Role of IP rights in innovation

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Countries without strong IPR regimes generally lack innovation, leading to a stagnation in their industrial growth, contends P Kandiah, one of the most experienced IP practitioners in Malaysia. He outlines the important role legislation can play in encouraging innovation with an example from the oil palm sector.

Remaining competitive in business involves the creation and introduction of new innovative products into the market. Efforts must then be made to develop a brand value for the product to persuade consumers to buy the innovative product. Large sums of money are required for both efforts. Firstly, expenditure in R&D costs to create an innovative product, and secondly, in creating a brand value for the product. But once a product is successful in the market, there are bound to be copycats. How can the company that created the innovative product prevent copycats?

Patents, Industrial Design Rights, Trademarks and Copyrights (all collectively referred to as Intellectual Property Rights or IPRs for short) are a form of government granted “monopoly” given to a patent/ trademark/IP rights owner to refrain all others from infringing upon the granted patent, registered industrial design or registered trademark. This “monopoly” would also allow the owner of the rights to command a premium price for their product, thus enabling them to recover their investment in the R&D and branding costs.

IPRs serve multiple functions in innovation. First they act as barriers to competition during the subsistence of the right (in the case of patents for about 17 to 20 years). Secondly, published patent documents serve as a springboard for further product innovation, resulting in further patents, which again act as a basis for still further innovation. The entire innovation process evolves as an enlarging spiral of development. Without the protection of IPRs, industries will keep all technological development confidential, which does not facilitate further contribution to product innovation by others. Countries without strong IPR regimes generally lack innovation, leading to a stagnation of industrial growth.

Innovative activities in an industry can either be forced by legislation or incentivised by tax breaks or incentive grants. If legislation is introduced to curtail certain undesirable activities under the threat of punitive fines or revoking of licenses, then generally industries affected by the proposed legislation would initiate proactive stops to solve the problem.

For example in Malaysia in the 1970s, the government introduced the Environmental Quality Act 1974 to regulate the discharge of palm oil mill effluents into the waterways. The palm oil mill industries quickly gathered its resources and created technology to economically treat the palm oil mill effluent (POME) such that the discharge from the mills met the standards imposed by the EQA. The first company that produced a novel solution to the treatment of POME obtained a patent. Others subsequently improved upon this basic patent and created new technology until now Malaysia has its own indigenous technology for the efficient treatment of POME.

Moving on, the government has recently introduced the Feed-in Tariff (FiT) for the generation and supply of electrical energy to the national electrical energy grid. The FiT is attractive and acts as an incentive for palm oil mills to generate electrical energy over and above the need of the mill to supply to the national grid at attractive rates.

Although it is work in progress, there are signs already that some mills are successful in their efforts. More mills and plantation companies are conducting R&D to take advantage of the incentives. The grant of patents will hopefully initiate a rise in innovative efforts to an extent that it is envisaged Malaysia will be a technology leader in the production of electrical energy from palm biomass.

The views expressed here are the personal opinion of the columnist.

Photo credit: Flickr user Administrador Galeria Uninter

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