Comments on the GIPC Index 2015, Part I – Misleading Links

The relationship between intellectual property and innovation is complex and multifaceted, and in some cases, rather tenuous, as Shamnad Sir discusses in his excellent article here. The GIPC Index 2015, in one of the very few things it gets right, partially acknowledges this relationship – and yet, in the very same sentence, ignores the complexity of the debate. The GIPC Index this year leaves no doubt that it is voicing the perspective of industry and the corporate that it cares about. The Index aims to create a cheat-sheet for countries to increase their appeal to the corporate sector, and promote their economic growth. The ‘innovation’ tag (and the views of other stakeholders) is just a placatory buzzword that it pays little attention to​. It is an unfortunate fact that these reports gain publicity despite having such weak methodology, but since they do become so popular, they must be looked at and criticised even if only to recognise their flaws and critique them, and know how little it means to say that “India fared poorly on the GIPC Index”. [Long post ahead]

The Same Broken Moulds

(Image Source:
(Image Source:

Last year, Swaraj pointed out the grievous faults that were blatantly visible in the methodology followed by the GIPC Index 2014. The same egregious issues still persist, and in fact, most of them have been repeated verbatim, and some issues appear even more blatant.

First and foremost, the major change this year is the inclusion of five new countries: Germany, South Korea, Taiwan, Peru and Switzerland. The same ‘equal treatment of un-equals’ continues from the last year’s Index. In fact, the inclusion of these five countries further tips the scales of rhetoric against the developing economies, as four of the five countries that have been included are developed economies, and the fifth country Peru, is an Upper-Middle-Economy. Thus the 5 lower-middle-income countries are now being compared against 11 High-Income OECD members, 4 High Income Economies, and 10 Upper-Middle-Income Economies, on the basis of baselines created mostly by and for those developed countries.

Like last year, the indicators that the Index uses and the concerns it highlight show quite clearly that the goal here is to appease major industry lobbies. The index in fact subtly mentions it when it states on page 4 in its Executive Summary, that “First and foremost, the GIPC Index is intended to be a tool for governments that wish to understand the key IP factors that drive business decisions in innovative industries” – with the obvious implication being that the focus is on ‘business decisions’ and not ‘innovation’.

Some of the more clear examples present in the Index, include its comments on the Pharma industry and the Tobacco industry – which is no surprise, the Tobacco and Pharma industries are two of the biggest spenders in terms of lobbying in the United States. Furthermore, as Swaraj pointed out last year, five of the seven patent indicators are oriented towards the pharmaceutical industry – without any information as to why a “patent” indicator, supposedly for all patents across thousands of sectors of technology, focuses only on one. And when, in one of the two indicators that do diverge from a pharma-centric focus, speaks about patent-ability of computer-implemented inventions, they go ahead and establish a “baseline” assumption without even acknowledging the depth of the debate involved, including the big question of how, if at all, this helps innovation.

Misleading Links

And the same time, the Index, does try to relate the indicators it uses with a certain type of ‘innovation’. But it doesn’t quite unpack the more complex relationship between IP and innovation when it tries to explain the correlation between the Index score, which it refers to as ‘IP Rights’, and private R&D expenditure, high-value job growth, FDI, and Innovative Activity.

The claims it makes with in regard aren’t exactly conclusive, or convicing. For instance, the first data-chart it shows is meant to show the association between IP Rights and private Sector R&D Spending. In this section, the Index starts by saying that “Spending on R&D supports innovative activities in different sectors and establishes a foundation for long term economic growth.”

But the index does here discuss why it is treating the ‘IP Rights’ as an end in and of themselves. That is, it does not explain the link between these ‘IP Rights’ and innovation, of the kind that actually adds to the society, that provides some social value, which is what IP law, in its various theories, is originally meant to protect and promote. The latter type of articulation actually requires, inter alia, not only that IP protections are reasonable themselves and balanced, something that the Index seems to want to ignore as much as possible. In the terms of a cost-benefit analysis, such an articulation states that IP protections should stop where they end up costing more than they benefit, from the perspective of ‘individuals’ and society as whole. While the Index consistently seems to be arguing for extending the protections accorded to IP rights, it focuses on how this will increaseinvestment to the (lobbying) businesses, and not innovation, the two being extremely different.

Furthermore, when the Index moves on to showing the ‘correlation’ between IP Rights and FDI, it makes a curious decision. In order to find a method to measure ‘meaningful FDI’, it chooses to focus on the FDI in life sciences and biomedical fields, by focusing on the number of clinical trials conducted in a given economy. While that may seem like an innocent decision in most other contexts, in this Index, with its disproportionate and biased portrayal of the issues involved, it is especially concerning.

Notably, Japan and Switzerland, which have the highest private R&D expenditure in this chart, are ranked sixth and ninth respectively overall, and even India scores notably high here, despite its low rank. The next data-chart, showing the relationship between High-Value job creation and IP protection, actually skips out on India, Nigeria and Taiwan, as the relevant data is unavailable. But surprisingly, while Switzerland maintains its high rank even here, Japan’s score falls to the average.

And once again the data-chart itself is quite curious, as the highest number of clinical trials are shown to be in Switzerland, ranked sixth, followed by Canada and New Zealand, ranked eleventh and tenth respectively, with the top three (US, UK, and France) trailing far behind. The top three, in fact, are even lower than Taiwan, ranked thirteenth. The Index explains this by stating that Switzerland has a world-leading life-sciences sector, and Taiwan has made attempts recently to bring its clinical environment up to ‘international standards’.

Similarly, in the final data-chart, Switzerland again beats out the top three countries handily. It must be noted here that the last data chart would perhaps be the one that focuses on actual innovation, as compared to the other three. But overall, the ‘usefulness’ of the correlations, then, between the GIPC Index and any of these criteria, seems to be highly questionable. Furthermore, the factors that have been considered here are fundamentally linked to a multitude of non-IP issues, none of which have been considered by the Index in any detail, except in the case of extreme outliers. For instance, to come to any conclusions on these issues, multiple factors such as the existence of politically stable government, or corruption indices, or strength of the governing institutions etc. must be considered. In other words, the Index seems to be saying wind exists because there are windmills!

The Indian Relation

But what the above does clarify is the aim of the GIPC Index. The Index only pays the barest of lip-service to the idea of ‘Innovation’, its main focus being on what the Industry, specifically Big Pharma and Tobacco, want from economies around the world – specifically, from developing economies such as India, which are being unnecessarily being expected to adhere to laws of developed economies, regardless of context or even if these standards have been proven successful in those developed economies. In fact, the Index actually spends a fair amount of time waxing eloquent about the potential reforms that the Modi government might bring. And that, as we will see in the next, is a huge source of concern.

My thanks to Swaraj for his inputs on this post.

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