Intellectual Property Rights Regime and Creation of Innovation Based Enterprises in India

Presented at the GLOBELICS 2006 conference in India during 4-7 October 2006.Session I-5: New IPR Regime and InnovationIn recent years, the Indian government has undertaken significant modifications in the Intellectual Property (IP) regime of the country. Some of the key elements of the modified policy having major implications for several sectors in the economy, especially the pharmaceutical, chemical, biotechnology and information technology related sectors. Given the changes in the IP regime, the competitive landscape of many of these sectors is undergoing a fundamental change in India. This has led to a realignment of business strategies by firms in these sectors in order to face the challenges thrown up by the changing regime, as companies which enjoyed protection under Indian IP laws will have to adapt to India's accession to WTO (TRIPS) norms in 2005. At the same time, globalization of the Indian economy is opening up new opportunities for firms in the country and they will need to build strategies to exploit the emerging opportunities. IP regimes in a country play an important role in fostering the direction and the quality of entrepreneurial innovation across all sectors of the economy. For example, an IP law that fosters incremental innovation can allow small businesses to benefit by affording protection to small incremental improvements on existing intellectual property that can in turn be used by owners of the IP to move up the technological value chain. In addition, the IPR framework directly affects the ability of entrepreneurs to take advantage of commercial opportunities that require the existence of a suitable IP regime before commercial/service agreements can be reached with potential clients. Such market creating potential of the IPR framework can also impinge on the ability of small entrepreneurs to enter into IP intensive activities as subcontractors and licensees. While India has made its IP regime TRIPS compatible, it is not entirely clear if the new regime would facilitate the participation of Indian companies in the knowledge intensive global production and R&D networks and if it is appropriate for an economy that is expected to grow rapidly enlarging the demand for a variety of products and services. This paper explores these issues in the context of IT-electronics and pharmaceuticals- biotechnology sectors. It is built on the premise that ceteris paribus participation of Indian firms in IP creation and participation in knowledge intensive activities is desirable. If changes in technology and global industrial structure are creating opportunities for such participation, IP policies should positively discriminate in favour of such participation. Similarly, if the domestic market for knowledge intensive activities is growing rapidly, policy makers should explore if tinkering with IP policies can facilitate the participation of local firms in this market. The paper argues that such possibilities exist and some pro-active changes in IP policies are desirable. The rest of the paper is divided into four sections. Section 2 summarizes the emerging opportunities in the pharmaceutical-biotech sector and explores areas where Indian firms can potentially participate. The next section undertakes a similar analysis for the IT-electronics sector. Section 4 reviews the existing IPR laws to evaluate if these laws can potentially constrain the exploitation of the emerging opportunities in these sectors by Indian firms. The final section provides some concluding remarks