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INTELLECTUAL PROPERTY RIGHTS & DEFENCE PRODUCTION

 IPR plays key role in almost every sector and has become a crucial factor for investment decisions by many companies as it provides protection for the investment in the development of new technology and means to finance research and development activities. The author dwells on the importance of IPR in building defence production capabilities...

 

Intellectual property (IP) refers to creations of the intellect for which a monopoly is assigned to designated owners by law. Intellectual property rights (IPR) include patents, copyright, industrial design rights, trademarks, trade dress, and in some jurisdictions trade secrets. IPR are the rights given to persons over the creations of their minds and the creator is given an exclusive right over the use of his/her creation for a certain period of time.

The importance of intellectual property in India is well established at all levels- statutory, administrative and judicial. India ratified the agreement establishing the World Trade Organisation (WTO). This Agreement, inter-alia, contains an Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) which came into force from 1st January 1995. It lays down minimum standards for protection and enforcement of intellectual property rights in member countries which are required to promote effective and adequate protection of intellectual property rights with a view to reducing distortions and impediments to international trade.

In defence manufacturing, the IPR category includes inventions (protected by patents), industrial designs and the creation of technology. The social purpose is to provide protection for the results of investment in the development of new technology, thus giving the incentive and means to finance research and development activities. The protection is usually given for a finite term (typically 20 years in the case of patents). A functioning intellectual property regime also facilitates the transfer of technology in the form of foreign direct investment, joint ventures and licensing.

Capacity Building

The vision of "Make in India" is to achieve self reliance through building indigenous capabilities for manufacture and maintenance of defence equipment in a cost effective manner. Partnering for technologies from OEM to avail opportunities in defence production to the tune of approximately INR 250 Billion during the next 10 years, is main reason. The opening of the strategic defence sector for private sector participation has opened avenue for foreign original equipment manufacturers (OEM) to enter into strategic partnerships with Indian companies and leverage the domestic markets. Indian companies needs to bridge the capability gap in the technology and equipment development through partnership with global OEMs by ToT. With A&D sector becoming more global, the advantage is in seeking collaborative ventures with defence firms abroad in which local skills can make useful contribution in terms of cost reduction to the foreign manufacturer of main equipment. This will also enable Indian industry to participate in international supply chain with export focus.

Till now India has been contracting technology transfers and manufacture under license, which never assisted technological absorption and innovations. The intellectual property rights remained with OEMs and the OEMs were not willing to part with their latest technologies. Resultantly our complacent domestic industry merely assembled the system with import of major sub systems. The industry never bothered to “Know Why” to absorb the technology leave aside upgrading it, thus, buying the upgraded version of same technology, by again paying hefty amount.

Transfer of Technology (ToT) & Relevance of IPR

Technology transfer is a process by which a firm/ country gains access to and employs technology developed in another firm/country through market or non-market transactions or spill over. ToT is never sold as a commodity. For most developing countries advanced technologies will have to be imported. Hence need to synchronize procurement and cost effective acquisition to be in tune with Technology and reconcile competing interests with, set targets for intellectual property rights (IPR).

The OEMs guard their IP, and inhibit/ hesitate the collaborating partners to bring in cutting-edge technology. Practically, OEMs do not possess all IPRs for platform related technologies as many of such vest with their Tier suppliers. Today OEMs are integrators with various assemblies/ subassemblies being manufactured by their Tier 1 & Tier 2 partners and as such the IPR of different parts are held with different partners. Thus expecting the overall IPR to be acquired from OEM may not be feasible, though he may facilitate. ToT should be made directly to Indian industry/selected production agency rather than to DRDO, who may then share the technology to identified industry participants with proper safeguards.

IPR & DPP Provisions

IPR is contractually-mandated deliverables in terms of design, form, fit and function data and other technical documentation, irrespective of manufacturing by the suppliers or by the supplier's sub-contractors. In DPP, ToT provisions essentially deals with licensed production based largely on OEM-supplied CKD and SKD kits. As per the DPP provisions in “Buy & Make” with ToT by Indian Production Agencies from OEMs is to encourage domestic Industry however the guidelines do not have contractual provisions outlining management of IPRs related issues. Same is the case in Govt funded R&D-cum-productionisation contracts such as “Make” cases, or licensing of DRDO-developed technologies ToT” itself is left undefined in terms of minimum IPRs to be acquired by MoD/ IPAs, IPR related issues need to be dealt in details, taking care of minimum government-purpose.

MoD Subsidised R&D- IPR Issues

The MoD-subsidised R&D through development contract likely to specify that the MoD will test the equipment or technology that is developed and IPR ownership will be with MoD. However some of the hypothetical situations where ownership of IP rights will arise such as when a Private sector company develops a product or subsystem technology under Make India Project.

  •  The technology is developed by Private sector.
  •  The DRDO may have played a role in the beginning stages and later as advisor in development of a technology.
  •  DRDO continuous association as part of the collaboration.

In past the MoD had few issues related to IPR. Understandingly the Industry do not want to give away or share IPR for technology development by them with MoD or their competitors. The issuance of EOI for the FICV at a point of time was stuck up due to IPR related issues, where the MoD desired the industries must have the IPR of the product that they manufacture. The recent global RFI floated by IA on FRCV has clearly mentioned that the IPR of selected design will belong to IA.

ToT From OEM- IPR Issues

The technology transfer is likely to subject to approval of the foreign government and hence obtaining latest technology becomes difficult. The OEMs or the Govt who own cutting-edge technologies, do not part with their technologies citing patents, IPRs etc., or may fix enormous prices for the same or subject to export control regime. The commonly accessed routes for technology are :-

  •   Co-development and Co-production
  •   Sub- Contracting
  •   Joint Ventures
  •   Licensed Production
  •   Maintenance ToT and Training

In technology transfer the associated generic IPR issues are as under:

  • There are always gaps between the needs / expectations of the both the partners. While IPR aspects are primarily applicable to hardware related programs, the issues become further complicated where there is substantial software content also.
  • It will be either through 'Build to Print” or “Build to Spec.” The 'know why' is not normally part of the sub contract without which the buyer cannot carry out any enhancement /modification of the product for its uninterrupted usage or even marginal up-gradations to overcome obsolescence related issues during its service life.
  •  During negotiation stage the IP related issues are to be resolved so as to avoid legal problems later. JV should also be engaged in R&D and the IPR should rest with JV. Foreign partner should bring high level specialized technology that is not easily available. Foreign partner should ensure JV access to the global market (subject to government approval).
  • Joint Intellectual Property (IP) rights and shared international market space should be part of the negotiated contract thereby providing international exposure and a fair share of the resultant revenues to the Indian firms.
  • Long-term customer support activities have become mandatory. The training of local industrial partners and user agencies in maintenance of the system through applicable level of technology transfer ensures effective and committed maintenance support.

OEM Concerns

The paradigm shifts in the manner global enterprises carry out knowledge business have transformed how intellectual property (IP) is being created, valued, protected and exploited. OEMs clearly indicate their unwillingness to transfer technologies to Indian companies unless there is substantial improvement in the IPR and technology safety environment in India. Another important factor that has influenced the OEMs' reluctance to transfer critical technologies to India is the US, European and Japanese technology export experiences with China. Some of IPR risks rated highest by the OEM are:

  • Illegal sharing of software codes, blueprints, specifications, industrial designs, trade secrets and confidential know-how.
  • Patent and design infringement.
  • Piracy and copyright violations.
  • Counterfeiting of products and components manufactured from blueprints, algorithms of OEMs.
  • Indiscriminate production of licensed technologies.
  • Indiscriminate copying of processes and proprietary frameworks.
  • Non-payment of royalties and licence fees.

Indian IPR Eco System

The protection of intellectual property rights (IPR) was not a major international trade issue prior to the 1990s. However with recent trends such as globalization, emergence of new technologies, and emerging economies have elevated the importance of IPR protection, both politically and commercially, and has become a global commerce issue. The salient IPR issues, such as the economic impact of weak protection of IPR, outdated patent systems in developed economies, tensions between developed countries and developing countries over IPR protection, government and business responses, and proposed reforms.

The Indian government has taken several initiatives to create a conducive environment for the protection of intellectual property rights of innovators and creators by bringing about changes at legislative and policy level. IPR-related issues and IPR in India are governed by the Patents Act 1970 and Patent Rules 2003, Trademarks Act 1999 and the Trademarks Rules 2002, Indian Copyrights Act, 1957, Design Act 2000 and Rules 2001, and The Geographical Indications of Goods (Registration & Protection) Act, 1999 and The Geographical Indications of Goods (Registration & Protection) Rules 2002, respectively. The IPR framework in India is stable, well established and is fully compliant with the Agreement on Trade-Related Aspects of Intellectual Property Rights. India is committed to wide range of international treaties and conventions relating to intellectual property rights.

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Notwithstanding above, the recent US Trade Representative (USTR) Congressional-mandated 301 Report on IPR has raised serious questions regarding the future of the innovative climate in India, across multiple sectors and disciplines. In the report, the US has urged India to take specific actions to address the concerns raised by multiple stake holders, including by means of constructive bilateral engagement directly with the US Government and stakeholders. The Indian Govt has contested the report as unilateral.

 

Maj Gen Dr. Bhupinder Yadav (Retd.)

Maj Gen Dr. Bhupinder Yadav (Retd.)

 

1 Response

  1. The article has some interesting view points.

    The point that Indian industry did not bother to”know why” implies that “know whys” can be learned by simple application of effort. What is this effort that can be applied? Is it studying the design? Or reverse engineering? or experimenting with modifications? What is the probability of success of these methods?

    Are there any more methods of obtaining know-whys?

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