Intellectual Property Primer

a lex-warrier initiative

Economic perspectives of intellectual property management

As we discussed earlier, the business front line has shifted from the control of markets for raw materials to the control of rights to fresh ideas and innovation. Therefore, the intellectual property protection has vital legal, informational and policy functions which serves as a tool for innovation stimulating the development of new markets and defusing technology and other knowledge to the public in beneficial (economic perspectives) ways.

Intellectual property is native to all peoples and relevant in all times and cultures, and has historically contributed to the progress of societies. It is a force that can be used to enrich the lives of individuals and the future of nations – materially, culturally and socially. Hence, we can say that, the management of intellectual property can boost the research and development (R&D) into category leading products, branding effectiveness and enhanced market share.

Referring to the article Discovering new value in intellectual property by Kevin G Rivette & David Kline,(Harvard Business Review, 2003), the strategic management intellectual property rights can significantly enhance the enterprise’s success in three broad ways viz. by (a) establishing a proprietary market advantage; (b) improving financial performance; and (c) enhancing overall competitiveness.

Though, successful companies across the world deploy the intellectual property rights to achieve competitive advantage and as a source of unexpected income, the potential of the intellectual property as a power tool for economic development and wealth creation has not been utilized by almost all the nations in the world, especially, the developing nations.

As observed by Kamil Idris in Intellectual Property – A Power Tool for Economic Growth, the intellectual property has indeed become the driving force for economic health and social welfare. Therefore, the economic perspectives on the intellectual property has to be understood under following heads viz. (a) the knowledge economy and the relation to intellectual property which provide the macro-economic perspectives of intellectual property; and (b) the micro-economic perspectives of intellectual property which analyses the situation in a knowledge economy for a firm.

Macro – economic perspectives of intellectual property

Intellectual property rights are becoming the central force of modern economy due to the increasing significance of knowledge as a driving force of innovation and economic growth worldwide. Intellectual property protection policy accelerates the economic growth on a macro-economic level.

The impact of the intellectual property protection on a macro-economic level is aptly illustrated by, the difference intellectual property can make to the economic prosperity of different regions within the same country. There is a direct nexus between the national patent filing profile of a country and its economic prosperity.

The United Nations Industrial Development Organization (UNIDO) report of 2009 highlights the changing patterns in industrial performance as a direct result of the use of knowledge based appropriation regimes of intellectual property. It also appealed to the member nations of the United Nations to move along the transformational trajectory (to industrialization) requires serious investment, over the long-term, in knowledge generating factors such as Research &Development, accessing intellectual property through paying patent, royalty and license fees for strategically valuable knowhow.

In this context it is significant to note the observation of Keith Maskus that, the strengthening of intellectual property protection in developing countries, notably in Brazil, China, India and South Africa has led to a dramatic boost in foreign direct investment which is believed to have contributed to economic growth.

Micro – economic perspectives of intellectual property

Investments in research and development generate new know-how, which indeed gives a competitive advantage and encourages a better market position and enables companies to generate income. This generated know-how has the potential to be converted into cash-flow.Companies which continue to invest in new products and innovation during times of economic recession will be those that will be best positioned to take advantage of the recovery. In other words, companies view patent filing as an economic lynchpin.

Thus, we can say that, the micro-economic perspective analyses the advantages of intellectual property for IP owners, whereas the macro-economic perspective analyses the advantages of intellectual property on a national level.