Intellectual Property -
A Social Paradox

Vincent McBrierty/Raymond P. Kinsella

Issue 345, vol.87, Spring 1998

The commercialisation of knowledge is central to innovation. But the successful exploitation of a new idea can be tortuous. There are three major hurdles to overcome: 1) the commercial viability of the new idea; 2) its acceptability by society; 3) the availability of the finance for development, production and marketing.

Estimates of the division of expenditure between (i) the research which creates the original idea and (ii) the technological development which exploits it vary widely; a ratio of 60:40 has been authoritatively quoted. Thus the technology development element entails major additional expenditures principally in capital management and marketing.

Patents protect new inventions which meet the principal criteria of novelty, applicability and non-obviousness; copyright protects the expression of ideas. The patent system continues to develop to meet the growing challenges of today's knowledge-driven society: (i) the protection of intellectual property in complex new growth areas such as biotechnology where current European patent law in particular is increasingly inadequate and (ii) the harmonisation of national patent systems.

Major problems arise in the biotechnology which is one of the key growth areas of intellectual property and which attracts the lion’s share of public and private research funding. Recurring problems centre on the term 'essentially biological' which is open to interpretation and suffers from the vagaries of translation from one language to another.

Infringement of IP by those who do not have ownership rights is a global phenomenon: it is on a scale which is seriously undermining the profitability and competitiveness of many high-tech companies. Piracy and patent infringement subvert the incentives which are at the heart of a knowledge-based economy. In so doing, they erode and distort the basis for trade both in intellectual property itself and the trade and investment that flows from it.

Today, in the international arena, legal redress against patent infringement is increasingly effective but the deeper economic and social conflicts continue unabated. The global balance of power is shifting from "technologically disenfranchised imitators to technologically franchised innovators" because of the link between strong foreign competition and weak intellectual property protection.

The creation of wealth, employment and international trade is increasingly a function of the generation and commercialisation of knowledge. At the microeconomic level, management structures and accounting systems are being re-engineered to accommodate this. At the macroeconomic level, we require robust and acceptable methodologies for protecting intellectual property and effecting its subsequent diffusion to the benefit of society to achieve sustained economic growth.

Vincent J. McBrierty is Professor of Physics at Trinity College, Dublin and a member of the Royal Irish Academy. 

Raymond P. Kinsella is Professor of Banking and Finance, Graduate Business School, University College, Dublin and the University of Ulster, Coleraine, Northern Ireland.