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Executive Summary

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Executive Summary ...

October 2009

Patenting Landscape in

India 2009

     Patenting Landscape in India 2009 Table of Contents

    Executive Summary ........................................................................................................................................ 2 Patent Application Filings at the IPO ............................................................................................................ 2 Top Filers at the IPO ....................................................................................................................................... 5 Top Domestic Filers at the IPO ...................................................................................................................... 7 Filing-Trend Analysis: Domestic Pharmaceutical Companies ................................................................... 7 Filing-Trend Analysis: Domestic IT Companies........................................................................................... 8 Filing-Trend Analysis: Domestic Automobile Companies .......................................................................... 9 IP Infrastructure and Enforcement Developments ...................................................................................... 9 Conclusion ..................................................................................................................................................... 10 Appendix ........................................................................................................................................................ 11 References ..................................................................................................................................................... 15 About Evalueserve ........................................................................................................................................ 16 Evalueserve Disclaimer ................................................................................................................................ 16 Copyright Notice ........................................................................................................................................... 16 About the Authors........................................................................................................................................ 16

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     Patenting Landscape in India 2009

    Executive Summary

    Patenting activity is an important yardstick for measuring innovation, research and technological

    development in a country. In recent years, India has witnessed rapid changes in its patenting landscape as a

    result of the growing economic activity and reforms (related to patents). In May 2008, Evalueserve, a global

    research and analytics firm, investigated the patenting landscape in India [1], focussing on the patent

    applications published over 200507. The present study includes data for 2008 and analyses the latest

    trends and developments in the Indian patent landscape.

    The key findings of the patenting landscape study over the past four years (January 2005 to December

    2008) are listed below.

    ? Reduced growth in patent filings: The number of applications filed by foreign applicants globally fell in

    2008 because of the economic downturn [2, 3]. Since more than 80% of the applications filed with the

    Indian Patent Office (IPO) are from foreign applicants, the growth in IPO filings experienced over the

    past few years has slowed down considerably. In fiscal year 200809 (April 2008 to March 2009), patent

    filings grew 5% as against the 20% increase in the previous years.

    ? Top filers: Qualcomm has emerged as the top patent filer for the two consecutive years2007 and

    2008. General Motors, General Electric, Tata Group, LG Electronics, Research in Motion, 3M and Sony

    Ericsson have made huge gains in their 2008 rankings. The rankings of Philips, Bayer, Microsoft and

    AstraZeneca have slipped marginally.

    ? Share of domestic applicants: There has been an increase in the filing of patents overall, but Indian

    companies have not been able to keep pace with their foreign counterparts. In 200708, domestic

    applicants filed 6,296 applications with the IPO, which constitutes about 18% of the total applications.

    This was much lower than the percentage share in 200607 (19%), 200506 (20%), and 200405 (23%).

    There has been a progressive decline in the share of the domestic applicants over the years.

    Evalueserve has compiled a list of top 200 filers by investigating the applications published over 2005

    08, and found that only 20 domestic applicants, i.e., 10%, featured in the list.

    ? Domestic pharma sector maintains its lead over other industries: The domestic pharma industry is

    performing significantly better than the other industries. A total of six domestic pharma companies found

    place in the list of top 100 filers during 200508. Among these six corporations, Ranbaxy Laboratories

    emerged as the top filer (rank 31), followed by Dr. Reddy‘s Laboratories (rank 45) and Cadila Healthcare

    (rank 66).

    ? Domestic automobile sector looking up: Patenting activity in the domestic automotive sector is

    improving as a result of the increased awareness (due to the recent patent lawsuit between TVS Motors

    and Bajaj Auto), and also due to the development of Nano by Tata Motors. The count of Tata Motors‘

    published applications and the patenting intensity significantly increased in 2008. In addition, Tata

    Motors and TVS Motors for the first time started filing PCT applications in 2008.

    ? Not much change in the domestic information technology (IT) sector: In the domestic IT sector, the

    number of published patent applications of Infosys and TCS increased in 2008. Infosys had 25

    published applications in 2008 as against 19 in 2007.

    Patent Application Filings at the IPO

    During the past six years, the number of patent applications filed with the IPO has increased threefold. This

    has been primarily due to multinational companies setting up and expanding their markets in India. Figure 1

    shows the trend of patent filings at the IPO over the past 13 years.

    The global economic recession, however, has slowed down the growth of patent application filings in India.

    During fiscal year 200809, 36,877 applications were filed in the country, which is just a 5% increase over

    35,218 filed in the previous fiscal year. This is significantly lower than the 20% growth observed in the past

    few years [4 and 5].

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     Patenting Landscape in India 2009 Figure 1: Patent Filing Trends at the IPO (199596 to 200809*)

    4000035000300002500020000

    150001000050000

    No. Patents FiledNo. of Patents Examined

    No. Patents GrantedNo. of Patents Rejected

    Source: Annual Reports of the Indian Patent Office *The fiscal year of the IPO ends on 31 March. Hence, the data for 200809 corresponds to the period 1 April 200831 March 2009

The IPO output has been increasing, as can be seen in the 20% growth in the number of granted patents.

    During 200809, the IPO awarded 18,230 patents as against the 15,262 granted in the previous fiscal year.

    However, the percentage of patent applications filed by domestic applicants has been declining as depicted

    in Figure 2. In 200708, a total of 6,296 applications (including direct, convention and PCT national phase) were filed by domestic applicants, which comprises about 18% of the total applications filed with the IPO.

    The corresponding percentage share of domestic applicants was 19% in 200607, 20% in 200506 and 23% in 200405.

    Figure 2: Patent Filing Trends of Domestic and Foreign Applicants

    35000

    30000

    25000

    20000

    15000

    10000

    5000

    0

    Foreign ApplicantsDomestic Applicants

    Source: Evalueserve Research

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     Patenting Landscape in India 2009 Figure 3 shows that a majority of the applications (approximately 81%) filed in 200708 were filed by taking priority from other countries, and the rest were filed directly. This indicates that most of the innovations (for

    which patents are being filed) are happening outside India. About 68% (23,891 applications) of the

    applications filed in 200708 were filed through the PCT route, and about 13% (4,497 applications) were

    filed using PCT. Clearly, PCT has emerged as a preferred mode of filing for foreign applicants.

    Figure 3: Breakdown of Patent Applications as per Priority Taken (200708)

    25000

    20000

    15000

    10000

    5000

    0

    ResidentNon-Resident

    OrdinaryConventionPCT

    Source: Annual Reports of the Indian Patent Office

    Figure 4 represents a domain-wise breakdown of the patent applications filed with the IPO during 200607. The most active industry was chemicals and drugs (combined 32%), followed by mechanical (19%) and

    computer/electronics (14%). Figure 5 shows that while there was a drop in the number of applications filed

    over 200608 in the electrical, computer/electronics and biotechnology industries, other industries including

    chemicals, drugs and mechanical experienced impressive growth in patent filings. It is also interesting to

    note that the ‗other fields (physics, communication, biochemistry, polymer science, biomedical, etc.) of

    technology grew 340% as shown in Figure 6.

    Figure 4: Domain-wise Breakdown of Patent Applications Filed with the IPO (200708)

    Other FieldsChemical21%19%DrugBiotechnology13%6%Food1%Computer/ ElectronicsElectrical14%7%Mechanical19%

    Source: Annual Reports of the Indian Patent Office

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     Patenting Landscape in India 2009

    Figure 5: Patent Application Filing Growth in Different Domains (200405 to 200708)

    8000

    7000

    6000

    5000

    4000

    3000

    2000

    1000

    0

    2004-052005-062006-072007-08

    Source: Annual Reports of the Indian Patent Office

Figure 6: Distribution of Applications under Other Fields’ (200708)

    Metallurgy/ Material MicrobiologyAgrochemicalScience2%2%Agriculture5%Civil1%Physics5%20%Textiles5%

    Biomedical12%CommunicationPolymer 18%ScienceBiochemistry13%17%

    Source: Annual Reports of the Indian Patent Office

    Top Filers at the IPO

    Evalueserve has identified the top patent filers at the IPO for the past four years by analysing 112,515

    patent applications published by the IPO during the period January 2005 to December 2008 [6].

    Table 1 lists the top 25 filers for the calendar years 2007 and 2008. The top patent filers have been selected

    on the basis of their published patent applications. Generally, most patent jurisdictions publish a patent

    application 18 months after its earliest effective filing date, after which it is considered to be in the public

    domain. Before this publication, the content and the very act of filing are considered proprietary information

    that is closely guarded by most filers.

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     Patenting Landscape in India 2009 The top 25 filers list includes 11 corporations from the electronics and telecom domain, and 8 from the

    pharmaceuticals and chemicals domain. It is interesting to note that Qualcomm has emerged as the top filer

    for both 2007 and 2008. During the period 200508, Qualcomm had 2,068 published applications at the IPO,

    which constitutes about 63% of its filing with the USPTO and 45% of its PCT filings during the same period.

    This shows how seriously Qualcomm protects its innovations in India, which is the world‘s fastest-growing

    mobile market, growing at the rate 18% annually [7].

    In addition, General Motors, Wockhardt, General Electric, Tata Group, LG Electronics, Research in Motion,

    3M, Alcatel-Lucent and Sony Ericsson have significantly improved their rankings. In contrast, the rankings of

    Philips, Bayer, Microsoft and AstraZeneca have dropped marginally.

    1 1 0 Qualcomm 982 637

    2 3 1 CSIR 796 527

    3 6 3 Samsung 544 392

    4 2 -2 Philips Electronics 880 347

    5 5 0 Thomson Licensing 621 334

    6 12 6 General Electric 385 317

    7 4 -3 Ericsson 666 301

    8 8 0 Nokia 518 272

    9 7 -2 Bayer 535 260

    10 35 25 General Motors 206 245

    11 13 2 Siemens 380 230

    12 16 4 Novartis 294 226

    13 9 -4 Microsoft 432 207

    14 14 0 Procter & Gamble 327 198

    15 11 -4 AstraZeneca 391 180

    16 20 4 BASF 278 151

    17 120 103 Wockhardt 44 151

    18 45 27 Tata Group 150 144

    19 33 14 Ranbaxy Laboratories 218 135

    20 22 2 Motorola 271 133

    21 18 -3 Sony 288 132

    22 19 -3 LG Electronics 281 131

    23 21 -2 Wyeth 272 125

    24 61 37 Alcatel-Lucent 88 124

    25 42 17 Sony Ericsson 159 118 The top 50 patent filers at the IPO for 2005 to 2008 have been listed in the Appendix (Table 2). Interestingly,

    only four Indian organisations the Council of Scientific and Industrial Research (CSIR), Ranbaxy

    Laboratories, Dr. Reddy‘s Laboratories and Tata Group—appear in the list of top 50 patent filers.

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     Patenting Landscape in India 2009

    Top Domestic Filers at the IPO

    The top 200 patent filers‘ list (for 200508) is dominated by foreign and multinational firms. Evalueserve found that only 20 of the top 200 filers, i.e., 10%, are pure-bred Indian organisations. Table 3 in the

    Appendix lists these 10 Indian organisations. Among these 20 organisations, 10 are pharmaceutical

    companies, 5 are research institutes and 1 is a government-owned enterprise.

    These 20 organisations are CSIR, Ranbaxy Laboratories, Dr. Reddy's Laboratories, Tata Group, Indian

    Institute of Technology, Bharat Heavy Electricals, Cadila, Steel Authority of India, Orchid Chemicals, Larsen

    & Toubro, Cipla, DRDO, TVS Group, Sun Pharmaceutical Industries, Aurobindo Pharma, Indian Council of

    Agricultural Research, ISRO, Panacea Biotec, Torrent Pharmaceuticals and Matrix Laboratories.

    It is encouraging to note that most of these organisations have improved their patenting intensity over the

    last year which is reflected from their improved scores in the revenue to patent-count ratio (hereinafter

    referred to as patenting intensity ratio). Lower the ratio for a company, better is the investment made by the

    corporation in protecting its intellectual capital using patents.

    Filing-Trend Analysis: Domestic Pharmaceutical Companies

    Table 4 in the Appendix provides the patent-filing trends (by revenue) of the top 10 Indian pharmaceutical

    companies, namely, Ranbaxy Laboratories, Dr. Reddy's Laboratories, Cadila, Orchid Chemicals, Cipla, Sun

    Pharmaceutical Industries, Aurobindo Pharma, Panacea Biotec, Torrent Pharmaceuticals and Matrix

    Laboratories.

    As expected, all these companies are among the top 200 filers with the IPO. Table 4 provides interesting

    insights into the patenting intensity ratio for IPO filings for four years. A company‘s lower patenting intensity

    ratio than that of its peers implies that the inventive activity exhibited by the company is higher than that of

    its peers. The ratio is approximately 9 for the two largest pharmaceutical companies, but is significantly low

    (approximately 4.1) for Orchid Chemicals & Pharmaceuticals. This implies that during the four-year period,

    Orchid Chemicals & Pharmaceuticals filed more intensely at the IPO than its peers, including some with

    larger revenues. The data on Cipla shows that in spite of it being the third-largest pharmaceutical company

    by revenue, it lags significantly behind its peers in terms of inventive activity.

    Upon analysing Table 4, the following general trends are observed:

    ? Pharmaceutical companies are more active in filing applications in jurisdictions outside India as

    compared with organisations in other industries because protection of their products and processes in

    these jurisdictions is important for their business.

    ? The patenting intensity ratio for IPO filings is relatively healthy for almost all the top pharmaceutical

    companies, with an average ratio of 9.8 in 2005-08(the lower the ratio, the better is the patent-filing rate

    per US dollar of revenue), which has improved over 200507 (10.8). This indicates that pharmaceutical

    companies are actively investing in patenting their innovations.

    ? The patenting intensity ratio for global filings (i.e., the ratio of revenues to the sum of patent publications

    in the IPO, the USPTO, the EPO and the PCT) provides an indication of the patenting activity worldwide.

    Aurobindo Pharma and Sun Pharma, with a ratio of 7.4 and 7.0, respectively, exhibit the lowest patent

    activity among their peer group. In contrast, Orchid, Ranbaxy, Cadila and Panacea Biotec score high

    with ratios between 2.4 and 3.1.

    ? A comparison of the patenting intensity ratio of 200508 with that of 200507 reveals interesting trends.

    The ratio for IPO filings and global filings has improved for all companies except Sun Pharmaceuticals.

    In addition, the patenting intensity for Ranbaxy Laboratories has improved for IPO filings, and

    deteriorated for global filings. In contrast, patenting intensity for Dr. Reddy‘s Laboratories has improved

    for global filings, and deteriorated for IPO filings.

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     Patenting Landscape in India 2009

    Filing-Trend Analysis: Domestic IT Companies

    Similar to Evalueserve‘s analysis for 2005 to 2007 [1], no domestic information technology (IT) or software

    company found a place in the top 200 rankings of published patent applications during 200508. In contrast,

    foreign IT majors such as Microsoft, IBM and Oracle have stepped up their patent filings in India. Microsoft

    filed 1,115 published patent applications, IBM 452 and Oracle 140 (at the IPO) between January 2005 and

    December 2008.

    One of the reasons for low patenting activity among domestic IT companies could be that many such firms

    are predominantly serving markets outside India, and their clients usually own the intellectual property they

    produce. Another reason could be the lack of clarity on the patentability of software inventions in India.

    According to section 3(k) of the Indian Patent Act 1970, a computer program per se or an algorithm is

    excluded from the patentable subject matter. However, according to the Manual of Patent Practice and

    Procedure [8], a software invention may be patentable in India under the following circumstances:

    ? Invention having a technical application and solving a technical problem

    ? Process that is under the control of a software program or hardware

    ? A novel solution to a problem that relates to the internal operations of a computer ? Application of a mathematical method or an algorithm

    Table 5 in the Appendix ranks (by cumulative revenues over 200508) the top eight IT and IT-enabled

    services (ITES) firms in India which have substantial Indian ownership and are all listed on the Indian public

    bourses. (Included in this table are their revenues and patent filing trends.) The data shows that except for

    Infosys and Tata Consultancy Services, the companies have not indulged in patent-filing activity, and that

    the filing intensity exhibited by these firms is not commensurate with their respective revenues and revenue

    growth rates. Interestingly, only Infosys has been able to improve its patenting intensity ratio for both IPO

    filings (from 264 to 177) and global filings (142 to 81) as compared with the figures for 200507.

    All the companies listed in Table 5 generate a major portion of their revenues from outside India; typically

    from more mature markets such as the United States and Western Europe. However, surprisingly, even the

    companies‘ USPTO and PCT filing trends show marginal to no patenting activity, except for Infosys.

    The following are some explanations that can explain this trend:

    ? The Indian firms listed in Table 5 lack a cohesive strategy to protect their intellectual property. ? The services and products delivered by these firms eventually become the intellectually property of their

    clients.

    ? There is a lack of patentable innovation at these firms (as gauged by standards of novelty, non-

    obviousness and industrial applicability).

    ? These firms choose to protect their intellectually property through trade secrets rather than through

    patents.

    ? Most of the innovations at these firms are not patentable subject matter according to the Indian Patent

    Law, the European Patent Law, and similar laws in other jurisdictions.

    ? Since these patent applications undergo substantive examination at the IPO, they tend to be costly,

    especially for SMEs. The cost of filing a patent application (with 20 claims) at the IPO is about INR

    12,000 (USD 284), and that of substantive examination is about INR 10,000 (USD 236). Once the patent

    application is granted, its maintenance fee is INR 192,000 (USD 4,535) and is valid for a period of 20

    years).

    ? Often the IPO takes as many as five years to grant the corresponding patents, which is a long time in

    the IT and ITES industries (as compared to biotech and pharmaceutical industries). As depicted in Table 5, the average patenting intensity ratio for IPO filings is about 3,661, which is worse

    than the score (1,318) in the previous year. Thus, as compared with the pharmaceutical sector, the

    patenting activity of these IT firms is 374 times lesser (on a per US dollar revenue basis).

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     Patenting Landscape in India 2009

    Filing-Trend Analysis: Domestic Automobile Companies

    The domestic automobile industry has experienced a significant boom in innovations and enforcement of

    intellectual property in recent years. The growth could be mainly due to two factors. The first factor is the

    creation of the world‘s cheapest car, Nano, that compelled Tata Motors to innovate from scratch, and file as

    many as 35 patent applications with the IPO. The second factor for the boom could be the recent patent

    feud between Bajaj Auto and TVS Motors may have led to increased awareness about IP rights protection

    among auto companies. In a market where more than eight million two-wheelers are sold every year, and

    where the automobile market has been growing at an annual rate of 15% [9], Bajaj Auto successfully moved

    the Indian courts to block the TVS 125 cc motorcycle from being manufactured and sold by demonstrating

    that it infringed Bajaj‘s patent [10].

    Table 6 in the Appendix details the patent-filing trends of the top four Indian automobile companies, namely,

    TVS Motors, Bajaj Auto, Tata Motors and Mahindra and Mahindra, ranked according to their patenting

    intensity at the IPO.

    The following are some insights that can be gleaned from the data in Table 6:

    ? Among these auto companies, TVS Motors has the maximum number of patent applications published

    by the IPO (153), followed by Tata Motors (150), Bajaj Auto (53), and Mahindra and Mahindra (41). ? Bajaj Auto is the top filer in terms of filing patent applications outside India (the US, EP and the PCT).

    TVS Motors and Tata Motors started filing applications in 2008.

    ? All of these companies, except Mahindra and Mahindra, have improved their patenting intensity ratio.

    Tata Nano has given a boost to Tata Motors‘ patent filing strategy. Bajaj Auto and TVS Motors may have

    also increased their patent filings post the lawsuit. The patenting intensity ratio for Mahindra and

    Mahindra for both IPO and global filings has lowered as compared with the ratio for previous years. ? The average patenting intensity ratio for IPO filings is 157.8, which is considerably better than its score

    last year (191). This indicates that auto majors‘ patenting activity at the IPO is 23 times that of IT

    companies, but is approximately 16 lower than that of pharmaceutical companies. IP Infrastructure and Enforcement Developments

    On the administrative side, the IPO has modernised its patent offices and upgraded its infrastructure. The

    first phase of modernisation worth Rs 1.53 billion has been completed and the second phase with a budget

    of Rs 3 billion has been approved by the Government of India [11]. In July 2007, the IPO started an online

    facility for filing patent applications. The process of digitisation of patent records and development of the

    Indian Patent Database is underway. The WIPO recently awarded the status of International Searching

    Authority (ISA) and International Preliminary Examining Authority (IPEA) under PCT to the IPO. The Indian

    government has also established National Institute for Intellectual Property Management (NIIPM) for

    conducting training/awareness programmes on Intellectual Property Rights.

    There is an increase in the number of applicants approaching the courts to enforce their patents or

    challenging the validity of patents, or even challenging the decisions of the IPO. Reports suggest that, in

    2008, a number of patent-related cases were pending in various Indian courts; more than 175 cases were

    pending in the Delhi High Court [12]. Two cases worth mentioning here are TVS Motors vs. Bajaj Auto [10]

    and Roche vs. Cipla [13]. While the first one is a conflict between two domestic corporations in the auto

    sector, the second one includes a multinational corporation and domestic manufacturer.

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