A few weeks ago, the government announced that during 2023-24, patents granted in India had crossed the 100,000-mark for the first time. Perhaps more significantly, patents granted in the country had reached the five-figure mark only in 2017-18, and in the following five years, an 8-fold increase was registered.

According to some commentators, this trend “marks a big moment for [India’s] innovation and knowledge sector”, while others viewed this development as evidence of “India’s soaring innovation stock”.

The reality, in our view, is at a variance with these comments on two counts. First, even if we accept the argument that a mere increase in patent grants is a positive augury, it cannot be assumed that India would benefit automatically as patents are granted in India to both residents and non-residents.

If the larger share of the patents is granted to the non-residents (foreigners), which is indeed the case, benefits of higher levels of patenting do not accrue to the country. Foreign patentees zealously protect their patents and do not usually allow their use in India.

Quality matters

Secondly, cross-country evidence suggests that mere increase in patents granted to residents is not a robust indicator of a country’s innovation system, and hence its improved technological competence. The quality of the patents granted holds the key, an issue which has frequently been discussed in the context of the rapid increase in patents granted in China.

Who owns the larger share of patents granted in India? Data for answering this question are provided by the World Intellectual Property Organization (WIPO), using which we can not only understand the trends in the relative shares of patents owned by residents and non-residents in India, but can also compare the numbers for India with those of three other countries — the US, Japan, and the Republic of Korea (RoK), all of which grant patents in excess of 100,000 annually.

Although the WIPO database does not provide data for patents granted in 2023, the year in which patents granted in India increased dramatically, the immediate past trends would help in assessing the relative importance of resident patent holders in India in the total patents granted.

The share of residents in the patents granted in India increased over the past decade, from nearly 18 per cent in 2013 to 26 per cent in 2022. In terms of absolute numbers, patents granted to residents increased from less than 600 to almost 7,800, while the corresponding figures for non-residents were 3,400 and 30,500, respectively.

Cross-country comparison shows that the share of patents granted to residents in India was the lowest among the countries that granted 100,000 patents in 2022. China was the leading country in terms of patent grants for several years: in 2022, 87 per cent of the patents granted belonged to residents. This figure had increased by almost 20 percentage points over the past decade.

In both Japan and the RoK, more than three-fourths of the patents granted were owned by residents over the past decade, while the corresponding figure for the US was just below 50 per cent.

What are the implications of the aforementioned patenting trends for India? Non-residents, which are mostly globally significant firms, have used their patent rights to establish/strengthen control over India’s technology market. Foreign firms have thus used their monopoly power to pre-empt entry of potential Indian competitors, perpetuating the country’s technological dependence.

The immediate consequence of this technological dependence is steady increase in India’s liabilities on account of payments for the use of patents and other forms of intellectual property like trademarks over the past decade.

Forex outgo

Between 2013-14 and 2022-23, foreign exchange outgo on this account increased more than two and a half times, from $4 billion to $10.5 billion.

That patent numbers are inadequate indicators of the state of a country’s innovation system has widely been discussed in the context of the extraordinary surge in patents granted by the CNIPA.

It has been argued that the quality of patents granted in China was “below the world average and significantly lower than that of other developed economies”, which explains the sudden surge in grants. Even the CNIPA took cognizance of the growing criticism by shifting its focus from quantity to the quality of patents that it grants (https://bit.ly/3UHbh9O).

The Federal Trade Commission (FTC), the competition authority in the US, had warned about the dangers of granting poor quality patents (https://bit.ly/4dOVxdH). The FTC argued that patents of questionable quality “may have anticompetitive effects can cause unwarranted market power and can unjustifiably increase costs. Such effects can hamper competition that otherwise would stimulate innovation”.

Given these concerns about patent quality, questions will be asked about the patents granted in 2023-24 for two reasons.

First, the Patent Office had granted 250 patents every working day, a fact that will be questioned as the institution suffers from shortage of “manpower, physical and digital infrastructure”. This issue has been underlined, including by the PM’s Economic Advisory Council (https://bit.ly/44PBxDL).

Secondly, since patents are an output indicator of R&D activities, steep increase in patenting activity should have resulted from the growing robustness of India’s innovation system. Unfortunately, even after decades of discussions on ways to strengthen the country’s technological sinews through increasing R&D intensity, India continues to considerably lag behind most major economies.

While countries with high R&D intensities, including Israel and the RoK had spent 4 per cent or more of their GDP on R&D in 2020, India had spent a mere 0.64 per cent. More worryingly, this figure had declined over the past decade. Therefore, the government and its agencies must focus their energies towards beefing up the country’s innovation system by effectively implementing the Science Technology and Innovation Policy.

Promoting the inaccurate narrative that higher number of patents granted reflects increase in the country’s technological strengths is an undesirable distraction.

Dhar is with the Council for Social Development; Gopakumar is with the Third World Network