“An intelligent society like ours need not fear IPR",  S. Narayan, India's former Ambassador to WTO 

WTO is a mystery for many. It is seen either as an unwanted imposition on the country's economy or an inevitable institution in current times. What do we gain by being associated with WTO? What do we make of TRIPS? How can e-commerce and country's custom laws be made compatible? Are we the losers in the knowledge economy game that is coinciding with WTO regime, being slow in economic reforms?

Ambassador S. Narayanan, till recently Indian Ambassador to WTO at Geneva, unravels the mystery. He argues that protecting knowledge and commercializing the same is the order of the day, not sharing the knowledge freely as our maxim went. He points out that there is certain amount of dichotomy in India’s approach to Intellectual Property Rights. One notices in our country coexistence of passionate arguments against patent protection especially for drugs and powerful plea in favour of copyright protection especially for films and music. He feels an intelligent society like India need not fear IPRs.

Ambassador Narayanan shares his views on IPR and WTO

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Do you feel that the emerging knowledge based economy in India can leverage maximum benefit out of the current international economic system regulated by WTO?

In the current international economic system there are three multilateral institutions playing a very significant role - World Bank, IMF and, WTO. World Trade Organization came into existence on 1^st Jan 1995. Before WTO came in to existence the international trade rules were set under GATT 1947. This dealt basically with international trade in goods and essentially covered broader measures like tariffs. WTO has a wider jurisdiction. It covers not only trade in goods but trade in services too. It also covers the intellectual property rights. In the emerging knowledge economies the IPRs assume a very important significance. The WTO agreement on Trade Related Intellectual Property Rights (TRIPS) provides for minimum standards of protection for seven different types of IPRs by WTO Members.

It is acknowledged that India is one of the very intelligent societies in the world. Therefore, we have the capacity to develop a very strong knowledge based economy and use it effectively for our development. It is possible, in my view, for India to derive benefits out of the WTO agreements, even though I will be the first person to concede that these agreements are not always based on equity or fairness. Countries like India whose economic strength as well as share in international trade are limited have a better chance of protecting their economic and trade interests n a multilateral forum rather than through bilateral negotiations with powerful trading partners.

Knowledge advantage in the knowledge economy seems to be much dependent on the western countries, as only they have the capital and make their choice of investing in a given country through FDIs. Is there a way out of the 'baggage of the past' for third world countries?

it is a complex situation on the ground today. West has the capital and the technology. Countries like India are short of both. Let me first address technology. It is generally accepted that for new technology to get invented and flourish, an environment in which there is protection for Intellectual property is necessary. A sound regime of intellectual property protection encourages innovations by offering appropriate benefits to those who innovate. This is what the TRIPS agreement of the WTO is trying to get. This agreement is also making us change our approach to intellectual property protection, especially, with regard to product patents in the pharmaceutical sector. China agreed to change its intellectual property regime in 1991/92, in accordance with the made by the United States, though at that point of time what was in public domain was only a draft TRIPS agreement as contained in the Dunkel draft and the Uruguay Round negotiations were still going round. Today more and more Chinese are filing patents and culture of innovation is spreading in China. In India also such a situation will develop. You are right in saying there is already a large gap in technology. This gap might even increase because all the new regimes in the world, including the TRIPS agreement, make technology transfer more difficult. In the past we could reverse engineer. We cannot do it now. The provisions relating to compulsory licensing in the TRIPS agreement are extremely onerous and therefore it is not easy for governments to take recourse to compulsory licensing. Main motivation for the TRIPS agreement came from those who are technologically advanced and who want to retain their advantage. In today's world technology is the most critical determinant of competitiveness. We are lagging behind in technology and the International regimes do not make technology transfer easy.

Countries like India have to think for themselves and decide what is in their best interest. Nobody would help us out when we are in a fix. It is regrettable that major Indian companies hardly spend any money on R&D. This culture has to change. The government alone cannot go on investing money through CSIR and such labs. The private sector has to recognize the need for R&D investment. Perhaps the government can give tax relief in such a way that they feel encouraged. It will take a long time for us to catch up.

As far as the capital is concerned we can say India is not the most sought after destination today. This is because of the general perception that we are slow, procedure bound, corrupt and not competitive. It is also true that no country can prosper only through foreign investment. Brazil, China and others have a lot of foreign investment. And they have also had problems because of Foreign Investment. We have to adopt policies to increase domestic savings. We also have to ensure that our policies and procedures create a favourable environment for attracting foreign investment.

There have been several projections as to how E-commerce will not only rule the world but increase the volume of trade as well. If this comes true what macro changes would you see forthcoming, both to the world economy and to that of India?

The subject of e-commerce is currently being studied in the WTO. It is a complex subject. Many things can be transferred online. There is a debate going on now as to whether what comes through electronic transmission be treated as a product or a service. In 1998 during Geneva ministerial conference the ministers adopted a voluntary commitment that they will not levy customs duty on what is transmitted electronically. This decision was extended during the Doha ministerial meeting. General Council has been periodically considering the subject of e-commerce. The main focus of discussion in the General Council is the need or otherwise for multilateral rules in the area of e-commerce. There are different views as to how this can be tackled. Some say that e-commerce is only a mode of delivery Others feel that this is an entirely a new form of trade. Right now there is no technology available to keep track of whatever is downloaded through Internet and see whether any duty can be levied. E-commerce is under discussion in WTO for the last three and a half years. There are hundreds of papers submitted by different countries. We have to realize that e-commerce is a growing field. We cannot stop it. This is a reality we have to live with. It is wrong to think that e-commerce is relevant only for exports. E-commerce can have a significant impact on the domestic economy as well.

Whether it is in monetary reforms or in economic reforms Indian government has always been very cautious. Considering knowledge economy is dubbed to be one of speed and willingness to change fast, are we an inherent losers in the knowledge economy game?

One may feel that India has been very cautious in reform process. I would like to say that the caution exercised by India with regard to its reform process, has by and large been appreciated by western experts. In a vast country like India things can easily go wrong, if the reforms process is not handled carefully keeping in view the short term and medium term adverse effects on vulnerable sections of population. One premise is that we have started our reform process late, therefore we have to move fast. At the same time we should not move so fast that we crash. It has to be a fine balance about the need for speed and caution. The general perception of Western observers is that in the area of trade reforms we have been more cautious than justified. But in the area of monetary reforms, even western economists, after seeing the experience of East Asian countries, Argentina and Brazil say that countries like India should integrate gradually.

Another important factor we have to keep in mind is that though India is relatively poor, it is a big country and an important player in the international arena. We want to uphold our political independence at international level very strongly and we do not like to be dictated by anybody. It therefore follows that if we get into a serious problem, powerful countries who are not very happy with our independent stance on many international issues, whether political economic or trade, will not easily come to our rescue. So being cautious is not a bad thing.

Nothing prevents the government from changing the policies as the situation develops depending on the requirements of knowledge economy. It is wrong to imagine that WTO will come in the way of our actions. In the WTO we have undertaken some binding commitments in respect of tariffs as well as in respect of modest opening of specified services sector. Besides, WTO has rules in areas like Anti-dumping, etc. WTO will come into the picture only if we do something in violation of our own binding commitments or in violation of WTO rules. I do not believe that WTO disciplines come in the way of policy measures, we may like to adopt for developing our software industries. What is needed is a change in our thinking and a recognition that knowledge economy requires our businesses to function differently from what they have been doing till now. WTO does not in any way hinder this process.

We were in a similar situation as in mid 1980s. Doordarshan was available in a small periphery of the metros only those days. A decision at the highest level was taken to have a national network and it was made possible in eight months. And within two years after that Doordarshan could cover 98 percent of our country.

Something similar happened in the case of information access to districts from the state capitals. National Informatics Centre established a network that was of great significance in pre-Internet days. State capitals and Delhi were connected in the first phase. Next, the state capital and district headquarters were connected. Thus, a network was established connecting national capita, state capitals and district headquarters facilitating very fast flow of information and data. There were some who initially thought that such a network was not possible or was not necessary. But once the network was established and its potential was realized there was recognition that the decision to go in for a national network was correct. Making Internet access simpler and cheaper for the common man has to be a political decision, I feel, sooner it happens better it is for the country.

How do you see the manipulations and maneuvers behind the politics of patents and where do India stand to gain in this context?

In the case of TRIPS agreement one major issue India is trying to grapple with is product patenting of pharmaceuticals. Till 1970, Indian Patents Act provided for both product and process patents. At that time there was a feeling that in order to develop a vibrant pharmaceutical industry we should do away with the product patent and have only process patents. Indian Patents Act, 1970 provided only for process patents. Because of this major move Indian pharmaceuticals industry started reverse engineering in a big way and manufacturing a number of products. And, due to this, today we have a fairly widespread and vibrant pharmaceuticals sector. During the Uruguay Round negotiation demand for product patent came mainly from USA and was backed by Japan and European countries. Initially developing countries did not want to accept the concept of product patent in the pharmaceuticals area. India kept out of the negotiations for a long time. It is now widely known that the US used its power of unilateral action under 301 against Brazil and ASEAN countries and made them to accept the concept of product patents in the pharmaceutical sector. India was left alone at the end. At that time we tried to do some damage containment by getting a transition period, for introduction of product patents in the pharmaceutical area. TRIPS accepted ten-year transition period to introduce product patents in pharmaceuticals and agro-chemicals. By 2005 we will complete this period. For this from our side quid pro quo was to provide for a mailbox system and exclusive marketing rights. Experience has proved that exclusive marketing right, which was considered to be a great danger for India at that time, has not created any problem. There has been no application in the last eight years for exclusive marketing right for any product.

During the 1991-95 when the product / process debate was on its high, many felt that the Indian pharmaceuticals industry would be vanquished because it had developed on the basis of reverse engineering. But the new reality is that in the recent years many of our pharmaceutical companies have taken US patents. There certainly will be a transition period of difficulties for Indian companies that are not big and are exclusively concentrating on the reverse engineering. We have to realise that we have had more than ten years time to prepare ourselves for the new situation. It is not reasonable to expect a longer notice period.

When people talk about TRIPS in India we always think of pharmaceuticals and start criticizing the patent system itself. TRIPS also incorporate minimum standards about copyright protection. It is essentially in the interest of countries like India. We have enormous interest in copyright protection as we have a booming music and film industry. We have a very strong copyright protection mechanism. In fact, our copyright Act is more stringent than the minimum standards provided for in the TRIPS agreement. This is done keeping in view our own artists, filmmakers, etc.

The Indian culture in the past has been different. We have always said that knowledge should be shared and not sold. But, whether we like it or not, in today's world everybody feels that innovation takes place only when there is a reward for the effort. In a globalising world, we have no option but to accept this.

Some feel the very patenting of innovation could mean inadvertently leaking out some element of the innovation, because there is more to an innovation than the product or the process directly applicable in the context. Would TRIPS address such possible conflicts?

This is a very important issue. The patent system tries to balance the interests of the innovator and the interests of the society. The patent holder has to reveal all the details regarding his innovation in his application for grant of patent. Others can enrich their knowledge and learn what is going on basing on the details furnished in the patent application, but they cannot copy or reverse engineer during the 20 year period from the date of filing patent application. Even within the protection period if the government thinks that patent holder is abusing his patent right, government can intervene and ask someone else to produce the product using the details furnished in the patent application.

Society at large benefits from the current patenting system because the patent holder makes available all the details. Thus Knowledge comes to the public domain. In many cases this published information may have serendipity value in guiding other innovators to adopt similar methods for new inventions. There is criticism in the U.S. that many of the patent applicants are withholding crucial information. The real test of a full disclosure in a patent application is that another person should be able to produce the same product using the given process.

Are new processes for the same product denied under TRIPS?

TRIPS agreement says that you can innovate more efficient processes to produce the same product. But the burden of proof will be on the one who claims that the product is derived with a more efficient process. There is a reversal of burden of proof. TRIPS does not completely rule out the improved processes. The concept of reversal of burden of proof has been introduced to maintain the integrity of product patent system and at the same time provide scope for inventing more efficient processes to manufacture an already patented product.

Where does India stand to gain in this context, considering that Southeast Asian countries reverse engineered with electronics and made good. Now the same thing is denied to us?

The margins in the pharmaceutical industry are really huge. Our pharmaceutical industry has still now prospered through reverse engineering. But that situation is changing. It is difficult for us to argue that we must have a permanent right to derive undue benefits from the R&D investments made by others. Our pharmaceutical companies who were opposing product patents till recently are saying in private today that they can make a fortune if they can patent one molecule.

There is recognition that India is an intelligent society. Other countries wonder why an intelligent society should be afraid of protection to IPRs. We are capable of creating intellectual properties.

We have our double standards. Once we wanted to move against another WTO Member as they were supposed to be violating our copyrights in music. But when it comes to patents we behave as if we should have a permanent right to reverse engineer.. Our copyright Act is stronger than what is required under TRIPS because of obvious pressure from music and film industry.

Times have changed. We are also looking for commercializing our intellectual property rights. In olden days, we were listening to music of great singers paying next to nothing. Now even non-descript musicians would announce before their concert that only they have the copyright and caution anyone about recording and possible prosecution in case of violation. On the other hand, we are objecting to introduction of product patents in the pharmaceutical area since we are not investing enough in R & D.

Is there anything like fair period for patent protection? With twenty-year protection period now we seem to lock almost a period of one generation with protection?

Originally the protection was for a seven-year period from the date of grant of patent. It is now changed to twenty years from the date of filing. The argument is that it takes minimum of seven to eight years from the date of filing, especially in respect of pharmaceutical products, before a patent is granted. Thus the period for which the patent holder enjoys monopoly rights will be about 10-12 years. Now my feeling is that the US and the EU are speeding up the process of field trial, marketing approval etc., so that their companies can have a maximum possible period of protection. In my view one of the bad things that have happened is the change of period of protection to twenty years from the date of filing. I feel protection of seven or a maximum of ten years from the date of grant of patent would be ideal. Now there are other manipulations taking place. Certain companies just change the dosage prescription from one to two and re-file for patents. These things have come up in the WTO disputes. Powerful pharmaceutical companies are continuing to maintain their monopoly in one-way or the other.

It is often said that knowledge assets (IPR) will ensure a lead position in the comity of nations. How do you react to this assertion considering there is always a tendency of knowledge assets getting ignored or the patent holders forced to compromise as it happened in the case of health clause in Doha?

It is no doubt true that in today's world the intellectual property and knowledge assets enhance the competitiveness. The implication of the TRIPS agreement is that by 2005 US and Kenya will have more or less same level of intellectual property protection. After TRIPS agreement came in to force with effect from 1^st Jan 1995 many had expressed many type of concerns. Leave alone the political arguments in India; many western thinkers and institutions including World Bank, WHO and UN reports, point to one major concern in the TRIPS agreement. They say the balance between the private rights or private profits and public interest has not been arrived at properly especially in the area of pharmaceuticals. This fact is now widely acknowledged by economists, WHO and World Bank. There are genuine concerns about the new IPR regime. The feeling is that there is too much protection given to the patent holder and the consumer is at the receiving end. In the last 3-4 years there has been sensitivity all over the world about AIDS. In some countries in Africa AIDS affects a large proportion of the population. It would be a human failing if large populations die for not being able to get medicines at affordable prices. In a South African Conference the country's Supreme Court Judge, himself an AIDS patient, in one of his speeches mentioned that he could afford the price of medicines by virtue of his official position, and but for his official position he would have been dead long back.

I am afraid that your feeling that the Doha Declaration in Public Health is adverse to the interest of patent holders is not correct. Let us look at the background to the Doha Declaration On Public Health. South Africa and other African countries were facing a major health crisis in the form of AIDS. The efforts of South African government to procure medicines required for treatment of AIDS at affordable prices were getting thwarted. NGOs all over the world especially US and EU pointed out that South African government should have the right to procure urgently required medicines from Indian companies who were offering the medicines at very low prices compared to Western Pharmaceutical Companies. An argument was made that because of the patent protection available to the medicines in South Africa they should not import these medicines from countries like India. The situation of high prices for AIDS medicines and other countries reinforced the feeling that the TRIPS agreement protects private profits more than public good. The negotiators at Geneva felt that a clear signal should go to the effect that TRIPS agreement should not stand in the way of governments taking measures to protect public health. The United States tried to deflect the issue by saying that price of medicines is not the problem and that lack of health infrastructure is the real problem. The Doha Declaration does not dilute the TRIPs agreement in anyway. In a way, it reiterates the understanding of the position of a large number of WTO Members that the TRIPS agreement does not and should not come in the way of governments providing appropriate health care to people affected by diseases. The compulsory licensing provisions of the TRIPS agreement are very onerous making it very difficult for governments to intervene effectively when situation demands. The Doha Declaration brings about certain amount of balance by pointing out the paramount responsibility of governments towards health of their people and makes sure that TRIPS agreement is not misinterpreted in such a way as to take away the right of governments in the area of public health. The Doha Declaration is a political declaration and is meant to be a clarification to the TRIPS agreement.

Is WTO inherently biased towards larger corporations, as individuals or smaller business houses cannot take on violation of WTO norms with transnational business houses. How effective, do you feel, is the dispute settlement mechanism?

The WTO is an intergovernmental organisation and governments and governments alone are Members of the WTO. The dispute resolution system of the WTO can be put in motion only by Member governments and not by corporations or individuals. All business enterprises, big or small, act through their governments whether it is WTO negotiations or whether it is WTO disputes.

The dispute settlement of the WTO has won the admiration of academics and experts all over the world. The WTO dispute settlement system is the fastest and most effective system available in any international organisation. Trade disputes involving billions of dollars are settled in a maximum period of about 15 months including the appeal stage. Compare this with the speed of our own judicial system. It is very difficult to fault WTO dispute settlement system.

What in your view are the priority areas, if India has to catch up with the more developed countries. What time frame would you give the country before it fares better and catches up with these countries?

Our problem, in my view, is that we did not change to more liberal policies as China and South East Asian countries did at the right time. Till 1991 we had import restrictions and very high tariff protection. Experience shows that countries with closed economy had had done rather badly But we accepted the reality only when we were in very bad shape. Many of our problems are not because of World Bank or IMF. It is purely because of domestic policy failures. Take our food economy, for instance. WTO has nothing to do with support price, issue price or FCI functioning. Our procurement prices are fixed at very high levels for political reasons and coupled with high storage cost of FCI, high procurement prices result in high issue prices under the public distribution system resulting in a situation where open market prices are lower than prices in the public distribution system. This is a classic example of how our policy failure has affected a major sector of our economy. Ninety percent of our problems are self-made. We have high tariff protection. Our industrial tariffs are second highest in the world. Our industry has got accustomed to a very high level of protection for a long time now. When they are not willing to compete with imported products in our own country, it is not realistic for them to compete effectively in foreign markets.

See what we did for insurance. We do not do things in time. We delay and end up doing things either under pressure or we are over taken by events. Malhotra committee recommended allowing Indian companies to enter the insurance market. Our trade union leaders and our political masters did not accept these recommendations. And now there are 13 foreign companies operating in the insurance sector in India. When we opened up the insurance sector we opened it simultaneously to Indian and foreign private sector. Indian private sector has no experience in this sector and could at best form joint ventures with the foreign companies. Sequencing of the reform was the problem in this context. We should have first allowed Indian private companies to enter the Indian Insurance market and then open up the market for foreign companies. We failed in this regard.