A more sustainable approach to intellectual property

July 18, 2021

Much of business and art today relies to some extent on ownership, use and transfer of intellectual property rights.

There are many reasons for doing so, including incentivizing innovation, rewarding investment in R&D and protecting the concept of authorship.  But above all, intellectual property laws exist to protect the revenue streams associated with the underlying technology or innovation.

This is true for many industries, including software, entertainment, media, luxury goods, pharma and telecom.  All are dependent on licensing agreements and royalties. 

Some are also heavily dependent on patents, particularly pharma companies, who tend to experience a revenue cliff once patent protection expires and generic drugs can be manufactured and sold using the same technology. 

If one looks closely at the internal and external growth strategies of multinationals over the last few years, this is abundantly clear.  But it can lead to some undesirable outcomes.

In the pharma sector, intellectual property rights tend to have a disproportionate impact on which R&D projects get funded and commercialized.  In fairness, big pharma would have no incentive to undertake any R&D at all if they didn’t have a chance to recuperate their investment.  But exploring the power of existing treatments that no longer benefit from patent protection becomes less incentivized.  And so the drugs that are on the market are as influenced by future revenue streams (and the ability to protect those streams) as they are by public health dilemmas.  How does this impact our collective understanding of lifestyle changes as opposed to drugs and medical devices?

In tech, intellectual property rights tend to encourage hardware and software manufacturers to constantly “version up.”  This is in part motivated by the desire to constantly stay in new patent territory, but also to justify the ongoing royalties.  We tend to think of software as a product but it’s really a subscription that gives its owners access to unlimited future revenue streams. How would the valuation change if the software were no longer subject to ongoing license renewal but simply a product that is designed to be sold once?  How would access to technology in heavily indebted countries be improved?

In the luxury space, intellectual property rights create and protect brand heritage and loyalty.  But they are often the subject of dispute, including among competitors, counterfeiters and, in some cases, authors. One case that stands out is the dispute between Starbucks and the Ethiopian government over the recognition of certain of its coffees as Ethiopian.  While intellectual property can lead to the negative outcomes previously discussed, it can also lead to stronger protection of cultural heritage and local communities.

There has been much discussion about how sustainability considerations should shape law and economics going forward.  While it is important to look at the latest legal and regulatory developments, multinationals must also take their own initiatives to temper their impact in a way that is consistent with the SDGs. 

With respect to intellectual property, this can include specific waivers, such as what we have seen with the COVID-19 vaccine, or other initiatives that are designed to stimulate innovation, such as IP sharing, donations, pledges or open-source innovation models.

There have been some positive examples of late, but more can be done. Having a more generous approach to intellectual property can create stronger links between the company and its stakeholders and allow for targeted stimulation of growth, particularly in the developing world, in a way that is consistent with the companies’ own long-term strategy.

CPM