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Literature Review On Intellectual Property Rights Economics Essay

Chapter 1

1.0 Introduction

For a sustainable growth and economic development of a country, innovation and creativity is a very important dimension. Industries and the global markets of the 21st century rest on the intellectual property protection as it is one of the central public policy. By the mid-1990s, a minimum global standard for IPR had been preserved in the WTO Charter through the incorporation of the Agreement on Trade-Related Aspects of Intellectual Property Rights.

The transfer in international economic policy and the lowering of tariff and nontariff trade barriers to the embrace of strong IPR is genuinely an issue of controversy. Intellectual property rights (IPR) are legal claims settled by governments within their relevant sovereignties that grant trademark, patents and owners of copyright the exclusive right to exploit their intellectual property for a certain period. The fundamental right for IPR protection is to provide an incentive for innovation by granting IP owners an opportunity to recuperate their research and development costs. With the rapid change in technology and social drivers, the introduction of the Intellectual Property Rights has become increasingly important as it provides a legal and policy toolkit to encourage innovation, stimulating investments required to develop, market new innovations and spreading technology. However, certain policymakers, nongovernmental organisations, scholars and others have queried on the roles of IPRs in the 21st century and also whether its full implementation might be very costly to developing nations.

Chapter 2

Literature Review on IPR

2.0 Introduction

The way IPR is protected from one country to another differentiates to a large extent. From the economists view point, IPR protection represents a transaction between the profits of innovation and the costs of superiority. However, in some cases, it can grant monopoly power. For this fact, the protection of IPR is always restricted in either the length or scope of protection.

2.1 Evolution of IPR

The term “intellectual property” acquired force after the setting up of the World Intellectual Property Organization (WIPO) in year 1967; however it became more popular after the introduction of the Bayh-Dole Act 1980. Intellectual property was introduced so as to protect the labours of the mind, production and all a man’s own. The French law of 1791 contributed towards making Intellectual property a privilege for those who had discovered new creations and thus allowing a temporary enjoyment for a certain period of time. The WIPO is one the agencies which encourage creations all over the world.

In the late 19th century, with the introduction of high technological progress and process of globalisation, Intellectual property transactions have started together with the creation and development. However, it has been noted a high contradiction between the global demand for IPR and regional restrictions. With the view to solve this contradiction, a number of countries have bound themselves with the International Convention for the protection of their Intellectual properties. The TRIPS agreement has been able to connect the global trade with that of people’s IPR. And as a result, this has contributed towards boosting up the international trade and speed up the economic growth.

New confronts cropped up in the 21st century of the IPR system. Gradually the loopholes on the IP system has started to manifest themselves and this took place in developing countries.

2.2 IPR and its cost

The reasons for both developed and developing countries adopting IPR is to stop counterfeiting and piracy. The economic impact on developing countries for implementing and protecting IPR is not lucid. Some debated that the increase in IPR protection will enhance economic growth and welfare in developing nations, whereas others believe that it will be of no use and can even go the extent of detriment. It has been found that it decreases the income of industries that rely on products imitation of developed countries and the increase in the costs of those protected goods and therefore strengthening of IPR protection in developing countries contribute towards profit maximisation for the developed nations. Production of resources and the increase in innovation will cause a decrease in the availability of the products.

Lanjouw (1997) and McCalman (2001), have argued that the shift toward stronger IPR in developing countries may cause harm to national economic interests, transferring rents to multinational corporate patent holders in the world’s most highly developed countries, especially the United States. IPR supports counter that strengthening IPR will encourage more innovation to the global economy, thus promoting rapid economic intensification. Moreover, they also uphold that even if the supplementary novelty is mostly intense in advanced countries, reinforcement of IPR will speed up the transfer of technology between countries, thus ensuring that all countries benefit.

2.3 IPR and economic growth

Robert Solow (1957) demonstrated that technological progression and increased human capital of the workforce accounted between 80 to 90 percent of the annual productivity increase in the US economy between 1909 and 1949. From the analysis of Denison (1985) it has been found similar results for the period 1929-1982; that is a percentage of 68of productivity growth due to the scientific and technological knowledge and progress, 34 percent due to improved worker education, 22 percent because of a greater realization of scale economies, and 13 percent attributable to increased capital concentration. It can be said that technological advancement and enhanced human capital are the principal driving force of economic growth in the United States and other industrialized countries (Scherer and Ross, 1990, pp. 613-614).

2.4 IPR and Investment

Private business investments and R&D are the important agents for most innovative and technological advancement. The commercialisation process for the R&D results of product advancement requires investment. It has been noted that for both foreign and domestic market it is the quality of the IPR establishment that acts as a motivational factor. It can be said that without the implementation of IPR, the innovation cost and the product development would not have increased its benefits. IPR system acts as a stimulator for the investment of both domestic and foreign market. Several researches have shown that strengthening IPR increases both quantity and quality of FDI in those countries. Furthermore, it has been seen that a great degree of IPR conditions may reduce incentives for the domestic investment. IPR is an important tool but it is not enough to enhance investment, R&D and increase the flow of FDI in the country.

2.5 IPR and Technology

Technological transfer from foreign firms in developed countries can be a very significant resource for firms in developing nations. The impact that the stronger IPR protection has always depends on a country’s present circumstance. On one side, a strong IPR regime could limit the spread of technology by the patenting procedure which will prevent others from misusing the knowledge. However, IPR has its positive light as it encourages the transfer of technology by increasing trade of goods and services. The prime benefits of the TRIPS agreement is that it has allowed the diffusion of technology from one country to another and it was beneficial for developing nations as they do not innovate much. It has been found that stronger protection of IPR encourages the transfer of technology through several channels; however it’s given impact depends hugely on the imitative and development capability of a country.

2.7 IPR and Protection of consumers

Legislations are been put into practice to protect gullible consumers from dishonest marketers who in the name of IPR they exploit their products by false advertising , misleading packaging and marketing of unsafe products. Through legislation, the government tries to promote healthy competition so as to combat malpractices of trade. The government also tries to protect the environment by holding business people a social cost to pay.

Chapter 3

3.0 Benefits of IPR

One of the benefits of reinforcing IPR is that such protections may persuade foreign companies to produce and sell technologically advanced products in the developing country. Some of these elements may have been pending from the

firm’s patents, in the U.S. and foreign countries as well, so as to avoid other parties from being able to copy its technology merely by reading its patents.

IPRs have become an important factor in both the creation and use of ideas that are interpreted into knowledge and inventions so as to promote innovation and economic growth. The protection of intellectual property has become an assurance for both innovators and creators in order to encourage them bringing their works to market and also to build on the innovations and creations of others for the benefit of the society. Invention and creation has become a key factor to overcome market failure through the transfer of technology and creative activities. So it can be said that IPRs inspire innovation and create economic growth through increased productivity, trade and investment and also increase consumer welfare. IPRs being an efficient market oriented tool, it enables firms to more fully appropriate the return from risky and uncertain investments.

IPRs drive consecutive creative efforts which facilitate a vital cross fertilization of ideas. The protection of IPR provides the incentive for firms and individuals to invest in the creation of new technology, product and also where investments involve significant costs or risks and also where these invention or creation can be easily copied.

The global economy is much dependent on the international appreciation and spread of IPRs related to branded products. The protection of trademark is crucial to maintain high quality goods and services that contribute towards the achievement of consumers’ trust. The market boom in imitating products often puts the consumers’ health and even their lives at stake. Intellectual property and competition policy are crucial to keep up competition and markets as both promote innovation and consumer welfare. Computers, telecommunications and other information based sectors heavily depend on IPRs as legal and economic backbone. IPRs ease the operation of markets and help new ones as it is tradable and transferable.

Innovation helps to create new jobs, making provision for higher incomes, offering opportunities for investments, eradicating social dilemmas, aiding diseases, environmental protection and protecting our security.IPR protection will permit companies to invest in the creation of new technologies.

Chapter 4

4.0 Weaknesses of IPR

In a weak IPR environment, the multinational firm has little recourse. IPRs have numerous loopholes; promotes risky, uncertain and costly investments. For instance: the counterfeiting of toys and games is a serious and increasing problem for Europe’s toy manufacturers and consumers. At present, toy manufacturers often lack the appropriate legislative means to protect many of their product innovations, for three main reasons:

The fast-moving nature of the toys and games market often makes it takes too long to obtain the appropriate protection, with the result that a product suffers counterfeit ting from its first day on the market.

The cost of protecting various products in different European countries can be too expensive.

Patent protection is not appropriate, as toy products are not "inventions" in the traditional sense and therefore lack the required level of innovative level. The purpose of the toy industry is not to invent new technologies, but to create or "invent" products that offer an educational or entertainment value.

On the other hand, the industry introduces a large number of new products every year where a great number of them have a short product life.

IPRs can be said that it has changed to a very large extent the nature of competition as most industries which do not benefit the protection of intellectual property rights find themselves engaged in extreme competition and also a lower profit margin. Conversely, companies with intellectual property rights benefit high profits and minimal competition.

Intellectual property rights contribute towards the corruption of the society in a numerous ways. Intellectual property rights will give rise to class differences. It has been a remarkable issue in recent years that the rich have become richer to an unimaginable extent. The members of the “Forbes 400,” which assemble 400 of the richest people in United States, have a net worth of 1 trillion dollars more than the gross domestic product of China.

The colossal riches of the famous Bill Gates of Microsoft, Phil Knight of Nike, and the other billionaires of the internet, along the sizable remains of poverty that impairs the modern United States, which brings into focus the relationship between the income distribution and intellectual property. This innovative distribution of wealth, in 1999 discarding those who have inherited their riches, three of the four richest people in the world, according to a survey conducted by Forbes magazine, owed their wealth to Microsoft, one of the major holders of IPRs, suiting the so-called New Economy in which “DOS Capital” has supplanted Das Kapital. IPRs weaken the very science and technology that they are supposed to promote. Both create bottlenecks and obstruct forward developments.

Some developing countries, have to endure huge amount of money for the protection of IPR, for example the cost of some medical or necessaries and the prices of these products are so high that people in trouble cannot meet their needs. Some scholars even put forward that the system of intellectual property will know an end. The TRIPS agreement has made many developing countries to re-examine the effects of the intellectual property system on the economy wellbeing. To be able to cope with these problems, the developing countries have amend their legislation regarding the system of the intellectual property. However, it has been witnessed that developed countries monopolise the scientific knowledge that they possess in order to gain leadership on the market trends.

Chapter 5

5.0 Analysis

Indeed the full implementation of IPR in developing nations can be very costly for multiple reasons. Developing countries should well examine their economic benefits compared to the cost they are investing in strengthening and reforming IPR protection and its present system. The effects of TRIPS that is the retrenchment of Intellectual Property Rights will fluctuate as per the intensity of economic development in countries. Developing countries went along with the TRIPS agreement for diverse reasons, for example, starting from the agricultural and clothing markets in developed nations, to that expectation that stronger the IPRs, the more there will be technological transfer and innovation. But on analysing the matter profoundly we will see that the long term benefits seems uncertain and costly to achieve in many developing countries. The administrative cost and the high process for medicines and technological investments seem to be a huge investment.

Least developed nations devote practically no resources to innovation and have little intellectual property to protect(World Bank, 2001). For instance; these countries have a low ratio R&D in Gross Domestic Products and lower patent rights than others. In developing countries, IPRs offer no benefit if those countries are not able to purchase, absorb and deploy new technologies.

Developing countries are left out with little incentive for investing in R&D on neglected diseases. Developed countries in the interest of everyone should pay more attention to reconciling their business-related self concern with the need to lessen poverty in developing countries. Higher Intellectual Property standards should not be imposed on developing countries without a serious consideration and examination of their impact. The impact of IP rights on poor people will fluctuate according to socio-economic conditions. IP systems should be adapted to a country's given present condition of development and its particular circumstances.

Developing countries need to shape their IP laws in such a way so that it helps in the promotion of their development and keep in mind some of the negative impacts of overly generous IP protection. For instance, as some developed countries have found, the patenting of technologies needed to conduct research can provide an incentive for research, but it can also slow down research, which needs to make use of those protected technologies. For example, the search for an effective malaria vaccine may be complicated by the large number of patents on the genetic material required in the research. Developing countries should also restrict the patenting of minor advances, which can create a legal maze of patent claim. Developing countries should well examine their economic benefits compared to the cost they are investing in strengthening and reforming IPR protection and its present system.

Chapter 6

6.0 Conclusion

As a conclusive note, it can be said that indeed the implementation of IPR is costly to developing nations. The cost and resources associated with the full functioning of IPR is highly expensive and these developing countries will not be able to afford investing in its implementation. However, we must also not forget the fact that through its implementation also, the economies of these developing countries will know a high increase as invention and innovations are the key success for any developing or developed countries. With the intensity of the progression of the world economy, the speed of the intellectual property system will accelerate.

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