U.S. Ranks Best in Protecting Intellectual Property: Good News for Startups and Small Business
By SBE Council at 17 February, 2017, 9:04 am
Small Business Insider
by Raymond J. Keating-
Small businesses and entrepreneurs got some very good news earlier this month with the U.S. Chamber’s publication of its international rankings of intellectual property systems titled The Roots of Innovation: U.S. Chamber International IP Index.
The Index ranks the 45 economies representing roughly 90 percent of global GDP based 35 measures in six broad categories: patents, copyrights, trademarks, trade secrets and market access, enforcement, and ratification of international treaties. The top nation on the 2017 Index is the United States.
As noted in the study, the key areas of strength for the U.S. are:
• “Key IP rights, including sector-specific rights, in place”
• “Largely supportive technology transfer and licensing environment”
• “Generally deterrent civil and criminal remedies”
• “Commitment to and implementation of international treaties.”
On the flip side, weaknesses are:
• “Patent opposition system adds substantial costs and uncertainty”
• “Somewhat narrow interpretation of patentability of biotech and computer-related inventions compared with international standards”
• “Inconsistent enforcement against counterfeit and pirated goods, especially goods sold online.”
The study also drives home the point of how important IP protections are for the economy, offering analyses making clear the link between a sound IP system and R&D, innovation, “a strong relationship with greater access to end products and services that make novel technologies and content available to consumers,” and “foreign direct investment (FDI), business and industrial growth, jobs, and gross domestic product (GDP), ultimately providing the basis for re-investment of resources as the virtuous cycle begins anew.”
IP Critical to Entrepreneurship
But there’s still more. As explained in SBE Council’s book “Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment,” strong IP rights and protections are key positives for entrepreneurship. In fact, each major IP industry is overwhelmingly populated by small businesses. For example, among employer firms, 72 percent of software publishers, 96 percent of sound recording industry businesses, and 93 percent of motion picture and video industry companies have less than 20 workers.
Sound IP protections serve as an essential foundational element for innovation and small business development in general. As noted in the book: “Continuing with the focus on small business and innovation, a July 2005 Congressional Research Service analysis (‘Patent Reform: Innovation Issues’) not only summed up the role played by small business, but also explained that IP protections tend to be more important to smaller businesses. It was noted: ‘Entrepreneurs and small, innovative firms play a role in the technological advancement and economic growth of the United States. Several studies commissioned by U.S. federal agencies have concluded that individuals and small entities constitute a significant source of innovative products and services. Studies have also indicated that entrepreneurs and small, innovative firms rely more heavily upon the patent system than larger enterprises…’”
Also, economists Andrew Burke, from the University of Cranfield in the United Kingdom and the Max Plank Institute of Economics in Germany, and Stuart Fraser, from the University of Warwick in the U.K., examined the issue of startups and innovation in a paper titled “The Impact of Intellectual Property Rights on Self-Employed Unleashing Small Business Through IP Entrepreneurship: An International Analysis.”
They found that “a well developed IPR regime has a net positive effect on the self-employed sector,” international agreements protecting IP have positive effects on self-employed enterprises, and “that the most fundamental tenets of IPR laws, namely the existence of the laws themselves, their specificity and strength, and a democratic society in which to accommodate them are three very positive drivers of self-employment.”
Finally, as summed up in “Unleashing Small Business Through IP”: “The entire entrepreneurial process is dependent upon strong property rights and protections, including intellectual property. Without strong IP rights, entrepreneurs, innovators and investors simply would be far less likely to undertake the tremendous risks involved with creating, and bringing a new or improved good or service to the marketplace. In turn, of course, consumers wind up with fewer choices and benefits, economic growth falters, and workers face reduced job opportunities and lower incomes.”
So, as noted at the start of this piece, the U.S. ranking best in the world in terms of its intellectual property system is very good news for entrepreneurs and small business.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.