Patenting and the Dynamics of Innovation: The role of Appropriability Regime in Pharmaceutical R&D

The appropriability regime in India changed with the implementation of Trade Related Intellectual Property Rights agreement and the ensuing Patent Amendments Act 2005, leading to product patent regime. When faced with a change from process patent regime to product patent regime in 2005, local firms could either continue with the generics business for patenting expired drugs or engage in research and development of incremental product innovations of existing drugs or new drug research. We analyze patent data and information from published sources for cases of five established and four startup Indian pharmaceutical firms to understand the influence of the change in the appropriability regime on the research and innovative activities of the firms. Our results show that firms have shown technological progression during both appropriability regimes and there is stepwise increment in nature of innovation. Furthermore, in the new appropriability regime, firms tend to file international applications for their high value inventions with greater commercial or out-licensing potential. We conclude that new appropriability regime offers distinct commercial opportunities and influences the research and development activities and propensity of firm to innovate.