Innovation Others

Is ‘Utility Model’ worth considering?


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[*Long post]

Mr. Zakir Thomas, former Registrar of Copyrights, penned an article in Deccan Herald criticizing ‘Utility Model’ (“UM”) which was, in fact, proposed by the recently released Draft National Intellectual Property Policy. According to him, the draft policy believes that the Micro, Small and Medium Enterprises (MSME) sector has a large number of inventors having potential IP who can benefit only by introduction of a new law on UMs. This claim sounds appealing, but is not supported by any scholarly literature establishing that the lack of UMs deters minor innovations in this sector. 

The sector requires higher order technologies protected by patents. The minor innovations, referred to as jugaad (basic innovation) is the mainstay of the non formal sector. Such innovations widely spread and are improved upon. The grant of monopoly rights will increase transaction costs and restrict the spread of such innovations. The IPRs promote investment in technologies by restricting access to them. In the low investment minor innovation sector, granting of property rights could be counterproductive to the objective of promoting the limited innovations in the MSME sector.

Jugaad-type innovations which we find across the country are good examples of open innovation. It is an open source way of dissemination of knowledge which is continuously refined and improved upon by the masses. In effect, this is an example of crowd sourcing of innovations. It is essentially an alternative innovation model that thrives on openness and sharing. It is India’s own innovation system developed and existing in this country overtime, without property rights. 

It is like ayurveda which developed over thousands of years without property right protection. Granting property rights to build fences around these innovations could only hamper this open system of technology and knowledge dissemination. It may lead to expensive litigations and may impede the innovations happening in the rural and informal sector. We need to be extremely cautious in intervening in this sector with IP regimes.” 

Objective of this post

I disagree with any ‘outright’ rejection of UMs. My argument is, in fact, more nuanced. I shall argue that the model is worth examining and therefore, outright rejection is not apposite. A sui generis UM model may work wonders. In the light of arguments set out in this post, I argue for a creative, prescient ‘due diligence’ on the feasibility of a sui generis UM.

 What is a ‘Utility Model’?

Broadly speaking, a UM is an exclusive right granted for an invention, which allows the right holder to prevent others from commercially using the protected invention, without his authorization, for a limited period of time. In its basic definition, which may vary from one country (where such protection is available) to another, a UM is similar to a patent. In fact, UMs are sometimes referred to as “petty patents” or “innovation patents.” The requirements for acquiring a UM are less stringent than for patents. While the requirement of “novelty” is always to be met, “inventive step” or “non-obviousness” may be much lower or absent altogether.  The term of protection for UMs is shorter than for patents and varies from country to country.

                         Arguments in favour of consideration of Utility Model

1. Incentivising grassroot innovations

The policy of incentivizing grassroot innovations has to be appreciated at a broader level viz., from the perspective of inclusive growth. “Bottom-top” approach rather than “Top-Bottom” approach is the driving principle of inclusive growth. In this regard, incentivizing grassroot innovations is highly imperative.

Prof. Shamnad Basheer made some prescient observations which are pertinent here (28 May 2010):

“…..the Indian legal regime that is meant to engender innovation continues to mainly favour only “formal” innovations emanating from the rich. This is despite the fact that almost 90% of India’s economy qualifies as “informal”! For one, the existing patent registration process is beset with considerable uncertainties and costs (including steep attorney fees), making it well-nigh impossible for a number of our informal creative minds to participate in India’s IP regime. …….

Not too surprising, given that India hiked up its patentability threshold considerably, owing to adverse perceptions against pharmaceutical patents. While this is laudable from the point of view of preventing pharmaceutical ever-greening and keeping drug costs down, it is a double edged sword, in that it impacts the patentability of a great number of grassroots innovations, many of which are “incremental” in nature. Illustratively, consider the example of the inventor father son duo, the Appachans’, whose tree-climbing device was so attractive that even botanists from the US were interested. Unfortunately, both father and son died within a week of each other in 2008. While the father held the “parent” patent over this device, the son obtained a patent over a slight improvement. The son’s improvement is generally thought to be a “weak” patent, which may perhaps explain the reluctance of the NIF to take on the Kerala state government that has been violating this patent with impunity.

Owing to the rather severe standards that India’s patents regime now represents (at least on paper), a large number of grass-root innovation may find it difficult to make the cut, leading to a wide “patent” divide. Indeed, if “access” to patented goods is the key issue today, the problem of access to the patent system itself will be the issue of tomorrow!”

According to Mr. Zakir Thomas, ‘jugaad type innovations’ thrive on openness and sharing. Assuming my agreement to the aforesaid argument, I would like to draw your attention to the “tree-climbing device” (mentioned above by Prof. Shamnad). This innovation essentially changed the “coconut-climbing” scene in Kerala. As I can gather, the device is very much in demand. If there was a vibrant UM, the innovators of the device (if they were alive) could have enjoyed some ‘real’ tangible benefits. I doubt how many Keralites, in fact, know about those innovators. Greater benefits and recognition can, in fact, incentivize more innovations at the grass root level. The idea of inclusive growth encompasses ‘incorporating’ grassroot innovators (say, informal innovators) into the formal framework. There is no reason why they should not be rewarded for their innovative skills. If a model can, in fact, enhance their economic well-being with commensurate benefits for the society, it is worth exploring.

2. UM and start-ups

As I can gather from various policy documents of both Centre and States (including the 2015 Budget), the government is quite serious about incentivizing start-ups. According to the Economic Survey 2014-15, India has emerged as the world’s fourth largest hub for start-ups with over 3,100 of them, driven by “hyper growth” in technology and software products in the country. UM can, in fact, be a driving force for start-ups. It can even attract venture capital as the UM tries to bring down the inherent risks of an innovation which is on a ‘weak wicket’. In the absence of a UM, an invention which does not meet the stringent criteria of Indian Patents Act, 1970, will remain unprotected and thereby attracts high risk perception. Therefore, a ‘start-up friendly’ ecosystem necessary entails some kind of a ‘weak’ protection for their innovations (say, a sui generis UM).

3. Significance of incremental innovations in pharmaceutical industry

Pharmaceutical innovation, as in innovation in other fields, has both radical and incremental dimensions. While radical pharmaceutical innovation involves the often groundbreaking discovery of new molecules/drug classes, incremental innovation involves modification and improvement of existing drugs resulting in a greater number of drugs within a given drug class.

Breakthrough drugs often exhibit side-effects and other limitations that lead to their replacement by more effective, incrementally improved versions. Drugs based on incremental advances demonstrate improvement over existing drugs in one or more of the following ways: (1) evidence of increased effectiveness in the diagnosis, treatment or preventing of a disease; (2) elimination or substantial reduction of a treatment-limiting drug reaction; (3) documented enhancement of patient compliance ; or (4) evidence of safety and effectiveness for a new patient sub-population. These improvements enhance the quality of healthcare. Incremental innovations have to be incentivised for improving public health and providing better medicines. Considering its significance in healthcare, it does not stand logic to incentivize only breakthrough innovations.

The RA Mashelkar-led technical experts committee (TEC) stressed on the importance of using the patent system to incentivise incremental innovation. The Committee observed that the process of innovation is continuous and progressive leading to an ever extending chain of knowledge. Innovative incremental improvements based on existing knowledge and existing products is a ‘norm’ rather than an ‘exception’ in the process of innovation.

Note that the case of ever-greening is in sharp contrast with that of incremental innovation. Changes made in this regard neither represent medical advancements nor bring additional therapeutic benefits. They are made for the sole purpose of extending the patent protection. 

Considering the stringent criteria of Patents Act, 1970, most incremental innovations will remain unprotected. As they are necessary innovations, a lesser protection in the form of a sui generis UM may be apposite. The aforesaid argument applies mutatis mutandis to ‘Traditional Knowledge’ as well.

The need for a sui generis UM…

As Prof. Shamnad Basheer observed (28 May 2010): ”….there are variations amongst the various prevailing models and India must work towards a model that caters to the India milieu…..It must be borne in mind that utility model systems in other countries have not always been run-away successes.

But we could at least begin to think along these lines and devise a system that would most appropriately address the Indian milieu. Once grassroots and other informal innovators become familiar with a utility model like system, it may perhaps make it easier for them to gain access to the tougher patent system. In other words, the utility model system has the potential to serve as a “stepping stone” of sorts for such informal innovators.”

I reckon that Prof. Basheer is reconsidering his views. In this recent report, he observed as follows (26 December 2014): “Prior to adopting a utility model regime, one needs to undertake a detailed cost benefit analysis. For such a regime comes with its own share of costs.

More importantly, if such a regime is to cater to grassroots innovation and the informal economy, then we need to understand this economy better. What drives creativity here? Is it the lure of monetary incentives? What of socio-cultural norms of sharing and collaboration? Would this be disrupted by the individual inventor-centric model imposed by the new regime,”

Even then, his observations in 2010 still remain relevant. Therefore, I advocate a more nuanced approach: Let us not incline towards outright rejection of this model. The model may have worked at some places. It may not have worked at some places. The right question that we should ask ourselves is: Is UM conducive in the Indian context? Let us analyse the model dispassionately. If UM model with built-in safeguards has the possibility of working wonders, we should take the risk of trying it out. An effective UM may, in fact, catalyse inclusive growth. The right approach is, therefore, to conduct a creative, prescient ‘due diligence’ on the feasibility of a sui generis UM.

Mathews P. George

Mathews P. George

Mathews is a graduate of National University of Juridical Sciences, Kolkata. His interest in intellectual property was kindled when he bagged the second position in his very second year in the prestigious Nani Palkhiwala Essay Competition on Intellectual Property. Winner of almost a dozen essay competitions in his law school days, he was involved in various research and policy initiatives relating to intellectual property. His stint as a student of Prof. Shamnad Basheer further accentuated his interest in intellectual property.

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