Misinterpreting the IPR 2010 Report

The Intellectual Property Rights Alliance just published its 2010 report reviewing countries’ rankings on various indexes measuring their respect for property rights. The aim of the report was to show the clear link between a country’s respect for property rights and economic prosperity.

According to the report, the link can be seen in all forms of property including intellectual property. Dealing with the latter, the report states:

“The modern economy relies not only on physical property rights but also intellectual property rights (IPRs). Intellectual property rights are exclusive rights over creations of the mind. These include inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.6 The world economy has come to depend on IP goods – from airplanes to business software, and from pharmaceuticals to cell phones.

In many ways, intellectual property rights play a similar role to physical property rights. Secure   intellectual property rights create incentives for innovation just as secure property rights create incentives for production. Similarly to physical property rights, IPRs reduce transaction costs. For example, trademarks signal information about the quality of products, which reduce consumer search costs (Baroncelli, Krivonos, & Olarreaga, 2004).

The challenge of protecting intellectual property rights, however, is even more daunting compared to physical property rights because theft of IPRs is facilitated by their own intrinsic qualities. Therefore, countries with weak IPRs require substantial resources to build an effective enforcement system of IPRs. While some countries may feel this investment is beyond their means, they need to realize that an effective IPR system is an important ingredient for long-term economic success. In addition to spurring domestic innovation, strong intellectual property rights increase incentives for foreign direct investment (Branstetter & Saggi, 2009), which in turn also  leads to economic growth (Saggi, 2002).”

Yesterday, Prof. Geist  posted a blog claiming that “they highlight the absurdity of the IIPAs ongoing campaign characterizing Canada as weak on IP.” Further he claims the “ranking is all the more remarkable since one of the primary data sources for the ranking is the IIPA itself.  In other words, even after using IIPA data, Canada ranks alongside many other countries that are typically applauded by the IIPA for their IP policies.”

As Prof. Geist pointed out, the IPRI Index focuses on three areas: Legal and Political Environment, Physical Property Rights, and Intellectual Property Rights. The IPR sub-index measures a countries’ performance in protecting all intellectual property rights including patents, trade secrets, trademarks, industrial designs, and copyrights including copyright piracy.

One would expect that Canada would have a relatively high overall ranking on the IPR sub-index given that Canada is a member of many of the leading IP conventions and treaties such as the Berne Convention, TRIPS, and the Rome Convention. (We still haven’t jointed the WCT or WPPT, however). On the overall IPR sub-index, howoever, Canada did not make the top 10 which included the US, Japan, Denmark, Finland, Germany, and Australia. Canada finished 13th, with a score that declined from our 2009 score (by -01).

The report contains is no specific ranking or sub-sub-index for copyright piracy, which was a main criticism of the IIPA 301 Report which Prof. Geist references. Accordingly, one cannot conclude as Prof. Geist does that Canada has adequate copyright laws merely because of the overall IPR sub-index. Moreover, you cannot conclude that Canada has adequate copyright laws to address physical or digital piracy from the overall IPR sub-index either.

However, in the Canada country profile, not referred to by Prof. Geist, the report concluded that “The IPR scores have remained relatively unchanged for the last four years. Copyright piracy levels continued to be somewhat high for a well developed country – estimated at an average of 33 percent. As a result, the country was added to the “priority watch list” by the U.S. Trade Representative. Moreover, reflective of the lack of progress with respect to IPR protection is the fact that expert [opinion] on protection of intellectual property rights has deteriorated since 2009.”

So, infact, the report concludes that Canada has higher piracy levels than would be expected for a developed country and that our position in the world rankings are declining as a result. This conclusion is hardly a basis for anyone to conclude that we don’t need copyright reform in this country to deal with digital piracy or that the IIPA was wrong in its Section 301 Report to focus on Canada’s weak copyright laws  as they relate to combating digtital piracy. Here again we have Prof.Geist Toying with funny math to downplay Canada’s role as a piracy haven.

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