2.2. 3 Concepts of Intellectual Property Rights and the Importance of its Protection
Intellectual property rights (IPRs) can be defined in economic terms as the rights to use and sell (or otherwise dispose of) "creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. They are rights conferred by status of individual or a cooperate body with respect to a product of his or her intellect, guaranteeing the exclusive control of the exportation of his work for a limited period. The object of protection here is usually a work of the mind or human intellect (Owoseni,2001:8).
For the firms owning them, they form part of their intangible assets (as opposed to tangible assets such as machinery or buildings), together with customer goodwill, the firm’s specific skills of their work forces, knowledge imbedded in the organization, or good management practices. Sopple(2010:68) defines intellectual property rights as the rights given to people over the creations of their minds. With rights in hand through the exploitation of intellectual property, these individuals and/or business organizations earn profits either through manufacturing or licensing which is a reward for their innovative efforts. It also acts as stimulus to Research and Development, (R&D) efforts.
Intellectual Property right is thus a policy tool and is also viewed as a tool through which countries can attain industrial and technological development. Firms should as a result make policies that link intellectual property to other national imperatives such as trade, economic growth and competitiveness. Today, the economic and cultural importance of this collection of rights is increasing rapidly. Nevertheless, the role of intellectual property rights and intangible assets in business is insufficiently understood by most people in the society especially in the growing economies of the developing world. This is typically depicted in the way accounting students and professionals are generally not helpful in representing the worth of intellectual property rights in companies’ accounts. Most often therefore intellectual property rights are undervalued, undermanaged or underexploited. Despite the importance and complexity of intellectual property rights, there is generally little coordination between the different professionals dealing with organization’s intellectual property rights especially in the developing countries. Notwithstanding that fact (WIPO, 2000: 17) states that the fortunes of many businesses now depend heavily on intellectual-property rights.
Intellectual Property rights protect innovation and reward innovative ability. It comprises a bundle of rights focusing on the physical manifestations of intellectual activity in any field of human endeavour. It is concerned with protecting the expression of an idea for an invention, the details of which have been worked out and which takes the form of a product or process that can be applied industrially. Intellectual property rights underpin a market for innovations, which is significant because brilliant inventors are not always brilliant entrepreneurs and vice versa. Markets for innovations allow inventors and entrepreneurs to match their talents in successfully bringing innovations to market (Greenhalgh, and Rogers, 2007:56)
Controversies on Intellectual Property surround the subject matter of coverage as to the range of rites the holder of Intellectual Property enjoys. Appropriation of rights and allocation of resources to these rights pose a great challenge to policy makers and managers of these assets. Suffice it to say that Intellectual Property is intricately related to trade, competition, industrial growth, economic development and productivity. Countries in Africa are faced with the challenges of complying with the agreements, policies and provisions provided by the government and authorities. In addition, implementation and compliance are other major issues.
From an economic point of view, intellectual property rights is a policy tool used to align the private returns to innovative activity with its social return, i.e. its benefit to society, and thus to generate socially optimal incentives for private-sector innovative activity. Intellectual Property rights are essentially established to perform such functions namely; to create incentives for innovative behaviour and to help diffuse knowledge. It is presupposed that the monopoly power created by competition which improves appropriation of knowledge through Intellectual Property rights is what acts as an incentive to invent and innovate. Knowledge therefore is an economic asset. Greenhalgh (2007:27) identifies the following objectives of Intellectual Property Rights;
- • They contribute to the promotion of technological innovation and transfer of social and economic welfare and a balance of rights and obligations.
- • These rights make it possible for innovative firms to appropriate the benefits of their innovative activity. However they are not the only appropriate method available to firms. Other methods like lead-time advantage and technology complexity can also be used.
- • They encourage innovation and creativity for advancement in technology.
- • Protect inventions, creations, and other works of the mind so that the creator will reap his benefit.
- • They encourage healthy competition amongst firms while discouraging adulteration of products and processes.
Firms are therefore expected to choose an optimal Intellectual Property Rights regime that will both encourage innovative activity and knowledge dissemination, improved productivity and any other activity that will improve their performance in order to achieve their set goals.
2.2.4 Intellectual Property Rights and Policies
There are two types of intellectual property rights; Industrial property and artistic literally property rights involving copyright. However, within the natural science sector, different property rights may be obtained, used and enforced. The deployment of rights will depend on a number of factors, including an actor’s area of specialization, structure, anticipated activities, and whether it is engaged in commercial activity. Various kinds of rights exists, Copy rights, Patents rights, Trade mark law, Traditional knowledge, Trade secret, Industrial property rights, Industrial Design, Brand Signature,etc.
Babafemi (2007:26) emphasizes that a well-designed intellectual property rights systems give temporary exclusive rights to inventors and thereby increase their chances to recover the often substantial upfront investments they need to make to generate innovations and to bring them to market. Intellectual property rights systems should also make it possible for innovators to sell license or give away the rights of their innovations to others, who may be better placed to exploit them. In other words, intellectual property rights and policies are key prerequisite for intellectual assets to emerge in markets. He also notes that a well-designed intellectual property rights system also encourage innovators to disclose their knowledge so that future innovators can build on it, thereby helping to accelerate the rate of innovation. The essence of intellectual property development is generally to increase public knowledge for development and also provide incentives to create knowledge. All the same, in setting these policies, a balance has to be struck between the need to give temporary exclusive rights to innovators so that they can recover their investments and the need to make new knowledge available for use by future innovators and competitors. Another major issue has been how to balance economic gain accruing from the invention and ensuring that the creations/ works of intellectual property benefit the general public for the common good of all. For instance, how do you design a policy that will allow a patentee to continue to enjoy his rights without denying the public of some human rights?
Countries with economies in transition are in the process of developing and adapting their intellectual property regimes with a view to meeting these challenges. They are undertaking commitments in the framework of the treaties administered by the World Intellectual Property Organization (WIPO), agreement negotiations to the World Trade Organization (WTO), and/or Partnership Agreements with the European Union (EU). At the same time, these treaties and agreements still leave significant scope for policy making at the national level. It is hoped that Nigeria will join these crusade.
Branstetter (2004:81) observes that a well-designed and well-performing intellectual property regime is not an end in itself,but a tool to improve the innovative capacity and competitiveness of manufacturing companies leading to improvement in the performance of firms which in turn contributes to economic growth. Policy makers should therefore ensure that practices and policies targeting improvements in the intellectual property regime are consistent with and integrated into a larger effort to improve the policy, legal and regulatory framework thereby promoting innovation and competitiveness.
Given that, the effectiveness of anyintellectual property policy depends on the broader policy, regulatory andlegal environment. Hence, any policy recommendations regarding the development of intellectual property regimes in countries with economies in transition need to be considered as part of a thorough analysis of the relevant conditions prevailing in the respective national economies.
Beyond the design of the legal framework, intellectual property can contribute effectively to knowledge-based economic development only if the drivers of the process who are the key stakeholders in the innovation process have the capacity to actually make optimal use of the intellectual property system. Evenin the leading innovative economies of the united nation region, research time and again finds that by far, not all stakeholders have this capacity. The innovation process which is the process of turning inventions and other forms of new knowledge into production processes, product or services which are commercially successful and generate new jobs and economic growth, is far from automatic. It is fraught with business risks and frequently requires massive capital investments over long periods of time (Okafor, 2012: 56). This process takes place mainly in the manufacturing companies where it is put into use to produce goods or services to be offered to the public.
Strategic management of intellectual property can thus be regarded as a very important factor in managingthe innovation process successfully. However, research organizations and small and mediumsizedenterprises including manufacturing firms frequently lack the skills and sometimes also the incentives to manageintellectual property strategically and to maximize its impact on innovation.
In Schumpeter(2007: 9) interdependencies exist across various intellectual property policies. For instance, policies aimed atimproving intellectual property management capabilities at research organizations or small enterprises are unlikelyto have a big impact unless the legal protection is sufficiently strong and enforcement effective. Policies aimed at strengthening legal protection and enforcement are unlikely to enhance economy wide innovative capacity and competitiveness if potential innovators lack the awareness, skills or resources to access the legal system or to manage them judiciously. Policy should therefore address simultaneously weaknesses in the regime along the entire spectrum from the management in research organizations, enterprises and financial firms, manufacturing firms to the legal and institutional system for protection, and enforcement. Levin et al (1987) in Menell(1999:132) discover that industrial property rights in comparing with trade secrecy, lead time, rapid movement down the learning curve and marketing efforts play a major role in enabling most firms to appropriate returns for their inventions but of course with the exception of those in the pharmaceuticals and chemical industries.
Being an intangible right, intellectual property right has a unique and peculiar nature since it is aimed at protecting the moral and economic rights of the author from being infringed by unauthorized person. In Ige (2005:24) the objective of Intellectual Property right which is made possible by intellectual property policies is to protect a work that has only one abstract existence and therefore can’t be perceived by the senses, unlike a building or car. References to the importance of rewarding authors and inventors for their labor are almost as common. Schumpter (2009:17-23) clearly portrays it by highlighting that proponents of legislative extensions of copyright or patent protection routinely make arguments like: "Our American society is founded on the principle that the one who creates something of value is entitled to enjoy the fruits of his labor." The United States Supreme Court often uses a similar vocabulary. For example, Justice Reed ended his opinion in Mazer V Stein with the solemn statement: "Sacrificial days devoted to creative activities deserve rewards commensurate with the services rendered." Lower court opinions and appellate arguments frequently take the same tack. Intellectual Property rights therefore protect the exclusive rights of the inventor, innovator and researchers with new research findings or other creators in the product of his intellectual or inventive abilities in order that the inventor or creator will not only reap the fruits of his labour, but will also contribute to other peoples enjoyment of the creation and the societal economic growth too.
Firms with research and development departments should have polices which ensures that the new ideas, discoveries, and technologies arising from research conducted as part of the manufacturing process are used in the best interest of the firm. The policy addresses the ownership of management and tangible research property. Research is one of the most important and rewarding aspects of the manufacturing process, because it usually leads to the development of new ideas, discoveries, and technologies with the potential to benefit not only the firm but the public at large. From the above, it can be seen that intellectual property policies play a major role in simulating the production of socially valuable works both in economic, social, manufacturing and agricultural sectors of the nation. Policies should therefore be enacted to provide incentives for creating intellectual efforts that would benefit the society. Menell(1999:140) states that policies usually should address ownership of Intellectual Property as classified below.
• Creator of third party own which refers to Intellectual Property developed by an individual whose employment responsibilities does not include that.
• A talented individual who did this without the support or without using the firm’s system facility.
• System owned Intellectual Property conceived or developed as a result of activities related to an individual’s employment responsibilities and/or with support from the firm in the form of administrative funds shall be owned by the firm and assigned to the firm by such individuals.
• Intellectual Property involving sponsored research which is Intellectual Property conceived or developed in the course of research supported by a grant.
• Intellectual Property arising from consulting activities; where external faculty consulting is recognized by the system as an effective mechanism for professional development.
• Intellectual Property arising from external employment.
2.2.4 The Role of Intellectual Property in the Innovation Process:
In order to generate innovations, in order to bring new or improved products or services to market, or to introduce new or improved production processes, firms need to undertake investments into research and development (R&D) and into their Brand Name Capital. These investments are often highly risky, expensive and take a long time to come to fruition (up to a decade or more in the case of pharmaceuticals). Depending on the industry, firms may have to start dozens or even hundreds of research projects in order to achieve one commercial success.Pharmaceutical companies research hundreds of molecular groups to produce one marketable drug. Similarly, less than 2 % of movies account for 80 % of box office returns. Because of the highly risky nature of the innovation process, venture capitalists earn a positive return on less than 20 % of their investments, and up to 90 % of newly founded firms fail within a short period of time (Kubis, 2011:13)
Once a new product or service is on the market, though, or in fact, once a truly path breaking innovative company has created a new market where none existed before, competitors invariably try to muscle in by imitating the successful innovation.
Kamiyama, Sheehan, and Martinez(2006: 17) point out that while this type of competition benefits consumers by driving down the price of the new product or service, it is potentially harmful in the long run because it may prevent the innovator from earning a profit margin high enough to recover not only the upfront R&D investment into the successful product or service,but also the costs of the many failed R&D projects they also undertook before achieving their break-through innovation.If innovators systematically find that they cannot recover the costs of innovation due to ex-post competition from imitators, this will undermine their incentives to innovate in the future. Would be innovators who foresee that they will not be able to fully recover their costs will not engage in innovation in the first place.To protect themselves against imitating competitors, innovators constantly make their own efforts despite the legal rights attached to these properties. For example, they can try to keep the critical elements of their innovations secret, or to stay ahead of the competition by continuously introducing incrementally improved products (WIPO, 2000). Imitation is one of the major factors that hamper innovative activities by firms. This is mainly because of the heavy burden these innovators go through while trying to break through.For instance, according to the International Federation of Pharmaceutical Manufacturers and Associations(IFPMA), the average cost of developing a new drug or therapy stands at US$ 800 billion, in large part because out of 8,000 substances studied at the laboratory level, only one reaches the market as a new drug, and out of those that do reach the market, not all are commercially successful (http://www.ifpma.org/Issues/index.php?id=421)
Azinge, and Adekunle(2011: 23), declare that a well-designed competition policy will go a long way towards ensuring that companies can use intellectual property rights for their intended purpose, which is to build innovative businesses,without abuses that could stifle beneficial competition.Where the above balance should be struck is an empirical question, the answer to which will depend among other things on the level of development and the structure of the economy in question. Unfortunately, the only systematic evidence that exists is on patents. This is unsatisfactory because trademarks in particular are likely to also play a very significant role in economic performance for two reasons. First, trademarks are the intellectual property rights by which companies protect their brand name capital, i.e. their investments in the quality of their products and the reputation of their brands. Brand name capital is a major component of the intangible assets of leading innovative companies and accounts for a major part of their stock market valuations. Secondly, trademarks are one of the main intellectual property rights by which companies differentiate their products from those of competitors. This product differentiation creates variety of choice for consumers. Studies suggest that trademarks are associated with higher productivity levels and productivity growth, particularly in the service sector. But it would be desirable to produce more internationally comparable economy wide empirical evidence on the nexus between the trademark regime and economic performance, (Martinez, et al 2006: 34).Similarly to the case of copyrights, solid empirical evidence on the value of copyright to society and the impact of the copyright regime on economic performance is scarce because copyright protection is granted automatically to all creative works without a need to file or register. However, “creative” copyright-based industries contribute a rising share of GDP in advanced economies
(http://www.wipo.int/ipdevelopment/en/creative_industry/economic_contribution.html
The patent or copyrights owners have the exclusive licenses to enforce their rights. However, it does not end on enforcement. Strategic management and control must be applied especially to help in avoidance of the invention being copied. This is critical in maintaining their competitive edge, market share and profitability.
Unfortunately,Nigeria still lags behind in developing an indigenous law that will address basic issues. This in turn leads to poor management and lack of adequate control. In the area of trademarks, there have been developments of other forms of marks different from marks relating to goods. There are service marks, scent marks, sound mark and slogans. The grant of patent on some plant varieties and seeds already en force in England has been recognized and regulated in Kenya and South Africa and it is indeed a milestone development. Nigeria and some other sub-Sahara Africa still regard plant varieties as non-patentable in their laws. This is preventing protection and conservation of the rich, natural and bio-cultural products in the country.
Azinge et al (2011:30) enlists the following as the reason why we should promote and protect intellectual property?
First, the progress and well-being of humanity rest on its capacity to create and invent new works in the areas of technology and culture.
Second, the legal protection of new creations encourages the commitment of additional resources for further innovation.
Third, the promotion and protection of intellectual property spurs economic growth,creates new jobs and industries, and enhances the quality and enjoyment of life.
An efficient and equitable intellectual property system can help all countries to realize intellectual property’s potential as a catalyst for economic development and social and cultural well-being.