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Global

Innovation Fact of the Week: Foreign Patent Applications in Tech Fields of Strategic Importance to China are 4-7 Percentage Points Less Likely to be Approved than Local Applications, All Else Equal

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Despite the fact that the World Trade Organization commits member nations to accord treatment no less favorable to nationals of other member nations as it treats its own with regard to intellectual property, a new study from Rassenfosse and Raiteri finds evidence of an anti-foreign bias in the issuance of patents in sectors that the Chinese government finds of strategic importance (as defined by a sector’s inclusion in China’s National Medium and Long-Term Program for Science and Technology Development 2006-2020).

While much analysis has focused on unequal enforcement of IP rights in China, this is the first study to find systematic evidence of bias in the granting of patents against foreigners in China. As the authors conclude, “Given the importance of industrial policy in China and the country’s strong focus on indigenous innovation and intellectual property, the empirical results provide a case of technology protectionism by means of the patent system.”

Read last week’s Innovation Fact of the Week

Photo Credit: Keoni Cabral

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vietnam

Vietnam’s Proposed Law on Information Network Security Threatens to Imperil Its ICT Economy

Over the past decade, the information and communications technology (ICT) sector has made significant contributions to Vietnam’s economic growth. However, a proposed new Law on Information Network Security (LONIS)—which would apply onerous licensing and permitting requirements upon millions of ICT products containing cryptographic capabilities—threatens to short-circuit the robust levels of both ICT imports and exports that have underpinned the rapid growth of Vietnam’s ICT sector. Not only that, but LONIS potentially breaches commitments made by Vietnam in its World Trade Organization (WTO) accession report concerning imports of ICT products containing encryption as well as elements of the Trans-Pacific Partnership (TPP) trade agreement protecting trade in encrypted products.

ICT production and consumption have been key pillars in Vietnam’s stellar economic performance, with Vietnamese GDP growing, on average, more than 6 percent annually over the past 15 years. For example, the average annual growth rate of Vietnam’s ICT sector reached 55 percent from 2008 to 2013, while from 2004 to 2014, the percentage of ICT goods exports as a share of Vietnam’s total goods exports increased nine-fold, from 2.7 percent to 27 percent, making ICT goods the country’s largest export sector in

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access

The Recommendations the UN High-Level Access to Medicines Panel Should Be Making

In November 2015, United Nations Secretary-General Ban Ki-moon convened a high-level panel tasked with studying the relationship between intellectual property rights (IPRs) and access to medicines. The panel was charged with “review[ing] and assess[ing] proposals and recommend solutions for remedying the policy incoherence between the justifiable [intellectual property] rights of inventors, international human rights law, trade rules, and public health in the context of health technologies.”

Were this a panel pursuing a comprehensive research program considering the complete range of factors impacting access to medicines and incorporating a diverse set of voices representing the patients using and the enterprises producing those medicines; the governments and their health-care systems (public and private) procuring, distributing, and disseminating those medicines; and engaging the viewpoints of a broad range of stakeholders, it could have represented a serious and constructive dialogue toward tackling a significant global health challenge.

But the panel has given the game away from the outset. First, by starting from a position of supposed “policy incoherence” between IP rights, innovation, and affordable access to medicines; and, second, by focusing exclusively on IP as the main determinant of access to medicines. The German

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pharma

Countries’ Use of Life Sciences Localization Policies Continues to Metastasize

The global economy—across a range of industries from information and communication technologies (ICTs), to advanced manufacturing, to life sciences—has seen a substantial increase in countries’ use of forced localization policies, particularly since the beginning of the Great Recession in 2008. These so-called localization barriers to trade represent policies that seek to explicitly pressure foreign enterprises to localize economic activity in order to compete in a country’s markets.

The life sciences sector confronts a number of different types of localization policies, though they can be generally grouped into three categories: 1) local production as a condition of market participation (including in government procurement); 2) forced intellectual property or technology transfer as a condition of market access; and 3) the use (or threat of use) of compulsory licenses. Unfortunately, the roll call of countries employing these pernicious policies continues to grow.

For example, Indonesia’s Decree 1010 requires foreign pharmaceutical companies to manufacture locally or entrust manufacturing to a company already registered as a manufacturer in Indonesia (a company that could be a potential competitor) in order to obtain drug approvals. Further, Decree 1010 requires local manufacturing in Indonesia of all pharmaceutical products

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wafer chip

A Welcome Expansion of the Information Technology Agreement Has Arrived

On July 1, the global production, trade, and usage of information and communications technology (ICT) products received a long-awaited boost when the expanded Information Technology Agreement (ITA)—a trade agreement that eliminates tariffs on hundreds of ICT products—came into force. The World Trade Organization (WTO) considers the initial ITA, concluded in 1996, as one of the most successful trade agreements ever. The expanded ITA is the biggest tariff-cutting deal in WTO history. It’s hoped that the deal will have similar success in driving ICT-based trade, productivity, and innovation as its successor.

The expanded ITA will build on the significant impact that the initial ITA exerted on growing global ICT trade. From 1996 to 2008, total global two-way trade in ICT products covered by the agreement increased by more than 10 percent annually, from $1.2 trillion to $4.0 trillion. The expanded ITA promotes affordability and accessibility to a new generation of ICT products by eliminating tariffs to trade on an updated list of 201 ICT products. The initial ITA cut tariffs on eight categories of ICT products, such as semiconductors, computers, and telecommunication products. The latest list includes scores of products

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bayh-dole

Why Exploiting Bayh-Dole “March-In” Provisions Would Harm Medical Discovery

By most accounts, patients in the United States and across the globe are in the midst of a new era of medical discovery, one in which new treatments and cures for costly diseases will become increasingly commonplace.

As ITIF noted in a recent report, our nation has benefited from public policies that support innovation and discovery, including strong intellectual property (IP) protections, limits on price controls for innovative medicines, data protections for biologic drugs, and strong government research and development expenditures on health care.

Unfortunately, these core fundamentals are being set aside by proponents of expanding “march-in” rights to address concerns about the price of drugs.

“March-in” rights were included as a privilege for the government under the Bayh-Dole Act, which was enacted with bipartisan support in 1980 to address intellectual property created (at least in part) from government-funded research. The law has played a significant role in driving impactful medical discovery and life-sciences innovation by allowing academic and other research institutions to patent inventions created by federally funded research and exclusively license them to industry for further development and commercialization. As The Economist has written about Bayh-Dole, it

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conference

University Startups Conference Showcases Latest ITIF Tech Transfer and Commercialization Policy Proposals

ITIF Vice President for Global Innovation Policy Stephen Ezell spoke at the National Council of Entrepreneurial Tech Transfer’s University Startups and Global 1,000 Conference in Washington, DC, on April 5, 2016. The following excerpts his remarks.

With innovation being the lifeblood of the American economy, I’d like to offer several policy recommendations that could bolster America’s broader innovation, tech transfer, and commercialization ecosystem.

First, as a society, we’re simply not investing enough in scientific research. We’re not investing as much in research and development (R&D) compared to our own history. In fact, if our own federal government invested as much in scientific research as a share of gross domestic product (GDP) that we did in 1983, we’d invest at least $60 billion more a year in R&D than we do now. So closer to $200 billion a year than $138 billion a year. Moreover, we’re not investing as much as a share of R&D compared to competitor nations. Preliminary data for the forthcoming 2016 OECD Science, Technology, and Industry Scoreboard shows the United States falling to 10th of the 39 OECD countries in national R&D intensity (national R&D investment in

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usflag

Yes, the U.S. Really Isn’t Contributing as Much to Global Innovation as Belgium

The American Enterprise Institute’s James Pethokoukis writes about ITIF’s Contributors and Detractors: Ranking Countries’ Impact on Global Innovation report in a new AEIdeas blogpost. We certainly appreciate James bringing attention to the report and calling it out as a “must read.” Yet his post does raise a degree of skepticism about ITIF’s report, questioning in particular the United States’ overall tenth place ranking and asking “If the U.S. is really less innovative than Belgium?”

It’s vital to remember that the intent of ITIF’s report is not to rank the world’s most innovative countries or to rank countries on their aggregate innovation output as measured by indicators such as numbers of new start-ups, numbers of digital economy “unicorns” valued at over $1 billion, or new technologies created—and, indeed, the report acknowledges that the United States leads the world in levels of absolute innovation output. Rather, the report’s objective is to assess which countries’ economic, innovation, and trade policies—on a per-capita basis, crucially—are doing the most to contribute to and the least to detract from global innovation. In other words, to ascertain which countries are producing the most positive global innovation

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manufacturing-blog

New ‘Manufacturing Communities Act’ Would Spur Broad Manufacturing Renewal

While America’s manufacturing sector has rebounded somewhat from Great Recession lows—for example, adding 865,000 manufacturing jobs since February 2010—the recovery languishes, and even those job gains recover less than one-sixth of the U.S. manufacturing jobs lost during the 2000s. Moreover, the U.S. manufacturing sector has seen no growth in real value added since the end of the Recession. In fact, in 2013, U.S. manufacturing value added remained 3.2 percent below 2007 levels.

Put simply, America’s manufacturing sector continues to underperform its potential, meaning that America’s policymakers need to be leveraging every tool and instrument at their disposal to bolster the health of America’s manufacturing economy. And here, a key component of the strategy for accelerating America’s manufacturing recovery should include better empowering regional- and community-based manufacturing ecosystems.

That’s exactly what new, bipartisan legislation in the Made In America Manufacturing Communities Act, unveiled on Tuesday, February 9, 2016, sets out to accomplish. Sponsored by Senators Kirsten Gillibrand (D-NY), Mark Kirk (R-IL), and Jerry Moran (R-KS) along with Representatives David Cicilline (D-NY), Richard Hanna (R-NY), John Katko (R-NY), Tom Reed (R-NY), and Tim Ryan (D-OH), the legislation supports local manufacturing ecosystems

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china-blog

Top 9 False Promises That China Made in Joining the World Trade Organization

After almost 15 years in the World Trade Organization (WTO), China has still failed to follow through on many of the trade-liberalizing commitments it made in order to convince free trade-oriented nations to approve its membership in 2001. These broken promises have harmed the global trading system as   well as both economic growth and the health of innovative industries across the United States and Europe. Here are nine commitments China made, but never lived up to:

  1. Refraining from requiring technology transfer as a condition of market access

Although its WTO accession agreement included rules forbidding China from tying foreign direct investment or market access to technology-transfer requirements, it remains commonplace for China to compel firms to hand over their technology in exchange for the privilege of investing, operating, or selling in China.

  1. Significantly reducing intellectual property (IP) theft and violations

Joining the WTO required China to recognize the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which provides protections for patents, copyrights, trademarks, service marks, industrial designs, digital content, and other intangible property. Unfortunately, Chinese IP theft grows unabated. The IP Commission Report on the Theft of U.S. Intellectual

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