I spent a few days this week shuttling between Bangalore and Delhi, and am writing this reflection on the very important topic of intellectual property as I saw it being discussed in the hubs of entrepreneurship and policymaking.
In Bangalore, there was the entrepreneur’s lament, mine and that of others, voiced in a conference on IP at IIM Bangalore. My own science-centric ventures, for example, a diabetes monitoring company with a novel measurement technology, Janacare, or a machine-learning company, Aspiring Minds, dedicated to democratizing the market for talent through scientific assessments, realized quite early on that our intellectual property would be valued much more in the developed world, the US, Europe, Japan or Singapore. In these locations, there are more buyers used to valuing IP and bidding for it. As a result, there is what economists refer to as ‘price discovery’ of the underlying asset value. That is, the IP is valued more fairly. The developing world suffers from having too few buyers for intellectual property, so sellers of IP receive little for their efforts, not being able to run an implicit or explicit auction for their asset.
In turn, this means that entrepreneurs either under-invest in IP by steering their ventures towards more tangible assets – these might be things more easily ‘counted’ for want of a better term such as number of customers (or ‘eyeballs’ on a site, or users of a social media game) – or decamp with their ventures for the developed world. The fewer entrepreneurs in turn results in fewer buyers flocking to such locations, and the pernicious situation persists.
India’s biotech leader, Kiran Mazumdar-Shaw, reminded us not only of the value of IP in her own experiences, but noted that she had sold her enzymes business many years ago to a global buyer, Novozymes (if I recall correctly). So, IP is valuable, and is valued, but not yet sufficiently in India.
In Delhi, among the policymakers and bureaucrats, I appreciated another facet of the issue. There is indeed recognition on paper of the value of IP; thankfully we have some amazing scientists who are now making relevant policies in Delhi.
But some of our bureaucrats perhaps under-estimate what it will take to thicken the institutional ‘soup’ – the interlocking mesh of specialists – needed to value IP. This soup is comprised of several types of intermediaries, for example, patent examiners, lawyers specializing in IP in a variety of sectors (life sciences, computational sciences, hardware design, social media, etcetera), transaction platforms to which buyers and sellers of IP can gravitate, patent aggregators (people who buy patents), and courts and arbitration agencies specializing in adjudication of IP disputes, just to get started.
Now, take one of these specialists, patent examiners. Can we not just graduate several hundred more, maybe a few thousands more? Of course, it will help clear backlogs in principle – entrepreneurs lament the ‘speed’ at which patents in India are sometimes issued today – but I don’t think it’s that simple. These examiners have to develop some sophistication about their art. This takes time. If the patent office is creative, it might consider cooperating with the private sector to help develop this capability, perhaps through industry associations and also seek to learn from patent offices globally that are further ahead in this game. Finally, the effectiveness of the patents the examiners issue depends very much on the existence of the rest of the IP-soup I described above.
There is also the issue of de jure versus de facto rules. For example, there might be adjudication mechanisms in theory, but, in practice, unless patent-related disputes are resolved (in court or via arbitration) within a defined (short) time period, they are ineffective.
I haven’t even gotten into the issue of appropriate legislation to support the IP-soup of intermediaries. Passing laws takes time, I need not remind you. For example, what are laws and customs regarding patent pooling, the grouping together of patents to support innovative activity? Should specific considerations be offered to smaller entities to encourage them to patent locally? (In 2011, under the “America Invents Act,” so-called ‘micro-entities’ were given concessions in patent-filing fees, as an example.) How shall public IP be used and consumed by individual entrepreneurs? Many, if not most, significant innovations in the US today, in pharmaceuticals and e-commerce, build on a thick bedrock of publicly funded R&D, for example supported by the National Institute of Health over the years or other US government departments and agencies. Just recall that the internet as we see it today is the result of years, decades, of investment by the government atop which we have the famous successes.
We have debates about laws and policies of course, but these have mostly been about how India fits into the global norms. Witness the TRIPS debates over the years. This is important of course, but the other facets I’ve mentioned here view things from the lens of the individual entrepreneur, and the support she will need from the state and its policies.
Where does this leave us? The difficulty of building the institutions needed to support science and IP-based entrepreneurship does not diminish its value. We must get started, but with a clear-eyed understanding of the contours of the challenge. Getting it right will be cool. It will be a gift that keeps on giving, for generations.