India's Response as a Non-Western Society to the Computing Age

Intellectual Property

Intellectual Property Rights in India

India has seen a remarkable turnaround from its once protective policy towards its domestic industries with minimal intellectual property protection to encourage a copying culture of cheap goods to a wide acceptance of foreign companies and strict intellectual proper rights. For example, in 1977, intellectual property law so favored Indian industries, it required that Coca-Cola disclose its recipe. Rather than reveal its recipe, Coca-Cola left India instead. Local colas such as Thums Up and Campa Cola sprang up to take its place. But in 1993, Coca-Cola and Pepsi were back in India and drove Thums Up and Campa Cola out of the market, buying their factories in the process.

Nehruvian Socialism

Since its independence in 1947 until 1991, India adopted a policy similar to one implemented by Japan in which trade with outside countries was minimized in an attempt to achieve self-sufficiency. This strategy was known as Nehruvian Socialism. It promoted and protected Indian industries, in particular, those companies that were trying to replace foreign imports. For example, in 1977, a socialist Indian government changed investment rules to protect Indian industries, which drove IBM out of the country.

During the period of Nehruvian Socialism, trade tariffs were kept high to erect a barrier against foreign imports. Expensive import licenses turned away many foreign companies and protected domestic producers. While well intentioned, this barrier kept some needed industrial parts India could not produce out of India. Further, without imports, other countries refused to accept Indian exports leading to the dramatic decline of Indian world trade on the world market.

At the same time, the state was intervening in many sectors to stimulate industries yet still provide basic services to the people. The Indian government during this time tried to keep as many people employed as possible through large public projects. As trade unions developed through these public works, workers became resistant to improvements in productivity since that meant the loss of jobs. The government was also trying to stimulate agriculture yet provide cheap food to the public. In the end, the public won out as the government set the price much lower than the market would bear. To help out the farmers, the government had to subsidize the cost of grain production. This policy, combined with needed foreign industrial parts being kept out of India made business in efficient. The public expenditures also made the government lose money.

In the 1970s, the Indian government took a renewed effort to remove foreign companies from India. In 1970, it introduced the Indian Patent Act of 1970. This Act recognized process patents but not product patents. In particular, the following were not patentable according to Chapter II of the Patent Act of 1970:

an invention which is frivolous or which claims anything obvious contrary to well established natural laws;
an invention the primary or intended use of which would be contrary to law or morality or injurious to public health;
the mere discovery of a scientific principle or the formulation of an abstract theory;
the mere discovery of any new property of new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant;
a substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof or a process for producing such substance;
the mere arrangement or re-arrangement or duplication of known devices each functioning independently of one another in a known way;
a method or process of testing applicable during the process of manufacture for rendering the machine, apparatus or other equipment more efficient or for the improvement or restoration of the existing machine, apparatus or other equipment or for the improvement or control of manufacture;
a method of agriculture or horticulture;
any process for the medicinal, surgical, curative, prophylactic or other treatment of human beings or any process for a similar treatment of animals or plants to render them free of disease or to increase their economic value or that of their products.

The Act was designed so that domestic companies could easily produce substitutes for foreign companies since products were not patentable. This Act quickly spawned a copying culture in India since it was not against the law to copy existing products. In the pharmaceutical industry, many generic drugs were developed competing against foreign proprietary versions. Products that were protected elsewhere in the world quickly became unprotected in India. As mentioned above, Coca-Cola faced revealing its recipe as a result of its products not being patentable. Rather than reveal its recipe, it left the country. In its wake, local colas such as Thums Up and Campa Cola sprang up. In addition, the patents that were granted for processes only had a lifetime of seven years, which made it easy for companies to adopt processes after that time.

These social policies combined with the isolationist policy caused other countries to withdraw foreign aid and drove the government closer and closer towards debt. At this point, India’s tiny trade on the world market came back to haunt it since India could not use the world market to produce profit to support its economy. In the 1980s, India began borrowing from the World Bank to support its economy; however, this was not enough to sustain its expenses in social projects. Everything came to a climax following the Gulf War in 1991 as the Indian economy was on the verge of bankruptcy. The crisis was resolved by $2.3 billion from the IMF, but it became apparent Indian needed to change its policy to survive.

Thus, in July 1991, the government adopted a policy of radical liberalization that was designed to encourage foreign investments and reduce its trade deficit brought about by years of isolation. The import licenses were removed and foreign companies were now allowed to own 51% stakes in Indian companies. Intellectual property rights were seen as another method to lure foreign investment to India.