POST-GRADUATE DIPLOMA COURSE INTELLECTUAL PROPERTY RIGHTS

ECONOMIC ANALYSIS OF INTELLECTUAL PROPERTY RIGHTS

Submitted by:
Bhavya Aggarwal
IPR Roll no. 1

INTRODUCTION

According to the World Trade Organization, “Intellectual property rights are the rights given
to persons over the creations of their minds. They usually give the creator an exclusive right
over the use of his/her creation for a certain period of time.” 1 It is a way by which use of
different types of information can be regulated in a lawful manner. While copyright law
safeguards the “forms of expression of an idea” such as movies, symphonic melodies,
musical compositions, written literature, computer software, etc.; patent law aims at
protection novel inventions of products and processes. Trademarks aim at safeguarding the
brand value and good will of the name associated with various goods and services, by
protecting words and symbols associated with the brand that create brand recognition in the
minds of people.

Effect of intellectual property rights on the processes of economy and its growth is one that is
dependent on multiple variables. While stronger systems of intellectual property protection
are equally capable of limiting economic growth, evidence in support of intellectual property
protection shows that strengthening intellectual property rights has the potential of increasing
economic growth and stir beneficial change that leads to improvement of developmental
prospects to incorporate structured and dynamic competition.
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) has had a monumental
role in strengthening intellectual property rights at a global level. However, these changes
caused by the TRIPS cannot ensure that the new regime will only cause positive changes to
the economic growth and development process. Keeping in mind the present scenario and the

1
Trade topics; What are intellectual property rights; WTO; Link:
https://www.wto.org/english/tratop_e/trips_e/intel1_e.htm#:~:text=Intellectual%20property%20rights%20are
%20the,a%20certain%20period%20of%20time.
brief background as traversed above, this paper aims at assessing the economic impact of
intellectual property rights on a global and domestic level.

HISTORICAL BACKGROUND

Legal theorists in the past have attempted in various manners to analyze the impact of
intellectual property on economies. Four of the most prominent theories are explained as
follows:

Rights to resources ‘held in common’

Some theorists like John Locke2 believe that when a person labours upon and utilizes the
resources that are either unowned or ‘held in common’, such a person earns a natural property
rights to the gains of his or her efforts; furthering imposing upon the state a duty to enforce
such a natural right of any such person. He proposes that by describing an environment or
more appropriately a state of nature wherein all goods are held in common among one
another, or the people co-existing together by the virtue of a grant from God. 3 Locke believes
that God grants such bounties to humanity agreeably for the enjoyment of goods bestowed
upon humans, however these goods cannot be optimally enjoyed in their natural state. Such
natural goods must be converted into optimal private property by exerting labour upon them4.
In his opinion, there is no other way to appropriately enjoy the value of such goods without
giving them the status of private property by adding the required amount of personal labour
that improves their value. Such a concept when incorporated with intellectual property
becomes highly relevant. This means that ideas and concepts are the pertinent raw materials
that are unowned by any one person or more so, are held in common by everyone. However,
when a person puts in their individual intellectual labour to such ideas held in common, the
expression originating out of such labour on ideas contributes to the finished product in a

2
See J. LOCKE, Second Treatise of Government, in TWO TREATISES OF GOVERNMENT P. Laslett rev.
ed. 1963 3d ed. 1698.
3
See Justin Hughes, The Philosophy of Intellectual Property, 77 Geo. L.J. 287 (1988); Link:
https://cyber.harvard.edu/IPCoop/88hugh.html#n33
4
AN ANALYSIS OF TRADE MARK INFRINGEMENT BY DILUTION UNDER SOUTH AFRICAN LAW;
ALVIZO ROMANO MIGGELS; Link:
https://etd.uwc.ac.za/xmlui/bitstream/handle/11394/7329/miggels_m_law_2020.pdf?isAllowed=y&sequence=6
manner novel and different to any other; and automatically such a person gains a natural right
on the expression of any such idea.

Kant and Hegel

Another popular theory is from the thesis of Kant and Hegel that states two things in
particular. Firstly, in order to satisfy some of the very fundamental human needs or interests,
one needs to look at safeguarding and furnishing private property rights to individuals.
Secondly, in order to provide such private property rights as part of the fundamental rights of
an individual, policymakers must select the right set of entitlements that will most effectively
contribute to human advancement. Similar to other predominant social institutions, property
rights are often associated with the benefits that the bring to the particular individuals in the
society. It is believed that in order to maximise the social wealth brought about by all types of
property, has been the economic formula to assess the value of such property rights. 5 Such
property rights are essentially a manner of which the personhood of individuals is
safeguarded. When interpreting this theory with intellectual property rights, when authors or
creators create conducive intellectual property through various modes of expression, they are
contributing to human flourishing and advancement in a manner of speaking making them
justified as a fundamental need.

Formation of a culture

While previous theories have more to do with economic fulfillment, this theory is more
focused on the social and political fulfillment gained out of intellectual property rights. This
states that property rights, and intellectual property rights in particular are meant to be shaped
in a manner that’s fosters and paves the way for an attractive and interactive culture. Derived
from the principles of classic republicanism, this theory draws inspiration from legal and
political theorists6 like Jefferson, the early Marx and the Legal Realists. This theory in many
ways is similar to utilitarianism when it comes to its technological acclimatization, but not
5
See Justin Hughes, The Personality Interest of Artists and Inventors in Intellectual Property, 16 CARDOZO
ARTS & ENT LJ 81(1998).
6
See, for example, James Harrington, Oceana (Westport, Conn.: Hyperion Press, 1979); Thomas
Jefferson, Notes on the State of Virginia (New York: Norton, 1972); Karl Marx, Economic and Philosophic
Manuscripts of 1844 (New York: International Publishers, 1964); Morris Cohen, "Property &
Sovereignty," Cornell Law Quarterly, 13 (1927): 8; Frank Michelman Yale Law Journal, 97 (1988): William
Fisher, Morton Horwitz, and Thomas Reed, eds., American Legal Realism (New York: Oxford University Press,
1993).
very similar when it comes to the approach of initiative to delegate vision of desirable society
greater than social welfare as deployed by utilitarians.

Greatest good of the greatest number

This theory suggests that when an individual is shaping and building around its intellectual
property rights, it should be done in a manner that it produces the greatest good for the
greatest number of people. This means that the set of entitlements should be selected in such
a manner that it firstly, induces people to behave in ways that increase the socially valuable
goods and services and secondly, its distributed in a manner that maximizes the net
satisfaction that people get from it. When interpreting this utilitarian theory into the ideals of
intellectual property, it is key to translate this Benthamite ideal into standards in economic
policy that are more administrable. In order to do so, certain criterions also need to be set in
place. Such criterions, for example the criterion of “wealth-maximization” may help to
increase the average welfare that is derived out of the aggregate consumers’ ability and
willingness to indulge and pay for such goods and services 7; or maybe the “Kaldor-Hicks”
criterion wherein a particular type of state of affairs are proffered over a different set of state
of affairs. The compensation being for the gainer by a lumpsum transfer who is compensating
the loser for its loss of utility and still benefiting from the move8.

PURPOSES AND WORKING OF INTELLECTUAL PROPERTY RIGHTS

A very crucial question pertaining to the economics of intellectual property rights is whether
the benefits gained out of it outweigh the cost of getting them in the first place, making it is
utilitarian scheme. The anticipated benefits of such intellectual property rights may vary
depending on external factors like market conditions, type of products, nature of social
institutions etc.

Investing in intellectual property rights has two very central economic objectives. The first
one being, to promote investments in protecting business innovations and promoting the
value of knowledge creation by establishing clear and exclusive rights to the autonomy

7
See Richard Posner, Economic Analysis of Law (3rd ed., Boston: Little, Brown, 1986), pp. 11-15.
8
See Nicholas Kaldor, "Welfare Propositions in Economics and Interpersonal Comparisons of
Utility," Economic Journal, 69 (1939): 549-52.
related to usage and selling of such newly developed technologies, goods and services 9.
When rights are not assigned to such kind of property, information with high economic value
can be misused or exploited by individuals that may be rivals of creators of such information,
helping them gain compensation for no substantial effort put by them in creation of such
valuable information.10 This might make institutions and individual investors hesitant in
investing money and resources in research and development of concepts, activities and
creations; thereby hindering advancement.
The second object pertains to promotion of dissemination of new knowledge by encouraging
rights holders to put out such information in the public domain11. Placing these inventions and
ideas in the markets knowing that they are secure also helps encourage other individuals to
also undergo research and attempt creating new advancements for the human kind. From an
economic perspective, it also becomes extremely affordable and efficient to provide wide
scale access to new technologies and products produced after being developed at base
production costs.
When it comes to economic analysis of intellectual property rights, all kinds of rights cannot
be consolidated into one group as all function and are protectable differently.
With regard to patents, protection from unauthorized creation, sale, import or distribution of a
novel invention is granted to the creator of such invention for a period of 20 years. It is
imperative that in order to seek protection under patent law, the creation is established as
novel, of effective industrial application and utility. It is also important to show the inventive
step taken in order to distinguish the novel creation from prior art. There are also other kinds
of patents like utility patents or petty patents which are mostly for incremental inventions and
provide a short period of exclusive rights. Thus, by revealing technical knowledge which is
novel, inventive and effective in nature; the creator gains a protected market advantage which
is beneficial to the business innovation in an economic manner.12
It is also beneficial for small-scale companies to utilize patent filing in order to attract
investors to provide financial backing. Moreover, when local companies own patents to their
inventions, it helps attract foreign investment into their enterprises and develop their products
9
See Innovation and Intellection Property, WIPO, Link:
https://www.wipo.int/ipoutreach/en/ipday/2017/innovation_and_intellectual_property.html
10
See Digitalisation, business models and value creation, Interim Report 2018 OECD, Link: https://www.oecd-
ilibrary.org/docserver/9789264293083-4-en.pdf?
expires=1618679698&id=id&accname=guest&checksum=C0DBAF00F7877EAAF57C6A277D4F0EF
11
Intellectual Property, Dissemination of Innovation and Sustainable Development; Claude Henry Joseph E.
Stiglitz; Wiley Online Library; Link: https://onlinelibrary.wiley.com/doi/full/10.1111/j.1758-5899.2010.00048.x
12
Manual of patent practise and procedure; The Patent Office India; Link:
http://ipindia.gov.in/writereaddata/Portal/IPOGuidelinesManuals/1_59_1_15-wo-ga-34-china.pdf
in a manner that is eligible for export. 13 The profits that a company acquires by registering
their patents in lucrative to the scale that it can be further invested into research and
development for another innovations and development; that helps in stimulating commercial
and industrial growth both on a micro level and at as industry level platform.
However, one may also wonder the adverse effects that patents may have on a business from
an economic perspective. The substantial license fees associated with the patent filing is
likely to drum up the cost of goods and services provided, in addition to the transaction costs
that also applicable when it comes to filing the patent and enforcing the rights gained by such
patents.
In addition to that, fees associated with filing a patent is quite substantial. Such fees have to
be paid before the patent application is even examined or granted, along with the continuous
investment by way of fees that is required to maintain such a patent when it is granted. While
enforcing one’s patent rights, when a business challenges another to safeguard its innovation
or stop a competitor to use any such innovation that is protected by their patent rights,
prosecution of such violation also undergoes substantial investment. This might not always
be the most viable option for small and medium sized businesses that are required to allocate
their funds in the expansion of their venture, and not use it to prosecute competitors
infringing on their rights.

There are often times when minute technologies created by the business are not substantial
enough to be patentable, or would be extremely expensive to register as opposed to the
benefit the business may reap out of it14. There are also times when some technologies are
rendered more valuable if they are kept undisclosed. Such kind of information is known as
trade secret. Trade secrets are furnished with the safety of non-disclosure by statutory rules
that protect its discovery by rival businesses through dishonest means. However, if such trade
secrets are gathered through fair use or fair means, the protection would automatically lapse.

Another form of intellectual property is afforded to businesses via trademarks. Such market
goods and services that have identifiable names and symbols associated with these good and
13
Economic benefits of the patent system; Australian Law Reform Commission; Link:
https://www.alrc.gov.au/publication/genes-and-ingenuity-gene-patenting-and-human-health-alrc-report-99/2-
the-patent-system/economic-benefits-of-the-patent-system/#:~:text=In%20addition%2C%20patents
%20stimulate%20the,stimulate%20commercial%20and%20industrial%20growth.
14
The Law and Economics Analysis of Intellectual Property: Paradigmatic Shift From Incentives to Traditional
Property; Eli M Salzberger; Princeton Publication; Link:
https://law.haifa.ac.il/images/Publications/Eli_Salzberger_The_Law_and_Economics_Analysis_of_Intellectual
_Property.pdf
services can be safeguarded by trademark protection. It is necessary that the mark being
registered, word or device is unique in a manner that it does not cause confusion among
customers, which also contributes in cutting down customer search costs15. These kinds of
rights help in brand recognition and building long time goodwill with the customers.
Trademark protection also ensures that firms consistently deliver a certain quality and level
of goods that is associated with the brand. These guaranteed quality levels help safeguard
brands from any low quality protect that may be passed off by a competitor, thereby lowering
the value of the superior and well-recognized brand. Enforcing trademarks over the
intellectual property of a brand proves to be highly beneficial in the global domain as a result
of the strong brand image development facilitated by trademarks.16
Furthermore, trademarks also enable healthy brand competition, driving facilitators of goods
and services to provide the highest possible quality. This nature of legal framework enables
consumer’s confidence in any given product to receive the optimal level of quality they are
used to experiencing.
However unlikely, trademarks may pose some economic damage to the brand by falling prey
to common usage and jargon in the public domain. This concept has been termed by judges
as ‘trademark genericide’. When terms associated with the brand name become so generic
due to high usage, and consumers begin to denote a particular product with the brand name
instead of its source name the mark ends up becoming the common descriptive name. This
usurps the owner of such brand name from the rights granted to it by the trademark. In the
case of Park’N Fly v. Dollar Park and Fly Inc. where Justice O’Connor gave a judgement on
whether the long-term airport parking services was valid to be trademarked, held that “A
trademark or service mark that becomes generic is no longer entitled to protection."17 In the
case of Coca Cola v. Overland Inc. 18, the Court held that “An originally non-generic, valid
trademark becomes generic and invalid when the principal significance of the word to the
public becomes the indication of the nature or class of an article, rather than the indication of
the article's origin”19 The above mentioned cases showcase how there generalizing of any
brand name is now becoming a major concern for companies whose own success can bring

15
The Economics of Trademarks; WIPO Public documents; Link:
https://www.wipo.int/edocs/pubdocs/en/wipo_pub_944_2013-chapter2.pdf
16
See THE ROLE OF INDUSTRIAL PROPERTY IN THE PROTECTION OF CONSUMERS; WIPO Public
Document, Link: https://www.wipo.int/edocs/pubdocs/en/wipo_pub_648.pdf
17
Park'N Fly, Inc. v. Dollar park and Fly,Inc. 469 U.S 189(1985)
18
Coca Cola v. Overland Inc. 692 F.2d 1250
19
Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250, 1254 note 10 (9th Cir. 1982) (emphasis by the court)
them into such trouble. Once any trademark becomes generic, due to the prerequisites of such
intellectual property being distinctive in nature, the brand may lose all proprietary rights over
its name due to the name’s presence in the public domain. This could cause serious economic
hindrance to a brand that has established quality control and years of goodwill to its goods
and services under the umbrella of a distinctive name that later turns generic.

Another type of intellectual property right is the protection of copyrights afforded to literary
and artistic works, computer software and other creative productions. Such protection is
generally given for the life of the author and 60 years after that. In such a period, the rights to
sell, distribute, recreate and exploit the various rights associated with the copyrighted work
lie exclusively in the hands of the author or the owner of such work.
Copyright in an economic perspective, provides incentives for innovation. Copyright gives
the owners of such copyrightable material to bar potential consumers from using such content
without the consent of such owner. This exclusionary power is important so that individuals
who undergo creating such material can earn rewards for their efforts. This incentive also
helps in garnering social benefits of recognition associated with any creative work, and
encouraging other individuals towards such creativity and business innovation. It also gives
the owner such exclusive rights over the distribution or publication of such works, public
performance except for artistic works, transmission in any mode to the subscribers to any
services.
On the economic downlow as an effect of securing copyright, we might look at the term of
protection for beginners. Although 60 years after the death of the author may sound like a
long time, especially when the copyrighted material is computer software that undergoes
regular changes, there are still advantages to having secured one standardized term for a wide
range of creations and other matter of copyrightable interest. 20 Another aspect to look at with
regard to balancing the interests and rights of copyright owners with that of the general public
that is the consumer of such content, is that of fair dealing and fair use. Fair dealing is
permitted generally for usage under research work or education, criticism, parody and review,
reporting currents events or professional advice. By virtue of recent amendments that have
taken place under this act, computer programs have now been allowed for back up copying
and for the uses of de-compilation in order to facilitate error correction. 21 Furthermore,
20
For instance, the Copyright Agency Ltd licences for educational photocopying are more widely used than the
statutory licences: see further S Simpson, Review of Australian Copyright Collecting Societies (AGPS, 1995).
21
See The Economic impact of Copyright, Jodie & Griffin, Staff Attorney; Public Knowledge; Link:
https://www.publicknowledge.org/files/TPP%20Econ%20Presentation.pdf
prevail statutory licenses like compulsory licensing, under which various institutions like
educational bodies for example, can copy limited copyright material even though for
restricted purposes, but for a very nominal and standard fees. Provisions like these might
render the owner of copyright helpless at when on no negotiation of reasonable terms,
consumers just resort to taking shade under these statutory licenses where the owner of
copyright does not have any stake in negotiation and is coerced to giving away its valuable
copyrighted material for deliverables that do not amount to what the copyrighted material
might be worth.22
With regard to the similarity in the copyright work, and if there has been an attempt to
recreate such work, seeking relief is based on the ‘originality threshold’. In order for
reproduction or copying to be detected, the owner of such copyrighted work needs to
establish an overall similarity in his/her work with the infringing work. If there is sufficient if
not substantial dissimilarity established in such two works, then the reproduction will not be
infringing even if it uses material from the copyrighted work. Even to surpass the originality
threshold, the exercise of skill and labour needs to be passed. This establishes a high
threshold on protection of any work by way of copyright.

PROBLEMS OF INTELLECTUAL PROPERTY AND INNOVATION IN ECONOMIC

DEVELOPMENT

With regard to economic growth, countries tend to follow conditions of either an innovation
economy or a knowledge-based economy. While innovation economy sees its own pace of
steady growth, promoting the use, transfer and distribution of knowledge acquisition is an
approach being adopted by the new world countries.
The most significant difference between these two kinds of approaches is centrally of
intellectual property. This might include information, knowledge, skill sets, advancing
technologies and even experience; contributing greatly to the country’s intellectual reserve
and its subsequent development. Therefore, with the ascent of business innovations, more
leading companies sprawled across the world are focusing and investing in accelerated
growth in knowledge.

22
The Benefits and costs of copyright- an economic perspective; Megan Richardson, Joshua Gans et al; Link:
https://static-copyright-com-au.s3.amazonaws.com/uploads/2015/08/CentreCopyrightStudies_Benefits-Costs-
Copyright.pdf
In order to integrate economies across the world, it is important to utilize their intellectual
resources. In this regard there are two main problems faced in this process:

i) Understanding the nature of intellectual property that enables utilizing it as an

effective tool for economic development23

In order to strengthen the economic component of intellectual property, focus

needs to be given to what constitutes as knowledge. One may say that knowledge
would be the intangible end result of any kind of human intellectual activity in any
field like art, science, literature, technology, business innovation etc. thereby
making it the intellectual pool of any business. Due to its capability of self-
production as and when undergone, it also becomes an unlimited resource to any
business.
Due to the phenomenon, that knowledge as an unlimited resource can be used by
any number of persons at any given time can lead to greater and more effective
scale of production. However, because knowledge is also intangible in nature, this
makes it extremely vulnerable to fall in the hands of competitor businesses. This
may be a compromising factor because if a third person becomes known to a
novel idea or information, another company may be equipped in applying it to its
own production process and thereby gaining benefits out of the same. Thus, it is
most imperative that intellectual property is safeguarded in a manner that it does
not become accessible to the competitors of the business.

Therefore, preventing business entities from accessing such property helps ensure
the legal monopoly on knowledge held by the creators of such intellectual
property.

ii) Devising an appropriate intellectual property strategy that becomes an effective

and integral part of every country’s general innovation and development strategy24

23
See Intellectual property rights: An overview and implications in pharmaceutical industry; Chandra Nath
Saha and Sanjib Bhattacharya; Link: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3217699
24
IP Asset Development and Management: A Key Strategy for Economic Growth; WIPO Public Documents;
Link: https://www.wipo.int/edocs/pubdocs/en/intproperty/896/wipo_pub_896.pdf
 This issue revolves around the management of intellectual property and its rights.
It is pertinent for societies to alter their management structures in a manner that it
newly prioritizes intellectual property. Effective management of such property
rights contributes greatly to the development strategy of the country in terms of
advancement and innovation. But, for countries that are undergoing a transition in
economies, giving priority to knowledge-based assets might prove to be difficult.
Technological advancement in any country can happen only by way technological
innovations. To define technological innovations, they are basically a process or a
resultant of any process relating to the achievements and advancements in
scientific and technological research that are incorporated and interpreted into any
business. The agenda of such a process is generally to create such a product that it
provides novel technical solutions to consumers and are protected in nature.
In order to conclude this theory, it is fair to say that in cases where intellectual
property is created or utilized; innovations become an integral part of it by default.
Thus, for the existence of intellectual property, innovations become a fair but not
necessary condition. This might mean that innovations when utilized are always a
form of intellectual property.

Inexhaustible efforts by the country and the community contribute to economic growth of any
developed or developing country. Potency of such efforts depends on the policies made by
the government that particular country in the field of science and innovation.
Around the globe, all leading nations consider state policy within the field of innovation as
one of the most vital components of their policies. A change in innovation policies is
observed every 5 to 10 years in addition to other changes in government policies. For
instance, undisputed leader in field of science, tech and innovations, USA, has amended and
changed its policy with in the field of science and innovations numerous times over the past
30 years. Japan and new industrial nations also give utmost importance to their innovation
policies.
Policies in innovation and science tends to become the top priority of the nations whose
economies are evolving and undergoing changes. As the monetary resources of such nations
are scant, these policies help them in optimal realisation of potential and efforts of the
country and the community25.
The demand for development of a state specific technical and innovation policy in nations
with economies under transition is supported by the data collected in this survey. Similar
policies have already been formed in the countries who have participated in this survey26.
The analysis has disclosed the shared goals and tasks of the innovation policy of developed
countries and countries with economies in transition, which include:

a. In most nations, state innovation policies have been formulated till 2015, and
even 2020 for some countries.
b. Rise in contribution of science and technology in the development of countries
economy.
c. Establishment of new age knowledge-based sectors of the economy.
d. Enhanced quality of life of the population.
e. Establishment of an energy conserving economy
f. Enhanced environmental conditions.

Apart from that, general and specific factors which influence formation of innovation policies
have also been identified:

a. The business community is poorly represented and lacks involvement in

policy formation and implementation.
b. Relationship between public sector and private sector is absent.
c. Illiteracy and unawareness in the field of IP
d. Absence of any link between scientific institutions and the production sector.
e. Low synergy between research institutes and industry.
f. Inadequate harmonization of national standards in the field of innovations and
IP with international standards, etc.

25
Science Technology and Innovation (STI) Policies in India: a Flashback; Aditya Kaushik, B. Chagun
Basha & Lakshmi Ganesan; Link: https://indiabioscience.org/columns/indian-scenario/science-technology-and-
innovation-sti-policies-in-india-a-flashback
26
STI policies for delivering on the Sustainable Development Goals; Mario Cervantes, Soon Jeong Hong; Link:
https://www.oecd-ilibrary.org/sites/sti_in_outlook-2018-9-en/index.html?itemId=/content/component/
sti_in_outlook-2018-9-en
The factors mentioned above should be prioritized while formulating science, tech and
innovation policies as they pose road blocks in the process of innovative development.

For instance, nations with economies undergoing development, the common disturbing factor
is lac of research and meagre practice in the field of tech transfer. Financial support and
strategies to eliminate this block should be of apex importance while developing policies.
Inadequate activity of business is another road block to innovative development. Appropriate
measures are to be taken to promote involvement of business in process of innovation.
Special educational programs are required to eradicate the unawareness and illiteracy in the
field of IP.
Conversely, policies need to be in place to tap onto the potential of the population if the
awareness and literacy are high in the field of IP for effective optimization of resources.
Hence, a nation should keep in mind both, global and domestic trends in the field of
innovative development when formulating their scientific-technological and innovation
policy. This policy should guide the nation and set objectives, determine tasks and priorities
for innovative development of the country.

ECONOMIC BENEFITS OF INTELLECTUAL PROPERTY RIGHTS AND THE WAY

FORWARD

Intellectual property rights have the bandwidth to play a notable role in encouraging
innovation, development, and technical change. Developing countries tend to possess
intellectual property rights systems that favour information diffusion through low-cost
imitation of foreign products and technologies. To become competitive, enterprises in
developing countries typically must adopt new management and organizational systems and
techniques for internal control, which may markedly raise productivity. Such investments are
costly but tend to possess high social returns because they're crucial for raising productivity
toward global norms27. They’re more likely to be undertaken in an environment where risks
of unfair competition and trademark infringement are small. Moreover, intellectual property
rights system garners creativity and strength by rewarding such creativity and the risks
undertaken by businesses specially the ones that are new enterprises and entrepreneurs.

27
Intellectual Property Rights and Economic Development; Keith E. Maskus; Case Western Reserve Journal of
International Law; Link: https://core.ac.uk/download/pdf/214079093.pdf
Countries that retain weak standards could remain hooked in to dynamically inefficient firms
that believe counterfeiting and imitation.

Similar comments apply to copyrights. Just like other industries like publishing,
entertainment among others, copyright industry is also likely to be overpowered by foreign
companies which may have the capacity to undergo temporary losses and also afford the
prices to avoid any such infringements against private firms in such countries that do not
have the necessary protection nor do the law have concrete enforcement against such
infringements. In China, the domestic software industry has grown rapidly within the area of
particular business applications, which didn't suffer extensive unauthorized copying, but has
faced obstacles in developing larger and more fundamental programs. Thus, domestic
commercial interests in stronger copyrights have emerged and are now playing a task in
promoting enforcement.

Intellectual property rights also could stimulate acquisition and dissemination of latest
information. Patent claims are published, allowing rival firms to use the knowledge in them
to develop further inventions. Patents, trademarks and trade secrets ensure a higher level of
certainty from facing threats of utilising their creations without being compensated. With that
level of certainty, firms are enabled to trade and license their innovation in the competitive
market feeling more secured.

In strengthening their intellectual property rights regimes, either unilaterally or through

adherence to TRIPS, developing countries hope to draw in greater inflows of technology.
There are three main channels through which technology can be transferred across borders.
By way of foreign direct investment in large scale multinational companies, licensing via
contracts of technological advancements and trademarks to unsolicited firms, subsidiaries of
such firms or joint ventures thereof can be made proper channels of international trading of
goods. This theory finds that technology transfers through each channel depend partially on
local protection of intellectual property rights, albeit in complex and subtle ways. There are
important practical implications of this analysis. First, countries with weak intellectual
property rights might be isolated from modern technologies and would be forced to develop
technological knowledge from their own resources, a difficult and dear task. Second, those
countries may receive lesser spill over benefits and demonstration effects of latest
technologies in their economies. Third, technologies in such nations would likely not be to
the latest date. Finally, nations with weak intellectual property rights would experience both
limited incentives for domestic innovation and comparatively few inward technology
transfers.

There is no dispute about the fact that intellectual property rights should encourage the
possibilities associated with regional and international distribution and networking of markets
that are indispensable to achieve economies of scale. Weak intellectual property rights could
limit incentives for such investments because rights owners would be unable to stop their
marketing outlets from debasing the standard of their products, nor could they readily deter
counterfeiting of their trademarks. Thus, intellectual property rights should permit effective
monitoring and enforcement of activities throughout supply and distribution chains,
providing both innovators and distributors an incentive to take a position in marketing,
service, and quality guarantees.

Quality assurance is vital for safeguarding the interests of consumers. However, widespread
distribution of counterfeit products can ruin reputations achieved at considerable cost, a drag
which will be overcome only with additional investments. for instance, in food products,
beverages, cosmetics, and medicines, counterfeit products are often hazardous for consumers.
Moreover, many field researches conducted in China suggested that in spite of the various
advantages to poor consumers of low-cost and quality product knockoffs, market saturation
by unauthorized goods which in turn was diminishing the range of available goods was
causing evident resentfulness in the market.

A further potential advantage of strengthened intellectual-property protection is that it could

induce greater R&D aimed toward meeting the actual needs of developing countries.
Inventive firms in developed economies tend to orient their research programs toward
products and technologies that they expect an outsized global demand which could also be
protected through intellectual property rights and trade secrets. this suggests that a
disproportionately bit of worldwide R&D is concentrated on the requirements of developing
economies with low incomes and weak intellectual property rights. For instance, the planet
Health Organization (1996) claims that of the $56 billion spent globally on medical R&D in
1994, only 0.2% was aimed toward pneumonia, diarrheal maladies, and tuberculosis, which
together account for 18% of worldwide illness.
It is possible that the new patent regimes introduced by TRIPS could change this example. As
mentioned in The Introduction of Pharmaceutical Product Patents in India: Heartless
Exploitation of the Poor and Suffering, “The entire market size for pharmaceuticals of the
countries that has got to upgrade their patent protection over the medium term is sufficiently
large that, even at current shares of medicine patented elsewhere, the increase in demand
might be the maximum amount as 25% of worldwide spending” 28. Thus, the incentives
generated for R&D focused on diseases of poor countries might be significant. While this is
often a crude calculation, it suggests that pharmaceutical firms could anticipate higher profits
in developing nations, some portion of which might be dedicated to research on their endemic
diseases.

SUGGESTIONS

Currently, intellectual property rights protection is changing the narrative when it comes to
economic relations both at a domestic level as well as internationally. From simply acting as
a tool in order to safeguard the creative expertise of an individual’s novel work, it now acts as
an efficient way to protect the author economically and contribute to the overall economic
development of the individual, community and industry. The economic development of a
country is now heavily dependent on the IP regime that it follows, as transitions on the basis
of the priorities given by the State to such regimes. In the light of this, it is important to
recognize the real value of intellectual property rights and utilize in an efficient manner to
maximise economic development. This may include some steps towards the protection of
intellectual property rights and development of a sound intellectual property regime as
elucidated below:

1. In order to safeguard intellectual property rights on a national level, it is important to

make sure that the strategy to safeguard such intellectual property rights addresses and
provides regualtions with regard to the creation, legal protection and
commercialization of intellectual property. This is to be done in order to ensure that
laws are enforced in place wherein, in a situation of violation of such intellectual

28
The Introduction of Pharmaceutical Product Patents in India: "Heartless Exploitation of the Poor and
Suffering"?; Jean O. Lanjouw; SSRN; Link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=226115
 property rights, necessary action can be taken in order to avoid hindrance to the
economic and other benefits of intellectual property.
2. Every nation’s innovation policy revolves around different things. While developing
countries focus on matching the technological advancements coming in from the west,
developed nations look at optimizing such technological advancements in a cost-
effective manner. Therefore, every state’s innovation policy along with such country-
specific regimes must include an integral IP strategy that will be followed alongside
the policies drafted. It is imperative that the IP strategy goes hand in hand with the
technological advancements as foreseen in the state innovation policy for the said
term.
3. Government innovation policies are generally drafted with the objective of creation of
technology-led businesses and sourcing investments to finance such initiatives in
order to secure highest level of economic and technological advancement. This means
that the State needs to play a constant active role while acting as the middleman
between the invention and the money. It is the State’s responsibility which should be
enforced along with the highest level of accountability, that the state ensures the
development of efficient innovation infrastructure by promoting technological
advancements with the appropriate amount of foreign as well as domestic investments
to incubate such businesses.
4. Intellectual property rights as discussed earlier has numerous domains and fields. All
of such fields of intellectual property while intertwined with one another, are still
extremely subjective in nature and differ from each other on a definitive fundamental
level. Therefore, it is essential that each of such fields are looked at, at an individual
level and databases for the same are organized separately. Such databases for each
domain of intellectual property must then contain holistic information regarding the
said field covering all theories and data revolving around it, for example, legal,
economic, political, etc. Constant updates are also imperative to these databases
which show at any given point the latest innovation, regime, law or phenomenon
related to the specific intellectual property right. Such databases must be made
available for every kind of intellectual property right available and access to such
rights must be free and available at all times for bodies involved in technological and
creative advancement through new innovations.
5. In order to calculate the effectiveness of the IP strategy devised by each state, it is
essential to determine and define key factors that play a major role in the impact IP
 and the strategy devised by it has on the national economy. A set of indicators that
determine the connection of IP to economic processes taking place in countries whose
economies are in transition can give us a fair idea of this. This includes a wide range
of qualitative and quantitative factors which lead to an optima evaluation of resources
available in the country to divest and the conditions for utilizing such resources for
the creation of IP and evaluate such results achieved by the practical use of IP.
Selecting a large number of indicators that are detailed is essential because that leads
to a detailed review of what the IP is doing to the economic development of the
country. Choosing the correct and appropriate indicators is also important in order to
focus on the specific goals and objectives that is sought to be achieved by the IP
strategy. Furthermore, quantitative relationships with respect to the role IPR is
playing in the economic development can only be optimally assessed once the key
indicators are appropriately defined.
6. When the state is strategizing its IP policy, it should be made of utmost importance to
focus on the international patenting with regard to the results of research and
development. This is to be assessed with the foresight that such domestic or national
products will later want to be accessed and tapped by the global markets. Therefore,
inconsistency or deprivation of intellectual property should be the obstacle that causes
products and technologies from entering global markets and appreciating the
intellectual property value of the said products and technologies. When research is
optimally protected in its early stages, it reaps greater economic rewards once such
research matures into applicable technological that can be consumed globally.
7. Greater focus and importance should be given to developing not only the international
markets, but in particular the national markets of intellectual property. This means
that for local market participants, the continuous investment climate becomes an
extremely important factor. So much so that it is essential that along with the other
policies brought in, the state regulation policy in particular looks at this issue and
takes deliberate steps to solve it. Specifically, the issues relating to patenting and
licensing agreements, as well as compulsory licensing issues should be properly
addressed in such state policies in order to establish a concrete plan of action.
8. It should be termed as the general and central task of the state policy established in the
interest of intellectual property to undergo stimulations of innovations and IP as a
whole. There needs to be established an optimal balance that will safeguard public
interest and the interest of the stakeholders involved in any kind of IP rights like the
 businesses or the creator or the investors. Once this balance is established, it will be
easier to deduce what is being done in the actual spirit of public interest and what has
been plainly done to destroy the economic benefits availed from a said intellectual
property right.
9. Necessary attention needs to be provided to the enforcement of intellectual property
rights when formulating the state strategy for the development and advancement of
intellectual property for a said country. The level of enforcement and degree of
accountability that is set in place causes a great impact of how advances the
innovation economy will be made by the virtues of policies provided by the state. It is
important that the enforcement is taken seriously by each and every stakeholder
including the IP offices, customs, the police enforcement, the judiciary, rights holders
of such intellectual property, authors that create such intellectual property among
others. When all the pillars of the enforcement division take up the task to impose the
regulations in the manner prescribed can effective enforcement lead to development
of economy by the virtue of intellectual property rights.
10. It is imperative to factor in all forms of international cooperation and relations that
may be necessary to formulate a sound IP strategy. When it comes to copyright and
patent protection, it is necessary to formulate such common approaches and joint
documents to ensure the optimal protection of intellectual property on an international
level.

It is the author’s belief that implementing such IP strategies may be effective for the
economic development of nations as well as global technological advancement brought about
by the regulation of intellectual property rights protection.

CONCLUSION

The past few decades have seen a steady growth in getting protection against one’s
intellectual property rights. This has been caused by the striking downfall in the quality-
adjusted cost and the delay around copying due to the onset of digitization; the most
prominent example for this being the copying and sharing of computer files containing
copyrighted music. When the cost of copying is so low, it is that much more difficult for the
owner of such work to recoup fixed costs. Along with that, with the regular and drastic
increase in worldwide consumers and the disproportionate decline in the costs of sharing such
information in which intellectual property subsists, the low incremental costs associated in
sharing such works, the social value of such works drastically increases. However,
undermining the intellectual property rights of such works due to lack of protection causes
drastic social loss diminishing the quality adjusted work.

The economic impact of intellectual property rights demonstrates that such rights can pay a
pivotal role, which may be positive or negative in fostering growth and development for a
nation. However limited, from the above stated thesis, we may want to take an optimistic
view on the positive role that intellectual property rights have to pay in the economic
development of any business in any nation. Further, the issues regarding intellectual property
protection do come with a set of alternatives that may be opted in order to help promote the
benefits that can be availed from intellectual property protection. While intellectual property
rights can be effective in facilitating market-based mechanisms and overcoming issues that
are generally faced in markets, they may also cause obstacles in terms of potential products
costs or abuse by way of competition.
It is necessary that intellectual property regimes are immersed in state policy in order to
encourage effective economic development and advancement of technology. When
incorporated within a coherent and vast set of policies as enshrined in every state regime, the
potential of intellectual property to push forward dynamic competition and development can
be multiplied manifolds.

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