Protecting Intellectual Property Rights is Vital to the Innovation Economy

I wholeheartedly agree with colleague Alex Rued’s insights in her post Innovation Economy Helps U.S. Reclaim Reputation as an Investment Hotspot. She observes that America’s “[comparative] advantage depends on technology.” An additional vital element underpinning the innovation economy is our reliable and consistent protection of intellectual property rights (IPR). Our enduring understanding of the importance of IPR protection has helped afford us unparalleled economic benefits. According to the US Chamber of Commerce’s Global Intellectual Property Center, over one-third of U.S. gross output originates from IP-centered companies and they account for 74% of U.S. exports – see Intellectual Property: The Innovation Economy’s Engine for Growth and Job Creation for a more in depth discussion of this topic.

While most countries are trending toward stronger IP protections and better enforcement of existing IP laws, among some a troubling disregard for international IP norms persists. With the recent decision by its Supreme Court to deny patent protection to Novartis AG for its Gleevec cancer medication, India provides an example of a country that may be sacrificing its long-term economic fortunes for a perceived short-term gain.  The patent denied by India’s Supreme Court is recognized by 40 countries including the US, China and Russia, and the Court’s decision drew strong criticism from the Office of the United States Trade Representative (USTR).  Supporters of the decision contend it will enable the marketing of a less expensive generic version increasing patient access to the drug, however 95 percent of Indians receive the drug for free from Novartis AG, and the other five percent at a subsidized rate making this a somewhat specious claim.

India’s Supreme Court ruling may have a chilling effect on pharmaceutical innovation where the development of a single new life-saving treatment requires an average $1.3 billion investment and 10-15 years of research.  Without the promise of effective patent protections, pharmaceutical companies lack the incentive to make such a significant investment in research that might not even result in a marketable product, which hurts us all.

The implications of this decision go beyond pharmaceuticals as without clear and consistent IPR protections, innovative companies that require significant up-front costs have little incentive to invest billions of dollars and many years of research to create the new products and technologies that enhance all of our lives and promote economic growth.  The blatant disregard for IPR exhibited by the Indian Government will give pause to any innovative industries considering investment there.

The far-reaching ramifications of India’s Supreme Court decision are not lost on USTR which commented earlier this month in the 2013 Special 301 Report that “there are serious questions regarding the future condition of the innovation climate in India across multiple sectors and disciplines” and that “recent actions by the Indian Government [including the Supreme Court decision] risk hindering the country’s progress toward an innovation-focused economy.” Their comments underscore the fact that while technology was an important factor in re-attracting investment to our shores, America’s strong regard for IPR protections undoubtedly played a significant role too.