The global landscape of intellectual property (IP) is highly complex and difficult to navigate. The ability of IP holders to obtain, retain, exploit, and enforce their IP rights can vary substantially from one country to another. The quality of a country’s IP environment is measured both by the existence of relevant IP policy and regulation and the successful application of that policy or regulation. With some exceptions, the majority of high-GDP countries have strong national IP regimes in place. Conversely, the most inadequate national IP regimes tend to be in middle- and lower-middle-GDP economies. Despite recent introductions of important reforms in IP rights worldwide, considerable problems remain in many countries. Therefore, it is imperative that IP practitioners understand the challenges associated with international IP rights.
There are numerous reports and studies on the global state of the IP environment. Most notably, the Office of the United States Trade Representative (USTR) releases an annual on the adequacy and effectiveness of U.S. trading partners’ protection and enforcement of IP rights. As illustrated on the following map, 10 of the 82 countries reviewed by the USTR in 2014 are on its Priority Watch List and another 27 are on its Watch List. Several of these countries, including Chile, China, India, Indonesia, Thailand, and Turkey, have been listed every year since the Report’s inception in 1989.
Credit: U.S. Department of State. Click photo to enlarge.
According to the World Intellectual Property Organization (WIPO), international patent filings reached record highs in 2013, attesting to the “importance of intellectual property in the global innovation ecosystem”. China and India are the largest users of the Patent and Cooperation Treaty (PCT) system among middle- and low-GDP economies, filing 21,516 and 1,392 PCT international applications in 2013, respectively. Coincidentally, they are also notable examples of countries with weaker national IP regimes.
Global IP indices such as those published by the U.S. Chamber of Commerce Global Intellectual Property Center (GIPC) and international law firm TaylorWessing https://united-kingdom.taylorwessing.com/en/ provide important insights into the relative quality of individual countries’ IP regimes. For example, the 2014 GIPC International IP Index ranks China in 17th place and India last out of 25 geographically diverse economies. These rankings are based on 30 unique indicators across several categories including rights related to patents, copyrights, trademarks and trade secrets, enforcement, market access, and international treaties.
Credit: Global Intellectual Property Center. Click photo to enlarge.
The quality of the global IP environment plays an important role in the valuation of international IP portfolios. All else equal, a patent in the U.S., due to better protection and enforcement laws, is more valuable than its counterpart in India.To assess the value of a foreign or international IP asset, appraisers are typically required to:
- determine the jurisdictions within which IP rights are held;
- establish the commercial use of the IP within these jurisdictions; and
- assess the likelihood of the subject IP rights being upheld and/or enforced within each jurisdiction.
Consequently, an IP valuation with significant international filings may include the use of different country-specific discount rates to reflect the varying quality of individual countries’ IP regimes.
A special thanks to Maria Lazarova and Tristan Sieve for their contribution to this blog post.