Spurring innovation in SMEs

A WTO council focuses on the need for supporting companies to invent and create within the Intellectual Property Rights system in the country

The council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organisation (WTO) met a few days back and discussed some interesting issues. These ranged from the need to allow the least developed countries a longer transition period for fully adhering to the TRIPS agreement to the issue of innovation by small and medium-sized enterprises (SMEs).

The least developed countries have been given time till July this year to align their laws completely with the TRIPS agreement. And on pharmaceuticals, they have time till 2016 to align with the agreement. The transition period, however, does not exempt these countries from applying the TRIPS agreement. But it provides them freedom to choose whether or not to protect trademarks, patents, copyright, industrial designs, geographical indications or any other form of intellectual property. Haiti and Nepal had sought this extension on behalf of all the least developed countries.

For businesses in India, a more important issue of discussion at this meeting was innovation by SMEs. WTO officials pointed out that it was for the second time that the TRIPS council had discussed innovation. However, this time, the focus remained on SMEs, at the request of the US, Chile, Korea and Chinese Taipei.

Several countries were of the view that SMEs were essential for most economies for providing employment, since they account for up to two-thirds of the workforce. They believed innovation, ideas and other intellectual property were important for companies, and governments needed to support them to increase awareness of intellectual property systems, encourage domestic and international collaboration in innovation, make registering trademarks and patents simpler and cheaper, and help companies protect their intellectual property.

The debate on innovation and intellectual property protection is aimed at building a balance between allowing companies to innovate while staying within the system of Intellectual Property Rights (IPR) in the country. Many countries broadly agreed that a balanced intellectual property system had a role to play in spurring innovation - a term not defined in the TRIPS agreement.

The agreement strikes a balance between protecting intellectual property by giving creators exclusive rights, usually for a limited time, and enabling inventions and creations to be disseminated to the society as a whole. This balance includes "flexibilities" - allowing governments to bypass protection under certain conditions. But most developing countries are of the view that the current system is tilted in favour of the developed countries. And so, there has been a lack of greater spends on research and development by companies in the developing and the least developed countries.

The developing countries, therefore, have stressed the need to use "flexibilities". Several developing countries have also built their national innovation strategies, including policies to increase public awareness, encourage companies to work with universities and research institutes to develop inventions, and strengthen enforcement.

The developed countries, however, pointed out that an emphasis on "flexibilities" and mandatory technology transfer would undermine the incentive to innovate, which the intellectual property protection provides. They also argued that "local working requirements" would be counterproductive to the development of IPR.

A WTO report of an earlier 2012 meeting on innovation, which quoted statistics provided by the World Intellectual Property Organisation (WIPO), noted that spendings on research and development almost doubled between 1993 and 2009, with 70 per cent coming from the high-income countries. Of this, 13 per cent growth came from the low- and middle-income countries, with China accounting for 10 per cent. The WIPO report had added that innovation increasingly involved international collaboration and sharing inventions between firms.

Given the globalisation of Indian companies, especially the SME sector, owing to the rise of comprehensive trade and investment agreements that India is signing, there is a need for industry to take a closer look at the innovation strategy to be adopted to remain competitive in different markets. Price advantage alone will not help companies compete but innovative products can help tap new markets.

It will be important for industry to remain tuned in to the global discussion on innovation and provide valuable insights to negotiators at Geneva to help build India's innovation strategy that does not fall foul of its international commitments.

The writer is Principal Adviser at APJ-SLG Law Offices