India abolished product patents in 1970 to enable its manufacturers to use foreign patents without breaking any law. In the Uruguay round it promised to reintroduce product patents. It did so as slowly as it could. I had done one of the earliest studies on patents for National Council of Applied Economic Research in the late 1960s. In this column in Business World of 10 January 2005, I discussed India's policy reversal.
The patent ordinance
By means of patents, a government gives the patentor a temporary monopoly of use of his patented invention. The first recorded patent was given by Henry VI in 1449 to a certain John of Utynam for a process of making stained glass; in return he was supposed to teach the process to other Englishmen. The glass windows of Eton College were made with his process. Queen Elizabeth I gave about 50 patents, but turned down an application for a water closet which she held to be improper.
A patentor has to file a description of his invention, and it is open to anybody for inspection. They can reproduce it and learn from it as long as they do not put it to commercial use. The whole idea of patents is to bring inventions early to public knowledge, and thereby to stimulate invention by others.
Why then do patents evoke so much hostility in India? It is because most patents are taken out in other countries, given to their nationals, and stimulate little invention in India. But many people in India would like to reproduce inventions patented abroad and could not do so if patents were granted in India to foreigners. Patent breaking can be profitable; a country that has many potential imitators and few inventors would be hostile to patents.
This issue came to a boil in the 1960s. Chemical and pharmaceutical firms tried to produce products similar to or with processes used in inventions patented in India by foreign inventors; and under the existing Patent Act – which went back to British times – the courts invariably ruled against them. Some of them were riled, and asked the government to amend the Patent Act. The government was sympathetic because it was following a policy of indiscriminate import substitution, and disapproved of foreign firms patenting a product in India and then importing it instead of producing it in India. So it appointed a committee of likeminded hangers-on, and on the basis of its report, amended the Patent Act in 1970. The amendment abolished product patents in food, chemical and pharmaceutical products; anyone in India could read foreign patents for such products, copy them and produce imitations without fear of legal punishment. I did my first studies of technology transfer in 1968-70, and found that the pressure to change the law came from three or four firms; but they had MPs to put their case, and the government had its own reasons for relaxing patent protection.
The impression that the Indian pharmaceutical industry grew and flourished because product patents were abolished is wrong. Patent protection lasts only 15-20 years; after that a product is no longer protected, and its patent description tells you exactly how to produce it. So it can be imitated perfectly legally; and the number of out-of-patent products is many times more than that of patented products. What Indian producers did was to start producing out-of-patent products. Their products were cheap because the producers were small and low-cost, and competition was fierce. The low prices of drugs in India never had anything to do with lack of product patents.
Nevertheless, there were a handful of large firms that specialized in patent-breaking. They were opposed to reintroduction of product patents, and their opposition prevailed for 20 years. Then, in the Uruguay round of trade negotiations, the US and Europe told India: we will give up the multi-fibre agreement and open our huge textile market to you if you reintroduce product patents in food, chemicals and drugs. India had a choice and made it.
But instead of introducing product patents straightaway, the government made an intermediate arrangement. It began to give foreign patentors exclusive marketing rights (EMRs) from 1 January 1995. India was supposed to introduce full product patents within 10 years. But the BJP government was hand-in-glove with industrialists; although it amended the patent act twice, it did not introduce product patents. The UPA government dragged its feet for six months, and introduced product patents by ordinance from 1 January 2005. Now, foreign inventors can file for proper product patents instead of EMRs; those who were given EMRs in the past 10 years will be given patents, but none too soon.
The real impact of this amendment will be small, for all the big patent-breakers of the 1980s have turned to other businesses in the meanwhile – to gene modification, contract manufacture, biotechnology etc. India may again become respectable – and painlessly.