Effect of patent law changes on the innovation strategy of Chinese and Indian Life Science companies as reflected in US patent filings

Abstract

In this paper we evaluate how harmonization of patent laws in China and India to developed world standards has affected innovative research and development activity in the life sciences industry of those countries. The patents listed in the United States Patent and Trademark Office were used as a proxy to measure innovative activity. The number and types of patents filed over the period from 1976 through 2008 were analyzed for trends towards innovation. At a high level, we found that 'Drugs and Medical' account for only 6% of Chinese patents but make up 20% of the universe of Indian patents. When evaluating patent activity over time, we found that filings rose exponentially in the mid-nineties corresponding to the creation and implementation of product patent laws in both countries. India exhibited a much higher and steeper increase, likely due to its previously established capabilities as a generics manufacturer. When segmenting the data based on type of firms (academic, foreign multinationals and local private) we found that post product patent laws, local private firms exhibit more activity in India whereas local firms and multinationals show similar amounts of activity in China. In both countries, academic institutions show the greatest amount of activity compared to the multinationals and local private companies. We conclude that stronger IP laws have resulted in greater innovative activity as seen in the exponential rise in patent filings in the life sciences industry in both China and India. Although India has shown greater activity compared to China possibly due to its established capabilities in the generics space as a result of its protective patent regime prior to the harmonization.