28 Apr
2015

Indian businesses crave IP certainty, but better patent values are tempting them overseas

Indian corporate leaders view a strong and sustainable IP system as key to furthering their country’s economic development and attracting continued foreign investment, a recent study suggests. A lack of confidence that this is currently the case – and the perceived higher value attached to IP assets in other markets – is driving some of the brightest high tech prospects to build their businesses abroad rather than at home.

Research and advocacy firm Strategic Partners Group (SPAG) surveyed executives in a number of major Indian and multinational companies across six broadly defined sectors: healthcare, pharmaceuticals and diagnostics (life sciences); information technology, fast-moving consumer goods and telecommunications (IT/telecoms); legal services; music and entertainment; academic/research institutions; and industry associations. Ninety-nine percent of respondents to the survey agreed that intellectual property plays an important role in their industry. When asked if they believed India has a ‘sound IP policy’, 70% of life sciences, 79% of IT/telecoms and 80% of industry association respondents gave a negative answer. The group that most frequently answered in the affirmative was legal services providers, who were split 50/50 between those content with India’s current IP policy and those wanting to see improvements. While 29% of survey respondents felt that India’s policy makers are doing enough to establish a strong IP rights regime in the country, 65% thought otherwise.

India is all too often thought of by foreign companies as being a highly problematic place in which to own, manage and enforce intellectual property, due to what they see as inefficient infrastructure and misguided policy. The country’s treatment of pharmaceutical patents has been of particular concern to outsiders in recent years. As such, the resulting environment is seen to be somewhat biased in favour of alleged infringers. As a result, foreign rights holders and governments (the United States, in particular) have called on the country’s authorities to review its laws and regulations to bring them into line with what they would argue are international norms.

But the findings of the SPAG survey highlight that it is not just IP owners from overseas who feel they are missing out because of the country’s challenging IP regime.  India has one of the most pronounced brain-drains of any country in terms of inventor emigration. And worryingly for the government, several high-profile start-ups have decided to move out of India in recent times in order to take advantage of better appreciation of the value of their intellectual property in other jurisdictions.

Sriram Kanuni, founder of IT consultancy Arteria Technologies, told the Economic Times recently that he had relocated much of his company’s IP holdings to the United States in an effort to get a better valuation for its next round of funding. “Global investors seem to value companies with patents in the United States much higher,” he said. “Therefore, it makes more sense to shift patents out of India, in case you're looking to raise money or exit.”

According to the Times, e-commerce company Flipkart, mobile advertising firm InMobi and customer engagement solutions provider Capillary Technologies all decided to incorporate in Singapore rather than their native India; while data protection start-up Druva opted to make California its new home. Mobile marketing and analytics firm ZipDial also incorporated in the south-east Asian city state; if it had remained in India, its chances of being acquired by Twitter for a reported sum of between $30 million and $40 million back in January may have been significantly lower.

At least part of the issue lies in a lack of certainty surrounding the Indian court system’s treatment of IP rights. “Indian courts aren't uniform when it comes to developing jurisprudence around copyright and patent infringement,” Sunil Abraham, executive director of the Centre for Internet and Society, told the Times. He opined that judges lacking in IP-related experience may sometimes grant injunctions too readily. “Then the loss of six months… can be quite expensive, because in six months' time your competitor might eat into all of your market.”

According to the SPAG report, Indian courts are yet to award damages in a patent case. They have allocated damages in 72% of trademark cases, 27% of copyright cases and 1% of publicity rights cases, though the approximate average amount awarded is a rather paltry-sounding $1,000.

It sounds like IP policy-shapers in India – whether in government, the judiciary or business – have plenty of work on their hands in order to keep its brightest innovation prospects in the country. India has a lot to offer which may make it more attractive to many foreign rights holders than other developing IP markets. But without an IP system that effectively addresses the value of IP assets, multinationals will continue to be apprehensive to increase their investments in the country – and emerging domestic players may feel they have little choice but to make their IP-related investments elsewhere.

Jack Ellis

Writer