assignment

DBA 1733 – Technology commercialisation

Assignment 1

1.

A cross-licensing agreement is a contract between two or more parties where each party grants rights to their intellectual property to the other parties.

In several key industries, including semiconductors, biotechnology, computer software, and the Internet, our patent system is creating a patent thicket: an overlapping set of patent rights requiring that those seeking to commercialize new technology obtain licenses from multiple patentees. The patent thicket is especially thorny when combined with the risk of hold-up, namely the danger that new products will inadvertently infringe on patents issued after these products were designed. The need to navigate the patent thicket and hold-up is especially pronounced in industries such as telecommunications and computing in which formal standard-setting is a core part of bringing new technologies to market. Cross-licenses and patent pools are two natural and effective methods used by market participants to cut through the patent thicket, but each involves some transaction costs. Antitrust law and enforcement, with its historical hostility to cooperation among horizontal rivals, can easily add to these transaction costs. Yet a few relatively simple principles, such as the desirability package licensing for complementary patents but not for substitute patents, can go a long way towards insuring that antitrust will help solve the problems caused by the patent thicket and by hold-up rather than exacerbating them.

Patent law

In patent law, a cross-licensing agreement is an agreement according to which two or more parties grant a license to each other for the exploitation of the subject-matter claimed in one or more of the patents each owns. [1] Very often, the patents that each party owns covers different essential aspects of a given commercial product. Thus by cross licensing, each party maintains their freedom to bring the commercial product to market. The term "cross licensing" implies that neither party pays monetary royalties to the other party, however, this may be the case.

For example, Microsoft and JVC entered into a cross license agreement in January 2008.[2] Each party, therefore, is able to practice the inventions covered by the patents included in the agreement.[3] This benefits competition by allowing each more freedom to design products covered by the others patents without provoking a patent infringement lawsuit.

Parties that enter into cross-licensing agreements must be careful not to violate antitrust laws and regulations. This can easily become a complex issue, involving (as far as the European Union is concerned) Art. 81 and 82 of the EC Treaty (abuse of dominant position, etc) as well as licensing directives, cartels, etc.

Some companies file patent applications primarily to be able to cross license the resulting patents, as opposed to trying to stop a competitor from bringing a product to market.[4] In the early 1990's, for example, Taiwanese original design manufacturers, such as Hon Hai, rapidly increased their patent filings after their US competitors brought patent infringement lawsuits against them. [5] They used the patents to cross license.

One of the limitations of cross licensing is that it is ineffective against patent holding companies. The primary business of a patent holding company is to license patents in exchange for a monetary royalty. Thus, they have no need for rights to practice other companies' patents. These companies are often referred to pejoratively as patent trolls.

[edit] Non patent law

Other non-patent intellectual property such as copyright and trademark can also be cross-licensed. For example, a literary work and an anthology that includes that literary work may be cross-licensed between two publishers. A cross-license for computer software may involve a combination of patent, copyright, and trademark licensing.

2, Diffusion of innovations

Diffusion of technology is a theory of how, why, and at what rate new ideas and technology spread through cultures. The concept was first studied by the French sociologist Gabriel Tarde (1890) and by German and Austrian anthropologists such as Friedrich Ratzel or Leo Frobenius [1]. Its basic epidemiological or internal-influence form was described by H. Earl Pemberton[2], who provided examples of institutional diffusions such as postage stamps or compulsory school laws. The publication of a study of Ryan and Gross on the diffusion of hybrid corn in Iowa[3] was the first sustainably visible contribution in a broader interest in innovations which was especially popularized by the textbook by Everett Rogers (1962), Diffusion of Innovations (Rogers 1964). He defines diffusion as "the process by which an innovation is communicated through certain channels over time among the members of a social system." [1]

Elements of diffusion of innovations

The key elements in diffusion research are: the innovation, types of communication channels, time or rate of adoption, and the social system which frames the innovation decision process.

[edit] Types of innovation-decisions

There are three types of innovation-decisions within diffusion of innovations. An individual or an organization/social system bases the type of decision on whether an innovation is adopted/rejected. The three types of innovation-decisions are: Optional innovation-decisions, collective innovation-decisions, authority innovation-decisions.

Optional Innovation-Decision

This decision is made by an individual who is in some way distinguished from others in a social system.

Collective Innovation-Decision

This decision is made collectively by all individuals of a social system.

Authority Innovation-Decision

This decision is made for the entire social system by few individuals in positions of influence or power.

[edit] The adoption process

Diffusion of an innovation occurs through a five–step process. This process is a type of decision-making. It occurs through a series of communication channels over a period of time among the members of a similar social system. Ryan & Gross first indicated the identification of adoption as a process in 1943 (Rogers 1964, p. 79). Rogers categorizes the five stages (steps) as: awareness, interest, evaluation, trial, and adoption. It should be noted that an individual might reject an innovation at anytime during or after the adoption process. In later editions of the Diffusion of Innovations Rogers changes the terminology of the five stages to: knowledge, persuasion, decision, implementation, and confirmation. However the descriptions of the categories have remained similar throughout the editions.

[edit] Five stages of the adoption process

Knowledge

In this stage the individual is first exposed to an innovation but lacks information about the innovation. It should be noted that during this stage of the process the individual has not been inspired to find more information about the innovation.

Persuasion

In this stage the individual is interested in the innovation and actively seeks information/detail about the innovation.

Decision

In this stage the individual takes the concept of the innovation and weighs the advantages/disadvantages of using the innovation and decides whether to adopt or reject the innovation. Due to the individualistic nature of this stage Rogers notes that it is the most difficult stage to acquire empirical evidence (Rogers 1964, p. 83).

Implementation

In this stage the individual employs the innovation to a varying degree depending on the situation. During this stage the individual determines the usefulness of the innovation and may search for further information about it.

Confirmation

Although the name of this stage may be misleading, in this stage the individual finalizes their decision to continue using the innovation and may use the innovation to its fullest potential.

[edit] Rates of adoption

The rate of adoption is defined as: the relative speed with which members of a social system adopt an innovation. It is usually measured by the length of time required for a certain percentage of the members of a social system to adopt an innovation (Rogers 1964, p. 134). The rates of adoption for innovations are determined by an individual’s adopter category. In general individuals who first adopt an innovation require a shorter adoption period (adoption process) than late adopters.
Within the rate of adoption there is a point at which a innovation reaches critical mass. This is a point in time within the adoption curve that enough individuals have adopted an innovation in order that the continued adoption of the innovation is self-sustaining. In describing how an innovation reaches critical mass, Rogers outlines several strategies in order to help a innovation reach this stage. These strategies are: have an innovation adopted by a highly respected individual within a social network, creating an instinctive desire for a specific innovation. Inject an innovation into a group of individuals who would readily use an innovation, and provide positive reactions and benefits for early adopters of an innovation.

Assignment 2:

2.

What can an industrial ecologist involved in commercialising long-lead time scientific R&D learn from an innovator, a venture capitalist and a patent attorney when they are all sitting on the same side of the table?

A great deal more than I thought before I attended the pre-conference workshop on commercialising a spin-off company and conference on 'Commercialising Technology 2000' conference organised by IIR Pty Ltd in Sydney, Australia on 16 and 17 May 2000.

The workshop facilitators included David Evans, Managing Director of Uniquest Pty Ltd, the technology commercialisation and consulting company owned by the University of Queensland; Frank Foster, a venture capital investor with Allen and Buckeridge in Sydney, and Rob McInnes, a partner specialising in intellectual property law at Baldwin Shelton Waters Law in Sydney.

The trio set themselves the ambitious scope of:

• Establishing a sound business plan that meets the expectations of all stakeholders and responds to the target market
• Creating a workplace culture that fosters innovation and satisfies the institution
• Structuring the ownership in a spin-off company
• Managing the legal risks in running a start-up, and
• Raising capital and financing a spin-off company.

By and large, all these topics were touched on and developed through the skilful facilitation of David Evans who brought out both the knowledge and experience of the expert panel and the accumulated ideas, concerns and interests of the 15-20 participants.

I was left with a much better understanding of the difficulties of commercialising R&D out of a large scientific organisation, the pitfalls in establishing a successful spin-off when the initial Intellectual Property is closely held by the founder who wants to control the control the company, and the importance of achieving technology milestones to the ongoing valuation of the spin-off company.

The two day conference was attended by 40-50 participants in a more formal but nonetheless informative setting. Once again, the emphasis was on the case studies and practical experience across a wide body of c-commerce and biotechnology companies, from 10 person start-ups in Internet media services to global players in biotechnology and pharmaceutics.

The ecologist in me searched for underlying patterns and processes that linked these diverse ideas from people working in organisations across many scales of organisational and commercial complexity.

I found many parallels with invasive species colonising new or disturbed ground, with populations struggling to fill an unoccupied niche, with individuals exploiting an under-utilised resource or successfully outmanoeuvring the slow-growing, stable but nonetheless vulnerable founders.

To an ecologist, research commercialisation offers many parallels with invasive species colonising new or disturbed ground, populations struggling to fill an unoccupied niche, and individuals exploiting an under-utilised resource.

As in natural ecosystems, those individual agents that are most successful can withstand or adapt rapidly to change, and most importantly, pass on and increase their form of capital, genetic or financial, over time.

Apart from these lateral lessons in the human ecology of new businesses and emerging commerce, I also benefited from the fresh insights of young men and women running bold start-ups in e-commerce (eg Ben Hosken and Kerri Lee Sinclair, AgentsArts; Peter Moore, eBusiness Interactive).

There were also valuable insights from a more established electronic products and services company (Rob Douglas, Keycorp Ltd), from innovators taking Intellectual Property out of educational institutions (Stan Jeffery, Australia Technology Park; David Evans, Uniquest), and insights into the minds, pockets and hearts of the investors (Frank Foster, Allen and Buckeridge; Bob Moses, CSL Pty Ltd; Paul Martin, The Profit Foundation).

The final day contrasted two sobering presentations on Protecting your Intellectual Property by a tag team from Allen Allen & Hemsley (Niranjan Arasaratnam and Tanya Ross Gadsden) and adequate disclosure of information affecting the capital markets (Louise Elsing, Australian Stock Exchange).

Two fascinating case studies were also presented on the development of micro-electronics in Australia (Trevor Cole, The Warren Centre) and fostering innovation through supporting scientific research with commercial applications, using gene therapeutics as an example (Geoff Symonds, Johnson & Johnson Research Ltd).

The first case study pointed out the great potential for benefits to Australia from the development of a micro-electronics industry based on local know-how. Critically though, access to design software was described as tightly controlled by a few key players in the USA and the price of entry to this game was seen to be too high for many smaller national players to fully develop their competitive design potential. This seemed to be more of a problem with how the local players were currently resourcing and structuring their research and commercial activity.

By contrast, the global reach of Johnson & Johnson (188 companies in 52 countries) shows the market potential for the commercialisation of powerful new biotechnologies in the area of human health.

Geoff Symonds described the networked relationship of Johnson & Johnson Research in what I would describe as a knowledge broker role poised between academia and the marketplace. Interestingly for me, he described the adoption and development of "gene shears" technology for use in HIV treatment. This gene technology was originally developed by CSIRO Plant Industry in the 1980s for use in the emerging field of plant genetics underlying current agricultural biotechnology. However, Johnson & Johnson licensed the gene shears technology for use in the pharmaceutical area and hired one of the CSIRO inventors. Limograin, the French life sciences company, licensed the technology for use in the agricultural area.

As in natural ecosystems, those individual agents that are most successful can withstand or adapt rapidly to change, and most importantly, pass on and increase their form of capital, genetic or financial, over time.

Although not well known, the rest is history, and suffice to say that due to the 'Greenpeace Effect', it is now easier to do a human clinical trial using this biotechnology than an agricultural trial. Such uncertainties, and unintended consequences of various commercialisation pathways, were richly sprinkled through the three days of this fascinating conference.

As one who resides fairly close to the 'techie' end of the commercialisation spectrum I was left with a healthy regard for the social, economic, legal and commercial complexities that govern whether or not a great idea or technology successfully makes the long journey to the market.

Technology Transfer

Assignment 1

TECHNOLOGY TRANSFER AGREEMENTS

The topic of technology transfer encompasses commercial aspects and a

range of laws including intellectual property. No generalizations are

possible regarding the terms of the contract and much would depend upon

the facts and circumstances underlying a particular technology transfer.

This Chapter is limited to providing a general overview of certain

commercial and legal aspects that may be considered in a contract for

technology transfer.

Nature of the contract

A contract for technology transfer can either be a licence agreement or a

know-how agreement. The licence agreement normally refers to the

licensing of intellectual property rights such as patents, trade marks,

copyrights, etc. whereas a know-how agreement involves the transfer of

information or skills which have not received statutory recognition. This

distinction has an impact on the confidentiality and secrecy aspects of the

contract. Any technology transfer contract broadly deals with the mode of

transfer of technology, its use under certain terms and conditions. The

mode of transfer can take place through documents or through the provision

of technical services, assistance and training, software programs on

diskettes or even through the sale of machinery, raw materials or

components that embody technology.

Typical provisions of a licence or know-how agreement

An illustrative list of the provisions are briefly discussed below:

Product/ service definition

It is essential to provide an exact description of the product or service for

which technology is being transferred. A very wide definition can bind the

transferor from parting with technology that he had no intention of

transferring. It must be determined whether technology for future model

updates and improvements are included within the definition, and whether

the specified consideration would include improvements or whether

payments would have to be made in future.

Licensed property

The precise categories and details of patents, copyrights, etc. that are

licensed are enumerated.

Technical know-how

Any technology transfer involves many types of expertise and knowledge.

Therefore, it is important that these are precisely defined. These may

include:

(i) latest and complete data on the functioning of the product;

(ii) information and assistance on suppliers of raw material, machinery,

spare parts, etc.;

(iii) maintenance manuals and instructions;

(iv) engineering drawings and designs;

(v) test methods;

(vi) response to specific queries from licensee;

(vii) deputation of personnel for on-site supervision.

Territory and sub-licensing

The territory in which the product/ services to be sold/rendered is defined

so that the market areas of the Licenser and the licensee are clearly

demarcated. This prevents the licensee from becoming a competitor to the

Licenser and also provides flexibility for the Licenser to provide

technology to parties in other areas. The normal practice in many cases is

to provide that the licensee has an exclusive licence as far as India is

concerned and that other areas may be added by mutual agreement. Further,

it must be specified whether the licensee has a right to sub-license the

technology and the terms and conditions if such a right is granted.

Commercial production

The start of commercial production may take place after certain test runs

are conducted. The timing of the commercial production is critical from the

view-point of the payment of royalties based on sales.

Licenser’s obligations

The Licenser’s obligations may typically encompass;

(i) guarantee that the product manufactured shall meet certain

performance tests and standards;

(ii) providing technical assistance either in India or abroad;

(iii) providing minimum sample quantities of test product;

(iv) procuring equipment for the licensee;

(v) training employees of the licensee;

(vi) assist in setting up of facilities for testing and quality control;

(vii) allowing use of intellectual property rights;

(viii) providing knowledge of improvements made to the product;

(ix) buy-back of product, if any;

(x) deputation of on-site personnel.

Licensee’s obligations

The following are some of the obligations of any licensee:

(i) to make payments to Licenser;

(ii) treat the technology confidentially;

(iii) to exploit the technology to the maximum extent;

(iv) to reach a minimum quality standard as required by the Licenser;

(v) reporting production details;

(vi) in case of manufacturing concerns -providing factory site with

adequate infrastructure.

Warranties, indemnity and infringement

The Licenser warranties and agrees to indemnify the licensee for

infringement of any rights in respect of the following:

(i) Licenser has full and absolute ownership or otherwise has fully and

absolute right and authority to transfer and furnish the know-how;

(ii) the technical know-how provided under the contract and the

intellectual property licensed shall achieve the objective of

producing a quality product;

(iii) the technical know-how provided under the contract and the

intellectual property licensed does not infringe the rights of any third

party to the best of the Licenser’s knowledge. In case of any third

party infringement or proceeding, the contract normally provides

that the Licenser and the licensee shall take joint action to defend the

matter and the costs of such a defence shall be borne by the Licenser

and not the licensee;

(iv) indemnity from third party claims in respect of defective products

(provided that the defect is shown to be due to a lapse on the part of

the licenser’s technology);

(v) licenser is not aware of any actions, suits or proceedings at law or at

equity, before any court or authority in relation to know-how;

(vi) the execution and delivery of the contract or the performance by the

Licenser of its duties and obligations conflicts with or is contrary to

any law or any agreement or commitment to which the Licenser is a

party to.

Product liability and indemnity

product liability is an area where there is increasing judicial activism.

Determining the cause of product liability is obviously critical; i.e. whether

it is a manufacturing defect or a technical defect. It is advisable that the

licensee procures product liability insurance particularly when products are

exported to the European Community and the United States.

Improvements and Inventions

It is possible that the Licenser or the licensee’s employees may make

improvements to the licensed product. In such an event, it is the duty to

disclose such improvements to the other party. The clause should also

provide the suitable action regarding the joint registration of the intellectual

property right and the party that is entitled to use such a right. In certain

cases, the improvement may belong to the licensee for exploitation in the

defined territory but the Licenser may have right of first refusal in case the

product is to be sold out of the territory.

Inspection and information

The licensee agrees to provide access to any information required by the

Licenser in connection with production and sales records. This is useful in

case there is any discrepancy in royalty calculations between the Licenser

and the licensee. There may also be a provision for penalties in case of

discrepancies. Further, the cost of the audit is borne by the licensee in case

any discrepancy is found.

Payment of consideration

The consideration can be in the form of a lump sum payment and/or royalty

payment based on sales. These payments are subject to RBI guidelines

(please refer Chapter 3). The net selling price is defined taking into

considering these guidelines.

Currency and taxes

The currency in which payments are to be made and the exchange rate to be

used is expressly stated. Any payment made by an Indian company

towards royalty or fees for technical services are taxable in India in the

hands of the foreign collaborator. The tax rate is 20% on such payments

under the Indian Income-tax Act (“ITA”). This can be reduced to a lower

rate based on India’s tax treaties. The payment of these taxes either by the

Licenser or the licensee is frequently a negotiating point. The following

considerations are important in the negotiation:

(i) Taxes paid in India by a foreign collaborator is normally available as

a tax credit in the collaborator’s home country. If a tax credit is

available, it may be preferable that the foreign collaborator bear the

tax in India as it reduces the tax cost of the total transaction.

(ii) In certain cases, the foreign collaborator may not be able to use the

tax credits as the overseas company may have carried forward losses

or is located in a low-tax country. In such a case, if the taxes are

paid by the licensee, no tax credit would be available to the foreign

collaborator. No gross-up is required to compute the tax payment

made by the licensee under section 10(6A) of the ITA as long as the

agreement relates to a matter included in the industrial policy in

force or is an agreement that is approved by the Central

Government.

Research and development Cess of 5% is payable by the licensee on all

payments made in connection with the payment of royalty or fees for

technical services. Further, drawings and designs are subject to customs

duty, but as of now an exemption is in force, so effective rate of duty is nil.

However, it is important to note that if capital goods and technology are

being imported in a composite transaction, the cost of the technology may

be added to the value of capital goods for purposes of custom duty.

Confidentiality

Secrecy is of utmost importance in any technology transfer agreement and

particularly in cases where unpatented know-how is involved. The

following issues need to be addressed:

(i) a breach of confidentiality can occur either during the preliminary

stage of negotiation or during the duration of the agreement;

(ii) the breach could also occur after the expiry of the agreement.

Therefore, the confidentiality provision must survive the termination

of the agreement for any reason;

(iii) the technology to be kept confidential must be clearly identified.

For example, information already in possession of the licensee and

information publicly know are not subject to confidentiality;

(iv) extent of permissible disclosure. For example, it is necessary to

disclose certain technical details to an employee or a sub-contractor

manufacturing the product or a component;

(v) the extent to which the Indian licensee can bind its employees in

respect of confidentiality during and after the employment;

(vi) the obligation to preserve confidentiality is also imposed on the

Licenser in cases where the agreement is exclusive.

The remedy for breach of confidentiality can be either provided in the

contract or in its absence, the law of contract relating to damages for breach

would apply. Liquidated damages may also be provided.

Duration of the agreement

The duration of know-how agreements is restricted by the RBI norms in

this regard. Royalty payments can be made only during a period of 10

years from the date of agreement or 7 years from commencement of

commercial production, whichever is earlier. Thus, most agreements

provide for an initial term based on the above norms with a clause enabling

renewal of the agreement subject to Government regulations at the time of

renewal.

Termination

Termination of the agreement must be distinguished from the expiry of the

agreement due to efflux of time. A breach of warranty by the Licenser or

the licensee can cause termination of the agreement for instance, due to:

(i) continued non-payment of royalty;

(ii) failure to achieve quality standards set by the Licenser;

(iii) Material breach of key obligations (after providing time to remedy);

(iv) insolvency or change in ownership of any of the parties. The

identity of the parties is crucial in a technology transfer and the

agreement may be terminated if the control over any one of the

parties passes over to a competitor.

If a technology transfer agreement is part of a joint venture, it may be

provided in certain cases that any termination of the technology transfer

agreement can also trigger off a termination of the joint venture agreement

or vice versa.

Consequences of termination

One consequence that is of utmost importance is that of continued use of

technology by the licensee. The Licenser may insist that know-how in the

form of documents, equipment, etc. revert back to the Licenser and that the

Licensee is not permitted the use of know-how. The termination normally

does not absolve the Licensee from its obligations regarding confidentiality

or payment of royalty. The termination is to be contrasted against expiry of

agreement wherein the licensee may be permitted to manufacture the

product beyond the life of the agreement.

Applicable law

The parties to an agreement have a choice with regard to the substantive

law that applies to a particular contract. Ordinarily, Indian Law will apply

to the contract as the technology is absorbed and used in India.

Arbitration

It is open to the parties to select the procedure and venue of arbitration.

Each party normally bids for the arbitration procedure and venue in their

own country and the result is that the procedure in a neutral country is

adopted. For example, the International Chamber of Commerce procedural

rules can be adopted and the venue of such arbitration can be in Paris. If

the venue is not in India, but in say Paris or London, the Indian licensee

must consider the high costs of arbitration and examine the enforceability

of the awards in the Licensers country. The high costs is itself a deterrent

to arbitration in such cases and thus, a more acceptable solution from an

Indian Licensee’s standpoint may be that the International Chamber of

Commerce rules of arbitration may be adopted and the venue may be

Singapore, rather than London or Paris. It is also important to specify the

number of arbitrators that each party will appoint and it must be an odd

number.

.

Assignment or other transfer

The parties have to decide whether this agreement can be assigned or

transferred to any subsidiary or group company of any of the parties or any

of its successors or assignees. A subsidiary may be defined as any

company that is under the control and management of the parent.

Preconditions

The agreement is expressly subject to the approval of RBI or SIA and the

terms and conditions stipulated by the RBI in their letter of approval are to

be made part of this agreement.

Assignment 2:

1.

Overview of IPR Enforcement: A Priority Trade Issue

(04/22/2008)The trade in counterfeit and pirated goods threatens America’s innovation economy, the competitiveness of our businesses, the livelihoods of U.S. workers, and, in some cases, national security and the health and safety of consumers. The trade in these illegitimate goods is associated with smuggling and other criminal activities, and often funds criminal enterprises.

Safety and Security Threats
CBP has targeted and seized an increasing number of counterfeit products that pose safety threats to American consumers, to our infrastructure, and potentially to our security. These products range from electrical articles such as power cords and lights that can catch fire or shock consumers, to batteries that may explode or leak mercury, to personal care items such as toothpaste and shampoo that may contain harmful bacteria, to computer network components and semiconductors that can cripple infrastructure vital for national security.

Strategic Approach to IPR Enforcement
Stopping the flow of fake goods is a priority for the U.S. government, and CBP has designated intellectual property rights (IPR) enforcement as a Priority Trade Issue (PTI). Our strategic approach to IPR enforcement is multi-layered and includes seizing fake goods at our borders, pushing the border outward through audits of infringing importers and cooperation with our international trading partners, and partnering with industry and other government agencies to enhance these efforts. CBP provides considerable resources, diverse personnel and focused training to respond to IPR issues.

IPR enforcement is integrated into the work of several offices throughout CBP. The Office of International Trade develops national IP enforcement policy and initiatives, directs foreign diplomacy, targets shipments of IPR infringing goods, audits infringing importers, and provides training and legal guidance on IPR seizures and penalties. CBP officers and Import Specialist from the Office of Field Operations inspect and seize IPR infringing shipments at ports of entry on a daily basis. Other CBP offices, including the Office of Information and Technology and the Office of International Affairs and Trade Relations, provide valuable expertise in laboratory analysis and provide assistance with foreign diplomacy to further CBP’s IPR enforcement mission. CBP internally coordinates IPR strategy through an intra-agency PTI IPR Working Group. This Working Group, which includes representatives from the Office of International Trade (OT), the Office of Field Operations (OFO), the Office of Chief Counsel, the Office of International Affairs and Trade Relations (INATR), the Office of Information Technology (OIT), and U.S. Immigration and Customs Enforcement (ICE), meets on a regular basis to address IPR policy and enforcement issues and to focus the resources of offices throughout CBP.

Domestic Partners in IPR Enforcement
CBP’s enforcement is accomplished through the cooperative efforts of our trained enforcement officers, other government agencies, and the trade community. We coordinate our enforcement efforts with U.S. government trade policy and law enforcement agencies. In addition, CBP works closely with ICE to carry out criminal IPR enforcement actions. As the primary border enforcement agency, CBP is a key player in The Administration’s inter-agency Strategy for Targeting Organized Piracy (STOP!).

CBP also works closely with the trade community on IPR enforcement. CBP conducts industry outreach by partnering with rights owners and industry organizations to collaborate on IPR education, and to share information on trends, and where appropriate, on individual cases of suspected IPR infringement. CBP has an on-line recordation system, Intellectual Property Rights e-Recordation, which allows rights owners to electronically record their trademarks and copyrights with CBP, and facilitates IPR seizures by making IPR recordation information readily available to CBP personnel.

International Partners in IPR Enforcement
CBP collaborates with international organizations and foreign governments to enhance IPR border enforcement efforts globally. CBP actively participates in the IPR working groups of several international organizations including the World Customs Organization, the G8, and APEC. CBP also has significant ongoing bilateral efforts. CBP has a memorandum of cooperation with the People’s Republic of China to strengthen the enforcement of intellectual property rights laws through exchange of information on seizures and trends, and effective enforcement programs. CBP also is implementing a five point IPR action plan with the European Union, and is partnering with Canada and Mexico through the Security and Prosperity Partnership (SPP) on a strategy to reduce counterfeiting in North America.

2.

/-*/-*/-*/-*/-*/-

PBAS Principles

Participants who pass Level 2 of PBAS are expected to sign and morally abide by the following principles in order to become an accredited Partnership Broker. The principles commit the broker to act in a professional manner and to demonstrate integrity in their duties as a Partnership Broker:

1. Keeping in touch with new developments in theory and practices of brokering partnerships for sustainable development.
2. Applying the most appropriate tools at each stage of the partnering process and innovate where necessary.
3. Taking every opportunity to build partnering capacity in others.
4. Refrain from promoting a partnering process when aware of a realistic alternative that would deliver better sustainable development outcomes.
5. Avoid taking actions as part of a brokering process that might involve risk without prior endorsement of these actions from all parties likely to be impacted.
6. Demonstrating a responsible attitude by raising concerns of an ethical or legal nature with partners when necessary.
7. Knowing ones own competence limitations and the circumstances in which it is appropriate to request assistance from, or hand over brokering responsibility to, others.

To protect the overall quality of the scheme, ODI and IBLF reserve the right to withdraw accreditation status.

Definitions

• Multi-sector Partnerships - A multi-sector partnership describes a strategic alliance between organisations drawn from the three sectors of society - government, business and civil society - who commit to work collaboratively on a project or programme to pursue sustainable development goals, and in which all partners contribute from their core competencies, share the risks, and benefit by achieving their own, each others, and the overall partnership's objectives.
• Partnership Brokers - A partnership broker is a 'go-between'. He or she acts as an intermediary within or between different parties in an active rather than passive manner, guiding a partnering process, interpreting one party to another or negotiating some kind of agreement. A partnership broker inspires others to work together, building collaboration between partners, encouraging the adoption of behaviours that enable the partnership to function effectively, and developing or protecting the principles and vision of the partnership.

Internal brokers - individuals from (or working for) an organisation who take on the role of preparing their organisation for working in multi-sectoral partnerships, negotiating their organisation's involvement in a partnership, and/or playing a key role in maintaining a partnership arrangement, tracking performance or securing mutual benefits.

External brokers - independent third-parties contracted to plan or facilitate consultation or negotiations to develop a partnering arrangement, and/or to research, maintain, monitor, review or evaluate partnerships over time.

• Generic vs Specific - Many aspects of the partnership broker's role are generic in character. The processes of partnership exploration, building and maintenance are largely common to all forms of multi-sector partnering and therefore require generic rather than specific skills. Specificity arises in relation to:

technical expertise - for particular types of partnership programmes or projects the broker either needs to have the necessary technical background or be in a position to contract-in the relevant expertise.

local culture - cases where the broker needs to be familiar with, and respectful of, local customs, history and traditions.

behaviour or patterns of facilitation dependent upon whether the partnership is operating at the community, district, regional, or national level.

• Interest-Based Negotiation - the principles of interest-based negotiation can be used and adapted by a broker to help in developing robust and effect multi-sector partnerships:

Build trust and working relationships through mutual understanding and meaningful communication.

Focus on revealing underlying interests rather than positions to develop partnership objectives and assumptions.

Widen the options for solutions through the creativity and lateral thinking that comes from joint problem solving, for example, in agreeing design parameters and resources contributions.

Reach agreement that satisfies underlying interests and adds value for all parties, and capture this as appropriate in some form of Partnering Agreement.

Knowledge partners
Companies aiming to extract the maximum value from intellectual property should begin by reviewing all of their patents, processes and technologies and be prepared to do so at least once every three years. They will need two types of on-call knowledge partners--broad-based technologists and industry specialists--to suggest applications for their technologies across a range of industries and then to confirm that each application is viable and to estimate its business impact in every relevant industry. That process should yield an A-list of ideas warranting immediate attention.

Generalists with the experience needed to think up applications across many markets are a rare breed. Typically based in technical societies, universities, and research laboratories such as Battelle Memorial Institute (Columbus, Ohio) and Argonne National Laboratory (Argonne, Illinois), these generalists conduct fundamental research across a wide range of industries. To review each technology in the portfolio, a company will need access to several broad-based technologists.

Procter & Gamble, for example, used a panel of technologists, including academics and representatives of small technical firms, to generate new applications for its Olestra molecule. When Olestra first appeared, it was hailed as a low-fat ingredient for snack foods, but unpleasant side effects (since corrected) caused sales to fall flat. Stuck with a multimillion-dollar plant equipped to produce the molecule, Procter & Gamble sought other applications for it. Internal technologists came up with a shortlist of ideas, mostly for consumer products such as lotions, but outside experts generated many more. The winning application so far is environmental remediation: Poured on contaminated soil or sludge, the Olestra molecule binds itself to pollutants, which can then be removed easily. Thanks to these alternative applications, Procter & Gamble has salvaged its investment in research and infrastructure.

The technologist's task is twofold: to produce a summary of all a technology's possible applications, ranked according to technical and business feasibility, and to estimate the economic impact of each application (for example, the savings semiconductor manufacturers could realize from the gas-separation process). Such estimates are especially important when companies negotiate terms with potential buyers.

A company should secure enough of these advisers' time to have them available as needed but refrain from engaging them full-time or from limiting their ability to work with other companies; a large part of the value of such people lies in their exposure to cross-industry knowledge, which can come only from working with a variety of companies on common technologies. Advisers are usually paid through project fees or retainers (perhaps $2,500 to $5,000 a day) but seldom have a financial stake in a project's outcome.

Experts with a knowledge of applications in specific markets can often be found in the same institutions that employ broad-based technologists. Most companies will need a roster of specialists in a dozen or more fields to refine and validate ideas the technologists bring to light.

One carmaker, for instance, learned that a magnetostrictive sensor in its steering mechanisms could have several unexpected applications. The most promising of them was a system to test the strength and stability of the poured concrete used in bridges and roads. (The sensor responds to changes in pressure and then sends electromagnetic signals that can be read as the concrete cures.) To test the technology's potential value and performance requirements, the company interviewed more than 20 industry specialists: engineers for construction companies, professors of materials sciences, entrepreneurs in related markets and employees of the transportation departments of several US states. By saving time and improving compliance with industry codes, these specialists said, the device could save construction contractors and transportation departments billions of dollars a year.

The carmaker should realize more than $17 million in annual licensing revenue from this unexpected application.

Academics, engineers and other professionals don't routinely sell their services on the open market. Such experts might be prepared to donate their time to pursue the intellectual challenge of assessing the market demand for a new technology or of surmounting the technical barriers to its success. But when the commercial validation of an idea and the development of performance specifications take center stage, most of these people will expect to be compensated. Their fee arrangements are comparable to those for broad-based technologists.

The dozens of mostly small firms that occupy this fast-growing niche have pushed U.S. licensing revenue to an estimated $100 billion a year.

Conversion partners
When a company has identified its marketable assets and assessed their approximate value, a network of conversion partners--intellectual-property brokers, consolidators and business builders--can help it strike licensing and equity deals with buyers. The dozens of mostly small firms that occupy this fast-growing niche have pushed U.S. licensing revenue to an estimated $100 billion a year. Each type of partner can assist the intellectual-property owner in a different way, and sometimes the same firm serves different clients in different capacities. Like investment bankers, conversion partners can price and market a property, provide industry contacts and, occasionally, offer a portfolio of existing intellectual assets from other companies and institutions) that enhance a company's offerings. It rarely makes sense for the owner to maintain such conversion specialists on its own staff unless it expects to conduct ongoing deals in a specific industry.

Intellectual-property brokers use the technical specialist's initial assessment to judge how much a buyer would be likely to pay for an asset. Like their counterparts in commercial real estate, they can draw on a wealth of potential purchasers.

Brokerage firms are usually boutiques, often started by former business development leaders of large corporations. (Competitive Technologies, NineSigma and Chipworks are among the leading names in the United States.) Such a firm generally enters the game when patents or processes are well-established and have a clear market value, though the owner doesn't care to develop them further. For example, researchers in Monsanto's electrochemical-sciences group developed a flexible color display. The project, far removed from the company's core business, was about to be dropped, but the office supplies company Avery Dennison had an interest in just such a technology, which could be used in retail displays and in packaging for consumer goods. Competitive Technologies brokered a deal between Avery and Pharmacia (Monsanto's parent), and the first products are expected to reach the market early next year.

An owner of intellectual property should identify the broker with the best track record in each target market (medical devices, transportation or consumer goods, for example), give all of the company's business to that broker, and hold it to strict performance standards, such as the number of interested buyers approached and of discussions held during a given time period. The owner should also arrange an exit option in case of nonperformance.

Brokerage firms usually enter the licensing game when patents or processes are well-established and have a clear market value.

Brokers usually receive a commission of 10 percent to 30 percent of the transaction price, though for less well-developed or more speculative assets they could command up to half of it. They might also require a retainer to offset early expenses; if so, they should contribute some up-front value by helping to refine an application for intellectual property, reassessing its value, and suggesting specific companies and managers to target.

Some companies see the activities of intellectual-property consolidators as the moral equivalent of telemarketing, for they will call, uninvited, to generate business. Even so, don't hang up on them. Consolidators, often backed by private equity firms, purchase selected properties from a variety of players--even before patents are secured--and assemble packages that could be used to launch new businesses or sold to strategic buyers. Sometimes consolidators also conduct additional research to develop the full package or to show how different patents complement one another. These firms are most useful to organizations that have intellectual assets with limited standalone value and that aim for quick sales rather than continuing participation in ventures.

Certain deals can provide both, however. The intellectual-property division of the law firm Greenberg Traurig bundled five patents from three universities and licensed the package to a pharmaceutical company that was developing cancer treatments. The package is worth up to $300 million to the drug company, with the universities sharing the royalties. Other consolidators, including firms such as British Technology Group (BTG) and Research Corporation Technologies (RCT), play a similar role. When working with consolidators, owners of intellectual assets may receive compensation in forms ranging from up-front payments to royalties.

Business-building partners, which help companies create new ventures based on patents or technologies, are usually private equity firms, such as Accel-KKR and Milcom. A firm of this kind focuses on a particular end-market and provides industry-specific management talent and operating skills. Companies should use business builders when technologies could serve as growth platforms for other products or services or as the foundation for self-contained businesses. McDonald's, for instance, developed its own point-of-sale software for its cash registers and order-tracking and other systems. In 2001, Accel-KKR helped the company launch eMac Digital to sell software and services to the global restaurant industry. Unlike a consolidator, which cherry-picks one or two ideas from a company's portfolio, a business builder wants all relevant assets in a given area. It looks for ideas in the early stages and assumes most of the risk, usually acting as the lead investor in any new venture.

Occasionally, an intellectual-property owner will contribute financing through its corporate venture capital arm. It then typically becomes an equity partner with a minority (usually less than 20 percent) stake in the venture and provides in-kind support, such as access to developers of the technology. There are dividends only after the business is profitable, and the exit comes with the venture's sale to a strategic buyer or a financial investor or with an equity placement. Intellectual-property owners should maintain only two or three business-building partnerships at a time: Given the longer-term involvement, these are the most demanding relationships to operate and maintain.

Teams should have a sense of the value of any application before negotiating an arrangement with brokers or consolidators and especially before dealing with business builders.

Managing the network
The most successful companies see their intellectual-property programs as one of several business processes--including internal R&D, mergers and acquisitions, and in-licensing--that drive growth and innovation. To that end, these standouts build a dedicated, cross-functional intellectual-property organization.

But such organizations are rare; most companies, if they have any intellectual-property unit at all, usually staff it with a few patent attorneys working alone. Ideally, the team should be small (no more than ten people) and accountable for its performance, with pay tied to the unit's annual financial goals. In general, half or more of the team should be drawn from the product development, business development, and R&D departments and work with the technical experts; the lawyers on the team should oversee the conversion partners.

Above all, the team must be independent--that is, it must constitute a separate unit led by the chief of R&D or some other senior manager, for without the visible involvement of high-ranking corporate leaders, the effort will founder. (Such advice has become standard for any kind of change initiative, but because the commercialization of intellectual property involves noncore activities and is rarely anyone's top priority, the effort will die on the vine if not supported at the highest levels.)

Furthermore, management backing and organizational autonomy are needed if the unit is to avoid a host of political pitfalls: Unless managers define clear decision-making rights, for example, organizational lobbying will influence choices about what or what not to sell, and to whom. The provision of top talent and adequate resources calls for high-ranking leadership as well.

Finally, the involvement of senior executives can help a company avoid one of the problems of network management: the possibility that the intellectual-property team will cede control of the process to its outside partners, particularly those who help it value a technology. Teams should have a sense of the value of any application before negotiating an arrangement with brokers or consolidators and especially before dealing with business builders. (Knowledge partners, as independent advisers with no stake in a deal's outcome, can help make this assessment.) Likewise, companies should be extremely cautious about negotiating value-sharing deals or other terms favored by their conversion partners; in lucrative licensing arrangements, the difference between a 4 percent royalty and a 4.5 percent one can actually be millions of dollars.

/-*/-*/-*/-*/-*-*/-

DBA 1733 - TECHNOLOGY COMMERCIALISATION

ASSIGNMENT – I 10marks

1. Write short notes on “cross licenses” in technology commercialization.

1. INTRODUCTION

In many industries, the patent rights necessary to commercialize a product are frequently controlled by multiple rights holders. This fragmentation of rights can increase the costs of bringing products to market due to the transaction costs of negotiating multiple licenses and greater cumulative royalty payments. Portfolio cross licenses and patent pools can help solve the problems created by these overlapping patent rights, or patent thicket, by reducing transaction costs for licensees while preserving the financial incentives for inventors to commercialize their existing innovations and undertake new, potentially patentable research and development ("R&D").⁽¹⁾

A portfolio cross license, under which two firms license large blocks of their respective patents to one another, can provide a partial solution to the problem of patent thickets because it removes the need for patent-by-patent licensing. This bilateral licensing solution, however, is not likely to be much help when a firm requires licenses to a small number of patents held by each of many firms. In such cases, patent-pooling agreements may create substantial transaction efficiencies by enabling multiple patent holders to pool their patented technologies and, through a joint entity, license them as a group to each other and to third parties. As a result, patent pools may reduce the transaction costs of multiple licensing negotiations and may mitigate royalty stacking and hold up problems that can occur when multiple patent holders individually demand royalties from a licensee.⁽²⁾

Although both cross-licensing and patent-pooling agreements have the potential to generate significant efficiencies, they also may generate anticompetitive effects if the arrangements result in price fixing, coordinated output restrictions among competitors, or foreclosure of innovation.⁽³⁾ Pooling agreements typically warrant greater antitrust scrutiny than do cross-licensing agreements due to the collective pricing of pooled patents, greater possibilities for collusion, and generally larger number of market participants.

The Agencies dedicated several sessions of the Hearings to the subject of cross-licensing and patent-pooling agreements. Participants discussed a number of topics, including the similarities and differences between pooling and cross-licensing agreements, the potential procompetitive benefits and anticompetitive effects of pools and cross licenses, and the safeguards that have been proposed to help ensure that patent pools do not harm competition.⁽⁴⁾

The Agencies continue to develop scholarship and guidance on patent pools and similar licensing agreements. As part of this process, the Hearing participants and the Agencies identified a number of key concerns and best practices that may be of benefit to patent licensors and licensees contemplating entering into cross-licensing and pooling agreements.

1. PORTFOLIO CROSS LICENSES

Portfolio cross licenses are commonly bilateral agreements between two parties seeking to avoid infringement litigation.⁽⁵⁾ They are licenses to broad portfolios of technology, generally related to a particular field of use.⁽⁶⁾ Some panelists noted that cross licenses usually grant the licensee the right to use the patented technology only in a limited field and for a fixed period of time. Cross licenses often cover both existing patents as well as those issued during the period of the agreement. Panelists further suggested that most cross licenses require royalty payments and are granted on a non-exclusive basis so that the parties retain the right to license their patents to others.⁽⁷⁾

1. 1. Efficiencies

Portfolio cross licenses may be especially useful in industries, such as the semiconductor and computer industries, that are characterized by large numbers of overlapping patent rights.⁽⁸⁾ The most significant potential benefit of portfolio cross licensing is that it allows firms operating within a patent thicket⁽⁹⁾ to use each other's patented technology without the risk of litigation, including the risk of facing an injunction that shuts down production.⁽¹⁰⁾ Panelists suggested that this elimination of risk, or "patent peace," can give firms the design freedom they need to improve current products or design new products without fear of infringement.⁽¹¹⁾ Some commentators agreed that portfolio cross licensing may encourage long-term investments in both manufacturing capacity and R&D because the parties to the portfolio cross license do not fear "unforeseen, and unforeseeable, infringement actions."⁽¹²⁾ Portfolio cross licenses also can reduce transaction costs to licensors by allowing firms to license multiple patents at once.⁽¹³⁾

A portfolio cross-licensing arrangement among multiple patent holders may also mitigate the problem of stacking royalties.⁽¹⁴⁾ Royalty stacking occurs when access to multiple patents is required to produce an end product, forcing the manufacturer's products "to bear multiple patent burdens," usually in the form of multiple licensing fees.⁽¹⁵⁾ Royalty stacking can make production unprofitable and retard innovation. But when a rights holder enters into a portfolio cross-licensing arrangement, it may acquire access to all the blocking technologies required for production at a lower royalty rate than if each input were independently priced.⁽¹⁶⁾ As one economist has stated, a portfolio license can alleviate the "drag on innovation and commercialization of new technologies" that royalty stacking creates.⁽¹⁷⁾

One panelist questioned whether patent thickets are much of a problem and suggested that, if a patent holder will not license a patent or tries to extract a royalty that is too high, other firms may respond by designing around the technology covered by the patent.⁽¹⁸⁾ He argued that when firms design around each other's intellectual property rights, they avoid royalties, and may be able to offer newer, less expensive products to consumers.⁽¹⁹⁾ Others were skeptical that design-around attempts would be successful.⁽²⁰⁾

1. 1. Competitive Concerns

Portfolio cross licenses with provisions that may facilitate the coordination of other activity--such as the setting of prices, dividing markets, or licensing to third parties--can raise antitrust concerns.⁽²¹⁾ Some panelists suggested that a portfolio cross-licensing regime can pose a barrier to entry if existing relationships make it harder for "new firms to come in and overcome the patent thicket."⁽²²⁾ Other panelists doubted that portfolio cross-licensing arrangements create barriers to entry because, they said, companies engaged in portfolio cross licensing are generally willing to license their portfolios to all interested parties.⁽²³⁾ Panelists also found that new firms entering the market frequently develop their own patents with their own R&D.⁽²⁴⁾

1. 1. Analysis

The Agencies continue to recognize that most of the nonexclusive cross-licensing agreements of the type discussed herein generally do not raise competition concerns. When the licensing of intellectual property allows firms to combine complementary factors of production, such licensing can be procompetitive.⁽²⁵⁾ Accordingly, cross-licensing (and pooling) arrangements typically are analyzed pursuant to the rule of reason.⁽²⁶⁾ Indeed, the case law generally establishes that both cross-licensing and patent-pooling agreements should be so analyzed because, although they have the potential to diminish competition in some circumstances,⁽²⁷⁾ they also can be procompetitive mechanisms for using technologies that require access to a large number of patents.⁽²⁸⁾ The Agencies' general approach in analyzing a licensing restraint pursuant to the rule of reason is to inquire whether the restraint "harms competition among entities that would have been actual or likely potential competitors" in the absence of the license and whether the restraint is reasonably necessary to achieve procompetitive benefits that outweigh those anticompetitive effects.⁽²⁹⁾

"The Agencies apply the same general antitrust principles to conduct involving intellectual property that they apply to conduct involving any other form of tangible or intangible property."⁽³⁰⁾ In evaluating cross-licensing agreements, patent pools, or any other IP-related conduct, the Agencies do not presume that market power is necessarily associated with an intellectual property right.⁽³¹⁾ The Agencies also do not presume market power derives from a cross-licensing agreement (or patent pool) because there may be viable alternatives to participation in the licensing agreement that would preclude the assertion of market power. The Agencies believe that antitrust concerns about exclusion from portfolio cross licenses are unlikely unless the parties to the portfolio cross licenses collectively possess market power.⁽³²⁾

Of course, agreements that are determined to be mechanisms to accomplish naked price fixing or market division are subject to challenge under the per se rule.⁽³³⁾ The Agencies would be concerned, therefore, if a cross-licensing relationship were a method for collusion on price or output by downstream producers.⁽³⁴⁾

The Antitrust-IP Guidelines provide a safe harbor if the parties to a cross license "collectively account for no more than twenty percent of each relevant market significantly affected by the restraint," and the restraint is not "facially anticompetitive."⁽³⁵⁾ The Agencies recognize that, if a cross-licensing agreement were to affect a technology market, market share data may be unavailable or may not accurately represent the parties' competitive significance in the marketplace. In such cases, the Agencies would consider whether "there are four or more independently controlled technologies in addition to the technologies controlled by the parties to the licensing arrangement that may be substitutable for the licensed technology at a comparable cost to the user."⁽³⁶⁾

2. Discuss the scope and methods of technology diffusion

ASSIGNMENT – II 10marks

1. How to commercialize the patent technology?

	Provides financial support for the development and commercialization of pilot products of superior patented inventions.
Council for Commercialization of Patent Has gathered under the Patented Technology Commercialization Council all government patented technology trading and commercialization support systems. Has also established a well-organized comprehensive support system managed by the KIPA. Technology Innovation Project for SMEs Encourages innovation (with the government¡¯s financial support) among small and medium firms equipped with the right technological resources and potential. Industrial Technology Development Loan Project Encourages firms possessing patents to home-develop major capital goods and products requiring sophisticated technology, as well as disseminate innovative technologies, by offering long-term low-interest loans that can be used to cover production costs from research and development (R & D) to pilot plant manufacturing. Patented Technology Transfer Promotion Fund Promotes the efficient transfer of superior patented technologies (from local universities, research institutes, and other enterprises) to recipient firms by lending financial support and helping commercialize such patented technologies. Support the production of prototypes of good inventions Boosts inventors¡¯ morale and helps commercialize inventions by providing finances for manufacturing pilot products from the government¡¯s coffers. Assistance for the Acquisition of Good Inventions Makes well-founded recommendations to public agencies regarding which superior inventions are to be prioritized or purchased. Also helps explore the market, increase the volume of trade, enhance the morale of small and medium firms and individual inventors, collect the funds for the development of patented technologies and secure profits.

The Patent System and Commercialization of Inventions

32. In the highly competitive environment of international trade, increasing importance is being placed on planning and forecasting, and the development of appropriate commercial and industrial strategies on the part of individual enterprises, industrial groupings, and even countries. Such strategic planning is an increasingly important part of the successful implementation of the product and marketing policy of individual companies, and of the establishment and development of a technological base which is appropriate to the capacities and opportunities of the relevant country.

33. Recently, increasing attention and importance has been given to the role of the patent system as an analytical instrument for such industrial planning and decision-making. Two main uses of the patent system may be of interest in this regard.

34. First, the information aspect of the patent system: Awareness of the state-of-the-art in a particular technical field can avoid duplication in research work by indications that the desired technology already exists. Also it can provide ideas for further improvements; and can give an insight into the technological activities of competitors and, by reference to the countries in which patents have been taken out, the marketing strategies of competitors. A state-of-the-art search can also identify newly developing areas of technology in which future R&D activity should be monitored.

35. And second, as a tool for industrial planning and strategic decision making, the industrial property system may be very useful through analyses of the statistical aggregation of patenting activity as revealed through published patent documents. Since the degree of patenting activity provides an index of the degree of technological activity in a given technical field, the statistical analysis of patent documentation can indicate which countries or companies are active in various fields, in which industries technology is moving at a rapid pace and in which the technology is stable, and which are the enterprises active in particular technical fields. Such analyses provide a means of forecasting future industrial developments, identifying areas in which market demand is increasing, monitoring general technological progress, and testing the soundness of policy and investment decisions.

36. Technology, and inventions, as a fundamental part of it, are, by nature, both private goods in creation and public goods in productive use or consumption. They are private goods in so far as their creation consumes both mental and physical resources which are thereby diverted from other production or consumption activities. Once technology or inventions become available in the form of information, however, they lose their characteristics as private goods. Unlike a tangible object, they can be used by many without loss to any person, and without further investment in re-creating it for new users.

37. These characteristics of technology and invention create a dilemma. If all are free to use technology and inventions which have been created, who will be willing to bear the cost associated with their creation? One of the basic rationales of the patent system is to provide such an incentive for the creation of new technology and inventions. It does this by offering to inventors exclusive rights to commercially exploit patented inventions for a limited time in return for the disclosure of the inventions to the public.

38. The exclusive rights to exploit the invention commercially permit the creator of the invention to work it without fear of interference from imitators who have not incurred the investment in research and development which produced the invention. The inventor will thus have the opportunity to recover research and development costs through the competitive advantage which the exclusive rights to exploit the invention confer. The patent grant in this respect acts as an instrument of economic policy to stimulate further risk-taking in the investment of resources in the development of new products and technology.

39. Patents are granted on technical criteria and not on the basis of commercial or market criteria. The exclusive rights which are conferred by the patent relate to the commercial exploitation of the invention, and do not preclude another person from experimental work using the technological information contained in the patent specification. In other words, while the patent owner can prevent others from using, for commercial purposes, the same technology as is revealed in the disclosure of his invention, he is not protected against those who derive from his disclosed invention a perception of a market need which may be satisfied by the legitimate adaptation or improvement of his technology, or through the discovery of a different technical solution to satisfy the same market need.

40. The patent system contributes to economic growth and development by creating the conditions for the marketing and commercialization of inventions in several ways:

(a) it gives an incentive to the creation of new technology which will result in, inter alia, new products, inventions and commercial opportunities;

(b) it contributes to the creation of an environment which facilitates the successful industrial application of inventions and new technology, and the legal framework which encourages investment, including from foreign countries;

(c) it acts as a catalyst for the commercialization of inventions and their transfer to productive use;

(d) it is an instrument of commercial and industrial planning and strategy.

41. The framework of the patent system also provides a necessary element of certainty for a technology transfer transaction. If a potential technology recipient were located in a country which did not maintain a patent system, the supplier of the technology would need to rely on purely contractual arrangements seeking to guarantee non-disclosure and use of the invention by third parties. Such arrangements establish an element of commercial risk for technology suppliers which is more pronounced than in circumstances where the transfer transaction can be linked to a patented invention or technology guaranteeing protection against illegal exploitation by third parties.

42. The existence of a patent also introduces another measure of certainty to the commercial transfer transaction by enabling the potential recipient of the technology to sight the essence of the technology which he is wishing to acquire. In the absence of a patent, such initial sightings of the technology which it is proposed to transfer must take place through disclosures under secrecy and confidentiality agreements, which can again introduce an element of commercial risk of the leakage of the technology to third parties, thus undermining both the value of the technology from the point of view of the supplier, and the value of the technology for which the recipient will be paying. Furthermore, to cover such high risk the supplier would calculate it into a higher price of his technology.

43. The patent system must be understood as a policy instrument which encourages developing indigenous technological capabilities by providing an incentive to local inventors, research and development organizations and industry, rather than a policy instrument which, if adopted, will immediately effect a transformation in the level of technological sophistication in the relevant country. In fact, it represents a strong shield for the development of innovative domestic industry however small it may be at the moment.

44. The patent system does not constitute an instant remedy, but rather a long-term infrastructure investment in development of the national market. Without any patent system, local inventors, entrepreneurs and companies would have no effective protection against the imitation of their inventions, and less incentive to invest in the development and strengthening of their technological capacities. It might therefore be expected that the number of inventions produced by local inventors would be even less in the absence of a patent system.

Information Aspects of The Patent System and

Marketing and Commercialization of Inventions

45. Historically, patent protection was introduced as an economic policy instrument through which foreign skills and expertise could be attracted to a domestic economy by the grant of exclusive rights to work a particular skill or trade which was not present, or was underdeveloped, in the domestic economy.* The modern patent system contributes to the commercialization, marketing and transfer of technology in several ways.

46. The patent system plays an important role in the process of matching technology suppliers and recipients. In addition to the valuable technological information, a published patent document contains details of the names and addresses of the applicant, patentee and inventor, and thus provides a means whereby the owners of rights in relation to technology may be located.

47. The patent system stimulates invention and innovation through the accumulated pool of technological information contained in patent documents: the technology disclosed in patent documentation may serve to stimulate ideas for further invention and innovation.

48. The accumulated store of information which is contained and classified in patent documentation constitutes the single most valuable and comprehensive source of technological information available in the world today. As a source of technology and commercial and legal information, patent documentation has a number of distinct advantages:

(a) the technology contained in patent documents is, by definition, new industrial technology. It is a condition of the grant of a patent that the invention for which the patent is claimed be new, workable and capable of industrial application;

(b) patent documentation contains both a historical record of the evolution of a particular technical field, and a record of the most recent advances in that field;

(c) patent documentation also contains an extensive range of technological information which has not been published elsewhere; Such technological information would appear in traditional information sources much later than its publication in the application or the patent;

(d) a further advantage of patent documentation as a source of technology is that it is usually published in a uniform structure and form, which typically includes a summary of the invention, a description of the invention and how it differs from the prior art, and, of course claims, that define the scope of the invention. Very often it contains also drawings and an abstract of the invention to facilitate easy reference;

(e) additionally, patent documentation is usually classified in such a way as to enable a searcher to retrieve documents belonging to any given field of technology, thus facilitating comprehensive access to sources of technology in that field;

(f) patent applications and patents contain the full names and addresses of the inventors, applicants and patent owners (patentees), and thus provide a means for identification of the owners of rights in relation to technology;

(g) patent documents provide information on the state of protection of a given technology or invention.

49. Analyzing patent applications or patents for the same invention in different countries will permit conclusions concerning the commercial interests of the patent owner.

50. As already mentioned, the effective searching of patent documentation can indicate the state-of-the-art which exists in relation to any particular field of technology, which will be of particular importance to the individual enterprise. Awareness of the state-of-the-art in a particular technical field can avoid duplication in research work by indications that the desired technology already exists. Also it can provide ideas for further improvements; and can give an insight into the technological activities of competitors and, by reference to the countries in which patents have been taken out, the marketing strategies of competitors. A state-of-the-art search can also identify newly developing areas of technology in which future R&D activity should be monitored.

51. The aforementioned advantages characterize the information which is available through the patent system as an extremely valuable and comprehensive source of commercial and technological information, which can be used directly for scientific and experimental purposes and as a basis for stimulating the adaptation and improvement of the technology described in patent documents immediately after its publication, provided the user has the necessary basic and specialized knowledge.

52. It should be noted that the information contained in patent documentation provides merely the skeleton of a particular technology, and needs to be supplemented from other sources in order to represent a functional body of technology. In every case the raw source of technology disclosed in a patent specification is supplemented after the grant of a patent by know-how derived from the accumulated experience of the use of the invention.

2. Explain the uses of technology commercialization in technology management.

Commercialization is the process or cycle of introducing a new product into the market. The actual launch of a new product is the final stage of new product development, and the one where the most money will have to be spent for advertising, sales promotion, and other marketing efforts. In the case of a new consumer packaged good, costs will be at least $ 10 million, but can reach up to $ 200 million. In general one can say that it will cost about a dollar for each dollar of sales turnover achieved.

Commercialization is often confused with sales, marketing or business development. The Commercialization process has three key aspects:

1. The funnel. It is essential to look at many ideas to get one or two products or business that can be sustained long-term
2. It is a stage-wise process and each stage has its own key goals and milestones
3. It is vital to involve key stakeholders early, including customers

Contents [hide] 1 The Commercialization Process 1.1 When? 1.2 Where? 1.3 To Whom? 1.4 How? 2 Example of commercialization 3 References 4 Further reading 5 See also

[edit] The Commercialization Process

Commercialization of a product will only take place, if the following four questions can be answered:

[edit] When?

The company has to decide on the introduction timing. When facing the danger of cannibalizing the sales of the company’s other products, if the product can be improved further, or if the economy is down, the launch should be delayed.

[edit] Where?

The company has to decide where to launch its products. It can be in a single location, one or several regions, a national or the international market. This decision will be strongly influenced by the company’s resources, in terms of capital, managerial confidence and operational capacities. Smaller companies usually launch in attractive cities or regions, while larger companies enter a national market at once.

Global roll outs are generally only undertaken by multinational conglomerates, since they have the necessary size and make use of international distribution systems (e.g., Unilever, Procter & Gamble). Other multinationals use the “lead-country” strategy: introducing the new product in one country/region at a time (e.g. Colgate-Palmolive).

[edit] To Whom?

The primary target consumer group will have been identified earlier by research and test marketing. These primary consumer group should consist of innovators, early adopters, heavy users and/or opinion leaders. This will ensure adoption by other buyers in the market place during the product growth period.

[edit] How?

The company has to decide on an action plan for introducing the product by implementing the above decisions. It has to develop a viable marketing mix and create a respective marketing budget.

---

* [1] See F. Beier and J. Straus, The Patent System and Its Information Function - Yesterday and Today, International Review of Industrial Property and Copyright (1977, 8) p.p.387 - 406.

/*-/-*/-*/*-/-*/

DBA - 1702 - INTERNATIONAL BUSINESS MANAGEMENT

ASSIGNMENT – I

1. Describe the types and role of Export promotional council to promote International Trade.

EXPORT PROMOTION:

Export promotion has been one of the main planks of foreign trade policy of most

countries. With increasing export earnings, the benefits of enhanced domestic employment, rising revenues to companies and government, rise in standard of living, expanding overseas operations funded by export surplus, appreciation of domestic currency, raising forex reserve, no pressure to borrow from world markets – institutional or otherwise, an acknowledgement of capabilities of domestic people and firms, etc emanate. Also, in the world of rising oil prices, countries with no or far less oil reserves have to depend on exports to pay for rising oil import bills. Thus exports benefit a nation in many ways, but the world market is competitive, because every firm/country wants to export more. To have the edge over others in the global market, governments provide some promotional measures to firms to increase their export competitiveness. These measures are: (roles)

Financial,

Fiscal,

Facilitative,

Favours and Felicitating.

Types:

Export Promotion Council & Commodities Boards

• Federation of Indian Export Organizations (FIEO)
• All India Exporters Chamber
• Agricultural and Processed Food Products Export Development Authority (APEDA)
• Marine Products Export Development Authority
• Carpet Export Promotion Council
• Engineering Export Promotion Council
• Export Promotion Council for EOUs and SEZ Units
• Electronics & Computer Software Export Promotion Council
• Export Promotion Council for Handicrafts
• Gem & Jewellery Export Promotion Council
• Apparel Export Promotion Council (AEPC)
• Basic Chemicals, Pharmaceuticals & Cosmetics Export Promotion Council, (CHEMEXCIL)
• Cashew Export Promotion Council of India (CEPC)
• Chemical & Allied Products Export Promotion Council (CAPEXIL)
• Cotton Textile Export Promotion Council
• Council for Leather Exports (CLE)
• Handloom Export Promotion Council (HEPC)
• Indian Silk Export Promotion Council (ISEPC)
• National Agricultural Cooperative Federation of India Ltd. (NAFED)
• Project Exports Promotion Council (PEPC)
• Plastics Export Promotion Council (PLEXCONCIL)
• Shellac Export Promotion Council
• Sports Goods Export Promotion Council (SGEPC)
• Synthetic & Rayon Textiles Export Promotion Council (SRTEPC)
• Wool & Woollens Export Promotion Council (WWEPC)
• Central Silk Board (CSB)
• Coconut Development Board (CDB)
• Coffee Board of India
• Coir Board
• Jute Manufacturers Development Council (JMDC)
• Rubber Board
• Spices Board
• Tea Board
• Tobacco Board

1. Financial Services for Exporters

Exporters are given priority finance at concessional terms of lending by financial

and banking institutions under a kind of directive lending. Even specialist financial institutions are created to exclusively cater to export firms.

Commercial banks and the special Export-Import Bank of India, in short, EX-IM Bank, serve the exporting community by providing credit finance to exporters. The EXIM bank functions as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade. Another facility is credit guarantee.

a. Credit by EX-IM bank, Commercial Banks and ECGC for exporters

Pre-shipment credit, Post Shipment credit, Supplier’s Credit, Credit for Project

Exporters, Credit for Exporters of Consultancy and Technological Services, and Guarantee facilities are different assistances offered by EX-IM bank, Commercial Banks, Export Credit and Guarantee corporation, etc.

Pre-shipment Credit facility, in Indian Rupees and foreign currency, provides access to finance at the manufacturing stage - enabling exporters to purchase raw materials and other inputs. Supplier’s Credit facility enables exporters to extend term credit to importers (overseas) of eligible goods at the post-shipment stage.

Credit facility for Project exporters to meet rupee expenditure on overseas project export contracts on mobilization / acquisition of materials, personnel and equipment etc is also offered.

Credit facility to exporters of consultancy and technology services, so that they can, in turn, extend term credit to overseas importers is also provided. EX-IM bank offers Rediscounting Facility to commercial banks, enabling them to rediscount export bills of their SME customers, with usance not exceeding 90 days. EX-IM bank also offers Refinance of Supplier’s Credit, enabling commercial banks to offer credit to exporters of eligible goods, who in turn extend them credit over 180 days to importers overseas. Companies executing contracts within India, but which are categorized as Deemed Exports in the Foreign Trade Policy of India or contracts secured under international competitive bidding or contracts, under which payments are received in foreign currency, can avail of credit under Finance for Deemed Exports facility, aimed at helping them meet cash flow deficits. Overseas buyers can avail of Buyer’s Credit, for import of eligible goods from India on deferred payment terms. Special schemes are available for Small and Medium enterprises (SMEs), rural grass-root enterprises and Agri-exporters.

b. Funding for Exporting Companies

EX-IM bank, term lending financial institutions and commercial banks provide term Finance under different schemes: Equity Participation, Project Finance, Equipment Finance, Import of Technology & Related Services, Domestic Acquisitions of businesses/companies/brands and Export Product Development/ Research & Development. Under General Corporate Finance Working Capital Finance (For Exporting Companies) Working Capital Term Loans [<> Export Bills Discounting, Warehousing Finance, Export Lines of Credit, Export Packing Credit and Cash Flow financing are extended. Letter of Credit facility is also extended to importers.

Funding for overseas acquisition: The schemes for financing Indian Company’s

equity participation in the overseas Joint Venture (JV)/ Wholly Owned Subsidiary (WOS), Term & Working Capital to the overseas JV / WOS, Finance (for equity/debt component) for acquisition of overseas businesses / companies including leveraged buy-outs including structured financing options and Direct Equity are available with Exim Bank, selected commercial banks and term lending financial institutions.

c. Line of Credit

Line of credit is a facility where a foreign institution, generally government or government owned, is provided finance which in turn extends the funds to a domestic institution that takes designated works or projects in the foreign country concerned. This is a tripartite arrangement, of which one is the Indian financing institution, the second is an Indian firm carrying out a project oversea and the third is the foreign government or financing agency.

d. Export Credit Guarantee service

Apart providing finance for exporters, insurance against risk of default on the part of importers is a very great need. To provide this guarantee, Export Credit Guarantee Corporation of India (ECGC) was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports.

It provides a range of credit risk insurance covers to exporters against loss in export of goods and services. Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them. Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan

1. Facilitating Services for Exporters

There are scores of institutions that render varied services to exporters. There are

Export Promotion Councils for major product groups, Commodity Boards for selected plantation and other crops, Trade Authorities for few product classes that render a range of services for product/service/commodity items that they are responsible.

1. Services extended

Exploration of overseas market, Identification of items with export potential, Market survey and up-to-date market intelligence, Contact with protective buyers to interest them in the exporters’ products, Providing the export company’s profile to overseas buyers and vice-versa, Advice on international marketing, Display of selected product groups ,Arrangement for supply of indigenous and imported raw materials for export production, Resolving shipping and transport problems, Advice on export finance banking and insurance, Extensive publicity in India and abroad, Participation in Trade Fairs and Exhibitions abroad, Deputation of trade delegations, study teams and sales teams to foreign markets, Organizing Buyer-Seller Meets in India and abroad, Catering to other developmental needs, Collecting, collating and disseminating world market intelligence, Updating the information on global trends in fashion & design, product development and adaptation, Dissemination of information of commercial and technological nature through seminars, news bulletins and magazines, Organizing participation of Indian exporters in international fairs and buyer seller meets, Organizing visits of buyers’ delegations from different countries, Liaising with various international organizations dealing with trade information, Leading trade delegations to potential markets globally, Formulating Inter-State trade Council to engage State Governments in providing an enabling environment for promotion of international trade, etc.

b. Facilitating Institutions: Export Promotion Councils and Authorities

1. Agricultural and Processed Food Products Export Development Authority,
2. Marine Products Exports Development Authority,
3. Apparel Export Promotion Council,

iv. Building Materials and Technology Promotion Council,

v. Carpet Export Promotion Council,

vi. Cashew Export Promotion Council of India,

vii. Chemicals & Allied Products Export Promotion Council,

viii. Council for Leather Exports,

ix. Cotton Textiles Export Promotion Council,

x. Electronics & Computer Software Export Promotion Council,

xi. Engineering Export Promotion Council,

xii. Export Promotion Council for Handicrafts,

xiii. Gem and Jewellery Export Promotion Council,

xiv. Handloom Export Promotion Council,

xv. Silk Export Promotion Council,

xvi. Synthetic & Rayon Textile Export Promotion Council,

xvii. Wool & Woolens Export Promotion Council,

xviii. Jute Manufactures Development Council,

xix. Plastics and Linoleums Export Promotion Council,

xx. Power loom Development & Export Promotion Council,

xxi. Cotton Textile Export Promotion Council,

xxii. Shellac Export Promotion Council, and

xxiii. Sports Goods Export Promotion Council.

c. Facilitating Institutions: Commodity Boards and Other Agencies

Asia Pacific Textile Clothing Forum, Central Silk Board, Coconut Development

Board, Coir Board, Federation of Indian Export Organizations (FIEO, India Trade

Promotion Organization, Indian Institute of Foreign Trade, National Agricultural Cooperative Marketing Federation of India Limited (NAFED), National Dairy Development Board, National Horticulture Board, National Oilseeds and Vegetable Oils Development Board,National Medicinal Plants Board, Patent Facilitating Centre, etc.

1. Fiscal Concession for Exporters

Fiscal concessions are in the form of tax concession on profit from export business, import duty concession on imports for supporting export activities, excise duty concession for export activities, exemption from certain levies on exports, etc.

I Export cess on export of all agricultural and plantation commodities levied under various Commodity Board Acts was waived.

Ii No safeguard and antidumping duty to be levied on inputs under advance

license for deemed export supplies made to ICB (International Competitive Bidding) projects.

Iii EPCG Scheme will facilitate the modernization of retail sector by allowing concessional duty imports. For this the retailer should have a minimum covered

shopping area of 1000 square meters.

IV Duty free import of inputs based on the past export performance, import of

mono filament long line system for tuna fishing at concessional duty and establishes a self removal for clearance of waste of perishable commodities.

V Entitlement of duty free imports of samples enhanced to Rs. 3 lakhs for gems.

VI EOUs can claim IT exemption within a period of 12 months from the date of exports.

Vii All actions by Income Tax authority on DEPB benefits have been stopped by Prime Minister with immediate effect. The matter is to be decided at economic advisory council headed by Prime Minister in the next 30 days.

Viii Export obligation for specified projects shall be calculated based on

Concessional duty permitted to them. This would improve the viability of such projects. An EPCG license can also be issued for import of capital goods for supply to projects notified by the Central Board of Excise and Customs under

S.No.441 of Customs Exemption Notification No.21/2002 dated 01-03-2002 where in the basic customs duty on imports is 10% with a CVD of 16%.The

export obligation for such EPCG licenses would be eight times the duty saved.

The duty saved would be the difference between the effective duty under the

Aforesaid Customs Notification and the concessional duty under the EPCG

Scheme.

Ix Fiscal Relief to EOUs

a. EOUs shall be exempted from Service Tax in proportion to their exported goods and services.

b. EOUs shall be permitted to retain 100% of export earnings in EEFC accounts.

c. Income Tax benefits on plant and machinery shall be extended to DTA units

which convert to EOUs.

1. Favours for Exporters

1. 1. Realizing that great potential and opportunities exist in the manufacturing sector, Annual supplement introduces a number of measures to enhance the competitiveness of manufacturing sector.

1. 1. To promote accelerated export performance, balance export obligation will be waived
   2. for the exporters completing 75% of their export obligation in half the prescribed export obligation period.

1. 1. Reduced export obligation and enhanced time available for exports under the EPCG Scheme for the imports made by the agriculture sector.

1. 1. Favours to EOUs
   2. Favours to Free Trade and Warehousing Zone
   3. Common Facilities Centre
   4. Procedural Simplification & Rationalization Measures
   5. Facilities at Pragati Maidan
   6. Legal Aid
   7. Grievance Redressal
   8. Quality Policy
   9. Bio Technology Parks
   10. Co-Acceptance/Avalisation
   11. Revamping Boards of Trade
   12. Web chat

1. Felicitative Encouragements to Exporters

a. Target Plus

A new scheme to accelerate growth of exports called “Target Plus” has been introduced. Exporters who have achieved a quantum growth in exports would be entitled

to duty free credit based on incremental exports substantially higher than the general actual export target fixed.(Since the target fixed for 2004-05 is 16%, the lower limit of performance for qualifying for rewards is pegged at 20% for the current year). Rewards will be granted based on a tiered approach. For incremental growth of over 20%, 25% and 100%, the duty free credits would be 5%, 10% and 15% of FOB value of incremental exports.

b. New Status holder Categorization:

The Scheme of status holders continues but the categorization of status holders from Export House, Trading House, Star Trading House and Super Star Trading House has been changed to one Star Export House, two Star Export House, three Star Export

House, four Star Export House and five Star Export House. Star Export Houses shall be eligible for a number of privileges

2. What are the concerns and challenges for India from the WTO perspective?

World Trade Organization

India is an original Member of the WTO and provides MFN treatment to all Members and other countries. It has accepted the Fourth and Fifth Protocols and is a Member of the Information Technology Agreement. It is not a party to the WTO Government Procurement Agreement (GPA). Like all Members, India is required to make regular notifications on its trade-related laws and measures.

India is an active Member of the WTO. In the current negotiations, it has submitted proposals relating to, inter alia, agriculture, non-agriculture market access (NAMA), services, disputes, competition policy, trade facilitation, rules, TRIPS, and special and differential treatment. A number of these proposals were made jointly with other Members and in many instances with developing countries, including the G-20, G-33, and NAMA-11 groups. India’s position prior to the launch of the Doha Round of negotiations placed emphasis on securing the objectives outlined in the mandated negotiations and the implementation issues raised by a number of developing countries. At the Ministerial Conference in Cancun, in September 2003, and in Hong Kong, China in December 2005, India stressed the need to address agricultural subsidies in rich countries and tariff and non-tariff barriers maintained by these countries on products of export interest to developing countries. India believes that the interests of its 650 million rural poor, who are dependent on agriculture for a livelihood, cannot be jeopardized. It is therefore emphasizing special and differential treatment through proportionately lower overall bound tariff reduction commitments by developing countries, coupled with a special safeguard mechanism and a list of special products vital to ensuring livelihoods and food security of farmers in developing countries.

With regard to NAMA, (NAMA products include fish and fishery products, wood and forestry products, electronics, manufactures, automotive products, machinery, textiles, clothing, leather, chemical products, and mining products) India, along with its coalition partners, believes that: progress must be made on achieving a fair, balanced, and development-oriented set of modalities based on the mandated principles of placing development concerns at the heart of the negotiations; ensuring less than full reciprocity in reduction commitments for developing countries; achieving a comparable level of ambition.

Read and concise

India submits proposals on strengthening the WTO
Published in SUNS #6739 dated 13 July 2009

Geneva, 10 Jul (Kanaga Raja) -- India has proposed that the forthcoming seventh Ministerial Conference of the World Trade Organization (WTO) end November should address some systemic issues with the aim of improving the functioning and efficiency of the WTO as a rules-based system, and make the system more useful, relevant, vibrant and user-friendly.

Towards this end, India has submitted a set of five proposals, in a communication (WT/GC/W/605, dated 2 July 2009) to the upcoming General Council meeting on 28-29 July.

The communication is in the context of India's stated intention at a General Council meeting on 26 May 2009 to submit a few proposals that it considered important from the perspective of improving the functioning and efficiency of the WTO as a rules-based system.

India's first proposal relates to trade information based on member notifications. The proposal calls on Ministers to direct the setting up of a project to enhance the Integrated Database to include in an appropriate format non-tariff data, based on the current notification obligations under WTO Agreements.

[Trade experts and former negotiators have been noticing, and commenting, that many of the agreements have provisions requiring members to notify regularly - such as on agriculture supports/subsidies, and regulatory changes in respect of services - and the scheme of the Marrakesh agreement envisaged the various committees to exercise oversight. However, in the preoccupations of launching the Doha Round, and attempts to conclude it, via mini-ministerial meetings etc, an important aspect of routine technical work has been neglected.]

The project, India said in its communication, should be designed to be efficient and effective by inter alia limiting additional resource requirements; optimising the design and structure of present notification systems; enhancing co-operation with related multilateral agencies; and providing technical assistance to developing countries, in particular the LDCs.

India noted that in the realm of trade information, there is a significant gap in the information available on non-tariff measures (NTMs). Closing this gap is of particular importance to governments as well as for trade operators.

While the WTO is uniquely placed as the biggest repository of certified trade information about its members' regimes through its system of notifications under various WTO agreements, at present, this information has at best archival value because of the way information is submitted and stored. "It is incomplete, not comparable amongst members or even timely."

What is needed is better integration and coherence in database form and more effective public visibility of the existing information, said India, voicing the view that such an exercise need not be resource intensive.

The second proposal relates to re-vitalizing WTO Committees. The proposal points to direction from Ministers to include in the agenda of formal WTO Committee meetings inter alia - monitoring of recent developments in members on the trade disciplines covered by the committee, based on a compilation by the Secretariat of developments between formal meetings and verified by the member concerned; regular discussions on general developments in the areas covered by the committee, including in the presence of outside experts; and through adoption of appropriate procedures, discussion on and resolution of low threshold specific trade concerns in small group settings.

"Given the widely perceived declining utility of the committee work, it is imperative that measures to revitalise them be adopted," said India, suggesting some ways on how the committees can be re-invigorated.

One way is that the recent exercise in the TPRB (Trade Policy Review Body) of the WTO of monitoring developments in the trade regimes of various members has proved to be a useful tool for all members, particularly the developing countries that have an inherent disadvantage in gathering such information. This practice could be formalized and be made a regular agenda item for all formal meetings of all trade related WTO Committees.

"Along with member notified measures, the Secretariat may make factual presentation on developments in various members on the disciplines covered by a committee. The Secretariat may base its factual report on information gathered from publicly available and reliable sources and after the gathered information being verified by the member concerned."

Another way to improve the relevance of the WTO Committees may be to include on the agenda, on a mandated basis, a discussion on the current practices and developments in the trade disciplines covered by a particular Committee. It may be considered to invite outside experts to present their views on such developments. Such a topical discussion will keep members abreast of the latest developments, said India.

According to the communication, one other measure would be to enable the Committees to discuss and offer possible solutions to the specific trade concerns of members. As a forum to discuss and resolve the specific trade concerns, it is important that members have access to at least a limited committee process right through the year and not just the periodical formal committee meetings.

"Working procedures that balance the need for confidentiality, to meaningfully discuss and resolve a specific trade concern, with that of transparency, i. e. information to the membership as a whole about the issue and its resolution, has to be devised and adopted."

Finally, said India, keeping the above in view, members may like to review the frequency of the WTO meetings. The frequency of the meetings refers to both the formal meetings as well as informal meetings. These could be increased to allow discharge of its work efficiently.

The third proposal concerns the WTO's engagement with Regional Trade Agreements (RTAs).

The proposal states: "Directions from Ministers to monitor the developing trends in RTAs and develop non-binding best practice guidelines for reference while negotiating new RTAs. To ensure robust and regular monitoring, the two transparency mechanisms should be implemented on a permanent basis; the Secretariat to produce an Annual Review of RTAs based on the factual reports; and members to discuss trends and formulate non-binding best practices in the CRTA (Committee on Regional Trade Agreements)."

India explained that the fact that RTAs are proliferating and most of the global trade is conducted on preferential terms is well documented. The work in the WTO on RTAs which earlier focused entirely on evaluating the RTAs for their compatibility with GATT/ WTO provisions was for long log-jammed. Members could neither definitively establish standards for the examination or evaluation, and even where they had clear yardsticks such as for "reasonable length of time", they could not agree whether indeed the RTAs under examination met the standards or not.

Noting that the RTA Transparency Mechanism was a success, India said that the success of the existing mechanism is reflected by the desire of the membership to design a similar mechanism for the unilateral preferential schemes as well. Even this mechanism, which is not Doha mandated, is close to finalisation. Thereby, all agreements offering preferences of any kind to participants will be covered by the transparency regime in the WTO.

Given the accepted benefits of the RTA Transparency Mechanism and the expectation that the transparency mechanism on preferential schemes will be as useful, Ministers could now agree to implement both on a permanent basis, albeit with in-built provisions for periodic review, said the communication.

The basic problem with examination of RTAs in the WTO has been the lack of a clear understanding amongst the members about the yardsticks on trade coverage; implementation periods; means to evaluate trade diversion, etc. While the work on the substantive issues may continue in the NGR (Negotiating Group on Rules), "it will be useful, in parallel, to put in place measures that will allow us to move further on implementing the Transparency Mechanisms and best utilise the knowledge gathered on RTAs through them."

In this context, said India, it is suggested that the Secretariat be requested to prepare an annual RTA Review. This publication, based on the factual presentations prepared by the Secretariat of individual RTAs, will inter alia review horizontally, across RTAs, the trends in content and structure of the RTAs that have come into effect during the year concerned.

Based on the trends detected in the annual reviews, members in the CRTA may examine from an educative perspective ways to reduce the adverse impact of RTAs on multilateral trade. Aspects like trade coverage/substantially all trade; reasonable length of time; non-trade issues; preferential rules of origin, etc. can be examined. To the extent that there is consensus, the outcome could be a series of non-binding "best practices/guidelines" on various elements/aspects of RTAs for reference by members in negotiating future RTAs.

The fourth proposal tabled by India relates to an omnibus legal instrument for preferential market access to LDCs. The proposal states: "Direction from Ministers for establishing a 'Steering Group' or a subsidiary body under the General Council to comprehensively examine all WTO-related instruments allowing members to grant preferential access to LDCs. Following such examination, members to consider; propose and adopt a single instrument that would address all forms of preferential market access for LDCs."

Within the GATT/WTO, members have provided special and differential treatment for Least-Developed Country members (LDCs) on a preferential basis under a variety of legal instruments and agreements. These preferential schemes have evolved over time both from the perspective of coverage, depth of concessions and the members granting the concessions, said India.

Highlighting several existing instruments that provide legal coverage for preferential market access for LDCs, the communication said that the multiple and sometimes overlapping instruments have different types of legal coverage and a variety of procedural requirements. This, combined with differential levels of market access commitments made in favour of LDCs, has created an environment of uncertainty both for the LDC preference receivers and the members granting or establishing such preferential market access schemes, said India.

It noted as an example, that just on the procedural front, the developed country GSP schemes under the Enabling Clause are notified in the CTD (Committee on Trade and Development) while developing countries will have to notify their schemes through the Council for Trade in Goods under the cover of the Decision contained in WT/L/759. The implementation of the DFQF (duty-free, quota-free market access) Decision is being notified to the CTD.

For the purposes of certainty, predictability and transparency on all aspects of preferential market access for LDCs, an Omnibus Legal Instrument is necessary, stressed India. The final proposal concerns the need to reaffirm the primacy of international standards and standard setting for WTO obligations.

It calls for a "Statement from Ministers in the Conference outcome document, reaffirming the provisions relating to the need to adopt international standards in respect of sanitary, phytosanitary and technical barriers to trade, stressing the need for members to primarily base domestic regulations on such international standards for all trade in goods. Encourage increased participation in international standard setting activities."

India argued that lack of common product standards and framing of technical regulations on national rather than international standards is increasingly a major hindrance to a smooth flow of trade. Arguably, alignment of standards amongst the membership and reduction of costs related to adherence, i. e. conformity assessment procedures, will bring about the most significant benefit to world trade.

A reaffirmation by Ministers will be an important signal to the membership that the increasing divergence from international standards and conformity assessment/testing practices is a matter of concern and it is time to roll back the complications brought about by the divergent national regulatory regimes, said India.

ASSIGNMENT- II

1. What is Globalization? Is it a Threat, Challenge or Opportunity to Indian Economy Discuss?

Introduction:

Globalisation is the new buzzword that has come to dominate the world since the nineties of the last century with the end of the cold war and the break-up of the former Soviet Union and the global trend towards the rolling ball. The frontiers of the state with increased reliance on the market economy and renewed faith in the private capital and resources, a process of structural adjustment spurred by the studies and influences of the World Bank and other International organisations have started in many of the developing countries. Also Globalisation has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard. But globalisation has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Another negative aspect of globalisation is that a great majority of developing countries remain removed from the process. Till the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalisation

Definition:

Globalised World - What does it mean?

Does it mean the fast movement of people which results in greater interaction?

Does it mean that because of IT revolution people can be in touch with each other in any part of the world?

Does it mean trade and economy of each country is open in Non-Intrusive way so that all varieties are available to consumer of his choice?

Does it mean that mankind has achieved emancipation to a level of where we can say it means a social, economic and political globalisation?

Though the precise definition of globalisation is still unavailable a few definitions worth viewing, Stephen Gill: defines globalisation as the reduction of transaction cost of transborder movements of capital and goods thus of factors of production and goods. Guy Brainbant: says that the process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC's, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution

Impact on India:

India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of amore open and market oriented economy.

Major measures initiated as a part of the liberalisation and globalisation strategy in the early nineties included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates.

Over the years there has been a steady liberalisation of the current account transactions, more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom, roads, ports, airports, insurance and other major sectors.

The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimum with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by march 2002, including almost all quantitative restrictions.

India is Global:
The liberalisation of the domestic economy and the increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70% in 2003-04. A Global comparison shows that India is now the fastest growing just after China.

This is major improvement given that India is growth rate in the 1970's was very low at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India. Though India's average annual growth rate almost doubled in the eighties to 5.9% it was still lower than the growth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve India's global position. Consequently India's position in the global economy has improved from the 8^th position in 1991 to 4^th place in 2001. When GDP is calculated on a purchasing power parity basis.

Globalisation and Poverty:

Globalisation in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global inequality over recent decades. But it is not the only reason for this often unrecognised progress, good national polices , sound institutions and domestic political stability also matter.

Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2 billion of the developing world 4.8 billion people still live in extreme poverty.

But the proportion of the world population living in poverty has been steadily declining and since 1980 the absolute number of poor people has stopped rising and appears to have fallen in recent years despite strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987 alone a further 215million people would be living in extreme poverty today.

India has to concentrate on five important areas or things to follow to achieve this goal. The areas like technological entrepreneurship, new business openings for small and medium enterprises, importance of quality management, new prospects in rural areas and privatisation of financial institutions. The manufacturing of technology and management of technology are two different significant areas in the country.

There will be new prospects in rural India. The growth of Indian economy very much depends upon rural participation in the global race. After implementing the new economic policy the role of villages got its own significance because of its unique outlook and branding methods. For example food processing and packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand.

Understanding the current status of globalisation is necessary for setting course for future. For all nations to reap the full benefits of globalisation it is essential to create a level playing field. President Bush's recent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufactured goods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs will be lowered each year until they are eliminated by 2015.

GDP Growth rate:

The Indian economy is passing through a difficult phase caused by several unfavourable domestic and external developments; Domestic output and Demand conditions were adversely affected by poor performance in agriculture in the past two years. The global economy experienced an overall deceleration and recorded an output growth of 2.4% during the past year growth in real GDP in 2001-02 was 5.4% as per the Economic Survey in 2000-01. The performance in the first quarter of the financial year is5.8% and second quarter is 6.1%.

Export and Import:

India's Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 million respectively. Many Indian companies have started becoming respectable players in the International scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of which was contributed by the marine products alone. Marine products in recent years have emerged as the single largest contributor to the total agricultural export from the country accounting for over one fifth of the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the other prominent products each of which accounts fro nearly 5 to 10% of the countries total agricultural exports.

Where does Indian stand in terms of Global Integration?

India clearly lags in globalisation. Numbers of countries have a clear lead among them China, large part of east and far east Asia and Eastern Europe. Let’s look at a few indicators how much we lag.

• Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now exceeds US $ 50 billion annually. It is only US $ 4billion in the case of India
• Consider global trade - India's share of world merchandise exports increased from .05% to .07% over the pat 20 years. Over the same period China's share has tripled to almost 4%.
• India's share of global trade is similar to that of the Philippines an economy 6 times smaller according to IMF estimates. India under trades by 70-80% given its size, proximity to markets and labour cost advantages.
• It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the talk, we are now where ever close being globalised in terms of any commonly used indicator of globalisation. In fact we are one of the least globalised among the major countries - however we look at it.
• As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt, assimilate and contribute. This goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication, greater trade linkages, denting of political and economic sovereignty and greater acceptance of democracy as a way of life.

Consequences:

The implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. This is reflected in Interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic policies and market conditions. Rather, they are influenced by both domestic and international policies and economic conditions. It is thus clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This constrained the policy option available to the government which implies loss of policy autonomy to some extent, in decision-making at the national level.

~

2. Examine the various forms of Tariff and non Tariff Barriers in international trade & their impact on India’s trade.

Tariff Barrier:

A tariff is a duty imposed on goods when they are moved across a political boundary. They are usually associated with protectionism, the economic policy of restraining trade between nations. For political reasons, tariffs are usually imposed on imported goods, although they may also be imposed on exported goods.A certain amount of goods allowed in one's country.

In the past, tariffs formed a much larger part of government revenue than they do today.

When shipments of goods arrive at a border crossing or port, customs officers inspect the contents and charge a tax according to the tariff formula. Since the goods cannot continue on their way until the duty is paid, it is the easiest duty to collect, and the cost of collection is small. Traders seeking to evade tariffs are known as smugglers.

Types:

There are various types of tariffs:

• An ad valorem tariff is a set percentage of the value of the good that is being imported. Sometimes these are problematic, as when the international price of a good falls, so does the tariff, and domestic industries become more vulnerable to competition. Conversely, when the price of a good rises on the international market so does the tariff, but a country is often less interested in protection when the price is high.

They also face the problem of inappropriate transfer pricing where a company declares a value for goods being traded which differs from the market price, aimed at reducing overall taxes due.

• A specific tariff, is a tariff of a specific amount of money that does not vary with the price of the good. These tariffs are vulnerable to changes in the market or inflation unless updated periodically.
• A revenue tariff is a set of rates designed primarily to raise money for the government. A tariff on coffee imports imposed by countries where coffee cannot be grown, for example raises a steady flow of revenue.
• A prohibitive tariff is one so high that nearly no one imports any of that item.
• A protective tariff is intended to artificially inflate prices of imports and protect domestic industries from foreign competition (see also effective rate of protection,) especially from competitors whose host nations allow them to operate under conditions that are illegal in the protected nation, or who subsidize their exports.
• An environmental tariff, similar to a 'protective' tariff, is also known as a 'green' tariff or 'eco-tariff', and is placed on products being imported from, and also being sent to countries with substandard environmental pollution controls.

Tariffs, in the 20th century, are set by a Tariff Commission based on terms of reference obtained from the government or local authority and suo motu studies of industry structure.

Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy, investment policy, and agricultural policy. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs and other barriers against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc. A customs union has a common external tariff, and, according to an agreed formula, the participating countries share the revenues from tariffs on goods entering the customs union.

If a country's major industries lose to foreign competition, the loss of jobs and tax revenue can severely impair parts of that country's economy and increase poverty. If a nation's standard of living or industrial regulations are too great, it is impossible for domestic industries to survive unprotected trade with inferior nations without compromising them; this compromise consists of a global race to the bottom. Protective tariffs have historically been used as a measure against this possibility. However, protective tariffs have disadvantages as well. The most notable is that they prevent the price of the good subject to the tariff from undercutting local competition, disadvantaging consumers of that good or manufacturers who use that good to produce something else: for example a tariff on food can increase poverty, while a tariff on steel can make automobile manufacture less competitive. They can also backfire if countries whose trade is disadvantaged by the tariff impose tariffs of their own, resulting in a trade war and, according to free trade theorists, disadvantaging both sides.

Non-tariff barriers to trade (NTB's) are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTB's are anti-dumping measures and countervailing duties, which, although they are called "non-tariff" barriers, have the effect of tariffs once they are enacted.

Their use has risen sharply after the WTO rules led to a very significant reduction in tariff use. Some non-tariff trade barriers are expressly permitted in very limited circumstances, when they are deemed necessary to protect health, safety, or sanitation, or to protect depletable natural resources. In other forms, they are criticized as a means to evade free trade rules such as those of the World Trade Organization (WTO), the European Union (EU), or North American Free Trade Agreement (NAFTA) that restrict the use of tariffs.

Examples of Non-Tariff Barriers to Trade

Non-tariff barriers to trade can be:

• Import bans
• General or product-specific quotas
• Rules of Origin
• Quality conditions imposed by the importing country on the exporting countries
• Sanitary and phyto-sanitary conditions
• Packaging conditions
• Labeling conditions
• Product standards
• Complex regulatory environment
• Determination of eligibility of an exporting country by the importing country
• Determination of eligibility of an exporting establishment(firm, company) by the importing country.
• Additional trade documents like Certificate of Origin, Certificate of Authenticity etc.
• Occupational safety and health regulation
• Employment law
• Import licenses
• State subsidies, procurement, trading, state ownership
• Export subsidies
• Fixation of a minimum import price
• Product classification
• Quota shares
• Foreign exchange controls and multiplicity
• Inadequate infrastructure
• "Buy national" policy
• Over-valued currency
• Intellectual property laws (patents, copyrights)
• Restrictive licenses
• Seasonal import regimes
• Corrupt and/or lengthy customs procedures
• Bribery and corruption .

Reasons why India struggles with trade policymaking in a broad sense in turn, feeds through to operational and procedural difficulties at every level.

Economic analysis

Libertarian economic theories hold that tariffs are a harmful interference with the individual freedom and the laws of the free market. They believe that it is unfair toward consumers and generally disadvantageous for a country to artificially maintain an industry made inefficient by local demands, and that it is better to allow a collapse to take place. Opposition to all tariffs is part of the free trade principle; the World Trade Organization aims to reduce tariffs and to avoid countries discriminating between differing countries when applying tariffs.

Political analysis

The first is that the ministry that negotiates international trade agreements –

the Ministry of Commerce and Industry (MoCI) – is firmly embedded in the

domestic political culture, which accords little importance to the principles of

free trade within the domestic context. This is a development model to which

both the federal and state governments largely subscribe, and which political

parties, most NGOs and major business associations all share, to some degree

or the other.

Indeed, it is revealing that no single ministry deals with the issue of domestic

free trade, which means that India’s international negotiating position, is often

at substantial variance with the way that the domestic economy is actually run

creating obvious operational problems.

And secondly, India’s political culture is strikingly insular, in marked contrast

to her foreign policy. Political attention is directed resolutely inward for the

most part, and, if anything, this process has become more pronounced over

the years with the rise to political power of formerly disadvantaged castes,

classes and communities, and the steady fragmentation of the structure of

political parties combined with the growing influence of federal units.

As a consequence, India’s political appetite and interest in engaging with the

outside world is very limited. The Ministry of External Affairs (MEA), which

was responsible for so much of post-independence policy-making – and which

has a strong internationalist reputation – watches from the sidelines and can

do little to alter this state of affairs.

In this strange situation, the MoCI can only be effective at the multilateral

level, if what it says and does remains largely concealed from domestic public

view, including from other ministries of the central government and state

governments. On the other hand, as this is, in reality, impossible, it often means

minimal real discussion, and minimal real engagement with the ideas of

liberalisation and reciprocity in the process of policy formulation