SDG
9 aims to foster innovation besides building resilient infrastructure and
promote sustainable industrialization. An effective Intellectual Property
(hereinafter referred to as "IP") legal framework is the cornerstone
of the innovation policy of any country in order to encourage companies to
invest in the Research and Development (R&D) of knowledge creation and
innovations. This paper aims to discuss such a legal framework fostering
innovation from a Law and Economics perspective.
Considering
research, development and innovation are expensive processes, businesses must
be stimulated to innovate. Companies are generally engaged in the Research and
Development of new business innovations for getting ahead of their competitors.
Therefore, it is noteworthy to mention that the results of such innovations
will give a considerable advantage to the company only if its rivals have no
free access to the said knowledge or inventions. Hence, it is essential to
guarantee that the Intellectual Property of these endeavors will not be
accessible to their competitors. This inaccessibility is ensured by the IP
policy that introduces exclusive rights to the intellectual property created by
the company which restricts access to such business innovations by others, thus
offers the possibility of a return on investment. In the absence of adequate protection,
the competitors would freely use the result of R&D and subsequently,
businesses would have no incentive to invest in research, development and
innovation. This would have detrimental effects on the technological progress
and economy of any country.
However,
an overprotected IP system may also have a negative impact on the economy. By
providing exclusive rights to the author of innovation, the IP system
establishes a monopoly on such knowledge and innovation. The owner of business
innovation prevents other companies from producing the same product and entering
the market during the granted period of exclusive rights. Eventually, IP rights
as patents, copyrights, licenses, trademarks, etc., provide a monopoly for
companies and create obstacles to entry in the industry, restricting
competition and favoring monopoly situations. As a result, companies holding
exclusive IP rights may increase and reduce production, sales, and also generate
higher monopoly prices for consumers. Thus, the superior position of the
exclusive IP rights holder may cause the disruption of the market economy and
lead to the monopoly.
The
resolution of this conflict can be the introduction of an alternative IP policy
to reward the authors of IP in the form of direct or indirect government
subsidies and granting limited proprietary rights over their intellectual
results. Such a system enables both incentives for the creators to be motivated
to continue to invest in R&D and the access to those innovations for the benefit of the society in the meantime: the author of IP is remunerated for the
cost of creation and as there is no exclusive right to exclude others, the
competition will bring the price down to marginal cost. To exemplify this
policy, according to WIPO, Serbian the Ministry of Economy and Regional
Development provides special grants to support innovative projects implemented
by SMEs.
In
conclusion, Law and Economics perspective shows that the IP policy fostering
innovation can have either positive or negative effect on economic development:
a weak protection system will reduce innovation due to the lack of an adequate
return on investment; the severe system will reduce the dissemination of
innovative results and lead to the monopoly on their use. In contrast, an
alternative reward-based system not only offers the remuneration for
innovations to be continued, but also society benefits from such inventions at
an affordable price.
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