Intellectual Property Rights and ASEAN Development in the Digital Age

Lurong Chen, Fukunari Kimura, Lurong Chen, Fukunari Kimura

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000477290
• Edition: 1
• Topic: Derecho
• Subtopic: Derecho de la propiedad intelectual

The trade-investment-service-intellectual property (IP) nexus remains at the heart of economic development and the main features of which are global value chains (GVCs) and digitalisation. The protection of intellectual property rights (IPR) has become a critical issue not only for advanced economies but also for emerging markets. This edited volume contributes to the debates on IPR protection and economic development from the perspective of Association of Southeast Asian Nations (ASEAN) member states. The book provides insights into the mechanism and evidence on how effective IPR protection will increase economic and social welfare via promoting innovation activities and providing incentives to diffuse knowledge and transfer technologies.

Written by economists and lawyers from the region, these experts share their latest findings and thoughts on how countries in Southeast Asia have been progressively improving IPR protection and increasing the interoperability of different IPR regimes through regional cooperation to facilitate business operations in the context of digital transformation.

1 IPR protection and global value chains in the digital era With policy implications for ASEAN development

Lurong Chen and Fukunari Kimura

DOI: 10.4324/9781003147657-2

1.1 Introduction

Intellectual property (IP), the intangible property of the human intellect, and intellectual property rights (IPR),¹ a reward to creators and inventors for their innovative achievements, have been crucial in economic growth, innovation, and competitiveness. With digitalisation, international flows of goods and services tend to be more IP-intensive than ever before. Accordingly, policy effort to enhance IPR protection is critical when promoting research and development (R&D) and innovation, and sustaining society’s long-term development.

For long, it has been widely debated how IPR laws and the related international agreement(s), particularly in the case of patents, could fairly balance IP owners’ interests and that of IP users, and reconcile social judgements with economic efficiency. For instance, the normal way for IP owners to get a reward for their creation is to gain temporary monopoly market power for a given period. Economically, this is at the cost of reducing consumer surplus, discouraging follow-on innovations, and losing a dynamic competition (Falvey et al. 2006, Lee and Fukunaga 2013, Aghion et al. 2002, Correa 2007). On the one side, without sufficient IPR protection measures, the introduction of imitation products could make the original IP owners lose their market shares or, to an extreme, even crowding them out totally. On the other side, proper IPR protection should facilitate the knowledge spillover among inventors and expedite the sharing of off-patent intelligence. Too harsh terms tend to increase the cost of using the related technologies and discourage following R&D. Internationally, the very restrictive IPR regime would have side effects on hindering technology diffusion and slowing down the pace of technological progress.

Globally, an efficient IPR protection system can stimulate economic growth as part of the incentive mechanism that encourages local innovation and facilitates technology transfer. International trade has evolved trade in goods and, increasingly, cross-border exchanges of value-added generated by innovation, creativity, and branding (WTO 2015). For that reason, IP issues have become an integral part of the multilateral trading system, particularly when the global economy is increasingly organised within the global value chains (GVCs). Improving international cooperation in IPR protection has been a common issue for all countries. But countries’ interests and appeals on IPR protection vary greatly, depending on their development stage and position in the GVCs. Generally speaking, developed countries aim to stimulate their innovative activities and support their technological advance by enhancing IPR protection. Developing countries, especially middle-income ones, see IPR protection as a key to improving the local market’s capacity to host large foreign direct investment (FDI) inflows that would come with the country’s deeper involvement in the GVCs and, meanwhile, facilitating the domestic adoption of foreign technology (OECD 2016). Many empirical studies have shown evidence of the positive relationship between IPR protection and FDI, such as Lee and Park (2013), Awokuse and Yin (2010), Branstetter et al. (2007), OECD (2003), Mayer and Pfister (2001), and Maskus (1998).

Asian economies are already highly interdependent with each other via the GVCs, and ASEAN is an essential link to it. Production sharing, which first occurs in manufacturing and later increasingly extends to services, has proved to be an effective growth-driving mechanism of the regional economy (Kimura and Ando 2005, Obashi and Kimura 2017, Kimura and Chen 2018). Economically, digitalisation enables a finer division of labour and leads to extensive and intensive expansion of the GVCs. Development in information and communication technology has further facilitated information dissemination, making it easier than ever for data and knowledge to flow and be accessible and shared online (Chen 2019). The associated IP has been part of production sharing in the region, augmented to capital, goods, and services.

The idea is to have the IPR protection system incentivise innovative activities, considering the necessary compensation to the consequent social cost and balancing the short-term loss in competition with long-term gains in innovation. As production dispersion internationalises the need to coordinate production stages, the trade–investment–services–IP nexus stays at the heart of the 21st-century trade (Baldwin 2011, 2016). For Asia, this provides a useful policy framework to improve ASEAN’s adherence to international agreement(s) containing robust IPR standards to help businesses gain access to, or secure an established presence in, the GVCs, which needs domestic and international efforts on IPR protection to be more integral to efforts that facilitate technology adoption and stimulate innovations.

1.2 IP in the trade–investment–services nexus of the world economy

For over two centuries since Adam Smith and David Ricardo first revealed potential welfare gains from international trade and cooperation, it has been widely accepted that trade is not zero-sum. Instead, through international division of labour, technology-rich economies will find a competitive advantage and specialise in technology-intensive activities. In contrast, technology-scared economies will participate in the world trading system by exporting labour-intensive products. Since the Industrial Revolution, technological progress has made the geographic dispersion ...