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Small Business & Entrepreneurship Council: Intellectual Property: Tremendous Opportunities, Serious Challenges
June 27, 2013
By Raymond J. Keating

In recent weeks, the White House has been barraged by letters from Congress regarding trade with India. A key concern? The violation of intellectual property (IP) rights.

In a June 20 letter, 40 U.S. senators, for example, cited an assortment of concerns, including India’s recent actions “to deny, break or revoke patents for nearly a dozen lifesaving medications risk undermining our broader relationship. This is particularly troubling against the backdrop of a generally deteriorating environment for intellectual property protection in India.” In addition, the senators pointed out, “Already, several other countries in Asia, Africa and Latin America are reportedly contemplating actions similar to those India has already taken that would further harm jobs and growth in our states and across the country.”

A letter from the U.S. House of Ways and Means, also dated on June 20, noted, “India’s intellectual property rights regime has also suffered from forced localization, and India’s pharmaceutical IP climate has become increasingly difficult. To date, India has issued compulsory licenses (CLs) or revoked patents for eight drugs, in addition to enacting challenging drug pricing policies… As 40 million U.S. workers are employed directly or indirectly in IP-intensive industries, India’s policies also have a very real, negative impact on jobs and investment in the United States.”

And it was pointed out in a June 18 letter signed by 169 House members that “the intellectual property (IP) climate has become increasingly challenging in India. U.S. companies have suffered from a whole host of IP issues in areas like information technology, renewable energy, and biopharmaceuticals.”

Perhaps most noteworthy about this input from Congress is that it has been a bipartisan effort. Both sides of the political aisle are concerned with policies in India that undermine the intellectual property of U.S. enterprises.

And the administration acknowledges the challenges. On June 21, Reuters reported, “New U.S. Trade Representative Michael Froman on Friday said he expected growing trade problems with India to be a major early focus of his tenure, but stopped short of saying the United States should cut off benefits for that country. ‘We have a number of concerns about the investment and innovation environment in India,’ Froman said in a wide-ranging interview shortly after being sworn into office. ‘It’s something that we’re very focused on.’”

These challenges regarding IP and India point to the overall importance of intellectual property to the U.S. economy, and to the new book that I have authored for the Small Business & Entrepreneurship Council titled Unleashing Small Business Through IP: Protecting Intellectual Property, Driving Entrepreneurship.

The book serves as a source for policymakers, entrepreneurs, managers, and teachers and students on the critical role played by IP, including the role of IP in our economy, in economic thinking, in history, in the digital world, and in an assortment of industries, including software, music, Hollywood, video gaming, book publishing, and pharmaceuticals. And a key point made throughout the book is why IP rights and protections matter most to small businesses, and that small firms overwhelmingly populate key IP industries.

Consider small business in pharmaceuticals. That is, among employer firms, 58 percent in the pharmaceutical and medicine manufacturing industry have fewer than 20 employees, and 90 percent have less than 500 workers.

As for the broader role of IP in the economy, a 2012 report titled “Intellectual Property and the U.S. Economy: Industries in Focus,” published by the U.S. Department of Commerce, estimated that “IP-intensive industries” account for 35 percent of GDP and 28 percent of all jobs. But given that all industries rely on IP to varying degrees, the actual impact of IP in the U.S. economy is even larger.

The IP challenges of U.S. pharmaceutical firms in India are noted in Unleashing Small Business Through IP. For example, “there is the matter of compulsory licensing, whereby a government authorizes a company to produce a drug without the consent of the firm holding the IP rights on the drug. A January 2013 report noted that the government in India ‘appointed a panel to look into issues related to compulsory licensing of drugs and whether cheaper versions of cancer medicines Trastuzumab, Ixabepilone and Dasatinib can be launched under the provision…’ Unfortunately, it’s easy to see how compulsory licenses would move beyond legitimate health emergencies, and become a policy of government to undermine IP. In a June 2012 statement on India’s compulsory licensing, PhRMA President and CEO John Castellani noted, ‘While India has not routinely issued compulsory licenses (CL), PhRMA believes it is not an appropriate tool even if granting CLs may be a legal option. Assessments of particular compulsory licensing policies and decisions need to be made on a case-by-case basis, taking into account a number of factors. Legitimate health emergencies that require making exceptions to intellectual property rights can and should be accommodated under the international framework, but only after exhausting all other efforts and under extraordinary circumstances… If countries begin to routinely use CLs, we could see a ‘race to the bottom’ in which governments in the developing world walk away from their responsibility to support research and innovation in public health. In the absence of the investment made by our members, and the resulting research and development, there would be no generic medicines for the world’s patients.’”

In the end, it’s crucial that federal policymakers stay focused on establishing strong IP protections at home and internationally. Of course, if other nations, such as India, wish to boost innovation and investment, then solid IP protections are essential for them as well. Unfortunately, sometimes very short-term political calculations steer policymakers in directions that do serious damage to economic, income and employment growth. If property rights are undermined, then so is economic development.

In a June report titled “2013 Joint Strategic Plan of Intellectual Property Enforcement,” Victoria Espinel, the U.S. Intellectual Property Enforcement Coordinator, wrote, “Our Nation rightly prides itself on the innovation and creativity that has been the engine of our economy throughout our history. Predictable and effective enforcement of intellectual property rights supports jobs, maintains our global competiveness, and protects health and safety.” That goes not just for the U.S., but all other nations.

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