2001) have all found strong empirical evidence of a positive correlation between IPR protection, domestic innovation and economic growth. The highly cited Patent Rights Index by economist Walter Park discusses the strong correlation between market size (in terms of GDP) and innovation capacities (in terms of R&D and patenting) for countries such as Korea, Taiwan, India, Chile and Mexico.

Despite announcing a new IPR policy, India still remains at the bottom of most IP indices. The Global Innovation Index 2017 was jointly released this week by WIPO, Cornell University and INSEAD, and it ranked India at 60 out of 127 countries. The Index provides detailed metrics about the innovation performance of the surveyed economies on the basis of 81 indicators, which explore a broad vision of innovation, including political environment, education, infrastructure and, business sophistication. Such a ranking is consistent with other low rankings that India has received when it comes to its state of innovation and IP standards. The International IP Index 2017 released by the Global Intellectual Property Centre (GIPC) ranks India at 43, just above Pakistan and Venezuela. This index benchmarks IP standards in 45 economies, which represent about 90% of the global GDP. While India’s performance may have improved marginally in the past couple of years, it is still inadequate and leaves much to be desired. This IP Index suggests a direct correlation between stronger IP systems and greater access to finance, increased R&D investment, and greater FDI in biomedical science.

The National IPR Policy includes some positive measures to streamline IP-related administrative processes and talks about introducing new measures to bolster IP enforcement. But the policy has not been able to offer predictability, clarity and transparency for improved investment and business decisions around IPRs. We need to translate the recent dialogues around IP into concrete, legislative change. India’s reluctance to adhere to building and enforcing strong IP standards has bruised reputation as a destination for business investment compared to China, Brazil or Thailand. “Make in India” is unlikely to achieve its potential in the long run if India continues to be lax about the implementation and enforcement of IP rights.

Dr. Bharadwaj is Co-Director, JIRICO and teaches law and economics in Jindal Global Law School. Ms. Chawla is a research analyst in O.P. Jindal Global University.