Benefits to Companies: Turning R&D into Business Assets

Intellectual property is a “‘power tool’ for economic development”, as the Director General of the World Intellectual Property Organization (WIPO) Kamil Idris put it in 2002. “[I]nternational acceptance and utilisation of IP tools means that there will be more innovation and therefore more creative change and cultural and economic growth.” The way this works generally is that IP provides a negotiable currency of rights in inventions, works and other intangible representations of products of the mind. Governments award this intellectual currency to inventive and creative companies and individuals if their inventions and creations meet the criteria for protection established in the IP laws. In a healthy IP system, the value of the IP’s currency is determined by the market. It is reflected in the levels of sales of IP-based products and services, the prices at which rights in these IP-based items can be sold or licensed and the market values of the companies that own the IP. This intellectual currency in intangible inventions and works has vital importance in a modern economy. As the Economist put it in October 2005: “[I]deas and innovations have become the most important resource, replacing land, energy and raw materials. As much as three-quarters of the value of publicly traded companies in America comes from intangible assets, up from around 40% in the early 1980s. The economic product of the United States, [said] Alan Greenspan, the [former] chairman of America’s Federal Reserve, has become predominantly conceptual. Intellectual property forms part of those conceptual assets.” There have been some interesting studies showing specifically how the IP system works to provide incentives and rewards for those companies that use the system to turn innovative research and development (R&D) into business assets.

[This is an excerpt from the publication released by WIPO called The Role of IP in Promoting Economic Growth through Innovation. To read the complete publication, please visit the Download menu to get a copy]