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Study shows how strengthening the patent policy has boosted research & development in India

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24 Apr 2018

“The only thing that is constant is change”, said Heraclitus, the Greek philosopher. This adage is apt for organisations as they need to evolve with new and unique ideas to live in the present. Hence, many of them spend much of their revenues on research and innovation. While companies in the US and China spend around 60-70% of their earnings on research, private sector companies in India invest only about 20% as of 2016.

One way the companies recoup the spending on inventions is by obtaining a patent—a legal document that prevents others from using, making or selling their invention without permission—thus monopolising on it. However, in developing countries like India, the spending on research has always been low due to weak policies that protect the patents. Now, a new study by researchers at the Indian Institute of Technology Indore, India; University of North Texas, USA and the National Institute of Technology Goa, has shown that the changes made to patent policies in 2005 have boosted research and development in India.

Patent laws in India have existed as far back as the 19th century. One of the most pivotal changes in came in 2005, when India decided to comply with the Trade-Related Aspects of Intellectual Property Rights or the TRIPS agreement. TRIPS is an international legal agreement between member nations of the World Trade Organization that sets down minimum standards for the regulation of intellectual property. Complying with TRIPS brought India’s patent policy close to the international norms through several changes like increasing the patent duration to 20 years and allowing patents on food and pharmaceutical products.

The researchers of this study looked at the impact of changes to the existing patent policies on the intensity of research and development from 1989 to 2010. “For some changes in the patent policy, we have found positive impact”, remarks Dr. Ruchi Sharma, the lead author of the study, in an interview to Research Matters. The study was published in The Journal of World Intellectual Property and was funded by the Indian Council of Social Science Research.

The results of the study show that the spending on research and development in the private sector in India has been increasing since 1989. In the period between 1989 and 1990, the research and development expenditure was close to 0.06% of the total sales of these companies. This number jumped to around 0.40% during 2004-2005 when Indian patent policies complied with TRIPS and gradually increased to 0.48% in 2007-2008.

To ascertain that the significant increase is due to changes in the patent policies, the researchers looked at other factors that promote innovation like the increase in exports, technological improvements, and changes in tariff rates and economic policies. They found that each of these factors did play a role in influencing the spending on research. However, on investigating the aspects of the patent policy itself, they found that the increase in patent protection duration to 20 years, better enforcement mechanisms and complying with international norms significantly impacted the spending on research. Industries involved in the manufacture of chemical products, botanical products, communication equipment, pharmaceuticals, etc. recorded a notably greater spending on research.

While the findings are good news for a country like India that has enormous innovation potential, the researchers opine that changes in the patent policies  is just one step in the right direction. “Having made changes in the patent policy as per TRIPS, there is no immediate need to strengthen the laws further”, says Dr. Sharma. However, allowing industries to access better technology and promoting exports could further increase research spending and innovation, the researchers suggest.