Re-thinking the role of intellectual property

By Dr Francis Gurry

Dr Francis Gurry (LLB(Hons) 1973, LLM 1975) is Director General of the World Intellectual Property Organization (WIPO).  This year he visited Melbourne Law School  to deliver the fifth annual address in the lecture series named in his honour, the Francis Gurry Lecture on Intellectual Property. This is a summary of the lecture given by Dr Gurry in Melbourne and Sydney in August 2013.

Dr Francis Gurry
Dr Francis Gurry
Traditionally, intellectual property (IP) has played an important, but somewhat hidden, role in the legal and economic system. 

It was there to encourage and protect investment in innovation through patents, designs and rights for new plant varieties; to encourage cultural creation through copyright; and to contribute to orderly markets by protecting the distinctive brands of different economic agents and their products and services and by sanctioning unfair competition.

A number of developments have propelled IP into a much more central and visible role in the economy and society.  In particular, we have witnessed three major shifts that have had a direct impact on the role of IP.

The first shift is the economic one from tangibles to intangibles – the rise of intangibles and the knowledge economy.  Looking at the distribution of corporate assets between tangibles and intangibles, one sees a growing, and usually greater, share on the part of intangibles.  In advanced economies, the rate of increase in investment in intellectual or knowledge-based capital is consistently higher than the corresponding rate of increase of investment in physical capital.  IP protects the economic value of intangibles – innovation, design, reputation and image.  In consequence, as the role and value of intangibles have risen, so too has demand for IP. 

Over the past 15 years, the annual number of patent applications filed worldwide has doubled from 1.05 million to 2.14 million applications, the number of trademark applications filed worldwide has also doubled from 2 to 4.2 million applications per year and the number of design applications filed globally has trebled from 245,000 to 775,000 applications.

The second major shift is the geopolitical one from West to East.  As we all know, the centre of economic gravity is moving and, with it, the centre of technological gravity.  This shift is being expressed dramatically in the production of knowledge and technology.  In terms of inputs, we see that China is now the second largest investor in R&D, in absolute terms, in the world.  The third largest, in absolute terms, is Japan.  Asian countries represented 24% of global R&D in 1999, but accounted for 32% in 2009.  In terms of outputs, we see the share of Asia in the production of scientific articles is increasing compared to the shares of Europe and North America.  The picture is even clearer in the case of technology, as measured by the number of international patent applications filed under the Patent Cooperation Treaty (PCT).  In 1994, Japan, China and the Republic of Korea accounted for 7.6% of all international patent applications.  In 2012, they accounted for 38%, more than the shares of the EU (31%) or the USA (26.5%).

The third shift is the political one from State to non-State - the diffusion of political power throughout society as a result of the empowerment brought about originally by the Internet and more recently by other forms of social media.  The Internet has facilitated the creation of all sorts of networks and has created a shift in access to information and knowledge and in the capacity to use knowledge for all sorts of purposes.  Since IP has become more economically valuable, and since technology pervades our lives, we see the empowerment of civil society expressed also in relation to IP.  The most salient example of this was perhaps the coordinated action taken on January 18, 2012, which led to the withdrawal of two pieces of IP legislation from the United States Congress that had enjoyed bipartisan support, the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA).  There are many other examples and enterprises with valuable intellectual assets, particularly in sensitive areas such as food, agriculture or health, now need to look after not just their commercial management, but also their political management.

These shifts have occurred against a backdrop of globalization, that is, the rise of free, open and interconnected markets and global value chains, driven by reduced trade barriers, improved transportation, telecommunications and communication devices.  Among the by-products or consequences of globalization are the global awareness and use of consumer technologies (there are 6.8 billion mobile subscriptions in the world, for example), global fashions and trends and globalized consumption of culture and entertainment (as of July 28, 2013, the music video "Gangnam Style" by the Korean performer Psy had been viewed over 1.715 billion times on YouTube, having surpassed Justin Bieber's "Baby" as the site's most watched video).

All this produces a vastly different context for IP from the one in which it was originally conceived.  It requires us to add certain functions to the traditional job description of IP.

In the first place, we should notice that, in the words of the former Prime Minister of China, Mr Wen Jiabao, IP will be the basis of competition in the future. 

Since innovation is the key to economic success, and since IP captures the competitive advantage conferred by innovation, we see that more and more competition is focussed on innovation and IP.  At the level of enterprises, this is apparent in the purchase of patent portfolios for enormous sums, the smartphone patent wars and the increased incidence of espionage.  At the level of states, we see it in the development of national innovation strategies, competition for the location of R&D facilities or technology -intensive investment and fierce competition for skilled human resources.  IP has an important role in providing a rules-based framework for the conduct of this increasingly intense competition.

Secondly, since innovation, cultural creations and entertainment have become such a central part of our economic, social and cultural lives, there is a convergence in intellectual property of many competing interests.  Increasingly, IP is called upon also to perform the function of finding the equilibrium point between the many and richly diverse interests that surround the acts of innovation and creation – the interest of encouraging investment in innovation, which requires that innovators be given a period of exclusivity for the commercial use of the invention, as against the interest in sharing the social benefit of the innovation; the interest of the individual creator, as against the interest of society; the interest of producers and producing countries as against the interest of consumers and consuming countries.

The task of reconciling the diverse interests that surround innovation and creation is an extremely delicate one.  I do not think that a fixed equilibrium point can be found for all interests and all circumstances.  Rather, it is more likely that the tension between interests will continue and intensify.  It requires us to recognize that the mission of IP is much larger and more sophisticated than in the past.  It is really about the whole way in which knowledge and culture are produced, distributed and consumed in an economy in which knowledge is the basis of wealth generation and in a society with global habits of consumption of technology, culture and entertainment.

Banner image: Dr Francis GurryDirector General of the World Intellectual Property Organization
Credit: © WIPO 2009: Dhillon

This article originally appeared in MLS News, Issue 10, December 2013.