: "n th" As India continues to become more relevant in a global world, hoping to leapfrog into a developed nation through its brainpower and service capabilities, the importance of intellectual property and its protection will come even more sharply into the foreground.

At present, one of the grey areas clouding corporate investment decisions in the Indian economy is the concern over our compliance with internationally accepted intellectual property standards.

A recent Business Week article explained that part of the trouble with India is its deficit of traditional infrastructures such as highways, reliable power and clean water. Yet, there is another infrastructure that India needs to be focusing on strongly, in order to propel its economy forward much faster — one that consists of protection for innovation.

This protection must be delivered in a manner that is perceived by corporates to be credible, transparent and based on principles of commitment and unimpeachable integrity. Inevitably, this intangible infrastructure is one of the basic building blocks of our fast-emerging knowledge economy.

Against this background, corporate India is closely watching the Novartis Pharmaceuticals case in the Madras High Court. Novartis has claimed that section 3(d) of the Indian Patents Act — amended in 2005, which defines exactly what a new invention should consist of — is not in compliance with the WTO agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and is therefore unconstitutional and in breach of international trade law.

It has claimed that this section creates additional hurdles, is outside the normal patentability criteria, and goes beyond the framework of international agreements for pharmaceutical patents.

This case has evoked strong emotions from health activists and NGOs who feel that if the section was indeed struck down or amended significantly by the high court, patents would be granted far more widely in India, heavily restricting the production of affordable medicines that has become crucial to the treatment of diseases across the developing world.

At the heart of the matter is the way the court will interpret the challenge to the legislation. However, it is clear that significant events hang in balance, depending on which way this judgement will go. Investors, both foreign and domestic, will use it to benchmark the long-term potential of the Indian pharma market.

It is worthwhile to note that this market is increasingly going to see not only greater interest from foreign players but also a fight for dominance by Indian players who have exponentially increased their R&D spends to morph from being great chemical synthesisers into innovators of repute.

At stake is the balancing of a long-term sustainable investment in healthcare infrastructure — along with encouragement and nurturing of domestic scientific talent (the third largest in the world) — with making medicines more affordable.

This balancing is excruciatingly difficult and will have to be achieved objectively, realising that the pharmaceutical industry itself is highly competitive, not only nationally but also internationally. As Asia becomes a global hub for investment, particularly for the pharmaceutical industry, India must compete with key players in the region — many of whom are more willing to adopt internationally acceptable intellectual-property standards.

A case in point is Singapore, which is striving to successfully transition to developed-country status and has taken certain steps concerning patent law that appeal to foreign investors. Recognising the importance of IPRs, the Intellectual Property Office of Singapore has implemented various initiatives, such as making Singaporeans ‘IP ready’ by educating school children about IP, and teaching businesses how to use the IP system to be more competitive.

If India has to contend to be a viable investment option within Asia, we must ensure we maintain our competitive edge over other countries in the region.

The current boost to FDI in India is only the trickle at the beginning of what could be a flood, which could help us to bridge the “prosperity gap” and herald more inclusive growth for our people. Without strong intellectual property protection, there is a disincentive for corporates to invest in a sustainable manner in developing innovative IP, which could, in the medium to long term, hamper our ability to harness opportunities for growth.

Strong intellectual property laws and a fair and credible implementation that gives investors the opportunity to be rewarded for their innovations and to recoup the value of their investments are necessary building blocks for spurring even more investment in IP innovation.

The resultant increase in economic activity could provide a chance to many of our less fortunate brethren to escape the shackles of poverty and deprivation.

Economic theory holds out, since time immemorial, the direct correlation of risk and reward and a climate conducive to innovation and entrepreneurship is a sine qua non to long-term economic prosperity.

(The author is sector leader, Pharmaceuticals, KPMG)