15-09-2014, 10:47 AM
Methods employed by R and D of various companies for screening ideas
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Introduction
In today’s competitive scenario, Research and Development has assumed a very important role. For many large corporations, R and D is the source for competitive advantage. Some firms use innovative ideas to develop new products, molecules while others innovate to reduce cost or improve product/ service quality and some businesses are completely developed from an innovative idea. In this study, the functioning of R and D has been studied in two different roles, one of developing new products and second is of reactive research to improve a process.
Agrochemicals and Pharmaceuticals are two such industries where the whole business thrives on how many new products a company can bring to the market. In other words, R and D is the most crucial function for them. But along with being innovative and creating new products, there is also another important concern about the Intellectual Property Rights which guarantees the return from R and D that these firms make. So it is necessary to understand the patents laws first to appreciate the methods of screening new ideas by these firms.
Patent Law
Any industry which is characterized by high R&D processes require intellectual property rights to protect its inventions and earn justifiable return on huge investments it has incurred for R&D. India followed process patent law till 2005. Under process patent law, protection is given to the process and not product. So it is quite possible for any other firm to make the same product through reverse engineering in which only different process is used to manufacture same product. This way any well performing product could be copied and launched by rival firm, thereby reducing the revenues for original inventor. So no organization would have any incentive to invest huge money in R&D to discover new pesticide molecules. Moreover onus of proving infringement was on patent holder. Such kind of regulatory environment discouraged any R&D efforts in India. Hence till 2005, India has major off patented products in market.
Patent (amendment) act 2005
On completion of 10 years joining WTO, India launched new patent law in 2005 with major breakthrough by shifting to product patent as obliged by TRIPS agreements. Though India has product patent now, there are lot of loop hole which are impeding the process. We will study some of them here.
• Product patent to only “new chemical entities” (NCE): India patent law gives product patent to New Chemical Entities (NCE) only. But NCEs are beyond reach of many innovators as it takes lot of R&D budget and time. At the same time there are lots of innovators who does increment innovation and these innovations are not patentable. In Indian situation, many Indian companies, research institutions, scientists have huge potential for incremental innovations but patent law 2005 doesn’t support such innovations. But given that India need to comply with TRIPS agreement, which suggests patent protection to all innovation including incremental ones, have not included protection for incremental innovations.
• TRIPS agreement has general guidelines criteria for innovation getting qualified for patenting. But Indian patent law has different definitions for criteria which has created lot of confusion among MNCs. Because there are
• Law hasn’t made any provision to increase the protection period for mail box applicants. Because for mail box applicants, the rights and privileges are available from date of patent grant if they have filed application after 1/1/2005 whereas rights commence from date of publication of application. This reduced the protection period for 1995 mail box applicants.
New Product Registration
It is a regulatory process of evaluation and acceptance by the statutory authority of the claims made by the applicant in order to protect the health of people, animals, plants and environment and to ensure that pests are controlled in a safe and efficient manner. Registration of agrochemicals is handled at central Government level whereas issues regarding implementation of the Act including manufacturing license is done at the state level. It is a multidisciplinary endeavor including chemistry, bio-efficacy, toxicity and packaging.
Types of registration
• Provisional Registration u/s 9(3b)
– For the new molecule introduced first time in India. Usually granted for a period of 2 years
• Regular Registration u/s 9(3)
– Subject to the submission of complete data
• “Me-Too” Registration u/s 9(4)
– After 9(3) registration of a molecule, any other person can apply for registration
New Product development and screening of ideas in Agrochemical industry
The main contention in Agrochemical and Pharmaceutical industries is not only the fact that there is around 3 years lead time between a product is being applied for patent and it is actually out into the market. The lead time actually conceptualizing a product and finally selling it commercially is even more. For the last 10 years industry average, the lead time between a product being synthesized for the first time to the market is about 9.1 years (Ref: Mazumdar P. K. ( 2006, January 13) “R and D of new molecules” http://www.ficcimedia-room/speeches-presentations/2006/jan/agrochem/ SessionIII/MrMazumdar.ppt ).
For formulating one successful, unique product (Noble Product) of crop production, there is actually a screening of about 140,000 molecules and the whole process costs about $ 210 million from inception to consummation (Ref: Mazumdar P. K. ( 2006, January 13) “R and D of new molecules” http://www.ficcimedia-room/speeches-presentations/2006/jan/agrochem/ SessionIII/MrMazumdar.ppt ). So the main concern is to design a product looking ahead into a market of 10 years ahead. The R and D of an agrochemical company will have to assume the market conditions, prevailing problems and regulations 10-12 years ahead and then design a new product.
The process of new product development starts from collecting new leads or ideas. The new leads may come from existing products or problems in the market. Sometimes new leads come from combinatorial chemistry i.e. combining the active ingredients or functional groups of some existing products. Sometimes leads may come from natural products or by discovering the properties of some new molecule. Then these ideas are thoroughly screened and infeasible ideas are eliminated to get some workable leads.
After the workable leads are identified, then starts an iterative process of implementing it by actually synthesizing the chemical, screening the properties of the new compound on actual samples. Then based on the shortcomings of the compound, a new molecule is generated, then again it is screened and again a new molecule is generated. This process continues until a noble product is obtained.
The main parameters for screening are
R and D in manufacturing industries:
Apart from being used in developing new products, R and D assume another equally important role of process improvement. In this section, R and D is viewed in a context of process improvement and modifying rather than actually creating new ideas.
In manufacturing industries, when a new product comes to market, it stays there for a long time and a series of improvements and add-ons are made to that product. So the R and D is bifurcated into two streams. One concentrates on developing new product, while the deals with improving the existing products and processes. We can take the example of Tata Motors, a premier motor manufacturer in India. For new product development, there is a separate department “Engineering Research Centre” (ERC) which is separate from the plants R and D department. ERC develops new models
Conclusion:
Based on the above observations, a few conclusions can be made about how companies contemplate R and D and how they vary from context to context.
• Consideration of the market: it is very important to keep in mind the market conditions of the time when the idea will be actually marketable. For instance, in pharmacological or agrochemical industry, the lead time is very high and so they have to consider the customer demands, regulations etc. of 10 – 12 years ahead and not of the present. The same is with ERC of Tata motors, they will have to consider the changed customer preferences but only the lead time to market is not that long.
Hence all new ideas should be developed by looking into the future market. If a company wants to launch a really good product which should stay very long time in market, then they should look even ahead than the time it will be in market.
• Difference in judging criteria: there is a huge difference in the judging criteria used for proactive research and reactive, improvement based research. In the earlier case, the success of the idea is the main criterion while in the latter case, the main consideration is that the idea should be effective and creative, but it must gel with the existing process causing the minimum possible disruption.
So, when a company is designing a new process for manufacturing a new product this should be kept in mind. It implies that once a process is established, it is not going have many major changes until the process is shelved. So during the first designing, as many contingencies as possible should be taken into account.
• Difference in new product vis-à-vis improvement based research: these two aspects of R and D are completely different from each other. New product design is an aggregate level business decision, while the later one is a functional research. These two should be kept separately as their functioning is entirely different. Tata Motors duly appreciates this fact and thus ERC there is centrally controlled while the functional research is controlled by each individual plant.