U.S. Flags India Over IP Concerns Again

Another year, another spotlight — and not the flattering kind. In its April 2025 edition of the Special 301 Report, the U.S. Trade Representative (USTR) decided once again to keep India snugly on the Priority Watch List. It’s sort of like being called out by your report card for “needs improvement” — except it’s your entire intellectual property system that’s under the microscope, and the teacher is one of your largest trading partners.

India Under Scrutiny Once Again

For India, being on this list isn’t just a bureaucratic slap on the wrist. It signals friction in trade dynamics, raises eyebrows among global investors, and invites some uncomfortable questions about the country’s stance on patents, enforcement, and IP transparency. So, why can’t India seem to shake off this label? And what’s the real story behind this persistent critique? Let’s break it down.

What Is the Special 301 Report and the Priority Watch List?

Think of the Special 301 Report as Washington D.C.’s annual “naughty-or-nice” list for global IP protection — and India, it seems, keeps landing in the same section year after year. The report is released by the Office of the U.S. Trade Representative and evaluates countries based on how well (or poorly) they protect and enforce intellectual property rights for American companies.

Now, there are levels to this game. The worst of the worst go on the Priority Watch List, and that’s exactly where India finds itself again in 2025. It’s not as bad as facing trade sanctions, but it’s not a compliment. Countries on this list are seen as having significant IP-related deficiencies that the U.S. deems harmful to its commercial interests.

For India, this matters. A spot on the list can impact trade negotiations, investment sentiment, and even how multinational firms view the Indian market for launching innovations. It’s like being invited to the global innovation party but with a stern warning at the door: “We’re watching you.”

Key Reasons Behind India’s Continued Presence on the List

So, what’s keeping India on the USTR’s radar year after year? Let’s just say it’s a medley of ongoing concerns — a recurring playlist of “IP issues greatest hits.”

One of the biggest sticking points is India’s narrow patentability criteria. Under the Indian Patents Act, Section 3(d) famously makes it harder for incremental pharmaceutical innovations (like tweaking an existing drug) to qualify for a new patent. The U.S., with its pharma-heavy IP interests, sees this as a roadblock to innovation and market access.

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Then there’s the specter of compulsory licensing. Although India hasn’t issued one recently, the fact that it’s still part of the legal toolbox makes American companies nervous. They see it as a threat — the possibility that their patented products could be licensed out without consent during public health emergencies.

On top of that, we have bureaucratic bottlenecks. The USTR flagged long delays in trademark opposition proceedings, patchy examination quality, and generally cumbersome application procedures. Add to that India’s high customs duties on IP-intensive goods like medical devices, and the U.S. is not exactly applauding the current state of affairs.

Has India Made Any Progress on IP Reforms?

Absolutely — but it’s a bit like cleaning half your room and hoping your parents won’t notice the pile of laundry under the bed. India has taken tangible steps in recent years to modernize its IP regime, and the Patents (Amendments) Rules, 2024, are a prime example.

These new rules aim to reduce the compliance burden for patent applicants. Think simplified procedures, more clarity on deadlines, and streamlined communication — all good things. India has also made strides in digitizing its IP offices and increasing transparency around examination timelines.

Yet, despite these efforts, the USTR’s patience seems limited. The report acknowledges progress but notes that it’s not enough to resolve long-standing issues. India’s reforms, while meaningful, haven’t yet tackled the deeper structural concerns, like revamping Section 3(d), tightening enforcement against counterfeit goods, or improving judicial outcomes for IP cases. So while India is moving, it’s not moving fast enough to jump off the watch list.

The U.S. Perspective: Where Does the Frustration Lie?

Let’s be honest — part of this is about business. The U.S. views India as a vital market, especially for industries like pharmaceuticals, software, media, and high-tech. But when American firms struggle to secure patents or enforce trademarks, frustration quickly sets in.

The U.S. government has long argued that India’s IP framework poses non-tariff trade barriers. These aren’t about import taxes per se, but about systemic hurdles that make it tough for U.S. companies to operate fairly. A weak enforcement regime, the USTR argues, creates a playground for counterfeiters and pirates, putting genuine U.S. brands at a disadvantage.

Then there’s the issue of high import duties, especially on IP-rich goods like medical devices and cutting-edge electronics. From the U.S. perspective, these are just more reasons why access to the Indian market feels uneven — and why India still isn’t passing the IP “trust test.”

The Indian View: Balancing Access and Innovation

Of course, this isn’t a one-sided story. India’s stance on IP — especially around pharmaceuticals — has a deeply rooted logic. The country has long championed access to affordable medicines, and its patent laws reflect that public health priority.

Section 3(d), for example, is often cited by Indian policymakers and activists as a necessary safeguard against “evergreening” — the practice of extending patent life through minor, often cosmetic modifications. In a country where millions rely on generics, this isn’t just a legal argument; it’s a moral one.

India also contends that compulsory licensing is a WTO-compliant tool meant to balance IP rights with urgent public needs. Its use has been rare, but just having the option available keeps Big Pharma on edge. It’s a classic case of policy ideals clashing with commercial interests.

What’s at Stake for Global Trade and Innovation?

The longer India stays on the Priority Watch List, the more complicated things become. On a global level, this isn’t just about patents and trademarks — it’s about trust. For U.S.–India trade relations, unresolved IP issues remain a sticking point in larger economic agreements, like a long-hoped-for bilateral trade deal.

Multinational companies may hesitate to invest or launch new products in India if they fear inadequate IP protection. Meanwhile, India’s ambitions to become an innovation hub could be undercut if global players see its legal framework as too unpredictable.

Yet there’s another side to this coin. If India can evolve its IP regime to strike a fairer balance between access and protection, it could become a model for emerging markets, showing that you don’t have to sacrifice affordability to attract innovation.

Conclusion: Will India Move Off the Watch List Anytime Soon?

So, is India destined to stay on this diplomatic “naughty list” forever? Not necessarily. Progress is being made — just not at the pace or scale the U.S. wants. The 2024 patent rule amendments are a step in the right direction, but more systemic reform is needed.

To move the needle, India will likely need to address deeper concerns around enforcement, reduce delays in legal processes, and — perhaps most delicately — revisit its stance on what constitutes a patentable invention. That won’t be easy, given domestic priorities, but it may be the only way to satisfy both sides of this ongoing IP debate.

Until then, India walks a fine line: protecting its sovereign interests while trying not to lose the confidence of its global partners. Whether 2026’s report brings a change in status remains to be seen, but the conversation about how we balance innovation, access, and fairness is far from over.