Intellectual Property Rights 'regimes' are archaic!

Posted by: Ash Khanna

Organizations (or Soft Technologies) are the most sophisticated of innovations we as a species create, maintain and grow.

As so eloquently pointed out by Hernando de Soto, the reason that many western economies are advanced is because they have developed ‘sophisticated property rights’ systems over centuries, facilitated by, emergent, democratic institutions and the rule of law. This in turn facilitated the industrial revolution and informed the structure of their institutions and organizations.

Today the global economy is predominately service based. The contradiction is that it is ‘served’ by institutions and organizations primarily informed by the 20th century (and even earlier)! The great level playing field is in the intellectual property rights systems – which according to me should evolve into ‘activity based property rights systems’ – (details for another posting(s)) that may be characterised, at best, as ‘developing’, globally.

Tangible resources are inadequate and existing jurisdictionally sensitive, industrial rights (i.e. patents) and copyright laws are archaic. It is derisory to expect such 'regimes' to facilitate sustainable high economic growth (as experienced by few countries during the second half of the 20th century), globally. Quite simply as far as intellectual property based transactions are concerned it is the ‘wild west’! And what that means for businesses that are ‘classified’ under the banner – “service economy”, its high risk and hence (potentially) high return!

From a business perspective you have to go back to the basics and ask yourselves: “What are we trying to get done and what structures are we using at multi-firm levels or intra-firm levels?” The stakeholders have to engage. They have to understand, “How a ‘business process’ makes 'business sense'?" They have to appreciate the "Why?" of an economic activity.

Management, to begin with, has to become fluent at implementing issues related to: control rights (contract or ownership); incentives; relational contracts. In the medium term they have to be educated in identifying and aggregrating transactions that are of the intellectual activity kind and the nature of ‘property rights’ that may emerge (and be currently associated with them).

The macro challenge lies in establishing activity based property rights systems comparable to the advanced existing property rights systems that may effectively accommodate ‘incentives to entrepreneurs’ and hence facilitate all the five types of innovations according to Schumpeter – i.e. new products, new methods of production, new sources of supply, the exploitation of new markets, and new ways to organize business.