Intellectual Property Rights In India
Pam Stokes
November 24, 2002
In order to conduct international business, India will have to vigorously enforce its intellectual property laws. Presently, enforcement is very lax and therefore makes it difficult for countries interested in foreign direct investment (FDI). Economic gains and international trade opportunities, as well as the mandates of the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), have required India to examine its enforcement protocol for intellectual property. These and other changes must occur before expanding companies with growing international property (such as Staples) feel confident and sure enough to enter the Indian market.
Countries wishing to conduct business outside of their borders have to adhere to the intellectual property rights of the foreign nation that they are trying to enter. Intellectual property includes patents, trademarks, trade secrets, and copyrights (Sullivan, 1999, p. 414). All of these instances involve a degree of ownership, and therefore requires countries to be knowledgeable of other countries’ intellectual property rights and enforcement practices. India is one of the countries that should consistently focus on this aspect of business.
The structure of laws in India influence how intellectual property is addressed. India has the potential for investment and growth by way of its large population and cheap labor. Labor laws are strict, but the enforcement and protection of intellectual property in India is weak. The lack of enforcement of “intellectual property rights (IPRs) has produced major strife with the industrialized nations, in particular the USA. Having shifted from a material manufacturing economy to an information processing economy, the USA has much at stake to ensure the protection of these ‘goods of the mind’ in international trade” (Tikku, 1998, p. 1). This process is difficult to follow in India because of its thick bureaucracy and political environment. In addition, many U.S. based companies looking to expand globally (e.g., Staples) have an understandable and increased concern about India’s intellectual property rights, regulations, and enforcement. Looking to India for new fertile ground may prove to be arduous.
India’s intellectual property protections have been debated and analyzed by many business scholars. What is constant in the literature is that “less developed countries (LDCs) offer intellectual property rights in particular patent rights, not to induce inventions in their country, but rather as incentives to develop trading advantages” (Tikku, 1998, p. 2). This author goes on to mention that when LDCs grant intellectual property protection to businesses from other countries, the socioeconomic burdens incurred outweigh the benefits gained (Tikku, p. 2). Even with this understanding, India has decided to offer protection for intellectual property, although this is not guaranteed to occur. “Because India has yet to achieve sustainable innovation, its intellectual property regime should allow it to catch up with the industrialized nations” (Tikku, p. 3). Thus, India has had to rely on foreign innovation to carry them into globalization. This has been due to “the examples of foreign investment, indigenous innovation, and development [which] have taken place against the backdrop of India’s intellectual property regime” (Tikku, p. 17). As such, this system has not changed with the times.
The World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) seeks to address the quagmire of the varying degrees of intellectual property rights by requiring “nations to develop domestic laws which penalize intellectual property rights violations” (Sullivan, 1999, p. 415). TRIPS accomplishes this arduous task by applying GATT principles, existing treaties, and similarities among national laws toward the development and implementation of global protection and enforcement of intellectual property rights (Sullivan). Ideally, this is how it is supposed to function, for the betterment of all nations. However, some scholars and economists believe that this notion is not true. “It is clear that the focus of attention in TRIPS is represented by a few industrialized nations, while the interests of LDCs are the object of neglect” (Tikku, 1998, p. 4). The author suggests that the implementation of the TRIPS provisions directly go against those countries that maintain philosophical and cultural differences. India is one such nation.
India is required by the TRIPS provisions to fulfill its obligations by 2005 (Tikku, 1998, p. 5). Unfortunately, the United States has put undue pressure on India to conform prior to the 2005 TRIPS deadline. Because India is desperate to conduct business with the U.S., its government has “amended the various laws much earlier than the negotiated deadline” (Tikku, p. 5). The copyright laws have been adjusted to meet compliance with the current international standards, but the new patent legislation has been greeted with much reticence. “The obligations incurred under TRIPS entail major changes to India’s patent laws” (Tikku, p. 10). These changes cover great areas of contention between India and the United States (Tikku). Efforts are being made to change the current patents legislation to make it more compatible with TRIPS, as well as shifting the legislative environment in India. This massive change requires amendments to how the laws for intellectual property are enforced in India. If this does not occur, India will be forced to forgo its desire for international trade and foreign direct investment (FDI).
Presently, India is grappling with ownership rights. This is due, in part, to the nation’s history. Becoming free of a controlling British regime, India is reserved about other countries demanding that they conform. However, the current India Patent Act allows for protection for inventions, foods, pharmaceuticals, pesticides and other chemicals, as well as films, music, and artistic works (Tikku, 1998, p. 5). Interestingly, these products and services must be able to ‘function’ in India before they are granted the protection (Tikku, p. 6). Granting patents is just one of India’s burdens.
Organizations such as Transparency International (TI), located in Germany, have conducted surveys to assess countries with high corruption and bribery. India was assessed as one of the most corrupt countries, with a rating of 2.63 out a possible 10.0 (Sullivan, 1999). “With the exception of China, India and other corrupt countries have not attracted much foreign investment” (Sullivan, p. 404). As a consequence of its shaky enforcement against intellectual property, India’s FDI has lagged significantly behind other nations. “Substantively, the intellectual property laws in India have changed little over the past five decades, with the exception of the copyright paradigm. Enforcement of intellectual property laws has remained consistent over this period, almost nil (Tikku, 1998, p. 15). To this end, India will have to fully realize its potential by examining the widening of its market to FDI and joint ventures, and by strengthening its enforcement of intellectual property protections.
As aforementioned, India’s enforcement issues stem from decades of complacency and corruption. This issue has ballooned into a huge area of contention within the international community (Tikku, 1998, p. 9). Friedman (2000) calls this phenomenon “kleptocracy.” This concept describes state systems that “have become so infected by corruption that legal transactions become the exception rather than the norm” (p. 146). The author offers an example of kleptocracy based in India:
In the summer of 1998, John Burns, the New York Times bureau chief in New Delhi, wanted to purchase a book about the Indian Parliament. The clerk offered Burns the book for seven hundred rupees, then went to retrieve a copy. With a copy in hand, he told Burns that he could not give him a receipt (which Burns requested) because the office closed at noon, and stated that this purchase was an ‘out of office’ sale. Burns got his book and the clerk pocketed the money for himself (p. 150).
This corrupt action involved stealing and bribery, two common occurrences in India. The author found it amusing that Burns was bribed in the lobby of the India legislature for a book about Indian legislation (p. 150).
Nonetheless, things are looking up for Indian legislation and regulations. “The Arbitration and Conciliation Ordinance of 1996 consolidates and amends the old law relating to domestic and international arbitration and enforcement of arbitral awards” (Gaya, 1996, p. 1). This procedure has minimized the intervention of the court, which generally ties up legislative action in a slow, bureaucratic cycle.
Staples, a company interested in foreign regulations and FDI, is ready for international expansion. In 1992 Staples entered the European market, and in 1998, they expanded European retail stores across Germany, the Netherlands, and Portugal (http://investor.staples.com). Although India is a rich and fertile market, many companies are wary of entering the market due to the lax enforcement of intellectual property laws and regulations. Staples is looking to expand into fertile markets, but India is still on shaky ground. The company has shifted its focus to business-oriented entities and has developed risk management protocol (Gianatasio & Baar, 2002, p. 1). Therefore, Staples is ready to enter new international market ventures but needs the assurance of the entered country that it will be able to conduct business in a legal manner. India may not be able to offer these assurances at this juncture.
Even with its profound accomplishments and gradual changes in some legislation, “India has experienced neither the flow of investment that China has, nor the innovation that seems to gush from U.S. corporations. Sure, intellectual property protection is vital in India, and this has not changed. However, India should also be concerned with its political climate, FDI, low wages, and infrastructure concerns.
Anonymous. (2002). Milestones and history. Retrieved November 18, 2002 http://investorstaples.com
Friedman, T. L. (2000). Understanding globalization: The Lexus and the olive tree. New York, NY: Anchor Books (a division of Random House).
Gaya, J. (1996). India speeds up the arbitration process. Asian Business Review. Retrieved November 18, 2002 from http://mdusa.lib.umd.edu
Gianatasio, D. & Baar, A. (2002). Staples shifts focus to business. Adweek Southeast Edition, (23), 29. Retrieved November 18, 2002 from http://mdusa.lib.umd.edu
Sullivan, J. J. (1999). Exploring international business environments. Needham Heights, NJ: Pearson Custom Publishing.
Tikku, A. (1998). Indian inflow: The interplay of foreign investment and intellectual property. Third World Quarterly, (19) (1). Retrieved November 18, 2002 from http://mdusa.lib.umd.edu