Intellectual Property, A Sector Analysis In The Indian Market

The World Intellectual Property Organisation defines IPR as “creations of the mind; inventions; literary and artistic works and symbols, names and images used in commerce”.

India moved up to 66th place from 81st in 2015 in the Global Innovation Index (GII). GII also reports that India has all the ingredients needed to become a global driver of innovation including strong market potential, an excellent talent pool, and an underlying culture of frugal innovation. In this context, Government of India announced the “National IPR Policy”, a vision document on 12th May 2016, with its tagline as ‘Creative India; Innovative India’. It is a strategy towards a stronger economic future and expediting ease of doing business in India.

Before going into the depth of Intellectual Property laws affecting todays world, let’s look into some core concepts of this intangible landscape.

Intellectual Property is the biggest asset on the planet in terms of value, estimated to be at least US$ 5.5 trillion in the U.S. alone as of 2015.[1]

What is Intellectual Property and what is it that makes it so valuable?

Intellectual Property is in its most basic sense means an intangible asset which contains with itself a bunch of exclusive rights which can be transferred, licensed, owned, transmitted, assigned or even acquired by the concerned authority in each case.

Intellectual Property has many facets including the traditional form of Intellectual Property which covers patents, trademarks, copyrights and then the non-traditional form of Intellectual Property which covers designs, trade secrets, geographical indicators, traditional knowledge, confidential information, circuit layouts and domain names among others.

The whole concept of protecting and at the same time promoting innovation is what makes Intellectual Property so valuable.

The Indian Patent Office recently granted a patent to a nine-year-old wheelchair-ridden boy for a rare invention of a six-player chess game. Hrideyshwar Singh hence became the youngest disabled person to obtain a patent for meeting up the required conditions of being unique, non-obvious, having public utility and at the same time having some sort of enablement.[2]

The repercussions of this patent not only promote the interest in the game but also interest in the whole idea of innovation and creativity which are mail pillars for obtaining a patent.

This was just a simple example of Intellectual Property and the cases associated with it.

The whole paper will take you through the different nuances of Intellectual property and why the implementation of this asset and the pragmatic tasks associated with it, make it difficult for the common man to grasp it.

The concept of Intellectual Property in India has now taken a steady place compared to the European and the American markets, although the Scandinavian and Chinese dominate every other Intellectual Property Index.

Like mentioned earlier, the technicalities like having a science background in high school in order to qualify as a patent attorney limits the scope of practice of Intellectual Property.

The world wide web is a huge space which is responsible for making the world a smaller place but along with it, the ramifications of misuse and abuse of Intellectual Property are not only vast but to restrict them to a particular domain becomes increasingly difficult as the domestic laws of that country come into motion.

Although there are numerous International Conventions signed and ratified by majority of countries starting from the Stockholm declaration on Intellectual Property, the international law on its part can only be persuasive in nature and cannot bind even the countries who have ratified the particular treaty or convention unless the domestic or municipal laws of that country are in perfect synchronisation of that international law.

 

DOMESTIC HURDLES AND SUGGESTIONS:

India has made definite strides in the protection, administration, and management of IP that is commensurable with Europeans IP laws. One of the main challenges lies in effective enforcement of IPR regime. With evolution of digital technologies, we have newer ways of circumventing the laws. Government may therefore consider the following measures that can lead to effective execution of enforcement of intellectual property Rights:

  • “Least priority given to adjudication of IP matters” is often quoted as a reason for weak IP enforcement, prompting a circumstance where IP right holders can’t make the most of their IP resources. Backlog of cases, cognate to IPR, at both the civil and criminal courts obstruct the commercial utilization of IPR by the authentic owner. Establishment of special IP courts, creating awareness, fast-track judicial process, and active indulgence of expert investigators & law enforcement agencies could be a conceivable arrangement[3].
  • Creation of IPR development fund can help in reconciling this issue and developing IP culture in the country.
  • Draft an Optical Disc (OD) law aiming at developing an effective enforcement policy to deal with music, film and software piracy by giving an identification number (ID) to each OD manufactured in India or imported in country. The ID number would enable easy tracking/tracing of the potential infringer[4].

 

INTELLECTUAL PROPERTY AND ITS ANALYSIS SECTOR WISE:

Patents

Patents are exclusive rights granted to exclude a third party from making, using, selling, manufacturing, or importing an invention. Using patent applications filed in India in the year 2015-2016 as a measure of innovation, the analysis found that the chemical and the pharmaceutical sector dominated the list, contributing to 38% of patent applications, followed by the communications and the computing sector, contributing to 27% of the patent applications[5].

Pharmaceutical Sector

The pharmaceutical industry in India, despite topping the list for patent filings, is highly dominated by generics, and much of the revenue in the pharmaceutical industry (about 72%) comes from the generic drugs[6]. The Indian Patent Law, as it stands now, favours the generic industry, and imposes huge number of barriers for patentability; and enforcement of patent rights.

Provisions such as section 3(d), and compulsory licensing, form the heart of the tussle between the generic manufacturers and the innovators. These provisions affect the market dynamics, such as pricing, public health, access to medicine, foreign investments, and economic growth. Policy measures suggested here aim to strike a balance between the inventor rights and public health, with due consultation of the stake holders.

Evergreening

Patents are normally granted for a period of twenty years. Any generic manufacturer can manufacture and market the drug patent after the expiry of the patent; or when the drug is not covered by a patent. Pharmaceutical companies often try to extend their monopoly over products that are about to expire by patenting “new inventions” that are minor modifications of old drugs. This is called ‘Evergreening’, a practise commonly adopted in developed countries like U.S and Europe.

 

Evergreening (Provisions, Arguments, Industry views, & Impact) Comparative Analysis/Recommendations  
Position in India:

Considering the socio-economic factors in India, the Indian government in the year 2005 inserted a clause under Section 3(d) that prevents evergreening of patents unless the “new invention” has an enhanced therapeutic effect.

 

Declining patents for inventions under section 3(d) on the pretext of ever greening might deter innovator companies from investing in India. Innovation should be encouraged – big or small.

 
Relevant Case Law:

One landmark case worth mentioning here is Novartis vs. Union of India[7], where the Supreme Court (SC) dismissed Novartis patent application for Gleevac, a drug used to treat chronic myeloid leukemia (CML), a type of blood cancer, in the year 2013 on grounds of section 3(d).

Industry opinion:

Novartis India Vice Chairman and Managing Director Ranjit Shahani told PTI that “The recent cases that we have seen in IPR do not in any way point to an environment that encourages innovation. A patent is granted then revoked. A patent is granted then violated. A patent is granted then a compulsory license is issued”. He further added that “What we certainly would like to see is an ecosystem that fosters innovation and fast-track courts to hear and decide cases involving IPR. China has drawn all the leading global companies to invest in R&D there while India has not. That itself should serve as food for thought.[8]

Arguments and Impact:

India is under huge pressure from several innovator companies to quash section 3(d). However, removal of this provision might cause evergreening of patents, and consequently delay the entry of generics, thereby affecting access to medicine, and public health.

 

955 patent applications in the pharmaceutical sector have been rejected in the last three years by the IPO; 618 of which have been rejected on grounds of section 3(d)[9].

 

 

Since, India is not able to allow for evergreening now, the Indian Patent Office (IPO) should grant a patent of addition for inventions that are minor modifications with no enhanced therapeutic efficacy. Patent of addition is an application made for a patent in respect of any improvement or modification of an invention for which a patent has already been applied or has a patent. The term of a patent of addition is equal to that of a main application, and shall remain in force as long as the main application is in force, and expire along with that of the main application.

 

COMPULSORY LICENSING

Compulsory Licensing (Provisions, Arguments, Industry views, & Impact) Comparative Analysis/Recommendations  
Position in India: Section 84 of the Indian Patents Act, 1970 allows issue of Compulsory Licenses (CL) to any interested party on any of the following grounds –

·         Needs of the public have not been met;

·         The patented drug is not available to the public at a reasonable affordable price; or

·         The patented drug has not ‘worked’ in the territory of India[10].

 

Position in US and Europe: U.S and Europe oppose the grant of CL. Although, these countries have granted them in the past, they do not grant them anymore.

 

Although, compliant with TRIPS, CL is against the spirit of innovation. Might be a deterrent for companies to invest in R&D and there will be no incentive to manufacture new drugs.

Precedent

First granted to by the Indian Patent Office to Natco Pharmaceuticals Ltd., in the year 2012, to produce Bayer Corporation’s patented drug Nexavar. In the instant case, Bayer, a German Pharmaceutical Company, patented an API called Nexavar in 2008 to treat liver and kidney cancer in India. But the drug was exorbitantly priced at INR 2,80,000 per month, which is out of reach of most of the people. Thus, the drug which is a “lifesaving drug” was frequently in short supply even in cities. Further, Bayer failed to manufacture the drug in India even after four years from the patent grant date and further failed to grant voluntary licence for manufacturing in India.[11] A compulsory license was granted to Natco pharmaceutical Limited against Bayer’s patented drug, by the Indian government, on Bayer’s failure to comply with the three grounds as mentioned above.

Industry opinion: Bayer’s CEO Marijn Dekkers says I was particularly frustrated by the Indian government’s decision, to not protect a patent on Nexavar that was given to us by the Indian patent authority.  I remain firm that there is no excuse for any country to weaken the intellectual property rights. Without new medicines, people in developing countries – as well as those in the more prosperous countries – ultimately will all suffer.”[12]
Arguments and Impact:

Much debate has been going on what qualifies as “working” of patent in India. While the innovator companies have been arguing that importation of the patented drug shall qualify the “working” requirement, the generics argue otherwise. The key issue to consider is if importation shall fulfil the “working” requirement.

 

CL provisions serve as a constant threat to the innovators. Although, the access to cheap drugs is beneficial to public health, grant of CL might deter foreign companies from investing in India.

 

The focus should be to arrive at a balance to meet the needs of common man and the rights of the inventors, and not to drive away the investors with complicated laws so that they lose interest in the Indian market.

Importation, unlike local manufacturing, of a drug shall result in high pricing of the medicine – which may not be affordable to the common man. Care should be taken to ensure that each patented drug is manufactured in India. The pricing should be determined based on the costs incurred to manufacture the same in India.

 

Differential Pricing based on income bracket seems a good start, but regulation of the same may be a challenge.

 

Expand health coverage schemes.

 

Defence Sector

Position Recommendations
Position in India: With Indo-US nuclear deal finally taking shape, where India would now be importing nuclear technology worth billions of dollars. Foreign companies would be sceptic if not assured of adequate protection[13].

However, Section 4 of the Patent Act 1970 prohibits patenting of inventions relating to atomic energy, for reasons of national security, and strategic importance. The law as on now directs patent applications of such inventions to the Department of Atomic Energy to determine the patentability.

The NIPR policy 2016 is silent on this sector.

Position in U.S: Allows grant of patents on atomic energy; disallows nuclear weapons.

Position in U.K: No explicit bar against grant of patents for inventions related to atomic energy or weapons. However, patent applications of atomic energy inventions are directed to appropriate authorities to determine if its publication is detrimental to the national security.

The reasons for which section 4 was introduced no longer stand relevant as of today. This was introduced at a time when the accessibility to patents in other jurisdictions, and publicly available publications was rather limited. It is recommended that India disallows patents on nuclear weapons, but grant patents on atomic energy.

Also, it is recommended the DAE determines if publication of such inventions could be detrimental to the national security, instead of evaluating the patentability. If found to be detrimental, the DAE should directs the Indian Patent Office (IPO) to restrict the publication of atomic energy inventions, thereby balancing the rights of the inventors and national security[14].

 

Copyrights and Piracy

Under the Indian Copyright Act, 1957, the following categories of “original” work are given protection: artistic works (paintings, sculptures, drawings etc) literary work (including computer programs) musical work, sound recordings, and cinematograph films. Copyright comes into existence as soon as a work is created and no formality is required to be completed for acquiring Copyright in India.

 

Piracy

  • It refers to the unauthorized duplication of copyrighted content, which is then often sold at substantially lower prices in the ‘grey’ market.
  • The brief addresses three main piracy areas- music, movies and software.
  • The ease of access to technology has meant that over the years, piracy has become more rampant. For example, CD writers are available off the shelf at very low prices, making music piracy a simple affair.
  • However, the industry, especially the IT and music industry, is deprived of substantial revenues by the deluge of piracy, and so is the government denied substantial taxes. These organizations identify sources of piracy and then conduct raids with the help of the police. However, convictions are few and the penalties not harsh enough to act as a deterrent.
  • Government should form an IP cell in the Department of industrial policy and promotion (DIPP) to coordinate with state governments and train and sensitize them to counter copyright infringements.
  • There is a need to focus on educating stakeholders (copyright owners, intermediaries, ISPs) and spreading awareness among users about the deterrents of using pirated content.

 

Piracy in Films Recommendations
Ø  Online piracy happens through peer to peer (P2P) sharing, where thousands of active links can be created from a single file, resulting in mass distribution.

Ø  In a report by Ernst and Young in 2008, Indian film industry lost USD 959 million (Rs. 4,411 crores) in that year due to piracy.

Ø  Infringement suits that are filed by movie studios to block access to specific websites and URLs have led to over blocking where legitimate websites have often ended up being blocked. Courts realistically do not have enough time to manually check hundreds of file sharing websites.

Ø  Court orders are made ex parte—in the absence of a party whose lawyers would oppose the copyright holder petition.

 

Ø  Ideally, separate IPR dispute settlement tribunals should be set up to deal with cases efficiently and quickly.

Ø  Technical infrastructure should be upgraded so that ISPs can speedily intercept websites hosting pirated content and inject custom warning pages with all relevant information.

Ø  Netflix, the world’s leading internet television network, through its unlimited watch model (users pay monthly and not pay per view) provides users a legal and cost-effective way to access content. This should be emulated.

Ø  A neutral third-party body, acting like an ombudsman, could verify individual links and more efficiently deal with websites that get blocked erroneously. An example of an ombudsman type system for copyright disputes is Ombudsman Services, a neutral agency set up in the UK in 2002. It is funded through annual subscription and a per-case fee paid by the companies that have signed up for its services for resolution of consumer complaints against them.

 

 

Piracy in Music Recommendations
Ø  FICCI-KPMG put losses as $4 billion for the music industry in a 2015 report.

Ø  While some singers have recognized the role of piracy in spreading their music and getting more fans to their live concerts, many have spoken against the menace.

Ø  The Copyright law provides for centralised collective copyright licensing, like the IPRS (Indian Performing Rights Society). These agencies are not able to identify local talent that needs to be protected, nor are they able to cover the entire artistic populace.

Ø  IPRS is also accused of collecting huge royalties from different avenues and not subsequently passing on these amounts to the beneficiary creators.[15]

Ø  Entities other than the registered copyright societies cannot do the business of collective copyright licensing. Additionally, the law stipulates that the central government shall not ordinarily register more than one copyright society to do business in respect of the same class of works.

 

Ø  A good start would be to modify the Copyright Act and do away with the present model that vests virtual monopoly with registered copyright societies to collectively license copyrighted content.

Ø  Focus must be towards free competition among several licensing bodies with broad regulations in place to facilitate payment systems, real-time tracking of licensing agreements and the transparent maintenance of content inventory including rights-holder/creator information.

Ø  The system should encourage flexible and lean licensing models that target localised creators and users.

Ø  Spotify, the internet music streaming website, has demonstrably led to a reduction in music piracy and promoted access to legal music content.[16] The Government should encourage this model in India.

 

Piracy in Software Recommendations
Ø  Software piracy has inflicted serious damage to the country’s economy. The Indian Government lost an estimated $866 million (Rs. 4330 Crore) in taxes in FY 2009 to software piracy[17].

Ø  People are not aware of the costs of piracy. The ramifications on the economy, IT innovation and job creation within the country due to piracy of software are much more than the upfront cost of buying the software legally.

Ø  Only 33 per cent of companies in India have written policies in place requiring use of properly licensed software.

Ø  The PC market, which is growing fastest in emerging markets, is where the rates of unlicensed software use are the highest.

Ø  With increasing number of hacking attacks and security threats in the past few years, it is only a matter of time before disaster strikes companies that depend on the use of illegal software. Using unlicensed software leads to risk of security threats from malware, intrusions by hackers and loss of data.

Ø  Companies should establish a formal policy on using licensed software only and maintain careful records. The Government can amend the Companies Act 2013 to include this.

Ø  Student version of software’s should be sold in schools and colleges. The low price will deter the shift towards pirated software.

Ø  Government must promote awareness of the law by publicising activities which are illegal and invite punishment. These include end users buying illegal software, computer dealers installing illegal copies of software onto computers prior to sale and people indulging in software counterfeiting.

Ø  It is important to see convictions happen to erode this culture of using pirated software.

 

Opensource Software

Open Source is defined as a software-licensing model where the source code of the software is typically made available royalty-free to the users of the software, under terms allowing redistribution, modification and addition, though often with certain restrictions. However, it does not generally signify Free Software, as a developer can charge cash for the open-source software (OSS) they make or to which they contribute. OSS is easily downloadable without any restrictions, provides more flexibility and long-term stability, lowers the cost of starting a business, and allows for rapid innovation.

Given the benefits of OSS, Government of India has come up with three policies to promote the use of ‘open-source’, namely Policy on Adoption of Open Source Software for Government of India, Policy on Open Application Programming Interfaces (APIs) for Government of India and Collaborative Application Development by Opening the Source Code of Government Applications. However, these policies are criticized for narrowing down opportunities for closed software companies and making OSS adaptation mandatory.

Study conducted last year on the ‘Economic impact of replacing proprietary software with Free and Open Source Software (FOSS)[18]’ showed that India can potentially save more than Rs. 8300 crores (Schools and other institutions: Rs. 8254 crore & Police Departments: Rs. 51 crore) in government expenditure on education and police by adopting OSS.

Gaps and Recommendations

Be that as it may, challenges faced by OSS are lack of open source software support services, lack of human resource equipped with skills related to open source technology, lack of expert provision, and no accountability. Establishing Institutes to create a pool of OSS skilled people, spreading awareness about the value & benefits of Open Source Software, considering every stakeholder while deciding upon IT governance and constructing an OSS support system can be stated as some plausible recommendations to overcome the challenges and thereby make OSS system more efficient.

Traditional Knowledge (T.K.)

Traditional or Indigenous Knowledge is an informal system of knowledge, skills and practices that are developed, sustained and passed on from generation to generation within a community. Traditional knowledge can have an extremely large application base, ranging from agriculture to science and technology to medicine. It can be taken in the form of folk art, folk music or even herbal remedial medicines in the times of Ayurveda.

Problems in Traditional Knowledge

  • Conventional IP regimes do not provide for protection of T.K.
  • Biopiracy (the appropriation of knowledge and genetic resources of indigenous communities by institutions that seek exclusive monopoly control) is emerging as a grave threat. It involves stealing traditional knowledge from the hands of the holders by unfair application of patents to such knowledge.
  • A major weakness of traditional forms of knowledge is that it is often undocumented. In order to correct this, the Government through the Centre for Scientific and Industrial Research, created the Traditional Knowledge Digital Library (TKDL).
  • The success and impact of TKDL has been immense. Worldwide, around 206 cases of patent applications which have infringed upon traditional knowledge have resulted in the application being withdrawn or rejected.

 

Recommendations:

  • Creation of a Traditional Knowledge Docketing System(TKDS), which would indicate the location/community with which particular traditional information is present and a short description of the nature of such TK.
  • The communities must be educated and empowered to protect their TK through legal mechanisms of IPR.
  • More International Treaties such as the MOU between USPTO and India on Bilateral Intellectual Property Rights cooperation must be leveraged.
  • Pushing for faster legislation for this purpose from the Intergovernmental Committee on Intellectual Property and Genetic Resources and Convention on Biological Diversity.

Conclusion

Knowledge blossoms when shared, but when one invests a lot of time, energy, money and other resources on cultivation of this knowledge, one has a legitimate right to any profits derived from the application of the same. IPR provides a secure environment for scientists, investors, artists, designers, etc. to foster innovation and scientific temper. This innovation often yields high returns not only to the creators but also to the users. Therefore, it needs to be boosted by creating a strong IPR environment.

 

 

[1] James E. Malackowski, “Intellectual Property: From Asset to Asset Class,” in Intellectual Property Strategies for the 21st century. (John Wiley & Sons, 2011)

[2] Indian Express Article dated 29th March, 2012.

[3]Nafis, Zoya. “Combating the Weak IP Enforcement in India” Linkedin, https://www.linkedin.com/pulse/combating-weak-ip-enforcement-india-zoya-nafis?forceNoSplash=true

[4] http://blog.ficci.com/intellectual-property-regime-india/520/

[5]“India: Patent Trends for 2015-2016: Patseer, http://patseer.com/2016/07/india-patent-trends-for-2015-2016/

[6] IBEF, DoP, Planning Commission

[7] CIVIL APPEAL Nos. 2706-2716 OF 2013

(ARISING OUT OF SLP(C) Nos. 20539-20549 OF 2009)

[8]“Novartis lashes out at India for not respecting IPR” The Economic Times, http://economictimes.indiatimes.com/articleshow/21892747.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[9] “Its Official-Section 3(D) is the Most Formidable Hurdle for Pharmaceutical Patent Applications in India” Invn Tree, http://www.invntree.com/blogs/its-official-section-3d-is-the-most-formidable-hurdle-for-pharmaceutical-patent-applications-in-india

[10]“Report on Price Negotiations for Patented Drugs”, Department of Chemicals and Petrochemicals, See: http://www.pharmaceuticals.gov.in/sites/default/files/Report%20of%20Committee%20on%20Patented%20drugs.pdf

[11] http://fancifuip.blogspot.in/2012/08/utility-models.html

[12]“We didn’t make this medicine for Indians…”, mail online, See: http://www.dailymail.co.uk/news/article-2545360/Pharmaceutical-chief-tries-stop-India-replicating-cancer-treatment.html#ixzz4NPRmnlqA

[13]Reddy, Prashant. “The 123 Indo-US Civil Nuclear Deal and Section 4 of the Patent Act” spicy IP, See: http://spicyip.com/2008/08/1234-123-indo-us-civil-nuclear-deal-and.html

[14] Ishita, “Non Grant of Patents in case of Atomic Energy” Law Wire. See: http://www.lawinfowire.com/articleinfo/non-grant-patents-case-atomic-energy

[15] Padmanabhan, Ananth. “When will the copyright act favor the artist?” The Wire. www.thewire.in, 18 October 2016

[16] Barnett, Emma. “Spotify helps curb music piracy”. The Telegraph.www.telegraph.co.uk, 18 October 2016

[17]Dhakad,Keshav. “63% of Indian users use pirated software” www.cio.in 18 October 2016

[18] De Rahul. (2015). “Economic Impact of Free and Open Source Software Usage in Government”

 

Author:

Raghumanyu Taneja

A final year Law Student pursuing B.A. LL.B.(Hons.) at School of Law, Ansal University, Gurugram. An experienced anchor with a demonstrated history of working in the non-profit organizations including the Indian Red Cross Society. An extensive history of Interning in Dispute Resolution matters across Law Firms with strong oratory and communication skills. Founder and convenor of Debating Society at Law School with ample feathers in the cap. 

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