Intellectual property and its transparency in industry and commerce.
What is Intellectual Property: –
Property that originates from the human brain and for which the government provides protection is called Intellectual Property (IPR). Trademark. Patents, copyright, geographical location are just a few examples of intellectual property (IP). Intellectual property has become prominent in many business areas in recent times. Today it is a great asset to many of the world’s most powerful companies. A company’s intellectual property is its legally protective and exploitable invisible assets. It is a subset of assets called “intangibles”. The term “intellectual property (IP)” refers to property in the legal sense. It is something that can be owned and managed. The legal rights that give rise to intellectual property are usually called “intellectual property rights (IPRs)”. There are several types of IPRs that qualify as intellectual property. The most well-known LP category is patents. Other categories include copyrights, trademarks, design rights, trade secrets and plant breeders’ rights. In the growing knowledge economy, LP has become a critical success factor for most high schools. It is an intangible asset. But the future benefits to be achieved are uncertain. Therefore, valuation cannot be done correctly.
It has no objectivity or supporting documents unlike our accounting system which is based on objectivity.
HISTORICAL BACKGROUND leading to the development of intellectual property rights: –
For most of the 19th century, the United States provided no copyright protection for foreigners
writers; The argument was that freedom needed to copy to educate the new nation. Similarly, parts of Europe built their industries by copying inventions
others. The same model was later followed by Japan and even later, after the Second World War, by both South Korea and Taiwan.
Today, however, developing countries do not have the luxury of taking the time to intellectual property (IPR). As part of the trade agreement hammered out nine years ago, countries joining the World Trade Organization (WTO) also signed TRIPS (trade-related aspects of IPR), which include patents, copyrights, trademarks, trade secrets, geographical indicators and such other objects . Until 2006, the poorest countries in the world had to fully comply with the requirements of this treaty.
Contrary to popular belief, TRIPS does not create a universal patent system.
Rather, it lays down the basic rules that describe the protection that a country’s legal system must provide. Much of the recent debate about the impact of IPR on the poor has
centered on the issue of access to expensive drugs. In April 2001, South Africa won a victory against major drug companies fighting for patent reform there, giving access to cheaper versions of patented anti-AIDS medicines. Encouraged, developing countries issued a statement at the WTO meeting in Doha in November 2001, claiming public health precedence over IPR. They also decided that the least developed countries should have given at least until 2016 to introduce patent protection for medicines.
Tricky suggestions: –
In the last year, the World Trade Organization (WTO), responsible for TRIPS, was involved in a difficult proposition: “compulsory licensing” – the manufacture and marketing of a patented drug without the patent owner’s consent. This provision has been available since the formation of the WTO and Brazil has already used the “mandatory licensing” threat to demand substantial price discounts from major patent-holding pharmaceutical companies. This has allowed blessing under contentious conditions, including national emergencies and can be used by countries such as .g. Brazil or India, which has domestic drug industries to copy the drugs. The problem comes with countries that have no drug manufacturer. You can import generic copies from the kind of India. But can they do it after 2005, when these copying exporting countries are believed to have failed the TRIPS line? major patent-holding pharmaceutical companies in rich countries are worried that Indian and other companies may abuse the agreement for flooding their markets In order to reach a compromise, the WTO Council issued a statement just before the Cancun Council of Ministers started in September 2003, saying that countries could only infringe patents “in good faith to
protect public health ”. Special measures, such as different shapes, colors and packaging, have also been laid down to prevent these generic drugs from entering the markets of rich countries.
Not such a big deal: –
“Mandatory licensing” involves poor countries such as Kenya, Uganda or South Africa – unable to copy patented drugs to combat shed such as AIDS imports of cheaper copies from India. The governments concerned have to secure the public against people who need such medicines and thus money needed for import. Therefore, the affected countries must depend on the donors of rich countries to find this money. Alternatively, they can turn to world bodies, which in turn are funded by rich countries. As such, although the margin (the difference in prices between patented drugs ends up with Indian copies) may be fairly high, these are not really “lucrative” markets. There are also the annoying questions of government bureaucracy and inefficiency.
Look at ourselves: –
In order to stop and reduce the spread of tuberculosis, there is already a framework for Direct Observed Therapy Card Course (DOTS) that is being monitored by several world bodies and our government. The growing number of tuberculosis cases combined with HI V / Aids places a huge burden on tuberculosis control activities. The Indian pharmaceutical industry is not looking at the prospect (“No prescription drug sales”) – wildly. Maybe there is a lesson in this: not a moral lesson (involving right or wrong) but ethical (involving justice or disloyalty). There is a limit to the surplus of drugs that fight the public, especially in the poor countries. There may be no room for “sadistin” joy in the misery of others.
Medicines for the rich (and poor countries too: –
Diseases also affect people in rich countries. There are two different kinds of tremendous opportunities here.
First: For the research-oriented Indian pharmaceutical companies like Ranbaxy, Dr. Reddys and many other inventions (and delivery) of new drugs are no longer an option but a reality, they will be interested in protecting their IPR through appropriate patents.
Secondly, a large number of drugs expire in the US market very soon. In other words, generic versions of these drugs can be made by anyone, legally – if they are capable of it. And the Indian pharmaceutical companies – several of them are capable of doing it oo in the most cost competitive way. During the first six months of the calendar year, thirty four Indian companies made 50 submissions (called Drug Master Files-DMF’s) more than the total number of the next five countries. (Itally 21, China 10, Israel 9, Hungary 9 and Spain 5). Outside the United States, India is the highest number of FDA approved manufacturing facilities. In fact, the number of such facilities is almost equal to the number of approved plants in the United States.
Beware of Bulk Generic Medicines
However, the manufacture of generic drugs in bulk is not a bed of roses. Indian firms producing Penicillin are deadly afraid of imports of the same from China (which is much cheaper) and want protection through customs barriers raised by the Indian government. This will not be possible during the WTO rogime for any extended period.
Constitutional and legal aspects relating to intellectual property in commerce and services: –
Intellectual property falls under item 49 of List I of the Union’s Seventh Constitutional List. The product reads patents, inventions and designs, copyright, trademarks and merchandise marks. Patent is therefore a trade union. Patent protection was first introduced in the 18th century. The Patents Act, 1911, introduced formal protection of patent rights. In Biswanath Prasad v. Hindustan Metal Industries [ 1982 CS 144 (1979)] The Supreme Court noted, “the purpose of patent law is to encourage scientific research, new technology and industrial progress. Granting the exclusive right to own, use or sell the patented method or product for a limited period stimulates new inventions of commercial use. monopoly is the publication of the invention in the patent office, which, after the end of the fixed monopoly period, becomes public property.
World Intellectual Property Organization (WIPO), one of the 16 specialized agencies in
(United Nations Organization) The UNO, established in 1970, WIPO, headquartered in Geneva, Switzerland, became a UNO agency in December 1974, and it administers 23 international legal matters dealing with intellectual property protection.
International patenting is based on the 1883 Paris Convention on the Protection of Intellectual Property. The Paris Convention is a multilateral treaty covering the Patent Cooperation Agreement (PCI) administered by WIPO. PCI provides the following: –
a) Filing a single application in one language and International Search providing a report on previously published application;
b) Centralized publication and possibility of international feasibility study.
c) Seeks protection in a specific country.
Two important amendments to the Indian Patents Act 1970, namely the Patents (Amendment) Act, 1999 and the Patents (Amendment) Act 2002, recently appeared to be an extreme attempt to align the patent law with the international standards established by the TRIPS Agreement. as part of the Uruguay Round on multilateral trade negotiations. The whole history of the Indian patent court was a history of alignment with the West that allowed them to exercise the industrial and import monopolies. Since the Paris Convention, 1883, the West enacted to protect industrial property and to promote the expansion of trade monopoly numerous policies; and one of such policies related to intellectual property opportunities, including patent rights. Because they visualized that the East and other parts of the world would no longer be effective in operating imperialism. Intellectual property (IP) was considered a magnificent technique to be used for this, laid the first foundation for a successful association between the patents and the company’s monopoly, which eventually led to the formation of the General Agreement on Traits and Trade (GATT). themId The Indian patent was nothing but the culmination of a joint effort waged by the GAIT End MNCS.
Valuation of intellectual property: –
It is very difficult to value it as it is very uncertain to calculate the expected flow of future benefits we will get from it.
This paper is about valuing IP assets; it is about how these assets should be valued in the context of external financial reporting. Generating useful estimates of lp value is also crucial in internal reporting. But internal reporting requires assessment parameters or indicators that are different from those used for external reporting. Internal reporting is beyond this paper.
Valuation of assets
Valuation of assets requires first and foremost assets. Assets are recognized in the financial statements when they meet the definition and recognition tests. There are two main methods for valuing assets in the clearance of accounts: input approach and output approach. Under the input approach, the value of an asset is determined based on cost inputs that have gone or should have gone into its enterprise. The output approximation, on the other hand, seeks to determine the value of an asset according to what can be recovered from it either from its direct rate or from its continued use in business operations. Although both approaches are currently in use, the input method takes first place of interest. Under the existing GAAP, historical cost is the primary valuation basis for most assets. In recent years, standard accounting settlers have tended to prescribe measurement of actual value in some areas, but historically cost-driven valuation is still the predominant valuation basis in financial reporting. Valuation of assets in the financial statements is guided by two main considerations, relevance and reliability. The values assigned to assets reported in the balance sheet must be relevant as well as reliable. If there is a conflict between relevance and reliability, the latter wins over the former. Since historical cost-based values are derived from past transaction costs, they easily pass the reliability test. Historical values are adjusted downward when there is evidence of impairment. But upgrades are generally not allowed. However, in some jurisdictions, revaluation is permitted when certain specified conditions are met. The most common example is the valuation of “Land & building”.
Why IP assets need a different valuation method?
Accounting Standard 26 and International Accounting Standard (IAS) 38, include the valuation of intellectual property.
The transaction cost-based approach is incompatible with the role of IP assets. Acquired IP assets can be assessed based on transaction costs, but it is not possible to assess internally developed IP assets based on past transaction costs. In most cases, the transactions that give rise to an IP asset cannot be objectively identified. For example, patents have developed over a long period of time no identifiable costs. Although the cost of developing an IP asset is identified, these costs may not have any relation to the actual value of the asset. This is an important reason why most internally developed IP assets are not reported in the balance sheet. Standard accounting settlements struggle with the issue, but the mismatch between accounting principles and the correct valuation of IP and similar assets continues to exist. They have yet to develop an acceptable basis for solving the problem of compromise between relevance and reliability.
IP assets differ in many significant respects from traditional assets. Many of the IP assets are context specific. In most cases, the real value of an IP asset depends to a large extent on the company’s ability to use the asset to use it efficiently and effectively. The value in most cases also depends on the company’s ability to exclude others from using the asset. Because of this, it will be. Often difficult to determine reliable ways to assign values to IP assets. Considerable research has been done in recent years to address the issues of valuation of IP and other intangible assets, and as a result, some valuation models have been developed (eg Intangible Assets Monitor by Sveiby, the Skandia model and the balanced scorecard from Kaplan and Norton). But no one has gained common acceptance.
Alternative assessment methods: –
There are a number of tested ways to value IP. When choosing a valuation method, a company must first and foremost determine how the asset being valued creates value for it. An asset can create value for its owner by generating additional revenue, by saving costs or by providing competitive advantage. It is the way in which an asset creates value for the owner that must decide which valuation method to use. Below is an overview of possible valuation methods.
(1) Cash Flow Reduction Procedure (DCF): –
The DCF method is considered an ideal approach to valuing assets. At the most basic level, the value of an asset is determined by three factors; how much it is expected to generate in cash flow; the timing of generating these cash flows and the degree of uncertainty associated with the cash flows. The DCF method takes into account all these factors. Under this approach, the value of an asset is the discounted present value of its estimated future cash flows. In order to use this valuation method, it is necessary to examine the conditions under which the IP asset will be used and to develop an agreed basis for projecting future income and expenses related to the asset. The expected amounts are then discounted using an appropriate discount factor. The success of this approach depends on the accuracy with which future cash flow projections are made.
(2) Surplus operating profit: –
The excess operating profit method determines the value of an IPR asset by activating the excess profit that the company expects to generate using the asset. There are several ways in which excess profits can be calculated. One possible way to calculate such profits is to make estimates of profits that the company would make without the asset. to say what profits the company would earn in the normal course of business if intellectual property was not introduced into the business.
(3) Cost replacement procedure: –
This approach seeks to value an IP asset by quantifying the money that would be needed to replace the asset or create an equivalent asset. The replacement cost approach is based on the assumption that there is some cost-value relationship.
(4) Market-based approach: –
The market-based approach values IP assets by looking at the prices of comparable assets traded between knowledgeable parties at arm’s length in an active market. If it is possible to identify exactly comparable transactions, the procedure works satisfactorily. But in most cases, the search for a comparable transaction turns out to be a futile exercise.
(5) Cost / royalty saving method: –
The cost savings method values savings that the company expects to make as a result of owning the IP asset. If the company that owns the asset is able to calculate the costs it has saved as a result of the introduction of the new asset, it can easily arrive at a basis for assigning an appropriate value to the asset. Under the royalty saving method, the company must develop estimates of the amount of royalties it would have to pay if it were to license an asset to generate the return it earned on the existing asset.
(6) Twenty-five percent approach: –
The “25 percent” technique is used in many cases to value patents and technology. The technique is based on rules of thumb. Under this technique, the value of an IP asset is calculated to equal 25 percent of the gross profit earned on products using the asset’s services. The validity of the technique is difficult to prove.
(7) Choice-based approach: –
The option-based approach requires the use of the concept of value allocation options for IP assets. The option-based approach is currently used for valuation of financial derivatives. However, the option-based valuation model can easily be extended to other categories of assets. The owner of an intellectual property has different choices as to how he will use the asset. Option pricing models try to estimate the economic values for each of these possible choices.
The choice of valuation methods should not be arbitrary. It should be determined by the characteristics of the company and by the way the company provides its products and services. If, for technical reasons, the value attributed to IP assets cannot be incorporated into the balance sheet, the information can be provided on an additional basis. But this must be done in a systematic and consistent way.
Assigning a value to IP assets is a challenging job. It is a challenging job, especially when the exercise has to be done in connection with the preparation and presentation of external accounts. But the accounting profession must be prepared to accept the challenge. It should promote measures to update the existing accounting system. The current financial reporting gap caused by accounting failure
a system for recognizing important assets must be shortened. Efforts should be made to ensure that accounts provide an accurate portrait of the company’s resources.
INTELLECTUAL PROPERTY RIGHTS IMPLICATIONS FOR DEVELOPING COUNTRIES
Most countries aim to encourage innovation by designing laws to regulate copying of ideas, inventions, literary and other creative terms, unique names, busir. Industry process symbols, computer program codes, etc. Four distinct and distinct types of intellectual property, namely patents, trademarks, copyrights and trade secrets are called intellectual property (IP), IP is therefore any product of human intellect that is unique and not apparent and has no market value. IP has many of the features that real and personal property has. However, the most significant difference between IP and other types of properties is that IP is intangible and therefore cannot be defined or identified by physical parameters. It must be expressed in a characteristic way in order to be protected.
As PP is an asset, it can be bought, sold, licensed, exchanged or stored away like any other type of property. Again, the owner / creator of an IP has the right to prevent unauthorized use or sale of such property. All four types of PP are protected by national governments by transferring IP Intellectual Property Rights (IPRs) have been defined as’ rights granted to people over their thoughts’ (WTO website TRIPS material). Since intellectual property rights are protected by national governments, the scope of protection and the requirements for obtaining protection will vary from country to country.
In the developed world, there is a strong lobby of those who believe that all IPAs are good for business, benefit the general public and act as catalysts for socio-economic technological end. In the developing world, there is a strong belief that lPRs are likely to destroy the point of national industry and technology, harm people and only benefit the developed world. The process of implementing the trade-related aspects of intellectual property (TRIPS) has not resulted in reducing the gap between these two sides. In fact, it has helped to strengthen the opposing arguments that exist. Those who advocate for more IPRa and the creation of uniform age consider TRIPS as a useful tool to achieve their goals. But those who regard IPRa as a devastation for developing countries believe that the economic leeway, which was already uneven before, has become much more inequal with the introduction of TRIPS.
The developed world has accepted and adapted LPRs for a long time. Although sometimes the disadvantages of IPR8 are more than their advantages, most of the countries are
in the developed world is financially strong enough and has well-developed legal mechanisms to deal with the problems involved. Again, these countries have enough national wealth and infrastructure to take advantage of the opportunities available when the benefits of IPRS are more than their disadvantages. But probably this is not the case in developing countries.
The question is how national intellectual property rights can be designed to benefit the developing countries as much as possible. Stringent IP-related standards for tar, as developed by developing countries, should not be insisted upon until an objective assessment of the impact of such development standards is made. Developing countries may find that LPRs are useful only when accommodated to suit local conditions, and the international institutions and all the developed and developed countries should consider it.
The proponents of intellectual property rights, especially those in business and government in developed countries, believe that intellectual property rights help to stimulate economic growth and reduce poverty in developing countries in the same way as developed countries, but people from different social quarters. in the developing countries have rightly pointed out the error and this argument. They have categorically stated that IPRs can help create invention in all developing countries because the necessary human and technological capability is likely not always present. Contrary to the claims made by the allegations, LPRs have led to an increase in the cost of important medicines and agricultural inputs and have made life difficult for the poor people, including farmers, in developing countries.
The scope, scope and role of IPR protection has expanded at a very rapid rate over the last two decades or more. IPRs have been set up to cover many new technologies, namely information technology and biotechnology, and a large number of patents have been taken, especially with regard to genetic material. Minimum IP protection standards have been made global as a result of the World Trade Organization (WTO) agreement on TRIPS. There are also extensive discussions in the World Intellectual Property Qrganization (WIPO) to further harmonize the patent system. This apart covers bilateral or regional trade and investment agreements between the developed and developing countries, in most cases mutual obligations to implement IP regimes that exceed the minimum standards set by TRIPS. This means that developing countries are under constant pressure to increase the levels of IP protection in their own countries on a par with the standards set in developed countries.
Even in the developed world, there is fear that IPR will work
systems. Recently, applications for patents have increased, and it is believed that many patents of poor quality and / or with too much scope are issued. There is also the possibility that many companies may need a significant amount of time and money to decide how or whether to pursue research without infringing on others’ patent rights, or allowing others to infringe on their own patent rights The benefits of getting out of such expenses of time and money must be weighed against the huge costs associated with patent litigation and efforts should be made to reduce such non-productive / less productive expenses.
These concerns about the unaffected IP apply to developing countries. Furthermore, developing countries should be cautious about the direct influence that IP systems in developed countries can have on them, e.g. developing countries may not receive the benefits of research work (on some important issues that seriously affect them) performed in the developed world. Again, developing countries are largely deprived of their legitimate share of the benefits of commercializing their knowledge / resources if these are patented in developed countries.
An important point to consider is whether the rules for IP protection and institutions entrusted with their implementation, which have hitherto evolved in developed countries, can be of any use to developing countries in the process of their socio-economic development and especially in their efforts towards poverty reduction.
In some social quarters, there is a strong belief that IP protection of some kind is also useful to developing countries as it can motivate them to make inventions and develop new technologies that will ultimately be beneficial in their socio-economic environments. But it will result in high costs for consumers and other users of such protected technologies. Therefore, it becomes necessary to consider whether the benefits outweigh the costs. This in turn will depend on the nature of the use of IPRa and the socio-economic conditions of fashion in the country where they are used. Therefore, IP protection standards that benefit developed countries can be disastrous for developing countries as the latter must satisfy even their basic needs largely by drawing on the knowledge developed in other countries, especially the developed countries.
The situation in developing countries is quite different. While it is true that most of the developing countries are not technologically very advanced, they possess very rich knowledge developed over the centuries and valuable resources of various types; can not only benefit their own countries but the world as a whole. The fundamental question that arises is whether the IP systems generated so far in the developed world can help protect such knowledge and vast resources and guarantee justice for their owners.
From the government’s point of view, the transfer of IP law is a matter of public policy, and therefore the IP policy should be designed so that the benefit to society (in terms of improving basic facilities and infrastructure and technological innovation) must -weigh the cost of society (in terms of to the high cost to be paid by consumers and the cost of administering the system). But the point is that IP law, which itself is private, is diminishing the economic benefits and costs of various social groups.
An IP right can be seen as a means of enabling countries to make it easier to enjoy basic partner rights. IPRs should never be allowed to dominate fundamental human rights. Faktisk er intellektuelle ejendomsrettigheder (f.eks. Patenter og ophavsret), der er tildelt af regeringer, kortsigtede, men de grundlæggende menneskerettigheder hænger sammen med mennesket. Desværre bliver lPR’er i dag i de fleste tilfælde behandlet som økonomiske og kommercielle rettigheder, som virksomhederne besidder, snarere end individuelle opfindere. Tildeling af sådanne
rettigheder og deres anvendelse i deres udviklingslande vil sandsynligvis være til fordel for indehaverne af LPR’erne på bekostning af de grundlæggende menneskerettigheder for de fattige menneskers
udviklingslande, der i vid udstrækning vil blive frataget selv de grundlæggende behov i livet på grund af de høje omkostninger, der er involveret.
Problemet er, at interesserne for ejere / skabere af IP’er fortsætter med at dominere
formulering af LPR-politikker, og politikkerne for de endelige forbrugere skubbes til hedge. Udviklingslandene opererer fra en svagere position, mens de forhandler med de udviklede lande i spørgsmål, der vedrører lPR’er. Derfor bør beslutningstagerne seriøst undersøge de mulige virkninger af implementeringen af IPR’erne for de endelige forbrugere, inden de går til yderligere udvidelse af IPR’er i stedet for blot at tage pleje af interesserne for ejere / skabere af lPRs,
Det hele drejer sig om, at den udviklede verdens kommercielle interesser ofte kommer i konflikt med udviklingslandenes udviklingsbehov. What is important is that too high IPR standards should not be indiscriminately imposed on the developing countries and relevant technologies should be made available to them at competitive prices. The developing countries also need to strongly put up their causes in different world forum and countries like India and China are expected to play a leading role in this respect.
References:-(1)Adapted From Website Of Policy Statement Of Embassy Of India.
(2)Referential Notes Of Dr.UttamKr.Dutta,Reader , Department Of Commerce,University Of Burdwan,Golapbagh,Burdwan:713104.
(3)Journal On Intellectual Property ,published from Burdwan University,Page no.23-26,Pages.50-56.
(4)Abstract From Sujit Sikdar And Pranjit Kumar Nath,prof. and Lecturer respectively,of the Department Of Commerce,Gauhati University.