SBE Council: India’s Intellectual Property Challenges

Small Business & Entrepreneurship Council: India’s Intellectual Property Challenges
July 26, 2013
By Raymond J. Keating

Nations that undercut intellectual property rights for perceived short-term benefits only wind up inflicting real, significant damage on themselves. They suffer in terms of lost or restrained investment, job creation, and income and economic growth.

Consider the recent case of India.

As I explained in the new SBE Council book Unleashing Small Business Through IP: Protecting Intellectual Property, Driving Entrepreneurship, quoting from an International Trade Administration report, “When it comes to pharmaceuticals, there are numerous problems looming internationally on the IP front, such as ‘the lack of protection against unauthorized disclosure of test data generated to obtain regulatory marketing approval for pharmaceuticals, … unfair commercial use of regulatory test data, … laws that limit the scope of patentability for certain chemical forms, inadequate protection and enforcement of patented products on the market, the proliferation of counterfeit medicines, and lack of an effective system to prevent the issuance of marketing approvals of generic copies of patented drugs.’”

I go on to highlight problems with India’s patent system falling short, and on compulsory licensing, “whereby a government authorizes a company to produce a drug without the consent of the firm holding the IP rights on the drug.”

What’s the problem? Well, in reaction to India’s compulsory licensing moves, PhRMA President and CEO John Castellani has explained, “While India has not routinely issued compulsory licenses (CL), PhRMA believes it is not an appropriate tool even if granting CLs may be a legal option. Assessments of particular compulsory licensing policies and decisions need to be made on a case-by-case basis, taking into account a number of factors. Legitimate health emergencies that require making exceptions to intellectual property rights can and should be accommodated under the international framework, but only after exhausting all other efforts and under extraordinary circumstances… If countries begin to routinely use CLs, we could see a ‘race to the bottom’ in which governments in the developing world walk away from their responsibility to support research and innovation in public health. In the absence of the investment made by our members, and the resulting research and development, there would be no generic medicines for the world’s patients.”

But what does inadequate IP protections mean for India in general?

A new report from the Global Intellectual Property Center – titled “India: An International Outlier on IP” – looks at India’s faltering on protecting IP in recent years.

As noted in the study: “Since 2005, India has been obliged to improve patent protection and a host of other IP rights as part of its membership in the World Trade Organization (WTO). However, after an initial period of reform and implementation of important aspects of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), India’s national IP environment has deteriorated markedly since the late 2000s. A number of policy, regulatory, and legal decisions have significantly weakened the progress made by the implementation of TRIPS, making India an outlier in the international community.” Specifically, “in the Global Intellectual Property Center (GIPC) Index, India ranked last out of 11 countries benchmarked with a total score of only 6.24 out of a possible 25.3 India ranked at or near the bottom in all categories measured in the index. It did noticeably worse than all of its fellow BRIC (Brazil, Russia, India, and China) economies as well as the other middle-income countries benchmarked, including Mexico, Chile, and Malaysia. In fact, the latter three achieved scores nearly double that of India.”

Why does this matter? Again, as noted in the center’s study, “a substantial amount of empirical literature has been built on the effects of IP rights on economic development, innovation, technology transfer, and international trade. Much of this literature suggests that there is a strong and positive correlation between IP rights, FDI, trade, and economic development. The exact impact of IP rights depends on a country’s stage of development, income level, and technical capabilities. But overall the relationship is positive, particularly with regard to FDI.”

Quite simply, if a nation fails to adequately protect IP, then it suffers accordingly in terms of investment and growth.

So, what was the conclusion on India? The following: “Having examined a selection of economic and innovation indicators influenced by the level of IP protection offered in a country, it is clear that the Indian economy has performed below that of comparable countries that have a stronger national IP environment. On rates of FDI, biomedical FDI, receipts from IP-based assets, patenting, and R&D expenditure, India performed worse than most comparable countries… The positive relationship found by the OECD and others between the strength of a country’s IP rights environment and FDI inflows, and the evidence presented in this briefing, clearly suggest that if India adopted a stronger IP rights framework and policies, FDI would increase significantly. Increased FDI would help accelerate growth, innovation, and the building and strengthening of IP-dependent sectors of the Indian economy, and close the gap between India and comparator countries.”

As nations work to develop, there are no shortcuts. Failing to establish and protect property rights – including intellectual property – means that economic development, job creation, and income growth will fall far short of their full potential.

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