Petty patents can boost R&D

A petty patent regime could encourage domestic firms to undertake minor adaptive innovations

A petty patent regime could encourage domestic firms to undertake minor adaptive innovations

Innovative activity is the main driver of competitiveness and economic growth. In this context, India’s ranking of 46th in WIPO’s Global Innovation Index (GII) 2021, up from 81st in 2015, is encouraging. This finding corroborates a precedent from UNCTAD in its Digital Economy Report 2021, in which India was rated as exceeding expectations. Although these results are encouraging, India, which aspires to become one of the largest economies in the world, still needs to improve in the innovation rankings, to strengthen its technological autonomy, especially in the context of the emerging digital revolution. China ranks 12th in the GII, ahead of Japan in 13th. This shows that it is possible to climb the ladder with sustained effort.

Boosting R&D activities

India has plenty of room to boost its innovation activity. Among the key indicators, gross expenditure on R&D (GERD) as a percentage of GDP at 0.7% is weak. It must rise to more than 2% of GDP, as in the major innovative countries. Moreover, only around 30% of GERD is spent by business enterprises, despite the generous tax incentives offered by the government. This suggests that Indian companies have not entered into an R&D culture, let alone innovation rivalry. Most of the innovation activity is carried out by a handful of companies in the pharmaceutical and automotive sectors.

What can be done to boost the R&D activities of Indian companies? Given the strategic importance of innovative activity, governments in developed countries spend billions of dollars in R&D grants to domestic firms to boost their competitiveness. Grants of up to 50% of project costs have been rendered non-actionable under World Trade Organization rules. In India, R&D activities have been encouraged mainly through weighted tax deductions. Partial funding of specific R&D projects undertaken by commercial enterprises may be desirable to develop products or processes, thereby enhancing competitiveness.

Financial support for commercial enterprise R&D activity can help steer it in a desirable direction or area. For example, it can be used to promote capacity building for new products, process innovations for local or global markets, focus on improving ecological sustainability, promote industry linkages with laboratories publicly funded research centers and universities, etc.

A generous program is needed to boost business R&D activities through partial funding of viable R&D proposals from industry to enhance India’s competitive advantage. In addition, products based on locally developed technology could benefit from production tax advantages (such as those extended to small-scale industry products) and income tax advantages (such as those enjoyed by export turnover) to encourage innovation.

The patent system

The number of patents filed by residents is another indicator of innovative activity. Patent filings by Indian companies and other institutions increased from 8,841 in 2011 to 23,141 in 2020 (WIPO). However, granted patents were only 776 and 4,988 respectively. of utility. In this context, another policy to promote local innovation could be to protect minor innovations through so-called utility models or petty patents, as has been done by several East Asian countries. . The patent system does not encourage minor innovations since the criteria of inventiveness tend to focus on the novelty of the invention. The experience of several East Asian countries suggests that petty patents and industrial design patents could be effective means of encouraging domestic firms to undertake minor adaptive innovations and fostering among themselves a rivalry based on innovation. India should consider adopting a petty patent regime that provides protection limited to minor incremental innovations made, especially those by MSMEs, often referred to as jugaad. Utility models or petty patents generally offer a limited period of protection (5 to 10 years compared to 20 years in the case of patents) and have less strict requirements and procedures. Encouraging minor and incremental innovations through limited protection under utility models will help foster innovation rivalries between firms, especially MSMEs, paving the way for larger innovations from them to the future.

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India’s rising ranking in the global innovation league suggests its potential, opportunities and challenges in enhancing R&D culture within business enterprises to enhance their competitiveness. R&D funding and petty patents could help them.

Nagesh Kumar is Director and Reji Joseph is Associate Professor, Institute of Industrial Development Studies, New Delhi. Views are personal

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