Encouraging Innovation: The Way Forward

In today’s technology-driven world, innovation is of paramount importance. Innovative products and processes reduce manufacturing time, streamline the supply chain process and ultimately allows for the production of cheaper, more efficient goods that are accessible by more consumers. The importance of innovation is so much, in fact, that over the past few decades the major companies of the world have had more assets in IP that in traditional properties. The most famous and successful companies today have far more intangible assets than they do tangible assets. They now make up about 84% of the company valuation of the S&P 500 index, which includes giants such as Microsoft, Apple, Alphabet, Amazon and Tencent among others.

Consequently, it’s now generally agreed upon than innovation is one of the most important factors for economic growth. This, of course, means measuring and ranking intangible assets on an analytical scale for further study. While this task is complicated by the sheer nature of intangibility, the UN General Assembly in 2019 adopted the Global Innovation Index (GII) as a measurement tool for Innovation. The Index uses input factors and output factors to measure the innovation of a country and rank it on a global index.

India, as expected, is still in the growth stages of innovation. While there has been a considerable increase in IP filings over the past few years (especially trademarks), we have a long way to do. The country is currently in the 48th position in the GII, with 28,391 patents granted in 2020-21.

Patents are, more than any of the other IP types, an indicator of technological and economic progress. Unfortunately, as per the Indian Department of Science and Technology, more than three quarters of the total patents filed since 2000 have been filed by foreign entities. This is significant because while foreign patents can temporarily boost the economy, sustained innovative progress is only possible when the people of the country with no foreign market motivations drive innovation.

Because of this, reforms are being discussed regarding IP processes, in order to encourage domestic innovation. In a press release dated 01 Aug 2021, the Union Minister for Commerce and Industry spoke of the present and upcoming measures to bolster the patent regime. The proposals included fee reduction for startups, MSMEs and women entrepreneurs and speedier disposal of patent applications. There was also a general push of greater simplicity and streamlining of the patent application process, including a push to digitize both filings and hearings for greater convenience.

The question is if these reforms are by themselves capable of actually helping the innovation in the country. When we look into the global innovation index, regulatory mechanisms are just one small section of one the five identified input factors. It must be noted here that patent filing fees, while not insignificant, pale in comparison to the fees charged by legal professionals to prepare the filing documents. As an IP firm, we can confirm that these documents require a considerable amount of time and effort and the fees chargeable can be easily five times the current application fee, depending on the field of invention. In such circumstances, reducing the filing fees, while well-intentioned, may not make as much of an impact as hoped.

More importantly, while innovation is often depicted in popular media as being the fruits of one driven individual (often a genius), in practice it’s the product of infrastructure, funding and a team of efficient researches working together. IPs filed by individuals who have developed them with few resources do exist, but as a general rule they are both rare and unlikely to have quite as much business application as IP developed by well-funded teams.

Reductions in IP filing costs are not a bad thing, but they are not a treatment of the problem India faces. Unfortunately, the solution to the innovation problem is not easy. A country with limitless human capital but very few resources to develop that capital can only crawl out of the limitations by investing heavily in education, infrastructure, business development and market optimization. To make matters work, it is unlikely that implementing strategies followed by western economies will actually help the country in the long run, as they are not optimized to develop national economies when the nation is flooded by foreign actors with far greater resources than the locals. Innovation may indeed be an answer to bridge this divide, but as of now we have barely scratched the surface of the required reforms.

Author: Varsha Valsaraj, Legal Associate at PA Legal.

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