The Enforcement of IP Rights for R&D Investors.

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Introduction

Intellectual property rights play a vital role in socio-economic development. Nations attempt to have stronger IPR knowledge-led R&D outputs and other forms of technological development. The character of IPR is also significant in the protection of the results of research. Existing IPR tools which are developed by IPR experts at some level are problematic to use and handle. R&D outputs at the national level can be robust. This study elaborates on the need for intellectual property rights for R&D investors and the issues to be addressed in developing an appropriate IPR framework. For this purpose, it will analyze the IPR provisions of the Horizon 2020 European Union Framework Programme for Research and Innovation and the various issues involved.

The Impact of Intellectual Property Rights on an Industry’s R&D Intensity 

Since the intellectual property has value and the recognition and enforcement of the IP rights of a firm or individual protect that value, we should expect to observe a relationship between the provision and enforcement of IP rights and an industry’s IP or R&D intensity. In particular, IP rights and enforcement allow a firm or industry to earn greater revenues from the goods or services that body their IP, which justifies the costs entailed to develop the IP and produce the goods or services. Without the rights protected by patents and copyrights, a competitor can reproduce the IP and sell the goods or services that embody it at much lower prices, based on their marginal costs of production without considering the R&D investments required to develop the underlying IP.

The R&D Intensity of Indian Industries 

An analysis of well-known relationships between IP protections and an industry’s R&D intensity over time within a nation and across nations at a given time.  The study also established a relationship across the American economy between an industry’s R&D intensity and the rate of growth of its value-added, employment, and wages. 

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India, issued in the annual reports of India’s Department of Science and Technology (DS&T).  This data permits us to track the R&D intensity of Indian industries, defined as an industry’s R&D as a share of that industry’s productivity.  We emphasize here the period from 2000/2001 to 2009/2010, during which India became compliant with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and its G-P Index score for IP rights increased from 2.27 to 3.76, or 65.8 percent. Focus on those industries with above-average R&D intensity in 2010 – biotechnology, pharmaceuticals and drugs, information technology, scientific instruments, telecommunications, transportation, and medical and surgical appliances.  Using these data, we measure the sensitivity or elasticity of each industry’s R&D intensity to India’s improvements in its IP regime.

Table 1: The R&D-Intensity of Indian Industries and Improvements in IP Rights in India, 2000/2001 and 2009/2010 

  2000/2001  2009/2010  Change  Elasticity: R&D Intensity and  the G-P Index 
G-P Index Rating  2.27  3.76  65.8%  — 
R&D Intensity 
All Private Industries  0.61  0.82  34.4%  0.52 
IP/R&D-Intensive Industries 
Information Technology  0.90  4.87  441.1%  6.70 
Scientific Instruments  1.41  2.83  100.7%  1.53 
Transportation  0.81  1.37  69.1%  1.05 
Drugs & Pharmaceuticals   2.32  3.22  38.8%  0.59 
Medical & Surgical Appliances  0.76  0.93  22.4%  0.34 
Biotechnology   1.81  1.81  0.0%  0.00 
Telecommunications  1.25  1.24  – 0.8%  – 0.01 

 

India is building a number of advanced industries to compete with companies from the world’s most developed nations in both the Indian and global markets.  Their success will depend in large part on their capacity for innovation.  Economists have long-established, however, that such innovation depends on effective investments in R&D, and those investments, in turn, depend on the strength of a country’s IP regime.  This study has investigated the impact of India’s current IP regime on the R&D intensity of India’s advanced industries, how improvements in India’s IP rights and protections would affect the R&D intensity of those industries, and how increased R&D intensity would affect their value-added and wages per employee.  

Protection of R&D under TRIPS 

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The presence of IPR laws is important for protecting and managing research consequences. Nations must enrich awareness on intellectual property laws and their functions at national and international levels to protect patentable inventions in a legal way. R&D innovations can be protected under the TRIPS Agreement which covers seven forms of intellectual property, namely, patent, copyright, trademark, industrial design, geographical indication, layout design of a united circuit, and protection of undisclosed information or trade secrets. According to Article 27 of the TRIPS Agreement, all inventions regardless of the field of technology would be eligible for protection. Stronger protection checks imitations while simultaneously attempting to strengthen the ownership of the innovation. In other words, strong IPR protection by checking all possible imitations does not permit to offer ownership when the work does not entitle to receive it. It also has a positive effect on economic growth by increasing the average duration of monopoly on power of goods and an increase in the average price of goods in the economy. A supported IPR protection regime may lengthen the ownership duration of the owner over a product or invention. It means by providing strong protection according to their criteria, they ensure the IPR is being offered. Weak or ambiguous intellectual property rights decrease the incentive to innovate and produce, and countries with weak IPR protection and reduced institutional environments for that purpose are not known for their R&D and technology strength. A functional intellectual property rights structure is required for the successful utilization and implementation of R&D. 

Since intellectual property is a significant facet of global commerce; it is not possible to negotiate trade between states that do not utilize these key property rights. Therefore, countries recognize that designing a functional intellectual property system would help them to protect their rights. Although it has not been fully demonstrated that stronger IPR laws are essential for economic development, countries do attempt to comply with the international IPR regime, namely the TRIPS Agreement, to promote their technological development and enhance economic competitiveness. Most countries have amended their laws to make them compliant with the TRIPS Agreement so as to effectively protect and manage the results of their research. A good instance of this is India which stresses enhancing awareness of intellectual property laws and their operations at national and international levels. 

However, changes in technology require intellectual property laws to take into account the new technologies such as, in the field of biotechnology, domain names, animal genetic resources, and computer software.

The Enforcement of IP Rights for R&D Investors 

Data specifies that firms investing in R&D perform better in regions that have solid enforcement of IP rights that help to mitigate difficulties related to R&D protection. When enforcement of IP rights is poor, foreign investors in joint ventures would hesitate to transfer or invest in technology. Good enforcement of IP rights enables greater technology transfer and development by deterring the local partners from illegally appropriating the technology. In addition, foreign partners of joint venture firms in regions with strong enforcement of IP rights will be more forthcoming with resources for projects as well as in providing increased levels of R&D investments and enjoy greater productivity in terms of introducing new products. Countries must have proper legal structures as well as well-developed financial markets to have economic development. Knowledge subsequent from R&D activities occurs through contractual, patent arrangements in nations that have strong intellectual property rights protection. The gains from firms’ investments in R&D will be lost if courts are unwilling to restrain such action through leakage of proprietary information through imitation. This occurs due to the high cost of court action or trial in protecting R&D investments in countries with weak legal protection. Consequently, it curtails an individual firm’s R&D activities and will reduce the benefits of firm-specific R&D. Therefore, arbitration should be considered seriously as an option to take control of a dispute. It has plenty of advantages over litigation. The main con of this creature is that parties can select decision-makers with expertise in the type of intellectual property, which the dispute is involved in. Fundamentally, this is a major advantage of arbitration over litigation.  

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Further, ADR and Mediation consist of single proceedings under the law determined by the parties, while court litigation consists of multiple proceedings under different laws with the risk of conflicting results which create too much complexity in cross-border cases. IP rights in various contracts throughout the R & D project have a vital role. Thus, parties must be prudent in choosing dispute resolutions strategy when negotiating dispute resolution clauses. In fact, the legal protection of a firm’s investment in R&D will have an effect on financial market development and economic growth. This is quite apparent in China where economic development depends on financial markets and legal structures. Although China’s market was frail initially, transactions were protected via informal devices. One of the deviations of informal mechanisms is informal finance and informal financial schemes. 

Informal financial organizations play a complementary part in the formal financial system. Informal financing typically consists of small, unsecured, short-term loans restricted to rural areas, agricultural contracts, households, individuals, or small entrepreneurial ventures. The vastness of the country results in wide variation in the market and legal structures across different regions. However, the government ensured that certain regions were sufficiently well-developed to support economic activities. Statistics on more than 300,000 states and private industrial firms indicate that the leakage of proprietary information varies with the strength of property rights protection. Regions without such protection have larger R&D spillovers and firms have less incentive to invest in R&D activities. The strong economic position in China is an example of how R&D investment is closely associated with property rights protections and how they affect R&D investments. Despite the overall weak property rights protection within China, certain regions provide stronger protection which checks uncompensated spillovers of R&D. 

It is clear that weak property rights add to R&D spillovers and some developing countries “have not signed international treaties concerning the protection of intellectual property rights and others that have laxly enforced domestic laws and regulations designed for this purpose.” As such, imitation and information leakage are common in those countries. This can be compared with the situation in developed countries with strong IPR regimes. The existence of strong IPR regimes is one reason why the R&D spillovers on investment differ in developing and developed countries. According to the United States Trade Representative Report, about 90 countries have adequate and effective intellectual property rights protections. China is on its Priority Watch List as imitation is understood as a dominant element in R&D spillover there.

Conclusion

Property rights need to be well enforced and regulated to ensure that investments in socially desirable goods are not undermined. The level of property right protection at the national level can affect the leakage of firm proprietary information with countries having a strong regime in this area enjoying subordinate levels of leakages of proprietary information through imitation or theft. It has also been determined that there is a positive correlation between larger leakages of proprietary information and lower R&D investment, and this is aggravated in areas that have inadequate intellectual property rights protections. Legal protection of R&D activities and property rights protection affect R&D activities and concurrently impact economic and industrial growth. A robust intellectual property rights regime enhances firms’ incentives to invest in such activities.

 

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