The Indian School of Business hosted a conference on Innovation, Intellectual Property and Competition on 30 March 2018 to discuss a roadmap for innovation-led growth in India.
Globally, there is an emerging consensus that innovation drives economies to achieve higher levels of growth. Yet, India’s spending on research and development (R&D) in terms of percentage of GDP over the last two decades has remained at just above 0.5%. As the Economic Survey 2017-18 notes, these numbers lie far below leading nations such as the United States (US), China, South Korea and Israel. How can India break through this stagnation in its R&D and innovation ecosystem? How can it create products that do well in India and global markets, while creating wealth and value for all stakeholders, whether entrepreneurs or consumers? What is the role of intellectual property in this journey?
To address these questions, the Indian School of Business (ISB) organised a conference in New Delhi on 30 March 2018. The goal of the ‘Innovation, Intellectual Property and Competition’ conference (IIPC for short) was to bring policymakers, academics, industry experts, entrepreneurs and students of innovation on one platform to generate a solution-oriented dialogue. The keynote address was followed by four panel discussions. Each panel comprised experts and stakeholders across platforms.
Rajendra Srivastava, Dean at ISB, and Novartis Professor of Marketing Strategy and Innovation, opened the conference and set the stage on the need “to strike a balance between theory and practice”. He stressed on the need for lab experiments to find a place in the marketplace. The examples of China, Japan and Taiwan, he noted, pointed to the necessity of shifting focus to the best practices of the East rather than on advancements made by the West alone.
Suresh Prabhu, Honourable Union Minister of Commerce and Industry, and Civil Aviation, shared a video message with the audience. He made special mention of Start-up India as a successful example of innovative thinking. Under the programme, 20,000 new start-ups from different sectors such as fintech, health, petroleum among others are being fostered by the Government of India. The government’s role, Prabhu emphasised, lies in creating a regulatory environment that facilitates innovation and entrepreneurship.
Competition Economics, Growth and Innovation
The first panel focused on the role of entry of entrepreneurs, competition, innovation and the resultant effects on economic growth. In the process, it also highlighted frugal innovation in India. It argued for cutting-edge research and development to foster an environment of scientific innovation and healthy competition.
Rishikesha T Krishnan, Director, Indian Institute of Management – Indore, shared examples of process and product-based frugal innovations. The healthcare, pharmaceuticals and software sectors provided examples of process-based innovation, he noted, where firms have focused on making products and services affordable for consumers.
But even though India is one of the leading countries in the start-up domain, most new firms were imitating or further adapting existing models rather than pioneering new technology. “The top nine start-ups share only 30 patents between them,” Krishnan noted adding that “only a few clusters in leading Indian universities are R&D intensive.”
Lessons from CSIR
Girish Sahni, Director General, CSIR and Secretary, Department of Scientific and Industrial Research, next pointed out the requirements for a culture of innovation in India. He stressed on synergy between industries, and also investments and encouragement from the government for scientists to convert their innovative ideas into visible products and services. The Council of Scientific and Industrial Research (CSIR) is the leading patent filer in India, Sahni noted. It is also the only Indian organisation in the list of top 100 R&D organisations in the world on patents and ‘technology visibility’. Post-liberalisation, CSIR has fought to protect Indian traditional knowledge and products such as turmeric, neem and basmati globally.
Padma Shri Anil Gupta, Founder of the Honey Bee Network, and Executive Vice Chair of the National Innovation Foundation (NIF), also former Professor at the Indian Institute of Management – Ahmedabad argued that India is uniquely positioned to exploit the potential of its people. He pointed out that India is the only country where ideas from the informal sector are acknowledged as part of the country’s innovation ecosystem. Frugal innovation complements science-based innovation by giving “voice, visibility and velocity” to creative ideas from people belonging to different sections of society: farmers, technology students, artists, mechanics, professionals and even children. “Respecting, recognising and rewarding” these innovators is critical for the innovation ecosystem to grow, Gupta suggested in his inspirational speech.
Innovation and Competition
Geeta Gouri, Former Member, Competition Commission of India (CCI) and Director (Tariffs) at the Andhra Pradesh Electricity Regulatory Commission, focused attention on competition policy in India. She talked about the critical role that CCI plays in creating new and open markets for innovation. Markets, especially high technology markets, function on sharp incentives. Decisions taken by the CCI can affect the “basic incentive mechanism”. Talking about the Competition Act, Gouri emphasised that competition law was not about increasing competition. Instead, “its role is prohibiting competitive constraints on market power so that a new player can enter the market without any constraint.”
Evolving Jurisdiction for Innovation Ecosystem for India
The next panel discussed the policy dimension of patent law in India.
Jay Kesan, Professor of Law, University of Illinois at Urbana-Champaign, participating via video-conference, highlighted China’s patent-filing trajectory. Is Chinese patenting behaviour exceptional? Kesan presented his analysis on Chinese patenting behaviour vis-à-vis other Asian countries such as South Korea and Japan and BRICS nations. He noted that while indeed, Chinese technological innovation was improving at a much faster rate compared to other BRICS countries, the rate was probably not exceptional. For every million USD spent by China on R&D, it files 3.5 patents whereas US manages only 0.9 patent. Despite the sharp growth trajectories, however, Chinese trends are similar to South Korea and Japan between the mid-1980s to the early 1990s. For India to reach the growth level of China in terms of innovation and patents, he outlined the need to focus on generating more innovative products and reap the economies from agglomeration in the innovation ecosystem.
India has improved its ranking on the International Intellectual Property (IP) Index to 44th among 50 nations, noted Hemal Shah, Director, India and Regional Markets, Global Innovation Policy Center of U.S. Chamber of Commerce. The country’s score represents the largest percentage improvement of any country measured. In addition, for the first time ever, India has broken free from the bottom 10% on the index and stands out among peers like Brazil, Russia and South Africa.
Despite this progress, however, IP is still seen as a cost and not an investment in India. It is critical for India to build a strong legal and economic infrastructure framework to make a shift from a “services led economy” to a “knowledge-based innovation driven economy”, Shah added.
Creating prosperity through innovation
The Indian economy largely depends on the “inherited prosperity” of the finite natural resources of the region, said Amit Kapoor, President and Chief Executive Officer of the India Council on Competitiveness and Honorary Chairman at Institute for Competitiveness and Editor-in-Chief of Thinkers. “We have a long way to move to ‘created prosperity’ which is dependent on worker output and is not limited or finite in number,” Kapoor said.
Kapoor highlighted the importance of clusters in providing an environment conducive to innovation and knowledge creation. In states like Maharashtra, Gujarat and Himachal Pradesh, the presence of a biopharmaceutical industry cluster has led to higher job creation and increased wages for labour.
All the speakers agreed that in order to move up the chain in global innovation, India needs to step up from being a low-cost labour providing economy to a knowledge-based innovation-driven economy.
Economics of Innovation, Licensing and IPR in India
The third panel of the day provided further insights into the legal and economic aspects of intellectual property rights (IPR), intellectual property (IP) protection and copyright infringement.
Through the example of piracy in the entertainment sector, Rahul Telang, Professor of Information Systems, Carnegie Mellon, explained how technological innovation can sometimes lead to copyright infringement and disrupt the economics of the industry. When infringement is “easy and widespread”, the general belief is that producers will lose money, but consumers can consume data due to cheaper and widespread availability of content. However, this benefit is only short-term.
In the long run, piracy has a detrimental impact on the availability of good content, Telang’s research on the Indian Bollywood industry showed. With profits dwindling, producers do not invest in the production of new content. Creative output declines. A similar trend, Telang argued, could be seen in the mid-1980s to 2000, where the Indian motion picture industry made fewer movies as piracy was at its peak in the era of videocassette recorders. Piracy or infringement also hurt consumers indirectly through malware and/or by collecting and selling their personal data, he concluded.
Healthcare and Innovation
India’s healthcare industry is growing at an accelerated rate and is one of the largest contributors in the global healthcare industry, said Vivek V Kamath, Managing Director, Merck Sharp and Dohme Pharmaceuticals, India.
Growing at a compound annual growth rate of 11%, India’s pharmaceutical market is expected to reach US$ 28 billion by 2020. Despite the stellar growth story, the current hurdles to innovation in healthcare sector are opaque market access process and product pricing, low investment on clinical trials as well as low enforcement of IP protection policy. The government, Kamath argued, could do better on enforcing relevant regulations.
Rajat Kathuria, Director and Chief Executive, Indian Council for Research on International Economic Relations (ICRIER) next discussed India’s exponential app economy growth in the past few years. The app economy refers to the range of economic activity surrounding mobile applications. Mobile apps created new fortunes for entrepreneurs and changed the way business is done. India is now the fourth largest app economy in the world. Mobile app usage grew by 43% during past year compared to a global average of 11%.
Kathuria and his team estimated that the internet economy could contribute up to US$ 537.4 billion to India’s GDP in 2020. More than US$ 270.9 billion of that could be attributed to apps. However, one of the biggest constraints in app economy is India’s heavy reliance on spectrum and underutilisation of underground optical fiber cable networks, Kathuria concluded.
“Creativity is why you would want to have good intellectual property laws”, said Dev Robinson, Partner, Shardul Amarchand Mangaldas. The basic idea behind intellectual property law is to let the creator get the benefit of the creation. Despite the perception that India does not enforce the IP laws, Indian courts have been just and neutral while handling IP law cases and have considered every aspect of the cases comprehensively, Robinson stated.
Trade, Innovation and IPR
Tying together the day’s discussions, the final panel of the day talked about the role of trade and big data in driving innovation and competition. “Competition keeps us constantly innovating”, said Gopichand Katragadda, Group Chief Technology Officer, Tata Sons. Katragadda argued for the need to push technology to achieve higher profitability. If an economy does not protect intellectual property rights, investors perceive it to be “non-friendly”, said Keith Maskus, Professor of Economics, University of Colorado in Boulder. Maskus also spoke about the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement and other preferential trade agreements with respect to IPR.
Competition lowers prices and improves quality innovation, noted D Daniel Sokol, Professor of Law, University of Florida. To foster innovation, it is important to have open interdisciplinary interactions between people from technology, law and business.
Finally, Shubhashis Gangopadhyay, Founder and Research Director of India Development Foundation, highlighted the very important relationship between inequality and innovation. In the last 5-6 years, India has moved beyond Jugaad, Gangopadhyay suggested, and has adopted a more science-based approach towards innovation. It needs to continue on that path. The innovation journey need not be mixed up with the inequality journey especially if the innovation is inclusive in nature.
This report was written by Diksha Choudhary of The Script.