Tuesday, February 13, 2018

United States Remains Global Leader in IP But Still Can Improve

On February 8, 2018, the U.S. Chamber of Commerce’s Global Innovation Policy Center (GIPC) released the sixth edition of the International IP Index entitled “Create.” The Index scored the intellectual property (IP) systems of 50 countries, representing over 90% of the world’s gross domestic product. Scores were derived from several specific factors pertinent to IP rights protection, allowing policymakers to better understand where their countries stand in relation to others.
The International IP Index should prompt U.S. policymakers to strengthen our IP rights system. Although the U.S. ranked at the top of the Index, by a smidgen, 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 strong relationship between strong IP rights and economic activity. 
Scores in the 2018 International IP Index are based on eight key categories, including: patent rights, copyrights, trademarks, trade secrets, commercialization of IP assets, enforcement, systemic efficiency, and membership in and ratification of international treaties. Those categories encompass 40 separate indicators of a strong IP system.
Because scoring for this year’s Index is based on 40 indicators, instead of 35, a weighted-score was calculated to determine whether countries’ protections of IP rights were stronger or weaker than what was calculated in last year’s Index. Of the 45 countries included in the 2017 Index, 28 improved their weighted-scores in this year’s Index.
For the sixth consecutive year, the United States had the highest score. The U.S. IP system rated 37.98 (out of 40). The United Kingdom and Sweden followed with scores of 37.97 and 37.03, respectively. The countries with the lowest scores were Egypt, Algeria, and Venezuela at 10.10, 9.53, and 6.85, respectively.
Despite the United States’ leadership with regard to strong IP rights protections, there are some areas of weakness discussed in the Index. For example, the United States has a perfect score with regard to encouraging creativity by virtue of strong copyright protections, but it lacks an effective enforcement regime to disable access to websites which facilitate pirated content and counterfeit goods. A 2017 report by the IP Commission found that the annual cost of counterfeit goods, pirated software, and theft of trade secrets to the U.S. economy is between $225 billion and $600 billion.
To combat online piracy, Congress can help step up enforcement by reforming and updating the Digital Millennium Copyright Act’s notice and takedown system under Section 512. Also, modernizing the U.S. Copyright Office by updating the administrative technologies in order to maintain a readily searchable database of copyright registrations would be helpful. So too would be giving the Copyright Office the authority to address Section 512 matters. A process for adjudicating small claims for infringement would bolster IP protections and enhance the economic value of copyrighted works. The Register of Copyright Selection and Accountability Act of 2017, which would address some of these issues, passed the House of Representatives in April 2017, but it has not made much progress in the Senate. (See FSF Senior Fellow Seth Cooper’s February 2017 blog discussing the need to modernize the Copyright Office.)
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 agreements to better secure protections for IP rights holders internationally. The 2018 Index notes that the United States’ withdrawal from the Trans-Pacific Partnership (TPP) negatively affected the scores of member countries. (See our blogs about the importance of multilateral trade agreements and TPP here, here, and here.)
The U.S. should continue to seek new bilateral or multilateral agreements, including ones more narrowly focused on strengthening protections for all IP rights holders in the U.S. and foreign countries. As more countries adopt strong protections of IP rights through trade agreements, the entire global economy also will grow substantially, because legal institutions, including regimes that safeguard IP rights, constitute a positive externality for the global economy. The mutual gains from global trade are much higher when more nations adopt and enforce laws that protect IP rights.
Importantly, the supplemental statistical analysis of the Index emphasizes that “the stronger the IP environment is, the stronger an economy performs.” It also states that “even economies that implement moderate improvements to their IP environment experience positive economic and societal outcomes ranging from access to financing and foreign direct investment to higher levels of economic value generation.”
Across all countries, the Index found several noteworthy correlations between strong IP protections and economic innovation and creativity. On average, countries that scored above the median of the Index:
  • Are 20% more productive and 60% more likely to have robust entrepreneurial activity,
  • Produce up to 80% more knowledge and technology outputs,
  • Have twice the percentage of high-value workforce and over six times more highly skilled researchers in its labor force,

  • Are 62% more likely to have larger and more dynamic content and media sectors,
  • Provide up to three times wider access to new music through legitimate and secure platforms,
  • And generate twice as many video-on-demand and streaming services.

Strong protections of IP rights incentivize investment in research and development, innovation, and creative content because they ensure entrepreneurs have an opportunity to earn a return on their labors. And as economies with strong IP rights regimes grow and prosper, consumers are the ultimate beneficiaries as new goods and services, in whatever form they take, are brought to market.
The International IP Index provides U.S. and foreign policymakers a useful tool for assessing how to improve IP systems and enhance innovation and creativity in the 21st Century economy.