5 March 2013-WTO TRIPS Council-Intervention of India on Intellectual Property and Innovation: Small and medium Sized Enterprises

On 5 March 2013, the Government of India delivered the following statement at the TRIPS Council on agenda item 13, Intellectual Property and Innovation: Small and Medium-Sized Enterprises, a standalone item tabled by Chile, Chinese Taipei, the Republic of Korea and the United States of America.

We thank the delegations of Chinese Taipei, Korea, the United States and others for tabling an agenda item on “Intellectual Property and Innovation: Small and medium Sized Enterprises” which we understand is a standalone item.

In our intervention on a similar agenda item during the last TRIPS Council we had highlighted the fact that in the absence of a clear definition of innovation in the TRIPS Agreement, the empirical evidence on the role of intellectual property protection in promoting innovation and growth remains inconclusive. For the developing countries the path towards innovation is centred on incremental technological changes. It is therefore not in their interest to keep the threshold for IP so low that minor changes could get IP protection and in turn get exploited by bigger companies on account of their financial strength. The small and medium enterprises in developing countries therefore need a flexible IP regime that could help in technological progress.

Mr Chairman, to understand the correlation between IP, Innovation and small and medium enterprises in a country like India, it is essential to understand the SME sector in a developing country like India. These industries play a vital role in India’s economic growth, with over 30 million units and account for 17 per cent of the country’s GDP in 2011. They currently employ around 60 million people and the investment in these units varies from USD 60,000 to 1 million . Almost 2/3 rd of the SMEs are involved in manufacturing with 17% in the services sector and 16% in maintenance and repair services. Almost 90 % of the units in the manufacturing are mainly involved in low end manufacturing activities and exist in clusters. Since these units are labour intensive and are capital starved, hardly any investment is done in research or innovation. Their marginal innovation is mainly limited to technological adaptation and absorption without any attempt to innovate in a real sense. For these units which are capital starved, the protection of their IP, even if it exists is farthest on their agenda. This is because IPR have a national jurisdiction and they lack capacity to register in every market where there products are sold. Moreover they also do not have the financial capacity to fight the infringers of their IPRs in foreign countries. So, in essence, the use of IPRs as an instrument of protection for the inventions of SMEs is not necessarily either an immediate or a simple solution.

Mr Chairman, the capacity to invent is a function of available resources, technological capacity, highly skilled manpower and commitment to R&D work. There are very few companies in the developing countries in the SME sector that have the size and capacity necessary for engaging in such work. For most of these industries R&D is not important as they operate in technologically developed areas (like the textiles, food sector, automobiles), or because the companies are involved in the production of goods, and also services, that are not marketed on an international scale. The Indian Pharmaceutical and IT sectors which started as SMEs in the 1970s, in fact made greater progress during the pre TRIPS era compared to the current IP climate. India in fact became the pharmacy of the world to supply low cost affordable medicines to the developing world in the absence of any IP regime. For the developing countries especially for the SMEs, the IP in fact acts as an obstacle to adapt, absorb and reverse engineer the existing technologies.

Let me conclude by saying that there is no direct correlation between IP and Innovation even for the Small and Medium Industries. The technological progress even in the developed world had been achieved not through IP protection but through focussed governmental interventions like compulsory licenses, cross licensing, government funding, and competition policy. It is unfortunate that some of the technologically developed countries would like to show case the positive effect of IP on innovation , when historically these countries including the proponents of this Agenda Item have reached this stage of technological development by focussing solely on the development of their own domestic industry without caring for the intellectuals property rights of the foreigners or the right holders. After achieving a high level of development, they are now attempting to perpetuate their hold on their technologies by making a push towards a TRIPS plus regime.

Their agenda is not to create an environment where developing countries progress technologically, but to block their progress through the stringent IP regime. It is therefore essential that the flexibilities provided by the TRIPS Agreement need to be secured at any cost, if the people in the developing countries are to enjoy the benefits of innovations.