Intellectual Property in Canadian Manufacturing Industry - Essay Example

Intellectual Property in Canadian Manufacturing Industry Politics and Economics Table of Contents Introduction 3 Literature Review 3 IP Framework in Canada 5 Multiple Protection 5 Litigation 6 Economic and Political Impacts 8 Economic Impacts of IP Legislation 9 Impacts of Patents, Copyrights, and Trade marks 10 Manufacturing Firms in Canada 11 The economic Growth of Canadian Manufacturers 13 The Link between Innovation and Economic Growth 14 Use of IPRs and Type of Innovation 14 Inter-industry Differences in manufacturing firms 16 Research and Development Necessities 17 Conclusion 18 References 19 Introduction In a knowledge based economy, one instrument that provides the foundation for investment, growth and innovation is called intellectual property (IP). Although leading industries are intensive users of IP regime but still it is a must for IP regimes to balance the interests of stakeholders and one of the ways to do is to contribute towards Canada’s economy. IP rights or IPRs are considered as important source in providing help to creators and innovators so that the innovators could get a pay back in exchange of their creativities. IP provides market exclusivity to innovators so that they can get benefits for their innovative ideas. The crucial part of IP policy makers is to find the right balance. IP is also involved in providing protection to intellectual property as protection is an important aspect because Canadians get the benefits of the knowledge and creativity. The main issue for IP is therefore to explore that how this regime can stimulate the creative ideas as well as knowledge along with the access to the innovations in an economical or affordable way. And this is the way through which IP can make the contributions to the knowledge base economy of Canada. Literature Review The importance of Intellectual Property has been identified and explored by Schumpeter (1934), Arrow (1962) and by other as well. It was found out that IP plays an important role in the economic performance that how IP brings change via innovative ideas and latest technology. The result and outcome of this paper is ambiguous and the result can be varied according to different circumstances. The literature gives very important insights but still the economic performance based on IP is an empirical issue because of the varied outcome according to circumstances. The empirical literature is also limited to some extent. This is the reason that our understanding of IP is below satisfactory level. The patents of IP institution are considered as protectors of intellectual property as Canada has a history of intellectual property institution. In the year 1867, Canada was created as federation and its very first patent act starts from the year 1869. Right after its beginning the Patent Act used to revise several times in the last century. Recently there were major amendments took place. Canada has also abandoned its first to invent patent system for first to file system on 1st October 1989. The requirements related to disclose patents to public are modified. The duration is also modified among other amendments of patent act provisions. There is a very little information available regarding impact of Canadian patent system on Canada’s economy because there are changes made to the legislation in the year 1989 and how does it affected the economy of Canada; this information is yet to be revealed or explored. In the international trade and investment policy the IPR issue has captured the attention. The attention can be clearly identified where the inclusion of negotiations on TRIPs within multilateral trade policy were taking place. The implicit policy assumes the differences in IPRs worldwide and these differences affect the investment flows and international trade. Intellectual property is available in different forms like patents, trademarks, copyright etc and it is considered as a firm’s property. The exploitation of this IP can be enhanced via global marketing strategies. IP can be traded by three ways. The first is to export goods. It can take the form of creative component of FDI, or the product can be licensed to international competitor. Various differences at national level can however affect the trade of IP. The crucial question is that how sensitive is the Canadian IP in comparison with IPRs of receiving countries. This study focuses on what we already know and what needs to be found out regarding IPRs. We hope that this research will provide the basis to the future research work regarding the most important tool of economy that is intellectual property. IP Framework in Canada IP laws of Canada like copyright, trademark and patents are discussed in this paper. The laws are compared with several other countries’ including US and few suggestions are given regarding future developments and other areas of concern. Two questions were the point of focus in this paper. The first one is related to laws of US and Canada that are they really far apart? And the second question is that is it possible to bridge the distance easily? The answer to the first question is yes and for the second question is no. although recently initiatives have been taken but still there are differences in Canadian and US legal systems along with the social and economic policies. The legal divide of IP cannot be narrowed down further. The US government has narrowed unilaterally in fields like domain names by taking the help of court and jurisdiction. The imposition is not only on the disputes related too Canadian and US companies but court has imposed laws on disputes among Canadians firms as well. Apart from this unusual attitude what is more important is that what measures could be most desirable for both the countries and how those objectives can be achieved, this can be found out by doing more in depth research. Multiple Protection It is a common fact that IPRs are expanding and continuously growing therefore it is essential for the companies to register their IPRs. For example there are companies that protect their logos at common law and use as a trade mark. Similarly a textile pattern can be registered as a design related to the industry. Patent can be used to make a computer program protected. Therefore there are different ways to protect a logo or brand mark via using these three different methods. The patent right holders try to protect their rights and hence able to reduce the competition in the industry on the expiry of their registered designs. Plant breeders also get the rights for new seeds and cumulatively enforce the rights, hence avoid any inconvenience for other plant breeders. IPRs are therefore treated as a product in a supermarket or a mall i.e. a shopper can get the rights and as many rights as needed whenever required. In adventitious multiple protections there are hardly any innovations therefore the question may arise is whether the rule “only one per customer” should take the place of the rule “take as many as you can carry”. It also happens sometimes that multiple protections are discouraged by IP legislation itself. Canadian Copyright Act has enforced industrial design act and mass produced designs’ copyright act is eliminated. It was said that it is not the parliament intention to interpret the Patent Act as the Copyright Act so as to overlap the protection. If the same logic was applied to all IP laws then it would have been easy to find the best protection law that could suit the new product launch or technology. With the help of this logic overlapping could be minimized until/unless the law is explicitly authorized for the relevant reason. There is a possibility that while seeking for the IP registration could block the reliance on other rights that are not registered like copyright trademark and then it somehow corresponds with the rights that are registered; during the pendency as well as on expiry of the registration. This law does not go beyond far in Canada or any other country of the world. Litigation Federal Court is the place in Canada where IP Litigation occurs usually. Provincial courts also exercise concurrent jurisdiction, although to correct the federal register is not the job of provincial courts. For example expunging a trade mark, copyright registration or patent, all these are not come under the duties of provincial court. Similarly issuing nationwide orders is also not the job of provincial court in this matter. When trial division appeals in the federal court then only federal court is liable to deal with those appeals. Similarly appeals from provincial trails go to respective provincial courts. A final appeal option is however available to the Supreme Court of Canada. The Supreme Court is the final authority for solving all the issues related to federal and provincial statute and all related to constitutional law. Supreme Court is also responsible to give judgment on civil laws in Quebec and other common laws in various states or provinces. Theoretically IP protection is considered as a good idea but the recent configuration is something that not many people are agreed on it. Certainly, far more is protected far longer and far more vigorously today than was the case 50 or even 25 years ago: maius, longius, irritandius could serve as IP’s version of the Olympic motto. People belong to private sector or common mass can do one thing and it is that they all can create new IP without asking for permission or making payments for any privileges provided for using previous IP protected work. If there are advantages of new technology then there are disadvantages as well. New technology provides liberties and fresh opportunities in one hand then it restricts your liberties as well on the other hand. Even the positive result could have its doubts on. Therefore in Canada it is practically not possible to copy anything that is length, like a few sentences can be copied but not the lengthy stanzas. Similarly last century’s mark or squiggle can be copied to some extent or the collection of sound or music like birdsong that was recorded 50 years back when there was no risk of any copyright act or violation. It is however not easy to identify if the previous work is protected, even checking the copyright registry can’t help much since a very little work is registered already. It doesn’t matter that the work which was done previously took hardly any time, skill or even money to create it. However although there is the problem of copying previous work but one should not promote such activities or flaws of system of protection. Economic and Political Impacts In the global economy knowledge is that one factor that assures the success for both firm and the nation overall. Innovative ideas, creativity and dissemination of innovative ideas have become the success factor for the nations to improve their economic growth. These innovative ideas also help in improving the quality of life and productivity. Knowledge plays a vital role in the economy of a country especially in contemporary economies. Knowledge based economy is the term given to those countries who are continuously involved in innovation and promoting high tech products. These international markets produce goods that support new ideas and creativity, increase knowledge and promote innovation. These goods or new intermediate products are then used by other firms and get their efficiency improved regarding production processes. This is the way how the economy of any country is improved. The example of new intermediate outcome is the new technologies. However one cannot say that only these industries are responsible to the country to be called a knowledge based economy. Those industries who adopt the innovative technologies, it is a must for them that they have sufficient and capable work force with them to cope up with new technologies. And companies themselves must have standard and high level technological capacity to adapt the technological changes. Finance and communications are the examples of service activities in the organizations. The knowledge based industry can grow in the countries where importance is given to high tech manufacturing industry, finance, insurance, communication real estate business services, community services, social services and personnel services according to the definition of Organization for Economic Co-operation and Development (OECD). Economic Impacts of IP Legislation IP system is responsible for dissemination along with the stimulation of creativity and innovation. The example is the access of certain types of work given to particular users in the exceptional cases of Copyright Act. It is the responsibility of the patent owner to disseminate the technical information to the people regarding the innovation and creativity. This is done in return for a limited time period of market exclusivity. Within an economy the spreading of knowledge plays a very important role especially in the activities related to innovation. The information that is already available related to the existing technologies and innovations of that time helps the innovators and new creators in a way that they don’t replicate the goods or products that have been already created. This step helps in avoiding costly replication and saves time as well. The IP system which is balanced and used effectively can provide a big help in the growth and development of economy of any country. But this type of use of IP is expensive and this cost discourages its users to use the IP for effective purpose. For example it is quite costly to obtain a patent because a service of experts is required like lawyers and patent agents to get the proper patent application to be filled. There are different varieties of fees that can be paid and some of the rights of IP can be obtained but the cost in that case will be added to the already incurred cost. Cost can further be increased if few rights are enforced like disputes that have to be settled down before the courts. It is therefore expensive to enforce property rights as the cost is high and it depends on the firms to explore the benefits before enforcing these rights. It is the prediction and expectation that some sectors will use the IP rights in a better way than it has been used previously to improve the economic growth of their respective countries. For example there are industries that are unable to afford high prices to get patent rights, in that case they need to allocate their resources properly to use the rights and get the maximum benefits. The most prominent examples of this group are the biotechnology industry and pharmaceuticals. Where there are other industries whose income generated by IP is dependent on total income like cultural industries, these industries usually make their business strategies on the basis of IP rights. The intensity of various industries varies according to their usage of IP rights. The intensity varies according to the costs and benefits. This paper identifies manufacturing sectors for each type of IP right and also highlights the importance of IP according to the point of view of Canadian economy as well as knowledge-based economy. This study does not propose analysis of causality among different types of IP rights and other economic activities. This paper does not focus any specific casual role to IP rights; hence does not determine the growth and economy of any specific industry. The purpose of this paper is to develop the correlation between a set of economic activity variables and the usage of various types of IP rights. Impacts of Patents, Copyrights, and Trade marks One of the most important areas of Canadian economy is the patent sector. This patent sector contributes more than 17% to the Canadian GDP or over $130 billion. Strong growth has been witnessed during the years 1992 – 2000. The growth rate was 7.4% annually in comparison with 3.4% growth rate of economy as a whole. Patent sector’s performance depends on the growth in the industries like electronic products, furniture and fixtures, business services and transportation equipment. There are few industries that are considered as closely connected to knowledge based economy. Different methodology is used to define the copyright sector and patent sector. There is no necessity of registered copyright when one wants it to be effective. It is effective already once the work is fixed. Copyright sector can thus be defined on the basis of work protected via Copyright Act. This means that all industries are involved that are in creating, reproducing, making, producing, distributing and selling of work that is copyrighted. One of the tools called marks is used by majority of people for protecting IP than copyright or patents. Virtually all the firms of the industry use trademarks to some extent. Majority of the firms that use trademarks serve as final consumption markets most of the time. 35% of the Canadian economy is based on trademark sector. The growth of this sector is also fast (about 5%) than the other sectors of the economy. This fast growth and development of the industry also shows that there is a growth in the electronic products and industries providing business services. Manufacturing Firms in Canada A company in Canada, in what way, it will use its property rights or IPRs (Intellectual Property Rights) if it is linked with its strategies to being competitive in the market, its activities and the sector in which they works, would be the main goal of this study. In 1980, De Melto, McMullen and Wills presented a survey named Economic Council Of Canada (ECC), in which they studied about the 5 Canadian manufacturing firm's patenting and innovation, 283 innovations were found which were not patented from 20 years, was the conclusion of their research. The innovations of the firm that it considered them as the valuable ones, were only included in that survey. According to ECC survey, from last 20 years, only 32% of reported and important innovations were patented. Differences between the behaviors towards patenting were studied in the ECC by considering five major industries. Based on the structural qualities of any industry, these differences were discussed. The report of the survey deals with several crucial points and provides a detailed explanation on the most important ones. The report explains that the behavior towards patent was orderly increasing as the size firm size increased with foreign counterparts especially those which are controlled by U.S., were patented majorly (about 39%), as compared to the domestic ones that are 23%. It is also to be noted that those technology innovations that were imported from any other country were more patented, when it was compared to those which were made from domestic technology. The patent of any innovation depends upon innovation's cost; it shows direct relation, as the cost of innovation increases, there is a high chance to be patented. IP's security was different in different manufacturing industries of Canada. Robson et al (1988) said that the factors like product's nature, life cycle's stage of that product, and competitive conditions and technology sectors were used to determine the differences exists between all industries to use IPRs. The core sectors industries like chemical and machinery industries that give innovation to whole the economy, patenting was more broaden. Other industries like food, clothing, beverages and wood etc depends upon securing there trademarks and/or trade secrets, and doesn't patent their products. More than for anything else patent was applied on the product innovation, whether it is made from any production innovation process, as compared to the patent applied on the process of production innovations. Lending of process innovation can be easy to handle because it is protective. If a comparison is done between large and small firms, large one brought more the world's first innovation. 15% of World's First innovations were made by the large companies. The use of IPR was done by the firms that brought world's first innovations, as compared to those for low levels of innovation. Whether Canada or abroad, around 80% of world's first innovators used any kind of protection service. On comparison between the Canadian owned and foreign-owned firm, whatever would be the size of the firm, foreign firms use IP protection more than the Canadian ones. The economic Growth of Canadian Manufacturers The manufacturing industry of Canada is roughly comprised of approximately sixty five thousand small and medium sized companies in various sectors. Important manufacturing sectors are electronics, construction machinery, household products, and computer manufacturers. There are various sources and market forces act on the Canadian manufacturing organizations in the scenario of politics and economy. The recession in global markets of US and Europe especially, change in dollar prices and inflation, unstable economic conditions in third world countries affected Canadian manufacturers drastically. The need of strategic initiatives to deal with the local and global completion in a recessive economy is an important consideration of this industry. The prime challenge for manufacturers is to become a global player with a global mindset. The important economic trends in the world are trade liberalization by WTO after no tariff policy, worldwide value chains, supply chain management, technology democratization, and access to greater level of finances globally. The significant changes are required in nearly twenty sectors of Canadian manufacturing. The political and economic stability of the country demands that manufacturing sector adheres to the demands and challenges of the global economy. There are certain harsh facts faced by the sectors in this area which affect the performance in recent years. These factors include the appreciation of Canadian dollar to 60% after 2002which has apparently increased the cost of production and reduce the competitiveness in export markets. Increase in energy costs also affects the prices of manufacturers in international market. Strong global competition especially from the low cost countries like China has increased the pressure on squeezing costs. The recession of certain industries like automobile and financial sector in US had also affected the performance of Canadian manufacturers negatively. The role of government remained positive but the strict credit conditions discourages manufactures to expand on credit due to high cost of capital. The Link between Innovation and Economic Growth Innovation is the most important factor of the economic growth of any country. The function of the technological progress is the economic growth. Technological progress can be achieved by disseminating the technology and in turn it affects the economy in a positive way. Innovated firms since last three years were 80 percent. The firms which are busy in producing innovative product use this IPR service more than other firms in manufacturing sector. Minimum 1 IPR tool is used by approximately 72.6% of innovating companies who accomplished their aim that is almost three quarter. And the companies, from last three years, whose innovations were failed, are about one half of the total who used IPRs. During the period of 1997 to 1999, as shown in table 3, those firms which were not busy in making any innovative product but used IPR; their rate is the lowest that is 35.9%. Every IPR service have faced almost same model. Use of IPRs and Type of Innovation On the basis of kind of new invention or innovation usage of any IPR is done, as explained in the start. Appropriate way for the safety of any product, whether invention of innovation is IPR, and in the way of suitable benefits of innovation from way of innovation or invention, quality to maintain the secret is understood as more influenced method. But, according to the survey of 1999, the distinction found between product and process innovation should not be considered too much be, reason behind that many of the companies have showed that they are manufacturing combination of more than one process or product innovation, and ratio of these companies is about two-thirds or 66.8%. Those firms that introduced both process and product innovation at the same time, implement IPR service more than those who just innovated any product or any process. The focus of companies on the IPR or patent service is the major difference seen between the product and process innovators. If we compare both, product innovators are more conscious or about 3 times more sensitive towards its privacy, while process innovators are not. The companies of core sectors, means they are directly dealing with the innovation of technology, competition is seen. The most highly protection seeker companies are those who are of core sector, as compared to the secondary ones and secondary companies are more conscious about patent as compared to other sector companies. All other security methods are completely utilized by these highly competitive companies, as compared to less competitive, secondary and other sector companies. Every field of technology portion, there are increased application of any IPR accordingly the size of the company and the firm which would be more original or more innovative will utilize this service more than any other. As assumed that large firms highly go for patents because they are more innovative, they earn more profit and then they invest in their competitive field for more development, they invest in field of IPR protection also because they fulfill the legal proceedings. Minimum one IPR is applied by the all companies that have employed at least 500 people. Patents are utilized by 80 percent of these companies, and the companies that have employed 20 to 100 people, and considered as small companies, out of them 55 percent have used patents. Inter-industry Differences in manufacturing firms Although the companies of similar technology products use same strategy of IPR, Change exists between the all industries of separate sectors. Cohen, Nelson and Walsh in 2000, said that this change exists because of the expected influence of the IPRs. Pharma companies of Canada are very much conscious about its IPR, just like other countries. At least one IPR its trademarks, patents and agreements that are private, are utilized by almost all (94.2%) companies of the country. Patents application changes from industry to industry. As it is perceived that frequent use of IPR is done by the chemical and Pharma industries but actually it is not true, they are not the most highest user of IPR, said by Levin et al., 1987; and Cohen, Nelson and Walsh in 2000, also by Baldwin in 1997. In 1999, survey showed that highest number users of IPR are of agriculture sector, mining machinery and construction having rate about 72.3 percent companies which are considered as innovative, used IPR. 66.1% was the rate of companies of electrical equipment and components producing. And the third one was of Pharmaceutical having rate of 59.4%. Almost all of computer and peripheral industries used confidential agreements or IPR, and half of them were utilized these patents and trade-marks. Trajtenberg in 2000 said that the reason behind not using patents can be that Canadian companies of this field are not the best ones, and cannot brought innovations. Research and Development Necessities The companies working on any sort of project must have an innovative idea for the best implementation of idea generated from different purposes of research; research may be the internal or external. R&D is not necessarily the most important way to generate or implement the innovative or different idea. An overview of all firms (innovators and non-innovators) shows that, indeed, firms carrying out R&D use all IP protection instruments more often than firms that do not. To illustrate this, we show the relationship between the use of IPRs for the sub-population of innovating firms, separately for those that carry out R&D and those that do not. This is the process that remains same in any size of organizational technology sector. This is important for the organizations to protect their IPs for the safety of their ideas and area of concern through which they will be going to implement that innovation; this is particularly notable for firms that collaborate often with universities and colleges. These firms use IPRs, especially patents, more often than other firms do. In order to be the safe and secure operating firm, one should have patents as much as possible so that nobody can copy or misuse their idea. Many firms create monopoly by having patents of unique product for long term for example a medicine manufacturer develops the cure of malaria, then as the market pioneer of that product it can get the patent of medicine for 5 to 10 years so that nobody can produce or copy the formula of that particular medicine for 10 years and the manufacturer will having monopoly in that product. The accelerating pace of technological change and innovation, as well as the recent introduction in Canada of a first-to-file patent system has increased the propensity to file patent applications. Many firms are patenting their ideas in Canada and USA both but some apply for patents in USA only. Conclusion Most of the companies in Canada have a high opinion of the effectiveness and efficiency of IP protection, 66.9% of manufacturing firms in Canada use at least one of many IPRs. Organization use IP protection feel efficient work environment as compared with firms who have no idea about IP protection system, also the firm using IP protection innovated the ideas more frequently than the firms who did not and the latter use these instruments more than non-innovators. The proportion of firms that use IPRs is increasing with firm size. Firms operating in the low-tech other sector are at lowest level of IPR users. There is a relation between the use of IPRs and firm size within each technology sector. This provides a conclusion that there must be an encouragement for small and medium sized firms for the usage of IP protection; although it costs high while learning it but necessary to protect their innovations and the plans of implementation. The Canadian manufacturers have proved to be innovative, resilient, and responsive to the global changes but need to improve on the fronts of product development and innovation to meet international and local competition. The positive relationships can be developed through trade liberalizations, trade partnerships with firms in US, exploring new developing economies as an export target, and protecting intellectual properties are some suggestions for this sector. The boom in resources both tangible and human due to heavy immigration in Canada and improved economic situations of the country despites recession facilitate the manufacturers to exploit new opportunities. Te framework of economic changes, political alignments, and protection of intellectual property are some important consideration in this scenario. References De Melto, Denis P., Kathryn E. McMullen and Robert M. Wills. 1980. Preliminary Report: Innovation and Technological Change in Five Canadian Industries. Discussion Paper No. 176. Ottawa: Economic Council of Canada. European Commission. 2001. Building an Innovative Economy in Europe: A Review of 12 Studies of Innovation Policy and Practice in Today’s Europe. Luxembourg: European Commission. OECD.1996. The Knowledge-based Economy. Paris: Organisation for Economic Cooperation and Development. ——. 1999. Science, Technology and Industry Scoreboard, Benchmarking Knowledge-based Economies. Paris: Organisation for Economic Co-operation and Development. Statistics Canada. 2001. Industrial Research and Development, 2000 Intentions. Ottawa: Statistics Canada. Trajtenberg, Manuel. 2000. Is Canada Missing the ‘Technology Boat?’ Evidence from Patent Data. Micro-Economic Policy Analysis Branch, Discussion Paper No. 9. Ottawa: Industry Canada. Read More