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These rancid rankings

IP rankings are politically motivated and express a clear preference for ‘faith’ over ‘facts’

Written by Shamnad Basheer |
February 10, 2015 2:58:30 am
patent system, Intellectual property More worryingly, the best of economists have struggled to discover a credible nexus between patent and innovation.

“If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one.” So said Fritz Machlup, a wise American economist several decades ago. His words remain as true now as they were then. For, the patent system is one of the most faulty legal regimes that one could possibly have conceived. It purports to reward new, useful and non-obvious inventions. And yet, the best of judges are in disagreement about when something can be said to be non-obvious or inventive, the key patentability filter that asks whether or not the cognitive leap (the distance between the prior art and the alleged invention) is good enough to merit a patent.

More worryingly, the best of economists have struggled to discover a credible nexus between patent and innovation. Instead, they have found that non-patent incentives, such as lead-time and branding, work quite well in fostering innovation across a wide diversity of technology sectors. However, they do admit that in R&D intensive industries calling for huge investments, such as pharmaceuticals, some legal protection may be called for. Even here, as I have argued in the past, the patent regime is clearly not up to the task of meaningful investment protection. For, it is inherently uncertain (a patent could be invalidated at any time in many parts of the world if it is shown that it ought not to have been granted in the first place) and grants a uniform period of protection (20 years), irrespective of whether or not the firm that made the investment is ultimately under-compensated, fairly compensated or over-compensated.

As for the link between innovation leadership and intellectual property (IP) regimes, one needs to ask: Are developed countries strong innovators because of the patent system or in spite of it? For, contrary to the one-dimensional narrative of patents often touted in popular media, these legal instruments also act as strong deterrents to downstream innovation. A fact that is coming to be increasingly recognised by the US Supreme Court that has, in the recent past, refused to recognise patents over basic building blocks of nature (human DNA) or simple business methods that don’t really necessitate an extensive 20-year monopoly.

As for the costs imposed by patents on hapless consumers, the less said the better. Gilead’s revolutionary HCV treatment, Sovaldi, comes at a whopping $1,000 a day (or $84,000 for a full course) and has shocked the conscience of even the freest of free-market thinkers.

Given these various patent woes, it seems a bit silly to rank countries based on their formal “IP regimes”. And worse still, to engage in such rankings without measuring as to how such regimes contribute to innovation, technological learning or social welfare — goals that they are meant to foster.

And yet, this precisely is what the US Chamber of Commerce’s GIPC (Global Intellectual Property Centre) does. As with last year, the GIPC ranking continues to rest on a highly flawed framework, deploying indices that have absolutely no relation with any of the end goals mentioned above, such as innovation and technological learning. Illustratively, countries are marked higher if they sign up to more international treaties and free trade agreements (FTAs). The sheer imbecility of this is evident from the fact that Togo, a tiny African nation boasting far less technological and innovative proficiency than India, merits a higher score (an almost full score on the GIPC index), only because it autographed a far higher number of international IP treaties than did India!

But there is a silver lining in all of this. We’ve actually moved up in the rankings. From being ranked last, last year, India is now last but one. The reasons for this admirable progress are not very clear, save the fact that the Narendra Modi government appears to have made all the right noises, with the setting up of a bilateral IP group between the US and India and a think-tank tasked with drafting an IP policy. And yet, a close examination reveals that our laws remain the same: our much maligned Section 3(d), deployed most recently to axe Gilead’s patent application over Sovaldi, continues to rule the roost. And our notorious compulsory licensing order over Nexavar (an expensive kidney cancer drug) was recently endorsed by the Supreme Court. If all it takes to improve IP rankings are platitudes, platitudes we must dish out in plenty.

For, much like religion, IP has become a matter of faith, dividing the world into camps, best expressed in the words of George W. Bush, in
a long tradition: either you’re with us (believing in IP), or not. And unless one is “with” the believers on this, it is very difficult to see the point of these rankings. Particularly when it is clear that they are politically motivated and express a clear preference for “faith” over “facts”.

Facts that more than amply demonstrate that India is not the only country axing bad patents. The US does it with even more gusto. A 2012 study found that US district courts invalidated patents in almost 90 per cent of the cases that came before them. As for the evil of compulsory licensing, it bears noting that the US grants de facto licences through their courts in far greater numbers than any other country. And yet, India continues to be singled out.

So what do we do with these rancid rankings? Max Reger, a composer of some fame, is alleged to have reacted to a critical reviewer thus: “Sir, I am seated in the smallest room in the house. Your review is before me. Shortly, it will be behind me.”

I would urge that these deliberately devious IP rankings, designed to pressure India into converting to one of the faith, meet with the same fate.

The writer is founder of SpicyIP and a recent recipient of the Infosys Prize in Humanities for contributions to Indian intellectual property law

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