In 2014, then US President Barack Obama and Prime Minister Narendra Modi set the target of boosting Indo-US trade to half-a-trillion dollars. That is an ambitious goal, the upward trajectory of bilateral trade notwithstanding. From $12 billion when Bill Clinton and Atal Bihari Vajpayee reset relations between India and the US at the turn of the millennium, bilateral trade today stands at a little over $100 billion. But quintupling that figure will take some doing. It will involve dealing with several flashpoints. And the fifth edition of the US Chamber of Commerce’s annual global intellectual property index, ranking India 43rd out of 45 countries examined, points to one of the most persistent.
The weakness of India’s intellectual property rights (IPR) regime gives cause for legitimate complaint. There are signs that the National Democratic Alliance (NDA) government means to address this. Its national intellectual property rights policy, released last year, is a robust statement of intent. It’s the reason for India’s marginal improvement in the US chamber of commerce IP index from 7.05 out of 35 last year to 8.75 this year. But the issue is more nuanced than the chamber would have it. Filling the admittedly large gaps in India’s IPR regime must be balanced with Indian trade and public interest considerations—areas where Washington has, unsurprisingly, tried to impose standards that go above and beyond those mandated by the World Trade Organization (WTO).
Regarding the gaps, there are weaknesses at every point of India’s IPR value chain. Low private-sector research and development spending is compounded by weak IPR infrastructure. When the Patents Act, 1970, was amended in 2005 to bring it in line with WTO requirements, there were a little over 56,000 pending applications. By the end of 2015—a decade later—India had close to 250,000 pending applications for patents and over 500,000 pending applications for trademarks. The bottleneck this creates has real economic costs. A UN Industrial Development Organization review of almost 200 studies on the link between IPR and economic growth found a strong consensus on a positive relationship. While the degree of benefits accrued may vary, that relationship holds true for both developed and developing economies. It has gained particular relevance in India now. The Modi government’s flagship initiatives—Make In India and Start-Up India—require a strong IPR framework.
The policy has, at least, addressed some of the key areas of concern, such as the lack of patent examiners leading to pendency and prolonged application examination periods, and the lack of effective enforcement of existing regulations. But operationalizing all this will take sustained focus, and it will not be easy. The policy’s target of bringing patent examination times down to one month by March, for instance, seemed a pipe dream then and it seems more so now.
Thankfully, the government has made explicit its intention to preserve the manoeuvring space WTO regulations grant India. It took the better part of a decade—from the negotiation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994 to the Doha Declaration clarifying its scope in 2001—for developing nations to balance their rights with obligations, particularly in ensuring access to medicines to all. The Patent Act is compliant with TRIPS, but not with more stringent US regulations.
Therein lies the problem. American pharmaceutical companies in particular take exception to sections 3(d) and 84 of the Patents Act. The first prevents new formulations of existing medicines from being patented unless they improve therapeutic efficiency. Big pharmaceutical firms have used this method, called evergreening, to maintain market dominance and keep prices high. The second provides for compulsory licences to meet the reasonable requirements of the public. Abuse of these provisions may well disincentivize research and development spending and doing business in India, as American companies claim.
But the Indian government and courts have been judicious. In 2013, the Supreme Court denied Swiss multinational Novartis a patent for its cancer drug Glivec, citing evergreening. And in 2012, Indian company Natco Pharma was allowed to make a generic version of German company Bayer’s cancer drug Nexavar. These—and US company Pfizer’s involvement in patent-related disputes—hardly constitute a flagrant disregard for IPR. Giving up this manoeuvring space would be a major blow to India’s generics sector—and, given its global dominance, to public health in India and elsewhere.
This has been a major hurdle in the proposed Indo-US bilateral investment treaty. The pressure the office of the US trade representative has attempted to exert on New Delhi in recent years over IPR is now likely to increase given Donald Trump’s aggressive stance on trade. But one of the takeaways from his victory and political upsets in Europe is this: when trade and investment treaties move beyond their traditional domain to areas like IPR that are perceived to have an impact on sovereignty and public good, there is a price to pay.
Boosting bilateral trade will mean concessions and compromises on both sides. New Delhi must be flexible where it can. But on IPR it must strengthen its infrastructure while holding firm on the flexibility TRIPS grants it. It will not be an easy balance to maintain.
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