Do Intellectual Property Rights Affect The Economy In Any Way? If Yes, Then how?

Leezer Kaur
May 18, 2023
3 min read

"Written by Leezer Kaur, a student."

Introduction

Intellectual Property is a property that is developed with the use of human intellect. Intellectual property rights are the rights related to the intellectual property created by a person. These mainly exclude the power of others to use this idea or innovation for a limited period. In India, we have several legislations dealing with Intellectual Property Rights. Some of them include the Trademarks Act of 1999, the Copyright Act of 1957, and the Patent Act of 1970. Also, India complies with the TRIPS, i.e. an agreement on Trade-Related Intellectual Property Rights. These rights affect the economy of a country in both positive and negative ways. They hold an important place in the economic development of a country. It promotes innovation in an economy.

Economic Aspects of the Intellectual Property Rights

These rights play an important role in the economy as it contributes to the economic development of a country in the following ways:

They encourage research and innovation in a country.

The individuals are encouraged to create new products, and new ideas are also promoted as they are supposed to be original in their approach concerning innovative ideas. This ensures the promotion of research and innovation, which adds to the economic growth of a country.

Prevent others from using such property without the permission of the owner.

These rights ensure that the ideas and innovations of a person are not used by others without their permission for a certain period. Also, the owner may charge certain fees or amounts of money for the use of his innovation or idea within that limitation period.

Creates a market for innovations.

Conferring such rights results in the creation of a market in itself where new ideas and innovations are valued. This further promotes innovation and research. It also increases competition in the market. It also promotes wide access to new technology or innovation in the market.

Protects their innovation.

These rights protect the ideas and innovations and, sometimes, the literary and artistic works of the individuals and, therefore, value their efforts.

Enhances export opportunities.

The new idea or innovation will be in huge demand across the world, so this may even increase export opportunities and will add to the income of a country.

Transfers ideas or innovations into profits.

These rights make the ideas and innovations of the people a profit-making source and further promotes research and innovation.

Further, in a developing country like India, the introduction of Trade-Related Intellectual Property Rights, i.e. TRIPS, has led to an increase in opportunities and operations for the companies. The private sector has also started investing in research and development.

Negative Effects

Several negative impacts result from these rights. Some of these are as follows:

The most adverse is that if the person holding such a right misuse his right and charge money according to his will to prevent his competitors from using his ideas and innovations, then that can result in a restriction on technology and can hamper the economic growth of a country.
It also creates a monopoly which is against the principle of ‘Laissez-Faire’. Copyrights, patents, trademarks, etc., provide a monopoly to the creator, and these act as a restriction for the competitors to innovate. This reduces the competition for the monopoly-holder, who is free to sell his products and innovations at a price of his choice. However, when there is a fair amount of competition, the producer can charge only a price little more than the marginal costs of the product.
Also, there was an instance in China in the 1980s where the trademark infringement laws made the local companies exploit well-established companies as they started selling counterfeit products in the country.

Conclusion

Intellectual property refers to the property that is created by a person by using his intellect. Intellectual Property Rights are the rights granted to a person who has created such a product that prevents others from using his ideas or innovations for a limited period. This helps in generating profits for the creator, promoting research and innovation in the country, and also adds to the exports and income generated from all these sources. However, there are certain negative implications associated with it as well, like it results in the creation of a monopoly of the creator and hinders the progress of a nation by reducing competitiveness.

References

'The Role of Intellectual Property Rights in Economic Development', available at: https://www.khuranaandkhurana.com/2021/03/10/the-role-of-intellectual-property-rights-in-economic-development/.
The Role of Intellectual Property Rights in an Economy', available at: https://legalserviceindia.com/legal/article-7335-the-role-of-intellectual-property-rights-in-economic-development.html.
'Economic Benefits of the Intellectual Property Rights', available at: https://www.legalservicesindia.com/article/2550/Economic-Benefits-of-Intellectual-Property-Rights.html.