WIPO Innovation Report 2011

by Daniel Gervais on Tuesday, February 14th at 10:17 AM

I just finished reading the WIPO report on innovation (The Changing Face of Innovation) released in November 2011,  the first “World IP Report” published by the Organization.

The report confirms a point made (see TRIPS 3.0: Policy Calibration and Innovation Displacement in Chantal Thomas and Joel Trachtman’s Developing Countries in the WTO Legal System (Oxford UP, 2009) that TRIPS and TRIPS Plus have in many cases put the policy cart before the empirical horse. It seems we are just starting to identify linkages. In fact, WIPO hired its first (though highly qualified) Chief Economist (Carsten Fink) in 2009. It now has a small but very capable team. This is a major deliverable, with a strong patent focus.

The report debunks the statistical myth that patents = innovation and the (incorrect) conclusion that more patents necessarily means more net innovation.  Simply put, we don’t really know. Patents are not synonymous with innovation; they are “intermediate innovation outputs” (Report, p. 29). They may lead to more commercial innovation, but they may also fail to do so for a number of reasons: bad technology; unresponsive markets, lack of funding, poor commercialization, and because patents are also used very often to fence in or block competitors. Whether that leads to more or better innovation overall seems debatable; it is admittedly possible that it does in certain cases.

Innovation rests on a mixture of intellectual property rights such as patents, but also know-how, trade secrets etc. “Innovation” is both hard to define and probably impossible to quantify.  Perhaps broader correlations between GDP growth and IP metrics can be established but as I wrote in the piece mentioned above, higher IP also imposes welfare costs, which calls for calibration of the implementation at the national level including use of flexibilities.

However, the report may be making a preliminary case for higher IP protection in some developing countries. The report shows that innovation is growing faster in middle-income countries than in the “West,” and China is a spectacular example (see the graph p. 7). The metrics used are of intermediate steps like patents, however and subject to the same caveats.

I cannot summarize the full report here but two other major points are striking. First, the emphasis on open innovation. This is not a new phenomenon (see p 112) but it is growing. The report notes that some (like open source) does not require IP incentives (see p 119). It also notes that open innovation produces innovation spillovers and may allow even competitive firms better access to complementary skills and technologies (pp 95-96).

Second, the report emphasizes the push to patent/privatize publicly funded research, in particular at the level of universities. The report makes clear that universities are critical players in national innovation systems (p 139) and that basic research is mainly conducted by the public sector (p 140–and see my paper on innovation clusters here). The report identifies a long list of potential benefits AND additional costs that may arise from creating incentives to privatize publicly funded research (pp 157-158). This points clearly to the need to deepen the analysis, as many countries are debating whether to join the Bayh-Dole Club and patent ever closer to basic science (see the four models described in the box on page 145). The data are certainly noteworthy. For example, we learn that in 2009 the average tech transfer agreement by universities in Canada and the United States generated $75,000 and $436,000, respectively, though most of the income seems to reflect a few major patents.

This is a must-read. It points to the need for much more research on the impact of IP on developing countries in their various stages of development. Hopefully, this can be translated into lessons that national policy makers can use to calibrate their IP laws and infrastructure.





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