Knowledge Diffusion of Exploitation - Term Paper Example

Knowledge Diffusion of Exploitation? Over the time, international trade has come to encompass an important element of transfer and exchange of knowledge and information. Trade in international property has grown extensively in the past few decades. Ideas and knowledge are becoming part of the mainstream exchange of goods and services. Innovations in medicine and technology are taking place at a rapid rate, entailing changes in efficacy, design, efficiency and packaging amongst other factors. Trade of films, music, recordings, books etc is being promoted for the creativity and ideas delivered and not because of their packaging. Previously products that were regarded inferior in technology have been revamped to become more appealing and efficient on the technological end. All these aspects attest to the increasing trade being carried out across the borders in intellectual property (IP). Producers of goods are given by law the right to protect their ideas and creativity from being stolen and exploited by other people. Moreover producers can also negotiate and exchange these ideas at a price. This is referred to as intellectual property rights and occurs in an array of forms; for instance, copyrights can protect movies and books, trademarks can provide immunity from exploitation to product logos and patents can be applied to inventions. One of the reasons why such rights are being promoted is to encourage producers to come up with new ideas and practically apply them without the fear of them being exploited and stolen by competitors (1). Moreover the integration of IP into the trade regime has served to be a solution to the shortcomings of the WIPO system (2). IP has evolved into a means of gaining competitive advantage in modern international trade. The rapid pace of technological advancements occurring all around the world coupled with increasing economic globalization has helped to create more competitiveness amongst countries. Amidst such high competition, the protection of ideas and creativity of producers helps to guarantee that rivals do not steal the idea and take credit away from the original producers (3). The economic worth of IP lies in the fact that it serves to advance and further competitive capability. One such example is the protection of IP with regard to the software industry in India. The transfer and exchange of IP is often seen amongst developing countries. This is because the economies of these nations are still budding and developing. There is a need for greater investment and transfer in research and technology along with improvements and advancements in certain industries such as manufacturing and service industries. One way of achieving such modernization is through the trading of intellectual property across the national border. The advantages of such barter not only lie in the acquisition of better and advanced technology by the buyer but also in greater economic gain for the seller. The trade of IP allows countries to commercialize and market the creativity of their producers and to achieve competitive advantage through it. Moreover countries who are importing IP are benefitted from the influx of an array of IP such as textbooks for the national education system, art works by talented artists etc (4). The recent trends in international trade are making the exchange of buying and selling much simpler and secure. When looking at the changes occurring by the advent of e-commerce, one can appreciate that no industry is changing at a more rapid rate than the technology transfer industry. This tech transfer industry primarily compromises of patent licensing executives, inventor-scientists, patent attorneys and technology brokers. These agents are responsible for the sale, purchase and licensing of IP all over the world. There are a number of factors motivating these people to barter IP on an international scale; these also portray the advantages of trading IP globally. IP can be exploited in two main ways: selling and licensing; a range of factors affect the choice of method the buyer chooses for exploiting such as the costs of producing, the nature and span of the product lifecycle etc. Selling or assigning IP to a third party confers an important benefit to the creator. The creator gets a one-off lump sum payment. Also, the buyer is delivered from the responsibility of upholding, policing and implementing the right (5). When selling or buying the IP, the exchange carried out is referred to as an assignment. The possession of the IP exchanges hands, from the seller to the buyer, and is characteristic of a one-time movement. A price is fixed for the IP and the subsequent relationship does not compromise of long, complicated commitments. The sale of IP is of great consequence to the creator who has little know-how about trading IP on the national or international scale. The inventor of a new technology may either not have any hands-on experience in introducing the product in the market or may not be interested in going to the market and so may regard it as the ultimate option to sell the product to another party. Moreover the aspect of transacting the IP in one go also appeals to the seller and encourages him or her to trade the IP. On the other hand, licensing differs from the typical sale and purchase of IP because the owner still exerts proprietary rights on the licensed product. Licensing has both advantages and disadvantages to the licensor and the licensee. Licensing allows the licensing company to commercialize its product much more effectively and can be an instrumental way of breaking into a new market. However there are certain catches to licensing-out; e.g. the licensee may have agreed to a licensed technology which may not be ready to be commercially exploited or must be changed to satisfy the requirements of the licensee’s business (6). One of the drawbacks in the process of IP trade is that the transaction of patents is a time-consuming process, often extending to three years. This also causes a decrease of 15% in the potential lifetime worth of the patent. This is attributable to the inefficiency of the market for intangible products. One theorist argues that the market for intangible goods is characteristic of a high degree of financial instability and fragmented information. The market for IP trade is not efficient because it has not made use of financial tools characteristic of other regimented financial markets. The selling of IP on the international scale causes a decrease in the return on the preliminary investment made. One reason for this is that the changes in the market lead to difficulties causing depreciation in the value of IP assets. The intangibility of the assets also pushes up the chances of fraudulent exchanges. Physical products can be seen and felt and there is sound guarantee of the existence of the products. The buyer derives comfort from the fact that vendor owns the hard asset; in intangible property, the vendor can exchange a non-existent title (7). However, the Internet and the increasing surge of web-based sources are counteracting the financial deficiencies of the market and have led to the development of more reliable financial tools which are permitting buyers and sellers to carry out exchange of their IP in a relatively balanced way. Trading IP through the Internet has given producers the opportunity to interact with a bigger market. The transfer of IP is encouraging a buyers and sellers previously reluctant to close patent deals due to risk of patent invalidity to seek IP protection. This has caused industries from different sectors to integrate their ideas. For instance a furniture company is licensing a high-density ceramic produced by a maker of aircrafts. Bruce M. Berman (8) contends, ‘The IP transaction transformation is starting, and it looks like the kind of business-changing event that has not been seen since the founding of the Chicago Board of Trade in the late nineteenth century or the New York Stock Exchange (NYSE) a century before that’. In the UK, firms are beginning to recognize and appreciate the financial advantages that could be obtained from licensing IP. Establishing manufacturing plants and processing factories can prove to be expensive and time-consuming. Contrary to that, licensing technology presents itself as a more efficient option for making revenue, especially for infant firms with no access to capital (9). The nature of intellectual property laws all over the world shows a varying character. This has been the root cause of many intellectual property disputes amongst countries engaged in trade across borders. Over the time, such disputes have been counteracted by the creation of the TRIPS Agreement by the WTO (10).TRIPS Agreement has been an instrumental means of averting disputes occurring due to discrepancies and differences in IP laws amongst countries; it has also served to highlight the potential of IP as a means of exchange (11). It requires countries to meet a certain standard of protection in order to offset the drawbacks of engaging in trade of IP across borders. In this regard, the role of national governments comes into limelight. Governments are important in promoting the long-term benefits of IP over the disadvantages it gives rise to. IP also gives rise to certain tax issues (12). However, according to the WTO, governments decrease the costs incurred to the society by a number of measures such as mitigating health problems. Governments are also vital to the effective enforcement of IP rules as charted out by the WTO in the country. They can prevent the import of counterfeit and fake products in collaboration with the customs department. National governments of developing countries are involved in the promotion of IP when exchanging technology with other parties across the border. For encouraging the use of IP in protecting the innovation and creativity of producers, the government can offer incentives to the producers (13). The government can also play a role in the enforcement of false advertising laws (14). They can also prove influential in promoting the development of export strategies to root out the possibility of being part of fraudulent exchanges (15). In conclusion, IP is able to generate and maintain individuality in the market and is starting to become appreciated all over the world as a vital commercial asset and an important means of gaining competitive advantage. Moreover the trade of IP helps to promote national infrastructure and encourage innovations in technology (16). Increasingly, web-based exchanges of IP are starting to come to limelight (17). This is representative of the changes and promotion that international trade in IP is being subjected to. Bibliography (1) WTO. Intellectual property: protection and enforcement. 2011. Available at: http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm (Accessed: 27 February 2011). (2) Harrigan, J. Handbook of international trade, Volume 1. Massachusetts: Wiley-Blackwell, 2003. (3) On intellectual property protection on international trade pattern. 2011. Available at: http://eng.hi138.com/?i286406_On_intellectual_property_protection_on_international_trade_pattern# (Accessed: 27 February 2011). (4) Alikhan, S World Intellectual Property Organization. Socio-economic benefits of intellectual property protection in developing countries. World Intellectual Property Organization, 2000. (5) Waterfront Solicitors. Intellectual property. 2009. Available at: http://www.waterfrontsolicitors.com/intellectual-property/legal-basics/exploiting-ip/sale-of-intellectual-property (Accessed: 27 February 2011) (6) Loades, G World Intellectual Property Organization International Trade Centre UNCTAD/WTO. Exchanging Value: Negotiating Technology Licensing Agreements: A Training Manual. World Intellectual Property Organization (7) Zawada, CA. Buying and selling intellectual property. 1998. Available at: http://www.wmcz.com/articles/Buying%20and%20Selling%20Intellectual%20Property.pdf (Accessed: 27 February 2011). (8) Berman, BM. From ideas to assets: investing wisely in intellectual property. John Wiley and Sons, 2002. (9) Prowse, P. Intellectual property rights an increasingly important factor in international trade. 2011. Available at: http://www.internationaltrade.co.uk/articles_print.php?CID=14&SCID=&AID=367 (Accessed: 27 February 2011). (10) Pugatch, MP. The international political economy of intellectual property rights. Edward Elgar Publishing, 2004. (11) Govaere, I Ullrich, H. Intellectual property, public policy and international trade. Brussels: Peter Lang, 2007. (12) Darby, JB. Practical Guide to Mergers, Acquisitions and Business Sales. Chicago: CCH, 2006. (13) WTO. Intellectual property: protection and enforcement. 2011. Available at: http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm (Accessed: 27 February 2011). (14) Entertainment, Intellectual Property, Internet & New Media Law Group. Buying, selling, licensing and protecting intellectual property rights. 2011. Available at: http://www.entertainmentiplaw.com/Intellectual-Property-and-Licensing/Buying-Selling-and-Licensing-IP.shtml (Accessed: 27 February 2011). (15) Daniels, JD Radebaugh, LH & Sullivan, DP. International business: environments and operations. 12th ed. NJ: Prentice Hall, 2009. (16) Khan, SA World Intellectual Property Organization. Socio-economic benefits of intellectual property protection in developing countries. World Intellectual Property Organization, 2000. (17) Lichtenthaler, U. Trading intellectual property in the new economy. International Journal of Intellectual Property Management, 1(3), 2007, pp. 241-252. Read More