International IP Index Is a Useful Tool for Assessing IP Rights Protections

By Randolph J. May and Michael J. Horney

On February 10, 2016, the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) released the fourth edition of the International IP Index entitled “Infinite Possibilities.” As the Executive Summary of “Infinite Possibilities” states at the outset:

By providing a legal infrastructure through which ideas can become products, robust IP systems foster innovation leading to economic growth, job creation, and sustained competitiveness in global markets. The U.S. Chamber’s International IP Index provides economies with a comprehensive roadmap to harnessing the benefits robust IP systems provide.

Focusing on six separate key categories, the Index scores 38 countries representing over 85 percent of the world’s gross domestic product. The six categories are:

1. Patents, Related Rights, and Limitations
2. Copyrights, Related Rights, and Limitations
3. Trademarks, Related Rights, and Limitations
4. Trade Secrets and Market Access
5. Enforcement
6. Membership and Ratification of International Treaties

The United States had the highest score of 28.61 (out of 30), followed by the United Kingdom and Germany with scores of 27.53 and 27.36, respectively. The countries with the lowest scores were Thailand, India, and Venezuela at 7.40, 7.05, and 6.42, respectively.

The Index found some interesting correlations regarding strong protections of IP rights across all countries:

• Access to finance: Economies with robust IP regimes are more likely to attract venture capital and private equity funding.
• High-quality human capital: Economies with favorable protection of IP rights possess on average 2.5 times more R&D-focused personnel within their workforces.
• Foreign direct investment attractiveness: Economies with robust IP systems receive on average a 45 percent higher Standard and Poor’s credit rating than economies whose IP systems lag behind.
• Inventive activity: The top 10 economies in the Index exhibit patenting rates more than 30 times greater than the bottom 10 economies in the Index.
• Advanced technology markets: People and firms in economies scoring above the median level of the Index are 30 percent more likely to enjoy access to the most recent technological developments.
• Streamlined and enhanced access to creative content: Advanced and easy-access delivery of streaming services is 3 times greater in economies scoring above the median level of the Index than in those scoring below the median. Access in the top five economies is up to 25 times greater than in the lowest five.

The 4^th edition of the International IP Index contains important information about the 38 countries included. Eight new countries were added to this latest edition of the Index. While it is unknown where these countries would have ranked last year, three of the eight rank in the top 15. But regardless of the new countries’ overall scores, the addition of this new data allows policymakers in those countries to understand where their countries rank and how their IP policy frameworks can be improved.

Of the thirty countries in last year’s Index, sixteen improved their overall scores this year. Many of the countries in the Index’s bottom half decreased their overall scores, while many countries in the top half increased their overall scores.

In a January 2016 Perspectives from FSF Scholars titled “Protecting Global IP Rights Is an Economic Imperative, Free State Foundation President Randolph May and Senior Fellow Seth Cooper traced the history of the development of international protection of IP rights, including through the negotiation of international agreements and treaties. In the Perspectives, they emphasized the importance of concluding “international trade agreements, such as the recently-negotiated Trans-Pacific Partnership, that contain meaningful intellectual property protections.”

The United States, as a global leader with respect to IP rights and enforcement, should continue to use its leadership to negotiate multilateral trade agreements that ensure strong protections of IP rights in participating countries, particularly developing countries with low scores. By doing so, the countries involved will benefit through mutual gains from trade. And as more countries adopt strong protections of IP rights, 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 gains from global trade are much higher when more nations adopt and enforce laws that protect IP rights.

“Infinite Possibilities,” the fourth edition of the International IP Index, shows that strong protections of IP rights incentivize investment in R&D, innovation, and creative content because entrepreneurs are then enabled to earn a return on their labors. And, most importantly, this means that 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 Index is a useful tool for policymakers to use to consider how they may improve their own nation’s IP systems. Hopefully, we will see even higher scores next year!