Opinion:
IP in a Protectionist Age

Until recently intellectual property strategies have been formulated with the historical trend to globalisation in mind. When a product might be invented in country A, designed in country B, made in country C, and sold in countries D-Z careful thought is required in formulating a strategy that recognises the balance between commercial desires and financial resources.

At a time when globalisation appears on the retreat, and when protectionist urges may be rising again, past strategies formulated on traditional trade flows may no longer hold. What should innovators and creators consider when creating an IP strategy for a protectionist era?

There are three major routes by which intellectual property rights are utilised on an international scale:

1. Import/export of protected products or services, in which IP rights are exercised to prevent the production and circulation of unauthorised products or services in the jurisdiction being exported to.
2. Multinational operations, in which a proprietor seeks to establish/maintain a presence in a foreign jurisdiction and IP rights are used to provide protection in what is effectively an expanded home jurisdiction.
3. Licensing, in which an IP proprietor grants permission (for a price) to another party in a foreign jurisdiction to use the proprietor’s IP. IP rights in this case provide value to, and control over, the licensee.

The balance of these activities will be affected by protectionist policies.

High tariffs in a target market would create an incentive for the innovator to rely less on export to that market, and more on licensing or manufacturing by local subsidiaries.

In contrast, protectionist policies imposing restrictions on transfer of money could adversely affect licensing revenues or remittal of dividends from a local company.

Past experience (and economic orthodoxy) is that countries adopting such protectionist policies disincentivise investment into those countries, and increase costs to consumers in those countries.

For any IP right, the choice of where to seek protection is generally driven by:-

• the size of the market;
• the presence of competitors;
• the presence of potential local manufacturing sites;
• the presence of potential licensees;
• the strength/predictability of the local IP regime;
• cost of obtaining rights.

If we move to a world where trade is impeded by higher tariffs or non-tariff barriers, innovators may be more likely to seek income in other territories by licensing or local manufacture rather than by exporting. While the size of the market concerned will remain the most important factor, the presence of potential licensees might increase in relative importance.

Unless there are radical changes in practice in any given market (e.g. the 2023 introduction in Europe of the unitary patent and Unified Patent Court), the assessment of the relative strength of IP regimes should remain unchanged even in a protectionist world.

In short, a move to protectionism need not affect the criteria of where to seek protection, just the relative weight of those criteria.

However, the international IP system is supported by a network of treaties based on a most-favoured nation principle – that foreigners will be treated in like manner to nationals. If populist suspicion of international entanglements means there is political capital in disregarding treaties, regardless of consequence, such self-destructive actions cannot be ruled out forever: and such actions would have major consequences.

How do you think a protectionist world would affect IP?

• Would high tariffs on products destroy the logic of the global brand?
• Would tailoring trademarks to a target market take on an increased importance?
• Would a protectionist world increase the relative importance of large economies at the expense of small economies?
• What do you see as the principal effects on IP?