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 protects 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 etc. IPR are the rights given to persons over the creations of their minds and the creator is given an exclusive right over the use entity  for a certain period. Intellectual property is considered an intangible asset.

Indian IPR Eco System

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 to reducing distortions and impediments to international trade. 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.

IPR in Defence Manufacturing

In defence manufacturing, the IPR category includes inventions (protected by patents), industrial designs and the creation of technology.  The social purpose is to protect 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.

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 regarding 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 regarding 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 hypothetical situations will arise when a Private sector company develops a product or subsystem technology under Make India Project or the technology is developed by Private sector where DRDO may have played a role in the beginning stages and later as advisor in development of a technology. 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.

 ToT from OEM- IPR Issues

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.

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 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 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.

Intellectual Property Facilitation in Defence

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. Number of platforms that have been developed in India and these platforms have hundreds of components that have been designed and developed in India for which IPs have not necessarily been registered. The same is the case for some components that have been substituted on imported platforms through domestic efforts. Going forward, innovation is going to be the most important determinant for our capability to come up with new military technologies. The culture of innovation and technological advancement need to focus on generating in-house intellectual property (IP).MoD has now implemented a process of registering IP with creation of an IP Facilitation Cell under DGQA that will assist DPSUs and OFB in the process of identifying and registering IP. IPF Cell will provide general advisory about IPRs, such as patents, trademarks, designs and copyrights and Services such as IP Protection, IP Awareness & Training and Counseling& Advisory Services as enumerated below:-

To provide general advisory about IPRs, such as patents, trademarks, designs and copyrights etc.

To Provide Services such as IP Protection, IP Awareness & Training and Counseling& Advisory Services.

To enable organizations/individuals in understanding, Identifying & using Intellectual Property.

  • To provide services related to patent searches, patent drafting, patent prosecution, facilitation in commercialization of Inventions, trademark prosecution matters, etc.
  • To follow up the applications submitted for patents with various government agencies for speedy clearances and early grant of patents.
  • Keep the above organizations abreast of the latest amendments, if any, in the Indian Patents Act 1970 and Indian Patents Rules 2003 promulgated by the Government.
  • To create IP News Tracker for latest news in Intellectual Property, patents, industrial designs, trademarks, copyrights, IP Office India etc.
  • To handhold organizations/individuals for identifying Intellectual Property in their day to day functioning & leverage it for Business Excellence.
  • To create a delivery mechanism for comprehensive awareness & training in IPR to all stakeholders of IP in the corresponding technological fields.
  • To organize Patent Workshops at different locations to train the Engineers and guide them to formulate Patents by engaging IPR Consulting firms.
  • To have an arrangement with NRDC to seek their advice and to share their experiences.
  • To identify a panel of professional IP attorneys / IP Consultants and fix a fee structure for consulting them for professional services, so that the DPSUs / OFs can refer specific cases to them directly for professional expertise.

MoD need to amend policy to tap tech-savvy private defence companies, subsidising their R&D in their nominated projects to the extent of 80% of R&D costs. The smaller companies have driven technology development due to appetite for growth and technology and move up the value chain from technology absorption, to product improvement. The Indian defence industry, need to move up in the value chain to develop its own technologically superior product through product up gradation.

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