By Kishalaya Pal

 

Consolidation into Internal Management

The dispensation in India has adopted a highly peripheral approach to deal with the issue of protection of IPR. That is to say, the scope of their efforts is limited to facilitation and providing subsidies as facilitative bodies. The Ministry of MSME, RBI, and ‘Startup India’ scheme have all chipped in with initiatives, but there is a need for a concerted effort by an umbrella institution functioning under a statutory mandate.[1] The lacunas identified in the previous section can largely be attributed to this facilitative approach. As to the first lacuna, while engaging with the dominating firms, the facilitation provided does not bolster or invigorate the stature of the SMEs. Thus, the gap in bargaining power mostly remains unaltered. As to the second one, given the complex technicalities involved with the intersection of technology and legal principles, for an SME to instil a continuous means to claim and secure its IPR, an organ that understands and analyses the specific business elements of that particular entity. A government or government-aided institution cannot be expected to fulfil these as it cannot cater to the specific needs of each entity.

Therefore, in addition to the ongoing methods, the need of the hour is to establish a mechanism for SMEs which instils a culture of not just recognising and obtaining patents but also exercising the rights attached to them and accruing their benefits. Thus, massive efforts have to be directed towards empowering the SMEs from within and regulating the commercial interactions involving portfolios of IPR.

An important step towards these goals would be to have the ministry of MSME or any other statutory body, as the government may deem fit, prepare a list of IP auditors[2] and technical specialists in the field the SME’s business is related to and then by the mandate of law have them appointed in the management positions of SMEs. The provisions related to Director Identification Number in company law serves as a good example in this regard.[3] Criteria like accreditation from appropriate institutions should be designed for candidates to enlist themselves in this list. Regular training programs in relation to the current trends in various disciplines of IPR and in various parts of the world should also be undertaken.

Along with this, a strong framework that is provided for in the law must exist to intensely scrutinise the numerous transactions involving the purchase of IPR from SMEs should be set up. In buyouts of SMEs by large enterprises, the regulators should ensure that the IPR portfolios of SMEs are fairly valued. A combination of these measures would establish a well-ordered network entailing the regulators, the ministry, and the qualified personnel in the SMEs. This would ensure efficiency with which such processes are carried out along with the necessary protection.

A well-oiled machinery of regulators along with internal management would also enable the implementation of decisive policies like patent pooling which means an association of two or more companies wherein they agree to cross-license their patents with respect to a particular technology and then permit any third party to use the patents owned by them. This is particularly useful to SMEs because as it leads to aggregation of technology, involves lesser procedural expenses and an enhancement of their leverage in negotiations now that they are in an association. On the downside, patent pools may also provide an opportunity for anti-competitive behaviour like collusion or cartelisation which can increase transaction cost and adversely affect the development of new products.[4] For the purpose of arresting any such practices, there has to be a suitable mechanism for supervision and scrutiny of such deals by the regulators.

These measures will actually alter the management or governance structure of SMEs to imbibe a strong mechanism consisting of designated personnel bestowed with certain duties inculcating a sense of responsibility among the management. This will imbibe a robust and sustainable system as opposed to one-time interventions. A good example of this proposition could be found in Japan where corporations made massive gains because of a strong patent culture brought about by developments in the organisation and management of IPR.[5] Sound governance practices lead to improved internal control systems and higher profitability. They also enhance their capacities to accrue the benefits of the peripheral support that is already being provided. The measures should indicate that IP is an integral part of corporate management for SMEs.

This investment of human and monetary resources is a justified unique need of IPRs for SMEs as was previously explained. It will go a long way in keeping them afloat in the overwhelming dominance of large firms. Moreover, IPR related activities are a combination of technological, commercial, economic and legal competencies which needs special expertise to handle it and optimise benefits.[6] All of these eventually contribute to the growth of the MSME sector as a whole.

Conclusion

SMEs are the growth engines of our economy. They are up against a plethora of challenges, one of which is the protection of their IPRs. IPRs provide businesses with a means to commercially exploit their knowledge store and to contribute in the growth of the economy at large. India has a composite legislative framework to govern the arena of IPR in the country. SMEs, because of various business and economic reasons have a greater need for an enabling system to protect their intellectual property. For them, IP is not only another source of revenue but might prove to be the ace up their sleeve to compete with the larger entities.

The Indian authorities in the last few years have taken composite steps comprising of some legislative amendments, policy initiations and welfare schemes to assist the SMEs with their management and protection of IPR. Some of these measures have also materialised in the form of increased grants and efficiency. But still, the Indian SME is plagued by a severe shortage of awareness and the means required to secure and exercise IPRs on a regular basis. This could be attributed to some fundamental shortcomings in the Indian approach. It is a very generic and peripheral approach and is indifferent to some of the key modalities of the affair. Issues like gaps in bargaining power and the creation of a sustainable system of IPRs in the entities remain unaddressed. It is an approach of peripheral facilitation.

The current need is to establish a framework of statutes, policies and regulators that will not only assist the SMEs but also empower them to deal with the affairs themselves. This includes altering the management and governance structure by introducing qualified personnel into the mix by the mandate of law. This has to be complemented with strong supervisory roles on the commercial transactions of the SMEs with larger firms by regulatory bodies established by law. The human resource department within the SMEs should take up the responsibility to impose a set of rules and regulations pertaining to confidentiality, and handling of IPR sensitive information on the employees so that the IPR interests of the entity are not compromised during prosecution. Strengthening the internal mechanism of IP within the SMEs by law and policy can lead to the inculcation of a strong and vibrant culture across the sector and will go a long way in realising the business goals of the firms and the economic goals of the country.

 

[1] Sonia Mukherjee, supra note 3.

[2] Neeraj Parnami & Sunil Ailani, The Intellectual Property Audit: A Guide to Small and Medium Enterprises (SMEs), Social Science Research Network, (October 27, 2008), http://dx.doi.org/10.2139/ssrn.1289189.

[3] Companies Act, 2013, § 153, § 158, No. 18, Acts of Parliament, 2013(India).

[4] WIPO, Patent Pools and Anti-trust- A Comparative Analysis, World Intellectual Property Organisation, (March, 2014), https://www.wipo.int/export/sites/www/ip-competition/en/studies/patent_pools_report.pdf.

[5] Ove Granstrand, Corporate Management of Intellectual Property in Japan, 19 International Journal of Technology Management, 121, 123-124  (2000).

[6] Ibid,