Benefits of IP Protection for Developing Countries

1. Benefits of IP Protection for Developing Countries Trans-Pacific Partnership Stakeholder Event July 2, 2012 Tom Giovanetti President, Institute for Policy Innovation www.ipi.org

2. Ambassador Right Honorable Mike Moore New Zealand Embassy Washington, United States of America Speaking at IPI Trade Event “Growing Trade, Growing Jobs: The Benefits and Challenges of Free Trade” May 16, 2011 www.ipi.org

3. Luis Miguel Valdivieso Montano Ambassador Extraordinary and Plenipotentiary of Peru in the United States Speaking at IPI Trade Event “Growing Trade, Growing Jobs: The Benefits and Challenges of Free Trade” May 16, 2011 www.ipi.org

4. IPRs Recognized as a Basic Human Right • Universal Declaration of Human Rights (1948) • “Everyone has the right to the protection and material interests resulting from any scientific, literary or artistic production of which he is the author.” (Article 27) • Not placed there by multinational corporations or international bankers. www.ipi.org

5. IPRs StimulateForeign Direct Investment (FDI) • Rand study, 2010, Hassan, Yaqub, Diepeveen • “The empirical evidence suggests that stronger IPRs may positively affect the volume of FDI and exports.” • Maskus, K.E. and M. Penubarti (1995) ‘How Trade-related Are Intellectual Property Rights?’ Journal of International Economics 39(3–4): 227–48. • a 1 per cent rise in the extent of patent protection expanded the stock of US investment in developing countries by 0.45 per cent. • Lee, J.-Y. and E. Mansfield (1996) ‘Intellectual Property Protection and US Foreign Direct Investment’. Review of Economics and Statistics 78(2): 181–6. • found that the level of intellectual property protection influenced the volume of US FDI. www.ipi.org

6. IPRs StimulateForeign Direct Investment (FDI) • Branstetter, L.G., R. Fisman, C.F. Foley and K. Saggi (2007) ‘Intellectual Property Rights, Imitation and Foreign Direct Investment: Theory and Evidence’. NBER Working Paper 13033. • “Their findings showed that US multinationals expanded the scale of their activities in [16 countries in Asia, Europe, Latin America and the Middle East] after these countries implemented IPR reforms.” www.ipi.org

7. IPRs Stimulate Tech Transfer • Rand study, 2010, Hassan, Yaqub, Diepeveen • “The empirical evidence suggests that stronger IPRs in developing countries may encourage international technology transfer through market-based channels,1 particularly licensing, at least in countries with strong technical absorptive capacities.” • “The empirical literature also shows that stronger IPRs can encourage domestic innovation, at least in emerging industrialised economies.” www.ipi.org

8. IPRs Stimulate Tech Transfer • Smith, P.J. (2001) ‘How Do Foreign Patent Rights Affect US Exports, Affiliate Sales and Licenses?’ Journal of International Economics 55(2): 411–39. • “Smith (2001) finds that strong IPRs have a larger effect on US knowledge transferred outside the country and firm, relative to knowledge located inside the country and internalised in the firm. In order words, strong IPRs give incentives to firms in developed countries to license their technologies to other firms in developing countries, since the former will be able to control better the knowledge transferred. Conversely, under weak IPRs, multinationals may be encouraged to transfer the knowledge only to their foreign affiliates in order to keep control of it.” www.ipi.org

9. IPRs, Foreign Direct Investment, Tech Transfer • OECD Trade Policy Working Paper No. 62, “Technology Transfer and the Economic Implications of the Strengthening of Intellectual Property Rights in Developing Countries” (Walter Park & Douglas Lippoldt, 2008) • Post-TRIPS analysis • “Intellectual property rights are a significant determinant of U.S. outward FDI” (foreign direct investment). • “Stronger patent rights have a positive and statistically significant effect on the probability of foreign investment in high-technology sectors.” • “The results have established a positive association between patent rights and technology transfer, controlling for other variables, and that this association is not qualitatively different across different income groups of countries.” • “Thus stronger patent rights in developing countries have the potential not only to attract technology transfer but also encourage foreigners to transfer new technologies.” www.ipi.org

10. What Do Countries Get In Exchange for the “IP Premium”? • Higher Quality (esp. when combined with trademark) • Safety • Competition (patent vs. “monopoly”) • Pipeline • Benefits (health, etc.) • Tech Transfer • Foreign Direct Investment www.ipi.org

11. Benefit Sharing from Traditional Knowledge through IP System • IPI Study “Commercialization and Benefit Sharing from Traditional Knowledge: Case Studies from the United States” (Singleton, April 2011) • The U.S. has traditional knowledge • “. . . suggests an optimistic view of conventional IP rights in relation to traditional knowledge.” • “In the U.S., the commercialization of traditional knowledge has proceeded for many years within a conventional IP framework.” • Folklore (Pocahontas, Br’er Rabbit) • Music (tribal music, bluegrass, spirituals) • Foods (maize, grape varieties, wine-making) • Medicines (wintergreen, mayapple, Pacific Yew) • “Conventional IP system offers many benefits to traditional knowledge commercialization and benefit sharing.” www.ipi.org

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