CHINA IN THE PATENT RACE

[I wrote this in Business World of 15 July 2008.]

INVENTED IN CHINA

In 1970, India broke away from the world patent system. It abolished product patents in food products and pharmaceuticals, and opened the gates for its firms to break other countries’ patents and produce any drugs they liked. Thousands of small firms came up and started making copycat drugs. India became the haven of cheap drugs. It became such a serious threat that industrial countries had to bribe it to bring it back into line. In the Uruguay round they offered India a bargain: if it and its lawless allies such as Brazil enacted proper patent protection, the industrial countries would open up their textile markets to developing countries. Both sides had ten years to fulfil their bargain after the Uruguay round agreements were signed in 2005. The industrial countries kept their side of the bargain. India dragged its feet as long as it could, but finally kept its promise in 2006. Altogether, patent protection is stronger across the world than it was ten years ago.

The impact can be begun to be seen. According to a Thomson-Reuters study, the number of primary patents filed in ten countries – G8 plus China and South Korea – increased 16 per cent between 2003 and 2006; the total number, including refiling in countries other than the country of origin, went up 21 per cent. On the average, refilings in 2003 were roughly two-thirds of original patents; in 2007 they were about four-fifths. Patenting activity remains primarily national; few patentors seek protection in other countries as well. But their proportion is going up.

The United States is the world’s leading country in most things, but not in patenting; the country that hands out the largest number of patents is Japan. In 2007 it registered almost 600,000 patents, while the US registered about 400,000. The reason is that Japan has two categories of patents, major and minor. Significant advances in science and technology qualify for major patents. But there are many small improvements in techniques of research and production; Japan gives them patents too. The object is not so much to give the patentor a monopoly, but to give small improvements publicity, so that patentors can find licensees for them.

However, the world supremacy of Japan in patenting, achieved by means of this administrative trick, is declining. Patents registered in Japan went up about 15 per cent between 2003 and 2007; patents in the US went up by about 30 per cent. But Chinese patents almost doubled. China is still an infant compared to the US and Japan; its patents have just exceeded 100,000.

Patenting is primarily a business activity; it is businesses that invest in innovation and obtain patents for those innovations that they want exclusive use of or would like to license out. Patents taken by universities and laboratories are less than 5 per cent of the total in most countries. The two exceptions to this rule are China and Russia; 10-15 per cent of their patents are given to academic institutions. Both countries have traditionally spent heavily on universities and laboratories; and as in India, the number of patents taken out is taken as one of the parameters to judge academic institutions. In India, the incentives lead to at most a few hundred patents; in China and Russia, the number of academic patents runs into thousands.

Many patents are the result of incentives such as those just mentioned; some are a measure of pride. Most of the economically valuable patents come from corporate laboratories or plants. Of them, multinationals look for patents of high value, and try to maximize the value by taking out secondary patents in the big industrial markets – the US, the EU and Japan. Japan doubled its share of these triple patents between 2003 and 2007; now almost one out of two such patents is Japanese. The American share used to be over a third; it has come down to a fifth. Germany used to be the third, with roughly 10 per cent of the total; its share has come down to less than 5 per cent. The ascending country is not China; it is South Korea, whose share has grown from just about 2 per cent to over 10 per cent. South Korea used to be pretty isolated on account of its language; but it is rapidly latching on to the global innovation system.

And India? India figures nowhere. Not that it has not been trying; ever since Independence it has been investing ever larger sums in its government laboratories and universities. But their patent output has been measly. Ramesh Mashelkar, when he became director general of Council of Scientific and Industrial Research, tried to change this culture of “spend, spend and forget results”; he tried to make laboratories take out more patents. But he was unlucky enough to get Murli Manohar Joshi as minister. The score was love-all. India continues to wait for a return on its investment in science and technology.