According to the definition of the World Intellectual Property Organization (WIPO), intellectual property now applies to creations of mind or invention; literary and artistic works; and symbols, names, images, and designs used in commerce. Legally, intellectual property includes patents, trade secrets, trademarks, and copyright. Scholars prefer an even broader view of intellectual property. They prefer a definition that includes individual creativity and socially adopted innovations, as well as collective knowledge (Gollin, 2007).
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Intellectual property rights (IPR) are legal entitlements granted by governments within their respective sovereignties that provide patent, trademark, and copyright owners the exclusive right to exploit their intellectual property (IP) for a certain period. Defined another way, IPR, broadly, are rights granted to people who create and own works that are the result of human intellectual creativity. The main intellectual property rights are copyright, patents, trade marks, design rights, protection from passing off, and the protection of confidential information.
IP is normally classified into two categories namely industrial property and copyright. Industrial property includes inventions (patents), industrial designs and trademarks and copyright comprises of musical works, literary works like novels and poems and artistic works like photography, paintings and sculptures for instance. The basic rationale for IPR protection is to provide an incentive for innovation by granting IP owners an opportunity to recover their costs of research and development (NERA Economic Consulting).
As pointed out above, IP can be divided into two categories namely industrial property and copyright. Copyright assures legal protection for literary works (for example poems, books and film scripts), musical works, artistic works (such as paintings and sculptures), photography, computer software and cinematographic works. Copyright law is meant to protect authors by giving them special rights to commercialize copies of their work in whatever material form (printed publication, audio recording, film, broadcast and so on) is being used to communicate their creative expressions to the public. Even though registration is not normally necessary, it is prudent for authors to have their name put on the work. Nonetheless, legal protection includes the “expression” of the ideas contained, not the ideas themselves. Copyright offers owners exclusive rights, usually for the length of the author’s life plus 50 years. As for audio recordings, copyright is usually bestowed for 50 years and is accessible to the author or company in charge for creating the recording.
Authorization is probable to involve payment of royalties. These are known as moral rights and stay with the author even if the latter transfers the copyright to somebody else. Economic rights allow the rights owner to obtain financial compensation from the exploitation of his/her works by others. Copyright owners are granted rental rights in order to receive royalties for commercial rental of their works.
Industrial property is clearly specified in the Paris Convention for the Protection of Industrial Property (Article 1 (3)): “Industrial property shall be understood in the broadest sense and shall apply not only to industry and commerce proper, but likewise to agricultural and extractive industries and to all manufactured or natural products, for example, wines, grain, tobacco leaf, fruit, cattle, minerals, mineral waters, beer, flowers, and flour.” Industrial property takes a wide array of forms. These consist of patents to protect inventions and industrial designs, which are visual creations establishing the appearance of industrial products. Industrial property also includes trademarks, service marks, layout-designs of integrated circuits, commercial names and designations, as well as geographical indications, and protection against unfair competition. In some of these, the aspect of intellectual creation, although existent, is less clearly defined. What matters here is that the object of industrial property typically consists of signs conveying information, particularly to consumers, as regards products and services offered on the market. Protection is intended against unauthorized use of such signs likely to deceive consumers, and against deceptive practices in general.
A trademark is a sign which helps in making the distinction of the goods or services of one company from those of another. Such signs may use words, letters, numerals, pictures, shapes and colors, as well as any combination of the above. It usually consists of a distinctive design, word, or phrases, generally placed on the product label and sometimes demonstrated in advertisements. For example, L’Oreal is a trademark that can only be employed on products produced by the L’Oreal Company.
A lot of countries are now allowing for the registration of less conventional forms of trademark, such as three-dimensional signs (like the Fanta bottle or Toblerone chocolate bar), audible signs (sounds, such as the roar of the lion that precedes films produced by MGM), or olfactory signs (smells, such as perfumes). But many countries have laid down perimeters as to what may be registered as a trademark, generally consenting to only signs that are visually perceptible or can be represented graphically.
When utilized in association with the marketing of the goods, the sign may appear in advertisements, for example in newspapers or on television, or in the windows of the shops in which the goods are sold. Trademarks facilitate the choice to be made by the consumer when buying certain products or using certain services. The trademark helps the consumer to identify a product or service which was already familiar to him or which was advertised. The owner of a registered trademark has an exclusive right as far as his mark is concerned. It gives him the right to use the mark and to prevent unauthorized use of it.
Legal action can be undertaken against those who violate the patent by copying the invention or selling it without authorization from the patent owner. Patents can be bought, sold, hired, or licensed. When doing a patent application, some criteria need to be satisfied. The patent examiners should be convinced that the ‘invention” is
Several types of patent may be granted (Lesser 1991, p. 14):
Uses: covers a precise use only. Hence, it would cover the above drug uniquely as a cure for cancer and not for any uses that are later discovered.
Products-by-process: consists of only products manufactured by the process described in the application. Therefore, it would cover the drug, but only when manufactured by a particular process.
It must be noted that not all inventions that satisfy the above conditions can seek protection by patent. In many countries, medicines and genetically modified organisms cannot be patented at all. There are variations in national patent laws because each country has its own preferences when it comes to defining what inventions may be patented and these laws normally conform to the country’s perceived national interest.
HISTORY OF IPR
Since the first intellectual property system came into existence in the West, humanity has gone through nearly four hundred years. In the nearly four hundred years of history, intellectual property rights have completed their conversion from feudal power to people’s private rights. Today, it is irrefutable that the revolution brought by IPR has not only broadened the conventional content of property rights system, but also led the intellectual property system to become the world’s most significant property rights system, and also made a deep impact on mankind in the 21st century. However, the emergence of this new system is not a straightforward process. With the advent of new technologies and human cognitive aptitude, as an implement to balance the private rights and public interests, the intellectual property system has always stumbled upon challenges and disagreements.
The IP system was first introduced in the west and was later established throughout the world. For the IPR system, Patent law is the first system to be introduced in the world. The coming out of the patent system gave birth to human intellectual property system. The United States even established the principle of protection of proprietary technology in the Constitution, made patent protection to the height to constitutional level.
The history of copyrights has some strong monarchical power background. Before the beginning of the copyright system, many countries have had long-standing system of printing privileges. According to this franchise system, the king can grant a printed right to license the printer rather than the copyright owners. In 1709, Britain built the first modern copyright law – “the Queen Anne Act.” Following this, the United Kingdom, France and Germany set up the copyright system respectively. Under the influence of these countries as a pioneer, the copyright system has been gradually acknowledged by Governments. Trademarks originated in Spain. The trademark system in the modern sense started in the 19th century. In 1857, France established the first legal system in the world to protect trademarks. Consequently, the trademark system rapidly grew in other parts of the world.
Many countries accepted and implemented a variety of forms of intellectual property rights in different approach and evolution. At the same time, new types of intellectual property rights have continued to be progressively incorporated into the system of intellectual property rights. All these developments reveal that the historical development of the intellectual property system has gone through a stage of steady development. By the end of the eighties, the new trend of civil legislation began to emerge. Many countries tried to develop the Code of intellectual property or incorporate intellectual property law into the Civil Code. These activities started out a wave of codification of intellectual property rights.
Since the late 19th century onwards, along with the new technological development and the extension of international trade, intellectual property transactions in the international arena have also started with the formation and development. At the same time, there was a big contradiction between international demand for intellectual property rights and regional constraints. In order to find a solution to this contradiction, some countries have signed the International Convention for the protection of intellectual property, and established a number of global or regional international organizations. A system of international protection of intellectual property rights was set up in the world.
The convention of “Paris Convention for the Protection of Industrial Property”(set up by France, Germany, Belgium, and 10 other countries and launched in 1883) is the first international convention in protecting IP. “Berne Convention for the Protection of Literary and Art” is the first international convention about copyright. The establishment of International Conventions specified that the intellectual property system had reached the international stage. Among them, approved under the framework of the World Trade Organization (WTO) in 1993, “Trade-Related Aspects of Intellectual Property Rights Agreement”(TRIPS) succeeded to come to conclusion between developed country and developing country, which amplified the national standards of protection of intellectual property rights to a unified higher platform. More about these regulatory bodies and agreements will be discussed afterwards.
In this new century, intellectual property rights system is facing new challenges. The adverse effects of intellectual property system are appearing slowly. In some developing countries, the protection of IPR has brought about the exorbitant cost of some medicines and other necessities; the price of some products with IPR is so high that it cannot meet the needs of people in difficulty. To solve these problems, developed countries have begun a new set of amendments to the legislative activities of the intellectual property system. New laws and regulations continue to be adopted, and the scope of intellectual property’s objects has continued to grow.
In spite of this, the concern for IPR system has become an appealing trend. Developed countries take its monopoly of advanced scientific knowledge as an alluring weapon for technology leadership. Developing countries take the absorbing and creating knowledge as an important way to catch up with developed countries. It can be anticipated, that the next era is not only to develop and possess social substantial resources, but also to develop and possess mortal knowledge resources. Moreover, with the expansion of global economic integration, the international process of intellectual property system will definitely speed up. Protection of intellectual property rights has not only become the compulsory conditions of a country to promote economic development, but also it is considered a prerequisite so as to maintain international competitiveness.
IPR IN DEVELOPED COUNTRIES
As a social system stimulating innovation, the intellectual property system has been established in the Western countries at first, and has later spread in the world. Walking along with its historical development, the course of intellectual property system in Western countries has gone through three main stages which called as germination stage, development and internationalization stages. Intellectual property, possibly a current phenomenon and perhaps too narrative to some, nevertheless has portrayed western economics, multi national co-operations and supported western economic colonization.
As discussed previously, IPR was and still is a controversial subject. While Europe may have fared fairly well in comparison with the US, problems are rising in the EU as well. From an economic perspective, there is a need for harmonizing European administrative and legal practices in the area of IPRs while increasing the quality standards used in these system. Moreover, a new balance between the owners of rights and users of the protected subject matter needs to be found in many fields.
With its Lisbon Agenda, the European Union has nurtured a future vision of a region concentrating on learning and innovation so as to sustain high levels of productivity and wealth. To attain these objectives, EU policies will need to promote innovation and encourage investments in new and more competent products, processes and organizational routines. Intellectual property plays an important part in this vision, and in several areas, the EU has embarked on a course meant to reinforce rights that foster innovation.
Examples of some controversies in Europe involve the arguments on copyright and Digital Rights Management (DRM) systems, on the protection of computer software through patents and/or copyright, and the degree of patent protection for biotechnological inventions.
In many jurisdictions, the rights of IPR owners have been reinforced as compared to the rights of other parties. Wholly new IPRs (such as for database protection) have been formulated. These amendments have brought about a number of policy issues.
Patent systems are under strain not just in Europe, but in other countries as well. Like in the US, both patent submissions and patent grants at the EPO have increased much faster than Research and Development (R&D) inputs in OECD countries. From 1990 to 2000, EPO patent applications rose from 70,955 to 145,241 (an average growth rate of 7.4 per cent per annum) while OECD R&D inputs grew from $398 to $555 billion which reveals an average annual growth of 3.4 per cent. As for the actual grant rate (the share of patent applications leading to a patent grant) remained almost stable at about 65 percent for patents with application years from 1978 to 1995.
There are three major obstacles to the future design of European IPR policies, the first being harmonization. If the EU wants to become a region focusing on innovation without being bothered by national barriers, there is definitely a need for coming up with truly European IPR policies and institutions. That comprises of harmonized interpretation of IPR laws, harmonized court proceedings and the setting up of legal institutions which resolve cases that have been very much controversial.
A second significant criterion is the focus on balance. The naive belief that more and stronger IPRs are always excellent for innovation has been contested by scientists in empirical and theoretical work over the last decades. Balance in copyrights means that fair use of rights of consumers have to be considered seriously.
Third, IPRs that are granted on the basis of an examination process should be of high quality in the sense that they create legal certainty, rather than uncertainty. European institutions, in particular the European Patent Office, should seek to grant high-quality patent rights which are based on tough standards for novelty and inventive step.
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Despite a complete array of rules on the protection of intellectual property, counterfeiting and piracy have continued to rise in the world because offenders have the possibility of making considerable profits without risking any serious legal consequences. In July 2005, the Commission presented a double proposal for a directive and a Council framework decision aimed at introducing criminal sanctions for IPR infringements. The general penalty is for the court to grant damages to the patent owner, requiring the offender to pay a certain amount of money to the patent owner.
IPR IN DEVELOPING COUNTRIES
Countries vary to a great extent concerning the protection and enforcement of IPR, with developing countries being normally associated with much lower standards for IPR protection than developed countries.
This amount does not take into consideration any imitation of products manufactured and consumed in the same country or counterfeit digital products sold over the Internet. Some of the theoretical literature considers a stylized world with a technologically developed “North” and a less technologically developed “South.” These models are based on the premise set forth in Chin and Grossman (1988) “where the North innovates and the South imitates the Northern technologies. The main finding of Chin and Grossman (1988) was that a persistent tension exists between the North and the South-while the North innovates, the South chooses low levels of IPR protection because it benefits from the innovative output of the North.”
The debate for the implementation of ‘appropriate’ intellectual property rights in the developed countries is fueled since the advanced countries faced a menace to their pioneering technological and non- technological innovations and their commercialization in the developing nations.
Subsequently, developing countries have long been demanded by developed nations to implement intellectual property rights. The central apprehension by the developed nations is to protect the innovations in the less developed nations from the illegal counterfeiting and copying. The discussion between both parties, that is, industrialized countries and developing countries is getting intense since the last two decades. The developing countries are parted over the debate due to their economic conditions, FDI and technological sophistication. The concern for the developing countries is the eventual economic repercussions for the implementation of such intellectual property rights in their respective countries. The case can be even harsher for the Least Developed Countries (LDCs), where intellectual property rights are seen as the origin for the high technology cost and barriers for technology access to public.
On the other hand however, increased technology transfer with foreign direct investment may somehow validate such regime. But such ‘profitable’ offers as substitute for IPR in the developing nations, according to some developing countries, are in view of the developed countries benefits and they would be unable to heighten the economic conditions in the developing countries from their present conditions. The social benefits obtained from certain economic systems, established in the advanced nations may not affect the social systems of the developing nations as wished for. So far, different measures, particularly led by the United States have actually compelled the implementation for the intellectual property rights in the developing countries, exclusively backed by the strong business communities in the United States.
There is a need for IPR because, without them, a piece of potentially important information would be subject to overuse, to the point that access to it is not costly, from the perspective of its development and expansion. This use would quickly exhaust the economic worth of the information, limiting incentives to produce it. The contrast between the mounting need for international exploitation of intellectual assets and the territorial (and often underdeveloped) nature of rights to do so resulted in huge pressures for general change in recent years. These pressures triggered broad bilateral, regional, and multilateral negotiations on IPRs, which engendered a significant expansion of required minimum standards, especially in developing economies and countries in transition.
The World Intellectual Property Organization (WIPO) is an international organization set up to ensure that the rights of creators and owners of intellectual property are respected throughout the world and that inventors and authors are thus recognized and rewarded for their ingenuity. As a specialized organization of the United Nations, WIPO exists as a forum for its Member States to create and synchronize rules and practices to protect intellectual property rights. Most advanced nations have protection systems that are centuries old. Many new and developing countries, however, are now building up their patent, trademark and copyright laws and systems. With the rapid globalization of trade during the last decade, WIPO plays an important role in helping these new systems progress through treaty negotiation, legal and technical assistance, and training in various forms, including in the area of strengthening of intellectual property rights. WIPO also caters for international registration systems for patents, trademarks, appellations of origin and industrial designs. These hugely simplify the process for concurrently seeking intellectual property protection in a lot of countries. Instead of having to file national applications in different languages, these systems allow applicants to file a single application, in one language, and to pay a single application fee.
In the 1990s the world has shifted radically toward an international system of IPRs.
Apprehensions about the piracy and forgery of intellectual property have been increasingly raised in developed countries, where much of the intellectual property is located. As a solution to these concerns, the protection of intellectual property was a major area of negotiation at the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). The result of the negotiations was the founding of the World Trade Organization (WTO) to govern the GATT, the Trade Related Aspects of Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS).
The TRIPS Agreement is an integral and legally binding part of the WTO that requires all member countries (142 countries as of July 2001) to 12 grant patents for inventions in all fields of technology. It requires them to protect plant varieties either by patents, by “an effective sui generis” system or by a combination of both. Adherence to the TRIPS agreement for most, if not all member countries, means introducing more severe intellectual property protection (IPP). This is expected to have extensive consequences on the international transfer of technology and trade relationship between the developed and developing countries, especially in agricultural research.
Finally, in respect to the large and costly institutional and legal changes these provisions need in countries with restricted IPR systems, transition periods are granted. General obligations (national treatment and MFN) were to be operational immediately upon the implementation of the WTO. Developing countries and countries in transition should meet the detailed obligations within five years (that is, by January 1, 2000) and least-developed countries must meet them within eleven years (by January 1, 2006). The latter countries may, upon request to the TRIPS Council, be given extensions for an unspecified period, signifying that they have been given an opt-out procedure. Countries are free to accelerate their adherence to TRIPS.
The TRIPS Agreement leads in a new global framework for IPRs. It clearly built up minimum standards for protection, moving the system closer to harmonization, and inclines the balance of economic rewards toward innovative interests and away from counterfeiting and imitation. The TRIPS Agreement provides minimum national standards for levels of protection to the creators of intellectual property. Article 27.1 of this Agreement requires members to provide for patents “for all inventions, whether products or processes, in all fields of technology”.
BENEFIT OR DETRIMENT FOR DEVELOPING COUNTRIES?
The net economic effect on developing nations from establishing and protecting IPR is not completely obvious. Some have insisted that strengthening IPR protection will improve economic growth and wellbeing in developing nations, and others argue that it will be unfavorable, thereby diminishing overall welfare. Among the possible costs of this type of policy are decreased incomes in industries that depend on copying the products of industrialized nations and the related increases in the prices of protected commodities. For example, increasing IPR protection in the less-developed countries can promote innovation in there.
Certainly there are certain short-term costs linked with intellectual property rights for the developing nations, like higher prices for the technology and protected goods. Given this, the case for tighter intellectual property rights in these countries must rely on long term benefits like superior technology or foreign direct investment inflows and bigger incentive to national innovation.
FDI inflows in a country come mostly in the form of Multinational Corporations (MCs). MCs are able to stay really competitive when they are successful in transferring IP and other intangible assets to their global locations of operations. These sources of competitive advantage can be anything from a proprietary manufacturing plan for semiconductors to a cleaning solvent formula. But before taking any decision to set up any assets in a country, multinational managerial committees should analyze whether the country where they are going to transfer their technology has appropriate IPR to protect the organization against offenders and imitators.
Studying the impact of more rigid IPR protection in a less technologically developed South (developing countries) on welfare in both the North (developed countries) and the South, Diwan and Rodrik (1991) found that “net-innovation consuming countries (the South) were only motivated to safeguard IPR if the type of innovation demanded was different from the type demanded in the net-innovation-producing countries (the North).”
Evenson (1992) refers to these middle-income countries as being in the “technology draught,” because they tend to focus R&D efforts on adaptation, imitation, and reverse engineering. As economies become more innovative at the uppermost levels of income, patent protection tends to increase dramatically.
According to World Bank Global Economic Perspective, there are certain particular reasons for advanced countries, and interestingly for the developing nations to follow the TRIPS agreement, that is, it may offer developing countries improved access to agricultural and apparel markets in prosperous nations, an expectation that tighter IPR would also promote further technology transfer and innovation. However, according to World Bank, the guarantee for durable benefits seems doubtful and costly to accomplish in many countries, especially the Least Developed Countries (LDC’s). Moreover, the administrative costs and tribulations with higher prices for medicines and crucial technological inputs loom large in the minds of policy makers in developing nations. Many are favoring considerable provisions in the agreement. Some developing countries also applied for the provisions in implementation for the patent protection, particularly in pharmaceutical industry.
In developing countries, the lack of international IPR protection has helped in creating massive employment. India is one of the leaders in reproducing medicines and drugs manufactured by foreign companies. The reason it can do so is because India’s patent act forbids product patents for any invention intended for use or capable of being used as a food, medicine, or drug or relating to substances prepared or produced by chemical processes. This in return has negative effects on the international pharmaceutical industry. The US pharmaceutical industry is estimated to incur annual losses of $450 million due to imitation. It would prove to be very costly for these countries to adopt the IPR laws overnight in its totality. This would mean loss of job for many; inadequate access to medicines and drugs for needy people and all these could eventually lead to social unrest.
Countries with weak IPR protection are well positioned to gain an immediate benefit to lower-priced goods or technologies. Countries with lack of strong IPR protection must therefore compare these benefits with the loss of international willingness to invest resources or develop products, as well as lessened innovative commodities within the country.
Maskus (2000) notes three potential costs namely:
1. Higher prices for imported products and new technologies under IPR protection
2. Loss of economic activity, by the closure of imitative activities.
3. The possible abuse of protection by the patent holders, especially large foreign companies.
Some countries have accepted to adhere to TRIPS in order to benefit from concessions in other (non-technological) fields of economic activity, such as more aid, freer and greater access to developed country markets for key exports and so on. Whether they really benefited in these ways stays an open question, since neither the costs nor the benefits of TRIPS associated concessions have been appropriately calculated. Nonetheless such implementation would also fuel the local innovation in the developing nations, permitting them to import the foreign technologies and have hands-on experience in learning and using the technologies.
In addition, the strength and efficiency of enforcement efforts also differ with economic development stages. This reveals both a reluctance to bear the expensive administrative expenses related with enforcement and the incapacity to handle many of the complex technical and judicial matters linked with the use and infringement of IPRs. However, there is an essential tradeoff between the market power caused by stronger IPRs, which are likely to improve the ability of firms to fragment markets and limit trade, and the market-expansion impact of increasing the costs of counterfeit activity.
Detractors of the TRIPs Agreement claim that the step towards more rigid IPR may harm poor