All countries in the world consistently seek ways to develop their respective economies. Though there are many viable strategies which can be used to do so, one which is often overlooked but is no less useful is the use of
patents.

Patents are forms of intellectual property which provide owners with certain rights over inventions. Patents encourage innovation because they provide a limited monopoly to an inventor. By securing intellectual property rights, the inventor will be more likely to reap a great financial reward through the invention in question. Through this same facilitation of innovation, patents also drive economic development.

Patents and Economic Competitiveness

Like several other forms of intellectual property, patents can help make a country’s economy more competitive. A country’s economic competitiveness is measured by economic productivity. Factors which influence economic productivity include trade, investment, labour force skills, and innovative activity.

Patents are intended to incentivize innovation and therefore economic productivity. In addition, the protection of intellectual property rights that takes place through a patent encourages investment. Investors will be more inclined to fund a business which exhibits a high degree of innovation because of its potential for future business growth.

Patents, Market Size, and the Economy

The more patents a country issues, the larger the market size in that country becomes. The enlargement of the market size through protection of intellectual property rights has a stimulating effect on the economy.

As market size expands, the economy gradually grows. In due time, the economy will grow according to a balanced-growth path. Such a path implies that the economy will enjoy a steady, sustainable growth rate for the foreseeable future and resist the effects of global price fluctuations. This positive outcome is possible due to the use of this form of intellectual property.

This economic growth through a larger market can be expedited through patents and their related intellectual property rights. When more robust intellectual property protection exists, patents’ market value increases due to the reduction of price competition. Price competition is reduced because the stronger the protection, the more difficult it will be for
new entrants to enter the market. This phenomenon reduces the market size required to facilitate innovation, thus leading to much economic growth through intellectual property.

Patents and Investment

Patents make investors from abroad more likely to invest in the businesses of any country. A business’s ownership of one or more patents often indicates that the business has much potential for growth. After businesses which own this important form of intellectual property attract foreign investment through patents, they can use the investment to develop products for export. The export of products abroad makes a significant contribution to any country’s economy.

When foreign investors invest in a patent-owning business, the business owners might also choose to channel these investments into research and development. These research and development efforts are in turn likely to
bolster industrial and commercial growth. Once the results of these efforts are made available to businesses and their
owners across the country, the owners of these businesses may then use this new information to aid their own business ventures. As more business owners do so, the national rate of economic growth will continue to increase.

The Indirect Economic Impact of Patents

Like other types of intellectual property, patents assist with economic growth both directly and indirectly. After businesses initiate the process of research and development, their revenue will eventually increase. In due time, they will be more able to hire more employees. These employees in turn contribute to the country’s finances by paying taxes.

In addition, sectors which have a heavy reliance on intellectual property, including patents, are often leading contributors to a country’s economy. According to the International Chamber of Commerce, sectors with close ties to intellectual property and interdependent sectors account for around 4% to 11% of the Gross Domestic Product (GDP) of the world’s leading economies.

Sectors which are heavily involved with intellectual property such as patents also create many jobs. In countries with the world’s most powerful economies. around 3% to 8% of all jobs are in sectors with links to intellectual property.

This article brought to you by Exy Intellectual Property Malaysia and Singapore.