Last month’s relaunch of Authentication & Brand News™ comes, in the words of my co-editor Nicola Sudan, ‘at a time when it is more important than ever for brand owners to safeguard their intellectual property’ (see ABN January 2022). This is undoubtedly true, with the effects of COVID-19 bringing tighter household budgets, disrupted supply and distribution chains and the accelerated shift to online retail, making it easier than ever for counterfeiters and fraudsters to abuse intellectual and other corporate property.
So, it may be a good time for those of us who operate in the authentication and brand protection sectors to stop and ask ourselves two simple questions:
Why is intellectual property (IP) important, and
What is the future for IP protection?
The financial accounting answer to question one is that IP is an important intangible asset that sits on a company’s balance sheet whose value is difficult to quantify until the IP is either bought, sold or exploited. PricewaterhouseCoopers (PwC) conducted research in 2014 reflecting, on average, that 75% of a company’s total asset value is comprised of intangible assets.
The working definition of IP used by the World Intellectual Property Organisation (WIPO) is ‘a protection in law… which enables people to earn recognition or financial benefit from what they invent or create. By striking the right balance between the interests of innovators and the wider public interest, the IP system aims to foster an environment in which creativity and innovation can flourish.’
Patents were first systematically granted in Venice in the mid-1400’s, when inventions were communicated to the state and in return the inventor was offered legal protection against potential infringers.
In the early stages of the development of IP law, the balance between ‘the interests of innovators and the wider public interest’ was probably in favour of the innovator, leading to monopolistic practices and in turn to price gouging. But as economic factors pointed to the benefits of fair competition there was general agreement across jurisdictions that there should be a time limit to the protection provided by a patent, culminating in the 1990’s by the implementation of the World Trade Organisation’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) 1, Article 33, that provides a term of 20 years protection from the date of filing.
There is the idea that patent protection provides, for a fixed period of time, an individual or company a chance of getting a fair return on their investment in research and development (R&D), so that it encourages them to reinvest in innovation but without stifling competition. This notion is not universally held, although there are signs that this is changing.
Since the end of World War II, many countries in Asia, including China, Japan and South Korea, have developed their industrial bases to become thriving economies that operate globally in all industrial sectors. Amongst these countries, China has been identified, at least from a Western perspective, as having little regard for respect of IP.
As China has grown to become the largest industrialised nation 2 for many goods, including textiles and apparel, fertiliser, footwear, toys, electronics, food processing and automobile parts – the very goods that are the targets for counterfeits – China has shifted from following to participating in the realms of R&D and innovation. The nation was ranked 4th in the world for US granted patents in 2020 3. Add to this, the resources that are being put into university research funding resulting in three top-30 research intensive world rankings (Tsinghua University, Peking University and Fudan University), and you have a government that is putting sizeable state resources into creating their own sovereign IP portfolio.
What this means for the future of IP protection worldwide is difficult to say, but one indicator will be the extent to which a more IP-aware China regime will take measures to enforce domestic compliance with foreign owned IP.
As China presses ahead with its plans on R&D and innovation, it increasingly becomes in the country’s own interests to keep improving its IP legal framework and enforcement. It is already taking steps in that direction with the New Patent Law 4, which came into effect on 1 June 2021, that will make an impact on all areas of patent prosecution, enforcement, and exploration. Add to this the EU-China landmark agreement 5 on protecting European Geographical Indications, which came into force on 1 March 2021, and IPKey China 6 – an EU Project designed to enhance EU-China cooperation on selected emerging challenges – and you have a measure of the Chinese commitment to increase transparency and improve IP enforcement.
Does this mean that the traditional major supply routes of counterfeit goods converging back to China will be disrupted anytime soon? I suspect not. China is a massive country with loose legal reach outside the major conurbations. What I do think is that as China recognises the benefits of IP protections of its own homegrown IP, then a more robust attitude to domestic enforcement will follow.
1 - https://www.wto.org/english/tratop_e/trips_e/trips_e.htm
2 - https://www.cia.gov/the-world-factbook/countries/china/#economy
3 - https://www.ificlaims.com/rankings-trends-2020.htm
4 - https://gowlingwlg.com/en/insights-resources/articles/2020/ten-highlights-of-china-s-new-patent-law/
5 - https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1602
