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Utility model and its need for protection in India

Utility model is a generic term which refers to subject-matter that hinges precariously between that protectable under patent law and sui generis design law.[i] The definition of Utility Model is not specific and it varies from country to country. Since the requirements for obtaining utility model protection are less stringent as compared to getting patents, it is often referred to as petty patents, short-term patents, innovation patents and second-tier patents.

The purpose of utility model system is to safeguard innovations speedily and inexpensively. In India, such protection is not granted. Utility model protection, if granted, will be beneficial in developing countries like India, taking the pace with which startups and SMEs are emerging and establishing into consideration. Therefore it will be very encouraging for SMEs and individual innovators. Adoption of utility model protection system is important not only to promote further the development of intellectual property rights creation and protection but also to stimulate more research activities and innovations by SMEs.

Patents and its importance

Patents are designed to create a market for knowledge by assigning propriety rights to innovators which enable them to overcome the problem of non-excludability while, at the same time, encouraging the maximum diffusion of knowledge by making it public.[ii]

Since we are living in the era of globally competitive information and knowledge based economic world, intellectual property, being knowledge based creations has been considered as a tool for technological and economic development, worldwide. The successful development and exploitation of intellectual property rights contributes to the economic and technological development. Once patent rights are granted, the patent-owners seek to exploit them in the market-place. The possibility of attaining commercial benefits encourages innovation to a large extent.

Patents are tools for economic advancement that contributes for the enrichment of society through[iii]:

  1. the widest possible availability of new and useful goods, services and technical information that derive from inventive activity, and
  2. the highest possible level of economic activity based on the production, circulation and further development of such goods, services and information.

There are basically 4 types of patents:
  1. Utility patents: A utility patent is a patent that covers the creation of a new or improved product, process, or machine having industrial application.
  2. Utility model patents: Utility model patents protect incremental inventions, basically satisfying the novelty requirement.
  3. Design patents: Design patent protects an ornamental design on a useful item.
  4. Plant patents: Plant patents protect new kinds of plants produced by cuttings or other nonsexual means. Plant patents do not cover genetically modified organisms and gives more importance to conventional horticulture.
Patent Requirements Patent Obtaining procedure Term of protection
(varies from country to country)
Subject matter Governing   Act in India
Utility Novelty, non-obviousness, utility and industrial application, should not attract section 3 of The Patents Act, 1970 Lengthy, difficult, costly 20 years Inventions The Patents Act, 1970
Utility Model Novelty, low standards of non-obviousness and inventiveness. Easy and inexpensive 6-15 years Protects Incremental inventions Not granted in India
Design Novelty, originality, ornamental Not very difficult to obtain 14-15 years Protects shape, configuration, and appearance in 2D or 3D articles. Designs Act, 2000
Plant Distinct, stable, uniform Difficult to obtain 15-18 years Protects new kind of plants The Patents Act, 1970

Once patent rights are granted, the patent-owners seek to exploit them in the market-place. The possibility of attaining commercial benefits encourages innovation to a large extent.

Difference between utility patents and utility model patents

Like patents, utility model is an exclusive right granted to a technical invention. In order to prevent commercial exploitation and to protect such inventions, an application must be filed and utility model must be obtained. This allows the grantee, the right to prevent others from commercially using the protected invention, for a limited period, without the grantee’s authorization.[iv]

This system is in fact designed to complement the patent system as the inventions relating to such incremental technical creations are not given proper consideration under the patent law. However, such inventions need to be protected and promoted actively from industrial and economic point of view.

Though, both utility patents and utility model seem to be similar, but actually there are several differences between the two, which are mentioned in the table below:

 
Subject of differentiation Utility Patent Utility Model Patents
Requirements of obtaining patent High degree of worldwide novelty, Industrial application, Non-obviousness Novelty, low degree of non-obviousness or inventiveness
Examination of application Strictly done Not examined prior to registration.
Only procedural and no substantive examination.
Duration of registration Very high Less
Cost involved Very expensive Inexpensive
Term of protection 20 years 6-15 years

History and evolution of utility models

The significance of protection of intellectual property, particularly the industrial property was first recognized in the Paris Convention for the protection of Industrial Property, which was established more than 120 years ago in 1883 and revised many times since then but was finally amended on September 28, 1979, provides for the protection of utility models. At present, there are about more than 170 members to this convention. India joined the Paris Convention on December 8, 1998 and became bound to the provisions of this convention.[v] The utility model protection was first recognized by the German law of June 1891.

The German law demanded that minor invention should also be patented not only because it is novice but also because it is a technological advancement and a step forward in the future. This raised the need for a new law which provided protection to simple devices and the utility model came into existence.[vi]

Utility model protection system is a supplementary to patents and industrial designs. Several countries grant protection of minor inventions including Australia, Germany, Japan and Korea, Brazil, China, Greece, Georgia, Italy, Kuwait, Malaysia, Spain, Portugal, UAE, Poland, Peru etc. At present, there are about 46 countries and 2 Inter-Governmental Organizations, which have utility model protection system[vii].

The origin of this system in Germany, Australia and other countries including Japan stipulated that this system was ideally chronicled for small inventions for incremental improvements which cannot be protected under:

  • Patent Law, as they lack the stringent requirement of inventiveness under patent law
  • Industrial designs, as such improvements are mainly of utility related functions of a particular product but not to the aesthetic look or outer shape or configuration of the products.

Therefore such inventions are rarely promoted or protected.


Although the utility model system is fashioned to protect relatively small innovations over existing technology, utility model patents can actually be a vital weapon for the growth of a country since the procedure to obtain utility model patents is fast and comparatively easy and it carries the same remedies as invention patents, including substantial fines and injunctions.

Utility models and its need in developing countries

It is quite evident that patents among all IPs have played a more crucial role in the technological and economic development of a country. It has also been observed that although patent protection has played a major role in technology development, utility Model protection has also played an effective and vital role in advancing developing countries. TRIPS provides for only minimum standards for the protection of intellectual property rights, there is nothing which prevents any member country to adopt utility model system to promote IP protection among the small innovators particularly in the Small and Medium Sized Enterprises.[viii]

The conceptual rationale for utility models derives from the fact that most social welfare-enhancing inventions are cumulative in nature and a number of them are sub-patentable as the novelty and inventive step requirements are too high for the patent system to incorporate them. In a developing country, utility model is an important tool to safeguard inventions at lower cost for certain period of time. Utility model regime supplements the incentives for the owner of incremental inventions. The system also provides a nurturing and comprehensive policy framework for fast and effective domestic commercialization of such inventions in the benefit of public at large.

The recognition of utility models in any developing country would assist small businesses and start-up firms by granting inexpensive and rapid enforceable IP protection.

This may prove to be beneficial for start-up firms and SMEs in the following manner:

  • In obtaining capital or seeking investors,
  • Stimulating innovation
  • Accelerating developments in short time span,
  • In dealing with the importation of any rapidly copied or imitated products.

The utility models are considered generally good for the developing countries for following reasons[ix], namely:

  1. They enable the artisans to secure protection for innovations the strict novelty and inventive step requirement of patent law.
  2. They increase the role of small scale innovators and artisans in economic development and help them to stay in the business in the face of new technology,
  3. They act as a spur to enhanced levels of innovation,
  4. They are cheaper to acquire than patent and finally they become a source of data on innovative activity and experience in technological management.

Need of utility models in startup firms and SMEs

Utility patent protection majorly benefits small and medium enterprise businesses since they lack funds for conducting tests & trials and the humongous patent fees is not very affordable for them. An estimate shows that there are more than 48 million SME's in India providing employment to billions of people. For such SMEs utility patent protection can prove to be a boon, since they fail to protect their inventions and hence suffer losses in terms of business growth.[x]Apart from SMEs, utility model patent is also an effective safeguard for protection of inventions of MSMEs. The feasible mode of filing and obtaining utility models and the lower requirements for inventiveness makes it more beneficial for SMEs and MSMEs. Utility model protection could provide protection against substantial copying and imitation, through unfair means.

This can further stimulate and accelerate the business growth for MSMEs and would further act as an encouragement to the MSMEs under the 'MAKE IN INDIA' initiative of Government of India.[xi]

For the following reasons utility model patents can prove to be effective in development of SMEs:

  1. Protects inventions with minor improvements
  2. Acknowledges adaptations of existing products
  3. faster registration;
  4. low inventiveness required;
  5. protects invention which are incremental in nature;
  6. protects inventions which are tangible or mechanical in nature;
  7. No need of allocating high budgets to get such protection.
  8. Low cost entry into the IP field.

Position of utility model protection in India

India has set up WTO Cell in the Ministry of Small Scale Industry to assist the Small, Medium and Micro Enterprises (SMMEs) to take advantage of global IP System in order to protect their intellectual creations. India also took a step forward for the protection of traditional knowledge and prevention of bio-piracy.

Despite all these efforts, there is no law yet for the protection of utility model which can protect the small innovations which have lesser innovative steps and novelty but have practical benefits in order to satisfy the customers need and requirements[xii].
In India, small scale industry plays a major role in the economic and technological growth of the country.

This sector is a less capital-intensive producer of consumer goods and is a massive provider of employment thereby it solves not only the problem of unemployment but also plays a very important role in poverty removal process and therefore acquires an acclaimed place in the socio-economic development of the country. In spite of high economic growth and expansion of industrial sector, the intellectual property protection activities in India are minimal as compared to many developing countries.[xiii]

Despite the fact that, in India, SMEs and startups are emerging with a very high momentum, apart from patent system and design protection system, there is no other alternative system such as Utility Model Protection System, protect such research works or small innovative works which has utility to meet the requirement of the people but lacks inventive step to satisfy the novelty and inventive step criteria for patent protection.

The SMEs, also known as SMMEs, lacks in research and development activities due to lack of resources and investment and therefore they are principally engaged in the production of goods as per the utility requirement of common man. Now-a- days, the SMEs in India are facing a lot of competition in the market not only among themselves but also because of the standards of the imported goods, and therefore they are taking a step to beat the competition by making variations and making improvisation for the betterment in the existing products to improve their quality, shape, designs, etc. as per the modern days requirements.

However this kind of innovative work done in the SMSE sector is undermined as incremental innovative work is short lived due to humongous competition from foreign goods as well as from Indian goods and hence, they are unable to meet the requirement of patentable or industrial design subject matter as patenting needs higher degree of non-obviousness and worldwide novelty criteria.

Therefore this sector seems to be highly skeptical to protect their IP rights as current or existing patent protection system in India fails to protect the small or petty innovative work done either by SMEs or individual innovators.

Statistical data relating to applications for patents and industrial designs filed in the Indian patent office by the domestic applicants including the one which are filed by Council of Scientific and Industrial Research (CSIR) also indicate that the intellectual property protection activities are very low as compared to many developing countries such as Republic of China, South Korea, or even Taiwan and China, in spite of high economic growth ,expansion of industrial sector and good scientific manpower.

According to their majority opinion, the current patent and design law are neither sufficient to protect the all kind of industrial property creation activities nor to promote and protect the technical innovations particularly incremental innovations of SMEs sector. The views of majority IP firms were to enact a new legislation to promote and protect such innovations[xiv].

India should take inspiration from Japan when it comes to protect minor innovations. Until World War II, the technical level in Japan was very low as compared to other western countries but they did no delay in understanding the essence of developing their own technology. Although Japan has utility model system since 1905 but it has been amended several time to suit Japanese industrial development in order to encourage protection to local innovations and thereby promoting science and technological development in the country.

Today Japan stands very high in the technological development as utility model system remains part of business strategy and therefore regarded as one of the most advanced nations.[xv] Utility Model protection, if granted in India, will highly encourage small innovators and Indian SMMEs to enhance their intellectual property creation to meet global competitive challenges.

Advantages of granting utility model protection

The practical and economic benefits of granting utility model protection in developing countries are as follows[xvi]:

  • It will promote local industrial growth by offering rapid and inexpensive intellectual property protection in certain specific circumstances.
  • It would provide protection against massive substantial copying and imitation.
  • It will encourage local innovation so that local industries produce increase their efficiency to produce more goods.
  • It can further protect valuable inventions which are not protected under the standard patent law or other intellectual property laws.
  • This type of protection prevents free-riding of inventions by other predatory firms which expend no R&D costs or investment.
  • Utility model law can provide revenue to governments in the form of registration, search, publication, etc. fees.
  • Registered utility model rights can act as a source of valuable information via published specifications.

Conclusion
Utility model system is one of the avenues of protection under the patent law and its protection will be very beneficial in developing countries like India. A utility model can be a very useful right either alone, or to complement an invention patent. An estimate shows that there are more than 48 million SME's in India providing employment to billions of people.

For such SMEs utility patent protection can prove to be a boon, since they fail to protect their inventions and hence they are way behind other countries in terms of business growth. Hence, the introduction of utility model rights in India will be advantageous

End-Notes:
  1. Suthersanen, U. (2001), Incremental Inventions in Europe: A Legal and Economic Appraisal of Second Tier Patents, Journal of Business Law, July, pp 319-343.
  2. P. Geroski, Handbook of the economics of innovation and technological change.
  3. Utility model and innovation in developing countries, available at, https://unctad.org/en/Docs/iteipc20066_en.pdf
  4. Utility Models, available at, https://www.wipo.int/patents/en/topics/utility_models.html
  5. Paris convention for the protection of Industrial Property, available at, https://www.wipo.int/treaties/en/ip/paris/
  6. John Richards, Utility model protection throughout the world, Ladas & Parry LLP, available at http://www.ipo.org/wp-content/uploads/2013/03/Utility_Model_protection.pdf
  7. Utility Models, available at, http://www.wipo.int/sme/en/ip_business/utility_models/where.htm
  8. Protecting Innovations by Utility Model, available at, https://www.wipo.int/sme/en/ip_business/utility_models/utility_models.htm
  9. Uma Suthersanen-Utility Models and Innovation in developing Countries, available at, https://unctad.org/en/docs/iteipc20066_en.pdf
  10. Utility Patents and its position in India, available at, https://www.mondaq.com/india/patent/603302/utility-patents-its-position-in-india
  11. National study on IP and SMEs, available at, https://www.wipo.int/edocs/pubdocs/en/wipo_natstudy_sme_india.pdf
  12. Utility model: A tool for economic and technological development, available at, http://www.ipindia.nic.in/writereaddata/images/pdf/FinalReport_April2007.pdf
  13. Enhancing the contributions of SMEs in global and digitized economy, available at, https://www.oecd.org/industry/C-MIN-2017-8-EN.pdf
  14. Annual Report, available at, http://www.ipindia.nic.in/writereaddata/Portal/IPOAnnualReport/1_94_1_1_79_1_Annual_Report-2016-17_English.pdf
  15. Utility model: A tool for economic and technological development, available at, http://www.ipindia.nic.in/writereaddata/images/pdf/FinalReport_April2007.pdf
  16. Utility models and innovation in developing countries, available at, https://unctad.org/en/Docs/iteipc20066_en.pdf
Written By Poulomi Sen, Student Of Rajiv Gandhi School Of Intellectual Property Law, IIT Kharagpur

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