Importance of Robust IPR in Global Economy

Robust intellectual property rights stimulate innovative activity by increasing the allocation of returns to innovation, so innovators can get appropriate benefits from their own innovative activities to justify taking significant risks.If innovators are not provided with adequate benefit of their innovation, they will lose their motivation to participate in future innovations and likewise the companies will not have resources to carry out innovation activities.

Importance of Robust IPR in Global Economy

Introduction 

The global economy has become an innovation driven economy, where creativity, knowledge and technology build the country and its international trade. Global innovation is very crucial to face the commonly shared challenges such as climate change, disease prevention and treatment, and global economy. 

To support and encourage innovation, robust IP and IPR protection throughout the world is imperative. Robust IP protection inspires the individuals and companies to innovate the new technologies or infrastructures which address the global challenges, in return they get a right over that innovation. 

Apart from innovations, IP provides a framework to protect Trademarks, Designs, Copyrights etc. The role of IP in today’s world influences a wide range of economic sectors which affects innovations, trade, competition, taxes and others. IP has become a major source of wealth creation for the country and has overcome traditional factors of production like land, labor and capital. 

Despite the tremendous changes in the technologies and the need for further innovation, there are many who oppose robust IP and IPR protection. They view strong IP and IPR as a tool of developed countries to impose monopolistic rents on the developing countries. They further demand weak protection and forced redistribution of IP, so that they can gain a short term economic boost. But this perspective fails to understand the long-term impact on global innovation and productivity. 

The relationship between IP and innovation 

Before studying the relationship between innovation and IP, let’s try to understand what is meant by innovation? 

Innovation means doing something that is new which improves a product, process or service. It represents the creation of new value for the world, the value may be added through new technologies, new business models, new products or services.

Innovation is very important for long term economic growth and improvement in quality of life. Intellectual Property plays a key role in driving innovations and encouraging the inventors by providing reward and recognition to them. 

Robust intellectual property rights stimulate innovative activity by increasing the allocation of returns to innovation, so innovators can get appropriate benefits from their own innovative activities to justify taking significant risks. Increasing the deprived rate of the performance closest to the social rate of return, the intellectual property of the problem of knowledge-active incentive, which allows inventors to carry out economic profits from their inventions, which catalyzed the investment in creating knowledge. 

If innovators are not provided with adequate benefit of their innovation, they will lose their motivation to participate in future innovations and likewise the companies will not have resources to carry out innovation activities. 

IP produces a range of positive benefits, including: 

1) the creation of powerful incentives for domestic innovation; 

2) Inducing knowledge that help others to innovate;  

3) Ensure that companies in a country can focus on the industry in a productive and innovative  way; 

4) promote the international distribution of technology, innovation and knowledge; and 5) increasing the levels of research and development of a country, inbound Foreign Direct  Investment (FDI) and export of goods and services. 

Robust IP and IPR protections provide it’s benefit to both developed and developing countries in the similar way. 

2010 OECD review of the effects of IPR protections on developing countries, “Policy Complements to the Strengthening of IPRs in Developing Countries” found, “The results point to a tendency for IPR reform to deliver positive economic results.” The study found that developing-country IPR reforms concerning patent protection have tended to deliver the most substantial results. IPR reform also provides strong protection for domestic innovators. Using case studies from 18 developing countries, Sherwood concluded that weak IPR hinder regional innovation and risk-taking. In other words, local innovators are first introduced to technology through technology transfer in an environment where intellectual property rights are protected, then they may build an evolved product or develop alternative approaches (that is, innovate) based on those ideas. 

 

Relationship between IP and Productivity (Trade, FDI and Technology Transfer) 

Strengthening IPR protection has been shown to be associated with increased trade. Intellectual property is becoming one of the key elements of value in many international commerce. Global cross-border exports of technology and knowledge-intensive commercial goods and services reached an estimated $ 4 trillion in 2014, and knowledge-intensive commercial services exported $ 1.6 trillion, according to the National Science Foundation. Was 2.4 trillion dollars of high-tech products.

The knowledge-intensive services, accounts for about half of today's world trade flow. And this knowledge-intensive component grows faster, about 1.3 times faster than labor-intensive flows.4 This is partly due to the emergence of knowledge-intensive business services (law, accounting, etc.) such as computer-related services (software, information processing, etc.), research and development (R & D) services, and business services (software, information processing, etc.). doing. And advertising). - This provides important interim information for other economic activities. According to the survey, services account for only 20% of the world's total exports, but when value-added exports are taken into account, their share more than doubles to 41%.

Several researches show a positive link between the protection of the Intellectual Property Rights and commercial flow in high technology products. Likewise, strengthening the IPR protection is also linked to the increase in FDI inflows. Cavazos Cepeda et al found that an increase of 1 percent in the protection of intellectual property rights by the Patent Rights Index is associated with an increase of 2.8 percent at the entrance of the FDI.30 Similarly, an increase of 1 percent on the Trademark protection levels associated with an increase of 3.8 percent in the incoming FDI; And an increase of 1 percent in the protection of copyright produces an increase of 6.8 percent in FDI. 

In addition, researchers have identified a virtuous cycle between FDI and IP protection, so improvements in the IPR is associated with better economic performance. It is also evident that countries with similar levels of IP protection have more usual trades of with each other than the countries with weak IP protection.

Academic research also indicates a strong relationship between the IPR and technology transfer.  Lippoldt showed that the strengthening of the IPR in countries, especially in terms of patents, is associated with an increase in technology transfer by trade and investment. 

The survey of the World Bank's International Finance Corporation found that, with variations by sector, country and technology, at least 25 percent of US and Japanese high-tech companies refuse to invest directly, or enter a joint venture in developing countries with poor intellectual property rights; And a subsequent study confirmed the recording of the survey with real foreign investment data. and an International World Banking Institute data found that poor intellectual property rights reduced the flow of all commercial activities, regardless of the levels of economic development of nations.

Studies have also shown how the benefits of intellectual property extend to developing countries. Diwan and Rodrik showed that the robust patent rights in developing countries give companies of developed countries a greater incentive to investigate and introduce appropriate technologies for developing countries. Taylor in his study showed that weak patent rights in developing countries lead enterprises from developed countries to introduce less-than-best-practice technologies to developing countries.

 

References 

1) https://itif.org/publications/2019/04/25/way-forward-intellectual-property-internationally

2) https://www.wipo.int/ 

3) http://economy.nationaljournal.com/2010/08/how-can-we-boost-productivity.php.

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