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Theme Six: Global partnerships to achieve the United Nations Millennium Development Goals: what role for intellectual property?
From an IP perspective, the divide can be found in the “content gap” marked by a lack of online material, including works protected by and managed through IP rights, originating from creators and innovators in developing countries. The consumption of unauthorized works in such countries also tends to be of digital content of foreign origin, again diminishing the prospect for local content and ingenuity to flourish online. Thomas Homer-Dixon described the “Ingenuity Gap”.”5 and the implications of disparity between a society’s need for ingenuity to solve its problems and satisfy its demands, and the supply of ideas capable of responding to those problems. This reflects the fact that, in the digital economy, wealth is increasingly measured in terms of intellectual rather than physical capital. 2. The United Nations Millennium Development Goals originated in the Millennium Declaration of 2000, by which 191 Member States pledged to meet the eight Goals by 2015. The goals were to: (1) eradicate extreme poverty and hunger, (2) achieve universal primary education, (3) promote gender equality and empower women, (4) reduce child mortality, (5) improve maternal health, (6) combat HIV/AIDS, malaria and other diseases, (7) ensure environmental sustainability and (8) develop a global partnership for development. Clearly, these goals represent fundamental and pressing needs of humanity for survival – how can we consider the use of IP as a tool to meet those goals? WIPO’s approach towards economic development is rooted in the United Nations Millennium Declaration and its Millennium Development Goals, aimed at reducing global poverty and creating an environment conducive to development. The most recent WIPO draft Program and Budget states that WIPO’s core development objective is “To support developing and least developed countries in their initiatives to maximize the use and effectiveness of IP as a tool for economic, social and cultural development.” 3. It is arguable to what extent we can quantify, with any exactitude, the contribution of IP to human development. Likewise it is difficult to quantify the contribution of copyright to social progress, education, and human enlightnment. These effects are intangible, and long-term. What we can do is to assess the contribution that is made by economic activities that operate on the basis of copyright protection in terms of value added, job creation and foreign trade. This approach is described in the WIPO Guide on Measuring the Economic Contribution of the Copyright-Based Industries7 and tested in practice in a number of countries. It provides a good idea of the scale of the contribution of the creative industries, even if some may argue that the measurement is not exact. It also provides a valuable tool for assessing the importance of this sector and how one country may compare to its major competitors. The contribution of copyright industries illustrates the contribution made by IP overall to national economies. In Singapore8, in 2001, copyright-based industries accounted for 5.6% of the gross domestic product (GDP) and 5.7% of total employment. In Canada9, in 2002, such industries account for 5.38% of the GDP. In the United States10, in 2002, core copyright industries accounted for 6% while total copyright industries accounted for 12% of the GDP, and these industries employed between 4 and 8% of US workers respectively. Another way of looking at the contribution of the creative/copyright-based/cultural industries is to assess the copyright assets on which they are based – for example, to attempt to value the reproduction and distribution rights in film catalogs, or publishing and mechanical rights in musical compositions. What are these rights worth in different markets? Valuation is typically undertaken in the context of audits before mergers. This market-oriented approach can shed more light on the way copyright operates in practice, and on what rights may be worth at a given moment. In the meantime, alternative techniques for measuring the contribution of the IP industries are being developed by academic institutions and companies. There is obviously an important development dimension to the protection of IP rights, that will require each country to adopt an IP system that is customized to its development needs. However, it is undeniable that all countries possess a rich cultural and intellectual heritage that, appropriately managed, may provide a rich potential asset for economic, as well as cultural development. Clearly, when developing countries choose to implement IP laws and systems for protecting and promoting IP, they strike a balance among important tradeoffs that vary depending upon the nature of the economy in question. Fink and Maskus have identified some of the costs of IP protection for developing countries, including: the implications if rights are predominantly foreign-owned including higher costs of goods such as pharmaceuticals and computer software, the loss of employment in copying industries and the costs of administering and enforcing IPRs. Clearly, differences between developing and industrialized countries (including innovative potential, education of work force, structure and funding of research and development, management of technological assets and institutional support such as collection agencies) mean that a “one-size fits all” approach to implementing IP protection is not recommended11. The IP system has in-built flexibilities to ensure that countries can implement IP laws and practices that are nationally appropriate and optimal for development. IP functions as a tool that can be used to structure relationships between private rightsholders and the public, and it is the task of policy makers at national and international levels to ensure that this tool is used positively, to maximize the public good.
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I think WIPO should have a greater focus on how IP affects international trade. An important aspect of this is when developing countries tries to trade with other countries. Even though the IP laws may work nationally, the export may suffer because of patents and too strong copyright laws. An example of this is the software industry: software is relatively cheap to develop and distribute as soon as the competence level is high enough (and computers are affordable), but software patents are limiting the potential market to a national level. Patents limits what can be sold, and even program that do not infringe upon any patents may not be exported, because of the costs to just find possible infringements.
The patent threat is an important <i>trade barrier</i> that can be noticed even for industrialized countries when trying to enter the American market. Because of the ease of getting a patent at the US Patent and Trademark Office, and because they have become increasingly more enforceable during the past decades, it is plausible that entering the American market will end up in court. This, together with the American jury system that usually favors American companies, has become effective trade barriers. It has also resulted in an American export of law services, benefiting America on other countries' expense.
In light of how IP laws acts as trade barriers, it is interesting to note that the most important international agreement, TRIPS, requires the participating countries to fulfill minimum requirements, but have very few restrictions. One such restriction is the exception of software as what should be patentable, but nonetheless Europe, Japan and America are allowing software patents.
To allow developing countries to be able to compete, it is necessary that international IP agreements limits what can be patentable and enforced. Unless IP is handled as other trade barriers, the monopolies created by patents will further differentiate the industrialized countries from the developing countries, <i>and thus the first of the millennium goals is at risk</i>.
Posted by Klas Skogmar, Swedish Intellectual Property Enterprises on June 02, 2005 at 09:31 PM CEST #
of protecting intellectual property.I founded the Centre for Intellectual property - Nairobi popularly abbreviated as CENIP.
Let me disagree with my friend Klas from Sweden.We all remenber that the Uruguay Round of the WTO introduced TRIPS.Importantly,IP was used to curb piracy and promote trade.
Kenya being a developing country, i know of many innovations made in popular open air stalls by people of little income.I don't think that the goal of halving poverty will succeed unless we protect innovations by intellectual property and hence fing markets in the developed world coupled with the removal of subsidies.
NB For anyone interested,he can keep my contacts and contact me even after WIPO will close this online forum.Thank you all for having time to read my comments.
f we om
Posted by Wilson Rading Outa,Centre for Intellectual Property-Nairobi (CENIP) on June 03, 2005 at 02:48 PM CEST #
</p><p>While there may need be exemptions for such basic (subsistence) assets as home and tools of the trade (or subsistence land), as there is during bankruptcy procedings, there is another asset that should be exempted from taxation, with enforcement by and respected by all nations:
</p><p>
Inventor-owned IP.
</p><p>The point of this is quite simple: At present, acquisition of assets is subsidized by taxing things other than assets for the maintanence of the social construct of property rights. The only asset that is taxed is the patent of invention (via patent application and maintanence fees) -- a situation that forces frequently-capital-poor inventors to assign their inventions to acquisitors who have been subsidized.
</p><p>This is the opposite of what should be subsidized. Creation, not acquisition, should be subsidized. Inventors should be more capable of independent capitalization of their own ideas so that the world has more positive sum options and fewer forces driving it to resource conflicts.</p>
Posted by James Bowery on June 06, 2005 at 02:26 AM CEST
Website: http://jimbowery.blogspot.com #
In the software industry, for example, copyright covers most infringements already. It can be used to stifle piracy and promote trade. Patents, on the other hand, makes it harder for other inventors to develop anything, because it is not enough to make sure you haven't copied anyone, you must be aware of all patents in the area as well. This requires companies to use IP personel, because one missed patent might ruin the target market.
Posted by Klas Skogmar, Swedish Intellectual Property Enterprises on June 06, 2005 at 09:32 AM CEST #
IP protection is needed to prevent the original developers being exploited. However, with transferable copyright/patents/trade mark, large corporations currently are exploiting the original developers anyhow with many different methods such as hostile takeover and buy out. Microsoft corporation even 1up those practices, use the "copy and pay the fine" method in many occasions. I think the problem isn't "what" the IP protections are for, but "who".
Quoting Klas:
"In the software industry, for example, copyright covers most infringements already. It can be used to stifle piracy and promote trade."
You are right, copyright covers most infringements already. However, i have yet to see the copyright law stifle software piracy. Mean while, i found patents laws stifle open source development.
The IP protection we have right now don't provide adquet provisions.
Posted by W. Xu on June 06, 2005 at 08:17 PM CEST #
(1) It is arguable that there is not much actual 'created' content being created by the 'developed world' as well. While the internet is largely the domain of the 'developed nations', as supported by the quoted statistics, the question arises: What method was used to obtain these statistics, and do they include, as an example, Creative Commons licensed material?
Further, the *weight* or *impact* for society of something created has no direct correlation to protection by Patents, Copyrights and Trademarks. And to go further, much of the copyrighted software being sold by 'developed nations' originates from 'developing nations'.
Thus, the correlation between socio-economic status of people and internet access is really at issue, which is one interpretation of the phrase, 'digital divide'. However, durations of copyrights and patents do not make for fair competition at present. The public domain has to be increased significantly to allow opportunity for developing countries which are not producing copyrighted and patented information such that they have a chance to 'catch up'. This is true at a national and at an international level.
As Lawrence Lessig says as well in, "Free Culture", the 'developing nations' need to exercise sovereignity with present related laws and agreements. Arguably, this is important for many reasons - not the least of which is such that they can gain access to technologies and materials that would allow them to become 'developed nations' at a lower cost, and without transferring large amounts of money to 'developed nations' such that 'developing nations' are always at a disadvantage.
That Patents, Copyrights and Trademarks were not spoken of within the World Summit on Information Society (WSIS) Working Group on Internet Governance (WGIG) at this level is less than comforting. The answer within the Civil Society Plenary, or given to those concerned within the Civil Society Plenary, was that this was the jurisdiction of WIPO and would not be spoken of.
So then, the role of WIPO in the WSIS has to be questioned as well.
(2) The United Nations Millennium Development Goals can be better achieved by making public TRIPs agreements, making such agreements able to be overturned by a change in government (if they are not already) and making them conform to guidelines that are public, sharing information related to those goals, and assuring that the costs of patents, copyrights and trademarks as well as the licensing involved does not decrease the ability to meet these goals (which they presently do in many ways).
(3) Assuring that the costs of patents, copyrights and trademarks as well as the licensing involved does not decrease the ability to meet the United Nations Millennium Development Goals, especially with the figures quoted.
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Patents, Copyrights and Trademarks are more relevant to sustainable development in a 'developing nation as they are in a developed nation'. There is no empirical measure, it is a matter of degree.
Patents, Copyrights and Trademarks contribute to development by building a body of knowledge that is intellectually usable for development - not locked away from the public domain for lifetimes. Measuring the effect of patents, copyrights and trademarks cannot be done through metrics, the assessment can only be done through comparative analysis between countries. Economists call this economics, but it is a lot more involved than that. To make the point - how does one evaluate the quality of life of a person? It's relative from the point of view of the observer, and like global positioning, multiple perspectives would have to be measured and triangulated.
Patents, Copyrights and Trademarks can play a role in decreasing the Digital Divide if and only if they are used by patent holders, copyright holders and trademark holders to do this. The easiest way to assure that this happens is to decrease duration of copyrights, patents and trademarks, as well as assuring that TRIPs agreements lean toward the 'developing nation's needs instead of the 'developed nation's.
In the context of the critical priorities of poverty, hunger, health, housing and literacy - patents, copyrights and trademarks can play many roles with assuring that the relevant needs are met. Directly, the information that is copyrighted could be used; wechanisms and machines that are patented could be leveraged to the advantage, given licensing becomes more appreciative of the problems of developed nations. Indirectly, Copyrights, Patents and Trademarks should assure lower costs such that the money spent on them does not detract as much from other initiatives. Over the long term, decreasing duration of patents and copyrights would do just that.
You ask: "As a specialized agency of the United Nations, WIPO is responsible for “promoting creative intellectual activity and for facilitating the transfer of technology related to industrial property to the developing countries in order to accelerate economic, social and cultural development” – how can WIPO best fulfil its role in assisting countries to use the IP system to their advantage?"
And the answers are plain - listen to the creators of developed nations more through Civil Society and less through Government which makes trade agreements with other Governments. Make public TRIPs agreements such that people know what their country has done, and democratically assure that it is in the best interest of the nation. Assure that copyrighted works cannot be seized through extravagant and inexplicable measures (Indymedia), and make the copyrights and patents more available to the public domain by decreasing duration.
WIPO has no control of licensing costs - but if it chooses to, it can decrease the length of duration of copyrights and patents which decreases long term development costs, while retaining profitability. It would also be sensible that licensing of software allowed for the source code to be distributed to the public domain after a corporation stopped supporting the piece of software.
Posted by Taran on June 08, 2005 at 02:55 AM CEST
Website: http://www.knowprose.com #
Iam
Advocate & Legal Consultant on [IP]Rights.
I lookforward toworking together with you in this forum and to share with you additional thoughts ,ideas and concerns throughout this forum .
Iam hopeful that asprit of cooperation and constructive dialogue will lead to development.
This opproach highlights the value and importance of multilateralism and how open and constructive dialogue is essential in moving the international agenda forwad regardless of the area.
Thank you,Iam honoured to share with you this moment.
Posted by ِِِAbu bahi mekki on June 09, 2005 at 01:44 PM CEST #
Posted by Gonzalo Ramirez on June 14, 2005 at 02:00 AM CEST #
Nevertheless, it is the task of the rights holders to
- work in favor of international agreements (in WIPO, UNESCO and WTO) in order to protect and improve cultural production and national heritage in developing countries,
- establish networks and partnerships among authors and performers worldwide and, as is taking place in FIA (International Federation of Actors), seek funding for seminars and developing projects on subjects as: intellectual property rights, union development, cultural exchange.
- support any initiative that can enhance access to modern technology.
- work for freedom of speech and artistic freedom.
Posted by Danish Actors' Association, Mikael Waldorff, General Secretary on June 14, 2005 at 11:53 AM CEST
Website: http://hhtp://www.skuespillerforbundet.dk #
This section requires much more sophisticated analysis of the economics of the content industries and how they are bimodal in nature, with a few very large and wealthy firms and many very small ones who are in dependent relationships. It could also note how, even online, successful media production is undertaken by entities with a strong resource base and close links to existing media infrastructure.
The "built-in flexibilities" in the IP system clearly do *not* "ensure that countries can implement IP laws and practices that are nationally appropriate and optimal for development". TRIPS, for example, has come under extremely strong criticism from developing countries as it has become clear that it largely works in the favour of well-funded IP-owners and inhibits the development of local IP industries.
Danny Butt
Associate Member
ORBICOM International Network of UNESCO Chairs in Communications
Posted by Danny Butt on June 14, 2005 at 05:59 PM CEST
Website: http://www.orbicom.uqam.ca/ #
In considering a strategy to address the digital divide, a Government’s agenda should go beyond the mere provision of computers to low income families. Of greater importance is the need to have in place a comprehensive program that will equip such targeted families with the necessary information technology and software literacy skills so as to empower and enable these individuals to make use of the technology. At the same time, infrastructural needs also have to be addressed, for instance, to ensure that there is adequate and appropriate content and applications that are relevant to the general public (e.g. suitable e-government services), and to have available reliable connectivity for the public to access such content.
Lessons and best practices drawn from case studies have illustrated that the challenge of the digital divide requires a strategic and multilayered response. As concluded by a report [1] that examined digital divide issues in a number of developing regions, including Africa, South America, and India, providing access to technology proved critical, but the need for access went far beyond mere physical access to a computer or network connection. The study concluded that the benefits of such computers and connections would be lost if users lacked the knowledge to operate those technologies effectively. Access should be considered more broadly in the context of integrating technology into people’s lives, according to this study [2].
In keeping with these observations, an effective strategy to address digital divide issues should ensure that all aspects of preparing the general public for the information age are addressed. The strategy should not, as a first step, be focused solely on the provision of low-cost computers to the homes, but rather, should take a holistic and multi-prong approach covering skills, connectivity and content to ensure that such computers would be useful to those who have access to them.
Seow Hiong GOH
Director Software Policy (Asia)
Business Software Alliance
[1] See "Spanning the Digital Divide: Understanding and Tackling the Issues" at http://www.bridges.org/spanning/index.html.
[2] Conclusion found at section 4.3 on "Drawing out Lessons and Best Practices" at http://www.bridges.org/spanning/chpt4.html#_Toc515100166.
Posted by SH Goh on June 15, 2005 at 10:19 AM CEST
Website: http://www.bsa.org #
Indicator 46 talks of the proportion of population with access on sustainanble basis.
According to the WHO,Let us not forget that approximately 6% of pharmaceutical products sold world wide are counterfeit with developing countries accounting for 70%.
While trying to achive this goal,we should all be aware of dangers of counterfeit drugs.The WTO has endorsed compulsory licensing and parallel importation through the IP system in a bid to achieve this goal.
Patents are efficient drivers of national innovation,research and development which promote creation and business transactions.
Posted by Wilson Rading Outa on June 15, 2005 at 12:38 PM CEST #
Copyright constitutes a key element of any effective development strategy. “Copyright industries” are a powerful generator of economic growth and employment. In Europe, for example, according to a study by the European Commission, the copyright industries contributed more than € 1.2 billion to the EU-15 economy in 2000 and produced value added of € 450 billion – which equals 5.3% of the total EU-15 GDP.
This is all the more remarkable considering that the copyright-based industries are in large part composed of small and medium-sized companies. This is particularly evident in developing countries, where the creative sector is highly fragmented.
Under international intellectual property treaties, copyright and related rights are recognised throughout the world and creative works are equally protected regardless of the size or the fame of their creator(s). The unknown emerging singer in a developing country enjoys the same rights as the most famous world pop star. Fostering the understanding of the importance of adequate protection for copyright is key to empowering emerging authors, performers, and creative entrepreneurs in all countries in the world.
Posted by International Video Federation on June 15, 2005 at 04:15 PM CEST
Website: http://www.ivf-video.org #
Comments of the International Intellectual Property Alliance (IIPA), www.iipa.com, on Theme 6.
An adequate and effective intellectual property regime creates jobs in developing countries, creates tax revenue for the governments of those countries, and drives foreign investment by assuring protection for the investor’s intellectual property. Domestic copyright industries within the developing world, for example, suffer due to rampant piracy of foreign intellectual property-based products. It is virtually impossible for local artists/composers/publishers/producers to compete with cheap, foreign pirated films, books, business and entertainment software and musical recordings. The inability of domestic artists to thrive weakens developing nations. Strong copyright protection will enable those domestic artists/authors to thrive, in both the world of physical or “hard” goods as well as on the Information Superhighway.
Although the commentary cites the work of Carston Fink and Keith Maskus for the proposition that strong intellectual property rights protection comes at some cost to developing countries, Fink and Maskus have stated that “some dynamic gains could be induced by stronger and more harmonized protection” in developing countries. Maskus has also explained that if pirates were “allowed to free ride on works without compensating their creators, the incentives to create would be severely dampened. Static economic efficiency may be achieved, but at the cost of lower growth in cultural identity and reduced investment in ‘industrially useful’ expressions such as software.” Increasingly the economic community is coming over to the side that strong copyright protection enhances economic welfare even in developing countries. By looking at the dynamic upstream and downstream gains from protecting intellectual property (and not, erroneously, just looking at the static “balance of payments” impact), these welfare gains, particularly in the area of copyright (where market entry costs are usually lower), become even more demonstrable.
Strong intellectual property rights protection furthers the United Nations Millennium Development Goals by providing developing nations with a solid foundation upon which to build their economic futures and move their economies up the value chain. The commentary is correct when it states that “it is undeniable that all countries possess a rich cultural and intellectual heritage that, appropriately managed, may provide a rich potential asset for economic, as well as cultural development.” The appropriate way for countries to manage these assets is by way of the intellectual property system contained within the WIPO-administered treaties. We do not see these treaties, nor the TRIPS Agreement as a “one size fits all approach” to implementing intellectual property protection. Indeed, these treaties contain broad principles representing the “minimum” levels of protection that must be afforded. Countries have the ability to adjust protection to their own legal system, so long as they meet these treaties’ “minima.”
Below we have included excerpts from an April 2005 IIPA survey paper on the relationship of copyright protection to economic development, including summaries of surveys that have measured the role of the creative industries in the domestic economies of a number of developed and developing countries. (Source citations are excluded from the posting below, the entire survey is available on the IIPA website, www.iipa.com).
* * * * * * * *
INITIAL SURVEY OF THE CONTRIBUTION OF THE COPYRIGHT INDUSTRIES TO ECONOMIC DEVELOPMENT
by The International Intellectual Property Alliance (IIPA), April 2005
“We should not see the observance and enforcement of IP rights as merely protecting
the interests of the developed world, but rather as a powerful tool to galvanize our domestic industry while retaining national culture, national inventiveness, and national creativity.”
- Betty Mould-Iddrisu, Chief State Attorney, International Law Division, Ministry of Justice, Ghana
OVERVIEW:
Copyright protection serves the important goals of fostering economic development, increasing cultural diversity, and moving all countries toward greater participation in an increasingly technology-driven world. The general consensus among economists and scholars is that enhanced copyright protection leads to positive economic growth. The statistical evidence suggests that economies with stronger copyright protection experience a greater contribution to GDP from those sectors.
SECTION ONE: SURVEY OF ACADEMIC LITERATURE
Over the past 15 to 20 years, economists and scholars have increasingly focused their attention on intellectual property rights (“IPRs”) and the effects they have on enhancing economic development. Although the question is a difficult and multifaceted one, the general consensus is that protection for IPRs, including copyright protection, contributes to positive economic development. Keith Maskus, Edwin Mansfield, Carlos Primo Braga and others have demonstrated that enforceable IPR regimes increase overall economic welfare. While these studies have tended to focus on patents primarily, protection of copyrights, with lower costs of entry generally and greater domestic creation of copyrighted, as contrasted with patented products, in developing countries, also have been found to enhance economic welfare. An adequate and effective copyright regime creates jobs in developing countries, creates taxable income for the governments of those countries, and compels foreign investment by assuring protection for the investors’ intellectual property.
Maskus
Keith Maskus argues with convincing evidence that strengthened IPRs increase economic growth. Maskus notes that copyright protected products have extremely high investment costs but very low copying costs, and points out the detrimental effects of a regime that would allow piracy:
If other members of society were allowed to free ride on works without compensating their creators, the incentives to create would be severely dampened. Static economic efficiency might be achieved, but at the cost of lower growth in cultural identity and reduced investment in ‘industrially useful’ expressions such as software.
Maskus offers statistical evidence of increased international trade in goods protected by intellectual property rights in both developed and developing countries. In particular, Maskus presents data which show overall increases in trade in printed material and sound recordings, in a study covering the EU, the United States, Japan, Canada, Australia, Mexico, Brazil, China, South Korea, Malaysia, Indonesia, Thailand, and India. According to Maskus, between 1990 and 1996, total trade in these sectors for each country grew substantially. Maskus shows similar growth for IPR-sensitive services using data on trade in computer services as well as royalties and licensing fees. Again, using figures from 1990 to 1996, receipt of royalties and licensing fees for IPR-sensitive services in South Korea grew from US $37 million in 1990 to US $168 million in 1996, while payment of royalties and licensing fees leapt from US $136 million in 1990 to US $ 2.2 billion in 1996. According to Maskus, these figures suggest “[t]hat rapid growth is associated with rising technology imports.” It should be noted that these figures’ growth coincided with substantially increased enforcement in South Korea against software piracy in 1996.
Maskus also makes the point that IPRs strengthen as economic development increases: “As incomes rise, the demand for higher-quality, differentiated products also rises, leading to growing preferences for protection of trademarks and copyrights or, in political economy terms, an increase in the supply of IPRs. As an economy’s technological sophistication increases, inventors and creators require stronger protection for their works; thus demand for IPRs rises.” Importantly, he notes that “causation may flow both ways, with stronger property rights also contributing to growth in incomes.” In his section on Foreign Direct Investment (“FDI”), Maskus makes clear that developing countries with weak IPR regimes suffer from restricted trade, and suggests that adherence to TRIPS “bears the potential to raise. . . imports of technologically sophisticated goods [including computer software] by significant amounts.”
Maskus concludes that IPRs provide a framework for more complex business structures, usually at every level of economic development. He qualifies this by noting that “the function of IPRs as appropriate support mechanisms varies with income and technological capabilities.” Using both Lebanon and China as examples, Maskus makes the point that domestic copyright industries are hampered by inadequate copyright protection. In a survey in Lebanon, that country’s film and television industry made clear their belief that stronger copyright protection would give them the ability to successfully export their product to neighboring countries.
In a new book published in 2005 by the World Bank and Oxford University Press and co-authored with Carston Fink, another prominent economist, Maskus further argues that stronger copyright protection in Lebanon would have a beneficial effect on the domestic software industry:
. . . it is evident that Lebanon has a strong and entrepreneurial set of programmers with businesses that are well positioned to export to Middle Eastern markets. This fact is likely to attract additional technology-sharing agreements and joint ventures with foreign software firms, particularly if additional regional integration and harmonization of copyright law and enforcement takes place.
Maskus also makes this point with respect to other copyright industries: “. . . some dynamic gains could be induced by stronger and more harmonized copyright protection in the Middle East. Lebanon is well positioned as a regional net exporter of television programming and broadcasts, cinematic films, and music.”
In his earlier book, INTELLECTUAL PROPERTY RIGHTS IN THE GLOBAL ECONOMY, Maskus notes that in China “the domestic software industry has grown rapidly in particular business applications that do not suffer much copying, but has faced obstacles in developing larger and more fundamental program platforms.” He compares this with India, whose thriving domestic film industry many observers credit to that country’s better enforcement of copyright.
Maskus also offers support that Foreign Direct Investment (“FDI”) is fostered by strengthened intellectual property rights. He cites a 1998 study by Borensztein, De Gregorio, and Lee which found that “inward flows of FDI from industrial countries to 69 developing countries over the period 1970-89 contributed positively to growth of the recipient nations, more powerfully than did domestic investment,” and offers evidence that FDI reacts positively to stronger IPRs in developing countries. The strong suggestion is that strengthened IPRs contribute to positive economic growth by creating more attractive FDI opportunities for foreign investors and thus create a spill-over which leads to greater domestic economic growth. Maskus identifies four implications of this dynamic. First, weaker IPR regimes tend to isolate countries from technological advances, including computer software advances protected by copyright. Secondly, those countries with weaker protection of IPRs receive fewer spillover benefits that new technologies would bring. Third, the technologies that are available to such countries tend to be out of date. Finally, and perhaps most importantly, countries with weak IPRs provide almost no incentive to their people to create or innovate, nor do they attract new technological investment.
In summary, Maskus’ book makes the convincing argument that strengthened IPRs, including copyright, not only provide a framework for increasingly complicated business transactions, but also provide strong incentives for FDI which is vital to grow a domestic economy. Finally, and perhaps most importantly, strengthened IPRs provide the impetus for local creativity, increasing not only economic, but cultural, welfare.
In a separate contribution to the World Bank book, Maskus reiterates the importance of IPRs for creating incentives for FDI and technology transfer: "[s]een in their proper policy context, IPRs are an important component of the general regulatory system, including taxes, investment regulations, production incentives, trade policies, and competition rules." As for their effects on cross-border trade, Maskus makes the point that "[o]verall, empirical evidence indicates that, other things being equal, countries that have stronger IPR regimes do attract more imports, although the effect varies across industries."
Furthermore, Maskus speculates that strengthened IPRs will attract investment in different sectors. For example, industries where the costs of imitation or copying are high will be relatively uninterested in strong IPR protection. Conversely, "[f]irms with products and technologies that can easily be copied, such as. . . software, are more concerned with the ability of the local IPR system to deter imitation."
Incentives for licensing technology or other information based assets is even more closely tied to the relative strength of IPRs than FDI. According to Maskus, "[a]s IPRs improve, licensing costs should fall, because it becomes easier to discipline licensees against revelation or appropriation of proprietary technology and against misuse of trademark. Thus, for a given level of complexity of innovations, we would expect to see licensing displace FDI as IPRs are strengthened."
Smarzynska Javorcik
A recent (2005) study by Beata Smarzynska Javorcik of the World Bank comes to very similar conclusions to those of Maskus. Smarzynska Javorcik’s study looks at the composition of foreign direct investment in Eastern Europe and the former Soviet Union, as opposed to the "aggregate FDI flows" that marked earlier studies. Smarzynska Javorcik concludes that weak IPR protection acts as a deterrent for investors. Furthermore, "[t]here is also some evidence that weak IPR protection may discourage all investors, not just those in the sensitive sectors." Finally, Smarzynska Javorcik finds that where there is a "lack of IPR protection," investors are discouraged "from undertaking local production and encourag[ed]. . . to focus on distribution of imported products." As with the general statement about IPR protection, "this effect is present in all sectors, not only those relying heavily on IPR protection."
Primo Braga, Fink, and Sepulveda
The findings of Carlos A. Primo Braga, Carsten Fink, and Claudia Paz Sepulveda, not coincidentally, also come to similar conclusions as those of Maskus. Their World Bank Discussion Paper, Intellectual Property Rights and Economic Development, argues that creating a framework for enhanced intellectual property protection will benefit developing countries. This framework should be “one that facilitates access of local entrepreneurs to the IPRs system and that adopts a pro-competitive approach to intellectual property.” Primo Braga, Fink and Sepulveda address the oft-heard argument that enhancing IPRs in developing countries creates an incentive for abusive price discrimination by the right-holders. In the context of copyright for computer software, they argue that this is not the case. The higher prices for software in developing countries are instead just a reflection of the low volumes sold in those countries. As copyright protection increases, software manufacturers have the incentive to distribute greater volumes of their product at lower prices as the market for that product increases. Thus, increased copyright protection actually lowers the cost of legitimate product.
Mansfield and Benko
The economist Edwin Mansfield has done considerable work on the subject of technology’s contribution to economic growth. Though mostly in the context of patent law, the economic theories hold for other types of intellectual property as well. Mansfield offers evidence showing that economic growth in industrialized countries is largely dependent on technological change. The social rates of return on investments in technology are often very high, while the private rates of return for the innovator are considerably lower. IPR protection afforded by the patent system provides a way for inventors to get back some of the benefits to society at large that would not be theirs were there no patent system at all. Mansfield’s findings indicate that the existence of the patent system is thought to be crucial for innovation in both the chemical and drug industries. In a follow-up to Mansfield’s paper, Robert P. Benko applied the analysis to copyright, noting that “[o]ne survey of executives in the U.S. motion picture and television, prerecorded entertainment, publishing, and advertising industries conducted by CBS in 1984 found copyright infringement to be the most frequently mentioned barrier to trade.” This phenomenon suggests that, just as in the patent context, copyright protection provides incentives to invest in and trade in copyrighted material, thus expanding economic growth.
Barfield and Groombridge
A study by Claude E. Barfield and Mark A. Groombridge (which concluded that in most cases copyright owner control over the parallel importation of copyrighted works promotes competition and diversity and is critical to promoting new investment by copyright owners) noted the overwhelming consensus by economists that “creativity and technological progress are the central factors behind economic growth.” They went on to summarize studies which show the contribution of the copyright industries to economic growth, pointing to the software industry as a prime example:
the computer software industry is transforming major sectors, most significantly in banking, retail and health care. Over the last several years, commercial banks have increased productivity by over 10 percent annually, and new computer software has revolutionized the burgeoning health care industry by allowing for huge efficiency gains in patient record keeping, medical history, diagnosis, treatment and insurance reimbursement.
Further, they make the compelling point that the kinds of economic growth the United States has seen as a result of the contribution of the copyright industries, will go to any country that institutes a strong intellectual property regime.
Conclusion
The general consensus of the academic literature is that stronger copyright protection contributes to positive economic growth. This is arguably the case regardless of a country’s level of development. Strong intellectual property rights provide incentives for local creators to bring the products of their mind to their local markets. By doing so, they help to lay the groundwork, in their countries, for strong economic growth the likes of which have been seen in countries which have effective regimes for IPR protection.
SECTION TWO: COPYRIGHT AND ECONOMIC DEVELOPMENT STATISTICS:
SURVEY OF EXISTING STUDIES ON THE ECONOMIC IMPORTANCE OF COPYRIGHT
Several countries have compiled and published statistics showing the contribution that copyright industries make to the local economies. Most of these are modeled on the work that the International Intellectual Property Alliance (IIPA), in association with Economists Inc., have done over the years. In this part, we will survey the studies which come from the United States, the EU, Canada, Japan, Australia, and a number of developing countries, like Brazil and India. These studies show that the copyright industries generally account for 3-6% of overall economies, with growth and employment numbers similar to those in the U.S. While most of the studies are in developed countries (with the exception of India, the Mercosur countries, Latvia and Chile), this Part will seek to make the case that the statistics in developing countries do not, and likely will not, differ significantly from those in developed countries.
In the United States, the core copyright industries play a substantial role in the overall economy. The industry includes those that create and distribute copyrighted material, including newspapers, periodicals, books, television programs, films, recorded music, and business and entertainment software. In 2002, for example, the core copyright industries accounted for 6% of GDP or $626 billion. Between 1997 and 2002, the share of GDP for the copyright industries grew at a rate of 46.3% more than the remainder of the economy, an estimated compound annual growth rate of 3.51% vs. 2.4%. Employment in the copyright industries is 4.0% of total US employment, accounting for 5.5 million workers. Between 1997 and 2002 employment in this sector grew at a rate of 27% higher than the annual employment growth rate of the economy as a whole: 1.33% vs. 1.05%. Foreign sales and exports of the core copyright industries continue to be substantial. In 2002, they accounted for $89.26 billion, larger than nearly every industry sector, including the automobile and agricultural sectors.
In the European Union, the copyright industries accounted for 3.99% of GDP in 2000. In the employment sector, the copyright industries account for 2.02% of the total employment. A recent report just completed in an EU accession country – Latvia – and using the new WIPO methodology discussed below, shows similar contributions by the copyright sector to GDP and employment. In 2000, the core copyright industries in Latvia accounted for 2.9% of the GDP (or €228 million, representing 2 1/2 times the value to GDP contributed by the manufacture of textiles and textile importing and 8 times that contributed by the manufacture of machinery and equipment). That same year, the core copyright industries accounted for 3.7% of Latvia's total employees (7 times the transportation equipment manufacturing industry and 9 times more than the meat production industry). These surprising statistics, developed in accordance with WIPO’s new methodology, may prove helpful throughout the region in demonstrating the importance of copyright industries and copyright protection to economic and cultural development.
In Canada, the contribution to GDP of the copyright industries in 2000 was estimated at US $41.4 billion or 7.4%. The value of the copyright industries increased by 6.6% between 1992 and 2000, twice that of the rest of the economy. In 2002, the Canadian copyright industries represent the third most valuable contributor to Canada’s economic growth.
In 1998, the Japanese core copyright industries reached roughly US $235 billion in total value, representing 2.3% of the Japanese GDP. This is significant growth from 1.9% of GDP in 1994 in a country not often cited as strong in the copyright area. The average growth rate of 5.9% between 1994 and 1998 is only slightly less than the 6.2% growth rate of the telecommunications industry, which the Japanese consider "as being at the center of industrial innovation in the 21st century." This strongly suggests that core copyright industries are a substantial component of the economic growth of large, developed countries like Japan. Furthermore, the authors of the study noted that "the survey's quantitative assessments indicate that copyright is of critical importance to the national life as viewed not only from a purely cultural perspective but also from an industrial one."
The Australian copyright industries account for a similarly substantial share of that country’s economy. In 1999, the copyright industries accounted for 3.3% of GDP or US $10.2 billion. Between 1996 and 2000, the share of GDP grew faster than the remainder of the economy: 5.7% vs. 4.85%. In 2000, employment in the Australian copyright industries accounted for 3.8% of the total Australian workforce, roughly 345,000 people. That number is up from the 312,000 people employed in the Australian copyright industries in 1995-96. The difference represents a growth rate of 2.7%; higher than the overall Australian employment growth rate of 2%. Though Australia was a net importer of copyrighted goods during the period between 1995-96 and 1999-2000, revenue from exports in the core copyright industries increased by 44%; value from imports increased by 29%.
In New Zealand the copyright industries in 2001 made up 3.1% of total GDP or US $1.5 billion, growing faster from 1997 than the economy as a whole. As well, the copyright industries employ 3.6% of New Zealand's total work force.
In Singapore employment in the creative industries was 47,000 (2.2% of total employment), with an additional 34,000 persons employed in distribution industries. Total employment within the industry was 81,000 or 3.9% of total employment in 2000. The sector with the highest value-added and employment was the IT sector, which accounted for 38% of value-added and 31% of employment. For 2000 (latest data available), the creative industries contributed a total value-added (VA) of US $2.98 billion, or about 1.9% of GDP. Distribution industries associated with these core creative industries added a further US $2.02 billion, bringing the total VA of the copyright industries to US $5.00 billion, or 3.2% of GDP.
In Hong Kong, the creative industries contributed over HK$46 billion to the local economy in 2001, accounting for 3.8% of GDP. There were over 30,000 establishments engaging 170,000 persons in 2002. Despite the general economic downturn, there had been a real increase in the number of establishments (about 22%) and people employed in these sectors (11%) over the period 1996-2002.
In Taiwan, the cultural industries had a total value of NT $570 billion (US $16.8 billion) or 5.9% of GDP in 2000. The sector employed 337,456 workers representing 2.6% of total employment, increasing from employment of 245,412 persons in 1998. From 1998 to 2000, the industry experienced growth of 10.2%.
No comprehensive study has been done in South Korea to date. However, the four major cultural industry sectors of movie, music, broadcasting, and game are forecast to grow at an average rate of 22.8%, exceeding the growth rate of the whole economy of 6%. One interesting feature of the South Korean cultural industry is the contribution of the animation sector which is estimated to be worth US $300 million commanding about 0.4% of the world’s animation market. There are some 200 companies in this sector employing some 15,000 persons. The character, game and music industries are estimated to have a market size of US $3.8 billion, US $3.2 billion and US $340 million respectively.
Some developing countries, including India and certain countries in Latin America, have also contributed reports on the contribution of their copyright industries to economic development. These reports use similar formats to those used in the other countries surveyed and tend to find results consistent with the other studies. In a singular advance in this area, and in recognition of the importance of countries knowing the role of the copyright industries in their own economies, in 2003 WIPO published the Guide on Surveying the Economic Contribution of the Copyright-Based Industries. The methodology developed in this Guide was first used in the recent U.S. study described above and was also used in the Latvian study. A study is now ongoing in Hungary and is about to commence in Russia. Widespread use of the WIPO methodology will permit even better comparisons among countries at various levels of development.
In 1995, Indian copyright industries accounted for 5.06% of that country’s GDP. This can be accounted for by the fact that India’s book publishing, film and music industries are among the largest in Asia. The Indian book publishing industry is among the largest in the world in terms of volume, turning out 57,400 titles in 1997. The Indian film industry makes roughly 800 films a year, contributing significantly to the local economy. India is also an enormous producer and consumer of recorded music. In 1997, the total unit sales reached nearly 412 million. The growth of the Indian software industry is likewise staggering. Between 1990 and 1997, the industry grew more than 50%. Exports in this area have grown from US $225 million in 1992-93 to US $1.7 billion in 1997-98. The domestic software industry grew from US $490 million in 1995-96 to US $1.25 billion in 1998-99. The example of India suggests that strong copyright protection leads to positive economic growth. The statistics on domestic production of copyrighted material, books, films, music, and software, further strengthens the position that stronger copyright protections nurture local creativity and innovation, increasing not only economic welfare, but cultural welfare as well.
In a preliminary examination of the contribution of the copyright industries to the economy of Mexico reveals percentages comparable to those found in a number of other countries. In 1998, the year for which this data was gathered, the copyright industries accounted for 6.7% of Mexico’s GDP. Furthermore, in 1998, the copyright industries employed roughly 1.5 million people, representing 3.66% of the total workforce in Mexico in that year.
In Argentina, Brazil, and Uruguay, the copyright industries’ contribution to GDP is roughly the same. In 1993, the most recent year for available figures in Argentina, the copyright industries accounted for 6.6% of GDP or US $6.4 billion. In Brazil, figures for 1998 reveal that the copyright industries represented 6.7% of GDP or US $53 billion. In Uruguay, the copyright industries accounted for 6% of GDP in 1997, or US $705 million. In Chile the contribution is smaller, accounting for 2% of GDP or US $1.2 billion. Likewise in Paraguay, the contribution is smaller, accounting for 1% of GDP or US $98 million. Employment in the copyright industries is comparable to that found in the other surveyed countries. In Argentina, the copyright industries employ 508,000 people, or 5.3% of the total workforce. In Brazil, 1.3 million people work in the copyright industries, accounting for 5% of that country’s total employment. Chile’s copyright industries employ 149,000 workers or 2.7% of total employment. Paraguay’s copyright industries employed 51,000 people in 1992 or 3.3% of the total workforce. Finally, in Uruguay, the copyright industries account for 46,000 workers, or 4.9% of total employment.
CONCLUSION
Strong copyright protection has been shown in numerous studies to be the key engine in the growth of many countries' economies the world over. It also can stimulate greater diversity in cultural expression, and can foster technological and economic growth that can literally narrow the divide between economies now operating at vastly different levels of development. As the many economists who have studied these issues have all generally agreed, strong copyright protection enhances economic growth, which has positive net benefits for developing economies, including importantly, attracting foreign direct investment. Economic studies conducted on a country-by-country basis have noted that countries which have recently strengthened protection and enforcement for copyright have seen a marked increase in contribution to GDP from the copyright industries.
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[End of IIPA Survey Paper, available in full at www.iipa.com]
Posted by International Intellectual Property Alliance on June 15, 2005 at 09:44 PM CEST
Website: http://www.iipa.com #