Confusion over patent laws killing Indian software products industry

by Abhinna Shreshtha    Aug 26, 2010

Software product developmentThe Indian IT industry has always been service-driven, renowned across the world for quality and high standards. With major players like TCS, Infosys, Wipro, HCL, etc. concentrating more on the services aspect, development of original software products has usually been neglected, which has led to India lagging far behind in terms of Intellectual Property (IP). Last year, China filed 7,900 patents, America had around 45,000 patents applications, while the same number for India was a dismal 761 .

Things were looking better recently. In 2008, Zinnov & Nasscom had predicted that the software product market in India would reach $15 billion in 2015. However, Indian organizations faced a reality check last year when revenues from $1.85 billion to $1.67 billion.

A major problem, says Keshav Dhakad, chairperson, India committee of the BSA (business software alliance), is that people in India have the misconception that software patents cannot be filed in the country.

“Innovations rarely happen in MNCs, it’s the people tinkering in garages that come out with great products. Sadly, we don’t pay attention to basic things like filing patents for products. A reason for this is that most people don’t understand the patent laws here, leading to misconceptions,” said Dhakad.

Dhakad was mainly referring to a clause in the Indian software patent act that states that computer programs ‘per se’ are not patentable. “Most people don’t understand the use of the words ‘per se’ leading to the feeling that software itself is not patentable in India. What it actually means is that one has to show the software and along with it its application, for example, if it is a mobile software, one has to show how it works when it’s embedded in a mobile,” he explained.

Of course this is not the only reason why Indian has so little IP of its own, but it is an interesting point and one government and industry bodies should take note of. Developing original IP products becomes even more important with countries like the Philippines, Brazil, China, etc. becoming popular outsourcing destinations. Also, with so many e-governance projects lined up, it is a great opportunity for software developers to come out with innovative products.

Another important factor says Dhakkar is software piracy. Though, the amount of pirated software being used in the country has gone down in the last 6-7 years, BSA estimates put the percentage of pirated software being used in the country at 65% last year.

In the end, everything hinges on how well a product sells. If someone is going to sell cheap copies of a computer program on the roadside, then the developer is losing out on revenue. For small companies, any form of revenue loss can have serious repercussions. If they cannot make profits, they will face difficulties in finding investors and financial backing.

“Around a hundred software product companies had to close shop last year alone. There has to be something fundamentally wrong why this is happening. It is time the IT industry woke up to this reality,” said Dhakkar.