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Estimating the economic value of intellectual property in the UK

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‘What is the economic value of patents and licensing and what effects do they have on the UK economy? ‘

Professor Suma Athreye and her research team answer this question.

The success of technology markets depends on Intellectual Property (IP) and the Patent system. However, many academics and industry heads fear that patents lead to monopolies, reduced profit and restricted knowledge sharing, fuelling calls for an overhaul of the patent system.

Professor Athreye puts this fear down to a lack of empirical evidence about what patents do. Over the last two decades, her research has investigated the benefits for technology companies and the wider technology market, which cannot exist in the absence of a strong patent system.

Patents allow knowledge transfers through technology licensing. This underlies the idea of ‘distributed innovation’, championed by the World Intellectual Property Organisation (WIPO), which has used Professor Athreye’s estimates of world-wide licensing markets to put IP at the forefront of world innovation policy.

“The Patent Incentives' report was used by the IPO to make the case that the patent system works in UK. It [has] proved that patent incentives produce more R&D spending by UK firms and this [has] informed the policy decisions”

(Economics Research and Evidence Intellectual Property Office)

In work commissioned by the UK’s Intellectual Property Office (IPO), Professor Athreye and Professor Arora, of Duke University in the USA, found that companies that invest in IP rights increased their net profits by 30– 62%. This led to 18% more investment in research and development.

In further work undertaken in partnership with the UK IPO, the professors estimated that the value of the UK’s technology licensing market is about £6.9billion. From 2009-2012, this amounted to about 40% of all private expenditure on research & development. Furthermore, as predicted with the idea of distributed innovation, one-third of the market for technology consisted of non-innovating firms, which is the best measure of the social utility of the patent system.

The UK’s IPO has taken this research on board and in its response to the EU’s Patent Use legislation. Together with Athreye, the IPO has developed a survey instrument that can be regularly updated to give estimates of the UK’s technology market and use of patents. The work has also provided a benchmark for patenting and licensing in US, Japan, Australia, France and Germany.

Brunel Business School has answered some of the important questions around Intellectual property and patent use in UK, informing both policy and industry.

This research is part of the Strategy Entrepreneurship and International Business (SEIB) Group.

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