ECONOMIC SECURITY AND PATENT

Economic Security and Keeping United Kingdom Patent Secret

Economic Security and Keeping United Kingdom Patent Secret

CHAPTER 1: PATENTS

It is a well-established truth that innovation, whether technological or not, is a key determinant of economic growth and general welfare of the society. Broadly speaking innovation means developing a new idea or concept or a new association between existing ideas or concepts. It is a commonly perceived notion that intellectual property rights play a vital role in promoting innovation and growth. Technological advancement, a major force in propelling a country's economic prosperity, is particularly argued to be best protected and promoted through a strict patent regime. There are two primary theories underlying this conception. The Public Interest Theory suggests that the public benefits from disclosure of the invention, which would have otherwise remained a secret. Such disclosure enables circulation and ready availability of the technical information which, in turn, stimulates further innovation. The Incentive Theory, meanwhile, asserts that the grant of patent provides an incentive for the production of new inventions and thereby encourages improvements and innovations (Suthersanen, 2006).

A substantial amount of scholarly work has been devoted towards establishing the causal link between patents and innovation. Public disclosure and incentive arguments, however, continue to remain central to the justifications for grant of patent on ground of innovation. Further much of these justifications rely on the economic theory of intellectual property and employ economic arguments in asserting the positive correlation between patents and innovation. The economic theory asserts that intellectual property rights are necessary to promote inventions and creations, just as property rights are necessary to encourage the efficient use of the conventional types of properties (Michael, 2002).

This approach treats information as a “public good” which is non-rivalrous and non-exclusive. In the absence of clearly defined rights in favour of the inventor such public goods are liable to freeriding, thereby preventing the inventor from benefitting from his/her own invention. This causes disutility to the inventor and leads to underinvestment and, therefore, an undersupply of information goods. In this way the lack of patent protection stifles further innovation. Patents address this situation by granting a temporary monopoly to the inventor. This allows the inventor to charge a higher price than the marginal cost of producing such information goods and thereby recover the innovation costs and make a return on the investment. This economic reasoning lies at the crux of the argument that patents encourage companies to invest in research and development (R&D) which in turn stimulates innovation and dissemination of information (Caenegem, 2007).

Despite extensive theoretical justifications suggesting the beneficial impact of patents on innovation, empirical evidence on the role of patents in promoting innovation and growth in general remains limited and inconclusive. Market research suggests that strengthening of the patent regime the world over has resulted in a surge in the number of patent applications as well as an increase in R&D expenditures of the companies.

This, however, is only indicative of a few countries and of a few sectors of ...