Increase Economic Prosperity by Strengthening IP Rights Protections

By Seth L. Cooper and Michael J. Horney

On February 8, 2017, the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) released the fifth edition of the International IP Index. Entitled “The Roots of Innovation,” the Index scored the IP systems of 45 countries, representing over 90 percent of the world’s gross domestic product (GDP). Scores were derived from several specific factors pertinent to IP rights protections, allowing policymakers to better understand where their countries stand in comparison to their peers.

The International IP Index should prompt U.S. policymakers to strengthen our IP rights system. Although the U.S. ranked high in the Index, the Index nonetheless identified IP rights enforcement as one of the areas in which improvements need to be made. Lackluster Index scores for IP rights systems in certain foreign countries should also spur U.S. trade negotiators to seek stronger protections for Americans’ IP rights overseas. By bolstering IP protections, the U.S. will further benefit from the correlations between strong IP rights and overall economic innovation and investment. 

Scores in the Index were based on six key categories, including: patent rights, copyrights, trademarks, trade secrets and market access, and enforcement, as well as membership and ratification of international treaties. Those categories encompassed numerous indicators of a strong IP system, including: industrial designs term of protection, availability of legal measures to obtain redress for unauthorized use of industrial design rights, regulatory and administrative barriers to the commercialization of IP assets, and transparency and public reporting by customs authorities of trade-related IP infringement.

Because scoring for this year’s Index was based on 35 indicators, instead of 30, a weighted-score was calculated (by Michael Horney) to determine whether countries’ protections of IP rights were stronger or weaker than what was calculated in last year’s Index. Of the 38 countries included in the last Index, twenty improved their weighted-scores in this year’s Index.

For the fifth consecutive year, the United States had the highest score. The U.S. IP system rated 32.62 (out of 35). The United Kingdom and Germany followed with scores of 32.39 and 31.92, respectively. The countries with the lowest scores were India, Pakistan, and Venezuela at 8.75, 8.37, and 6.88, respectively.

However, the United States’ weighted-score, which takes into account five new indicators, actually decreased compared to the prior Index. The U.S. fell to 10th place in patent protections after previously being tied for first. A reason for this drop is that the patent opposition system in the U.S. adds substantial costs and uncertainty to the economy. The U.S. also needs to improve its enforcement efforts to combat counterfeit and pirated goods. Certainly, Congress can help step up enforcement by reforming and updating the Digital Millennium Copyright Act’s “notice and takedown system” under Section 512. Modernizing the U.S. Copyright Office and giving it authority for addressing Section 512 matters as well as small claims for infringement – as provided in the Goodlatte/Conyers proposal – would also bolster IP protections.

Moreover, the relative lack of IP rights protections in several other countries, as reflected in the Index, reinforces the need for U.S. pursuit of treaties or agreements to better secure protections for American IP rights holders internationally. In January, President Trump withdrew the U.S. from the Trans-Pacific Partnership (TPP) agreement, which the Index regarded as pro-IP. But there is no reason to think that TPP provisions regarding IP rights prompted the withdrawal. Rather, the U.S. should seek new bi-lateral or multi-lateral agreements, including ones more narrowly focused on strengthening protections for American IP rights holders in foreign countries. And as more countries adopt strong protections for IP rights through trade agreements, the global economy will grow substantially. Mutual gains from international trade are much higher when more nations adopt and enforce laws that protect IP rights.

Indeed, the Index emphasized how “IP provides the living and growing roots that stimulate innovation and bolster growth,” since economies with “the strongest IP systems stand to reap the greatest economic rewards.” Across all countries, the Index found several noteworthy correlations between strong IP protections and economic innovation and creativity:

• Resources dedicated to innovation: Economies that provide a robust IP environment are more likely to embrace policies that create a complete innovation “ecosystem” by investing in other key building blocks, such as human capital and technological infrastructure.

• R&D and creative activities: Economies that exhibit a steady buzz of innovation and creativity are, with few exceptions, those that have established strong IP environments – both generally and for specific high-tech sectors. The opposite is also true: on the whole, those economies with relatively weaker IP environments do not tend to experience the levels of R&D and release of new content that economies with more secure and stable IP environments do.

• Access to technologies and creative content: A strong relationship exists between IP protections and greater access to end products and services that make novel technologies and content available to consumers.

• A dynamic economy: IP is strongly related to measures of foreign direct investment, business and industrial growth, jobs, and GDP, ultimately providing the basis for reinvestment of resources as the virtuous cycle begins anew.

The Index concluded that strong protections of IP rights incentivize investment in R&D, innovation, and creative content because they ensure entrepreneurs have opportunity to earn a return on their labors. And as economies with strong IP rights regimes grow and prosper, new goods and services are brought to market, making consumers the ultimate beneficiaries.

The International IP Index provides U.S. policymakers a useful tool for assessing how to improve our nation’s IP systems and enhance innovation and creativity in the 21st Century economy.