IPR and Economic Development

Ashutosh Sharma

Meaning of both the terms

IPR (Intellectual Property Rights)

IPR consists of Patents, designs, copyrights, trade secrets and geographical indications which provide the foundation for building and extending markets for new technologies

What comes under IPR

Patent : is a monopoly right to the exclusive use of invention, granted to inventor or his assignee. This right is granted only for a limited period i.e. called the term of patent.

Trademarks : is a visual symbol in the form of word, device, character attached to the goods for indicating their trade origin.

Geographical indications: Qualities & characteristics of certain goods attributable to some geographical locations and reputable to as producer of certain items come under GI. (Oranges & Tea)

Legislations on IPR in INDIA

The Patents Act, 1970 (2005) The Designs Act, 2000 The Trade Marks Act, 1999 The Geographical Indications of Goods Act,

1999 The Copyright Act, 1957 (2000)

Economic Development

Economic development is the increase in the standard of living in a nation's population with sustained growth from a simple, low-income economy to a modern, high-income economy.

Link Between the two terms

IPR could well increase economic growth and foster beneficial technical change, thereby improving development prospects, if they are structured in a manner that promotes effective and dynamic competition .

How IPR helps in Economic Development

Intellectual property rights could play a significant role in encouraging innovation, product development, and technical change to help in development of the economy through low-cost imitation of foreign products and technologies. However, inadequate IPR could stifle technical change even at low levels of economic development because much invention and product innovation are aimed at local markets and could benefit from domestic protection of patents, utility models, and trade secrets.

Example

Japanese patent system (JPS) affected postwar Japanese technical progress, as measured by increases in total factor productivity (TFP). The JPS in place over the estimation period 1960-1993 evidently was designed to encourage incremental and adaptive innovation and diffusion of technical knowledge into the economy. That is they created new technology (in the form of IPR) that helped the Japanese economy to cover the post war losses.

Scenario for Poor Nations

Recent studies suggest that innovation through product development and entry of new firms is motivated in part by trademark protection, even in poor nations that helps their economy to grow. As poor nations does not have the required resources and infrastructure to support and do innovations which are treated as IPR.

It is widely recognized by economists that imports of goods and services could transfer and diffuse technology. Imports of capital goods and technical inputs could directly reduce production costs and raise productivity for the developed countries by outsourcing the required services from low income countries. this benefit would depend on the technological content of imports, suggesting that close trade linkages with innovative developed economies could engender considerable productivity gains through trade flows.

IPR and Economic Development

and

There are two types of countries: a developed, innovating" North” and a developing, imitating “South”, then the impact of stronger IPR protection benefits the innovating North, but its impact in the South where innovation is limited or non-existent is ambiguous, depending on the channels through which technology is transferred. Research indicates that stronger IPR protection is only found to benefit the South when R&D is highly productive, thus resulting in significant cost reductions, and when the South comprises a large share of the overall market of the product.

Ways through which IPR helps in Economic Development

Trade channel When technology is transferred through trade, then successful

southern imitation results in shifting the competitive advantage for the production of imitated products from the North to the South.

Foreign direct investment channel When foreign direct investment (FDI) is considered as a source

of technology transfer, northern innovators may shift production to the South, reducing competition for resources in the North.

Licensing channel If technology is transferred through licensing, stronger IPR

protection in the South results in greater innovation in the North, and increased licensing to the South. Licensing has the advantage to northern firms of higher profits due to lower production costs in the South, but involves other costs in terms of contract negotiations, transferring the necessary technology and in the rents that the innovator must give to the licensee to discourage imitation.

Conclusion

Strong IPR protection will hinder rather than facilitate technology transfer and indigenous learning activities in the early stages of industrialization, when learning takes place through reverse engineering and duplicative imitation of mature foreign products. It is only after countries have accumulated sufficient indigenous capabilities and an extensive science and technology infrastructure capable of undertaking creative imitation that IPR protection becomes an important element in technology transfer and industrial activities. Similarly, the development experience of India indicates the importance of weak IPR protection in building up local capabilities, even when countries are at very low levels of development.