7.7B - Intellectual Property
The global system of intellectual property rights can be undermined by counterfeiting, which strains trade relations and TNC investment.
Human resources are a key element of power. This is especially the case with regard to new inventions and discoveries such as:
- new military technology, used for defence or attack
- inventions and new products that could bring riches
Most inventions are made by government organisations or TNCs through R&D (research and development).
To prevent new inventions being copied illegally, they are protected by an international system of Intellectual Property (IP). This includes Trademark, copyright and patent protection (for physical or system inventions) and a system of royalty payments for the rights to use IP developed by someone else. Without this:
- TNCs would be reluctant to invest in R&D, because they would gain little profit from inventions that were immediately copied
- countries would be reluctant to trade, because their IP would fall into the hands of others who would steal it
IP has economic value. Royalty fees alone amount to $150-200 billion annually, with 80% going to the USA, Japan and western Europe. Intellectual property theft, counterfeiting and industrial espionage can strain trade relationships, causing problems. It has been estimated that counterfeit goods sales account for 5-8% of China's GDP. Chinese car companies have copied car designs from BMW and Mercedes, and iPhones are widely counterfeited.
- TNCs may limit investment in China if they fear IP theft
- Total losses widewide are probably $400-600 billion annually
- Trade deals with countries such as China are made much harder by its failure to tackle IP theft
- Counterfeit goods are often unsafe, putting consumers at risk.