〈日本知財学会誌〉Vol.4 No.3 ― 2008 : 42 ― 48

Does Intellectual Property Laws in India andChina Encourage Innovation?
Parama Sinha Palit（Senior Associate with Corporate Law Group）
Bhaskar Bhattacharya（Senior Associate with Corporate Law Group）

Incremental innovation has become a point of debate the world over. While it is largely believed that ‘breakthrough’innovations are important, at the same time it is held that such ‘breakthroughs’ are rare in medical research. India andChina, the two Asian countries are not only joining the international trade as emerging economies but theirpharmaceutical industry is also taking big strides. As far as the pharmaceutical industry is concerned, ‘minor’ but‘essential’ steps are considered crucial for the industry to improve medicines and public health. However, there seems to
be a dilemma amongst countries over the ‘value added’ by way of these small incremental changes. This paper attempts
to examine both the Indian and the Chinese pharmaceutical industry and analyse the criticality of ‘incremental
innovation’ for the industry in these two specific countries of interest.
■ KEYWORDS

Innovation, Incremental, Pharmaceutical, TRIPS, Healthcare, Patent

There is little doubt that Intellectual Property

1. Introduction

Rights in the form of patents not only encourage
innovation but also provides an economic

The ‘Asian Century’ seems to have come of age
in every sense of the term--strategically,

incentive to investors to invest risk capital ininnovation activity.

economically and of course pharmaceutically. It isa reality that all action of the 21st century

While the benefits of patents are getting more

appears to be shifting from the ‘West’ to the ‘East’and more accepted and acknowledged, theremaking Asia the new ‘centre of gravity’. As far asremains an apparent misconception with respect

the pharmaceutical industry is concerned, theto the nature of inventions to which patent

shifting has occurred no doubt. This is vindicatedprotection must be available. More often, at least

by Dan Bartholomew, senior Managing Director,

in case of India, one comes across the restrictive

PricewaterhouseCoopers Pharmaceutical and Life

treatment to adaptive or incremental innovation

Sciences Practice, who has rightly pointed out

by the Patent Offices. As a palpable instance ofthat “the pendulum for the pharmaceuticalaberration to the universally accepted norms of1industry is shifting from the West to the East”.

patentability, in Indian law, patentability ofpharmaceutical, biotechnological and chemical

However, despite the ‘shift’ and the promisinginventions has been left open ended to

Asian pharmaceutical industry, a lot needs to beoverarching subjective discretion of the Patent

done with respect to incentives for innovation ―Office, needless to state, to the detriment of thethe hallmark of any pharmaceutical industry.

applicants. However, it is largely true that any82

蘓 2008

IPAJISSN 1349 ― 421X
All rights reserved.

Does Intellectual Property Laws in India and China Encourage Innovation?

innovation is incremental in nature and protecting

existing products, alternative salt forms or

such innovations, therefore, becomes all the moreisomers of known substances, or minor changes toan important responsibility of any Government.

existing medial devices, have also been crucial in

Both Charles Darwin（a naturalist）and Alfred

increasing value to a drug. However, more thanMarshall’s（an economist）observation that

often these adaptive/incremental improvements to‘natureleaps’ 2

bea given drug have been disapproved of as “minor”

appropriately applied to understand the role ofor “small” changes that do not deserve any

incremental innovation in the pharmaceuticalinvestment.

industry.

granteddoes

nothing

incanon

It has been argued that patents
smallinnovations

misdirect

investments to minor changes and discourage
Incremental innovation is not confined to nature

further innovation. But there are still others whoalone. The invention of the wheel was acounter that though “innovation” may not be

breakthrough innovation in transportation. But

synonymous with “major breakthrough” andthe subsequent steps（ small incremental

advances in science and technology, theyadvances） involved

frequently occur in small steps referred to here as

have

revolutionizedtransportation today. Similarly in every otherincremental or adaptive innovations.

experimentation--drugs in this case--require

advances, they squabble, warrant recognition 3

building on existing knowledge and experience

accorded by intellectual property protection andwith additional creative/scientific thinking,the investment incentives such protectionresearch and trials which enhances the value ofprovides.4Such

the end-product. There is no denying that efficacy
of drugs often increases with small incremental

Breakthroughs have indeed occurred inimprovements which sometimes are responsible

diagnostic technologies, but incremental orfor bringing about tremendous benefits toadaptive innovations are required to bring relief

patients. It has been rightly pointed out that not

to certain diseases which are rampant in poor

recognizing incremental innovation in theregions of the world. For instance, most cervicalpharmaceutical industry is like asking medical

cancers are preventable if detected and treatedresearchers to reinvent the wheel. Incremental

early. Digene Corporation of Bethesda, Maryland

innovation or innovation by steps is essential to（Digene）is one of the companies responsible forpharmaceutical development of new and improved

recent technological breakthroughs in cervical

medicines and to public health.

cancerscreeningtechnology.

Products

embodying those breakthroughs have been given

2. Incremental Innovation: A Necessity
for Pharmaceutical Industry

marketing approval and have contributed toAny discussion of healthcare research andWorldwide, however, cervical cancer remains a

reduced mortality in Western countries.5

development often implies ‘major breakthroughs’

leading cause of cancer deaths among women inor ‘pioneering advances’ such as new classes ofsome poorer regions.

chemicals or new compounds that open entirely

imbalance in availability of cervical cancer

new therapeutic options. But incremental ordiagnostic tools were initiated recently by aadaptive innovations, new dosage forms ofpartnership between Digene and the Program forEfforts to diminish the83

〈日本知財学会誌〉Vol.4 No.3 ― 2008

Appropriate Technologies in Health（PATH）.6

from 1st January, 2005 by amending the Patents

That work would build on the existing basicAct, 1970 in India.

technology now used in developed countries withThis joint effort

While the pharmaceutical industry in India iscould yield low-cost, easy-to-use, culturally

undergoing transformation, its inventions haveacceptable tests for cervical cancer screening,always been treated differently. In the field of

suitable for regions with minimal resources andpharmaceutical inventions, the IPR issues have

The task is not ‘minor’:always been hijacked by issues of availability andboth research and development may take at least

affordability of essential medicines and protection

five years, if not more. Changes required to adaptof public health, thus imparting a wrong notion

existing technology may be incremental, but theythat absence of patents would ensure availability

definitely are not of a low value to any society. Inand accessibility of drugs, and thus take care offact, adapting the existing diagnostic technology

the public health concerns. The fallacy is evident

to developing country conditions could havefrom the very fact that from 1970 to 2005, there

significant benefits to women’s health in poor

were no pharmaceutical patents and even now astrong medical infrastructure.

medical infrastructure.

regions.

7very few patents have been granted. Even in theabsence of such patent regime, while the Indian

3. India & China Patent Regime:
Innovation at Crossroads

Pharmaceutical Industry grew at a fast rate, thepublic health scenario remained grim. If one looks
deep, the restrictive policy on pharmaceutical

With respect to the pharmaceutical industry ininnovations in the Indian Patent regime can be

India and China, their domestic consumption of

actually found in the Industry demography andmedicines is supplied by their respective domestic

the public health debate has rather been used as afirms. The US Department of Commerce puts theconvenient vehicle for voicing domestic industry

8

estimate at 70 per cent. This clearly indicatesconcerns.

that given the low incomes of the Indians and theChinese, the pharma companies of these two

It is a hard fact that after 1970, Indian

countries supply the low-priced medicines locallypharmaceutical companies especially the morefor the local population.

than 22,000 small manufacturers have a stake in a
weak patent regime continuing. It must be

While there is no doubt about the growth ofrecognized that most of these manufacturers

Pharmaceutical Industry in the two countries, theproduce ‘generic’ drugs. While the larger

countries have not gone far with protecting

manufacturers with a strong R&D base favor ainnovation, despite certain otherwise positive

TRIPS compliant patent regime, the smaller ones

changes taking place in the sector.

take a reverse stand. As a result, the new patent
regime is considerably weaker than the regimes

Both India and China agreed to go ahead toof most other countries. However, in doing so it isfulfil the Trade Related Intellectual Property

promoting a generic market both in India andRights（TRIPS）Agreement. In keeping with theabroad, which does not offer high value innovative

TRIPS Agreement, India introduced productproducts.

patent in the pharmaceutical sector with effect84

Does Intellectual Property Laws in India and China Encourage Innovation?

The Indian domestic pharma market, which has

Although the Chinese firms’ advances in biotechconsistently grown at 9.5 percent CAGR in theand traditional medicines are strong, it islast five years, is poised to accelerate at 13.6

gradually focusing on innovative R&D as a longer-percent between 2006―2010 to touch the market

term goal. Even within the innovative products

size of $9.48 billion by 2010 from present level ofcategory, Chinese firms seem to focus onlittle over $ 5.7 billion according to a study

opportunities with biotech and traditional

undertaken by the Associated Chambers ofmedicine primarily, with a lesser emphasis on

Commerce and Industry（ASSOCHAM）of India

small molecules, the traditional area of expertise ofand Cygnus. With such a promising potential, it isMNCs and Indian firms. 9 Incidentally, China’s

imperative for India to take measures to protect

biotech expertise already stands out at theinventions, thus making patents more effective.

international level with strengths in gene
mapping, transgenic technology for animals andIndia has a stake in the global IPR regime inplants, gene therapy technology, stem cellview of the gains being made by its own software

research, gene chips and gene research of someand pharmaceutical industry. India, with its vast

major diseases.

reservoir of scientific talent and establishedpharmaceutical industry stands at the threshold ofHowever, apart from the fact that China’s

success in biotechnology, after its success in theindustrialization of biotechnology still lags behind

IT sector and is capable of being part of the next

therevolution underway. India needs to stoke an

involvement and lower technological capacity ofinnovative culture. In this research driven sector

the Chinese domestic firms have made thethe right legal framework is lacking, which

Chinese pharmaceutical industry different fromdiscourages continuation and deepening ofcountries like India. However, since 2001 China

international partnerships and expanded research

has also made considerable advances in its

and development in India.

pharmaceutical-related regulations. It has largely

Westernstrengthened

world,

patenttheincreased

protection

state

but

its

China, on the other hand, primarily thought ofenforcement is weak. It has also overhauled its

as the lowest-cost source of pharmaceuticalPharmaceutical Management Law, and several

ingredients and plain vanilla generics, started

other regulations were enacted from 2002-03. It

moving towards protecting intellectual property inhas been observed that although transparency in1993 with reform of its patent law. It had also

the approval process is gradually improving, it’sraised bar for entering the pharmaceuticalmonitoring needs to be improved further.

business by passing laws including Drugon

With China posing as one of the world’s largest

Pharmaceutical Manufacturing since 1998.

market, and expected to grow even more, it isSubsequent to its accession to WTO and TRIPS, itemerging as an attractive market for foreign

has enacted regulations in 2002 in compliance withpharmaceutical investment. However, there are

TRIPS agreement. Its 2002 regulations extended

other problem areas too that continue to mar its

pharmaceutical patents to twenty years, and data

pharmaceutical industry. Despite international

exclusivity for six years.

recognition of China’s expertise in selected sectors

Management

LawandRegulations（ e.g. biotech）, the industrialization of this85

〈日本知財学会誌〉Vol.4 No.3 ― 2008

under-developed. 10 The

While China is taking a different approach tocooperative relationship between MNCs anddeal with patents, India seems to be far behind. It

Chinese firms are also not comparable to theis indeed unfortunate that the Indian law does not

Indian situation since many factors influence thisallow second use patents and discourages patentclose collaboration. First and foremost, theprotection to salts, esters, ethers, polymorphs andlanguage acts as a major barrier. Unlike in India,

other derivatives of known substances unless it

English is not a popular language in China which

can be shown that they differ significantly in

unfortunately

andproperties with regard to efficacy. With India

understanding at work. In addition, lower levels of

reluctant to change course, as also evident fromchemistry skills, relatively inferior quality,

the Chennai High Court ruling against Novartis,

insecure institutional development for intellectual

China’s opportunities seem to be graduallyproperty protection, long registration approvalincreasing in this sector.

expertiseprocesses,

is11

also

affects

communicationand regulatory favoritism towards

4. Future Prospects

local firms act as further deterrents.
Despite the problem areas, things seem to be

On the issue of providing incentives tolooking up in the Chinese pharmaceuticalinnovations through a robust patent system, oneindustry. The Chinese decision-makers seem keen

has to accept that it is difficult to categorise

to work on their problem areas. The recent

innovations

Pfizer’s victory in the Chinese courts（as against‘fundamental’ on one hand, or adaptive, cumulative

the Chennai High Court ruling in the Novartis

or incremental on the other. Most innovationscase）after generic drug makers tried to get its

bring forth some advantages in some form or theViagra patent overturned, is indicative of the factother. Innovation implies one step further,that a stronger legal framework combined withspecifically crucial in the pharmaceutical industry.

strong skilled scientists and Government

Specifically, with respect to the Indian context,

incentives are being worked upon to send aconsidering the stage of development of thepositive signal to the international community.

Indian Pharmaceutical industry and its capacity to

The Government seems determined to turn China

spend on R&D, it is the class of incremental andinto a pharma powerhouse. The new regulatory

adaptive innovations that is best suited for thestructure that is in place in China also facilitates a

Indian pharmaceutical industry and the same

court injunction to force the SFDA to withdraw

needs to be encouraged by providing adequate

the registration of a rival’s license. This ensuresand strong IPR protection.

aseither‘breakthrough’orthat everybody needs to pass through one place
in Beijing if they are to legally sell drugs toAlso, for developing country like India, it is time

hospitals and pharmacies in China. This move has

to understand the importance of patents for a

led China to surpass US in becoming the world's

growing pharmaceutical industry and objectively

most litigious country for IP disputes with 13,424

and empirically judge the actual role that patents

cases filed. This new regulatory system is a big

play

move, as it allows for more creativity in

Misconceptions based on extrapolated emotive

12

production methods as long as they remain safe.

intheentire

healthcare

scenario.

issues are detrimental both for public health andinnovations. While superimposing the entire

86

Does Intellectual Property Laws in India and China Encourage Innovation?

healthcare access issues on patents makeHealth（IOWH）, a non-profit pharmaceuticalinnovations suffer, the same concept results in acompany and Gland Pharma Ltd. of Andhra

flawed approach towards solving the healthcare

Pradesh.14

problems as a policy-maker is prone to overlook
Patentthe actual drawbacks in the healthcare delivery

incentives

andpublic-private

systems that is the root cause for the grim face ofpartnerships are necessary in the pharmaceutical

health situation in India.

industry. Without them useful innovative
adaptations would not be possible. An invention

Talking about improvement in the healthcare

canoften

range

from

manufacturing

scenario, there is an urgent need to come out of

improvements or modifications to changes in inert

the misconceived notions regarding patents alone

or active ingredients. None of these can beand look for other mechanisms to strengthen theconsidered ‘frivolous’ if the end result satisfies thehealthcare system. One of theuniversally accepted norms of patentability, viz.

aspects to beexplored in this sector is global public-private

novelty,partnerships that help distribute the results ofapplicability.

experiments in pharmaceuticals worldwide. There
are several instances of such global public-private
partnerships which have successfully distributed
improved derivatives, and bolstered scientificreputation in many developing countries. It was apublic-private partnership between Pfizer and theEdnaMcConnell

ClarkFoundation

that

incorporated a multi-faceted public health strategy（SAFE ― surgery, antibiotics, face washing andenvironmental control）.13 Another example ofsuch partnership is the Novartis Institute forTropical Diseases（NITD）Singapore EconomicDevelopment Board（SEDB）partnership which
successfully created increased access to drugs tofight TB and dengue fever by making new drugs
available to poor people in developing countries atthe lowest possible price.
There is an urgent need for India to get into asimilar mode of public-private partnerships in this
sector to improve healthcare system in thecountry. There are a few instances of such publicprivate partnership in India but we need to havemore of these to improve healthcare sector inIndia and China. An example that comes to themind is the one between Institute for One World

non-obviousness

andindustrial

Acknowledgement
The authors thank Ms Krishna Sarma, Managing Partner, CLG for
her inputs and critique of the paper. She had encouraged theauthors immensely to write on the topic and for the journal.
References
1 “Asia Pacific to Replace United States and Europe as
PharmaceuticalIndustry
Powerhouse,Finds
PricewaterhouseCoopers”, Prime News Wire, http://www.
primenewswire.com/newsroom/news. html?d=124404
2 “Adaptive Innovation, Intellectual Property and the Public
Interest: How Patent Extension Leads to More, Better and
Safer Medicines”, IFPMA, http://www.ifpma.org/documents/
NR4234/Adapting%20Innovation%20int.pdf
3 Recognition by grant of a patent does not by itself constitutean economic reward. Economic reward flows from products
placed in use that embody the patented innovation. This isparticularly important in pharmaceutical technologies
because patentability is determined long before any productexists from which one could calculate economic value withcertainty.
4 Bale, Harvey and Azais, Boris “Pharmaceutical Innovation is
Evolutionary and Incentive – Driven”, Id. At 788 – 789;
Attaran, Amir “Patents do not Strangle Innovation, but Their
Quality Must be Improved”, Id at 788. Recognition by grant ofa patent is not an economic reward. Economic reward flow
only through products placed in use
5 See press release and article at: http://www.path.
org/resources/press-release.php?id=3
and
http://www.prnewswire.com/cgibin/stories.pl?
ACCT=104&STORY=/www/story/02-18-2004/0002111586&EDATE=
6 ‘How does the Regulatory Framework Affect Incentives for
Research and Development’, Prepared for World HealthOrganisation’s Commission on Intellectual Property Rights ,Innovation and Public Health（CIPIH）, November 2005,
http://www.who.int/intellectualproperty/submissions/USPCIPI
H.pdf
7 Ibid8 See http://www.buyusa.gov/china/en/ pharmaceuticals.html
9 Cheri Grace, “The Effect of Changing Intellectual Property on
Pharmaceutical Industry Prospects in India and China:
Considerations for Access to Medicines”, DFID Health87

〈日本知財学会誌〉Vol.4 No.3 ― 2008
Systems Resource Centre. http://www.ip-watch.org/weblog/
index.php?p=176&res=1280&print=0.
10 Ibid
11 O n J u l y 1 0 , 2 0 0 7 , C h i n a ’s S t a t e F o o d a n d D r u g
Administration（SFDA）promulgated the amended Measureson the Administration of Drug Registration（the AmendedMeasures）which will take effect beginning October 1, 2007.
For details see China Reforms Drug Administration, July
2007, http://www.wilmerhale.com/files/Publication/
34e4cc44-5ae0-4489-b593-bedebd2ae1ae/Presentation/
PublicationAttachment/c1f42276-2337-475d-a06bbf7f5134e6f3/ChinaBriefing̲July2007.pdf
12 ‘Drug Makers Challenge India’, Business Week, September

8824, 2007.
13 ‘How does the Regulatory Framework Affect Incentives for
Research and Development’, Prepared for World HealthOrganisation’s Commission on Intellectual Property Rights ,Innovation and Public Health（CIPIH）, November 2005,
http://www.who.int/intellectualproperty/submissions/USPCIPIH.pdf
14 Gland Pharma Limited is an Indian Company with which IOWH
worked in preparing the product dossier for ‘Paromomycin
Injection’, and an entity that holds the recently-granted
product approval for ‘Paromomycin Injection’ in India. Gates
Foundation had funded the project.