The AWS Report on IP in India: The Good, the Bad and the Ugly

The overwhelming response to the previous post on the allegations of corruption in the IPO has led SpicyIP to also undertake a study into the AWS Report that the Mint had referred to in its investigation.

Austria Wirtschaftsservice inquired on behalf of the Austrian Ministry of Commerce and Labour between 11.02.2008 and 29.02.2008 with several official IPR institutions and private IPR service providers in India about the current national IPR situation in regard to foreign entities. The supreme objective was acquiring transparency in service pricing and increasing competition amongst service providers; thus facilitating and supporting IPR protection for Austrian businesses.

Overview of the Indian IP Scene

The Report, has essentially intended to make a study on the Intellectual Property Regime in India. Therefore, much of its focus is toward the study of the regimen here in India- the institutions, the policy, the legislation as well as the Courts. Interviewing several persons from law firms, the Patent Offices and the Government, AWS in its report had hoped to gauge the true scenario of Intellectual Property as it exists in India today.

Findings of the AWS Report: The Good

The AWS Report has chronicled the enforcement of intellectual property rights through police & court. Recounting a historical background to the same, the AWS Report has stated that the legacy left by the British, has culminated into a respected and effective enforcement mechanism.

Further as a part of the Executive summary, (though not mentioned anywhere else in the Report), AWS has also noted that firms dealing with Intellectual Property offer services not only in India, but also Pakistan and Bangladesh: indicating an expanding base of expertise.

Impressively, IP enforcement was found to be carried out almost entirely in trademark law. Further, the AWS Report has found that “The backlog of unexamined applications of approximately 5 lakh cases brought down to zero. Renewal of Trademarks certificates being done instantaneously in clear cases and new applications are examined within one week.” This coupled with increased filing rates of Trademarks is one of the silver linings in India’s IP cloud.

In the field of design, apart from noting that the Utility Model Law is under the process of being drafted, the Report also found increasing domestic design registration (something missing in the patent arena).

Findings of the AWS Report: The Bad

1. Areas of worry, keeping in mind the emerging IP “Dragon” were that almost 90% foreign patent applications compared to only 40% in China, 2007, the lack of more domestic applications as well as acceptance of the IPR system in India was found to be problematic. This was linked to the fact that Indian industry as of now focuses far more on the aspect of production rather than R&D.

Further, even though considerably more affordable in comparison to the European rates, the IPR application rates were found to be extremely expensive compared to Chinese fees based on PPP. Especially where the foreign rates of filing are sky rocketing, this could be a problem and perhaps lead to a shift of a patent filing base.

“A reason for the above situation can be found in the lack of public incentives for domestic enterprises in creating a strong national IPR portfolio. There are neither national nor regional subsidies for Indian companies to apply for formal IPR protection. The Chinese government creates with its subsidies on all levels of governance an enormous advantage for domestic over foreign applicants, reducing the overall expenses to roughly a tenth of what incurs to a foreign company. There exists nevertheless the CSIR (counsel of scientific and industrial research), which is an institution similar to AWS/FGG. It is the largest Indian patent filer in and outside of the country and files IPR mainly for universities. Private companies and individual inventors can also to a certain extent obtain support from the NDRC (National Development and Research Center) if they don’t have the financial means to file IPR themselves.”

2. Keeping in mind the recent rise of IP in metropolitan areas, an examination as to backlogs was made in the Patent Offices. While historically, the Calcutta PO and their High Court (in terms of injunctions etc.) were found to be extremely efficient, the Report has found that there is almost a 2 year patent application backlog in Delhi PO- which could be attributed to the fact that there are a large number of vacancies in the Patent Offices.

This large gaping hole of vacancies and increasing filing rates, has forced the Patent Office to recruit many new examiners were taken in during the recent years- several of whom have not yet acquired enough experience and “therefore may respond with incoherent and inconsistent objections to an application.” This has led to increasing workload since despite the recruitment of new Patent Officers, the Report claims that “first substantive examinations and first objections are carried out by senior examiners, and only after the first rectification will senior examiners (assistant controller or higher) take over from the juniors. The wave of newly staffed examiners might worsen this situation.”

Findings of the AWS Report: The Ugly

1. Unethical Alliances?

Stating that the patent backlog is great, the Report however acknowledges that in cases where a patent official is well known to the patent agent, the time for the grant of patent may not be as much.

Similar to what was stated in the Mint report by SpicyIP, the AWS Report also has found “Wide spread collaboration” between patent attorneys and IP officials. The Report suggests a “clear dependency” by legal representatives of patent drafting and the official examiners on patent searches that previously carried out in other national IPR jurisdictions.

2. Filing charges unclear?

Inquiring into the quantum of official fees and fees that are charged by private service providers, there was found to be a difficulty in obtaining precise charges for each service offered. Particularly since the procedures have been standardized by the law, this was found to be very disconcerting.

Especially for private service providers, the fees were found to be paid not as a lump sum but at every step of IPR registration- which the Report found clearly to avoid transparency and further making it very difficult for an enterprise seeking to file any application to estimate costs. Upon direct inquiry the law firms provided quite different pricing that ranged for patents around EUR 600-3500; trademarks EUR 200-1200; designs EUR 500-1000; copyright EUR 300-500.

While acknowledging that a legal service provider rarely offer a fixed price for their services, the lack of precise cost proposals and incomparable services by firms (vis-à-vis other areas of law as well as other firms), the Indian IP firms were reported to create perceptions of “inexistent transparency and very vague pricing.”

[The report has also taken into account that there are additional unforeseen costs under Indian patent law due to pre-grant oppositions, and cannot usually be calculated beforehand.]

3. The tale of two patents

Reported by SpicyIP, the AWS report also chronicles the problem of “Double patent granting” and blames this correctly on the failure of a cross verification system.

SpicyIP’s Take on the Report

The Report carried out by AWS was to expressly examine the IP Environment (existing infrastructure, policy and the statutory requirements) for a informed entrance of Small and Medium Enterprises from Austria. Interestingly, while initially several people (including this blogger) thought that the report was the basis of the Mint Investigation, both Mr. Unni from the Mint as well as our own study of the report has made it apparent that the Mint has by way of their investigation, come up with most of the hard hitting findings.

However, the significance of the report apart from some of its findings as to the working of the IP Regimen in India also raises valid questions as to the shying away of foreign entrants from the Indian scene due to alleged “collaborations” and lack of “transparency”, as well as the backlog in several cases.

SpicyIP once again hopes that a greater level of transparency be ensured as both these Reports (the Mint and the AWS Report) have brought focus to a larger problem that may exist in India’s IP Regime.