The economic effects of intellectual property laws - Research Paper Example

? The Economic Effects of Intellectual Property Laws 0. Introduction Intellectual property (IP) is often defined as the personalized ideas, inventions, as well as gathered information by an entity that can either be a corporate, a person or even a group of people. In the modern day context, these intellectual properties are considered to possess significant commercial value in the local, national as well as global market. It is due to this reason that by imitating the creator(s) of the idea, people often tend to use the idea for personal benefits without the permission of the creator(s) that reduces the incentives earned by them to a large extent. Moreover, the demand side of these ideas is also influenced strongly as it is quite likely that the imitated version of the property will not possess similar quality as served by the original version. Thus, to secure the rights of the creator(s) government in almost every country has enforced Intellectual Property Laws which aim at discouraging people to use the property without the consent of its creator(s) (Andrew Gowers & Great Britain Treasury, 2006). From a broad point of view, it can be stated that the enforcement of intellectual property laws have a considerable impact on the economic structure of a country. For instance, by restricting the unwanted and unpermitted use of the IPs, the law tends to raise the value of the patents, trademarks and other similar properties and thus encourage innovation within the economic structure contributing to the economic growth at large. On the contrary, enforcing Intellectual Property Laws can also result in decreased employment, especially in the developing economies where a considerable proportion of the entire labor population is engaged in manufacturing and selling the ideas without permission (Keith E. Maskus, 2000). In relation to the fact, this paper will deal with the enactment of Intellectual Property Law in the US economy and its impact on the overall economic growth and development in the current era. 2.0. Fundamental Tenets of the Intellectual Property Laws One of the foremost and main purposes of the Intellectual Property Laws is to discourage and barricade the unpermitted use of intellectual properties by anyone apart from the creator(s) or holder(s) of the property right. It is worth mentioning that property rights can be owned by a person under the US Intellectual Property Law in three major forms in terms of Patents, Copyrights, and Trademarks. Patents are defined as the exclusive rights which are granted for a specific period of time to a particular invention in any kind of technology related fields having the potential of industrial application. In case the technology based inventions have been conducted under the supervision and with the funds of a corporate entity, the patent for such inventions is to be entitled to the corporate entity/entities engaged with the invention process through a contract or agreement where the breach of agreement to sell the patent with the consent of other parties (when there are more than one entity engaged) shall also be termed as infringement of the rights (VoiceFill v. West Interactive Corporation et. al.). Similarly, copyrights are also a kind of exclusive rights which are issued to authorships related to the fields of art or literature for a specific period of time. Trademarks deal with the exclusive rights for any kind of specific sign or a particular combination of multiple signs which can distinguish the identity of one good and/or service from the other such as in the case of company logo. Unlike other exclusive IP rights, the trademarks are not effective for only a specified time period, but can be held by the creator(s) (i.e. mostly a corporate entity) until they wish to sell the property right to someone else (Valmont Industries, Inc. v. Lindsay Corporation et. al.). It is in this context that the infringement of either of these rights in order to use the properties without permission is called piracy which is strictly prohibited under the US Intellectual Property Law (United States Government Accountability Office, 2010). As stated by Mark A. Lemley (2004), the enforcement of Intellectual Property Law in the US has always been aimed at encouraging innovations. In this context that in order to gain the advantages from patents, copyrights and trademarks as incentives, people are likely to become more interested in innovating and creating fresh ideas to be used for the betterment of the socio-economic stance of the US. On the similar context, the Intellectual Property Laws are also intended to take controlling measures in relation to competition motivating the industries to provide with greater significance to their research & development activities. Trademark also plays a significant role in securing healthy competition within the industry sectors of the economy to a large extent (Jean O. Lanjouw & Josh Lerner, 1997). It is worth mentioning that there are certain governing bodies that are responsible for the enforcement of the Intellectual Property Laws. For instance, in the US, the laws are enforced by ABA Section of Intellectual Property Law, American Intellectual Property Law Association (AIPLA), Intellectual Property Law Server, Office of the Administrator for External Affairs (EA) - IP Enforcement and Policy, Office of the United States Trade Representative (USTR) United States Patent and Trademark Office (USPTO), and United States Department of Justice (USDOJ) (HG.org, 2011). In the recent years, the Intellectual Property Laws in the US have been proposed with a few transformations in its key focus areas by the government. As reported by the White House, the Intellectual Property laws practiced within the economy will be subjected to a substantial increase in the existing penalties charged for the criminals who have been witnessed to disregard the laws enforced either through piracy or by other means such as the Economic Espionage. For instance, earlier the penalties for Economic Espionage were practiced to be at least 15 years in prison which is now proposed to be maximized to 20 years (White House, 2011). The proposed alterations and additions in the laws also indicate the empowerment of the governing bodies engaged in the enactment of the laws defined by the government. The measures also include the sharing of information amid the Intellectual Property Right holders regarding all the clauses concerning the infringement of the property rights through Department of Homeland Security (DHS). Furthermore, the transformed measures will also intend to increase the effectiveness of Customs and Border Protection (CBP) by increasing the administrative penalties. The reforms in the Intellectual Property Laws also state that owners of the copyrights in the music industry are liable to be compensated when their public performances are to be broadcasted on-air through various mediums either nationally or internationally (White House, 2011). It is worth mentioning that these changes were imposed by the honorable President of the US, Mr. Barack Obama in the month of September, 2011 through America Invents Act which is also titled as Patents Reform Act of 2011. With its major concerns and substantial changes as mentioned above, the law enforced evidently intends to strengthen the Intellectual Property Law practiced in the economy earlier, eradicating most of the ambiguities. However, one of the most significant and crucial objectives confirmed by the enforcement of these changes in the US Intellectual Property Law was to be more pertinent with the legislative measures adopted in other parts of the world and thus securing the interests of the Intellectual Property Right holders in the US not only in the national but also in the international context. Furthermore, the rules are intended to be stricter in order to discourage any kind of piracy or infringements to the Intellectual Property Laws. In other words, the newly enforced changes through Patents Reform Act of 2011, the Intellectual Property Law practiced in US is concentrated on enhancing the benefits liable to the owners of Intellectual Property Rights and discouraging the infringements of these rights which in turn is expected to encourage the economic growth drivers to participate in innovations not only in the national but also in the international settings (The Engineer, 2011). Hence, it is quietly likely that these policy measures in relation to the Intellectual Property Laws in the US shall have a considerable impact on the overall economic growth and development. 3.0. Economic Effects of Intellectual Property Laws The impact of Intellectual Property Rights on the economic growth and development has been one of the major concerns of various researchers interested in the field of law and economics. As stated by Joanne E. Oxley (1999), the laws enforced for the protection of Intellectual Property Rights, have a direct impact on the industrial environment and the mechanisms of corporate governance followed within the economy. In order to protect the Intellectual Property Rights the corporate tend to favor hierarchical governance modes with the intention to limit the liberty enjoyed by any related party that can be misused to conduct an infringement of the laws. However, this is mostly the case when the policy measures adopted in relation to protect Intellectual Property Rights are not quite sufficient or are weak comprising of many loopholes. A similar kind of situation can be observed in the US economy when the enforcement of Intellectual Property Laws and policies were weak being insignificant in strictly barricading the infringement of such rights (United States Government Accountability Office, 2010). However, the newly enforced law considers a stricter approach towards controlling and protecting the rights of the patent, copyright and/or trademark holders in a more well-defined and universal manner to be pertinent with other jurisdiction forms relative to Intellectual Property Laws practiced by other economies (White House, 2011). Thus, a significant impact of the Intellectual Property Laws can be witnessed in the US economy in relation to corporate governance practices. Enforcement of Intellectual Property Laws also has certain implications on the international relationships of a particular economy. For instance, the newly adopted changes in the US Intellectual Property Laws are intended to be more pertinent with the globally enforced laws so as to protect the rights of the concerned parties in the international context. Earlier, it was observed that Intellectual Property Right holders in the US were dispossessed from the compensation they were liable to be paid in case their creations were used internationally due to the weakness of the US Intellectual Property Laws. With the changes enforced from September 2011, it is expected that the right holders will be eligible of attaining the compensation liable to be paid in the national as well as in the international context when their creations are used by other licensees (The Engineer, 2011; White House, 2011). With these reforms, the US Intellectual Property Act is intended to be more pertinent with the policy measures taken by international governing bodies including EU Legislation-Intellectual Property, International Intellectual Property Institute (IIPI), Interpol - Intellectual Property Rights (IPR) Programme, World Intellectual Property Organization (WIPO), and WTO-Trade-Related Aspects of Intellectual Property Rights (TRIPS) (HG.org, 2011). Embracing the global standard, economies can thus attain greater participation in the international trade relationships positively influencing global harmonization. However, in relation to the competitive environment of the global market, a more applicable policy measure with relation to the Intellectual Property Rights is also likely to raise the threats of monopolization through technology transfer and other policy considerations (Keith Eugene Maskus, 2000). Thus, it can be stated that implementation of Intellectual Property Laws can have both positive and negative impacts on the international relationships of an economy. From an in-depth perspective, Intellectual Property Laws can be observed to have a direct impact on the technology and science related sectors of any economy. By initiating strict measures with the purpose of protecting the Intellectual Property Rights in an economy, the government or regulatory bodies actually intend to facilitate and encourage the participation of potential creators to innovations. Furthermore, it also tends to encourage healthy competition within an economy. Increasing participation in innovative activities and encouragement of healthy competition with the virtues of effective Intellectual Property Rights tends to act as major drivers of economic growth and overall development. It also encourages the educational sector to be more competitive in up-bringing fresh innovative thoughts to the economic sectors which are directly or indirectly related to science and technology such as pharmaceutical, automobile engineering, healthcare, and agriculture among others (Mitchel B. Wallerstein et. al 1993). With its distinct virtues, the Intellectual Property Laws tend to encourage science and technology innovations which are quite likely to motivate the industry sectors to adopt highly efficient research and development programs. It is in this context that companies are expected to engage greater investment amounts in such programs in order to derive competitive advantages through innovations which in turn shall also foster the competitive trade relations amid industrial players. In addition, encouragement of innovations by securing Intellectual Property Rights can reward better job prospects in the economy with enhancements in the field of education as well as training and development (Mitchel B. Wallerstein et. al 1993). However, these impacts can be witnessed only when the laws related to the Intellectual Property Rights are enforced with efficiency at every level of the economy. To be precise, the effective implementations of Intellectual Property Laws are very likely to have a positive impact on the fundamental growth drivers of an economy and thus play a substantial function in the overall economic growth. Empirical evidences concerning the role of Intellectual Property Laws in accelerating the economic development and growth in the US also reveals that effective protection rendered to the Intellectual Property Right holders through law enforcements intend to influence the fundamental growth drivers such as employment, research and development and innovation on the whole. This impact can be apparently observed in the Intellectual Property intensive sectors such as the pharmaceutical manufacturing industry. Evidences reveal that with the strengthening of Intellectual Property Laws in the US in the period from 2000 to 2004, i.e. early 21st century, the job prospects grew by approximately 8% in the most Intellectual Property intensive industries which majorly included the pharmaceutical manufacturing sector. The average revenue earned by the companies from each employee also rose considerably during the same period. In addition, the employment rates in the engineering sectors also increased at a significant pace along with increasing investment amounts in the field of technology and science which palpably indicated the fact that Intellectual Property Laws can be quite beneficial for an economy to gain sustainable growth in its long run performance. In other words, with reference to the empirical facts, a direct correlation can be observed existing amid the invested amount for research and development by companies and the value-added by each employee. As Intellectual Property Laws are treated as one of the major influencing factors of research and development, it can also be stated that increased concentration on the Intellectual Property Rights protection shall have a significant impact on the overall economic development and sustainable growth (Robert J. Shapiro & Nam D. Pham, 2007). From an overall point of view, implementation of Intellectual Property Laws plays a crucial role in encouraging innovation by directly influencing the incentives earned by the Intellectual Property Right holders. This in turn tends to promote product and/or service development as well as provide significant concern towards the enhancement of technological changes. The enforcement of Intellectual Property Laws also acts as a major influencing factor in relation to competition in a particular industry. For instance, increased concern to the protect trademark rights in an economy can be observed to play a significant role in motivating new entrants of a particular industry which in turn shall slacken the trade barriers creating opportunities for growth and development in the industrial sector of an economy. This certain impact has been already witnessed in numerous instances with reference to the example of Lebanon, Middle Eastern Markets as well as China among others. Similar impacts can also be witnessed in the case of other Intellectual Property Rights such as copyrights and patents. Furthermore, enhanced innovative activities within an economy is also likely to raise demand for the domestic products in the international market which in turn shall facilitate the dispersion of technology influencing global trade relationship. Foreign Direct Investments (FDIs) are also quite probable to increase in the economies where innovation is considered as quite vital being influenced by effective implementation of Intellectual Property Rights (Keith E. Maskus, 2000). On the contrary, increased concern towards the protection of Intellectual Property Rights through law enforcement also has a few noteworthy negative impacts on the economy. For instance, economies are likely to incur extra costs for the activities executed with the purpose of facilitating innovation, especially in the short run. Moreover, a considerable amount of market and operational risk is also to be endured by the companies focusing on innovative measures after the enforcement of authoritarian laws on Intellectual Property protection. Even though these impacts can be principally witnessed in the case of developing economies, it can also be transferred to the developed nations with the virtue of globalization and international trade relations (Keith E. Maskus, 2000). Similarly, the developing countries also have a considerable number of employees associated with the ‘copying of unauthorized goods’ produced by other developing as well as developed countries. Hence, the enforcement of stricter penalties to restrict the infringement of Intellectual property Rights shall also cause job losses in the prospective markets. To relate the fact with the current scenario of Intellectual Property Law enforcement in the US, it can be stated that even though the enforced changes will enhance the job prospects in the national market of the economy, it is quite probable that labors engaged with the copying of goods without licenses, especially in the developing countries shall have to face job losses (Keith E. Maskus, 2000). 4.0. Conclusion With reference to the above discussion, it can be stated that enhanced consideration to Intellectual Property Laws with the intention to increase the benefits earned by the Intellectual Property Right holders and to protect their rights in the national as well as in the international context shall have mixed impacts on the economic growth and development of a particular economy. From a generalized point of view, where on one hand, the laws can be observed to encourage innovation in the economies, on the other hand, it is likely to create negative impacts on the dependent developing economies due to the effect of globalization and international trade relations. This in turn can certainly slowdown the pace of economic growth and development earned by a particular economy by the adoption of strict measures intended towards the protection of Intellectual Property Rights. However, only a handful number of researches have been observed to be based on the impacts of Intellectual Property Laws on the international trade relations between developed and developing countries. It is worth mentioning that FDIs and international trade relationships are considered to be quite vital in the 21st century context as major drivers of growth and development along with innovation. Thus, it can be regarded as a necessity to identify what implications Intellectual Property Rights have on the international trade relations and the generation of FDIs so as to have a better insight to the economic growth and development. The findings from such researches shall not only provide a new dimension to legal proceedings to Intellectual Property Rights but also reward better control over economic growth and development. 5.0. References Andrew Gowers & Great Britain Treasury, Gowers Review of Intellectual Property (2006). HG.org, Intellectual Property Law – US (Dec. 21, 2011), http://www.hg.org/intell.html#1. Jean O. Lanjouw & Josh Lerner, The Enforcement of Intellectual Property Rights: a Survey of the Empirical Literatures, NBER working paper series (1997). Joanne E. Oxley, Institutional Environment and the Mechanisms of Governance: The Impact of Intellectual Property Protection on the Structure of Inter-Firm Alliances, 38 J. Eco. Behavior & Org. 283-309 (1999). Keith Eugene Maskus, Intellectual Property Rights and Economic Development (2000). Keith Eugene Maskus, Intellectual Property Rights in the Global Economy 87-142 (2000). Mark A. Lemley, Property, Intellectual Property, and Free Riding, 291 John M. Olin Program in Law and Eco (2004). Mitchel B. Wallerstein et. al., Global Dimensions Of Intellectual Property Rights In Science And Technology, Part 3 192-207 (1993). Robert J. Shapiro & Nam D. Pham, Economic Effects of Intellectual Property-Intensive Manufacturing in the United States, Sonecon, LLC (2007). The Engineer, US Adopts ‘First-Inventor-To-File’ Intellectual Property Rule (Dec. 21, 2011), http://www.theengineer.co.uk/policy-and-business/news/us-adopts-%E2%80%98first-inventor-to-file%E2%80%99-intellectual-property-rule/1010093.article. United States Government Accountability Office, Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods (Dec. 21, 2011), http://www.gao.gov/new.items/d10423.pdf. Valmont Industries, Inc. v. Lindsay Corporation et. al., 2011 U.S. District Court for the District of Nebraska, Civil Action No. 8:11-cv-00415-LES-TDT VoiceFill v. West Interactive Corporation et. al., 2011U.S. District Court for the District of Nebraska, Civil Action No. 8:11-cv-00421 White House, Administration’s White Paper on Intellectual Property Enforcement Legislative Recommendations (Dec. 21, 2011), http://www.whitehouse.gov/sites/default/files/ip_white_paper.pdf. Read More