FROM TROLL TO TOOL? INDIA AND THE GLOBAL EXPERIMENT WITH SOVEREIGN PATENT FUNDS

-       Medhaansh Singh[1]

I.       ABSTRACT

The current article is a critical analysis of the concept of Sovereign Patent Funds (SPFs) as an instrument of innovation policy and its analysis of the implication of their nature to the Indian context. It seeks to determine whether India should pursue the establishment of an SPF or, alternatively, reinforce its intellectual property rights (IPR) ecosystem through other strategic measures. The main research question that would be used in the study is whether India should establish an SPF or it should work on improving its current IPR system through other means. The paper then outlines the roles assigned to SPFs and the perceived benefits that they bring, such as commercialization, easing of the R&D efforts, support of small and medium-sized enterprises (SMEs), and discouragement of patent trolling practices. The paper, further, examines the opposing shortcomings of SPFs including the possibility of protectionist behaviour, market distortions and contradictions to international trade standards. Such issues are put into perspective with the experiences of the world in Japan, Korea, France, and the United States. This analysis puts the rise of SPFs in the context of globalization. The India discussion compares and contrasts several different hybrid and sector-oriented models with systemic reforms and open-innovation models. At the end of the paper, an informative recommendation is also given that compromises national innovation with global trade commitments, i.e. selective adoption of SPF elements instead of mass imitation.

Keywords: Sovereign Patent Funds; Patent; Technology.

II.     INTRODUCTION  

Much like the ancient Romans who pooled resources into public granaries to safeguard collective strength, modern states now pool patents into Sovereign Patent Funds (SPFs) to secure technological and economic resilience. Sovereign Patent Funds (SPFs) are government-established entities that acquire and manage patents to advance national innovation goals. SPFs “strategically leverage” IP rights to “augment the competitiveness of domestic innovators against foreign competition”. In today’s globalized economy where IP assets drive firm valuation and trade balances, states see patents as strategic economic assets. This article critically examines SPFs’ roles and implications. This article has made an analytical study of the duality of the innovation policy in this paper, placing the standardised blanket patents (SPFs) into a global perspective by case studies of various jurisdictions like Japan, Korea, and France, and at the same time discussing its application to the policy aims of India.  To begin with, this article highlights the way SPFs may stimulate the predominance of technologies, ease the burden of research and development, contribute to the growth of small and medium enterprises (SMEs), collect licensing fees, reduce patent troll litigation, and finally boost national competitiveness.  Secondly, it explores how SPFs and international legal regimes interrelate, such as the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement and fair, reasonable, and non-discriminatory (FRAND) clauses relate to cross-border litigation and geopolitical policy, and thus show how different jurisdictions have embraced or avoided SPFs.  Finally, the India-specific discussion evaluates the need to establish an SPF or India to work on strengthening the intellectual property rights (IPR) ecosystem with specific reforms, hybridization, or encouraging an open-innovation regime. It analyses how SPFs might support or hinder innovation ecosystems amid globalization, explores multi-jurisdictional experiences, and considers strategies with an Indian emphasis to strengthen IPR systems while linking IP policy to sustainable and economic development. This article contends that hybrid models work best: combining public funding with private co-investment and focusing on specific sectors rather than all patents.

III.   UNDERSTANDING SOVEREIGN PATENT FUNDS

SPFs are essentially state-backed patent aggregators.  They typically collect patents from universities, distressed companies or the open market, and then bundle and license them for strategic purposes.^[2]  By consolidating patents in key industries (e.g. telecommunications or clean energy) governments aim to address inefficiencies in patent markets and prevent technology drain. Early examples include South Korea’s Intellectual Discovery (2010), Japan’s IP Bridge (2013)  and France’s France Brevets (2011). These funds blended public and private funding. In India’s case, policy discussions have surfaced recent proposals for SPFs. The 2019 Electronics Policy explicitly directs creating an SPF to develop domestic IP in electronics.^[3] Thus, SPFs now occupy a space in India’s innovation strategy, much as they have in other jurisdictions.

IV.   POWERS AND PERILS OF SOVEREIGN PATENT FUNDS

SPFs activate dormant technologies by “bundling patents into licensing packages,” SPFs can catalyze commercialization and technology transfer.  When patents held by cash-strapped inventors or universities are consolidated and relicensed, new products can emerge without each firm bearing the full R&D cost.  SPFs bridge the gap between research outputs and market needs by converting underutilized patents into active technological contributors. In effect, small and medium enterprises (SMEs) gain access to vital IP through SPF-mediated licenses, lowering entry barriers.  This helps disseminate innovation more widely. SPFs can generate revenue for both inventors and the fund itself. For example, Japan’s IP Bridge has secured licensing deals with major global firms and used the proceeds to support new patent investments.^[4] Crucially, SPFs also strengthen defense against IP litigation. By aggregating critical patents into defensive pools, SPFs deter patent assertion entities “trolls” from suing domestic companies. A domestic firm can obtain a license through the SPF and thus shield itself from infringement claims.  SPFs play a dual role, they license IP domestically and engage in litigation on behalf of SMEs or researchers, reinforcing national industries’ competitive position. They often foster public–private partnerships.^[5]

Despite their promise, SPFs face sharp criticism.  A common concern is trade protectionism i.e an economic policy of restricting imports through tariffs, quotas, or regulations to protect domestic industries from foreign competition.^[6] In the US especially, SPFs as “government-sponsored patent trolls.^[7] SPFs share the same traits as private-sector NPEs(Non-Practicing Entities) holding patents mostly to generate licensing revenue yet are publicly funded and thus “smack of state interventionism”. Such characterizations fuel fear that SPFs are really mercantilist tools.^[8] Critics warn these funds could provoke international patent conflicts. A 2017 policy brief asks whether SPFs will “lead to patent wars at the sovereign level” and whether WTO rules can contain them.^[9] Indeed, some analysts see SPFs as a new non-tariff trade barrier. Opponents worry an SPF might itself become overly aggressive. Although government-controlled, an SPF has the same economic incentive as a private patent assertion entity: to extract license fees.     Ironically SPFs could inadvertently harm the small innovators they aim to help.  By centralizing patent licensing, a sovereign fund might crowd out private licensing markets or set onerous terms that small firms must meet in order to be eligible.  Moreover, if SPFs focus on lucrative technologies, less attention may go to grassroots inventors.  Indian startups, for instance, could struggle if they must negotiate with a state-managed fund or if SPF-generated license prices rise. The very perception of a patent fund could make India a less attractive venue for many foreign entities, which would limit inflows of investment and technology. Absorbing patents into an SPF could siphon resources away from funding R&D itself, leading to a socialized risk and privatized reward. SPFs may conflict with social justice goals, Patents often cover life-saving drugs or essential knowledge.  If an SPF acquires patents on, say, pharmaceuticals or climate technology, it may restrict access or raise prices unless compelled to license.  This could run counter to human rights e.g. right to health or information. Relying on a government patent fund might hamper compulsory licensing or other flexibilities. Thus, without safeguards, SPFs risk prioritizing profit or national gain over equitable access.

V.     SPFS IN THE CONTEXT OF GLOBALIZATION

Global interdependence complicates any national patent strategy.  SPFs must navigate international IP rules and cross-border markets.  For example, patents are territorial; a fund operating in India must either file in other countries or license foreign-held patents.  Compliance with TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) and FRAND (Fair Reasonable and Non Discriminatory) is essential. SPFs operate under “domestic IP laws, international trade agreements, and competition policies,” adhering to norms like TRIPS and FRAND to avoid disputes. Enforcement often means foreign litigation.  Japan’s IP Bridge has sued in U.S. and German courts to enforce its patents .  Such actions involve complex jurisdictional issues. Moreover, SPF policies can send political signals.  In the Indian draft telecom policy, for instance, the very suggestion of a state-backed patent pool is described as “divisive” because it could be seen as hindering global market openness.  One analysis warns that India’s Telecom Patent Fund by leveraging public telecom funds must be careful to balance national ambitions (like 6G leadership) with India’s aim of attracting foreign investment . The SPF experience varies globally. In the U.S., no government patent fund exists; American policy focuses patent quality reforms instead on defending against NPEs through private means.  The U.S. government’s stance is sceptical: it often characterizes SPFs as mercantilist and hostile to free trade .  The EU is mixed: France ran France Brevets (with its subsidiary FSB) as an SPF, but the fund was closed in 2022 for lack of  profitability.^[10] Thus, national interests can conflict: an Indian SPF may aim to protect local telecom firms, while foreign rights-holders expect a neutral playing field.  Reconciling these requires careful diplomacy and rule adherence.

VI.   IS INDIA READY FOR A SOVEREIGN PATENT FUND?

Should a country adopt an SPF or rely on alternatives? There is no one-size-fits-all answer. Any SPF must be carefully tailored. For example, existing SPFs have gradually shifted toward more private sector contribution and to narrowing the focus on strategic industries. In India, if a patent fund is created, it should target sectors of national priority like telecom, renewables and biotechnology with transparency and independent oversight. Its licenses should be FRAND to avoid international penalties, and governance structures should include industry and academia representatives to maintain trust. India can achieve its goals without a sovereign fund.. India’s recent push for open patents e.g. compulsory licensing for public health and for technology transfer offices in universities are examples of such alternatives.  Importantly, any approach should respect international obligations: India might emphasize TRIPS flexibilities or negotiate patent licensing deals under World Trade Organization/World Intellectual Property Organization frameworks, rather than unilateral SPF actions. India must decide whether it needs a “big stick” SPF or can instead build capacity through market-friendly policies.

VII. FUTURE OUTLOOK

Looking ahead, the role of SPFs will hinge on emerging technologies and geopolitics. In rapidly evolving fields like AI, quantum computing, biotech and green energy, patents are both more valuable and more contentious. Major powers notably China with its million-plus annual patents could create new SPFs or expand existing ones to secure dominance in these sectors. If that happens, India and others may feel pressure to counter with their own patent strategies or else risk exclusion from future tech standards. For India, this raises a choice: protect nascent AI and biotech firms with domestic IP support via an SPF or other means, or instead foster open collaboration through international innovation alliances. In sum, the SPF concept is evolving. Early funds are transitioning: France’s ended, Japan’s privatized, Korea’s partly privatised. Indian policymakers should monitor these trends. For India, a cautious approach is warranted: leverage SPF-like mechanisms where clear benefits exist e.g. pooling telecom SEPs for strategic autonomy, but also strengthen domestic innovation capacity through education, R&D investment and international cooperation. Ultimately, a balanced IPR ecosystem will blend protection with openness by linking patent policies to ethical use and sustainable development, governments can ensure that any patent fund supports innovation that benefits all stakeholders.

VIII.               CONCLUSION

Sovereign patent funds are a portent of hope and danger; on the one hand, they can unlock unworked technologies, reduce the load on research and development, help small and medium-sized enterprises, and provide escalation against patent-troll lawsuits, but on the other, they are potentially a source of protectionism, distortion of the market, and cross-border aggression. The actual experience in the global arena is not homogenous: Japan and South Korea have embraced sovereign patent funds in the strategic portfolio of innovation, and France abandoned its program and the United States is doubtful. The answer to this question is not as simple in the Indian context. An umbrella sovereign patent fund would be prone to inefficiencies and create a backlash, but the hybrid strategies in this case can be suitably designed sector-specific approaches and can be of substantial usefulness. Finally, strengthening the intellectual-property-rights environment in India, encouraging open innovation and aligning international obligations with national priorities are a better alternative to reliance on a single sovereign fund. This means that the best course of India is one of selective adoption in combination with systemic reform, and not outright imitation.

[1] Medhaansh Singh is a student at Symbiosis Law School, NOIDA.

[2] Shivya Khanna & Tarun Khurana, Innovation and Protection: A Note on Sovereign Patent Funds, MONDAQ (Dec. 17, 2024), https://www.mondaq.com/india/patent/1556354/innovation-and-protection-a-note-on-sovereign-patent-funds.

[3] 5.7.5. MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY Notification, National Policy on Electronics 2019 (NPE 2019), New Delhi, Feb. 25, 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/static/uploads/2024/02/23rpr.pdf.

[4] Bing Zhao, Five Years After Its Founding, IP Bridge Reflects Japan’s Changing Approach to Patents, IAM (July 22, 2018).

[5] Garry Gabison, Government-Sponsored Patent Monetizing Entities, (Sept. 21, 2018), https://ssrn.com/abstract=3279544.

[6] Hosuk Lee-Makiyama & Patrick Messerlin, Sovereign Patent Funds (SPFs): Next-Generation Trade Defence?, Policy Brief No. 6/2014, Eur. Centre for Int’l Political Economy (ECIPE), https://ecipe.org/wp-content/uploads/2014/12/PB06.pdf.

[7]  David Balto, State-Sponsored Patent Trolls Signal New Form of Protectionism, ROLL CALL (Sept. 16, 2013, 1:21 PM), https://www.rollcall.com/news/state-sponsored-patent-trolls-signal-new-form-of-protectionism-commentary-227649-1.html.

[8] Jack Ellis, It’s Time to Talk About Patent Funds, IAM MAG. (Jan. 30, 2015), https://www.iam-media.com/article/its-time-talk-about-patent-funds. 

[9] Oonagh Fitzgerald, Understanding the Promise and Peril of Sovereign Patent Funds, CIGI Policy Brief No. 102 (Apr. 13, 2017), https://www.cigionline.org/static/documents/documents/Policy%20Brief%20No.102web_0.pdf.

[10] Xuan-Thao Nguyen, Sovereign Patent Funds, 51 U.C.D. L. Rev. 1257, 1273 (2018).