Is it because of the patent costs or strict patent laws that Indian SMEs are moving out of India? Tarun Bansal, Founder & Director, SagaciousIP

Tarun Bhansal Founder and Director SagaciousIPThe SME industry of India is no doubt a driving force for the Indian economy today. There are more than lakhs of SME units in India with investment of above Rs. 1 lakh crore. The sector has contributed approximately 40 percent to industrial production and 6 percent to country’s GDP.

Approximately 70 percent of the employment growth comes from the SMEs in the Asian region and they contribute towards 90% of industrial units in India and 40% of value addition in the manufacturing sector. In India they accounts for 90% of the industrial units in India.  Thus for the sake of their product and invention it’s quite important for them to invest in their own IP so that they can never be commercially exploited by the industry. But the scenario is quite different and research shows they follow a different route altogether. Then what’s the reason for the same?

According to The Hindu, research from the Indian Software Product Industry Roundtable found that 54% of tech start-ups and SMEs founded in the country last year chose to domicile themselves in either Singapore or the United States because of their favorable regulatory environments. The group guesses that the figure will rise to a full three quarters in 2015. As the Financial Times pointedly puts it, “few show signs of going home” where byzantine regulations await.

With the recent guidelines by the Indian software patent office to allow a wider range of computer-related inventions to earn patent protection has opened the back door to software patenting. The patent office for the first time made a clear interpretation of the Patents (Amendment) Act, 2002 to mean that if software has novelty, is inventive or tangible, and has proper technical effect or industrial application, it can be patented. This step would no doubt encourage the Indian Start-ups and SMEs to stay home and contribute to our GDP. In this process of encouraging Start-ups and SMEs to register for patents the most difficult task would be amassing a larger volume of quality assets.

But still the problem in India is there is no strong enforcement when it comes to IP laws forget about enforcement there is awareness among the Start-ups and SMEs regarding the same. In 2013, about 571,612 patent applications were filed in the USA; 825,136 in China; 328,436 in Japan; 204,589 in Korea; 147,987 in the European Patent Office, compared with a mere 43,031 applications in India.

Taking some of these recent examples when there was an infringement in the patent when these companies entered into a different market we can see how there is a dire need to patent your product.  According to Ericsson, Xiaomi needed a license from Ericsson for selling and marketing the phones imported to India and using Ericsson’s patents. Ericsson alleged standard essential patents (SEPs) used in AMR, 2G, 3G and Edge technologies for mobile phones were being infringed upon by Xiaomi.  Similarly Amazon’s 1- click patent which in fairly broad terms protects any E-commerce transaction executed with one-click using stored customer credentials to validate which in a way puts a full stop to any e-commerce buying portal. Such is the power of having a patent.

It’s quite hard to believe that the cost of filing patent is stopping the Indian companies to use the domestic patent system so what is the real reason driving the Indian high techs out of India. Forget about the cost or protection there is no strong enforcement law in India to drive the companies to register their patent in India.


Authored by Tarun Bansal, Founder & Director, SagaciousIP