Intellectual property in (huge) numbers

Statements about critical importance of IP to the contemporary economy have now become commonplace. Rarely, however, are those statements backed by concrete data. Two recent documents put in a sharper focus the sheer size and resulting challenges of the IP economy.

The first document is the is International Intellectual Property Alliance’s 2006 economic report on the economic import of the copyright in the US. The alliance is a private lobby group  formed in 1984 to represent US copyright-based industries in bilateral and multilateral efforts to improve international protection of copyrighted materials. It comprises trade associations representing various segments of the U.S. copyright community and companies producing and distributing materials protected by copyright laws throughout the world – all types of software, films, television programmes, home videos, music and books.

According to the report,  industries that depend on copyright protection laws for their existence accounted for U$819 billion of the US economy last year. In 2005 the economic contribution of “core copyright industries” (those whose main purpose is to produce and distribute the copyrighted material) made up 6.6 per cent of US GDP, up from $760.5 billion, or 6.5 per cent, in 2004.

Those industries were responsible for almost 13 per cent of US economic growth in 2005 and grow twice as quickly as the overall economy. Core copyright industries last year employed over 4 per cent of US workers, or about 5.38 million people in 2005, slightly higher than in 2004. Foreign sales and exports reached $110.8 billion, topping the contributions from the car, food, chemical and pharmaceutical industries.

“What is clear from this and previous studies of the copyright industries is that their contribution to this country's economic growth continues to increase in size and importance,” a representative of the alliance said in a statement. Not surprisingly, given the alliance’s purpose, this statement also highlighted the magnitude of copyright piracy and violations affecting US copyright industry, estimated at $35 billion in 2005 (not counting Internet piracy).

Alongside copyright, patents are another main vector of the IP economy. While we do not have reliable data about the “patent industry”, we know that patents themselves are growing at ever quicker rate. Thus,  in the 145 years from its founding in 1790 until 1935, the US Patent Office issued its first 2 million patents. It took just 41 years to grant the next 2 million patents. The next 2 million took only 23 years. 

This rapid increase poses serious challenges to patent offices, challenges discussed during a Trading Ideas symposium organised by the Australian government in Sydney from 28 to 30 January. This meeting brought together the heads of major patent offices around the world, including the US and European Patent Offices.

The Director of the US Patent Office, John Dudas, highlighted the increasing backlog of patents. He estimated that at present there are 18 million patent applications in the world, as against some 12 million in 2000. For her part, Alison Brimelow, president-elect of the European Patent Office, stressed the risk of deterioration in the quality of patents under pressure to accelerate the application process.

Clearly, current patent procedures are anything but frictionless and the efforts to streamline them do not appear to have been very effective. It is time to consider more radical remedies.

In a recent blog, we discussed the proposals to nationalise key pharmaceutical patents. In view of the current problems of existing patent offices, it may be useful to consider a solution going in the opposite direction – to introduce competition in patent attribution.

The idea is not to privatise the the existing patent offices but to allow the creation of new privately owned patent offices. Those would be regulated and their governance should provide all guarantees of quality and independence. To a certain extent, competition between various patent offices already exists. It is time to make it more explicit and effective.