Wednesday, September 10, 2008

Indian patent bill: Let's not be too hasty

Shamnad Basheer
10 September 2008

A new law to increase university patenting in India needs more research and public debate before being enacted, says Shamnad Basheer.

The Indian government is considering introducing a law based on the US Bayh–Dole Act — a 1980s statute that sought to promote technology transfer by giving universities and research institutions ownership of patents resulting from federally funded research.

The Indian bill has been hastily drafted and peddled across various ministries without proper forethought or public debate. Although it is not yet public, an unofficial copy of the bill — 'Public Funded Research and Development (Protection, Utilisation and Regulation of Intellectual Property) Bill, 2007' — is available on SpicyIP.

The Indian government appears to have been swayed, in large part, by romanticised accounts of the US Bayh–Dole Act. Most notably, an article in The Economist praised the act as a law that unlocked "all the inventions and discoveries that had been made in laboratories throughout the US with the help of taxpayers' money" and one that helped "reverse America's precipitous slide into industrial irrelevance." [1]

But the government has overlooked a growing body of literature that casts doubt on the wonders commonly attributed to the act. [2] Not only does the government need to assess this literature, it should also commission studies on the specific nature of university research in India and the complex relationship between academia and industry. If the bill is not sufficiently 'Indianised' it may fail to deliver.

Promoting technology transfer

As with the Bayh–Dole Act, the Indian bill is premised on the assumption that university ownership of patent rights is likely to increase the number of academia–industry collaborations. And that without it, industry may be unwilling to develop academic research into useful products for society.

It is true that a sizeable amount of public investment in Indian research is currently made without any express contract stipulating ownership over resulting patents. The proposed bill addresses this concern by providing a default position — that universities and research institutions can choose to patent any inventions arising from government funded research. But, if they fail to do so within a reasonable period of time, the option to patent passes on to the government funding agency.

This would provide more legal certainty — and consequently less transaction costs — for universities and industries wishing to collaborate. It may even act as an incentive for industries to approach universities in the first place.

It is difficult to advance any principled objection to fostering such legal certainty. Unless of course, one is opposed to the very idea of patents, as some critics of the Bayh–Dole Act appear to be. Taking this idea to its logical conclusion, these critics would suggest that India pass legislation banning all patenting of government funded research. Such a suggestion is unlikely to gain force, given that technologically proficient developing countries like India face increasing demands for patents from domestic industries. And if domestic industry can file patents, why not universities and research institutes? Particularly when the Council for Scientific and Industrial Research (CSIR) — a wide network of government funded labs — is currently the top patent filer in India.

Still, the bill's key defect lies in not leaving enough space for non–exclusive licensing, particularly in the context of platform technologies. Had it not been for Stanford University's non–exclusive licensing in relation to its famed Cohen–Boyer patents covering rDNA technology, biotechnology may not have developed the way that it did. Not only did such widespread licensing contribute to the economic success of the patents, it also permitted a number of companies to do follow–on research, rapidly advancing the frontiers of technology.

Creating wealth

The bill aspires to make universities wealthy and self–sufficient. But the ability of such legislation to generate cash may be vastly exaggerated. Empirical data from the United States shows that most universities do not make significant sums of money by licensing their technology.

In fact, the cost of operating a technology transfer office (TTO) often exceeds the money made from technology licensing. CSIR bears out this point well. While it generated approximately US$1 million in licensing revenues in 2004–2005, it spent more than twice that amount on filing patents.

India's Bayh–Dole attempt will come to nothing if it ignores this important fact regarding CSIR and its rather impressive patent numbers. The government should come up with ways of reducing the operational costs of TTOs and patents, while simultaneously increasing revenues from licensing.

Inventor rights

Perhaps the most laudable aspect of the Indian bill is that, unlike its US counterpart, it ensures that individual 'inventors' are paid at least 30 per cent of any royalties stemming from licensing. But despite this guarantee of a share in the profits, individuals are left with little option of determining how their invention can be used. For example, even if researchers wish to place their invention in the public domain or license it non–exclusively, they cannot do so — rather, the bill puts this discretionary power in the university's TTO.

The idea of achieving legal clarity on the ownership of inventions funded by public monies and thereby promoting university–industry technology transfer is, at its core, a good one.
But the current version of the Indian Bill leaves much to be desired. For one, it should ensure that, where necessary, non–exclusive licensing is encouraged. It must also embrace ways of measuring and promoting wider knowledge spillovers between research institutions, industry and society at large.

Most importantly, given that India is the world's largest democracy, the government must immediately make the bill public and foster an open and transparent debate around it.
Shamnad Basheer is an associate at the Oxford Intellectual Property Research Center.

[1] Innovation's Golden Goose. The Economist 365 (2002).
[2] Mowery, D., Nelson, R., Sampat, B. et al. Ivory Tower and Industrial Innovation: University–Industry Technology Transfer before and after the Bayh–Dole Act. 264pp (2004)


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