Patents in a Small Developing Economy: A Case Study of Sri Lanka
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1 Journal of Intellectual Property Rights Vol 7, September 2002, pp Patents in a Small Developing Economy: A Case Study of Sri Lanka R M W Amaradasa 1, M A T De Silva 2 and R P Pathirage 1 1 National Science Foundation of Sri Lanka, 47/5, Maitland Place, Colombo 07, Sri Lanka. (Received 27 May 2002) Patent counts have been useful in measuring research output. Patents can also be used to understand innovative trends. Sri Lanka being a small island nation with an equally small scientific resource base, such measures have not been considered useful or meaningful. However, the growth pattern of patent grants over the period shows an increasing interest of Sri Lankan scientists and technologists on the economic significance of intellectual property protection. In the current study patent registrations have been re-classified on a basis that is of relevance to Sri Lanka. On the basis of this classification, motivational factors for innovation in two economic sectors have been reviewed in the context of a changing economic scenario. In the construction industry sector, the study concludes that rapid economic growth consequent to a shift to a free market economy, had motivated innovation. While in the rubber production and processing sector, an international market threat had been countered by innovations for diversification and transformation of the industry from an almost total export orientation to that of import substitution. Historically, the concept of patents, and consequently of intellectual property rights (IPR), came into existence in Sri Lanka during the British colonial period, when the British Inventors Ordinance of 1859 was made applicable to Ceylon as the country was then known. Significantly, the first Sri Lankan patent had been granted to a British national in January for the invention of a coffee pulping machine. However, an institutional identity for patents remained obscure, although over 9,000 patents had been approved by the time the Registry of Patents and Trademarks was established in Subsequently, in 1997 as a result of the increasing realization of the significance of IPR issues in the country s new industrial, technological and agri-business strategies, the Registry of Patents and Trademarks was renamed as the National Intellectual Property Office of Sri Lanka (NIPO). 2 Centre for Science, Technology and Social Change, 6/9, De Silva Road, Kalubowila, Dehiwela, Sri Lanka. (i) wasantha@nsf.ac.lk; (ii) matdes@visual.lk; (iii) rohan@nsf.ac.lk
2 396 J INTELLEC PROP RIGHTS, SEPTEMBER 2002 The first study on patent grants in Sri Lanka was done in 1986, when an analysis was attempted of the small number (28 patents) awarded during the period 1980 to A significant conclusion from this study was that the smaller contribution of patents both by commercial organisations (22%) and by public research institutes (6%), as compared to a contribution of 72 per cent by individual inventors, was a reflection of the weak innovative character of the organized sector. Therefore, the present study on patent registrations and utilisation attempted to perform descriptive analysis of patents granted during the period 1980 to While doing the analysis, the objectives were diversified to develop a patent classification system suitable for a small developing country, which in turn provides room for appropriate analysis to reflect the socio-economic and market influences on innovation behaviour in specific sectors. Results and Discussions Preliminary Observations on Patents Granted during Between 1980 and 1998, a total 461 patents had been registered with the NIPO. These have been classified under the international codes and descriptions. Figure 1 depicts the growth trend of patents applied for and granted by the NIPO. The data show a steady increase in the applications and registrations. Yet significantly one-third of all patents granted during 1980 to 1998 were confined to the 3-year period The growth trend of patents is a clear indication of a steeply rising interest of innovators in protecting intellectual property. It is, however, noteworthy that the growth pattern observed by Liyanage and De Silva 2 in 1987 seems to remain substantially the same with private individual inventors enjoying the biggest share of patents (74%). Of the balance about 50 per cent have been granted to No. of patents Year No.of applications for patents (652) No.of patents granted (461) : The applications for these patents had been submmited within the particular year of application or previous year. Fig. 1 Growth trend in patent regirstration in Sri Lanka ( ) Source: (i) Patent Directory of Sri Lanka, 1994, (ii) National Intellectual Property Office of Sri Lanka, and (iii) Sri Lanka Inventors Commission
3 AMARADASA et al: PATENTS IN A SMALL DEVELOPING ECONOMY 397 private sector commercial organisations, and the rest to the public-funded institutions. Although it has been shown that over 25 per cent of Sri Lanka s expenditure on R & D had been accounted for by the Higher Education Sector 3, the universities share of patents had been less than 1.0 per cent. This is, however, not a surprising observation, because even among some of the most advanced countries, the university share of patents has been around 3 to 5 per cent 4. What is not known is the contribution of university research to patented innovations of other organisations, especially the commercial sector. In Sri Lanka commissioned or competitive contract research programmes are not common except in some engineering disciplines. It is generally conceded that in such instances of sponsored research, the first claim to property rights for an innovation resulting from such work rests with the organisation that sponsored the project, unless there has been prior agreement in relation to IPR claims. This fact together with the academic nature of the university research tends to devalue university research output, when patents are used to evaluate their scientific work. This seems to be the case even in developed market economy countries 4. In a specific initiative to identify the motivational factors behind the innovative character, and the consequent drive towards patenting, a cross section of patentees were interviewed. Inventors who had been successful in registering three or more patents were selected for this investigation. It was clear that almost all these patentees were self-motivated and creative, and driven by a desire for innovation. Almost all of them had good educational background, with 80 per cent of them claiming at least a first degree in science or engineering. However, they were not without their own problems and disabilities, among which are the following : Absence of common facilities for pilot scale testing of innovations. Reluctance of universities and publicfunded research organisations to assess even the technical feasibility of innovations of unattached inventors. Reluctance of public-funded organisations to promote and assist innovators not attached to their organizations. Private sector organisations, though receptive and supportive of creativity, invariably stakes a claim for intellectual property rights in toto, or on the basis of sharing royalties. Infringement of property rights and piracy have also been reported by some patentees, who find it difficult to file action because of the deceitful nature of infringement. Inadequacy of patronage and risk capital for financing of innovation and creative work. Some economic and industrial policy measures tending to dissuade indigenous technology development and innovation. There was at least one patentee who claimed that although his innovation resulted in a technology that was of a
4 398 J INTELLEC PROP RIGHTS, SEPTEMBER 2002 higher efficiency and more cost-effective than any available, the client favoured the purchase of a more costly product from a commercial agency, purely because of promotional incentives such as foreign training, etc. offered by the vendor. Classification and Country Relevance of Patents Patents are classified in accordance with an international agreement, which is now applied in at least 50 countries including Sri Lanka. This classification is based on broad themes, which are subdivided into sub-sections and classes. This classification though useful for international comparisons, may not necessarily be of assistance to understand the thrust, innovative nature, and motivational factors of the country s inventors. In this context an attempt was made to re-classify the patents granted in Sri Lanka since 1980, under a different set of themes that would enable an assessment relevant to Sri Lanka. Accordingly, Sri Lankan patents were re-grouped under 12 themes as follows: A B C D E F - Dryers/Dehydration Technology - Food and Beverage Process Technology - Rubber Production and Processing Technology - Agricultural Systems and Development Technology - Construction Technology and Materials - Packaging and Packing Materials G - Energy Saving/Generating Devices H - Process Technology Manufacturing Sector I - Process Technology Miscellaneous J - Innovations in Domestic Appliances/Utilities K - Innovations Mmiscellaneous L- - Product development The terminology used in this classification (which may be referred to as the National Science Foundation (NSF) classification is self-explanatory, and hence needs no definition. However, distinction has to be made between innovation and process technology, which may in a way be equated to the terms technological innovation and process innovation respectively as defined in the OECD Oslo manual (1992). Innovation implies an invention that has novelty in its concept and application, whereas process technology is a method, device or a mechanism that has increased the effectiveness, efficiency, viability and cost-effectiveness of a production system. The frequency distribution of Sri Lankan patents in the NSF classification (Figure 2) shows the following significant trends. (i) Most number of patents have been for miscellaneous innovations (17.1%), product development (12.8%), energy saving and generating devices (12.6%) and miscellaneous process technology (10%), which together accounts for over 50 percent of all patents awarded during this period.
5 AMARADASA et al: PATENTS IN A SMALL DEVELOPING ECONOMY 399 Fig. 2 Distribution of patents according to NSF classification Source: (i) Patent director of Sri Lanka, 1994, (ii) National Intellectual Property Office of Sri Lanka, and (iii) Sri Lanka Inventors Commission (ii) More than 50 per cent of patents granted in the categories of dryers and dehydration technologies, food and beverage process technology, agricultural systems, energy saving and generating devices, process technology, innovations in domestic appliances and utilities, miscellaneous innovations and product development, were during the 5-year period 1994 to 1998, whereas for rubber production and processing technology, as well as for construction technology and materials categories patenting peaked during the period 1982 to 1988 (see Table 1) (iii) The productive sector has contributed 70.8 per cent of patents in food and beverage process technologies of which the public sector share was 58.3 per cent. Likewise, the productive sector contribution to patents in rubber production and processing technologies was 52 per cent, of which the public sector share was 40 per cent. (iv) In the food and beverage process technology category one state organisation (Industrial Technology Institute) accounted for 42 per cent of all patents in that category, while in the rubber production and processing technology category, one state organisation (Rubber Research Institute of Sri Lanka) accounted for 32 per cent of all patents in that category.
6 400 J INTELLEC PROP RIGHTS, SEPTEMBER 2002 Table 1 Distribution of patents according to NSF classification NSF classification Dryers/Dehydration Technologies No. of patents granted Total Food & Beverage Process Technology Rubber Production & Processing Technology Agricultural Systems & Development Construction Technology & Materials Packaging & Packing Materials Energy Saving/Generating Devices Process Technology- Manufacturing Sector Process Technology- Miscellaneous Innovations- Domestic Appliances/Utilities Innovations- Miscellaneous Product Development Total Source : (i) Patent Directory of Sri Lanka, 1994, (ii) National Intellectual Property Office of Sri Lanka, and (iii) Sri Lanka Inventors Commission.
7 AMARADASA et al: PATENTS IN A SMALL DEVELOPING ECONOMY 401 These observations are significant because they are likely to be the result of a rapidly changing techno-economic scenario, and symptomatic of an emerging culture of entrepreneurialism. Unfortunately, for one reason or another, all good innovations are not patented, and as a result patents generally fail to be recognised as contributors to a technical change. This is because a patent while providing an insight into the innovative nature of the patentee, does not give a clear indication of the directional character or the entrepreneurial thrust of the invention. In order to study this aspect in greater detail two examples where patent registrations peaked during the early 1980s have been analysed. The first of these relate to patents awarded under the category construction technology and materials, and the other example concerns the patents awarded under rubber production and processing technology category. Economic Reforms and its Influence on Innovation The economic reforms brought in by the Government of Sri Lanka in 1978 towards a free market economy led to major shifts in sectoral contributions to the country s gross domestic product (GDP). The GDP growth, which averaged 2.9 per cent during the period 1971 to 1977 under a closed economy, increased to 6.0 per cent during the period 1978 to During this period one of the most phenomenal structural shifts observed in GDP was in the contribution of the construction industry. The average annual growth rate in this sector increased from 2.6 per cent during 1971 to 1977 to 8.5 per cent during 1982 to This boom in the construction industry was partly facilitated by the head-works of the accelerated Mahaweli River Diversion Programme as well as the massive project under the housing and urban development programme, and partly by a steeply rising land and property development market. In this context, it is significant that over 50 per cent of patents granted under construction technology and materials had been registered during the period 1982 to 1987, and over 50 per cent of all patents under this category are for innovations in construction materials. It has also been observed that many of the patentees though registered as unattached individuals, are in fact directly associated with design and materials development organisations for the construction industry where these innovations play a positive role. There is thus significant evidence that the growth in the construction industry was a motivating factor for the growth in patent registrations in this sector. Sri Lanka s Rubber Industry Responds to Market Threats The frequency distribution of patents in the rubber production and processing technology category shows a peak period during 1983 to Investigations reveal that of the 25 patents registered under this category, 17 were for process technology, 6 were for new products and only 2 were for new technologies. Apparently, there had been an enhanced demand for process improvements and
8 402 J INTELLEC PROP RIGHTS, SEPTEMBER kg mill Fig. 3 Trends in production, consumption and exports of rubber and rubber-based products Source: Annual reports of the Central Bank of Sri Lanka [( ) Annual production (kg mill); ( ) Exports (kg mill); and ( σ ) Domestic consumption (kg mill)] kg mill No of patents Fig. 4 Growth of patents superimposed on production, consumption and export trends of rubber and rubber-based products [( ) Annual production (kg mill); ( ) Exports (kg mill); ( σ ) Domestic consumption (kg mill); and ( ) No of patents granted] Source: (i) Annual reports of the Central Bank of Sri Lanka, (ii) National Intellectual Property Office of Sri Lanka, and (iii) Sri Lanka Inventors Commission. new products for the industry during the 1980s. During the mid decades of the last century, a veiled threat to the natural rubber (NR) industry was seen to emerge due to the appearance of synthetic polymers (synthetic rubber), developed to meet the rising demand during the Korean War. By , the global production volume of synthetic rubber (SR) had already overtaken that of NR and by the mid 1960s amidst stock piling
9 AMARADASA et al: PATENTS IN A SMALL DEVELOPING ECONOMY 403 of rubber by western countries the refined second generation SR had made its appearance in the international markets. Thus, by the 1970s although the Korean boom had receded, the contribution of SR had increased to 70 per cent of the world requirement, causing much concern to the natural rubber producing countries including Sri Lanka, which had enjoyed the windfall. For over 100 years, rubber had been a life-line for the small Sri Lankan economy, and for decades it had been the second largest foreign exchange earner for the country. Although its contribution to GNP had dropped from around 3.0 per cent in 1959 to about 1.4 per cent in 1980, its overall contribution to agricultural GNP had remained constant at around 6.0 per cent. Paradoxically, the Sri Lankan rubber industry which rode high during the 1950s and 1960s through the fall-outs of a bloody regional conflict, was seen to face peace-time strangulation a decade and a half later, by the technological spin offs of this very same conflict. The data shown graphically in Figure 3 depict the performance of the rubber industry of Sri Lanka during 1980 to Rubber production as well as exports have progressively declined, although the drop in rubber production is due to many diverse causes, which will not be discussed here. On the other hand, domestic consumption had steadily increased clearly indicating the onset of a techno-economic shift in the rubber production and processing sector. Now, if the patent registration data for rubber production and processing technologies are superimposed on Figure 3 as shown in Figure 4, presumptive implications emerge that needs further clarification. The Rubber Research Institute of Sri Lanka (RRISL) has been the major contributor of innovations (12 out of 25) for the rubber production and processing technology category of patents. It is noteworthy in this context that the World Intellectual Property Organization has awarded the Scientist of the Year 2000 Gold Medal to the Director of RRISL 5 in recognition of the number of implementable patents produced by himself and his colleagues. These innovations cover many aspects of the rubber industry and include several that concern the protection of the environment against hazardous pollutants of the rubber processing industry. Although some of the patented innovations have not been useful, there were several others that described new technologies for reducing costs of production, as well as techniques to refine raw rubber for high quality grades. It is clear that the sustenance and survival of the natural rubber industry depended on new products, process diversification and value addition. Evidently the positive and productive response of scientists and entrepreneurs created the environment for a significant techno-economic shift through which the country s natural rubber industry transformed itself from an almost exclusive raw material exporting enterprise to an industry contributing to import substitution. We have not attempted the tedious task of evaluating the contributions made by each of the
10 404 J INTELLEC PROP RIGHTS, SEPTEMBER 2002 implementable innovations to the rubber production and processing chain. Although we have also not tried to quantify the socio-economic benefits that may accrue to the industry and the country as a whole, it is presumed to be substantial and reflective of a technical change in the sector. However, what is significant is how a small island nation such as Sri Lanka, strived to stave off successfully the challenges of an international market threat to one of its key economic bases through a series of innovations and entrepreneurial skills that received both national and international acclaim. Thus, unlike in the previous case where an impressive economic growth pattern in an industry had been the motivating factor for innovations, in this case, it is a crisis market situation that had induced innovation. Conclusion The international classification of patents does not show much relevance to analyse the country specific behaviour in innovative activities in small developing countries. The analysis of patents granted in Sri Lanka provides supplementary evidence for the demand pull theory. Also it strengthens the argument that the scientific community is sensitive to the market signals while the industry is more sensitive to economic signals. References 1 Karunaratne D M, Intellectual property laws and TRIPS : The case of Sri Lanka, Asia Pacific Techmonitor, 17 (3) 1999, Liyanage S, and De Silva M A T, Sri Lanka Science and Technology Indications : Part I Organisational Structures and the Status of National Efforts in Science and Technology (Natural Resources, Energy and Science Authority of Sri Lanka, Colombo, Sri Lanka) 1987, Fernando C M, and Amaradasa W, National Survey of Research and Development in Sri Lanka 1996 (Natural Resources, Energy and Science Authority of Sri Lanka, Colombo, Sri Lanka) 1998, Pavitt K, Patent data : Do patents reflect the useful research output of universities?, Research Evaluation, 7(2) 1998, Tillekeratne L M K, Personal Communication,.2000.
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