its-official
Photo: Icons Jewelry / Shutterstock.com
1 June 2014Copyright

It's official: IP boosts the economy

From our visits to many industry conferences in the past two years, it’s clear to WIPR that intellectual property lawyers believe innovation is integral to boosting the economy. To help the recovery from such a deep recession, the line goes, IP owners need to step up and innovate the world out of trouble. While this link may seem obvious, a lack of hard evidence had left those claims open to scepticism or rejection.

But now we have some concrete data. In September 2013, a detailed report showed that ‘IP-intensive’ industries account for one in five jobs and nearly 40 percent of gross domestic product (GDP) in the EU. Trademark-intensive industries led both the employment and GDP rankings, although their copyright counterparts languished near the foot of each table.

Entitled IP rights-intensive industries: contribution to economic performance and employment in the EU, the study was produced by the Office for Harmonization in the Internal Market (OHIM), through its Observatory unit, and the European Patent Office (EPO). It is the first report to quantify the contribution the IP sector makes to the EU economy, analysing patents, trademarks, designs, copyright and geographical indications (GIs), and taking data from 2008 to 2010.

To determine which industries are IP-intensive, the authors matched the OHIM and EPO registers with Orbis, a private commercial database holding financial and industry information on European companies. The number of Community trademarks, registered Community designs and patents per employee was calculated for each industry, and the industries that were above average according to this measure were considered IP-intensive.

"No account is taken of the extent to which such trademarks are used in oppositions, cancellations, litigation or customs seizures. Data are available on all such proceedings."

“It is difficult to be more accurate,” says Paul Maier, director of the Observatory. “If you look at OHIM’s and the EPO’s filings, these are the companies that file patents, trademarks and designs; there aren’t many others.”

But the report’s methodology can be questioned on a number of levels, says Imogen Fowler, partner at Hogan Lovells LLP in Alicante, Spain.

“The calculation of the number of rights versus the number of employees in any given industry seems to oversimplify the assessment of the importance of IP’s role in the economy. As a similar report conducted by the US Patent and Trademark Office (USPTO) in 2012 pointed out, there is a range of other criteria that could have been used, such as interviewing the companies involved, or measuring gross output.

“More important, the study looks at only half the picture—namely the number of rights held, not the extent to which they are enforced. From a trademark lawyer’s perspective, it is well known that there are several industries in which companies have a habit of filing large numbers of trademarks in multiple classes, many of which may be speculative or defensive. Given that the report counts trademarks on an individual class basis, this presumably led to a finding that such industries are trademark-intensive.

“No account is taken of the extent to which such trademarks are used in oppositions, cancellations, litigation or customs seizures. Data are available on all such proceedings, and ideally should have been taken into account in order to provide a more rounded assessment,” Fowler says.

She admits, however, that there is “no one easy and robust criterion to use to draw the conclusions made in the report”, and that the report is useful and positive overall.

As the OHIM report shows, of the 26 percent of IP-generated employment in the EU, trademarks lead the way on 21 percent, followed by designs (12 percent) and patents (10 percent), with copyright and GIs making much smaller contributions. Of the 39 percent of IP-created GDP, trademark owners accounted for the largest share—34 percent—while patents (14 percent) and designs (13 percent) took the next spots.

At the top of the trademark list is the activity called “leasing of IP and similar products, except copyrighted works”, while “manufacture of power-driven hand tools” leads the patent rankings.

US comparisons

The report’s findings are not surprising, says Maier, as the US study from 2012—IP and the US Economy: Industries in Focus, on which the EU report was based—provided “some idea of what a developed economy should look like”.

The US study showed that IP owners generated 19 percent of national employment, which was seven percentage points lower than in the EU, while right owners were responsible for 35 percent of US GDP, compared with 40 percent in the EU.

“The figures are quite close, but there is one aspect in which there is quite a bit of a difference—the share of employment—which is significantly higher in the EU,” Maier says.

Asked to explain the discrepancies, he provides two possibilities.

“First, the US study does not take into account GIs and designs. The design industry accounts for more than 12 percent of GDP and employment in the EU, which is considerable, so taking into account EU design filings we can explain a good part of the difference between the two.

“Second, what we look at here is the employment generated by IP industries in the two jurisdictions—that is, what is produced. Delocalisation and investment in other countries for production is a major difference between the EU and the US. A lot of investment in the EU is taking place in the new member states, where the standard of living and the cost of employment are much lower than in the western European states.

“Therefore, a lot of the IP-intensive industries still manufacture in Europe, whereas in the US if you want to outsource or invest in a lower wage area, you do that in Mexico or China. That means the employment and the contribution to GDP is lost for you,” he says.

In addition, the US report did not cover the whole range of copyright industries.

“The US methodology is actually quite restrictive, as it excludes from the copyright-intensive industries the whole sector of movie theatres. They wanted to have only the copyright-producing industries,” Maier explains.

Complete statistics

Although the figures in the EU study derive from 2008 to 2010, Maier believes they are still useful, despite being at least three years out of date when the report was published.

“We needed to have a complete set of figures for every EU member state; some national statistics can take a while to be produced. Going over that period ensured complete figures. The contribution of IP to the economy is a structural phenomenon—you do not become an IP-intensive sector overnight. IP-intensive industrial sectors have been the same over the years and remain the same, with possible marginal changes.

“The figures are fully representative of the structure of the economy and are based on complete and certain data from the member states,” he says.

The report is aimed at policy makers, giving them a “precise picture of the EU situation” and allowing them to know “where to put their feet” when making decisions, says Maier, but he stresses that the Observatory is banned by law from making policy recommendations.

Fowler says she hopes that politicians and legislators take a greater interest in protecting and promoting IP across the EU, “which is good news for brand owners”.

Trade associations are highly interested in the report, argues Maier, because for the first time they have a picture of their “own industry”, while the general public will have a “better view of the structure of the economy”.

Although useful, the report does not define the link between IP intensity, and turnover and employment, says Maier.

“We are not saying that if you got rid of IP, 29 percent of the people in the EU would not be employed—we are saying that the businesses that are IP-intensive are generating that much employment.”

OHIM and the EPO are planning to repeat the study every two years to keep updating the statistics, Maier says. While he admits they will always be two years late, “that’s the reality of the speed with which the statistics are produced”.

“We will have less work next time, though, as our database now exists,” he says.

“We want to do more as well, looking at businesses within each sector and comparing them. Some companies use more patents or trademarks than others, so we can look at whether, at a company level, there is a difference between those that invest more in IP than others. We want to look at big and small companies.

“We have not looked into plant varieties—an important sector—so we hope to add these in the next two years to ensure a complete picture,” he says.

The report is impressive, even if questions about its accuracy remain. For the first time, IP owners in the EU can point to their positive contribution to the economy and employment. That should be celebrated, but let’s hope the politicians take note.

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