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Assess Costs Everywhere: Intellectual Property Rights

The Department of Commerce’s Assess Costs Everywhere (ACE) tool helps firms estimate the costs and risks associated with locating operations or supply chains overseas. Today, we are focusing on intellectual property (IP) in our eleven-part series highlighting the relatively low costs and risks of keeping business right here in America. Be sure to check out earlier Economics and Statistics Administration blog posts here.

In A Connecticut Yankee in King Arthur’s Court, Mark Twain wrote, “A country without a patent office and good patent laws was just a crab, and couldn’t travel any way but sideways or backways.” And as that Connecticut Yankee learned, unexpected problems can arise when a person is no longer protected by the laws of his own country.

Patents, trademarks, and copyrights all allow inventors to receive financial rewards for their innovations and creations. They provide incentives for entrepreneurs to create and businesses to grow, and in turn they strengthen our economy. In America, we are fortunate to live in a society that values IP rights, and to have a court system that enforces those rights without bribery or prejudice.

Nevertheless, obtaining a patent or trademark in the United States does not automatically confer protection outside our borders. As it turns out, some countries do a better job than others of protecting IP rights. For example, the U.S. International Trade Commission reports that American companies lost $49.2 billion in 2009 due to IP infringement in China. This figure includes $6.1 billion in trademark infringement losses, $2.4 billion in patent and trade secret losses, and a whopping $23.7 billion in copyright infringement losses. The remaining $16 billion was marked as unspecified losses.

Another bonus of the American trademark system is relative grounds examination. The U.S. Patent and Trademark Office (USPTO) ensures that no trademark is registered if it is too similar to an already existing trademark for related goods or services. This is a vital step in protecting a company’s brand name and image from would-be copiers. In countries that don’t provide this service, copiers are able to profit from another company’s innovations by securing registration on a knock-off trademark.

Making investments to protect IP can determine the success or failure of an enterprise, and the USPTO has helped make the costs easy to bear. Fees for obtaining a U.S. patent are about four times less than comparable European fees. For small and medium businesses, the United States provides an additional 50 percent discount, and a 75 percent discount for micro entities, a rare find outside of this country. These are just a few of the many ways the USPTO works to help businesses. For customized training materials on intellectual property awareness, head over to the IP Awareness Assessment tool.

IP protections are one thing; enforcing the law is another. Here, the United States offers relatively low risks because of a familiar legal process, strong institutions, and considerable judicial experience in IP.

More U.S. suppliers are regaining business as their former clients “reshore” their supply chains following IP loss abroad. For example, the Spectrum Plastics Group in Minneapolis is reporting more and more of its customers are choosing to reshore. Their clients faced a range of IP issues overseas, from foreign partners disregarding confidentiality agreements, to foreign businesses illegally “borrowing” their ideas. Eventually, many clients decided it just wasn’t worth the high cost, and they brought their business back to America.

Remember, intellectual property rights are just one of many reasons why keeping business in America is good for business. To learn more, check out the Assess Costs Everywhere tool.

Ben Zauzmer, Economics and Statistics Administration Intern

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