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Intellectual Property Intellectual Property VS Standard of Living • Thesis: How to increase your standard of Living through IPR • Abstract: Private Vs Government Investment – How do you maintain a Comparative Advantage in the new communications environment • Counter Argument : – R&D Tax Credits will the capital to sustain Growth What Is Intellectual Property • Copyrights,patents,trade secrets and trademarks • Exclusive, temporary and tradable rights • Enforcement by civil proceedings (IP rights fall to owners) Patent and Copyright • Patent – Length =17 years – Requirements • novelty • non-obviousness • useful – Examination =Yes – Publication =Yes – Protection = Claims • Copyright • Length = 50+years • Requirements – original • Examination =Yes • Publication = No • Protection = Expression Private Vs US Government R&D Funding R&D Funding VS GDP R&D Funding By Country U.S. Patents Granted U.S Patents Granted to Non Resident Inventors US R&D Tax Credit Policy US policy: Definition excludes contract R&D and reverse engineering. R&D above a base determined by the average of 84-88 R&D is eligible. R&D depreciated at 100% (the quantity is expensed) The credit is taxable Foreign R&D is not eligible The credit rate is 20%. Spillover Effects • Gap can vary by country – R&D benefits may go to other countries • Varies By Industry – Pharmaceuticals – Communications – Semiconductors Spillover Effects • Varies By Technology Type – Pure science • Bohr: quantum mechanics • Basic Genome Mapping – Goal-Oriented applied research • Edsion: light blub/photograph • electric batteries – Scientific Discoveries from solving practical problems • Pasteur: bacteriology via wine research • mathematics for encryption Prof. Bronwyn H. Hall R&D TAX Credit Summary R&D Tax Credit by Firm Size Total Assets Amount of Credits Under $1m $189 m 4,601 $40,984 $1m-$49m $742 m 8,568 $86,617 $50m-$99m $241 m 717 $335,287 $100m- $249m $312 m 625 $449,939 $250m-and up $5.75B 1,198 Total $7.23B 15,709 No. of Firms Credit per Firm $4.8m $460,604 Source : Internal Revenue Service data for 2000 complied by Washington Council Ernst &Young IP Balance of Payments Net Reciepts for 2002 Nation US Plus US Billions Minus US Billions 19.1 Japan 5.7 Germany 6.8 France 3.3 China 5.1 India 0.9 Mexico 2.6 Brazil 0.5 Source: World Bank Conclusion • Most Economic Models show that for every dollar of R&D credit another dollar of private R&D funds is made • Protection of IP very important to continued growth in standard of living • Must Balance social costs Vs social benefits • Increase in Government R&D needed to ensure social and political reform continue • R&D Tax credit provides small entrepreneurs the opportunity to bring there inventiveness to marketplace