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Patents Bill: a setback to innovative software developers

By Shanthi kannan

Software professionals at work developing insurance solutions in a company in Kolkata. — Photo: Parth Sanyal

CHENNAI, MARCH 25. The UPA Government has dropped from the Patents Amendment Ordinance 2004 protection to embedded software, following strong protects raised by the Left parties. This might not be a happy development for innovative companies in Indian IT sector, whose ranks might grow. The Patents Amendment Bill to replace the ordinance has been passed by both Houses of Parliament.

The December Patent Ordinance had allowed patenting of software embedded with hardware as also software-hardware combinations. The ordinance did not permit patenting of software, per se. The new ordinance was supposedly brought in to make the Patents Act 2002, TRIPS compliant.

The Union Minister for science and technology is reported to have said that the earlier proposal for patenting of software was a result of the demand of the Indian software industry whom it will help.

The Patents Act, 1970, as modified earlier in 2002 had made non-patentable the following: "a mathematical method or a business method or a computer programme per se or algorithms." The recent amendment ordinance stated instead: "a computer programme per se other than its technical application to industry or a combination with hardware; a mathematical method or a business method or algorithms."

The Chennai-based cyber expert and trademark attorney, A. A. Mohan, said moving from a copyright regime to software patenting would have increased manifold the cost of developing new software. Copyright under which all software has all along been protected in India is virtually automatic, there are no costs associated with obtaining copyright. On the contrary in the case of patent applications for grant of patent had to be filed involving fairly high cost.

Information technology (IT) software and services majors including Infosys, Wipro and TCS have been vocal about developing the embedded solutions and mobile computing space, under the patent regime. Patent regime would help increase India's software exports — about $15 billion at present — manifold, they have opined.

According to the Managing Director of California Software Company, Sam Santhosh, allowing the patenting of computer programmes was a move long awaited by the IT industry. The Government had made a good beginning. Removing embedded software from the ordinance did not affect Indian IT companies significantly. Though companies like Calsoft develop embedded software, they were mostly as projects for the U.S. companies, who own the IP. "But as the Indian IT industry grows and starts developing products, it might be good to have patent protection for embedded software also included," he added.

R & D outsourcing

However, he feels that in any case it might be better for Indian law to be different from other countries. As a developing country, it may be critical for India to keep some technology/developments in the open domain - especially if they are of life saving nature (example-developments in medical devices). Further with India being leading offshore developer needs of the Indian IT industry have to be kept in mind.

Mr. Sunil Mehta, Vice President, NASSCOM, would prefer retentions of the proposal to protect embedded software because this would have helped innovative small and medium companies in the IT sector. There is an increasing awareness among Indian ICT companies that IP is a valuable business asset that drives business strategy to create revenue streams that also fuel a nation's economic growth.

IP development would also be leading to increased activity in R&D outsourcing. A recent joint study by NASSCOM and KPMG, on the trend towards R&D outsourcing and its impact on IP creation in a market like India, says that the India bioinformatics market is expected to exceed $ 2 billion by 2008, while the market for Indian biotech R&D products and services will rise to around $ 3 billion by 2010. The embedded systems segment is expected to witness a spurt in R&D outsourcing as well and will account for revenues of around $ 1.5 billion by 2004-05.

Already, Indian BPO services companies are getting into the development of embedded system tools such as microcontrollers, DSPs, FPGAs, and design of hardware and software.

Though there are many merits to this issue, still patenting is considered to be a cause of concern. As India has very few software products — the industry supplies "bodies" (body shopping) to develop software for global giants — such a regime would push up the costs of the users of software as a whole and also make it almost impossible for Indian companies in the future to break into the global software market with its own products.

Cause for concern

Mr. Santhosh feels that if embedded software were protected, there would be potential for conflict between hardware and software producers. Software patents might inhibit development of new hardware products- since a number of hardware / software combinations might be possible in developing different solutions. Another concern is that there could be more inadvertent breaches in terms of claims. These could be more likely for small firms where they may not have the resources or exclusive IP wing to look and explore into such issue.

Patenting is a double-edged weapon, says Mr. Mohan. The prices of products will shoot up; on the other hand there will be a rise in the investment for R& D. Since any commercial software has some industry application it would have opened up all software to patenting.

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