Indian Innovation Act: Illustrating the Impact

The term “innovation” aims to include in its ambit a process for incremental or significant technical advance or change, which provides enhancement of measurable economic value by introducing new or improved goods or services, implementing new or improved operational processes and implementing new or improved organisational / managerial processes. Further the NIA wishes to include those processes that lead to an increase in market share, competitive advantage, improvement in the quality of products or services and a reduction of costs.

The NIA, aims primarily at giving a boost to investment, is targeting increased investment from corporations of a “vibrant nature”. These 'angel investors' as a quid-pro-quo to supporting innovation, will be offered several benefits such as a stamp duty waiver on certain market transactions and a waiver of direct and indirect taxes. It is also proposed that a capital gain waiver be granted on several types of investments including: universities, centres of excellence and institutions engaged in sciences, technologies, mathematics and engineering or finance, management, law, and legal services. The proposed NIA also suggests that Special Innovation Zones and Innovation Parks be identified to enable clustering of enterprises engaged in specific areas, which it is hoped will in turn stimulate innovation.

However, the NIA provides that such “angel investors” would not involve nor participate in the management, but restrict themselves to adding value by providing access to commercialisation of products and services through its social, professional or business networks and expertise. In other words, the investor would promote commercialisation, without being directly involved in the day to day functioning.

The NIA seems to have three diverse objectives, attracting investment while encouraging partnership deals, evolving a National Integrated Science and Technology Plan and establishing an emphasis on maintenance on confidentiality and protection of trade secrets. In a competitive environment, crediting due status to protection of trade secrets is essential in the promotion and will enable competing agencies to thrive. With regards to protection of trade secrets, contractual obligations do bind individuals, but the presence of an Act dealing exclusively with their protection will only act as a sentinel. The NIA also has specific provisions defining misappropriation, while providing measures to be taken against the misappropriator and exceptional instances that may be applicable. However, the proposed NIA like other legislative measures renders public interest and good faith as exceptions to the proposition on maintenance of confidentiality.

Thought in its draft stages, the NIA seems to be an attempt to take a step forward, towards making investments to promote research and development, while affording due protection to some entrepreneurial aspects such as trade secrets. Trade secrets under the TRIPS agreement is stated in Art. 39.3 and the NIA that sees its way through the Indian Parliament will have to conform to it.