economic and social merits of intellectual property
TRANSCRIPT
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Economic and Social Merits of Intellectual Property
Abstract: Intellectual property rights (IPR) are subjects of debate worldwide. Infringers
lobby for less protection and more radical free market economics, wherein the state has
virtually no control over trade conditions. Mainstream economists generally recognize that
IPRs provide incentive for innovation, which leads to growth and development. Various
statutes and treaties on intellectual property validate its legal legitimacy, although its
detractors are not silent. In this article, opposing viewpoints on the merits of IP are examined.
A sect of libertarians provides negative arguments which are analyzed for their contradictory
and fallacious elements. Proponents of IP are backed by Ayn Rands libertarianism,
international agreements, economic theory and business interests. IP is positioned as an
economic right and thus a human right. Market harmony is found possible through more
acceptance of and respect for IPRs.
Introduction
Intellectual property (IP) law exists largely because of compelling economic argument
in favor of IP being a form of property, and for protection of those intellectual property
rights (IPR). The bridge is axiomatic which connects economics with physical sciences
involved in the creation of patents, and other disciplines used in generation of trademarks,
copyrights and related rights. Validation of theories may elicit subjectivity but the case for
IPRs is generally more associated with the objective absolutism of physical sciences than
what we see in other fields of civil and criminal law. As such, IPRs have gained some
unanimous recognition, and consensus has formed in trade law that IP is essential to motivate
and reward innovation and development.
Interdisciplinary efforts are integral to supporting and reinforcing IPR theory at
academic and professional levels. Theoretically, the idea of IP itself is one that transcends
various institutions and philosophies, requiring public and private partnerships dependent
upon parallel thinking between lawyers, economists, engineers, doctors, scientists, artists,
musicians, and a wide array of workers in other disciplines. At the macro level, if IP theory is
to ultimately succeed internationally, harmonization policies and outlooks is necessary.
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Today, we see constrained success of IP law in the global market. Alongside that is
widespread approval of the argument opposing IPRs.
This article first presents cultural and historical aspects of IPRs, followed by the
influence of IP on world trade. Opposing viewpoints on the merits of IP are then examined. A
sect of libertarians such as Stephen Kinsella and scholars at the Mises Institute provide the
negative arguments which are analyzed for their contradictory and fallacious elements. Ayn
Rands libertarianism, by contrast, supports broad protection of IPRs. Proponents of IP are
backed by international agreements, economic theory and business interests. IP is positioned
as an economic right and thus a human right. A legal positivist approach justifies statutes and
treaties, which retain authority in spite of counterpoints. Conclusions indicate that strong
IPRs can be mutually beneficial to consumers and innovators.
World Cultures and Intellectual Property
IP law, like many aspects of international trade law and modern economics, may seem
as compound functions of predominantly Western interests rather than of a more
heterogeneous, comprehensive and inclusive nature. Social philosophies reminiscent of the
Scottish Enlightenment and classical period of economics are still present in capitalist
ideology although neither Smiths time are vividly unimaginable to most people living in this
age. Despite the flak that ber-traditionalists encounter, their ways persist through time.
Nobel Laureate Joseph Stiglitz (2007) said about his research regarding how market
economies deal with information and knowledge, what was clear is that the standard
paradigms of well-functioning markets solving the problemsAdam Smiths invisible
handjust didnt work Stiglitz showed in one of his papers on the topic, the reason that
the invisible hand often seemed invisiblewas that it wasnt there
Stiglitz used these statements to oppose specific intellectual property agreements, but
what stands out most about his complaint of the classical economic view is that he
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acknowledged our change in economic paradigm from those times of overt racism, when man
raped, pillaged and plundered his way to riches. Regardless of shortcomings and abuses
through that part of history, some characteristics were carried forward, providing latter
footholds for growth and solid foundations of institutions.
Theories not of the laboratory sciences are almost always doomed to fail over time, and
those buttressing the current model are not likely exceptions, but their influence and effects
are not as easily mutable as their popularity. Friedman (1953) argued that assumptions
underlying economic theories are never realistic in practice. The fact that our present system
contains inherent flaws does not indicate it is somehow obsolete or doomed to soon be.
Likely, though, is that we will experience economic ebb and flow, boom and bust markets
and business cycles through to a new era in the dismal science , perhaps culminating with
the much-awaited next paradigm shift. Nonetheless, some pieces of historical systems will
proceed forward following the purge, and IPRs are most probably in that less perishable heap.
History of IP
Historically, a host of schisms and schools of thought made up the epistemological
framework for IPRs. Origins of IP law may be 13th
century Europe, though these first grants
of rights would have been of a primitive form even compared to those in the early American
Constitutional period. The 1883 Paris Convention and 1886 Berne Convention ushered in a
new era of public commitment among nations toward upholding principles that previously
existed domestically for hundreds of years. Names like Locke, Paine, Fichte, and Kant are oft
cited when discussing theories of IP, as are isms like utilitarianism, consequentialism,
capitalism, socialism, and communism (Caslon Analytics, 2002; Waldron, 2004).
Broader Support of Modern IPRs
Once established as property rights like those related to fixed, tangible, immovable and
moveable physical matter, IPRs are supported by religious doctrines. Both Catholic and
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Protestant sects of Christianity support the Jedeo-Christian Seventh Commandment, which
protect rights to private property (Holy Bible, NKJV; The Holy See, n.d.). The Vatican
recognizes and respects intellectual property rights as a member of WIPO (Foley, 2002).
Sharia law recognizes private property rights, and Muslim states are compelled through the
Quran to protect those rights, though the Muslim abstract concept of ownership may be
slightly different from English common law definitions (Jamar, 1992). The five moral
precepts of Buddhism include proscription of stealing, or a protection of private property
rights. Asteya is one of ten disciplines in Hinduism which teaches against stealing, and thus
protects private property rights.
Culture and Information Ethics
Until the advent of internet technology, deontological ethical argument developed
rather slowly, with the official majority view being that property rights both over physical
tangible and immaterial intellectual propertieswere embedded in any functional social,
economic, or governing system. Currently, in general, nations are not so out of tune with
others that harmonization cannot be said to exist. However, any consensus or unanimity is
present only in legislative branches, whereas executives and judiciaries worldwide have not
exhibited as uniform a commitment to enforcing and adjudicating the harmonized laws.
Since 1990s there has been rapid growth in the number of people and research articles
discussing information ethics. Increasing publication on the subject is also evidence of
increasing interest. Growth in world trade, the inauguration of the World Trade Organization,
increased access to education, general market growth and other related factors have together
made information technology (IT) ethical issues part of the daily life of billions of people.
Being such an integral part of our daily work, home, and social lives, people view IT ethical
issues as important (Peslak, 2007).
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Perceptions regarding IP and ethical use of technology vary worldwide (Phukan &
Dhillon, 2001). Culture has been an important factor in perceptions of IPRs, and of the
appropriateness of enforcement and of compliance with a given set of laws. Hofstedes
cultural dimensions have been used to explain a variety of business and trade-related
differences among different nationalities of people, IPRs included. For example, so-called
individualist and collectivist cultures have been shown to value IPRs differently (Lee &
Workman, 2011). Critics of Hofstedes 1970s study, which included analysis of over 116,000
questionnaires from over 60,000 IBM employees in over 50 countries, argue that it may not
be relevant in the new millennium, and may have never been a reliable source of information
regarding entire nations of people, which are not as homogenous as the research suggested.
Further methodological complaints include the sample selection since IBMers are not the
average Joe in any society.
Besides, due to differences between cognition and behavior, self-reporting surveys
alone are not always accurate and reliable among a group (Jones, 2007; McSweeney, 2002).
Hofstedes model may help support reasons for why people think as they do, but we must
also conclude that if some behavior is prohibited in written law then such a behavior is also
culturally undesirable. In other words, if a democratic nation has promulgated a law then that
law is supported by the culture. If a culture or a subculture is decidedly opposed to a law,
then the law takes precedent in official matters until such a time that the law is repealed.
Cultural rationalization for legal violation is not an adequate defense. The culture motive
for IP infringement does not establish any external validity, nor does such justification
invalidate the law or its jurisdiction.
Development Issues
Anti-IPR ideology has long existed in the individualist American world, yet the USA
provides some of the harshest penalties in the world for IPR infringement. In the 19th
century,
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the United States was notorious for copyright piracy, which was considered a development
issue(Khan, 2002). The USA did eventually undertake to engage in international
conventions and protect foreign works along with domestic ones. Thomas Jeffersons famous
1813 quote that inventions then cannot, in nature, be a subject of property has long since
been considered incorrect.
Copyright piracy is still considered a development issue by some people, though the
enormous scale of infringing activity online and via optical discs is hardly similar to the
miniscule volumes of print offenses in the 1800s. Legitimate literature consistently concludes
that to usurp the economic and or moral rights of another is simply unethical and in many
cases illegal, which nullifies most dissenting opinions. Business ethics infrastructure is not
a debate team which crafts arguments against IPR enforcement, licensing, definitions of fair-
use, and payment of royalties, but is instead a compliance office which attempts to direct the
organization toward legal and ethical operations, which in turn theoretically reduces risks,
costs, and liabilities (US Department of Commerce International Trade Commission, 2004).
Like Jeffersons unruly two-centuries old quote, the popular hackers motto, information
wants to be free has simply been quashed by the law and interests of IPR proprietors
(Wagner, 2003).
Internationally we see a growing debate against IPRs in whole or in part made by
entities and persons from private sectors, but those arguments do not abrogate domestic laws
or international treaties on IPRs. Developing nations orcollectivist theories that inventions
are public goods where cultural esteem rather than material gain serves as the incentive for
creativity (Steidlmeier, 1993) do not preclude the rights of IPR owners or holders to file suit
against infringers under the law as we saw clearly in Cisco v. Huawei (2003).
IP and World Trade
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The World Economic Forum (WEF, 2010-2011) concluded that IPR protection is a
fundamental concern in investment decisions leading to R&D spending and innovation.
Nations with strong IPRs see comparative and competitive advantages in high-tech and
cutting edge products and processes, in academic and research institutions, in technical
literature, and in creative arts. In its World Competitiveness Report, WEF listed IP protection
in the 1st
pillar (institutions) and 12th
pillar (innovation). Competitiveness rankings of nations
in the report closely followed the level of IPR protection in the nation. For example,
Singapore was the highest ranked global competitor nation in Asia, and third worldwide, due
in large part to its focus on innovation and thus IPR protection.
Economic measures like GDP per capita and growth are associated with IP indicators
like patent and trademark applications. Between 2006 and 2009, the top 8 nations or unions
in patent filings in order were USA, Japan, China, Korea, EU, Germany, Russia, and India,
where China had the highest growth in the period (WIPO, 2010). The combine share of the
top five offices was 76.2% in 2008, adding to the fact that high-income economies hold a
greater share of total patent applications than of world GDP.
All of the top 50 Patent Cooperation Treaty (PCT, 1970) applicant companies in 2009
were from Europe, the USA, China, Korea, and Japan. US universities held the top spot with
the most 2009 PCT applications in the university sector, while Japanese, Korean, Israeli, UK,
Swiss, Canadian, Singaporean, and Australian universities also filed 29 or more in the year.
Trends in trademark applications and registrations similarly follow GDP growth and volume.
China, USA, India, Japan, EU, Brazil, Korea, Germany, and Australia made up the top batch
in total trademarks or growth. All of the top 50 Madrid System applicant brands were from
China, USA, Europe, Japan, and Russia (Madrid Agreement, 1891; WIPO, 2010).
Licensing is big money worldwide and OECD nations do have a large interest in
protecting IPRs because of the value of licenses to their economies. Between 2003 and 2008,
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the value of royalties and licenses in service exports from G7 nations rose 13.7% while the
value of royalties and licenses in service imports rose only 9.3%. In 2008, royalties and
licensing fees made up 7.3% of OECD exports and 6.9% of imports, helping the group post a
positive current account in services (OECD, 2010).
Developing and third world nations can and do benefit from IPR protection, including
that of foreign IP. For example, between 1995 and 2004, ASEAN nations received nearly 220
billion USD in foreign direct investment (FDI), with nearly half going to Singapore which
has the highest IPR protection standards in the region (ASEAN, 2004). The same trend
continued between 2004 and 2008 when ASEAN inflows totaled nearly 260 billion USD,
with Singapore, Thailand, Vietnam, Indonesia, and Malaysia collecting about 95%. Top 20
sources of FDI between 2006 and 2008 included EU, Japan, USA, Korea, Hong Kong,
Taiwan, China and Australia suggesting inflows of high-tech and capital products and
services not native to most of the region (ASEAN, 2009).
Piracy & Counterfeiting
There are, of course, counterpoints to the argument in favor of protecting IPRs. The
retail sector can increase profitability without paying licensing fees, and infringement can
leave a positive financial impact at the point of sale. The ICC estimates that counterfeiting
and piracy accounts for 5-7% of international trade (ICC Commercial Crime Services, 2011).
Those sales provide real money to real people. However, there are significant data and
theories suggesting that the economic costs of infringement, especially for SMEs, surpass the
financial gains of the criminals involved in the trade (BASCAP, n.d.; UNODC, 2011).
While more industrialized nations have preferred greater application of existing
treaties and expansion of the IP treaty set, developing countries and consumer groups have
forestalled some progress, calling for a moratorium on making new treaties, considering
certain types of infringement (i.e. counterfeiting and piracy, compulsory licensing) and
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government ignorance thereof part of a development agenda (Helfer, 2009). Both sides
have valid arguments within their mutually exclusive models and worldviews, but the non-
enforcement development agenda appears to support legal positivism far less than the
position of the wealthier IP proprietors and licensees.
Concern for consumers rights and the health of those in deep poverty is clearly
rational and humanitarian in nature, and the issue of compulsory licenses has been addressed
by the WTO. There is also social and economic argument on the far-less gray subject of
sales in safe counterfeit and pirated products (i.e. DVDs, clothing, etc.). In an economic
paradigm where profit alone most often justifies risk of undertaking R&D and investment
projects, companies expect their IP to be protected to the fullest extent of the law, which is
generally the right explicitly granted to them in statutes. Notwithstanding the clear provisions
of written laws which criminalize commercial infringement and offer civil remedies to
injured parties, very often the case is that pursuit of legal victories against commercial
infringers result in financial loss. The prospects of unrecoverable sunk costs in legal actions
are unappealing to both private and public attorneys and thus, certain infringements in
physical markets and online continue and proliferate.
Piracy and counterfeiting are topics of research in themselves that require far greater
inquiry than what can be presented within the scope of this article. For now we can conclude
that the majority of economists favor IPRs, and while it is not impossible that the majority is
wrong, it is improbable that the experts would be so erred. Even in the event of total
miscalculation by the academics, theorists, advisors and other professionals on this issue, the
legal framework is valid and generally prohibits infringement. Lawyers with some scruples
shall then most often favor obedience to the law and promotion of lawful behavior.
Against Intellectual Property: Postmodern Libertarian Conjecture
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Arguments against intellectual property in general, those relating to enforcement or of
abolition of only certain IPRs, can be persuasive as they have been crafted using powerful
knowledge and theory. Such arguments are also highly accessible. People around the world
can attend an on-demand online streaming video seminar from the Mises Institute and learn
about a libertarian thesis which is not in support of the current American and growing global
regime. Libertarians are said to favor property rights, including ownership of tangible
immovables and movables whether homesteadable or created, and rights over the body.
However, IP is considered intangible, and like their objections to laws protecting reputation
and against blackmail, a prominent number of libertarians do not support IPRs (Kinsella,
2001).
Followers and admirers of Ludwig von Mises and of Austrian economics may assume
economics to be one branch of praxeology, which according to Rothbard is the formal
implications of the fact that men use means to attain various chosen ends (Kinsella, 2011).
Libertarian scholars of praxeology contend that any economic system presupposes a legal
order which protects private property rights plus related rights such as contract, negotiable
instruments, promissory notes and debt, etc. Contractual rights, and any financial or post-gold
standard fiscal rights should be ipso facto inclusive of protection of intangibles, yet authors
like Kinsella continue to speak against IP, calling its origins a conservative propaganda
campaign. Such ad hoc argument rejects the legitimacy of intangible property as a form of
real property, capable of having ownership. Non-recognition of IPRs contravenes a number
of standing economic and legal rules. Adoption of the abolitionist opinion would require
several changes to generally accepted accounting principles on depreciation and amortization,
making such arguments at very least impractical.
Scholarly Support for Fallacious Commentary
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Notwithstanding academic and professional origins of certain libertarians anti-IP
philosophy, its logic appears self-contradictory. Considering that American university
professors are more financially privileged than not, their condescension on this issue is
somewhat of a mutiny against their own class, a self-defeating strategy. A message
communicated suggests opponents of IP are denying that the economic order which they have
significantly benefitted from presupposes the associated pro-IP legal order, or that the legal
and economic orders are inseparable as was previously claimed. Kinsella, a patent attorney
who argues against IP, is not only ironic in his delivery, but takes a leadership position that is
impossible to follow without losing objectivity.
Origins of fallacious arguments emanating from esteemed academic institutions in the
first world are not limited to the Mises Institute. Instead, a great deal of American academia
has been muddling around with its IP ethics ideology much in the same fashion as it has been
forestalling legal positivist action intended to eliminate performance-enhancing drug use in
NCAA programs, among other compliance and transparency initiatives.
In 2011, the Authors Guild and other rights organizations filed suit against the
University of Michigan, HathiTrust, and four other universities over storage and use of
millions of copyright-protected books (Authors Guild, 2011). In 2008, the Recording Industry
Association of America (RIAA) sent pre-litigation settlement letters to 18 American
universities regarding copyright infringement on campus networks (RIAA, 2008). Montana
State University estimated more than 20,000 copyright infringement cases since the early
2000s involved college and university students, many of which retrieved infringing content
via university networks in housing or computer labs under lax campus enforcement policies
(MSU, 2011). Universities publicly display policies against infringement and in support of
laws, but behavior and cognition again have distinctly separate qualities. A multitude of
academic articles have been published since the turn of the century in favor of online
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infringement and against enforcement, many with faculty and university support. Perhaps
academicfreedom now includes rights to commit and endorse crimes.
Daniel DAmico (2011) of Loyola University in New Orleans, a purported expert on
IPRs, opened a 2011 Cato Institute lecture by admitting to online copyright crimes. He
prefaced his confession of thievery with a comment about how he thought people over the
age of 45 should have their rights to speak about IPRs revoked because such old people do
not download and infringe online enough to understand IPRs. These uses ofnon sequiturin
the speech did not appear as much of mere opening jokes as they did seem parts of his
genuine intellectual arguments. DAmico thereafter presented an eloquent academic
libertarian argument against IPRs consisting primarily ofignoratio elenchi and youth-
oriented argumentum ad populum fallacies which are particularly persuasive in political
discourse. Like most criminals, DAmicos ignorance of the counterpoint invalidated the bulk
of his arguments and exposed crucial flaws of these so-called libertarian doctrines.
Despite contrarian university faculty and student support for abolition of IP laws, or
non-enforcement of laws and therefore de facto abolition, and for rights to infringe online, the
laws and supporting reasons for protection stand. As the world saw with the mortgage fraud
and Ponzi scheme epidemic that led to financial crises in the early 21st
century, an economic
system which is considered to exist in isolation, and is not considered bound to a strict legal
order is not a safe system for a society. Without IPRs, we would not likely have such
luxurious innovation, diversity in publishing and arts.
Anarchy?
Libertarian conjecture regarding morality and ethics in a state system and the need for
complete change is not constrained to objection to IPRs. Some libertarians are famous for
promoting the complete abolition of government. Libertarian anarchism, according to some
academics, is the perfect system for protection of all rights, although clearly such a system is
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rife with confound. The idea that in the absence of government, the citizens would naturally
correct the judicial order among themselves until a balance were reached closely resembles
Smiths market theory on the invisible hand which has been said to not exist at all .
Libertarian ethicist Roderick Long (2010) favored anarchy, saying I think that anarchy
shouldnt be seen as an absence of checks and balancesI think it should be seen as sort of
taking checks and balances to its own conclusionthat it would sort of start a new check and
balance. This vision assumes a cessation of abuse, corruption, and of cyclical wrongs upon a
first conclusion of a prior system, which is denying the antecedent. Long presumes that
simply because a new system is not the present one, that it will be unlike the present one.
Long continued, another thing is people often assume that there is going to be less
legal uniformity under anarchy than under governmentbut I think there is actually reason to
expect that there might be more legal uniformity under anarchy, which again fails to
recognize the very definition of anarchy, or a state of lawlessness and disorder (Princeton,
2011).
Longs vexed thinking is clearly emotionally provocative, causing many readers and
listeners to not thoroughly examine its intellectual constituents and in the process of such
inspection expose its myriad logical contradictions, confounds, and flaws. Like those who
yearn for a removal of government or some free period in the future, others strive to
resurrect systems of the past, believing the good old days better. Unfortunately, such theorists
who earn their salaries in whole or in part by rejecting the current system under the
presumption that any historical systems were superior are failing to acknowledge and
understand the fundamental motivating factors which led to historical changes, and thus
cannot fully comprehend the present tense.
For Intellectual Property: Rands Libertarianism
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Libertarians are attacking IP rights in the name of a so-called defense of property
rights, said George Mason University law professor Adam Mossoff(2010) in a speech
hosted by the Ayn Rand Institute. Nonetheless, libertarian opinion on intellectual property
rights is not restricted to mere opposition, abolitionist, and anti-IPRs ideology. There is some
diversity within the party. Much of the pro-IPR libertarian rhetoric draws on Ayn Rands
radical idealism. Mossoff continued, explaining that Rand was the first philosopher use the
connection between a mans mind and his life to support IP when she described the anti-IPR
position of her time as an assault on mans mind and on the values he produces, and thus, an
assault on mans life.
In Atlas Shrugged and in Capitalism: The Unknown Ideal, Rand examined the
relationship in capitalism between the mans mind and the mans survival. In the latter
pamphlet, she asserted that Mans essential characteristic is his rational faculty. Mans mind
is his basic means of survivalhis only means of gaining knowledge (Rand, 1966). Rand
argued in favor of IPRs as a fundamental right in capitalism in a turbulent ethos which likely
had her as an enemy of entire states on the geopolitical front. While the Rand articles are
dated, the breakthroughs made are still significant and, regardless of continuing argument
against, help form foundations of our formal IP laws. Kinsella, Long and their cohorts could
hardly hold a candle to Ayn Rand.
Intellectual Property as a Human Right
Some authors and commentators have been so bold as to consider a globalized IP
regime an aspect of neocolonialism(Rahmatian, 2009), but such theorists neglect that such
an informal empire is not an empire at all, nor is a system of voluntary treaty adoption and
reciprocal rights protection arrangements similar to models of the colonial era when equality
and reciprocity were explicitly avoided. As we look back from a future time we may see that
nations which benefitted most near the time of inception of the post-colonial IPR system
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surely were the wealthiest and primarily Western nations, but that over time other nations
closed the gap. The system is designed to provide rights for all people, built upon respect for
sovereign equality under the 1945 UN Charter, which is a clear and obvious movement away
from historical norms rather than hidden obedience thereto. Our global IPR protection regime
provides a framework in which developing and third world nations can achieve their goals,
and at some time be economic equals with presently wealthier nations, whose initially
disproportionate benefits from the unified system may one day be considered mere
coincidence.
Authors from the Institute for Policy Innovation Center for Technology Freedom
considered IPRs as furthering the progress of other human rights such as political speech,
health care and education, arguing that copyright took publishing out of the hands of
governments and monarchs and enabled the free published expression of individual authors
and publishers, that expansive publication improves education, and that it was
implementation of intellectual property protection that has resulted in widespread creation
and distribution of new pharmaceuticals(Giovanetti & Matthews, 2005).
Intellectual property rights are established as human rights in the Universal Declaration
of Human Rights (1946) and in the International Covenant on Economic, Social and Cultural
Rights (1966).With rare exceptions like compulsory licenses on pharmaceuticals, the agenda
at the UN has been to fully support IPRs. As such, the UN High Commissioner for Human
Rights called on governments to protect IPRs (UNHCHR, 2000, 2001), and the UN
Economic and Social Council called on governments to implement the 1966 Covenant with
the view of enhancing IPRs (Chapman, 2000). IPRs are economic rights, and economic rights
are human rights. Hence, support for IPRs is support for human rights.
Intellectual Property: A Core Business Asset
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The going theory is that protecting and enforcing IPRs provides incentive for
innovation, investment, and progress. In the field of patents, incentives are for disclosure so
people in the larger group can build on inventions and there may be a more collective benefit.
For the purposes of this article, we shall consider the copyright systems as fundamentally
similar to the patent systems and infer that disclosure of ideas to the public has a similar
effect in literary and artistic fields, where protected works may be used to inspire and support
future works. We will therefore rely on economic theory that copyright simultaneously
achieves socially optimal production and consumption of protected material (Watt, 2009).
IP Markets
Marketing departments, rather than engineering or research or other departments, are
most often charged with the task of deciding whether or not to launch new products or
services (Mullins & Walker, 2010). Complex matrices of consumer preferences and
probabilities are studied in the process of making such decisions regarding innovation.
Intellectual Ventures vice president Greg Kisor (2006)found that economics plays heavily
into innovation and bringing things to market.
Big businesses clearly have a competitive advantage over SMEs in bringing products
and services to markets due to their comparatively larger budgets and more expansive access
to human and other resources. But universities, research labs, inventors, and small companies
produce 60% of patents while only getting 1% of the revenue (ibid) as those patents are
bought up and utilized by much larger companies. Likewise with copyright and related rights,
oligopolies are the norm.
Strategic Importance of IP
At S&P 500 companies in the mid-1980s, tangible assetsproperty, plants,
equipment, etc.represented about 70% of total assets. By 2005, intangible assets accounted
for about 70% of total assets, meaning IP became the biggest asset category at large
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companies in about 20 yearsthe life of a patent (Razgaitis, 2006). Between 1990 and 2008
in the UK, investment in intangibles/IP outpaced that in tangibles, with the gap growing
widest after 1999, leading to intangibles investment making up nearly 60% of the total in
2008 (UKIPO, 2011).
IP can be sold, licensed, or used as leverage against competitors, providing market
advantages for businesses. IP provides sustainable competitive and comparative economic
advantages for businesses and nations. Innovation is associated with a higher standard of
living, sustained higher wages, and increased sophistication in society (WEF, 2010-2011).
Innovative economies suffer fewer and shorter term shocks, and drive growth and recovery in
global financial markets (World Bank, 2010).
[Americas] single greatest asset is the innovation and the ingenuity and creativity of
the American people, said US President Obama (2010), considering that IP-intensive
industries accounted for 18.8% of all employment and 34.8% of the GDP in the USA in the
same year (USESA & USPTO, 2012). The evolution of the US workforce closely followed
the growing importance of IP in the 20th
century, when the creative class grew from 10% to
30.1%, the working class declined from 35.8% to 26.1%, the service class grew from
16.7% to 43.4%, and the agriculture class fell from 37.5% to 0.4% of the workforce
(Matthews & Giovanetti, 2002).
Licensing and IP royalties help give western economies like the US, UK, and France
consistent trade surpluses in services whereas those countries consistently post current
account deficits (OECD, 2010).
While, for the time being, the USA and western Europe have distinctly different goals
and ambitions from the majority of the worlds countries and people, as development and
growth continue over time, it is doubtful that rising powers like BRICS and ASEAN nations
will not formulate IP strategies similar to the US and EU. Yu (2009) found that:
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As more countries migrate from the traditional agrarian and industrial economies to
ones that are based on post-industrial, knowledge-based innovation, intellectual
property assets will only become more important.
Market Symbiosis
A well-functioning market indeed presupposes or at least requires a similarly
functioning legal order. Protection of IPRs can enable entrepreneurs, SMEs, independent
researchers, university labs, and MNCs to engage in R&D efforts which yield profit. Without
profit available, without a market for IP, the cycle of research and development may cease
and markets could easily become dominated by foreign firms which enjoy IPR protection in
their home countries. The nature of the strong market imbued with a strong IP legal system is
such that research and development may lead to consistent new product offerings, which can
be associated with increased market activity and sales for individual companies, the proceeds
of which may be reinvested into further research and development in a cyclical order where
growth may be established as a norm.
Mutual benefits to consumers and producers are provided by the innovation economy
whereby customers have access to high technology and other new materials, and businesses
have sufficient capital and equity resources to expand and develop internally and externally.
SMEs and independent inventors have a stake in MNC successes given that MNCs may have
greater potential to acquire IPRs via licensing or assignment agreements. Smaller ventures
which do not have the necessary finances to bring products to market may concentrate on
innovation and the market may become more efficient through division of labor.
With broad IP portfolios, MNCs may be able to leverage their IP over competitors and
take advantage of economies of scale, thus further reducing the costs of production and end-
line prices of products offered to individual and organizational consumers. Reduced costs and
increased profit margins lead to increased shareholder equity, dividends, and opportunities
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for businesses to tend to their fiduciary responsibilities. Theoretically, the economic merits of
IPR protection and enforcement are virtually infallible.
The profit motive may then also benefit society in general as MNCs and other private
foundations will have more free cash and human resources to donate. Donations of time and
money further increase buyer awareness of certain brands, improve the reputation of
individual companies, and help make corporate social responsibility the expected norm.
Enhanced public cooperation and community participation in the supply chain and larger-
order economic structure tend to imply broader transparency and inclusion in the
marketplace. More profitable publishing, including online, available under systems featuring
better protection of copyright, may lead toward better education and improved institutions,
the benefits of which will be felt in all realms of societies.
Conclusions
Overall benefits to economies in the form of higher wages and standards of living
increase satisfaction and quality of life. In higher-quality societies, respect for the rights of
others down to the deepest levels of existence, such as those pondered by Rand in the 60s,
has a greater chance of becoming normalized. Hence, human rights and living conditions may
improve with simple changes like greater respect for intellectual property. The merits and
value of creativity and innovation are validated by recognition and enforcement of IPRs.
Presently, strife and argument run afoul due in no small part to greed and misuse of
capital and intellectual resources. Party splits and rebellious factions within groups magnify
disagreements between groups. Such in-fighting is counterproductive, alienating newcomers
to the discussion. If agreement is to be had, then it must be for mutual benefit. Surely, the
idea that a persons life and mind are inextricably linked may inspire cooperation.
Any creation of humankind comes from the bodywhether forged by hand, foot or
mouth. All such creative processes require exchanges of chemicals in the body, which are
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entirely tangible regardless of the composition of the final output. Lifeblood is translated into
the material world when ideas and visions are fixed into media, sculpted into matter, or
formed into prototypes, but those objects originate in the mindin the brainwhere they
continue to reside long after liberation. Energies expended in the design and production of
works should not go unrewarded, regardless of what some commentators refuse to consider
tangible. All creative works are real. In any case, the origins should be accurately marked
and economic benefits at least shared by the true originator. Anything less would, in fact, be
uncivilized.
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