INTELLECTUAL PROPERTY: India: Sleeping IP Giant

	The number of patents filed from India went up to 1,216 in FY 2004 against a figure of 848 the year before
	Only 9% of total patents filed out of India are from Indian companies. The rest are from MNC development centers
	The cost of getting patents filed and granted-about Rs 15 lakhs-is a big deterrent to Indian companies
	Patenting costs expected to go down, but not many Indian companies are focusing on patents

	MNC Scorecard: Way Ahead
	Indian Tally: Lagging Behind

Learning is not compulsory... neither is survival", said quality guru, W.
Edwards Deming. Intellectual Property, which is the result of learning getting
translated into a process or product, isn't really in the Indian mentality.
Hasn't ever been. For good or for worse, it looks as if that is now beginning
to change just a little bit. Since last year, Dataquest has been estimating the
number of patents filed for and granted to IT companies based out of the
country. The list we've managed to put together isn't complete, but
indicative and telling.

The trend-there are increasingly more patents being filed out of India, but
most of them come out of multinational development centers in the country. For
patents filed during FY 2003 and FY 2004, the number stood at 2,064. In fiscal
2003 around 848 patents were filed, but during the fiscal 2004, this number went
up to 1,216, as per the data we were able to get together. However, most of the
patents were being filed by MNC development centers. Of the, 1,216 patents filed
last year, 1,108 were filed by MNC development centers, while Indian companies
account for just about 104. Similarly, for among 336 patents granted, for which
data is available, 327 were granted to MNC development centers.

The good news is that Indian companies are beginning to wake up to the idea
of protecting their intellectual property and its advantages. From 80 patents
filed that we identified in fiscal 2003, the number has gone up to 108, while
actual patents granted have gone up from five to nine.

Not surprisingly, most of these have come from areas where Indian technology
professionals have an edge.

Advantage India

For the large part, much of the work done by the MNCs concentrates on the
strength areas of their employee pool in India. This means, for one, Java.

Sun Microsystems does a whole lot of Java related development and additions
from its India center. India also contributes to its Solaris testing and Gnome
developments. In fact, according to Sun, there is not one element of Sun's
products that is not touched by India.

India contribution to Intel's development agenda is also pretty high. With
around 1,500 people in India, the development center contributes to the MNC in
four major areas—switches and routers, Enterprise Products Group (EPG),
E-business Group (EBG) and the next generation of mobile processors from India.
The story is the same with Oracle, which states that everything that Oracle is
involved in; India is involved in it too-from grid computing, to their
database to their Linux initiatives.

Areas of dominant work among Indian companies also differed from company to
company. For example, Sasken's work revolved around broadband DSL, 3G and 4G
wireless along with MPEG. Mindtree, who filed their first patent this year, did
it in the area of digital signal processing.

The year saw a bit more activity on the IP front, with Indian companies and
organizations like Mindtree entering the list for the first time. More
encouragingly, most of these organizations plan to stick to their IP policies.
Mindtree itself has a target of five patent filings for the fiscal 2005.

Patent Barriers

Yet there are several major issues which hold back large scale awakening to
IP among the Indian IT fraternity.

One of the major ones is cost. The biggest hurdle for patent filing in fiscal
2004 was the perceived cost factor. Patents don't come cheap, especially the
international ones. An average patent costs over $35,000 or Rs 15.5 lakh through
its entire lifecycle—which includes everything from patent drafting and filing
to follow ups, to tracking and keeping the patent active after it is granted.
While that is not a particularly huge outflow, companies seem reluctant to spend
it. In addition, it could take up to five years before a patent is granted in a
long drawn out, rigid, bureaucratic process, designed to discourage even the
zealous and sometimes, even make the technology applied for, obsolete.

Secondly, there continues to be a general lack of awareness on what exactly
patents can end up doing for the company concerned. This includes an ignorance
of what makes for a patentable idea and the belief that patents do not offer as
much immunity as is made out. In addition, many companies believe that the money
spent on obtaining patents is better spent on marketing the service or product
better. The argument being that the building of a brand idea can go much further
than the mere grant of a patent in beating the competition. Many product
companies therefore, end up going for plain copyrighting even when a patent is
possible.

Moreover, by ignoring patents, companies miss out on a very important
advantage brought in by patents apart from the strong initial entry barrier to
potential competitors that it creates-a potential source of revenue. For
example, Ittiam Systems, which filed for five patents last year and for 13 in
2003-04, expects its royalty revenues from IP to be 25% of the total revenues by
the time they reach IPO maturity by around 2007. That should constitute a good
number, considering that their revenues for fiscal 2004 were Rs 21 crore and
there is a 30% YoY growth annually on the same.

Sasken Communications obtains about 10% of its total revenues from IP
royalties now, and says royalty revenues will only rise in the near future. G
Venkatesh who heads the company's Patents Division also says that IP revenues
come with 90% profit margins.

What is scary is that a lot of other big Indian companies have still not
woken up. Companies like i-flex and Subex have not yet initiated any processes
for patent filing so far. Subash Menon, CEO of Subex, says that much of their
products aren't patentable and that their domain expertise anyway gives them
quite a comfortable head start. CEO (international operations) of i-flex, R
Ravishankar says the company missed out on filing patents so far, but plans to
start a patent initiative in fiscal 2005. Contrast this apparent placidness of
Indian companies to the idea of patents of MNCs like Phillips, which has so far
filed for more than 1,200 Invention Disclosures (ID) from its Indian center.

On the services side, without an 'IP aware sense', Indian service
companies potentially face a danger that could hit the bottom line much more
strongly—infringement on other people's IP. Considering that there are
around 1 million IT related patents in the US alone, some of them covering the
broadest of aspects like the double click and that service companies do sign
agreements with customers accepting liability for any IP that is infringed upon
as part of the service, its about time they developed it.

Unfortunately though, fiscal 2004 carries with it the strong suggestion that
for the next two years at least, patent related IP will be restricted to very
few companies in India and most of them will be repeat filers that is, companies
which already have experience in filing or have been granted patents. Patent
filing costs though are expected to go down in the near future as US law firms
handling patents are increasingly outsourcing the work to Indian lawyers. That
along with great IP awareness might just give a spurt to patent related IP
activity from Indian companies. Ultimately, though, to borrow from Dickens,
whether we have everything or nothing before us, will depend on a major change
in the mindsets of Indian IT companies.

Sathya Mithra Ashok in Bangalor