The issues and challenges on Intellectual Properties (IP) have been around for as long as people have started inventing things.
More than a decade ago, the World Trade Organization (WTO) signed an agreement that sets forth a universal set of policies on the registration and use of intellectual properties. A major part of the discussion when to Asia’s needs to increase its effort to protect and honour Intellectual Properties considering majority of the properties originate from the North but imitations and cheaper versions are created in Asia. Immediately, there are obvious and more complicated implications or, at the very least, questions. There is only one country in Asia that belongs to G7, Japan and the biggest markets of piracy are the poorer countries like the Philippines. There is a possibility that the economic status actually affects how a country upholds IP.
Piracy in different countries differs in intensity. China is known for downright imitation of brands and passing on their imitations as originals. In other countries, movies, music, and books are downloaded online for free. These compounded actions could cost the global economy billions of dollars but solving the problem is a solution that no one country or one continent can solve. The effects are felt globally and the solution must be dealt with on the global level as well.
Where Is IP Now?
In order to understand exactly what role IP plays in the global economy, there should be should be a clear understanding on:
- How are international IP policies fit the countries expected to follow it and how strictly are they followed
- How much is piracy costing the global economy both in actual and opportunity loss
- What else can be done to ensure that the rights of IP owners are honoured and sustained
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) was set in place back in 1994, right about the time with the internet was beginning to infiltrate the commercial trade market. It was signed in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT).
It was the first international policy on IPs and remains to be the most comprehensive international documents that aim to create an international standard on IPs. This has been discussed and several attempts of amendment happened several times including a 2001 DoHa Declaration which clarified how IP will affect access to medicines of different countries.
- a clarification the rights and roles of performers, producers of sound recordings and broadcasting organizations
- countries and laws that apply to IPs
- rules on the use of industrial designs, integrated circuit layout-designs
- nature and essence of patents
- rules on monopolies for both investors and developers
- nature and extent of use of trademarks
TRIPS included artistic properties, biotechnology and other inventions. The policies written were expected to be followed by all member states in same intensity but third world countries were given an extension as to when strict implementation is to be expected arguing that the policy would require the setting up of physical infrastructure and enacted laws. Developing countries were expected to fully roll out the policy back in 2005.
Back in 2006, the World Health Organization (WHO) determined that many member nations are yet to implement or follow the policies especially on data protection and licensing.
How Much Is The World Losing?
TRIPS, for now, seems to be nothing more than a white paper followed by a select few. International custom officials all agree that IP crime thrives and the numbers show it.
The total amount of revenue lost to piracy has varied from agency to agency. The Organisation for Economic Co-operation and Development (OECD) estimated that up to USD 200 billion have been lost to counterfeited products or products that were imitated and copied. This included clothing, accessories, music, and movies. This amount is more than the national GDP of about 150 economies globally (Olsen 10).
The Business Action to Stop Counterfeiting and Piracy (BASCAP) did an anti-piracy project with the assistance of the International Chamber of Commerce (ICC) in Europe. They estimated that EU would lose €240 billion and 1.2 million jobs by 2015 due to piracy.
In Canada, 12,600 Full Time jobs were lost due to piracy which is more than the jobs lost due to the economic recession. Some C$1,803m in sales was lost which is equivalent to C$965m of the country’s GDP and the government lost C$294m in taxes (Oxford 3).
In the U.S., economic impact of IP issues are a bit more studied. In sound recording, the lost amounted to $12.5 billion in direct and indirect revenue. That contributed to $2.7 billion in employee earnings annually. Of this total, $1.1 billion should have gone to the pockets of writers and singers of the music industry while $1.6 billion should have gone to other workers related to this industry. This also resulted to 71,060 jobs losses. This equates to a minimum of $422 million in tax revenues annually (Siwek 1). Of this amount, $291 million is the money that people should have earned as their income while $131 million is lost by government and corporations. The Motion Picture Association of America says it $1.3 billion for the same year in America (Pruitt 5).
Software piracy is just as bad. In 2009, more than four out of 10 software programs installed on personal computers around the world were stolen. This totals to $51 billion. There is also the piracy in clothing and other merchandise. Nearly US$5,000 billion went down the drain due to manufacturers using brand names they don’t have license of using and designs that were never allowed to be used. In 1990, world trade was worth almost US$3 400 billion, and the value of counterfeit goods was assumed to be around 3 per cent of world trade, which gives losses of approximately US$100 million per annum. This means that even when world trade increased, so did the lost due to piracy (OECD 22).
The numbers are astounding but it only says half the story. The fact is that the values being presented are based on products that are being intercepted and tracked. There are products and transactions that continue to push through. For example, sound recording files sent via emails, movie ideas being used on other movies remain unnoticed, and even more software are being passed around with ready-made cracks. The estimates also don’t include pharmaceutical and biotechnology ideas that are being stolen and evolved by and for Asian markets.
Therefore, the statistics mentioned above is only part, however important, of a comprehensive picture.
Technology and Economy
The number of jobs lost due to piracy and the degradation of a country’s GDP is a clear demonstration of how important IP is in a country’s economy which eventually affects global economy. However, there are very few attempts at explaining the architecture of the connection.
The explanation may be traced back to the industrial revolution. It was an era ignited when several visionaries and businessmen started developing new products. These products created a more efficient communication system, transportation system, and trade and commerce processes. That resulted to greater trade, greater demand, and greater production (Landes 69; Maddison 191 and Freeman and Soete, 1247).
This connection was never really well received. Historians, academicians, and economist were apprehensive about acknowledging the contribution of technology, ownership, and development of these to the economy. ‘Pre-modern’ economists such as Marx and Schumpeter, instead, emphasized the importance of investing more money to the economy rather than creating products that would encourage people to spend and allow the money to circulate in the market and eventually stimulate whole economic process (Solow 65; Marshall 1890). This concept is also known as the law of diminishing returns, the process of adding more elements (capital) that will help in the production. As the capital increases, the idea is that the cost of the product decreases. This concept has been used by many economists through the century. However, there is one critical hole in the whole theory and that is that capital is not a bottomless pit. Capital can run out and when there is not enough market activity, production will be converted to loss
Recent economists (Romer 1002, Grossman and Helpman 51), however, started acknowledging the connection of technological changes to economic growth. Their theories stated that economy grows when ‘quality of life’ is improved. In their model, research and development (R&D) is a critical part in economic growth because it studies how life may be improved using technology. Since developments are based on needs, it becomes a long-term investment which leads to continuous consumption. However, R&D and resulting products that fulfil the needs of consumers are not enough. The products must be used by new developers in producing new products that will further improve the quality of life.
More news models are being presented to establish the clear connection between technology and economy but most are yet to be tested (Jones 759). However, empirical factors are clearly established. Technology does not only create demand, it creates a better life that will stimulate new products to further improve life. It is this whole cycle that results to economic growth.
There are existing policies that protect the interest of developers and investors of technologies and other products. The loss happens in the consumer market and, unfortunately, it happens in markets that no government can control such as the Internet and Asian black markets. In countries plagued by poverty, curbing piracy may not be a priority and the mathematical connection between their quality of life and paying for products is not direct for the country to appreciate.
The result of this is countries like China who openly create products using ideas and implementation elements directly lifted from properties in the West and even more countries who secure copies of artistic products. However, there is nothing countries that hold most of the patented products being used can do but create better partnership in both local and international levels. Setting up offices or links to local companies may be a good option. This way, the countries could feel they have something to gain from IPs instead of being a mere consumer.