UK IPO Report Estimates Economic Contribution Of Intellectual Property Rights

UK IPO Report Estimates Economic Contribution Of Intellectual Property Rights

Kalen Lumsden is a JD candidate at Osgoode Hall Law School.

The Intellectual Property Office of the United Kingdom recently released a report titled The Role of Intellectual Property Rights in the UK Market Sector that estimates the “level of UK market sector investment in knowledge assets protected by Intellectual Property Rights  (IPRs) and the impact of investment in those assets via their contribution to labour productivity and growth in the UK market sector.”  

The report was authored by Shikeb Farooqui, Peter Goodridge and Jonathan Haskel and an executive summary can be found here.  Their main findings, quoted below, are:

  1. On average, between 2000 and 2008, approximately 48% of UK market sector investment in knowledge was protected by IPRs.
  2. Approximately 75% of IPR investment is in assets protected by copyright and unregistered design rights.
  3. In 2008, approximately 62% of the stock of knowledge assets in the UK market sector were protected by IPRs.
  4. On average, between 1990 and 2008, 10.6% of growth in labour productivity was due to growth in the use of IPR-protected assets, similar to the 11.1% contribution of ICT [Information and Communication Technologies] equipment. The contribution of knowledge capital not protected by IPRs is around 10.3, slightly less than that of protected IPRs.
  5. …Patents protect a specific innovation but reveal information to others for free. The same is true for other forms of IPR-protected knowledge. Such freely available information contributes to growth via total factor productivity (TFP) – effects on total output not caused by inputs – which we estimate contributes around 45% of labour productivity growth .  [pp 3-4]

Notably these findings cannot be read to suggest that more intellectual property rights or a stricter, more inclusive rights regime would increase their economic contribution. Nor can it be read to suggest that their contribution is causally linked to their being unprotected. In their conclusion, the authors write that whether the 10.3% contribution of knowledge capital not protected by IPR would have been higher or lower if it had been protected is unclear and an area for further study.  They write “[w]hilst some evidence suggests that the ability to use IPRs increases innovation through the incentive of monopolist revenues, others suggest that the same mechanism reduces innovation by removing the incentive to continually innovate” [p 41].

Also notable is the relative valuation of different intellectual property areas and the overwhelming contribution of Copyright and Design rights compared to Patents and Trademarks.

The report also divides the intellectual property market into three categories of knowledge assets and weighs their relative contributions: i) Computerized information, ii) Innovative property, and iii) Economic competencies.

Table 1: UK Market Sector Investment; Tangible & Intangible, £bns nominal [p 11]

Year 1990 1995 2000 2008
All tangibles 67 62 87 104
Intangible category        
Computerised Information 6 10 16 22
Software (Own-account; Purchased) 6 10 16 22
Innovative property 25 27 31 44
R&D (Scientific; Non-scientific; Financial) 8 9 12 16
Design (Own-account; Purchased) 13 13 15 23
Artistic Originals (Film; TV & Radio; Music; Books; Misc Art) 2 3 4 4
Mineral Exploration 2 1 0 1
Economic Competencies 26 34 51 73
Branding (Advertising; Market Research) 5 7 12 15
Training 12 15 21 27
Organisational (Own-account; Purchased) 9 12 17 31
All intangibles 57 70 98 139

New to the report is the inclusion of the Artistic Originals category, which accounts for approximately £4 billion in investment. Considering this is just 1.65% of the total market sector investment, based on casual observation, this category seems to punch above its weight when it comes to media representation and the ongoing discourse surrounding intellectual property policy. No doubt this is partially because this category is the media. Regardless, in Canada we seem to spend a great deal of energy discussing the copyright issues that surround music, movies and books in the internet age. If Canada’s figures resemble the UK’s then very likely this amount of discussion is disproportionate to the actual effect this category of property rights has on the economy as a whole.  Information like this certainly helps to contextualize intellectual property rights discourse. After all, training employees contributes more than art to the United Kingdom’s economy.