Analysis of Recently Published Annual Report of Indian IP Office
By Kshitij Malhotra, Partner
In July this year, the Office of Controller General of Patents, Designs & Trademarks or CGPDTM, the administrator of Indian IP Offices, issued its annual report for financial year 2017-2018. The report is considered by many as one of the authentic sources of information about developments of IP in the country, and despite coming out a year after completion of the concerned fiscal, the report is widely awaited. The present report of 2017-18 fiscal is significant, as it is first official account, after the Indian IP offices undertook major administrative reforms in fiscal year 2016-17. The instant article investigates some key information reflected in the report.
Context of the present report
Just to give the readers a context of the significance of this report, the growth of number of IP filings in India has been stagnant for last 5-6 years. Many have attributed the main reason of the sluggishness to be the delays in examination and granting IP rights. Some reports, as recent as 2017, suggested that around 232,000 patent applications lay pending at the IP offices.
It is interesting to note that in year 2014, plagued by the problem of pendency of its patent applications, Japanese corporation, NITTO DENKO, had sued the Indian government for delays in patent grant procedure. The High court of Delhi looking into the matter ordered formation of a high-level committee to investigate the problem. The committee recommended various emergency administrative reforms in the Indian IP set up.
Accordingly, in fiscal year 2016, the government implemented various changesin the rules governing IP registration. Some of these reforms included reducing the statutory acceptance period of patents by half, improving e-filing systems for filing IP applications, change of opposition procedures, increasing the strength of patent & trademark examiners, centralizing examination process, coordinating allocation of patent & trademark applications among the four branches of the IP offices in a better manner, and other similar reforms.
Although it is little farfetched to anticipate that the 2017 fiscal data would have been significantly influenced by the measures taken in preceding fiscal, still it will be interesting to analyse the data to locate any positive indicators that augur well for users of patent & IP system of the country.
Overall Filing Trends of Patents, Designs & Trademarks
The charts below show the overall filing & issuance trends at the Indian IP offices in 2017 fiscal year as compared to last 5 years.
Chart 1: Overall IP filing trends at Indian IP office
As you can see, the overall number of filings in fiscal year 2017 has remained almost same as compared to 2016 fiscal. In 2017-18, 46,846 patent applications were filed, which increased marginally by around 3 percent only as compared to 2016 fiscal. Similar marginal growth is observed in design and trademark applications. The story seems little better when it comes to number of issuance of IP rights.
Chart 2: Overall IP registration trends at Indian IP office
As seen in Chart 2, the data for number of IP registrations shows that the number of IP rights issued to various applicants increased reasonably in 2017 fiscal. The number of granted patents increased by 32.4 percent, while the number of design registrations increased by 21 percent. The number of trademark registrations also shows a significant increase of around 20 percent.
Looking at the data, it is fair to conclude that the administrative reforms in 2016 fiscal, do not seem to show a significant early impact on the IP filings scenario in the country. However, they do seem to suggest more effectively towards the patent offices working effectively to resolve the backlog. This is in consonance with the feeling among IP practitioners in India, who have observed a markable improvement in working of the IP offices on the ground.
Since the suggestions of the committee instituted post NITTO DENKO ordered a special focus on reforms in patent examination and grant procedure, the next part of this article analyses the fiscal data of 2017 to identify deeply the potential impact of the 2016 reformson patent examination in the fiscal.
Trend of Patent Filings by Foreign Applicants
As you might be aware, in India, around 70-80 percent patent applications are filed by foreign applicants. Since one of the majority users of the patent system in India are foreign applicants, it would be interesting to see impact of the 2016 reforms on foreign companies filing in India? The chart below shows the filing trends based of Paris Convention and PCT applications in India.
Chart 3: Trends of no. of applications filed through PCT/ Convention route in India in last 5 years
As shown in chart 3, the PCT/ Paris Convention applications form a major share of the patent filings in India. Further, the trends indicate that the number of applications remained almost same in fiscal 2017, as compared to previous year, i.e., fiscal 2016. Again, the trends are early indicators, but, seem to show no significant immediate impact of the reforms of 2016 on the patent filings from foreign applicant.
Such a trend could be indicative of various factors in play. The first being that the foreign applicants, who started to use Indian patent offices extensively post the 2005 landmark reforms which introduced many changes like product patent regime, allowance of pharma patenting and the like, might be on standby mode to see real impact of the recent reforms before starting to use the system again.
The next set of trends look into comparing the number of applications filed from companies of top 5 patent offices, at the Indian patent office. Three sets of data are looked into keeping the Japanese perspective in mind. The first is comparing trends of Japanese applicants in India verses their American and European counterparts. The second is comparing the trends of Japanese applicants in India with their Korean and Chinese counterparts. The third set of data is identifying the top foreign applicants filing patent applications in India.
Chart 4: Trends of no. of applications filed with Japanese, American and European applicants in India in last 5 years
Chart 5: Trends of no. of applications filed with Japanese, American and European applicants in India in last 5 years
It should be noted that the American and European companies majorly filed in India between 2005 and 2015, followed by Japanese applicants, who started to file in India majorly after year 2008. However, from the charts above, the trends seem to indicate that the number of applications from Japan have in fact decreased in last 5 years. This trend is also seen among American and European applicants, i.e., applications with US and European priority in India have decreased.
Nevertheless, the main reason for the decline of patent filings from Japan, US and Europe seems to be indicative of many factors. A first factor could be degrading of economic activities of these countries in India. The other factors could point towards persisting negative sentiments of Japanese, European and American corporations on the IP ecosystem in India. However, Foreign Direct Investment data or FDI data seem to point towards the latter rather than former.
On the contrary, the data in chart 5 seem to indicate an increased patent filing from China and Korea at the IPO in recent years. As shown in chart 5, the patent applications from Korea have increased, while those from China remained constant but increased overall since 2013. The increased filings could generally point towards higher economic activities in these countries among various other reasons. The other could point towards special significance of the companies in these countries towards economic activities in India.
The chart 6 below summarizes the top 10 applicants at the IPO in fiscal year 2017.
Chart 6: Top 10 foreign applicants at IPO in 2017-18
The trends indicate that although the greatest number of patent filings in India are from American applicants, big European corporations seem to have overtaken the Americans in taking the top spots. It is interesting to note that two Japanese corporations, Mitsubishi Electric and Honda Motors, also feature in top 10. Their increased filing in India could be attributed to increased economic activities of Japanese corporations in India in recent years.
Trend of Patent Examination in Fiscal 2017-18
A part of patent reforms in year 2016 focused especially on hiring junior examiners in order to build a higher capacity at the patent offices. Accordingly, since then the patent offices carried out special recruitment drives to hire examiners, and train them to assist various patent examiners at the patent offices. The annual report data of 2017 fiscal reflects the above fact. The data shows that at present more than 550 examiners work at the Indian patent offices, and the number of examiners at the patent offices are more than 5 times the number in 2015 fiscal.
Chart 7: Examiner strength at Indian patent offices
The patent examination system in India now involves both the junior and senior examiner, called Controllers, working in tandem. While the junior examiners carry examination of patent applications and prepare examination reports called FERs, the controllers review them before sending to the applicant. It is believed by the patent offices that by increasing the strength of junior examiners, the senior examiners or the controllers could focus better on ensuing the quality checks of the examination report. Accordingly, it will be interesting to note if the 2017 fiscal data point towards any relation between increased capacity and the rate of office actions [examination reports] issuance?
The chart no. 8 below shows the trends of examination of patent applications at the Indian patent offices. More specifically, the data shows the no. of applications that were examined [issued first office actions or first examination reports] and disposed, that is decided [accepted or rejected] by the IPO.
Chart 8: Trends of no. of applications examined [OA issued] V. disposed
As seen from the chart 8, the number of first OAs issued every year by Indian patent offices has increased considerably to more than three folds the number of OAs issued 5 years back. Similarly, the number of cases disposed [either accepted or rejected by IPO] has also increased four times as compared to the cases disposed 5 years back. This data could be indicative of a positive development for clearance of backlog of patent applications. And if the trend continues, which many IP practitioners see are in continuity, it could augur well for the IP ecosystem in India.
Commercialization of patents
As you might be aware, the Indian patent laws are based on a premise that a patentee is granted exclusive rights vide patents in India on condition that they would commercialize their invention in territory of India. Accordingly, Indian laws require patentees to furnish annual statements with regards to the commercialization of their patents. This is also called as “working of patents” requirement.
The patent office annual report publishes yearly data regarding working of patents in its annual report. This edition of the report is no exception. In fact, the commercialization information of patents seems to show some interesting facts. The chart no. 9 below shows the Form 27 [the reporting form of the annual statement] information.
Chart 9: Form 27 [Working of patents] data of last 5 years
The chart 9 shows that, firstly there seems to be growing tendencies among patentees in not reporting the Form 27 information. The second seems to be that more companies are in fact reporting that their patents are not worked or commercialized. This information could point towards the fact that foreign companies might not be actually increasing their technological transfer in India, something that could be worrisome in longer run.
Conclusion: The IPO came out with its annual report for fiscal year in July 2019. The report is first official account of filings at Indian IP offices post the IP reforms introduced in fiscal year 2016. An analysis of the early trends from the data published in annual reports seem to point towards the fact that the reforms do not seem to have an instant effect on the growth of IP filings. Although, it should be noted that the number of IP registrations and examination of patent applications seem to have increased notably. The applicant data shows that the number of applications from foreign applicants seem to be same as compared to fiscal year 2016. The number of applications filed by Japanese corporations have in fact reduced. On the other hand, those from Chinese and Korean companies have increased in last few years. The top 10 applicants are dominated by European corporations, however, there seems to be a trend that more and more companies are tending towards not commercializing their patents in territory of India.
Indian financial year is from 01st April to 31st March of succeeding year
 Full 2017-18 Annual Report available @ URLhttp://www.ipindia.nic.in/writereaddata/Portal/IPOAnnualReport/1_110_1_Annual_Report_2017-18_English.pdf
Patent Amendment Rules of July, 2016 available @ URLwww.ipindia.nic.in/writereaddata/Portal/IPORule/1_42_1_Patent__Amendment_Rules_2016_16May2016.pdf
Trademark Amendment Rules of July, 2016 available @ URLhttp://www.ipindia.nic.in/writereaddata/Portal/IPORule/1_69_1_312_1_TRADE_MARKS_RULES_2017__English.pdf