The Nature and Role of
In our preface we stressed the fundamental role of innovation in driving economic growth. In chapter 1 we saw that IPRs can play a crucial role in offering incentives to innovate. In this chapter we explain much more about the nature and role of IPRs. We also outline some of the legal and practical issues that managers, entrepreneurs, and policy makers may encounter. To begin, section 2.2 returns to the issue of why IPRs are awarded and fills in more details. The main forms of IPR established and protected by law are patents, trademarks, designs, and copyright. While these forms of IPR dominate legal, management, and economic discussions of IPRs, there are further IPRs, including trade secrets, database rights, plant variety rights, and performers' rights. Sections 2.3–2.6 look at each of the main forms of IPR: what it covers, how to get this IPR, how strong is the IPR, its geographical coverage, whether there is a mar- ket for this IPR, and its use by different sectors. Section 2.7 deals with three additional questions that are important: is patenting always the best option, what is the optimal length of protection, and are there other ways of providing incentives to innovate?
As we saw in chapter 1, the basic justification for IPRs is that they give people an incentive to produce socially desirable new innovations. Without some guarantee of private ownership, innovators might not put resources into innovative activity, as their findings would rapidly be imitated, leaving them with little or no profit. This happens as knowledge has the characteristics of a public good: it is nonrival, meaning it can be used by many without being used up; and it is nonexcludable, as it cannot be easily defended from imitators. So IPRs assist the creators of