Intellectual Property Rights do not equal Innovation and Creativity

16 October 2013

Last month, the Office for the Harmonization of the Internal market (OHIM) and the European Patent Office (EPO) published a study on intellectual property rights intensive industries’ contribution to the economic performance and Employment in the European Union.

The study is modelled after a much criticized 2012 study published by the Department of Commerce and the US Patent and Trademark Office that attempted to measure the impact of IPR intensive industries on the US economy. Both studies come to similar conclusions, namely that IPR intensive industries make significant contributions to overall employment and GDP in the surveyed economies. For the European Union OHIM and EPO claim that:

IPR-intensive industries contribute 26% of employment and 39% of GDP in the EU. (page 6)

The study could be read to imply that without IPR one quarter of us would be out of work and that the EU would suddenly lose more than a third of its economy. Although it is fairly obvious that this is rather unrealistic, it did not prevent EU Commissioner (and noted copyright hawk) Michel Barnier from jumping on the opportunity to express once more how important he thinks that IP rights are:

"I am convinced that intellectual property rights play a hugely important role in stimulating innovation and creativity, and I welcome the publication of this study which confirms that the promotion of IPR is a matter of growth and jobs. It will help us to further underpin our evidence-based policy making.”

Unfortunately, this particular study has almost nothing to do with evidence-based policy making. On the contrary, the study represents one of the more brazen attempts to mislead the public (and policy makers) by throwing lots of data around and calling that evidence.

It is quite easy to criticise the study based on the data that is being presented. The study is built on NACE categories which describe broad sectors of economic activity. This approach has been criticised by others but is something that could be fixed relatively easily by statistically correcting for the overreach of these categories (which the authors have not done). It is a serious flaw that drives the numbers presented upwards, but it is not a fundamental flaw.

Throwing around lots of data does not equal providing evidence
The fundamental flaw of the study lies in the very objective of the study. The study aims to serve a basis for raising awareness of Intellectual Property Rights by looking at a broad range of such rights:

The study covers a broad range of IP rights – trademarks, patents, designs, copyright and Geographical Indications (GIs) – and considers a variety of economic indicators, in particular Gross Domestic Product (GDP), employment, external trade and wages. It makes no policy recommendations, as this is not within its scope. Instead, it is designed to provide evidence that can be used by policymakers in their work, and to serve as a basis for raising awareness of Intellectual Property among Europe’s citizens. (page 5)

Apart from the fact that the above quote clearly states that the study was designed with a particular objective in mind (which does not sound entirely neutral to me), this passage makes it clear that by looking at five very different types of IP rights the authors intend to draw conclusions that will be presented at the aggregate level.

This is highly problematic for at least two reasons:

Contrary to what is implied by Mr. Barnier, not all of the five IP rights are related to innovation and creativity. While copyright, patents and design rights clearly relate to these concepts, trademarks and Geographical Indications (GI) have very little to do with them. The function of the latter rights can best be described as consumer protection, or, depending on ones perspective, producer protection (Prosciutto di Parma can only be sold by people from Parma, which makes it easier for me to identify real Prosciutto di Parma when shopping, but that does not necessarily encourage innovation or creativity). The same is pretty much true for trademarks. The often made argument that there is considerable creativity involved in establishing a brand does not really convince here since brands would need to be established to compete in the marketplace even if there were no trademarks.

Lumping these two non-creativity and innovation related IPRs into the same analysis as the others means artificially pumping up the numbers. While the effect of GI intensive industries is rather small (only 0.2% of EU employment) in the case of trademark intensive industries the impact is much higher (according to the study they contribute 20.8% of EU employment).

This figure showing the overlap between IP intensive industries explains how trademarks can be responsible for 21% of EU enjoyment while the total of all IPR intensive industries is 26%: there is a lot of overlap.

The second problem with lumping all these different rights into one concept arises from the stated intentions of the authors of the study. They want to provide evidence that can be used to raise awareness of Intellectual Property among Europe’s citizens. Of the five listed IP rights only one (copyright) is currently subject to intense public discussion. In the context of these discussions the current level of copyright protection is challenged by many participants and it is exactly these challenges that the authors of the study and people like Mr. Barnier intend to counter with this study.

For this purpose, it certainly helps not only to make statements about copyright (3.2% of EU employment according to the study) but also to make sweeping generalisations about IPR in general even though the four other IP rights are relatively uncontested:

Patents are subject to some legitimate critique when it comes to their effects on the accessibility of life-saving medicines to the populations of developing countries. For the rest there is very little controversy here, partially thanks to a successful campaign against allowing software patents in the EU (the existence of these kinds of patents is the source of a large controversy in the US).

Trademarks are a relatively well-functioning system. They are infrequently used in attempts to censor speech (or art) that is critical of trademark owners, but there is no political debate about the concept or the reach of trademarks. The same is true for Geographical Indicators which tended to be controversial in international trade circles a while ago (see ‘the war on terroir’) but do not generate much public discussion either.

And how many people outside of the design and manufacturing industries have even heard of the existence of design rights? Probably very few. While this could be a justification to raise awareness, it is rather dubious if this makes much sense.

What all of these rights have in common is that they are well-defined in their scope and application and generally do not interfere with the lives of ordinary citizens. As the authors of the OHIM/EPO study point out the IP rights do play a role for the economic sectors that use them, but so do many other things. Claiming that they contribute a certain percentage to EU employment and GDP does not make any sense, unless this is intended to be used to influence the ongoing debate about copyrights.

There is an ongoing debate at many policy levels whether the current level of copyright protection is in line with the realities of the current economic, social and technological environment. Simply claiming that because there are copyright intensive industries copyright must be a good thing (and then massively inflating the size of the issue by throwing four unrelated IP rights into the mix) does not constitute providing evidence here. The issue at the heart of this debate is not whether copyright is a good or a bad thing, but how to balance copyright in order to maximise its benefit for society as a whole.

In this context it is interesting to note that some of the larger economic sectors which are identified as copyright intensive by the study, tend to be negatively affected and, as a result, relatively critical of the current level of copyright protection:

As for example, librarians and archivists (NACE code 91.01 Library and archive activities), who make up for 5.6% of all the jobs attributed to copyright intensive industries, are by and large critical of the current level of copyright protection. The same is true for a number of other sectors that have not been included in the OHIM/EPO definition but who are certainly copyright intensive such as education and academic research. While these sectors produce a lot of copyrighted works they also rely on access to copyrighted materials in order to properly function. This is where the simple 'if an economic sector produces lots of IP, stronger IP must be beneficial for that sector' logic grinds to a halt. Simply counting the number of jobs in these economic sectors does not help us understand why a balanced copyright system is important and how it should be balanced.

Given the above, it is hard not to see the OHIM/EPO study as an attempt to mislead the ongoing discussion about the need to modernise copyright. What is really needed are studies that look at the impact of copyright protection on specific sectors of economic activity that can provide us with evidence where copyright stimulates innovation and creativity and where it does not. For this to happen, the first thing that we need to realise is that basing economic analysis on catch-all terms like ‘Intellectual Property Rights’ obfuscates the complex dynamics of innovation and creativity in the 21st century.


Paul Keller

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