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Transforming the IP system: From competition towards collaboration

Authors:

Abstract

The author was tasked with the evaluation of two reports on the EU IPR SME Helpdesk (IHD), one undertaken by Technopolis Group, the second by DG GROW staff, and arrives at the conclusion that large parts of the EU's economic policy need to be reassessed in an era of exponential transformation and existential threats like climate change and mass unemployment. Investments need to be made in purposeful innovation and application of technologies and not today's protection of innovation which will be outdated tomorrow. China's economic might and the CCP's industrial policies have added momentum to this thesis. A government regulating a single domestic market which constitutes in many industries more than half of the global market is capable of undermining the concept of intangible asset protection and has made not only the EU' Intellectual Property Helpdesk, but the entire WIPO system obsolete.
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Transforming the IP System
From Competition Towards Collaboration
Abstract
The author was asked by the European Commission to analyze as external consultant the effectiveness of
the SME IP Helpdesks, a policy measure which tries to boost the EU knowledge economy. He concludes
that China’s economic might has undermined the concept of intangible asset protection and has accelerated
the natural evolution of the IP system. Accepting the status quo will contribute to the supranational
organization’s dissolution as it is being challenged by rising nationalism and economic competition. The
author suggests a pre-emptive system transformation from competition and profit towards collaboration and
purpose.
Table of Content
I. Executive Summary
II. Methodology and Evaluation POV
a. Logotherapy
b. Systems Theory
c. Sinology and Fareast Asian Studies
III. Status Quo System
a. Policy and Administrative Framework
b. Allocated EU Budget
c. Policy Teleology
d. Competing Knowledge Economies
e. Small and Medium Sized Enterprises
f. Definition of the Status Quo System
IV. Challenges to the Status Quo System
a. Hampering Innovation
b. IPR System Undermined by China
c. Shortening Innovation Cycles
d. Labor Market Transformation
e. Profit Extraction vs Value Added
f. Changing Innovation Patterns
V. Target System
VI. Conclusions and Recommendations to Initiate a Transformation
a. Discontinue IHD
b. Combine IPR Policy with Cutting Edge Innovation Studies
c. Assess Investments Contributing vs. Protecting Innovation
d. Install IPR System Incentives for Innovations Which Serve the General Well-Being Not
Only Corporate Interests
VII. About the Author
VIII. Sources
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Why did modern science, the mathematization of hypotheses about Nature, with all its implications for
advanced technology, take its meteoric rise only in the West at the time of Galileo but had not developed
in Chinese civilization or Indian civilization?” [Joseph Needham, 1969]
I. Executive Summary
The author was tasked with the evaluation of two reports on the EU IPR SME Helpdesk (IHD), one
undertaken by Technopolis Group, the second by DG GROW staff. He believes that the evaluation
undertaken by Technopolis Group is a textbook example of analytic rigor, but suffers from two substantial
shortcomings: 1. The evaluation focus was set by far too narrow as to be able to arrive at purposeful
conclusions; 2. the survey respondents who form the basis of the evaluation are quantitatively and
qualitatively not representative as to be able to draw conclusions on the effectiveness of the IHD.
The evaluation prepared by DG GROW (henceforth: Staff Working Document) is much broader in scope
and approach, but lacks the analytic expertise and methodology of the Technopolis Group document. The
right fundamental questions like: Is the need to protect IP still relevant? - have been asked, but the author
believes that lack of system awareness and conformity to top down ordained policy decisions have caused
the Staff Working Document to fall short in corresponding answers and required insight.
Both, the Technoloplis Group evaluation and the Staff Working Document arrive at the conclusion that the
IHD services should be continued and even extended beyond the currently active territories. The author
believes quite on the contrary that the IHD is a service which the EU can’t afford to operate any longer. Not
only the IHD, but as a matter of fact large parts of its economic policy needs to be reassessed in an era of
exponential transformation and existential threats like climate change and mass unemployment.
Investments need to be made into purposeful innovation and application of technologies and not today’s
protection of innovation which will be outdated tomorrow.
China’s economic might and the CCP’s industrial policies have moreover rendered the IHD services
valueless. A government regulating a single domestic market which constitutes in many industries more
than half of the global market is capable of undermining the concept of intangible asset protection and has
made not only the IHD but the entire WIPO system obsolete respectively has bent its rules in its own favor.
Reading policy papers like the Medium and long-term Program for Science and Technology Development
2006-2020, Chinese technocrats have never made a secret about what technology they want and they
have proved over the past decade that they have the means to get it, whether through smart JV contracts
or simple purchase of foreign assets.
China accelerates as such the natural evolution of the IPR system, a system which was conceived at the
onset of the industrial revolution and which has not changed conceptually since the 18th century despite the
technological developments which humanity has experienced in the 19th and the 20th century. The 21st
century will certainly require a new understanding of how mankind creates and manages intellectual assets
and China might well get the credit for making legislators in different jurisdictions eventually arrive at this
insight.
DG GROW has the choice between lobbying within the European Commission for a substantial
transformation of IPR governance or coopting with the status quo. Accepting the status quo and supporting
as such the continuation of the IHD will waste EU resources and eventually contribute to the supranational
organization’s dissolution as it is being challenged by rising nationalism and economic competition. A
transformation will require to sincerely ask questions about the social role the European institutions should
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fulfill not only within the union of member states but also as a global actor and responsible role model for
developing nations.
The Swedish statistician and public health expert Hans Rosling gave in 2010 a talk in which he made it
quite clear that the role of the old West in the new world is to become the foundation of the modern world -
- nothing more, nothing less. It's a very important role, which has to be done well and one to which Europe
has to get used. Doing it well means in the context of this evaluation taking the lead in transforming the
existing IPR system, i.e. the creation and management of intangible assets into a system which is value
not profit driven, a system, which in the words of the social psychologist Erich Fromm focuses on being
instead of having.
II. Methodology and Evaluation POV
The author draws largely on systems theory, logotherapy and sinology for the purpose of this evaluation
and approaches this report in a three-step method applying below described evaluation tools. He first looks
at the status quo system and tries to define an evaluation focus which might be different than the one
assumed in the assignment. He then defines a target system and asks in a last step what a transformation
process from the status quo system towards the target system entails.
1. Logotherapy
If there is anything that can help a person to manage challenges, then it is the knowledge of a purpose,
which is waiting for this person to be taken up and being fulfilled. [Viktor E. Frankl]
Logotherapy, also known as the third Viennese school of psychotherapy, was founded by the psychiatrist
Viktor Frankl after WWII. It puts man’s search for purpose against pleasure and power, the two drives which
Freud’s psychoanalysis and Adler’s individual therapy were centered around. Logotherapy asks in an
organizational context whether the pursued vision and mission of a business endeavor or a policy measure
2017%©%telospi.com 2
Methodological%Approach
2
System
What%is%the%system?%%What%are%current%issues?%
How%are%they%caused?%%What%are%the%consequences?
Targe t
What is%the%target?
Transformation
What%needs%to%be%done%to%reach%the%target%system?%Where%are%the%
opportunities?%Which%are%best%practices?
2017%©%telospi.com9/5/18
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serve a purpose which generates meaning for society at large. The author looks specifically into
government policies, business strategies and personal motivation to understand whether organization and
empowered individuals are driven by power, pleasure or purpose looking for intervention methods which
set the respective entity on track for purposeful action.
2. Systems Theory
In a system, there are no side effects just effects, anticipated or not. What we see as “side effects” simply
reflects our flawed understanding of the system. Much of the time people attribute what happens to them
to events close in time and space, when in reality it’s the result of the dynamics of the larger system within
which they are embedded. [Daniel Goleman]
Systems theory looks at different layers of systems, whether in vertical perspective, e.g. from atomic to
universal, or horizontal perspective, i.e. different systems on the same systemic level. Systems theory
requires us to define the status quo system and a target in order to identify the transformation necessary
to reach the target system. The advantage of systems theory over traditional forms of analysis is that it
mostly eliminates system blindness by focusing on a particular system only; quite on the contrary does it
try to take all relevant stakeholder into account and enables us to understand dynamics which take effect
in the focus layer, but are caused in other layers and vice versa. The author uses osmotic modelling to cut
through different system layers.
3. Sinology and Fareast Asian Studies
In a few years, you will not be able to make sense of the world, if you can’t make sense of China. [Martin
Jacques]
Sinology is a branch of Fareast Asian Studies and entails the academic study of China primarily through
Chinese language, literature, Chinese culture and history. While sinology was a marginalized subject up till
Osmotic(Modelling
ØIndividual(Sphere
ØFamily(Sphere
ØOrganization(Sphere
ØEducation(Sphere
ØEconomic(Sphere
ØRegime(Sphere
ØSocial(Sphere
ØTechnological(Sphere
2017(©(telospi.com
9/5/18 3
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the beginning of the 21st century, it did always attract important thinker who were drawn into understanding
China for the sake of understanding bigger questions about human civilization. The probably most important
example being the British chemist Joseph Needham, who devoted the second part of his academic career
to an encyclopedic research project which continues to be published under the title Science and Civilization
in China. His underlying research question grew into such importance that it is amongst sinologists known
has The Needham Question”: why had China and India been overtaken by the West in science and
technology, despite their earlier successes?
One could argue that Needham’s life time research subject has gained a new momentum due to China’s
stellar economic rise because the table of luck has seemingly turned against Europe and one could
reformulate the Needham Question for the 21st century and ask: Why had Europe and North America been
overtaken by China and India in science and technology, despite their earlier successes? Whether one
agrees with this vantage point or not, one can’t disagree with the fact that China studies have grown in
importance, because it is not anymore possible to comprehend most of humanitys economic activities
without properly analyzing the part China plays. This methodology and evaluation POV does imply that the
author gives little or no consideration to the IHD activities in other regions than China.
III. Status Quo System
The Staff Working Document states that the aim of this evaluation is to check to what extent the IHD
services have reached their objectives in terms of relevance, effectiveness, efficiency, coherence and EU
value added […] and determine on an evidence-basis whether the actual performance of the IHD has been
at least relevant given the needs and its objectives, effective and efficient, coherent both internally and
with other EU policy interventions, and has achieved EU added-value.
It would be certainly possible to lock in on the IHD as status quo system (and report subject), set improved
services for European SME as a target (report object) and discuss potential measures to achieve this
transformation; and indeed, this partly needs to be done, but the narrow focus on the IHD and its declared
beneficiaries is per se a futile undertaking. This report will therefore equally check the relevance and
efficiency of the IHD, but aims to understand the system layers in which the IHD is embedded.
1. Policy and Administrative Framework
The IPR SME Helpdesks (IHD) are one of many projects which the European Commission (EC) implements
in the execution of the European Union’s business internationalization policies. The European Union (EU)
is a supranational organization which consists at the time of writing of 28 national member states (MS)
comprising more than 500 million inhabitants and forming the world’s largest economic entity with a nominal
GDP of USD 17.1 trillion.
The EC is the EU’s main executive and operative institution comparable to a national government, which is
headed by 28 commissioners, i.e. supranational ministers. Roughly 32.000 civil servants and contract
employees are structured in 31 directorate generals (DG) and headed by a director-general who reports to
the corresponding commissioner. The EC operates moreover 16 service departments and 6 executive
agencies with locations in Brussels, Luxemburg, the EU beyond Belgium as well as non-EU locations and
is therefore a truly international organization, but geographically limited to the European continent.
It has set for 2015-2019 10 policy priorities, which include a new boost for jobs, growth and investment; a
connected digital single market; a resilient energy union with a forward looking climate change policy; a
deeper and fairer internal market with a strengthened industrial base; a deeper and fairer European
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monetary union; a reasonable and balanced free trade agreement with the US; justice and fundamental
rights based on trust; a new policy of migration; Europe as global actor; Europe as union of democratic
change.
DG Internal Market, Industry, Entrepreneurship and SMEs (GROW) has combined the responsibilities of
the previous DG Internal Market (MARKT) and DG Enterprise and Industry (ENTR) and develops and
executes the EC policies on business; industry and the single market. Its policy objectives are geared
towards promoting economic growth within the EU, but do also include the internationalization of EU
businesses. It is mainly located in Brussels with more than 1000 employees.
COSME (Competitiveness of Enterprises and Small and Medium-sized Enterprises) is a DG GROW policy
program which aims at strengthening the competitiveness and sustainability of small EU enterprises,
including their internationalisation. It largely continues the activities started under the previous programme,
the Entrepreneurship and Innovation Programme (EIP) and recognizes SMEs as the backbone of Europe’s
economy, providing 85% of all new jobs. COSME implements the Small Business Act (SBA) with four lines
of action: 1. facilitating access to finance, 2. supporting internationalization and access to markets, 3.
creating an environment favorable to competitiveness and, 4. encouraging an entrepreneurial culture.
COSME is open to third countries’ participation under certain conditions and resembles to a certain extent
the Chinese double innovation act | , which was announced by premier Li Keqiang in 2014 and includes
the mobilization of the economy through small enterprise innovation|  and mass innovation | 
 from micro companies. COSME and  both intend to promote distributed innovation instead of
centralized innovation in large corporations and research organizations.
The IHD is one of several EU projects supporting enterprises and SMEs through advice on intellectual
property rights in China, ASEAN and MERCOSUR member states. The IHD offers general information on
intellectual property, liaison with outside experts and preparation of general and customised training. The
IHD aims at improving EU enterprises’ competences to protect, exploit and leverage intellectual assets
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more efficiently in global markets; and it is as such one of the most detailed measures in an overall policy
framework directed at the economic growth of a knowledge based economy.
2. Allocated EU Budget
It seems important to note that there is a coalescence between the abbreviation of DG GROW and the
overall EC policy objective smart and inclusive GROWTH, which makes it necessary to look briefly into the
EU budget to assess the importance attached to economic growth and the role of the IHD within the policy
framework.
The EU’s budget is largely generated by MS contributions which are calculated on the basis of the MS’s
gross national income (GNI). The multiannual financial framework (MFF) 2014-2020 plans a total annual
budget of roughly EUR 140 billion or about one percent of the MS’s GNI. The lion share of this budget is
allocated to only two of six expenditure categories: smart and inclusive growth,” i.e. economic policies
directed mainly at the secondary and tertiary industry sectors and labor markets, and “sustainable growth
& natural resources,” i.e. policies directed mainly at the primary industry sector and labor market, account
for roughly 45% each and together for more than 90% of the annual EU expenditure.
DG GROW appears to be one of the central bureaucratic entities for the execution of the EC top policy
priority of “jobs, growth and investment” and administers EUR 16 billion for the current budget period. The
COSME program is one of four DG GROW policy programs which is endowed with EUR 2.3 billion from
2014-2020 making it the largest DG GROW program which focuses on strengthening and internationalizing
EU businesses; in particular because DG GROW’s policy measures are directed towards the internal
market rather than towards foreign markets, which are the explicit focus of DG TRADE. COSME is
implemented by the EC’s Executive Agency for Small and Medium-sized Enterprises (EASME) with about
300 employees under the supervision and guidance of DG GROW.
Policy'and'Administrative'Framework
9/5/18 2017'©'telospi.com 4
European'Union'(EU)'
European'Commission'(EC)
Supranational'organization;'28'MS;'500'mio population;'
USD'17.1'trl GDP;'annual'budget'approx.'EUR'140'bln
Supranational'government;'28'commissioners;'32k'
officials'and'contract'employees
DG'Internal'Market,'Industry,'
Entrepreneurship'and'SMEs'
(GROW)'
EU'ministry'responsible'for'economic'growth;'1400'
officials;'directly'and'indirectly'responsible'for'half'of'EU'
expenditure
Executive'Agency'for'Small'and'
Medium-sized'Enterprises'
(EASME)'
implements'COSME'(Competitiveness'of'Enterprises'and'
Small'and'Medium-sized'Enterprises)'program'for'DG'
GROW;'EUR'2.3'bln budget'2014-2020
IPR'SME'Helpdesks'for'China,'
ASEAN'and'MERCOSUR (IHD)
provide'advice'to'SMEs'on'intellectual'asset'protection;'
2016-2020'budget'EUR'7'mio.
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While more than 60% of the COSME budget go into the access to finance line of action, only a small fraction
of EUR 7 mio is allocated over the budget period to the IHD. This raises the questions, why DG GROW
engages Technopolis and in addition 3rd party experts to evaluate such a project of seemingly subordinate
policy relevance, and why a DG which focuses on the internal market, business stimulation and SME
promotion is in charge of such a project rather than DG TRADE which appears to be a natural contender
for all EC activities related to internationalization beyond the internal market.
3. Policy Teleology
This contradiction can be explained by looking into the economic principles which underlie EU policy. The
paramount EC policy priority focuses on economic growth, job creation and investments and is as such in
line with Keynesian economics of industrial societies: making megasystems of production and distribution
successful and manageable. DG GROW focuses on the growth of the internal market and supports
European entrepreneurs based on the widely acknowledged assumption that strong exporting companies
contribute substantially to a sound domestic economy.
The COSME program does follow to a substantial degree postindustrial economics as defined by E.F.
Schumacher by recognizing SMEs as the backbone of Europe’s economy which provide 85% of all new
jobs. Its designers probably understood that the scale of organization must be treated as an independent
and primary problem of economic sustainability, because COSME supports decentralized and small
business entities rather than global enterprises and multinational corporations.
The overall policy teleology is nevertheless clearly rooted in an industrial understanding of economics,
which defines linear economic growth as its central purpose, without differentiating whether this economic
growth is caused by MNOs or SMEs. SMEs become a mean to a single end: more wealth for the EU
member state economies. Such a teleology clearly implies a substantial system blindness, because it is
ignorant to the policy effects outside of the EU despite them being addressed in other policy objectives.
EU#2014-2020#Budget
For#the#period#2014-2020,#the#EU#budget#is#used#for#six#main#
categories#of#expenditure:
Growth (aimed#at#enhancing#competitiveness#for#growth#and#
jobs#and#economic,#social#and#territorial#cohesion);
Natural+resources (covering#the#common#agricultural#and#
common#fisheries#policies,#and#rural#and#environmental#
measures);
Security+and+citizenship (covering#justice,#border#protection,#
immigration#and#asylum,#public#health,#consumer#protection#
and#culture);
Foreign+p olicy (including#development#assistance#or#
humanitarian#aid#outside#the#EU);
Administration (covering#all#the#European#institutions,#
pensions#and#European#schools);#and
Compensations (temporary#payments#to#Croatia).
9/5/18 2017#©#telospi.com 9
Secondary+and+
tertiary+sector
Primary
sector
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4. Competing Knowledge Economies
The overview of EU instruments contributing to the internationalization of enterprises reveals a bigger
picture of overlapping policy instruments, which give the IPR Helpdesks at least specific relevance within
the EC’s overall strategy of promoting “smart and inclusive growth.” The HD can thus be seen as one of
many policy measures of a supranational knowledge economy which competes in a global rat race against
other big players like the US, China and Japan.
China, meanwhile a forerunner in innovation and education policies issued in 2015 a “Made in China 2025”
strategy paper, in which it wants to turn into a modern and most powerful manufacturing nation. Japan’s
education minister called recently upon Japanese universities to close or downsize their humanities
faculties in favor of more practical subjects like robotics and automotive engineering: the two strongholds
of Japanese industry which he sees threatened by rising China. The US White House released in October
2015 its updated American Strategy for Innovation and explains the need for an innovation strategy therein:
For an advanced economy such as the United States, innovation is a wellspring of economic growth and a
powerful tool for addressing our most pressing challenges as a nation such as enabling more Americans
to lead longer, healthier lives, and accelerating the transition to a low-carbon economy. In fact, from 1948-
2012 over half of the total increase in U.S. productivity growth, a key driver of economic growth, came from
innovation and technological change.
From a global perspective of competing knowledge economies, the entrepreneur becomes in itself a mean
to an end, i.e. the maintenance of existing governance structures, as described by Henry Kissinger in World
Order, and the IHD merely an auxiliary weapon with which the EU supplies its entrepreneurs in a battle for
markets and consumers. What is labeled entrepreneurial competition in the business sphere, is the
competition of knowledge economies in the regime sphere.
Competing*Knowledge*Economies
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EU*&*MS*
Governments
Intellectual*
Property*
Rights*SME*
Helpdesk*
(IHD)
Small*&*
Medium*
Enterprises*
(SME)
Intellectual*
Property*
Rights*(IPR)
Export*
markets*(=*
China,*SEA,*
Latin*
America)
Corporate*
competition
Export*
market*
governments
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For the purpose of this evaluation we need to take into account EU and its member state governments on
the one side and the governments of IHD target markets, i.e. China, South East Asia and Latin America on
the other side. In between we find on an organizational level EU SMEs and their foreign competitors, both
aiming to succeed in certain export markets by the application of IPR and other commercial strategies. Last
but not least we must take into consideration large corporations which even if headquartered in the same
country as an EU SME, present an equally formidable threat to a SME.
5. Small and Medium Sized Enterprises
European SME are implicitly defined by the evaluation assignee as the evaluation object because they are
the beneficiaries of the evaluation subject’s performance. All efforts invested in the IPR system and thus in
the IHD shall in the last extent strengthen European SMEs and thus the overall EU economy. The EU
definition of SME is specific and different from other economic regions like China or the US. It includes all
enterprises headquartered in an EU member state which have less than 250 employees, less than EUR 50
million annual turnover and less than EUR 43 million on their total balance sheet.
The author thinks that this definition needs to be reconsidered and adapted on basis of the financial means
necessary to engage in IPR management. The continuous globalization of the economy has not only
enabled micro enterprises to act internationally, it has also made it more costly to be globally active and
thus requires certain resources to create and exploit intangible assets both on domestic and on foreign
markets. In the experience of the author even so-called hidden champions require quite often substantial
support to adapt their IPR management to the pressures faced in Fareast Asia. The Chinese definition of
SME, which differentiates according to industries, includes companies with up to 2000 employees and
seems to be closer to the segment of companies which require global intangible asset management
support.
6. Definition of the Status Quo System
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