How Important is Intellectual Property to the World Economy?
The Technical Expert Solution for IP Teams
Intellectual property (IP) contributes significantly to both national and state economies. Dozens of sectors and industries rely on regulation that includes the proper enforcement of patents, trademarks, copyrights, and trade secrets. Additionally, IP is important for consumers as assurance that they are buying genuine, safe, and quality-guaranteed products. Intellectual property rights are well worth protecting, both in this country and abroad, for several reasons. Let’s dive a bit deeper into how the economy relies on IP.
Industries that rely on IP cover nearly every sector and are very important for keeping technology rights available for companies who have invested in it. In turn, they keep many people employed indirectly. In fact, according to a recent study by the U.S. Department of Commerce, IP-intensive industries employ over 45 million Americans and hundreds of millions more people across the world in 81 identified industries.
These 81 industries are expected to continue growing and jobs in IP-intensive industries are expected to grow faster than the national average over the next decade. This will be an important economic metric as the job roles associated with the companies driven by that IP are also expected to keep plenty of well-paying jobs available.
Salaries earned by companies with large investments in intellectual property are also considerably higher than those that do not have a portfolio to leverage. The average worker in an IP-intensive industry earned around 46% more than their counterparts in a non-IP industry. A competitive salary is important for many workers as well as the broader economy as they spend that salary.
For the economy to continue to thrive, it is important to not only have a large portion of the economy revolved around IP-backed jobs, but also to keep the U.S. competitive around the globe. According to the same study, America’s intellectual property was worth around $6.6trillion of added value in 2014 and should steadily increase each year. This is a significant amount of GDP and, for comparison, is more than the nominal GDP of any other country in the world.
IP-intensive industries account for over a third, or around 38.2%, of total US GDP. Intellectual property also accounts for over half of all US merchandise exports, resulting in almost $842 billion of revenue created.
There are many direct and indirect economic impacts that stem from IP-related innovation, which clearly influence the larger economy. In fact, IP-related economic growth and employment in the U.S. is critical to maintaining a competitive place in the world economy.
Based on national statistics, the economy would not be able to sustain long term growth without continued expansion of IP-related innovation. However, IP doesn’t just favor businesses who invest in it. IP is crucial to protect the consumer as well.
Strong IP rights can be used to help consumers make informed choices about what they’re buying. They become informed about the safety, reliability, and effectiveness of these products and services. When IP rights are properly enforced, this ensures that products on the market are authentic, and are of the high quality that consumers expect and recognize from the U.S. market. Intellectual property rights also foster a feeling of confidence that markets rely on, as consumers demand this peace of mind about what they’re buying.
As the World Intellectual Property Organization (WIPO) points out, innovation is the catalyst for individual product purchases that contribute to GDP swings in one economy or another. Their studies indicates that, “worldwide, 90 percent of consumers said patents are necessary to promote invention.”
IP can drive innovation, as products are pushed towards research and development as soon as possible to get any early advantage possible. New products and services have to be developed all the time, and companies know that the speed of technological advancements is often very rapid, in conjunction with patent filings and other IP keeping pace.
Almost all of the hundreds of products that are on the World Health Organization’s Essential Drug List, which are essential for improving and saving lives all over the world, came from the R&D-intensive pharmaceutical industry that depends on patent protections.
IP also benefits industries other than pharmaceuticals. For example, innovative agricultural companies are always developing new products to help farmers produce more food. Higher yields and better products can help the hungry around the world, while also reducing the environmental impact of farming methods. Discoveries driven by intellectual property in alternative energy and green technologies will help improve energy security in the future and assist in addressing climate change.
In fact, the International Renewable Energy Energy Association (IRENA) says, “accelerating the development and deployment of renewable energy technologies (RETs) requires innovation throughout the whole technology life cycle, from basic research to commercialization. The International Renewable Energy Agency (IRENA) has been assessing different instruments that promote RET innovation, focusing in particular on patents, standards, technology transfer, and cooperation in research, development and demonstration. Efficient use of such instruments will benefit RET innovation.”
Risk, and even the occasional failure, are very important to keep innovation economy thriving. IP rights can motivate entrepreneurs, and provide incentives towards creating new advances in their industry, even if they face some challenges along the way. IP rights further allow the free flow of information. Protected knowledge about original patented inventions can be shared without risk. In turn, this allows for innovation and improvements on an existing product or process.
The importance of innovation has been recognized since our founding fathers, hence why strong IP rights for authors and inventors were included in the U.S. Constitution. This makes the U.S. a world leader in entrepreneurship as evidenced by the sheer number of patents and trademarks that are filed with the U.S. Patent and Trademark Office every year.
Protecting intellectual property should be a non-partisan issue that revolves around understanding the impacts of IP on the economy. Rights granted for intellectual property are supported and embraced by all sectors of industry, including small, medium, and large organizations, as well as by labor organizations, consumer groups, and other trade associations. In short, IP has a significant impact on the world economy.