Intellectual Property Rights Regime and Creation of Innovation Based Enterprises in India

In recent years, the Indian government has undertaken significant modifications in theIntellectual Property (IP) regime of the country. Some of the key elements of the modifiedpolicy having major implications for several sectors in the economy, especially thepharmaceutical, chemical, biotechnology and information technology related sectors. Giventhe changes in the IP regime, the competitive landscape of many of these sectors isundergoing a fundamental change in India. This has led to a realignment of businessstrategies by firms in these sectors in order to face the challenges thrown up by the changingregime, as companies which enjoyed protection under Indian IP laws will have to adapt toIndia's accession to WTO (TRIPS) norms in 2005. At the same time, globalization of theIndian economy is opening up new opportunities for firms in the country and they will needto build strategies to exploit the emerging opportunities. IP regimes in a country play an important role in fostering the direction and the quality ofentrepreneurial innovation across all sectors of the economy. For example, an IP law thatfosters incremental innovation can allow small businesses to benefit by affording protectionto small incremental improvements on existing intellectual property that can in turn be usedby owners of the IP to move up the technological value chain. In addition, the IPR frameworkdirectly affects the ability of entrepreneurs to take advantage of commercial opportunities thatrequire the existence of a suitable IP regime before commercial/service agreements can bereached with potential clients. Such market creating potential of the IPR framework can alsoimpinge on the ability of small entrepreneurs to enter into IP intensive activities assubcontractors and licensees. While India has made its IP regime TRIPS compatible, it is not entirely clear if the newregime would facilitate the participation of Indian companies in the knowledge intensiveglobal production and R&D networks and if it is appropriate for an economy that is expectedto grow rapidly enlarging the demand for a variety of products and services. This paperexplores these issues in the context of IT-electronics and pharmaceuticals- biotechnologysectors. It is built on the premise that ceteris paribus participation of Indian firms in IPcreation and participation in knowledge intensive activities is desirable. If changes in technology and global industrial structure are creating opportunities for such participation, IPpolicies should positively discriminate in favour of such participation. Similarly, if thedomestic market for knowledge intensive activities is growing rapidly, policy makers shouldexplore if tinkering with IP policies can facilitate the participation of local firms in thismarket. The paper argues that such possibilities exist and some pro-active changes in IPpolicies are desirable. The rest of the paper is divided into four sections. Section 2 summarizes the emergingopportunities in the pharmaceutical-biotech sector and explores areas where Indian firms canpotentially participate. The next section undertakes a similar analysis for the IT-electronicssector. Section 4 reviews the existing IPR laws to evaluate if these laws can potentiallyconstrain the exploitation of the emerging opportunities in these sectors by Indian firms. Thefinal section provides some concluding remarks.