Last year was a noisy period for the IP world. Not because of less or more filings, but because of increased opposition to the patent regime by Europe, ripples of which found a chord with a section of the Indian intelligentsia. Will a highly protective IP regime harm the Indian industry? Will large companies with the ability to buy up patents tie up independent software companies and smaller developers in costly lawsuits? Perception, it emerges, is different from reality as many small companies Dataquest spoke to wanted to protect their innovation.

American MNCs also find Europe's conservative stance funny because software companies have always been the best examples of startups becoming global companies, like say Microsoft. This software giant feels the IP regime and the patent regime specifically works for innovators, not large companies against small companies. It protects innovation and the ability of the innovator to get a return on innovation. "It is this ability to get a return on investment, which has made the US a huge consumer of IP in IT and India a laggard. If India is to see small software development companies thrive, the best way to do that would be to ensure a strong IP regime for software. It helps no company for its ideas to be picked up by someone else and exploited. This can and will kill innovation," says the director of Law and Corporate Affairs with Microsoft India, Rakesh Bakshi.

The fact that this sentiment is shared is reflected in the growing number of Indian companies joining the patent club. FY 2004-05 saw three more companies making their first appearance-Ramco, i-flex and Subex. The one to do it with a bang, Ramco, has filed 16 provisional applications, emerging as one of the highest to do so from the country last year. The rest of the two have filed a patent each and Subex has actually identified two more patentable ideas-an indication that Team India is finally waking up to a culture that would ensure leadership in the global market and two, huge royalty revenues. Sasken, with 56 filings and five grants till date, generates 15% of its revenues from IP licensing. Ittiam, with an aggressive patent target of 10 filings every year, has a business model based around IP licensing-70% of its revenues come from licensing fee and the rest from customization charges for fitting the IP within the customer's application.

The US Patents and Trademark Office (USPTO) continues to be India's preferred destination but many companies are also waking up to the Patent Corporation Treaty PCT) of Europe, which helps countries reduce the task of deciding where to file and makes available regional patent databases. These apart, there were few other changes in the Indian IP landscape. The MNC scorecard continues to be miles ahead of their Indian counterparts, with TI ruling the roost as usual. ST Micro, with 60 filings and 32 awardings last year, figures prominently, along with Microsoft (40 filings) and Sun (27 filings). There would have been little change in the Indian top three but for Ramco's dramatic entry. It had 42 patentable ideas by FY 04, but finally filed 16 in the US, Europe and India, all pertaining to technologies related to Ramco virtualworks platform. But TCS, with 16 filings and five awardings, continues to lead the pack at the moment, followed by Sasken and Ittiam. Geometric Software Solutions was awarded two patents-one for 'Hole Recognition' algorithms and the second for 'Fillet Blend Recognition' algorithms developed as part of its flagship technology, Feature Recognition. Ittiam continued to focus on multimedia and communications, and Sasken received a patent for a technique for peak power to average power ratio reduction in multicarrier communication systems. Three of Wipro's pending patent applications are in the R&D services space of Wireless LAN, ATM and Messaging.

High end R&D is what the Indian human intellectual capital is up to and there is a strong evidence to the fact. "The R&D centers of Oracle and SAP in India are the largest outside their respective parent locations of USA and Germany. With many companies carrying out significant portions of their R&D work in India, software products are emerging," states Dr Mary Matthew of the Department of Management Studies at the Indian Institute of Science, Bangalore.

Sun has brought out products such as portal servers, web servers, identity servers and meta-directories from India. Texas Instruments has at least 20 fully developed products, including Ankur Digital Signal Processor, Sangam, a bridge router for DSL and Zeno, which runs multimedia applications. The local SAP products look at global markets and channel marketing solutions that help chip manufacturers negotiate prices with dealers online. i2 delivers about eight manufacturer-industry templates and retail solutions. "The Indian patent orientation will probably increase with more Indian self-funded R&D ICT centers emerging. Such domestic R&D investments will help change India's current image that its ICT business activities are in the low end of the value chain," Dr Matthew explains.

Cost Puzzle
While the patent potential is evident from the kind of R&D work done in the Bangalore cluster, not many such ideas actually get filed. The reasons mostly pertain to cost, but there are increasing signs of Indian companies discovering ways and means to reduce it. The average cost incurred during a patent lifecycle is $25,000-28,000 per patent for an international one. But there are different aspects a company needs to be aware of. First is the R&D cost, something that is usually ignored in the cost-benefit analysis. The other costs pertain to accessing the patent databases, the patent attorney fees, the filing fees at the patent office and if awarded, the fees to maintain the patent.

Among all these, attorney fees form the biggest chunk and Indian companies have been debating ways to cut their role. An IT R&D expert is capable of writing the technical specification for a patent. And the attorney translates that into legalese, files it at the patent office and chases the paper with the examiner. But if a company has employees skilled and trained in some of the attorney's competencies, costs can be significantly cut. This has to be a long-term effort and smaller Indian companies are open to trying this out.

There are now a lot of patent-filing Indian companies that have sprung up to provide low-cost services, work that US patent attorneys normally do. But CTO of Sasken G Venkatesh tells us the quality of these units is much poorer when compared to that of American attorneys. These units offer a fixed-price till a certain stage, mostly till such time the paper reaches the examiners. "About 60-70% of your costs are till that stage. If you get a fixed price, costs can come down by one-third. So instead of Rs15 lakhs, you end up paying Rs 10-11 lakhs," he says.

Some question as to whether cutting an attorney's role would affect the effectiveness of the process. "If you want to do a really good IP filing and ensure it is submitted in completeness, you cannot cut his role beyond a certain point. This is what decides the real priority of the company and we are not cutting down on that cost," says Sattam Dasgupta, VP, Ittiam.

Plan Well
If costs can't be minimized, the only other option is to plan better for a patent so that there are good long-term returns on investment. Sasken's approach calls for a closer look: Their foray into technology development and IPR-based product line is about 10 years old now. The thrust, from the beginning, was to look at various communication-related technologies that would get embedded on emerging processors. The focus was software as against silicon, which is how traditionally the communication technologies get implemented. They also picked domains where the extent of implementation was relatively weak, focusing on standards rather than things that were proprietary. This could have been tricky because not only did they have to develop technology and make it work, but also influence the standards body to get it incorporated in the standards. Things, as it turned out, have worked well for them, even though their IP licensing revenues have declined from 43% a few years back to its current level of 15%. That's partly because the company has moved all its contracts into royalty bearing, with an eye on the future. Customers thus tend to give them less licensing.

Perhaps, things can be further streamlined for companies if they treat the patent process as project management. A high potential for patents may exist at the idea generation stage itself, depending on the R&D problem. "The patent culture has to be mooted at that stage into the R&D team. It is a culture that has to be developed at the top management level and should infiltrate down the ranks. Unless it is done in that manner, you wouldn't be able to track it at an early stage," says Dr Matthew. Considering that the lifecycle of software is short, it could be a bit too late if one waits till the end of the project to discover patentable material. True, there is a mindset change happening, but Indians need to respect IP even more to get the desired returns.

Goutam Das