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Creativity, Innovation and Economic Growth in the 21st Century
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by OECD 23 Intellectual Property

An Affirmative Case for Intellectual Property Rights

A BIAC Discussion Paper

Executive Summary
Of course, the ultimate cause of all innovation is human creativity. But innovation does not occur in a vacuum; it requires a workable structure of incentives and institutions. Government policies that foster the right enabling conditions for innovation, and that allow entrepreneurship and markets to flourish, can provide a climate that encourages innovation and economic growth in the 21st Century. Increasingly, one of the core enabling conditions is intellectual property protection.

The American inventor and entrepreneur, Thomas Edison, once said, “the value of an idea lies in the using of it.” IPRs have become a significant factor in both creating and using ideas that are translated into knowledge and inventions to promote innovation and economic growth. With the advent of an increasingly knowledge-based society, intellectual property protection ensures that innovators and creators have sufficient incentive to bring their works to market and to build on the innovations and creations of others for the benefit of society.

Intellectual property rights remain crucial policy tools for promoting innovation and economic growth in the 21st Century for many reasons, including:

1. IP protection stimulates innovation and spurs sustainable and widespread economic growth by providing incentives that ensure a sufficient supply of new inventions and creations
By providing certainty and incentives for invention and creation to overcome the problems of market failure with public goods, by enabling technology transfers, and by stimulating additional creative activity, IPRs stimulate innovation and create economic growth through increased productivity, increased trade and investment, and enhanced consumer welfare. As efficient market-oriented tools, IPRs are likely to enable firms to more fully appropriate the return from risky and uncertain investments. At the same time, however, it is important that critical attention be given to the quality of IPRs.

2. IPRs promote the disclosure of inventions and pioneering information, which stimulates innovation across and within industries
Intellectual property rights are a market-based mechanism for disseminating knowledge. Public disclosure is one the most important functions of most IPRs, and one of the most overlooked. IPRs spur subsequent creative efforts facilitating a vigorous cross-fertilization of ideas.

3. IPRs promote risky, uncertain and costly investments
Forward-looking IPR protection provides the incentive for firms and individuals to invest in generating new technology and new products, including incremental improvements, especially where the returns from investment are longer term, where the investment involves significant costs or risks, and where the invention or creation may be easy to copy or imitate.

4. IPRs empower consumer protection in a global economy
The global economy increasingly depends on the international recognition and dissemination of IPRs related to branded products. Trademark protection is crucial to maintaining high-quality goods and services that earn consumer trust. The large and growing problem of counterfeiting, however, is a serious threat to legitimate commerce, as well as to public health and safety. The booming market in fake products too often puts the health, and even the lives, of consumers at risk. Counterfeiting also has a serious impact on reputation and consumer trust.

5. Effective competition policy depends on an appropriate IP regime
Intellectual property and competition policy are vital to maintaining competition and contestable markets because both encourage innovation and enhance consumer welfare. They, increasingly, should be viewed as complementary policy tools.

6. Securing the benefits of IP for the digital economy
Computers, telecommunications, semiconductors, entertainment and education content and other information-based sectors increasingly depend on IPRs as the legal and economic backbone of these industries. Digital piracy, however, threatens the continued growth of the digital economy. IPRs also play an integral role in broadband adoption and in creating new technology platforms and markets through de facto standards and network effects.

7. IP rights create new markets because IPRs are tradeable and transferable
IPRs facilitate the operation of markets and help create new ones because they are tradeable and transferable. The linkage between IPRs and contractual mechanisms such as voluntary licenses, distribution agreements, rights assignments, royalty agreements and other market-oriented transactions and relationships increasingly shapes the pace and direction of innovation processes in positive ways.

8. IP enables innovation in key economic growth sectors, such as healthcare
The large R&D, regulatory, clinical trial and other costs associated with healthcare innovation only can be sustained by innovator healthcare companies if the economic climate and policy framework encourages and supports the role of IPRs throughout the increasingly complex and risky process of innovation.

9. IPRs play a crucial role at the intersection between science and innovation
The quality of all our economies depends on their ability to acquire, protect, translate, combine and apply knowledge through new university-industry-government intersections and public-private partnerships. IPRs play an increasingly crucial role in facilitating these positive trends.

A Proposed, Proactive IPR Action Agenda for “Value-Added “ OECD Work Concerning Intellectual Property Rights

  • Integrate IPRs more fully, including the quality and the scope of IPRs, as a core enabling condition for innovation in all OECD activities
  • Address the changing role of IPRs at the interface between science and innovation and in the interactions between different stakeholders
  • Combat counterfeiting through new OECD work and the development of a new international anticounterfeiting convention that will provide for effective enforcement.
  • Develop new economic methodologies and economic indicators for measuring IPRs and understanding the increasingly critical role they play in stimulating innovation and economic performance
  • Initiate a forward-looking project about the growing importance of IPRs in “converging technologies” by focusing on the changing role of IPRs in three key 21st Century drivers – biotechnology, information technology and nanotechnology
  • Provide comparative analyses and undertake “value-added” reviews concerning the intersection of IPRs and competition/antitrust policy
  • Focus on health-related innovation as a principal policy challenge for the early 21st Century, and develop new frameworks and policies for linking IPRs and health innovation
  • Analyze the role of markets for technology and the economic accounting of intellectual assets

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