Theme 7 Intellectual Property and Economic Development WIPO UNITO-LLM ITC-ILO Julio Raffo Economics & Statistics Division (WIPO-ESD) Geneva October 23, 2014

Outline Highlights of global IP trend IP and economic development Economics of IP Q&A session

More and more patent applications every year Trend in Patent applications, 1985-2012 (source WIPO statistics database) Total patent applications filed worldwide is increasing

Not only patents: Trademarks x4 in 25 years! Trend in Trademark applications, 1985-2012 (source WIPO statistics database)

…and Industrial Designs x7! Trend in Industrial Design applications, 1980-2012 (source WIPO statistics database)

Higher concentration in few patent offices If we look at the shares of patent applications filed between 1995 and 2010, we can note the following interesting points: 1. The share of patents filed in China in 1995 is 1.8% of the world total, in 2010, it is 19.8%

Few countries originate most patent filings Main origins of PCT applications (2013) (source WIPO statistics database)

More on origin concentration Patent applications through the Patent Cooperation Treaty is overwhelmingly come from USA, Japan, Germany, China and the Republic of Korea

Increasing IP use translates into… Productivity? Technology transfer Innovation? Economic growth? Development? Start-ups? Creative outputs? We have evidence of some, but not all Competition? Trade? Licensing? Investments?

IP, Growth & Development: Theory Basic economic incentive for IP protection should work everywhere … but initial conditions across countries vary Study of economic growth process suggests that technological innovation is key for long-term growth… + by fostering innovation and technology transfer, IP protection can stimulate economic growth – reduces imitation, increasing the catching-up cost Arguably: is imitation bad?

Note: issue of causality: unsure if countries have high income because they are innovative or that innovative countries tend to be in the high income bracket; story is likely to be a combination of the two.

Strength of IPR and income levels for 177 countries, 2005 Source: Park index and World Bank

What are we missing in the picture? 1. What is the causality? IP generates economic growth, or … later development stages require “more” IP? 2. Can the same policy work in different countries? Legal, economic and political framework Innovation ecosystem 3. Can we isolate the impact of IP on growth rate? National endowment of resources Quality of infrastructure Macroeconomic stability Business and investment climate Investments in education and health Openness to trade and foreign investment

Going back to the economic basics IP is “simply” an economic policy instrument: What is its objective? Address problems arising from market failures… by providing the right incentives Is it neutral? Who wins and who loses? Who pays the bill?

Market failure #1 Information (and knowledge) good have traits of public good: Non-rivalry Non-excludability, to a certain extent Producing knowledge is costly Increasing returns to production Difficult to appropriate returns Uncertainty

Market failure #2 Markets may fail if there is asymmetric information between buyers and sellers of goods E.g.: markets for used cars or insurance Superior quality may give incentives to invest in reputation …if it reassures consumers that they purchase what they intend to purchase

IP instruments Stimulate innovative and creative activities Patents, utility models, copyrights, industrial design, plant breeders’ rights Alternatives: trade secrets, R&D subsidies, tax exemptions or prizes Address asymmetry of information issue Trademark, geographical indication, collective marks Alternatives: consumer protection, sanitary controls, product customization

IP Trade-off Advantages Disadvantages Market selection i.e. consumers pay not tax-payers Minimizes welfare distortion i.e. only market success Disadvantages Monopoly creation Bias against basic research i.e. only market oriented

Summarizing Use of IP protection is on the rise Increasing use of IP protection Broader geographical use of IP protection Link between IP protection and economic development Impact varies according to countries’ innovative and absorptive capacities Increasing use of IP affects certain aspects of economic activities But these are not neutral

Thank you for listening Questions? Julio.raffo@wipo.int