The patent system aims to confer Intellectual Property right to an innovator who has created an economic innovation which provides a better way to make something or something better to make. When an innovator comes up with a product which is new in the market, the innovator gains a competitive advantage. This is turn creates extraordinary profits for the innovator which temporarily causes disequilibrium in the market. However, in the long run, this competitive edge which the innovator has is lost, and the profits fall to an ordinary level. Hence, without any legal intervention and protection of the product, the competition which exists in the market, will destroy the profits. Hence, for this purpose, patent laws have come into place. The Indian Patents Act, 1970 aims to confer an IPR upon the person owning the same which basically gives a social recognition. This recognition will bring economic benefits to the innovator/holder. The reasoning behind IPR laws is to award the person for his labor, cost and efforts. This is often known as the “appropriability problem” ,that is when a firm is not able to recover the costs of invention because the resulting information was available to all. IPR plays an extremely important role in every sector of the society and is a crucial factor for investment decision by companies, foreign and domestic. In India, the Patent act is in conformity with the international standards and India is a signatory to the TRIPS Agreement which sets down minimum standards for many forms of IP regulations However, there are various anomalies in the existing IPR laws such as the one pointed out in the Novartis Case which will be discussed in the essay. The researcher will attempt to highlight the issues in the patent laws and its effect on our economy.
Economics of Patents
This section will essentially deal with the objectives of IPR laws in India and the international agreements (TRIPS) signed by the countries and it’s affect on patent laws. India enacted its first act relating to patent rights in India in 1856; however, after various reports asserting that the laws were not working, the Indian Parliament passed The Indian Patents Act in 1970. The principal objectives of the law are articulated in Section 83 of the act as: a) The patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay; and b) That they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article. Any new product has information which, if revealed by the innovator, would make him lose his competitive edge over the other marker competitors. Information is extremely costly to produce and cheap to copy which is the main reason behind creating a legal framework in order to protect and encourage people to innovate and produce. IPR laws also ensure the innovator, in case he has a monopoly in the market, does not sell the product for too high a price. Patents can vary in breadth and duration, and while deciding on them, various factors need to be looked into. Inventions are not patentable unless they are useful, novel and non-obvious. In order to comprehend the ‘Economics of patents’, one must understand the economic purposes of the requirement of utility. One is to rule out patents of basic research, another to delay the point in the development of a new product or process at which a patent may be obtained and the third is to reduce the cost of patent searches by screening out useless inventions. All intellectual property systems have an element of domestic regulation. The domestic IPR laws play a key role in affecting foreign investments and international trade. With the globalization of the economy, a need to have stringent laws protecting property rights has become...