Wipo rapport 2011_innovation


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Rapport de 2011 sur la propriété intellectuelle dans le monde : le nouveau visage de l’innovation (en anglais, WIPO -OMPI)

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Wipo rapport 2011_innovation

  1. 1. WIPO Economics & Statistics Series2011World Intellectual Property ReportThe Changing Face of Innovation
  2. 2. WIPO Economics & Statistics Series2011World Intellectual Property ReportThe Changing Face of Innovation
  3. 3. Foreword
  4. 4. FoReWoRdInnovation is a central driver of economic growth, de- Understanding these innovation trends and the asso-velopment and better jobs. It is the key that enables ciated role of IP is important in order for public policyfirms to compete in the global marketplace, and the to support new growth opportunities. The essentialprocess by which solutions are found to social and questions to ask are whether the design of the currenteconomic challenges. IP system is fit for this new innovation landscape, and how best to cope with the growing demand to protectThe face of innovation has evolved significantly over the and trade ideas. To move beyond polarized debates onlast decades. IP, more fact-based economic analysis is needed. In ad- dition, it is crucial to translate economic research in theFirst, firms are investing historically unprecedented field of IP into accessible policy analysis and messages.amounts in the creation of intangible assets – new ideas,technologies, designs, brands, organizational know-how I am pleased therefore that WIPO’s first World IP Reportand business models. explores the changing face of innovation. Through this new series, we aim to explain, clarify and contribute toSecond, innovation-driven growth is no longer the policy analysis relating to IP, with a view to facilitatingprerogative of high-income countries alone; the techno- evidence-based policymaking.logical gap between richer and poorer countries is nar-rowing. Incremental and more local forms of innovation Clearly, this Report leaves many questions open. Wherecontribute to economic and social development, on a the available evidence is insufficient for making informedpar with world-class technological inventions. policy choices, the World IP Report formulates sugges- tions for further research. This first edition does not ad-Third, the act of inventing new products or processes dress all the important IP themes – notably, trademarksis increasingly international in nature and seen as more and branding, copyright and the cultural and creativecollaborative and open. industries, or the protection of traditional knowledge. We intend to focus on these and other areas in futureFourth, knowledge markets are central within this more editions of this series.fluid innovation process. Policymakers increasingly seekto ensure that knowledge is transferred from science tofirms, thereby reinforcing the impact of public research.Moreover, ideas are being co-developed, exchanged andtraded via new platforms and intermediaries.In this new setting, the role of intellectual property (IP)has fundamentally changed. The increased focus onknowledge, the rise of new innovating countries andthe desire to protect inventions abroad have prompteda growing demand for IP protection. IP has moved frombeing a technical topic within small, specialized com-munities to playing a central role in firm strategies and Francis GURRYinnovation policies. Director General 3
  5. 5. AcknoWledgementsThis Report was developed under the general direction Thanks also go to the Association of Universityof Francis Gurry (Director General). It was prepared and Technology Managers (AUTM), Bronwyn Hall, Derekcoordinated by a core team led by Carsten Fink (Chief Hill, the Organisation for Economic Co-operation andEconomist) and comprising Intan Hamdan-Livramento Development, Maxim Pinkovskiy, Melissa Schilling, and(Economist) and Sacha Wunsch-Vincent (Senior the UNESCO Institute for Statistics for kindly providingEconomist), all from the Economics and Statistics Division. data used in this report.Chapter 3 draws heavily on a contribution from Josh Samiah Do Carmo Figueiredo provided valuable admin-Lerner and Eric Lin from Harvard Business School. istrative support.The IP Statistics and Data Development Sections sup- Finally, gratitude is due to Heidi Hawkings and Stephenplied many of the data used in this Report and made Mettler from the Communications Division for editing andwritten contributions to Chapters 1 and 4. Special thanks designing the Report and the Printing and Publicationgo to Mosahid Khan and Hao Zhou. Ignat Stepanok and Production Section for their printing services. All workedMaria-Pluvia Zuñiga contributed to the development of the hard to meet tight deadlines.data methodology and to several sections of Chapter 4.Background reports were prepared by Suma Athreye,José Miguel Benavente, Daniel Goya, Ove Granstand,Keun Lee, Sadao Nagaoka, Jerry Thursby, Marie Thursby,Yong Yang, and María Pluvia Zuñiga.Nuno Pires de Carvalho and Giovanni Napolitano fromthe Intellectual Property and Competition Policy Divisionprovided helpful input for Chapter 3. Ilaria Cameli, YumikoHamano, Ali Jazairy and Olga Spasic from the Innovationand Technology Transfer Section contributed to and of-fered helpful suggestions on Chapter 4.The Report team benefitted greatly from commentson draft chapters from Alfonso Gambardella, RichardGilbert, Christian Helmers, Derek Hill, Martin Schaaper,Mark Schankerman, Pedro Roffe, and Jayashree Watal.In addition, several WIPO colleagues also offered helpfulsuggestions, namely Philippe Baechthold, Juneho Jang,Ryan Lamb, Bruno Le Feuvre, Tomoko Miyamoto, JulioRaffo, Yoshiyuki Takagi and Takashi Yamashita.4
  6. 6. dIsclAImeR tecHnIcAl notesThis Report and any opinions reflected therein are the COUNTRY INCOME GROUPSsole responsibility of the WIPO Secretariat. They do not This Report relies on the World Bank income classifica-purport to reflect the opinions or views of WIPO Member tion based on gross national income per capita to referStates. The main authors of this Report also wish to to particular country groups. The groups are: low-incomeexonerate those who have contributed and commented (USD 1,005 or less); lower middle-income (USD 1,006 toupon it from responsibility for any outstanding errors USD 3,975)-; upper middle-income (USD 3,976 to USDor omissions. 12,275); and high-income (USD 12,276 or more).Readers are welcome to use the information provided in More information on this classification is available atthis report, but are requested to cite WIPO as the source. http://data.worldbank.org/about/country-classifications. IP DATA The majority of the IP data published in this Report are taken from the WIPO Statistics Database, which is primar- ily based on WIPO’s annual IP statistics survey and data compiled by WIPO in processing international applica- tions/registrations filed through the Patent Cooperation Treaty (PCT), the Madrid System and the Hague System. Data are available for download from WIPO’s web- page: www.wipo.int/ipstats/en. WIPO’s annual World Intellectual Property Indicators, freely available on the same webpage, provides additional information on the WIPO Statistics Database. The patent family and technology data presented in this Report come from the WIPO Statistics Database, the most recent Worldwide Patent Statistical Database (PATSTAT) of the EPO, and from selected national data sources, as indicated in the Report. Every effort has been made to compile IP statistics based on the same definitions and to ensure international compa- rability. The data are collected from IP offices using WIPO’s harmonized annual IP statistics questionnaires. However, it must be kept in mind that national laws and regulations for filing IP applications or for issuing IP rights, as well as statistical reporting practices, differ across jurisdictions. Please note that, due to the continual updating of miss- ing data and the revision of historical statistics, data pro- vided in this Report may differ from previously published figures and the data available on WIPO’s webpage. 5
  7. 7. eXecUtIVe sUmmARYThroughout human history, innovation has been a power- How is the face offul force for transformation. This arguably holds true now innovation changing?more than ever. However, the face of innovation – the“who”, the “how”, and the “what for” – has continu- Claims about new innovation models and practicesously changed. abound. Assessing the significance of those claims requires a dispassionate look at the available data – aUnderstanding these changes is important. In modern task performed in Chapter 1.market economies, innovation is a key ingredient of The geography of innovation has shifted,sustained economic growth. In high-income countries, although high-income countries stillstudies have estimated that innovation accounts for as dominate global R&D spendingmuch as 80 percent of economy-wide growth in produc-tivity. Research at the firm level has shown that firms that A natural first step is to look at trends in research andinnovate outperform their non-innovating peers. Less is development (R&D). Global R&D expenditure almostknown about innovation and its economic impact in low- doubled in real terms from 1993 to 2009. Since this periodand middle-income economies. However, the available also saw marked growth of the global economy, the shareevidence similarly suggests that innovating firms in those of global gross domestic product (GDP) devoted to R&Deconomies are more productive – especially if applying increased at a more modest rate – from 1.7 percent ina broad view of innovation that includes incremental 1993 to 1.9 percent in 2009. Two other important insightsproduct and process improvements. Indeed, the experi- emerge from the available R&D data (see Figure 1):ence of several East Asian economies has demonstratedhow innovation can spur economic catch-up – even • Most R&D spending still takes place in high-income if innovation may be only part of the success story of countries – around 70 percent of the world total. Theythose economies. spend around 2.5 percent of their GDP on R&D – more than double the rate of middle-income economies.For policymakers in particular, it is important to monitorand assess how innovation changes. Governments are • Low- and middle-income economies increased their key stakeholders in national innovation systems. They share of global R&D expenditure by 13 percent be-directly fund research and provide incentives for firms tween 1993 and 2009. China accounts for most of thisto invest in innovation – including through the protection increase – more than 10 percentage points – propel-of intellectual property (IP). As innovation practices shift, ling China to the world’s second largest R&D spendergovernments need to assess the effectiveness of existing in 2009.policies and, where necessary, adapt them.This Report seeks to make an analytical contribution inthis respect. It does so in two ways. First, it sheds lighton global innovation trends – especially those concerningIP – and assesses the ways in which innovation has reallychanged. Second, it reviews the available evidence onhow IP protection affects innovative behavior and whatthis evidence implies for the design of IP and innova-tion policies.6
  8. 8. eXeCUTIVe SUMMArYFigure 1: R&D expenditure still comes The innovation process is increasinglymainly from high-income countries international in natureWorldwide R&D expenditure, by income group,in 2005 PPP Dollars, 1993 and 2009 Clear evidence exists that innovation is increasingly 1993 20091000 international in nature. Greater mobility of students, 854 800 highly-skilled workers and scientists has spurred the in- 523 ternational exchange of knowledge. There also has been 600 a sharp increase in the share of peer-reviewed science 400 245 105 and engineering articles with international co-authorship, 200 56 44 and a rising share of patents that list inventors from more 0 High-income Middle- Middle- and low-income, than one country. More and more, multinational firms are and low-income excluding China locating their R&D facilities in a variety of countries – withSee Figure 1.5. certain middle-income economies seeing particularly fast growth. The rising share of middle-income countriesR&D statistics paint only a partial picture of innovation in the global economy is, in turn, reorienting innovationlandscapes. The innovation performance of economies towards the demands of those countries.depends on broader investment in knowledge beyond Innovation is seen to have become moreformal R&D spending. This includes, above all, invest- collaborative and open…ment in education. The introduction of new machinery but is this perception correct?and equipment is another important component ofinnovation expenditure, especially in low- and middle- One much-discussed element of the new innovationincome countries. paradigm is the increasingly collaborative nature of the innovation process. Indeed, the available data confirmStudies have also pointed to the importance of non-tech- that there is greater collaboration in some respects. Thenological innovation – including organizational, marketing, above-mentioned trend of more frequent internationaldesign and logistical innovation – as an important driver co-patenting points to greater collaboration at the in-of firm and economy-wide productivity enhancements. ternational level. In addition, the available data on R&DIndeed, data show that firms’ investment in all types alliances have shown upward trends in some sectors,of intangible assets has grown more rapidly than their although not necessarily in recent years, and the reliabilityinvestment in tangible assets; in selected countries, of those data is weak.firms even invest more in intangible than in tangible as-sets. However, few hard data exist to rigorously assess Heightening perceptions of greater collaboration, scholarswhether non-technological innovation has risen in relative and business strategists have emphasized that innova-importance – not least because such innovation often tion is becoming increasingly “open”. In particular, firmscomplements technological breakthroughs. practicing open innovation strategically manage inflows and outflows of knowledge to accelerate internal innova- tion and to expand the markets for external uses of their intangible assets. “Horizontal” collaboration with similar firms is one important element of open innovation, but it also includes “vertical” cooperation with customers, suppliers, universities, research institutes and others. 7
  9. 9. eXeCUTIVe SUMMArYAssessing the true scale and importance of open innova- • Comparing growth in the number of first filings to tion is challenging. For one, it is difficult to draw a clear growth in real R&D expenditure shows that, for thedistinction between open innovation strategies and long- world as a whole, the latter has grown somewhat fasterstanding collaborative practices, such as joint R&D, joint than the former. This suggests that growth in patent-marketing or strategic partnerships. In addition, certain ing is rooted in underlying knowledge investment. Aselements of open innovation strategies – such as new discussed further below, however, patenting and R&Dpolicies internal to firms or informal knowledge exchanges trends vary markedly across countries and industries,– cannot easily be traced. Anecdotally, examples of truly with important implications for how firms innovate.new approaches abound – notably, so-called crowd-sourcing initiatives, prizes and competitions, and Internet Figure 2: Patenting abroad is the mainplatforms on which firms can post challenges. Modern driver of worldwide patenting growthinformation and communications technologies (ICTs) have Patent applications by type of application, indexed 1995=1facilitated many of these approaches. First ling Subsequent ling 3.0IP ownership has become more central tobusiness strategies 2.5Turning to the IP system, there is every indication that IP 2.0ownership has become more central to the strategies ofinnovating firms. IP policy has, therefore, moved to the 1.5forefront of innovation policy. 1.0Demand for patents has risen from 800,000 applications 0.5worldwide in the early 1980s to 1.8 million in 2009. Thisincrease has occurred in different waves, with Japan 0.0 75 77 79 81 85 87 89 91 95 97 99 01 05 07driving filing growth in the 1980s, joined by the United 83 93 03 19 19 19 19 19 19 19 19 19 19 19 20 20 20 19 19 20States (US), Europe and the Republic of Korea in the Contribution of first and subsequent applications1990s and, more recently, by China. to total growth, in percent, 1995-2007There are many causes of this rapid increase in patent-ing, including some which are specific to countries and 51.7%industries. However, two key forces stand out:• Dividing the growth in patenting worldwide into so- 48.3% called first filings – approximating new inventions – and subsequent filings – primarily filings of the First ling same invention in additional countries – shows that Subsequent ling the latter explains slightly more than one-half of that See Figure 1.20. growth over the last 15 years (see Figure 2). Patent applicants increasingly seek to protect their patents abroad and, indeed, in a larger number of countries, reflecting greater economic integration.8
  10. 10. eXeCUTIVe SUMMArYFigure 3: International royalty and licensing payments and receipts are growingRLF payments and receipts, in USD millions (left) and as a percentage share of GDP (right), 1960-2009 Payments Receipts Payments (percentage share of GDP) Receipts (percentage share of GDP) 250000 0.0035 0.003 200000 0.0025 150000 0.002 0.0015 100000 0.001 50000 0.0005 0 0 1960 1961 1964 1965 1966 1967 1968 1969 1970 1971 1974 1975 1976 1977 1978 1979 1980 1981 1984 1985 1986 1987 1988 1989 1990 1991 1994 1995 1996 1997 1998 1999 2000 2001 2004 2005 2006 2007 2008 2009 1962 1963 1972 1973 1982 1983 1992 1993 2002 2003See Figure 1.26.Demand for other IP rights – which firms often use as a Figure 3 depicts the growth of cross-border licensingcomplement to patents – has also seen marked growth. trade in the world economy, showing an acceleration ofTrademark applications worldwide increased from 1 such trade since the 1990s. In nominal terms, interna-million per year in the mid-1980s to 3.3 million in 2009. tional royalty and licensing fee (RLF) receipts increasedSimilarly, industrial design applications worldwide more from USD 2.8 billion in 1970 to USD 27 billion in 1990,than doubled from about 290,000 in 2000 to 640,000 and to approximately USD 180 billion in 2009 – outpac-in 2009. Greater internationalization is also an important ing growth in global GDP. There are far fewer data onfactor behind the rising demand for protection of these domestic IP transactions, but selected company informa-forms of IP. However, little is known about what precisely tion confirms this trend.has driven their filing growth and to what extent their rolein business strategies has shifted. Technology market intermediaries have existed for a long time. However, new “market makers” have emerged, suchKnowledge markets based on IP rights are as IP clearinghouses, exchanges, auctions and broker-on the rise, though still nascent ages. Many of them use modern ICTs for valuing IP rightsA final important trend concerns the rise of IP-based and matching buyers and sellers. As further discussedknowledge markets. Evidence suggests that the trad- below, another rapidly growing form of intermediationability of IP has increased over the last few decades. This over the last decades has been the establishment ofis reflected in more frequent licensing of IP rights and the technology transfer offices (TTOs) at universities andemergence of new technology market intermediaries. public research organizations (PROs). 9
  11. 11. eXeCUTIVe SUMMArYWhile only limited analysis is available on the size and Difficult trade-offs exist in designing IP rights, not least be-scope of actual IP transactions, the available evidence cause IP protection has multifaceted effects on innovativeon patent licensing, auctions and other IP-based transac- behavior and market competition. As technologies ad-tions suggests that trading activity remains at incipient vance and business models shift, optimally balancing theselevels. For example, firms typically license less than 10 trade-offs represents a continuing high-stakes challenge.percent of their patents. Certainly, technology marketsare still small relative to the revenue of firms’ or the overall In more recent history, economists have refined theiroutput of economies. However, they increasingly shape view of the IP system – partly as a result of new researchhow innovation takes place and therefore deserve care- and partly due to real world developments. The patentful attention. system has received particular attention. Patent portfolio races complicateMany of the above-outlined changes in the innovation cumulative innovation processeslandscape are challenging long-standing business prac-tices. Firms need to adapt in order to remain competitive. Economists have long recognized that innovation seldomBut do these changes also require a rethinking of the happens in isolation; one firm’s solution to a problempolicy framework for innovation? This question is at the typically relies on insights gained from previous innova-heart of the remainder of the Report. The Report first of- tion. Similarly, in competitive markets, firms innovatefers a general introduction to the economic literature on simultaneously and develop technologies that mayhow IP protection affects innovation; it asks, in particular, complement each other. The rapid increase in the numberhow the views of economists have changed in the last of patent filings has, in turn, raised concerns about pat-few decades (Chapter 2). It then returns to the theme ents hindering cumulative innovation. Indeed, patentingof collaboration, first looking at collaborative practices activity has grown especially fast for so-called complexbetween firms (Chapter 3) and then at collaboration be- technologies. Economists define complex technologiestween public research institutions and firms (Chapter 4). as those that consist of numerous separately patentable inventions with possibly widespread patent ownership; discrete technologies, by contrast, describe products orHow have economists’ views processes made up of only a few patentable inventions.on IP protection evolved? Figure 4 shows that complex technologies have seenUnderstanding how IP protection affects innovative be- faster growth in patent applications worldwide.havior has long been a fertile field in economic research.Important insights from the past still shape how econo-mists view the IP system today. Above all, compared toother innovation policies, IP protection stands out in thatit mobilizes decentralized market forces to guide R&Dinvestment. This works especially well where privatemotivation to innovate aligns with society’s technologicalneeds, where solutions to technological problems arewithin sight, and where firms can finance upfront R&Dinvestment. In addition, the effectiveness of different IPinstruments depends on the absorptive and innovativecapacity of firms, which varies considerably acrosscountries at different levels of economic development.10
  12. 12. eXeCUTIVe SUMMArYFigure 4: Complex technologies Research which originally focused on the semiconductorsee faster patenting growth industry has shown that firms proactively build up largePatent filings for complex versus discrete patent portfolios. One motivation for such portfolios is totechnologies, 1972=100, 1972-2007 ensure a firm’s freedom to operate in its innovation spaceFirst filings and to preempt litigation. A second motivation for firms to First lings: complex technologies First lings: discrete technologies create these portfolios is to strengthen their bargaining400 position vis-à-vis competitors. In particular, firms own- ing many patents in a crowded technology space can300 preempt litigation by credibly threatening to countersue competitors. In addition, they are in a better position to200 negotiate favorable cross-licensing arrangements which are often needed to commercialize new technologies.100 In addition to semiconductors, patent portfolio races have been documented for other complex technologies – ICTs 0 in general and, in particular, telecommunications, soft- 74 76 78 19 0 84 86 88 19 0 94 96 98 20 0 04 06 72 82 92 02 8 9 0 19 19 19 19 19 19 19 19 19 19 19 20 20 20 19 ware, audiovisual technology, optics and, more recently, smartphones and tablet computers. Even though theseSubsequent filings portfolio races often take place in industries making fast Subsequent lings: complex technologies Subsequent lings: discrete technologies technological progress, there is concern that they may400 slow or even forestall cumulative innovation processes. In particular, entrepreneurs facing dense webs of over-300 lapping patent rights – or patent thickets – may forgo research activity or shelve plans for commercializing200 promising technologies. Patents facilitate specialization100 and learning A second area of refined thinking concerns the role of 0 patents in modern technology markets. Research has 74 76 7819 0 84 86 8819 0 94 96 98 00 04 06 92 02 72 82 8 919191919191919191919192020202019 shown that patents enable firms to specialize, allowing them to be more innovative and efficient at the sameSee Figure 2.1. time. In addition, they allow firms to flexibly control which knowledge to guard and which to share so as to maximizeWhat accounts for the difference in growth rates? It learning – a key element of open innovation strategies.partly reflects the nature of technological change. Forexample, complex technologies include most ICTs whichhave experienced rapid advances over the last threedecades. However, economic research suggests thatfaster growth in complex technologies is also due to ashift in patenting strategies. 11
  13. 13. eXeCUTIVe SUMMArYSuch learning can also take place when patents are Do markets forcesdisclosed to the public. Little evidence is available on the optimally balancevalue of patent disclosure, although some surveys have collaborationrevealed that published patents are indeed an important and competition?knowledge source for firms conducting R&D – moreso in Japan than in the US and Europe. Yet, the patent Firms increasingly look beyond their own boundaries toliterature represents a valuable source of knowledge maximize their investment in innovation. They collaboratefor creative minds anywhere in the world. In addition, with other firms – either in the production of IP or on thethe easy availability of millions of patent documents to basis of IP ownership in commercializing innovation.anyone connected to the Internet has arguably created Collaboration can benefit firms and societynew catch-up opportunities for technologically lessdeveloped economies. Joint IP production occurs through R&D alliances, in particular contractual partnerships and equity-basedWell-functioning patent institutions joint ventures. Data on such alliances are limited andare crucial sometimes difficult to interpret, but they suggest thatFinally, economic research has come to recognize the firms in the ICT, biotechnology and chemical industriescrucial role played by patent institutions in shaping in- most frequently enter into such alliances.novation incentives. Patent institutions perform the es-sential tasks of ensuring the quality of patents granted Joining forces with competitors offers several benefits.and providing balanced dispute resolution. A firm can learn from the experience of others, reduce costs by dividing efforts, share risk and coordinate withUnprecedented levels of patenting have put these institu- producers of complementary goods. Society usuallytions under considerable pressure. Many patent offices benefits from such collaboration as it enhances the ef-have seen growing backlogs of pending applications. In ficiency and effectiveness of the innovation process.2010, the number of unprocessed applications world-wide stood at 5.17 million. In absolute terms, the patent Collaboration between firms extends beyond the jointoffices of Japan and the US as well as the European production of IP. In many cases, firms only join forcesPatent Office account for the largest office backlogs. when, or even after, they commercialize their technolo-However, relative to annual application flows, several gies. As explained above, the fast growth of patenting inoffices in middle-income countries face the most sub- complex technologies has given rise to patent thickets,stantial backlogs. The increasing size and complexity whereby patent rights are distributed over a fragmentedof patent applications have added to the “examination base of patent holders. Those seeking to introduceburden” of offices. products that use such technologies face the high cost of negotiating with multiple parties. If each technologyThe choices patent offices face can have far-reaching is essential, a negotiation failure with any of the patentconsequences on incentives to innovate. These include holders amounts to a failure with all.the amount of fees to charge, how to involve third par-ties in the patenting process, how best to make use ofICTs and the level and type of international cooperationto pursue. In making these choices, a key challenge is toreconcile incentives for efficient office operations with apatenting process that promotes society’s best interest.12
  14. 14. eXeCUTIVe SUMMArYOne solution is for firms to pool their patents, sharing Notwithstanding their benefits, leaving the formation ofthem with other patent holders and sometimes licensing collaborative ventures to private market forces may notthem to third parties as a package. Patent pools are not always lead to socially optimal outcomes; firms may eithera new collaborative practice; they have existed for more collaborate below desirable levels or they may do so inthan a century. The available data point to their wide- an anticompetitive manner.spread use in the first half of the 20 century (see Figure th Market forces may not always lead to5). In the period after the Second World War, the more desirable levels of collaboration…skeptical attitudes of competition authorities drasticallyreduced the formation of new pools. However, this has Insufficient levels of collaboration – whether in the produc-again changed in the last two decades, with a new wave tion or commercialization of IP – may arise from conflictsof pools emerging, especially in the ICT industry where of interest between potential collaborators. Fears ofpatent thickets have proliferated. free riding, risk shifting and other forms of opportunistic behavior may lead firms to forgo mutually beneficialFigure 5: The ICT industry dominates cooperation. Differences in business strategies betweenthe recent wave of patent pools specialized R&D firms and “vertically” integrated R&DNumber of patent pools by industry and production firms can add to negotiation gridlock. Other Communications Transportation equipment Packaged software Scienti c instruments Chemicals Metal products Petroleum re ning Electrical Machinery In principle, the failure of private markets to attract optimal35 levels of collaboration provides a rationale for government30 intervention. Unfortunately, the available evidence offers little guidance to policymakers on how such market fail-25 ures are best resolved. This is partly because the benefits20 of and incentives for collaboration are highly specific to15 particular technologies and business models, and also because it is difficult to evaluate how often potentially10 fruitful collaboration opportunities go unexplored in dif- 5 ferent industries. 0 Some governments promote collaboration among firms s s s s s s s s s s 10 20 30 40 50 60 70 80 90 00 19 19 19 19 19 19 19 19 19 20 through fiscal incentives and related innovation policy in-See Figure 3.4. struments. In addition, there are incentive mechanisms for sharing patent rights – for example, discounts on renewalAs in the case of R&D alliances, there is a compelling fees if patent holders make available their patents forcase that patent pools are not only beneficial to partici- licensing. However, as greater technological complexitypating patent holders, but also to society. They enable and more fragmented patent landscapes have increasedthe introduction of new technologies and promote the the need for collaboration, there arguably is scope forinteroperability of different technologies. The latter as- creative policy thinking on how best to incentivize thepect is especially important where technology adoption licensing or sharing of patent rights.requires standard setting. Indeed, patent pools are oftenformed as a result of standard-setting efforts. 13
  15. 15. eXeCUTIVe SUMMArY… and they may sometimes result in Public policies have encouragedanticompetitive practices the commercialization of scientific knowledge…The problem of anticompetitive collaborative practicesseems to be easier to address from a policymaker’s The last three decades have seen the emergence ofviewpoint. Such practices are generally more observable, targeted policy initiatives to incentivize university and PROand authorities can assess the competitive effects of patenting, and subsequent commercial development.collaborative agreements on a case-by-case basis. Almost all high-income countries now have institutionalIn addition, some consensus exists about the type of frameworks to this effect. One general trend has beencollaborative practices that should not be allowed or for universities and PROs to take institutional ownershipthat, at the least, trigger warning signs. Nonetheless, of the inventions researchers generate, and to pursueevaluating the competitive effects of specific collaborative their commercialization through TTOs. More recently, aagreements remains challenging. Technologies move fast, number of middle- and low-income countries have alsoand their market impact is uncertain. In addition, many explored how technology transfer and the developmentlow- and middle-income countries have less developed of industry-university collaboration are best promoted.institutional frameworks for enforcing competition law … leading to rapid growth in patenting byin this area – although they are likely to benefit from universities and PROsthe enforcement actions of high-income countries,where most collaborative agreements with global reach Accordingly, there has been a marked increase in patentare concluded. applications by universities and PROs – both in absolute terms and as a share of total patents filed. Figure 6 depicts this trend for international patent filings under the PatentHow to harness public Cooperation Treaty (PCT) system.research for innovationUniversities and PROs play a key role in national inno- High-income countries have been responsible for mostvation systems. Beyond their mission to educate, they of the university and PRO filings under the PCT. However,account for substantial shares of total R&D spending. such filings have also grown rapidly in certain middle-They also perform most of the basic research carried income countries. Among them, China leads in termsout in their countries. This is especially so in middle- of university applications, followed by Brazil, India andincome countries; for example, the share of universities South Africa. Compared to university patenting, the dis-and PROs in total basic research is close to 100 percent tribution of middle-income country PRO filings is morefor China, 90 percent for Mexico and 80 percent for the concentrated. Chinese and Indian PROs alone accountRussian Federation. for 78 percent of the total. They are followed by PROs from Malaysia, South Africa and Brazil.Close interaction with public research helps firms tomonitor scientific advances that are likely to transform National patent statistics confirm the prominence of uni-technologies. It also facilitates joint problem solving and versity patenting in China; they also reveal a high shareopens up new avenues for research. of PRO patenting for India (see Figure 7).Public-private knowledge exchanges occur through anumber of channels. One is the creation of IP in the publicsector that is licensed to firms for commercial development.14
  16. 16. eXeCUTIVe SUMMArYFigure 6: University and PRO patenting is on the riseWorld PRO and university PCT applications, absolute numbers (left) and as a percentage of total PCT applications (right), 1980-2010 7 University PRO 10000 University share PRO share 6 Share in total PCT applications (%) Number of PCT applications 8000 5 6000 4 3 4000 2 2000 1 0 0 80 81 84 85 86 87 88 89 90 91 94 95 96 97 98 99 00 01 04 05 06 07 08 09 10 82 83 92 93 02 03 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 19 19 19 19 20 20See Figure 4.3Figure 7: University and PRO patenting is prominent in China and IndiaUniversity and PRO patent applications as a share of total national applications for selected countries, in percent, for different time spans University share PRO share 16% 14% Indian PROs stand at 22 percent. Capped for better readability of the gure 12% 10% 8% 6% 4% 2% 0% co ain ico a UK il n ea e y a l a ly US ae az di an pa nc ric in Ita oc r Sp ex In Isr Ch Br Ko m Af a Ja or Fr M er h of M G ut p. So ReSee Figure 4.10 15
  17. 17. eXeCUTIVe SUMMArYUniversities and PROs have also experienced growth in • Studies have pointed to several successful elements of licensing revenue. This growth has occurred from low institutional design. Well-defined university regulationsinitial levels and is still fairly concentrated; only selected on IP ownership and on the participation of research-institutions, few scientific fields and a small number ers in technology transfer matter. Performance incen-of patents account for the bulk of licensing revenue. tives for researchers need to appropriately balanceCompared to overall public research budgets, licensing entrepreneurial activity and scientific achievement.income remains small. In low- and middle-income coun- Finally, TTOs operating at a sufficient scale and helpingtries, university and PRO patents are used even less for to standardize relationships with licensees can lowertechnology transfer. However, recent trends suggest that the transaction costs of technology transfer.revenue flows are diversifying, in terms of both the numberof beneficiary institutions and the number of countries. • The evidence is more ambiguous as to the best own- ership model for public research. While the generalPolicy reforms have multifaceted effects trend has been towards institutional ownership, it ison research institutions, firms, the science not clear whether this model is necessarily superiorsystem and the economy – yet important to others.lessons are emergingReforms aimed at incentivizing university and PRO • Setting up successful frameworks for technology patenting and licensing have multifaceted effects on transfer that deliver tangible benefits takes time andresearch institutions and firms but also, more broadly, resources. In particular, it not only requires legalon the science system and on economic growth. The reforms, but also cultural change and the creation ofevidence – mostly focusing on high-income countries – new institutions.yields the following broad conclusions: Legitimate concerns exist about the potentially negative• Patenting can make an important difference in wid- effects that patenting and other entrepreneurial activity ening opportunities for commercializing university by researchers may have on scientific performance. inventions. Turning academic ideas into innovation often requires substantial private investment in de- • Reduced knowledge sharing among scientists and velopment. crowding-out of scientific research are often-cited downsides. The evidence on these effects is ambigu-• There are important synergies between scientists’ aca- ous, although it does not suggest radically negative demic activity and their interactions with private firms. effects. Much depends on researchers’ performance Such interactions not only take place through the licens- incentives. Moreover, interactions with the private ing of patents, but also through R&D collaboration, con- sector can lead to improved scientific performance. ference participation and scientific publishing. Indeed, the evidence suggests that the various channels of • Another source of concern is that university and technology transfer complement each other. For ex- PRO patenting may reduce the diversity of follow-on ample, researchers may find that their patenting activity research and access to essential research tools. A usefully informs their scientific activity, and vice-versa. few studies confirm this concern. However, most of the evidence to this effect is case-specific and limited to the life sciences.16
  18. 18. eXeCUTIVe SUMMArYMany of these conclusions are likely to apply to low- andmiddle-income economies as they do to high-incomeeconomies. However, the different environment in whichinnovation takes place in these economies raises ad-ditional questions.One is the extent to which greater university and PROpatenting in richer countries may reduce poorer countries’access to key technologies and international scientificcooperation. Another is whether the weaker absorptivecapacity of firms and more limited science-industry link-ages would favor channels of technology transfer otherthan IP-based licensing. Different stages of developmentand different innovation systems require tailor-madeapproaches to IP-based incentives for commercializingpublic research.Only limited guidance is available to policymakers onthese questions. At the same time, high-income countriesstill struggle with many of the same challenges. There isno perfect blueprint that lends itself to universal adoption.This caveat also extends to the development of safe-guards against the potentially negative consequencesof university and PRO patenting. Selected institutionshave pioneered such safeguards; however, it is too earlyto fully assess their effectiveness.ConclusionThe evidence presented in this Report is intended to in-form policymakers. While some innovation trends are wellunderstood, others are not. The Report points to a num-ber of areas where more statistical data and new investi-gations could offer fresh insights relevant to policymaking.Surely, the face of innovation will further evolve in thecoming years and decades. Some trends are bound tocontinue – above all the shifting geography of innovation.Others will come as a surprise. An unvarnished look attoday’s evidence and policy challenges – as attemptedin this Report – will hopefully stimulate thought on howbest to manage the future. 17
  19. 19. tAble oF contentscHAPteR 1The changing nature of innovation andintellectual property1.1Innovation as the driving force behind economic growthand development 231.2The shifting nature of innovation 27 1.2.1 Globalization of production and demand for innovation 29 1.2.2 Increased investment in innovation 33 1.2.3 Internationalization of science and innovation 36 1.2.4 The importance of non-R&D-based innovation 42 1.2.5 Greater collaboration in the process of innovation 431.3Shifting importance of IP 52 1.3.1 Demand and the changing geography of the IP system 52 1.3.2 Increased tradability of IP 60 1.3.3 New collaborative mechanisms and IP intermediaries 66 1.3.4 Emergence of new IP policies and practices 671.4Conclusions and directions for future research 68References 7018
  20. 20. TAble oF ConTenTScHAPteR 2The economics of intellectual property– old insights and new evidence2.1Understanding IP rights and their role in the innovation process 75 2.1.1 How IP protection shapes innovation incentives 77 2.1.2 Trade-offs in designing IP rights 80 2.1.3 How IP protection compares to other innovation policies 822.2Taking a closer look at the patent system 86 2.2.1 How patent protection affects firm performance 86 2.2.2 How patent strategies shift where innovation is cumulative 89 2.2.3 How patent rights shape the interplay between competition and innovation 92 2.2.4 The role patents play in technology markets and open innovation strategies 942.3Appreciating the role of patent institutions 97 2.3.1 What makes for sound patent institutions 97 2.3.2 How patenting trends have challenged patent offices 98 2.3.3 The choices patent institutions face 1002.4Conclusions and directions for future research 103References 105 19
  21. 21. TAble oF ConTenTScHAPteR 3Balancing collaboration and competition3.1Collaborating to generate new IP 109 3.1.1 What the available data says about formal R&D collaboration 110 3.1.2 Why firms collaborate for strategic reasons 114 3.1.3 How collaboration can improve efficiency 115 3.1.4 The complications that arise in joint R&D undertakings 116 3.1.5 How collaboration differs in the case of open source software 1183.2Collaborating to commercialize existing IP 120 3.2.1 Why complementarities require coordination 120 3.2.2 How firms collaborate in patent pools 121 3.2.3 Why patent pools are emerging in the life sciences 125 3.2.4 How firms cooperate to set standards 1263.3Safeguarding competition 129 3.3.1 The type of collaborative R&D alliances that may be considered anticompetitive 130 3.3.2 How competition rules treat patent pools and standard-setting agreements 1313.4Conclusions and directions for future research 132References 134Data Annex 13620
  22. 22. TAble oF ConTenTScHAPteR 4Harnessing public research for innovation– the role of intellectual property4.1The evolving role of universitiesand PROs in national innovation systems 140 4.1.1 Public R&D is key, in particular for basic research 140 4.1.2 Public R&D stimulates private R&D and innovation 141 4.1.3 Fostering the impact of publicly-funded research on innovation 1434.2Public research institutions’ IP comes of age 144 4.2.1 Developing policy frameworks for technology transfer 144 4.2.2 Measuring the increase in university and PRO patenting 146 4.2.3 University and PRO licensing growing but from low levels 1534.3Assessment of impacts and challenges in high-income countries 156 4.3.1 Direction of impacts 156 4.3.2 Impacts and experiences in high-income countries 1594.4IP-based technology transferand the case of low- and middle-income countries 168 4.4.1 Impacts of high-income technology transfer legislation on low- and middle-income countries 169 4.4.2 Challenges to home-grown technology transfer in low- and middle-income countries 1704.5New university policies act as safeguards 1724.6Conclusions and directions for future research 174References 176Data annex 179Methodological annex 181Acronyms 183 21
  23. 23. Chapter 1 the Changing faCe of innovation and intelleCtual propertycHAPteR 1tHe cHAngIng FAce oF InnoVAtIonAnd IntellectUAl PRoPeRtYInnovation is a central driver of economic growth and 1.1development. Firms rely on innovation and related invest-ments to improve their competitive edge in a globalizing Innovation as the drivingworld with shorter product life cycles. Innovation also has force behind economicthe potential to mitigate some of the emerging problems growth and developmentrelated to health, energy and the environment faced byboth richer and poorer countries. Overcoming barriers to Although there is not one uniquely accepted definition,innovation is hence a recurring and increasingly promi- innovation is often defined as the conversion of knowl-nent business and policy challenge. edge into new commercialized technologies, products and processes, and how these are brought to market.1At the same time, our understanding of innovative activity, Innovation often makes existing products and processesthe process of innovation itself and the role of IP within obsolete, leading to firms’ entry, exit and associated en-that process are in flux. Among the factors that have influ- trepreneurship.enced innovation over the last two decades are structuralshifts in the world economy, the steady globalization of In recent decades, economists and policymakers haveinnovative activity, the rise in new innovation actors and increasingly focused on innovation and its diffusion asnew ways of innovating. critical contributors to economic growth and develop- ment.2 Investments meant to foster innovation, suchThis chapter assesses the changing face of innovation as spending on research and development (R&D), areand the corresponding new demands on the intellectual found to generate positive local and cross-border im-property (IP) system. The first section sets out the central pacts, which play an important role in the accumulationrole of innovation, while the second describes what has of knowledge. In other words, thanks to these so-calledbeen labeled a new “innovation paradigm”. The third “spillovers” the benefits of innovative activity are not onlysection discusses the implications of this for IP. restricted to firms or countries that invest in innovation. While the importance of “creative destruction” was high- lighted in the early 20th century, more recent economic work stresses the role that various factors play in driving 1 The Oslo Manual defines four types of innovation: long-run growth and productivity.3 These include not product innovation (new goods or services or significant improvements to existing ones), process only formal investment in innovation such as R&D, but innovation (changes in production or delivery also learning-by-doing, human capital and institutions. methods), organizational innovation (changes in business practices, workplace organization or in a firm’s external relations) and marketing innovation 3 See Schumpeter (1943). The endogenous growth (changes in product design, packaging, placement, models and quality ladder models theorize that promotion or pricing) (OECD & Eurostat, 2005). innovation drives long-run aggregate productivity 2 For some examples of the classic literature in and economic growth. See Grossman and Helpman this field, see Edquist (1997); Freeman (1987); (1994); Romer (1986); Romer (2010); Grossman and Lundvall (1992); and Fagerberg et al. (2006). Helpman (1991); and Aghion and Howitt (1992). 23
  24. 24. Chapter 1 the Changing faCe of innovation and intelleCtual propertyA voluminous empirical literature has examined the re- At the firm-level, there is emerging but increasingly solidlationship between innovative activity and productivity evidence that demonstrates the positive links betweengrowth at the firm-, industry- and country-level. However, R&D, innovation and productivity in high-income coun-due to data limitations, earlier empirical work in this area tries.6 Specifically, these studies imply a positive relation-mostly relied on two imperfect measures of innovation, ship between innovative activity by firms and their sales,namely R&D spending and patent counts. In recent years, employment and productivity.7 Innovative firms are able toinnovation surveys and accounting exercises relating to increase efficiency and overtake less efficient firms. Firmsthe measurement of intangible assets have emerged as that invest in knowledge are also more likely to introducenew sources of data (see Boxes 1.1 and 1.2). new technological advances or processes, yielding in- creased labor productivity. In addition, a new stream ofMost empirical studies on the relationship between in- research stresses the role of investing in intangible assetsnovation and productivity have focused solely on high- for increased output and multifactor productivity growthincome economies and the manufacturing sector. As (see Box 1.1).8 While it is assumed that process innovationearly as the mid-1990s, the economic literature suggested has a direct effect on a firm’s labor productivity, this isthat innovation accounted for 80 percent of productivity harder to measure.9growth in high-income economies; whereas productivitygrowth, in turn, accounted for some 80 percent of gross Clearly, the causal factors determining the successdomestic product (GDP) growth. More recent studies 4 and impact of innovation at the firm-level are still underat the country-level demonstrate that innovation – as investigation. An increase in a firm’s R&D expendituremeasured by an increase in R&D expenditure – has a or the introduction of process innovation alone will notsignificant positive effect on output and productivity.5 automatically generate greater productivity or sales. Many often connected factors inherent in the firm or its environment contribute to and interact in improving a firm’s performance. 4 See Freeman (1994). 5 For an overview, see Khan and Luintel (2006) and newer studies at the firm level, such as Criscuolo et al. (2010). 6 See, for instance, Crepon et al. (1998); Griffith et al. (2006); Mairesse and Mohnen (2010); and OECD (2010a). 7 See Evangelista (2010); OECD (2010a); OECD (2009c); Guellec and van Pottelsberghe de la Potterie (2007); and Benavente and Lauterbach (2008). 8 See OECD (2010b). 9 See Hall (2011).24