Against the backdrop of last week's article, the question arises: are Sovereign Patent Funds, or SPFs, a feasible alternative to bilateral licensing or patent pools in India?
On paper, SPFs are meant to support and protect domestic innovation by: i) providing access to patents; ii) enhancing competitiveness; and iii) facilitating technology transfer. However, experiences with SPFs in other jurisdictions have highlighted concerns around trade distortion, mismanagement, and aggressive enforcement practices that can negatively affect the innovation ecosystem and free trade.
One of the key criticisms is that SPFs are primarily funded through public money, along with a small proportion of private funding, while the fees generated are ultimately distributed among private entities. Critics argue that this creates a situation where public funds are used to benefit a limited number of private players.
Since an SPF is a sovereign-backed fund, its governance structure would need careful consideration to address potential conflicts involving public international law, world trade and competition law, as well as conflicts among private enterprises themselves. Other concerns associated with SPFs include limited freedom to operate, opaque licensing negotiations, and unclear ownership structures. Royalty arrangements, collaboration agreements, and government-funding conditions can burden intellectual property assets with obligations that materially affect future revenue generation.
Another concern is that SPFs do not necessarily guarantee licensing fees that the public would consider reasonable. Further, because they are state-sponsored entities, SPFs often remain outside the direct purview of regulatory authorities. They tend to lack transparency and sound governance, as they rarely disclose performance indicators or establish clear mechanisms for stakeholder accountability. In many cases, SPFs also remain insulated from legislative scrutiny and public participation.
This creates scope for mismanagement and disconnects the fund's activities from broader national innovation policies. Without regular and independent external audits, SPF strategies risk being driven by narrow interests. A lack of transparency combined with concentrated control can lead to misuse, which becomes counterproductive to the very objective of SPFs.
These concerns extend beyond domestic governance issues. Globally, there are fears that SPFs could be misused during trade wars, ultimately affecting the global dissemination of technology and innovation. Some critics have even compared them to anti-dumping measures or barriers to free trade. Such developments could reverse years of liberalisation across industries and markets.
This also risks conflicting with the non-discrimination principles under the WTO's TRIPS Agreement. Even where no direct treaty violation exists, SPFs could still create diplomatic tensions. Countries targeted by such practices may respond with countermeasures or raise disputes before WTO forums. In that sense, SPFs may evolve into trade instruments that introduce instability into international economic relations.
Patent pools, on the other hand, remain subject to both regulatory and judicial scrutiny. Licensing fees are generally driven by market conditions and commercial realities. From an industry perspective, when a technology implementer joins a patent pool, it gains access to a broad portfolio of technologies rather than spending significant time and resources acquiring individual intellectual property rights separately.
As a result, Indian companies can gain access to a wider range of technologies through a single window instead of negotiating for each patent individually. Over the long term, this has the potential to reduce overall costs.
Patent pools are generally built around complementary or standard-essential patents. As a result, they promote innovation and interoperability without necessarily undermining market competition through cartelisation risks. Factors such as whether the royalty-sharing system accurately reflects the technical and commercial contribution of members are carefully evaluated before companies join such pools. Businesses also assess how membership could improve market access and strengthen their global commercial positioning.
Patent pools can also encourage collaboration and cross-licensing among industry participants. This allows companies to move beyond traditional competitive barriers and form mutually beneficial alliances. Companies can then leverage synergies and economies of scale to pursue common objectives, including developing industry standards, addressing emerging technological challenges, and capitalising on new market opportunities.
Moreover, patent pools can improve market access and penetration by giving companies greater flexibility in using intellectual property assets. Access to patent pools broadens exposure to related technologies, which can further encourage innovation and research. This, in turn, also carries the potential to generate employment.
At the same time, bilateral licensing agreements continue to remain important in situations involving complex commercial arrangements, multiple technologies, substantial patent ownership among different parties, or technology-transfer requirements. Bilateral licensing allows businesses to tailor agreements according to their specific commercial needs.
Ultimately, India should avoid adopting a one-size-fits-all approach, especially while navigating relatively uncharted territory. Licensing structures must be designed according to business requirements and industry realities, both domestic and global.
At present, India should focus on strengthening the foundations of a sustainable innovation ecosystem. That includes improving patent-office capacity, increasing research and development funding, and creating knowledge centres to support SMEs, MSMEs, and start-ups. India must also encourage public-private innovation partnerships and support greater participation by Indian companies in international standard-setting work.
In addition, the country should develop institutional infrastructure for the speedy and fair resolution of disputes before courts. The future can only be secured if India emerges as one of the world's leading technology- and knowledge-based economies.
This article is authored by Rajeev Ranjan, a retired IAS officer of the Tamil Nadu cadre who served as the Chief Secretary of Tamil Nadu.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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