Intellectual Property: The Currency of Today’s Global Trade

motorcycle-1515873__340

1. Intellectual Property and Global Trade

If the currency of the old capitalist social order is gold, the new currency of the new informational capitalism is said to be IP, that is, ownership of ideas, industrial designs, trademarks, copyright and other creative products and services based on human creativity and innovation. “Creativity, in the form of ideas, innovations, and inventions, has replaced gold, colonies, and raw materials as the wealth of nations” (Warshofky, 1994).

shield-167584__340

Innovation, both at the individual and group level, has been increasingly acknowledged by many as the true wealth of nations in the 21st century: “The creative economy has become a powerful transformative force in the world today and one of the most rapidly growing sectors of the world economy, not just in terms of income generation but also for job creation and export earnings (UNESCO & UNDP, Creative Economy Report, 2013, p.15). A greater proportion of the world’s intellectual and creative resources are now being invested in culture-based and IP-intensive industries. The concept of intellectual property which was used to be a specialist, an arcane subject has now moved center stage in the economy.

2. Types of Intellectual Property (IP)

2.1 Copyrights are creative works that have been fixed in a tangible form.

copyright-1700172__340

2.2 Patents are grants from the government that give you exclusive rights over your invention for a specific amount of time, in exchange for full disclosure.

technology-2396670__340

2.3 Trademarks are words, symbols, colors, sounds, or smells that someone is using in conjunction with a product or service.

rolls-royce-1314409__340

2.4 Trade secrets are secret information used by a business that derives its value from being secret, and where the business is invested in protecting that secrecy.

profit-599504__340

2.5 Right of publicity is defined as your right to control how your name, likeness, and persona are used by others.

3. US Control of the Global IP Economy

flag-1189866__340

        The American monopoly of the IP trade did not arise instantly. It started gradually with the leading role of U.S. IP industries in creating a new IPR regime in the U.S. economy which soon projected on a worldwide scale in the 1980s with the opening of economies of developing countries through free trade and reduction and elimination of tariffs in the General Agreement on Tariffs and Trade (GATT), a multilateral agreement signed by 110 countries around the world. Countries who signed this agreement also agreed to the creation of the World Trade Organization (WTO) and to GATT’s  Trade-Related Aspects of Intellectual Property Rights agreement (TRIPS), a multilateral agreement which requires member countries to protect IP goods and services from counterfeiting and piracy. Historically, the U.S. was the first country to realize how greatly its economy depends on IP as a source of national income and employment.

Today, practically almost all sectors of the US economy rely on some form of IP, because virtually “every industry either produces it or uses it” Thus, as early as the 1970s when the world was reeling from OPEC’s oil price increases, the U.S. first saw the need of new foreign policy for IP, for the ownership of ideas that suit American interest (Warshofsky, 1994).  From 1970s to early 1990s, there was a widespread belief that the US economy had declined and overtaken by Japan and that this decline can only be halted by a renewed emphasis on technological innovation to stimulate economic growth (Landes & Posner, 2003, p. 2). The promotion and protection of American IP exports gradually emerged as the most viable response to this decline. Riker (2012) explained that there are strong indications that improvements in IPR protection in U.S. export markets could increase export revenues and income from direct investment abroad, increase royalties from licensing U.S. knowledge capital, or from  a combination of these three (p. 288).

protected-267353__340

With this realization, the U.S. government shifted its economic focus from the traditional manufacturing and exportation of “hard” and “heavy” goods to “soft” and “liquid” goods and services of the creative economy which fit into the current globalizations trends characterized by “liquidity” and mobility of things (Ritzer, 2010). While China was busy converting its centrally-planned economy into a market economy  in the mid-1980s, the U.S. was preoccupied with harnessing its creative economy during this period, laying the foundation of a new economic infrastructure based on human innovation and IP.

        To protect and accelerate the growth of this new-found “gold” in the U.S. economy,  the  government, influenced by the intense and sustained corporate lobbying of top IP pharmaceutical multinationals, gave IP protection a special legislative push. Since the 1980s, the U.S. Congress introduced a series of legal reforms and innovations in IPR to curb piracy and counterfeiting at home and abroad. As a result, the profitability of American IP companies grew rapidly. Between 1987 and 1999, for instance, a period of only twelve years, the annual U.S. receipts from foreign IP trade rose from $10 billion to 36.5 billion. American exports in high technology goods such as computers and electronic products amounted to $190 billion out of the total exports of $690 billion (28%) (Landes & Posner, 2003, p.3). The supremacy of IP in the US economy became apparent in when nearly 61% of American exports, $775 billion, come from IP-intensive industries in 2010.

        The export of copyright-based industries such as films and computer software also increase with $89 billion in 2001. With sustained efforts of the U.S. government to protect U.S. goods and services from counterfeiting, the dramatic growth of IP trade at home and abroad continued to intensify in early 2000s (Landes & Posner, 2003 p. 3). In 2010, the total merchandise exports of the US IP-intensive industries has already reached a staggering $775 billion, accounting for 60.7 percent of total U.S. merchandise exports and for 40.0 million direct and indirect jobs or 27.7 percent of all jobs in the U.S.  But in 2012, the IIPA estimated that the value added by the core copyright industries to U.S. GDP exceeded $1 trillion dollars ($1,015.6 billion) for the first time, accounting for 6.48% of the U.S. economy and the value added by the total copyright industries to GDP exceeded $1.7 trillion ($1,765 billion), accounting for 11.25% of the U.S. economy (Siwek, 2012, p.2).

        In the realm of patents, the U.S. IP industries also showed dominance in the U.S. economy. In patent medicine, four (7) out of the top ten (10) pharmaceutical companies in the world are American multinationals with Johnson & Johnson and Pfizer occupying the top spots with revenues of US$61.9 billion and US$50.01 billion respectively.. In computer technology, the U.S. is overtaking other countries in terms of inventions in computer products and applications. The global leader in technology patent, the International Business Machines (IBM), for instance, has been a consistent number one patent creator in the world for a long time, amassing more U.S. patents than any other companies in the last 21 years. In 2013 alone, it created a total of 6, 809 patents, with more than 30% of these came from overseas.

         The significant contribution of the IP industries to the U.S. economy has pushed the  U.S. government to prioritize IPR protection at home and abroad in order to curb counterfeiting and piracy of American IP products. The strengthening of IPR protection abroad aims to build a global IP legal regime which makes it difficult for counterfeiters and infringers to hijack the exports of U.S. IP multinational companies (MNCs), the new key drivers of the American economy. The grand scheme of the U.S. includes the global institutionalization of the TRIPS and its own version of IPR protection  which can dominate its top economic competitors and leading IP counterfeiters such as China, Brazil, India and Russia, and other piracy-laden ASEAN countries. To achieve this end without manifest opposition from developed and developing countries around the world, the U.S. has to use a consensual power judiciously in the diplomatic front through the cultural institution of law as a mechanism to shield its hegemonic agenda of dominating the global IP trade as well as to project an image that the American-style of IPR protection serves the economic interest of all nations in the world.

Photo Credits: Pixabay.com

Thank you for reading this post. Subscribe or follow this blog for more updates.