• UGI USER
  • Jul 22, 2024
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INDIAN PATENT APPLICANTS OUTPACED FOREIGN ENTITIES IN FY24

Relevance: GS 3 – Issues relating to intellectual property rights

Why in the news?

  • In 2022, patents approved for non-resident Indians and entities accounted for 46%, one of the highest rates globally among major economies.
  • Increased applications in chemicals, pharma, computer science, and IT sectors have driven domestic patent applications in FY24 to outpace foreign applicants for the first time.
  • Despite this, foreign entities continue to hold a dominant share of patents granted in India, comprising nearly two-thirds of the overall applications

India’s Economic Context:

  • India has a trade deficit with 8 of its top 10 trade partners.
  • Imports from China alone surpassed $100 billion in FY24.
  • India aims to become the third largest economy in the next 5 years, currently being the fifth largest after the US, China, Germany, and Japan.

Skewed Patent Approvals Towards Foreign Entities

  • Foreign entities dominate patent approvals, with major global IT companies like Qualcomm Inc., Samsung Electronics, Huawei Technologies, and Apple leading.
  • Indian companies are edged out, as per data from the Controller General of Patents, Designs & TradeMarks (CGPDTM).
    • Over 70% of final patent clearances are granted to foreign entities, though the gap is narrowing.
  • Global Comparisons:
    • In 2022,46% of patents approved in India were for non-resident Indians and foreign entities, one of the highest rates among major economies.
      • In contrast, China’s share was 87%, indicating a significant difference.
    • As per WIPO, Countries with high R&D spending, such as Japan (22.98%) and the Republic of Korea (26.61%), have a lower share of foreign patent approvals.
      • Foreign patent domination in the European Patent Office was83%, in Germany 40.97%, and in the US 56.11%.
    • Increase in Domestic Patent Applications:
      • Since FY19, domestic patent applications have steadily increased, narrowing the gap between domestic and foreign applicants.
      • The share of resident applications rose from 34% in FY19 to 53% in FY24, as reported by the Office of the CGPDTM.
Stagnation in India’s R&D Spending

Low R&D Spending:

  • India’s R&D spending as a percentage of GDP has stagnated, falling from 0.83% in 2008 to 0.65% in 2022 (World Bank data).
  • This is significantly lower than the global average of 2.62%.

Comparative International R&D Spending:

  • China’s R&D spending: 2.43% of GDP.
  • South Korea: 4.93%.
  • Thailand: 1.21%.
  • European Union: 2.21%.
  • United States: 3.46%.

Domestic Patent Approval Rates

  • Despite the rise in applications, approvals for domestic patents have not kept pace, with foreign entities still accounting for over 70% of approvals for nearly a decade.
  • Experts attribute this to the quality of patent applications and the patent ecosystem in India.
    • The shortage of patent examiners in India, with only 597 full-time equivalents (FTE) compared to the EU’s 3,982, Germany’s 821, and the US’s 8,000.
    • In 2022, India ranked 6th globally in patent grants, with 30,490 patents granted, 72% of which went to non-residents.
  • Trends in Domestic Patent Approvals:
    • Government officials noted that the time lag in the patent process means current approvals often stem from applications filed 4-5 years ago.
    • Until recently, foreign entities dominated patent filings, but this trend has shifted since 2020.
    • In the 2022-2023 period, 53% of total filings were by residents, rising to 55% in 2023-2024.
      • This shift is expected to reflect in future patent grants based on the merit of applications under the Indian Patent Act of 1970, as amended.
Impact of International Treaties:

  • The high foreign patent approvals in India are driven by the Patent Cooperation Treaty (PCT) and the Paris Convention for the Protection of Industrial Property.
  • These treaties account for 90% of the patents filed by foreign entities in India.
  • India was not compelled to join the Patent Cooperation Treaty (PCT) in 1998 but India joined.
  • The PCT has 142 member countries, simplifying the process for multinational companies (MNCs) to file patents in multiple countries simultaneously.
  • By joining the PCT, India made it easier for MNCs to target its large market, effectively “opening the floodgates” for foreign patent applications.

Government Initiatives

  • The government acknowledges the need for greater IP creation and ownership by Indian firms.
  • In 2021, it launched a ₹76,000 crore semiconductor manufacturing incentive scheme.
    • Over ₹7,500 crore of this amount is dedicated to design-linked incentives for chip companies engaged in original design and IP creation in the semiconductor sector.

Challenges of Low R&D Spending

  • India as Back Office of Global IT Giants: In the early 90s, India emerged as the world’s back office, with little to no original intellectual property (IP) creation by Indian firms.
    • Over time, these back offices evolved into global capability centres (GCCs), experiencing a boom in the last half-decade.
    • Despite increased local value addition at GCCs, original IP creation remains limited.
  • Inefficiencies in India’s R&D Capabilities: Trade policy experts highlight that the disparity reflects inefficiencies in India’s R&D capabilities.
    • Foreign companies exploit these inefficiencies, pre-empting potential domestic competition in the Indian consumer market.
  • Weak Investments: Economists point to lower R&D activity due to weak private investments and stagnant government spending.
    • Corporate investments are currently low, impacting R&D investment cycles.
    • Consequently, Indian manufacturing relies heavily on imported machinery, parts, and foreign technicians to meet export demands.
  • Import Dependency: It hampers industrial growth and increases dependency on Chinese imports. China’s manufacturing success is attributed to innovation complementing capacity building.
    • Foreign firms dominating patents increases India’s tech dependence and foreign exchange outgo.
  • Expanding in existing technology:
    • Initially, companies focus on expanding capacity with existing technology before investing in long-term research.
    • China has outpaced India since the 1980s, with Chinese universities significantly enhancing research capabilities.

Way Forward for India’s Lagging Patent Applications

  • Increase R&D Spending:
    • Enhance both government and private sector investments in R&D to reach closer to global averages.
    • Encourage public-private partnerships to boost innovation and research activities.
  • Improve Patent Ecosystem:
    • Increase the number of patent examiners to expedite the patent approval process.
    • Provide training and resources to improve the quality of patent applications.
  • Support for Startups and SMEs:
    • Offer financial incentives and grants to startups and small-to-medium enterprises (SMEs) for R&D and patent filings.
    • Establish incubators and innovation hubs to support early-stage research and development.
  • Strengthen IP Laws and Enforcement:
    • Update and enforce intellectual property laws to protect innovations and encourage domestic patent filings.
    • Simplify the patent application process to make it more accessible.
  • Foster Academia-Industry Collaboration:
    • Promote partnerships between academic institutions and industry to drive research projects leading to patentable innovations.
    • Facilitate technology transfer from universities to the private sector.
  • Incentivize Original IP Creation:
    • Implement schemes and policies that reward original IP creation and innovation.
    • Encourage multinational corporations (MNCs) to engage in R&D activities within India rather than just utilizing it as a back office.
  • Awareness and Education:
    • Increase awareness about the importance of patents and intellectual property rights among researchers and businesses.
    • Integrate IP education into the curriculum of engineering, science, and business programs.
  • International Collaboration:
    • Engage in international collaborations and exchanges to bring in best practices and advanced technologies.
    • Leverage global patent systems like the PCT to facilitate the international protection of domestic innovations.

Alternative articles

Source: https://indianexpress.com/article/business/indian-patent-applicants-outpaced-foreign-entities-in-fy24-but-foreigners-dominate-final-patent-clearances-9467666/

Mains question

​​Discuss the challenges faced by India in increasing its domestic patent applications and approvals. Suggest measures to enhance research and development (R&D) activities in the country. (250 words)