Patents: what, how and why?
We all are known to the term patent and have some vague idea. But what exactly is Patent and how is it filed and granted? these are some of the questions which constatntly run in our mind everytime we see or hear the the word patents. I have got a good piece in ET and thought to reproduce the gist of the article here...
Today, staying competitive in business is not enough. What sets you apart from the competition are the intellectual assets you possess that enable you to offer what few or no others can. The Tatas demonstrated this with the world-beating Nano, whose revolutionary design the company is trying to patent.
Patenting is one of the many ways to protect a new process, product or technology by gaining exclusive access and rights to it for a period of 20 years. Though experts estimate that the top 20 per cent of organisations file 80 per cent of all patents, patent protection is just as important for small or medium-sized firms engaged in high-investment, high-risk sectors like life sciences or IT-enabled services, where any theft or loss of proprietary information could have disastrous consequences. Moreover, a patent also gives a small firm something it desperately needs—reputational capital, which goes a long way in creating commercial and market value.
Smaller companies often don’t have the resources to develop and defend their intellectual property. Based on his own experiences, Suresh Narasimha, CEO, TeliBrahma Convergent Communication feels that one of the critical challenges faced by SMEs is that there is a lack of awareness and seriousness about patent laws. Some of these companies often don’t even realise that they own intellectual property that can easily be siphoned off by a competitor, often through an insider.
Take the life sciences sector for example. Pharma companies are often victims of ‘copycat drugs’ and therefore, cannot afford to let their guard down in a market filled with manufacturers spoilt by weak pre—1995 patent laws which enabled them to copy foreign drug-making processes without fear of legal consequences.
Ajit Kamath, chairman and managing director of Arch Pharmalabs Ltd., a mid-sized manufacturer of active pharmaceutical intermediaries (drugs in their core form, before being converted into tablet, capsule or other form) agrees, “Attempts to poach people have been made since 1999 on a continuing basis, primarily by American or European firms that are looking to set up shop in India and do not hesitate to double the employee’s current salary.
There is also a perennial threat from some dubious ‘technology consultants’ floating around in the pharma sector who are known to steal and sell sensitive data for money.” Kamath is now taking no chances. Arch Pharmalabs already has patented eight of their processes and has filed within India two of their biggest patents yet, a novel polymorph of Perindopril, an anti-hypertensive drug and a non-infringing process for theanti-cancer drug, Gemcitabine.
The Gemcitabine patent is expected to augment Arch’s revenues by anywhere between Rs 50 crore and Rs100 crore post 2009, while Kamath believes that Perindopril will bring in between Rs 10 and Rs 15 crore annually.
The Process Filing a patent is somewhat complicated and one needs to be sure that the patent being filed is a robust one. The patent application, including the required documents and specifications, has to be filed provisionally or completely at the country’s respective patent office. If the patent is provisional (i.e. the product requires some modification), a complete patent has to be filed within a years’ time.
The applicant may also, after notifying the controlling authority, simultaneously file the same patent in another country. Eighteen months after the date on which patent application is filed in India, it is published by the patent office, which is when the application comes under intense scrutiny and debate.
The application is then forwarded to an examiner who will make a favourable or unfavourable report according to the merits of the invention. As such, the process of granting the patent could take anywhere between 3 and 5 years in India or abroad. There is also a structured annual renewal fee the company or individual must pay to keep the patent in force for 20 years.
Where SMEs feel the pinch is in understanding the minute procedures of a patent and having enough experts on board to manage the process, which automatically increases costs as well. A 30-page application with 10 claims costs only Rs 4,000 as per current laws, but additional costs pile up if you wish to modify the patent, change the names of the patentees, review the controller’s decision, etc., on top of which you have the patent lawyers’ fees as well.
Harpreet Oberoi, a partner with Jotwani Associates, a law firm specialising in IP law says, “Filing a patent is always an expensive proposition. And unlike large corporations, smaller companies are always wary of the fact that if the patent isn’t accepted, they stand to lose a lot of money. Even if the patent is passed, a patent infringement suit in India can be long and costly. That is why SMEs only consist a miniscule percentage of our clientele.”
A patent also has geographical limitations, i.e. it is valid only within the country it is filed in. But an Indian entrepreneur does not necessarily have to file a patent in India if he/she feels that the product first needs protection in a foreign territory.
Patent laws are thought to be much stricter abroad. However, IIM-Ahmedabad Professor and patent expert Anil Gupta says that since the costs aren’t exactly prohibitive, in most cases, taking out a patent in India is a good way to be one step ahead in the fast-growing marketplace. “It is not the stringency of the law which will determine where should one file the application but the availability of potential market,” he observes.
But it really depends on the entrepreneur and the offering. In late 2006, Srikanth Vittal, along with three other fresh-out-of-college graduates began Netcore Softec, a high-tech data security firm that specialises in multi-level user authentication, using a system they developed that involved ‘colour codes and puzzles’ to weed out unauthorised users trying to log into an e-banking or e-commerce website.
The four felt that the product would be better suited for the US market since a federal law in that country requires all banks to have multi-level authentication systems in place by the end of 2008, creating a great demand for these products. Accordingly, Netcore has filed a patent in that country, with a view to take their product to Europe next.
It’s cost the fledgling company around $3,500 so far, but they feel that they could afford to wait a while before patenting their offering in the Indian market, where bank regulatory laws are still not as stringent as developed markets.
Other SMEs rue the fact that patent protection while stringent abroad, also comes at a stiff price. Enterprise data management solutions company Solix’s founder and CEO Sai Gundavelli says, “We need to make Indian patent laws much more stringent. If the protection seems real, we will see many companies and individuals applying for patents.”
However, for the sake of convenience, it is possible to file an international patent application under the Patent Co-operation Treaty (PCT) to save oneself the trouble of making filings in multiple countries.
“The PCT is not the granting authority, clarifies Akash Taneja, executive director, FICCI-IPD, continuing, “It just facilitates the filing of one single application in place of filing multiple applications in multiple countries.” The patent then has to be individually run past each country’s designated controller.
An intermediary or vendor can often ease the hassles associated with filing a patent. Inrea is a two-year old patent outsourcing company based in Mumbai that is handling the backend patent filing work for about fifteen Indian SMEs at the moment from segments such IT and IT-enabled products, electrical and mechanical engineering and chemical sciences.
“Inrea searches databases to find out whether a similar product or process has already been patented, makes recommendations to tweak the product, works with the entrepreneur and handles all the documentation,” says Saurabh Shekhar, director, Inrea Research. Inrea also researches the patent portfolio of a potential acquisition target or a competitor to understand their patent focus areas. The clients base important strategic decisions such as takeovers, sale or R&D investments on the basis of this information.
Inrea signs a strict non-disclosure agreement with the client company to ensure total confidentiality. Shekhar says that patent intermediaries in India charge anywhere around Rs 50,000-Rs 60,000 for their services. “Managed security is anticipated to be one the fastest growing security investment areas among Indian SMBs.
Vendors who can provide secure, reliable and scalable services will find the Indian SMB segment to be a highly receptive market,” says Dipendra Mitra, an analyst at AMI-Partners, research firm doing research into information. AMI is a consulting firm specialising in market intelligence trends and strategy.
Gupta also feels that the patent regime needs to be more SME-friendly in India. At the moment, he says, an applicant has to download the gazette and then go through these applications one by one. “This is very cumbersome and there is no justification for this,” Gupta adds. Another fact is that SMEs have very few knowledge-sharing networks between themselves to discuss and explore the potential that lies in the large number of abandoned and expired patents in the country.
