India's Council of Scientific and Industrial Research blew so much money on rubbish patents, it's gone broke

CSIR-Tech is the commercial arm of the Indian government's Council of Scientific and Industrial Research; after spending ₹50 crore (about USD7.6M) pursuing more than 13,000 "bio-data patents" (patents of no real value save burnishing the credentials of the scientists whose names appear on them), they have run out of money and shut down.

CSIR-Tech claims that some of these patents resulted in license deals, but can't enumerate any of these deals, nor show revenue from them.

This is obviously grossly wasteful, but it's also a perfect parable about bad incentives. The world's patent offices distinguish themselves from other government offices in that they are largely or wholly self-sustaining: the wages of patent examiners come out of the filing fees from people seeking patents. The more patents the examiners grant, the more money there is to pay their salaries.

What's more, countries with patent offices all pay dues to the UN agency WIPO, which also supports itself with fees from people who file patents: the easier WIPO makes it to get patents, even low-quality patents of no commercial value (or worse, patents over obvious things, or patents that conflict with pre-existing patents, both of which open the door to economically devastating patent trolling), the more money WIPO has to operate. These perverse incentives are so strong that they've left WIPO's reputation in tatters: in international policy circles, WIPO is called "the FIFA of UN agencies."

It's not only the highest levels that are perverted by bad incentives: these are present all the way through the system, right down to the individual researchers. They get to spend someone else's money applying for patents on obvious, or useless, or pointless "inventions" and put them on their CVs; these achievements make it easier for the researchers to get grants and job-offers.

While it's true that it costs lakhs of rupees to get a patent in India, government-funded research organisations are likely to spend more money on patents so long as they are not asked to bear the risk. Reckless filing of patents using public funds may be explained by the economic concept of moral hazard. According to economist Paul Krugman, it happens in "any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly". In the case of public-funded research, the reckless filing of patents without due diligence results from the moral hazard of the government bearing the risk of patents that don't generate revenue. In the insurance sector, moral hazard refers to the loss-increasing behaviour of the insured who acts recklessly when the loss is covered by another. Insurance companies check moral hazard by introducing copayment from the insured. Dr. Sahni's statement that CSIR laboratories need to bear 25% of expenses for their patents acknowledges the moral hazard.

The National IPR Policy released last year does not offer any guideline on distinguishing IPR generated using public funds from private ones — it views every IPR with private objectives by insisting on commercialisation. Dissemination of technology to the masses, participation in nation-building and creating public goods are rarely objectives that drive the private sector. The IPR policy of some publicly-funded research institutions allows for 30-70% of the income generated through the commercialisation of the patent to be shared with the creators of the invention, i.e., scientists and professors on the payroll of the government. Such a policy could promote private aggrandisement and may work against public interest. In contrast, the IPR policy of private companies does not allow for a payback on the share of royalties earned by patents.

The compulsive patent hoarding disorder
[Feroz Ali and Shweta Mohandas/The Hindu]

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