03 Oct 2016

Why is IPR and technology transfer important for developing countries

There has been much debate in the developing countries on the intellectual property rights (IPRs) in terms on protection of innovation and technology diffusion. Developing countries have huge technology disadvantage in today’s globalized economy. These countries acquire technologies from foreign markets as they lack resources to develop and innovate in the domestic market. Moreover, weak IPR protection in the developing economies forces entrepreneurs to import new technologies from advanced or developed countries. This shifts benefit to foreign entities which gain monopoly in the developing countries by implementing strong intellectual property rights (IPRs). Developed countries focus more on stronger intellectual property rights and provide incentives to innovators for research and development. It also results in high return on investment for the costs associated with R&D. Stronger IPR protection helps in protecting valuable technologies and intellectual property of foreign entities. On the contrary, developing countries embrace weak IPR protection for rapid diffusion of technology and imitate technologies as a source of development. As cost of imitation is less over innovation, developed countries push national governments in developing countries for adoption of stronger IPR protection. IPRs create ownership of intellectual property to innovators and provide legal powers to prevent others to make or sell intellectual property creation without the consent of innovator. IPR creates monopoly in the market that provides return of successful investment in R&D.

Transfer of technology from advanced countries to developing countries is critical and controversial issue. As majority of the research is conducted in developed countries, new technologies are being developed and are concentrated in the hands of multinational corporations rather than individual inventors. Most of the multinationals restrict transfer of technology in developing countries due to technology spillovers and weak IPR protection. The technology is complex and can be transferred through formal and informal channels. While formal channels include foreign direct investment (FDI), licensing, foreign patenting, etc. whereas informal channels include imitation and counterfeiting.

IP and technology transfer
It is believed that stronger IPR protection increase trade flows and technology transfer resulting in more license fees and royalty. Intellectual property rights such as patents, copyrights, industrial designs and trademarks prevent third parties to manufacture, make or sell for a given period of time. However, IPR varies from one country to another. Also, IPR are territorial in nature and implemented in a particular geography. The following parameters have to be considered to gauge the strength of patent protection.

1. Subject matter of the invention that can be patented
2. Number of years of protection ( duration for which the patent is granted)
3. Provisions to prevent revocation of patent rights through licensing
4. Enforcement of legal instruments

The patent system still lack efficiency in enforcement of intellectual property protection across countries. Several measures including integrity of legal system, enforcements of patent laws, and impartiality of courts have to be considered for the efficacy in implementation of patent laws.

The developing countries restrict the patent system as it limits the diffusion of technology and growth. On the other hand, developed countries use social and economic pressures to break this resistance. As developing countries focus more on imitation of technology, there is less domestic innovation as they largely rely on foreign technologies. Additionally, developing countries opposed the TRIPS agreement and delayed implementation by incorporating caveats in their patent laws. It also depends on absorptive capacity of the developing countries to develop new technologies for their growth and development. The technology transfer depends on the market structure, pricing, and other country-related factors. The size and development of the economy to absorb the foreign technology, openness for trade, and economic freedom are some of the factors responsible for technology transfer and development.

To sum up, stronger IPR protection leads to increased royalty and license payments by developing countries resulting in greater transfer of technology. The main aim for IPR protection is to promote innovation and encourage growth. It grants innovators to gain monopoly in the market and allow them to earn higher returns on investment. Stronger IPR protection helps in developing new technologies and knowledge in the economy, thus leading to long-term growth. While IPR protection may be panacea for developing countries, providing a fillip in technology development and country’s growth. On one hand, stronger IPR protection can boost growth, innovation; on the other hand, it provides monopoly to patent holders, thus increasing the prices of products in the market and limits knowledge diffusion in the economy. Developing countries are embracing stronger IPR regime to facilitate technology developments and promote growth. IPR policies are generally set at the national level and international powers plays a crucial role in setting the level of the IPRs for majority of the countries. It benefits new-age innovators and entrepreneurs to develop technologies and protect them through IPRs. Stronger IPRs can increase FDI, licensing flows, trade that are considered as major drivers for technology transfer and foster innovation in the economy. On the flip side, stronger IPR protection in developing countries inhibits growth and technology diffusion and will not lead to any substantial benefits in terms of innovation or technology development. Stronger IPR protection will increase the trade and FDI flows in developing countries having imitative capabilities, thus enhancing technology transfer. Developing countries like china have benefited from IPR by encouraging domestic innovation and increased technology diffusion through formal channels. Going forward, adoption of stronger IPR regime by developing nations can be seen, thus leading to development of new technologies and patenting of innovations. Furthermore, other policies such as education and R&D investment will help in attracting FDI and will play a crucial role in developing a technological base.

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