Strong IP Protection Leads to Economic Growth and Innovation, Just as Our Founding Fathers Said – Part II

As I discussed in my last blog in this series, the Global Intellectual Property Center of the Chamber of Commerce held a conference last week to celebrate the launch of its Second Annual International IP Index, Charting the Course. The proposals included in the Index and in the presentations by conference panelists delivered the same unified message: Strong IP protection systems lead to economic growth and innovation.

Senator Orrin Hatch delivered a keynote presentation at the event. He focused on the importance of strong intellectual property protections like other panelists, but he was the only presenter to focus on the constitutional basis for intellectual property protection. Senator Hatch recognized that the strong IP system in the U.S., which leads the world in the latest Index, is firmly rooted in the beliefs of our Founding Fathers and is “woven throughout the fabric of our nation”:

Our Founding Fathers believed intellectual property to be so fundamental to America’s future prosperity that they explicitly granted Congress the constitutional authority to protect it … The fact is, strong intellectual property rights [are] a tool of economic growth, not an impediment. It is a simple truth – countries that strengthen their intellectual property rights regimes enjoy economic benefits. They attract more investment, more technology transfers, increased innovation, and, ultimately, more prosperity for their citizens. Yet, despite these fundamental truths, intellectual property protections around the globe are continually at risk.

Our Founding Fathers recognized the role that intellectual property protection would play in our future and they have been proven right. As our innovators continue to advance and compete globally, now, more than ever, the United States must heed the wisdom of our Founders and bring this lesson to the forefront of our trade policies. It is through strong protection of innovation that we developed as a nation, and it is through the protection of innovation that our nation will continue to thrive in the international arena.

While the value of strong IP protections may be gaining support in the U.S., there is still strong anti-IP sentiment both at home and abroad. Here in the U.S., some argue for weaker IP protections, and point to disruptive technologies which challenge traditional notions of content ownership and patentable innovation. These developments have indeed strained the existing IP framework, and action may be required to form a better IP framework for the digital age. The Index recognizes that the U.S. struggles in these areas, identifying issues like inconsistent applications of limitations and exceptions to copyrights and related rights and ambiguity concerning ISP obligation to respond to trademark holder notice of infringement as “key areas of weakness.”

Anti-IP sentiment is particularly strong abroad in many of the countries that ranked low on the GIPC’s Index. Those countries, like India and China, advocate for the free sharing of copyrightable or patentable works by arguing that doing so is for the “public good.” In fact, the opposite is true — IP protections create incentives for creation and innovation, which serve the public good. Elaine Wu, Attorney-Advisor at the U.S. Patent and Trademark Office and Michael Schlesinger, Counsel at the International Intellectual Property Alliance, particularly focused on the problem of anti-property rights rhetoric abroad. They recognized that government officials perpetuate this backwards perspective, because the voices of authors and inventors are not heard.

Anti-IP advocates should heed the message of Senator Hatch and recognize that strong IP rights established by the Founding Fathers have produced economic growth and innovation. Further, as FSF scholars have observed in Perspectives and blogs, James Madison’s theory that “the public good fully coincides … with the claims of individuals” should provide the foundation for IP protection frameworks. This statement from Federalist No. 43 expresses the idea that an IP system can serve the public good by meeting the public’s demand for information access, content sharing, and use of new inventions or products while also providing strong protection for authors’ and inventors’ rights.

In order to help other countries around the world improve their economies and the lives of their citizens, it is helpful to present facts and figures that demonstrate the positive effects of strong IP protection. And it is also important to recognize the constitutional roots of intellectual property protection. The Founding Fathers intended that one of the government’s primary purposes be to protect property rights. This protection for the works of authors and inventors has produced the positive economic impact discussed in the GIPC’s Index and by GIPC panelists.

As Senator Hatch urged, heeding the wisdom of our Founding Fathers by retaining a strong IP system will provide incentives for creation of all kinds of valuable works – ranging from literary works and music on the one hand to practical new products and services on the other. This, in turn, will fuel further innovation and economic development for generations to come.

Strong IP Protection Leads to Economic Growth and Innovation, Just as Our Founding Fathers Said – Part I

On January 29, the Global Intellectual Property Center of the Chamber of Commerce held a conference to celebrate the launch of its Second Annual International IP Index, Charting the Course. The Index provides an in-depth look at the IP environments of 25 countries, and offers proposals for improvement. Panelists at the GIPC event presented responses to the findings, as well as additional evidence on the impact of IP protection systems. The resounding message of the Index and panelists, based on empirical evidence in the Index and independent research, was that strong IP systems foster economic growth and development.

Senator Orrin Hatch took this message further, advocating for strong IP protection, but also recognizing that before evidence supported the theory of strong IP rights, the Founding Fathers explicitly provided protection for authors’ works as a founding principle of our nation. He credited this constitutional basis of intellectual property for leading the U.S. toward the strong IP environment in place today. In Part II of this blog on the GIPC event, I will discuss Senator Hatch’s comments and the constitutional foundations of intellectual property in further detail.

The Index ranks the IP environments of 25 countries that vary in market size, income level, and development. The Index uses 30 key metrics, which indicate whether an environment fosters growth and development and which provide a dynamic view of the strengths and weaknesses of each country’s IP protection system. The Index also includes proposals for improving economies, creating jobs, promoting innovation, ensuring safety, and providing access to creations and inventions through enhanced IP protections and supporting mechanisms.

The Index reports that most high-income economies, with some exceptions, have “robust national IP environments in place,” while the “weakest total national IP environments are in the lower-middle-income countries.” The Index ranks the U.S. first in the world in overall IP strength, and first in most other categories including Patents, Related Rights and Limitations, Copyrights, Related Rights and Limitations, Trademarks, Related Rights, and Limitations, and Trade Secrets and Market Access. The U.S. led the UK and France in all of these categories. The U.S., the UK, and France were equal in the Membership and Ratification of International Treaties category. The UK and France only out-ranked the U.S. in the Enforcement category, one of the weakest categories for all countries examined in the Index due to high rates of piracy worldwide.

The country with the weakest IP environment is India. This ranking was based on India’s continued use of compulsory licenses, patent revocations, and weak legislative and enforcement mechanisms. Other countries, like China, received low rankings due to their practice of conditioning market access on the forced sharing of protectable content, trade secrets, and sensitive technologies, despite its otherwise strong economic environment. Other countries that were among the lowest ranked on the Index include Indonesia, Vietnam, and Thailand.

Based on the Index findings and independent studies, the speakers at GIPC’s launch event delivered a unified response: Strong IP protection systems lead to strong economies, growth, and innovation. Panelists included members of Congress, government employees, interest group representatives, economists, and private industry stakeholders. Each advocated the importance of an empirical, fact-based analysis of an IP system’s impact, and presented evidence showing the indisputable link between strong IP protection and increases in innovative output, foreign direct investment, job creation, and other metrics indicative of economic growth and development.

For instance, Douglas Lippoldt, Senior Economist and Trade Policy Analyst at the Organisation for Economic Co-operation and Development (OECD) presented evidence demonstrating the link between strong patent protection and economic development. He found countries that increased their legal frameworks for patent protection after the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) experienced a clear increase in expenditure on research and development as a share of national GDP, in-flows of foreign direct investment, and increased output in creation and invention. He also noted an increase in foreign patent application filings, which indicated that increased patent protection attracted market entry.

Additionally, Michael Schlesinger, Counsel at the International IP Alliance and Aaron Brickman, Deputy Executive Director of SelectUSA, provided statistics proving the merits of the strong IP protection system in the U.S. Mr. Schlesinger noted that copyright-intensive industries grew by 4.73% in 2012 – more than double the growth in the rest of the U.S. economy. Those industries added $1 trillion to the U.S. economy in 2012, and employed 5.4 million workers. Further, those workers earned an estimated $85,000 on average, which is 33% higher than the average U.S. annual wage. Mr. Brickman stated that 1/3 of U.S. GDP is impacted by IP-intensive industries, and those industries are responsible for 1/3 of U.S. employment. He found that the U.S. IP framework is the reason the U.S. is the most attractive market for foreign direct investment, with approximately 1/3 of global research and development taking place in the U.S.

These numbers seem to clearly demonstrate that the U.S. IP environment leads the world, and that strong IP protections do indeed contribute to economic growth and innovation. However, Senator Orrin Hatch, Ranking Member of the Senate Committee on Finance, recognized that many economic and strategic competitors to the U.S. fail to understand that strong IP protections in the U.S. are to thank for much of its economic success. And, that the basis for protection of IP in the U.S. is the constitution. In his keynote address, Senator Hatch focused on the importance of strong intellectual property protections like other panelists, but he was the only presenter to recognize the role of the Founding Fathers in building the the U.S. system of intellectual property protection.

I will discuss Senator Hatch’s comments and the fundamental influence of the Founding Fathers on the U.S. intellectual property rights system in Part II of this blog series.