Michael D. Moberly February 18, 2010
In the current global, knowledge-based economy and business transaction environment in which intangible assets and IP are routinely in play, there is, unfortunately, little direct insight about how or whether c-suites and boards assess and/or attach concern about doing business in country’s that do not have, apply, or enforce intellectual property laws and protections.
Admittedly, I know several instances in which this issue is not only a routine fixture in c-suite and boardroom agendas, but is deliberated in the context of known vulnerabilities-probabilities, i.e., those left unchecked, ill-considered, or ill-conceived will surely become inevitabilities!
A key second question those company’s seek consensus is (a.) their (business, strategic) tolerance for IP – intangible asset risk, and (b.) if losses – compromises to those assets occur, how quickly will either begin to erode, dilute, and/or undermine company value, market share, competitive advantages, and revenue?
In other words, are that countries IPR’s protections (enforcement scheme) particularly weak or sufficiently strong enough to satisfactorily protect a company’s IP for the duration of its admittedly, abbreviated life-value cycle. This argument presumes, that the value, sustainability, defensibility, and projected returns of IP developed and/or brought into a country with weak IPR’s, will experience lower projected returns.
I am aware of a few instances, in SME and SMM arenas, in which companies have actually elected to wholly withdraw operations (and their IP and proprietary competitive advantages) from a country they found to be especially weak in IPR’s. I can’t say for sure whether those company’s were exercising particularly forward looking or risk averse strategies on behalf of their investments in IP and intangible assets, or whether their decision was influenced by a significant loss or compromise?
A 2004, University of Minnesota study/survey of U.S. headquartered companies titled ‘Doing R&D In Countries With Weak IPR Protection: Can Corporate Management Substitute For Legal Institutions?’ reasoned that (1.) technologies developed in weak IPR countries will be used more for internal purposes, and (2.) companies conducting R&D in weak IPR countries will likely have tighter IP-asset protection measures in place to compensate, and therefore, try to take advantage of such gaps across countries.
Insofar as whether ‘doing R&D in countries with weak IPR protection’ is a relevant action item for c-suites and boards, prudent starting points for either to consider are, (1.) if the decision is made to conduct IP bearing R&D and/or bring IP into a country in which a signficant percentage of that country’s GDP is linked to – dependant on the production, distribution, and sale of infringed or pirated (IP) products, it’s likely your company’s IP will experience the same or similar fate, and, (2) the presumption that my company can invent, innovate, and produce IP faster than others can steal or infringe it, and even it it does occur, the stolen/infringed IP will rapidly become obsolete and therefore hold little, if any, market value; therefore, why devote extraordinary resources to its protection and preservation, beyond the minimum?, is likely ill-conceived.
