Business Today

Making Patents Useful

The minister needs to think more about the IP Exchange proposal.
Ashok V. Desai        Print Edition: August 13, 2017
Making Patents Useful

Harsh Vardhan, Minister of Science and Technology, has approved a proposal that the National Research and Development Corporation (NRDC) should develop an Intellectual Property Exchange. The idea is appealing. The patent office receives thousands of applications every year. It usually takes a few years to get to an application, but eventually grants a patent - or, seldom, rejects an application because it does not contain a novel idea. Most of the patents it grants never go beyond its vaults; a good many expire eventually without having found commercial use. The system looks very wasteful: so many bright scientists and technicians sweat in laboratories and workshops and work out inventions for wider use, and most of their ideas are never sold. The minister believes he has a solution - that NRDC would create a market where bright inventors can go and sell their inventions to business firms. The core idea is great; but it is not an easy one to implement efficiently.

All major countries have a patent office, and everyone with a patentable invention can register it in any and all those offices. Patent offices, when they receive an application, look at whether it has got a patent in another country, especially in countries with high invention rates and efficient patent offices; if it has, its chances of being registered go up. Still, patent offices have a lot of work to do: for each application they have to establish novelty and utility. So they take months to approve an application; some patent offices' like India's take years. Most patents have limited uses and are of interest to a small number of firms. Firms that register and use patents on a large-scale keep an eye on patent applications, and try to snatch those useful to them before someone else does so. So patents get bought and sold, licensed and rented all the time; it is doubtful how much a patent exchange will add to this activity.

Second, patents taken out by Indians in India are a tiny proportion of patents registered all over the world. Most of the patents are taken out in the hubs of innovation, particularly the US, the European Union and Japan. Does the minister envisage that those "foreign" patents should also be traded in his exchange? For that he would have to get cooperation of both the patenters and the major foreign patent offices; that would take some doing.

Third, a large proportion of patenters are not inventors, but big firms with research and development departments which take out patents in bulk. They do so, not necessarily to use them, but to prevent others from patenting the idea: they occupy the field of ideas to prevent others from capturing it. They will not be interested at all in giving publicity to their patents and selling or leasing them out.

Finally, these big R&D departments are engaged not only in pursuing new ideas, but in working around others' patents to use their ideas without having to pay for them. The patent system was initially created precisely with the minister's idea in mind, namely to disseminate inventions and create a market for them. But multinationals that dominate technology-intensive industries, especially chemicals and pharmaceuticals, have a strong interest in preventing others from using inventions, and use patent carpet bombing to achieve this.

There is a quick way around these problems: the minister could abolish patents. Then anyone in India could use any patent in the world without having to pay anyone; anyone could sell any technology without worrying about its ownership. The minister has a precedent: Indira Gandhi abolished process patents in 1971. It annoyed the big industrial countries no end, and they twisted India's arm until it gave in and the government reintroduced process patents a decade ago. Harsh Vardhan should think seriously before following in Mrs Gandhi's footsteps.

 The writer is a senior economist and was chief consultant in the finance ministry from 1991 to 1993

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