By Sarah Arora

Introduction

The term intellectual property (IP) refers to any original work of the human intellect, be it artistic, literary, technological, or scientific. IPR refers to the legal rights granted to the inventor or creator to safeguard his innovation or creativity for a specified length of time. These legal rights grant the inventor/creator or his assignee the exclusive right to fully employ his invention/creation for a specified length of time. The human mind is astoundingly inventive in solving applicable technological and scientific challenges while explaining the existence and quality of things and persuading people to purchase them and expressing images and ideas.

These intellectual endeavours provide new technologies, goods, and services, define new methods of doing things, and enrich the cultural diversity of society. They produce intellectual assets, which are pieces of information that may have economic worth if used in the marketplace. Insofar as their ownership is acknowledged, such assets are referred to as intellectual property. Their economic returns are contingent upon the expenses of their creation, their attraction to potential users, the structure of the marketplaces in which they are sold, and the legal rights that allow their owners to govern their usage.

Discussing the impression of IPR on the Economic Development of a nation

Intellectual property is essential to innovation and economic expansion. We are always surrounded by intellectual property. Trademarks inform consumers of the origin of a product. Designs determine how items appear. Copyrights permit the production of artistic works such as books, music, paintings, photographs, and films. Patents safeguard technical innovations in all technological sectors. The role of intellectual property has evolved into a force that affects a broad spectrum of demand and industries, making it an increasingly significant framework condition that influences not just innovation, but also trade, competition, taxes, and other areas. 4 Intellectual property is mainstream and omnipresent in reality. When compared to traditional means of production such as land, labour, and capital, the generation and administration of knowledge play a preeminent role in wealth creation in today’s economy.

The question of how intellectual property rights (IPRS) affect economic development is subject to complex progress which is multifaceted and dependent on various variables. The efficiency of IPRS in this regard is highly dependent on the specific conditions of each country. Despite the fact that economists are spending more attention to this topic, the evidence to date is fragmented and rather conflicting, in part because many of the concepts involved cannot be easily assessed. In theory, as I will explain below, stronger mechanisms for safeguarding intellectual property could either promote or inhibit economic progress. Emerging research suggests that stronger and more definite IPRS could improve economic growth and foster beneficial technological progress, hence enhancing development prospects, if structured in a way that supports effective and dynamic competition.

The economic analysis of IPRS is utilitarian, examining whether the static and dynamic advantages of a system outweigh its costs. The projected advantages and costs depend on the market, product, and social institution features. Therefore, a one-size-fits-all strategy for harmonising worldwide IPRS is not economically rational.

There are two primary economic goals of any intellectual property protection regime.

The first objective is to encourage investments in knowledge development and commercial innovation by securing exclusive rights to use and sell newly generated commodities, technology, and services. Without such protections, economically important knowledge could be copied by rivals without reward. Companies would be less eager to incur the expenses associated with research and commercialization investments. Weak IPRS creates a negative dynamic externality from an economic perspective. They fail to overcome the inherent challenges of uncertainty in R&D and concerns of competitive appropriation in private information markets. The second objective is to facilitate the general distribution of new knowledge by encouraging (or mandating) rights holders to commercialise their products and ideas. Information is a type of public good because it is naturally non-rival and developers may find it difficult to prevent others from utilising it. Once new technologies and products are established, it is economically advantageous to make them widely available at marginal manufacturing costs. These expenses may be quite cheap, as they may include merely duplicating a blueprint or a compact disc or movie. These objectives are fundamentally at odds with one another. A system of IPRS that is unduly protective could limit the social benefits of innovation by limiting the incentives to share its fruits. However, a system that fails to deliver an appropriate return on investment could inhibit innovation. Thus, it is necessary to strike a balance between market conditions and growth-friendly policies.

An important observation to make is that national intellectual property protection systems are highly dependent on economic progress. Thus, the causal relationship between IPRS and development is bidirectional. Indeed, it is widely recognised that governments strengthen their IPRS systems as their economies grow wealthier and acquire a higher level of technological sophistication. The argument that robust IPRS foster technical development and change is more disputed.

Encouraging healthy competition policies

The adoption of greater IPRS in developing countries is frequently supported by promises that this reform will draw major new inward flows of technology, a flourishing of local innovation and culture industries, and a quicker narrowing of the technology gap with rich countries. However, it must be acknowledged that increased IPRS alone are extremely unlikely to deliver such improvements. Consider the disparities between countries in sub-Saharan Africa, which have long-standing and reasonably powerful laws (albeit with low enforcement capacity), and countries in East Asia, many of which have just recently overhauled their regimes. The preceding group attracts little FDI and receives few patents domestically and internationally. The latter group draws the majority of foreign direct investment in the developing world and is experiencing an increase in the use of intellectual property protection. It is unlikely that an increase in IPRS alone will result in technical change and expansion. The research presented previously indicates that IPRS could stimulate increased international economic activity and indigenous innovation, but such impacts would be contingent on the circumstances. The positive effects of IPRS should be more pronounced in nations with adequate complementing endowments and policies. Countries are faced with the difficulty of ensuring that their new policy regimes become proactive tools for encouraging constructive technological progress, innovation, and consumer gains.

Strengthening IPRS has the ability to boost growth and development under the right conditions, but it may also incur significant economic and social consequences. Indeed, developing economies may incur net welfare losses in the short term due to the fact that many of the costs of protection may arise earlier than their dynamic benefits. This circumstance explains why it is frequently difficult to mobilise reform-supporting interests in emerging nations. In the majority of emerging economies, substantial amounts of labour are employed to copy illegal items. As these nations modernise their laws and enforcement procedures, these workers must seek alternative jobs. This displacement issue should be the primary obstacle for governments seeking to implement a more robust IPRS.

In the end, the competitiveness of the marketplaces in which an IPRS works may be the most crucial factor in determining its success. In economies with competitive market structures, the dynamic advantages of IPRS are greater while the costs of abuse are lower. Therefore, it is essential for nations to liberalise their markets to the greatest extent possible while simultaneously enhancing their protective measures. This observation advocates for additional international trade and investment liberalisation, particularly the easing of constraints on service providers. Important are also domestic deregulation moves that make businesses more competitive. This change must be accompanied by methods to ensure that public rules do not impede the potential entry of new enterprises.

Furthermore, due to the fact that intellectual property rights generate market power, their application is susceptible to anticompetitive abuses. Such worries are frequently exaggerated. The boundaries of an inventor’s or creator’s exclusive use rights are outlined by intellectual property rights. These rights establish monopolistic positions infrequently unless they are supplemented with restrictions on the admission of competing enterprises. In fact, IPRS are crucial for fostering R&D that fosters dynamic competition. However, IPRS’s scope is restricted to foster access, dissemination, and competitiveness. Attempts by rights holders to use IPRS in excess of permissible limits are violations of the competitive system. It is useful to examine the various types of abuse that may occur. An example of a potential abuse is monopoly pricing, however in competitive markets there are typically market substitutes that limit IPRS’s capacity to support monopoly prices. In industrialised nations, pricing decisions are therefore rarely regulated by public authorities, except for the purpose of reducing the expenses of maintaining public health and nutrition.

Conclusion

Economic theory reveals that IPRS may have either a beneficial or negative effect on economic growth and development. The scant research available implies that the link is positive, but contingent on other conditions that boost intellectual property protection’s benefits. Briefly, IPRS could be effective market-based solutions for addressing challenges in information development and distribution marketplaces. Nevertheless, their existence could be problematic in terms of their potential for costs and anti-competitive behaviour. Therefore, modem IPRS systems alone are insufficient to promote effective technology transition. Instead, they must be included into a comprehensive and cohesive set of complementary policies that maximise the potential of IPRS to increase dynamic competition. These policies include enhancing human capital and skill acquisition, encouraging organisational flexibility, assuring a high level of competition on domestic markets, and establishing a transparent, non-discriminatory, and effective competition regime.

About the Author

Sarah Arora is an antepenultimate year law-student pursuing B.B.A LL.B Hons. from Jindal Global Law School. She loves to write poems and articles on issues that arouse her curiosity and inspires her to be better than yesterday. Her poems and writing pieces are also published in Teen-Anthologies available on Amazon and various other blogs respectively. She always believes in the saying that one should never be afraid to fail as failure is a paramount in order to appreciate where you came from. 

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