IP and innovators in traditional and informal sectors

From a social and economic perspective, support for local and inclusive innovation, which refers to innovation in economic sectors which are insufficiently covered formal arrangements, is particularly important in developing and emerging countries. This is because these sectors employ a substantial share of the labour force. However, IP for innovators in traditional and informal sectors is less relevant than it is for the other IP users because activities in this group are much more incremental and often involve very small local markets. They might, therefore, not be of sufficient quality for IP and patents, in particular, might be out of reach. Innovators in these sectors most frequently use informal mechanisms for appropriating returns from innovation such as after sales and other services, customer loyalty, family/community mechanisms, in tandem with community sanctions/ostracism for copying/imitation. This said, low use of other types of IP might be due to limited awareness or concern over enforcement rather than limited potential returns. Evidence on the relative importance of these factors to date is still scarce (WIPO, 2013). 
Several IP-related opportunities arise for IP policy. These include GI for traditional activities and other IP rights that closely affect agricultural products, handicrafts and traditional knowledge. Types of IP such as GI offer the opportunity to include specific regions that might otherwise remain marginal in standard innovation processes. The introduction of GI can result in economic benefits to local communities, such as higher prices for local agricultural products compared to those from other regions. Examples include locally grown coffee beans that are recognised as “community-owned". GI can thus generate resources in support of regional development and offer opportunities to integrate this group of innovators into innovation systems. 
Traditional knowledge can provide opportunities for innovation but pose challenges for the current IP system, as knowledge belongs to communities not individuals. In the area of healthcare, for example, traditional medicines, such as Ayurveda, which is native to the Indian subcontinent, can act as inputs for local groups to patent and develop innovations. Research institutions and companies can provide needed research capabilities to effectively turn products with economic potential into IP-protected products that generate economic returns for local groups. Products must pass regulatory tests before they can be sold on foreign markets, a process that also requires support from research institutions. It is worth noting that local entrepreneurs have also deployed non-IP strategies to successfully market these types of products.
Discussions around IP for traditional knowledge are complex because they refer to collective ownership of existing knowledge rather than “new” knowledge. However, they are of particular interest to developing and emerging countries as they can potentially result in profitable assets for local groups. (The topic is also of concern to some developed countries, such as Australia and Canada.) Moreover, traditional knowledge can also be a means to support marginalised groups that are weakly positioned to compete in innovation systems. Similarly, claiming national or group ownership over traditional knowledge can help these groups to engage in innovation activities. However, this will be the case only if traditional knowledge is applied to specific economic activities, such as the development of novel entertainment products. In sectors such as furniture or textiles, developing and emerging economies have traditional advantages and could extend their markets to developed country markets. The exploitation of traditional knowledge in such cases might provide a competitive advantage. 
Support for discussions on IP regarding traditional knowledge is therefore crucial, as is creating a record of such knowledge. Currently a portal of online databases and registries of traditional knowledge and genetic resources is available on the WIPO website. The portal aims to act as the clearing-house mechanism of the Convention for Biological Diversity (CBD). In addition to the Traditional Knowledge Digital Library project from India, three other databases are available from China, India and Korea. These sources not only facilitate prior art searches by patent offices, but also help potential innovators to make commercial use of such knowledge to the benefit of the communities owning that knowledge. 
However, as is the case for other types of IP, ownership rights do not alone generate economic value to the economy or to specific groups. Substantial investment is needed. In the case of GI, action needs to be undertaken on behalf of the collective to obtain added value. Producers need to maintain product quality and develop effective marketing strategies to ensure brand recognition. Adequate positioning in international distribution chains is also important. If producer associations are weak or even nonexistent, GIs will encounter major problems on the road to success. Complementary policies will be essential to support associations in their functions, rather than only supporting GI registrations. If a large number of products are registered using GI, such investments will be costly and difficult to maintain. A more reasonable strategy is to focus on a few selected products with the highest potential. Taking this approach also helps to avoid the risk of diluting impact by registering too many GIs. 
In general, collective action is more important for innovators in informal and traditional sectors because many firms are small, have limited resources and lack sufficient skills. Developing a successful strategy through the use of trademarks, for example, will not be feasible unless these are provided externally by a regional or sector-based business association. This underlines the importance of complementary policies and supporting associations to use IP for the economic benefit of these groups. Collective management is also relevant for the entertainment industry, which can provide opportunities for generating income for groups in traditional and informal sectors. Copyright is the main type of IP here. In this case, effective collective management organisations are critical for supporting the local creative industry. They provide one-stop access to a wider body of creations, simplifying negotiations for potential users (who would otherwise have to negotiate individually). These organisations also have greater resources to represent and raise awareness of the rights and interests of their users than their individual members. 
A key issue for individuals in informal and traditional sectors is the access costs generated by IP protection. IP protection imposes particularly high costs on the lowest income groups, which may be excluded from consuming products based on these inventions. This is particularly relevant for pharmaceuticals. IP constitutes a barrier if it restrains access by these groups to necessary technologies. Given the often very traditional modes of production, this is probably less of a challenge for most producers. However, it is important to ensure that IP does not become a barrier, in particular during the process of upgrading production technologies as a part of business growth. 
  • OECD (forthcoming), National Intellectual Property Systems, Innovation and Economic Development with Perspectives on Colombia and Indonesia, OECD, Paris. 
  • WIPO (2013), Conceptual Study on Innovation, Intellectual Property and the Informal Economy, Committee on Development and Intellectual Property (CDIP), Eleventh Session, Geneva, May 13 - 17, 2013
Image description here.

What Countries are Doing

Printer-friendly versionPDF version