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EFFECTS OF INTELLECTUAL PROPERTY MANAGEMENT ON PERFORMANCE OF SELECTED MANUFACTURING FIRMS IN SOUTH EAST NIGERIA

Business Administration & Management Project Topics

CHAPTER ONE

INTRODUCTION

 

1.1       Background of the Study

Since the beginning of 20th century, the world has witnessed astronomical advancement in scientific and technological innovation which has changed the face of modern society. Innovation has become the key driver of economic growth and development in both medium term and long term. Kubis(2011) defines innovation as the process of introducing new products, and services, and production process into the marketplace and creating new profitable enterprises and higher paying jobs on this basis. The popular documentary on “Cable Network News” of Make, Create and Innovate” is one of the indications of the importance of innovation in today’s world. Even the most read book in the world; the holy Bible establishes it in King James Translation of Revelation, 21: 5; “Behold, I make all things new”. Innovation is thus about having new ways of doing things which usually will emanate from ideas generated by individuals and groups of individuals in their various works of life and even in their everyday life. When these ideas are put into use or into tangible items for use in creation of wealth and other economic value, they become Properties of Intellect.They are thus called Intellectual Property (IP).

The term Intellectual Propertycame to lime light in the 19th century. By late 20th century, it became a common place in US literature. Nevertheless, Grant(2010)notes that, the usage of the term goes back as far as 1893, at the founding of Swiss federal office for intellectual property. The Paris convention for protection of industrial property (1883) and Berne convention for protecting of library and artistic work (1886) both were separate administrative offices that merged in 1893 and adopted the term intellectual property in their new title (Ige, 2000). Prior to that adoption, towards the end of the 19th century, inventive new ways of manufacturing helped trigger large scale industrialization accompanied by such phenomena as rapid city growth, expansion of railway network, investments of capital and growing trade transaction.  Idris(2012) states that the invention of movable typing and printing press by Johamas Gutenberg around 1440 contributed to the birth of the first copyright system in the world. Sople, (2010) explains that Trademarks are believed to date back to at least 3500 years when potters’ marks were used to identify the source of earthen pots. However, jurisdiction and statutes for the protection of trademarks appear to date back to only 350 years, i.e. seventeenth century in England.

Right from the medieval to several years over, intellectual property started developing. In Roman times, it was common for pottery to be embossed or impressed with a mark, for example a representation of a dolphin or the maker’s initial. Merchant’s marks were used in commerce in Britain from the thirteenth century. William Caxton used the mark W74C, in his Gold and Silver articles and these were hallmark as early as the fourteenth century. By the end of the sixteenth century it was very common for shopkeepers to erect signs illustrating their trade (Nwokocha, 2012). Traders took to using cards bearing their name and address, often accompanied by a device of some sort, an early form of what we have today as business card. The industrial revolution saw an enormous growth in the use of names and marks in advertising and thus modern trade mark was born. This marked the early development of the modern Trademark Law.

In the area of patent, the first recorded patent for an industrial invention was granted in 1421 in Firenze, Italy to Architect and Engineer Filippo Brunelleschi. The claim was that he had thought of a better method for transporting goods on the River Aron. He undertook with the Florentine authorities that to divulge details of his new invention he would be granted a monopoly in respect of the exploitation of the invention within Firenze for a number of years (Nwokocha, 2012). After this, any person would be free to exploit the invention or introduce further improvements to the technology.

Copyright awareness on the other hand, arose with the growth of the printing press, and the need for the authors and publishers of popular works to profit for their task. In 1709 the UK Parliament enacted the world’s first Copyright Act, the so-called Statue of Anne. This Act established principles of copyright law which remain valid today and have developed to the current Copyright laws existing in most countries.

Subsequently, the United National Bureau for protection of intellectual property relocated to Geneva in 1960 and in 1967 the World Intellectual Property Organization (WIPO) was established by a treaty as an agency of the United Nations.  The establishment of WIPO naturally led to sensitization, awareness and growing interest in intellectual property protection. Companies started investing in research and development. The evolution reveals the emergence of 3 basic trends in intellectual property; Research, Development, and Innovation over the decades that follow.  Idris (2012: 19) identifies these trends as follows:

  • Protection has been strengthened, broadened and harmonized internationally especially in the 1980’s
  • The number of applicants and grants has risen exponentially between 1980’s and 2001 as compared to the previous period especially in United States and United Kingdom. Basically two technical fields contributed to these surge, Information and communication technology, (ICT) and Biotechnology.
  • Innovation has also expanded rapidly. An important indicator is the increase in research and development spending,

 

Today, intellectual property is a value concept. It forces us to acknowledge value conflicts in public policies of various governments and firm’s and also conflicts of value in inventions, creations and innovations.For many firms in this modern economy, intellectual property is their most important asset not physical property. Companies engage in acquisition of intellectual property due to various reasons. Such reasons as the expected benefit that is accruable to it. Some of these benefits they believe will have a positive effect on the performance of the company and the various indices of performance.  This includes the productivity of the firm, profitability, sustainability, and long term viability of the organization. Marrand Neely(2003) argue that a firm’s value is often partly based on the intangible intellectual capital which is referred to as intellectual property that it possesses.

Just like the physical properties, intellectual properties also need to be protected. Countries usually establish a system whereby these properties are managed in order to not only benefit those that generated the ideas leading to the establishment of these properties, but also to be used as an economic tool.Northern Italy is said to be the cradle of intellectual property system. In recent time however, more emphasis is being placed on such properties rather than physical properties. It is necessary to note here that even though the term is increasingly used today, it is still little understood. For too many people, it is still an obscured legal concept of little relevance to everyday life. In most developing countries, intellectual property is a novel concept especially for manufacturing companies and public research institutes.Yet when these properties are introduced, they need to be established, protected and generally managed by the inventors, owners and other stake holders like managers and operators of industries. Secondly, the process of protection of these new products cannot again be effectively established without a well-balanced, affordable and reliable system of management thus the management of Intellectual Property. Thirdly, most writers’believe that if IP is linked to firm performance, firms and investors would benefit from this concept. It is also probable that the expected future economic benefit will flow to the entity and the cost of the asset can be reliably measured.These requirements are consistent with international standards, yet the criteria are rarely met by IP and so IP is hardly ever disclosed quantitatively in the accounts

The human capacity for intelligence, creativity, and collaboration produces an abundance of new information, inventions, and artistic creations. As long as these fruits of the mind are afforded legal protection, they constitute intellectual property(Kamil, 2000). In his own contribution, Kubis (2011),   states that IP is known in the industrial world as the most valued asset owned by a company because it is generally believed that an investment in knowledge always pays. He goes further to say that  as Ben Franklin quoted, “if a man empties his purse into his head, no man can take it away from him”  Current development  in the global economy have brought the best interest about the ascendency of intellectual property. The brick and mortar economy is being replaced with economy of ideas. In the new global economy, wealth is generated towards harnessing the value of knowledge. The concept of creative enterprise has evolved from ideas, innovations, inventions and knowledge and investors and company/firms are increasingly investing on that.  Innovators thus seek property rights that allow them to own their creativity and innovations in the same way that they can own physical property.

Intellectual property is seen as a key concern in the quest for growth, development and competitiveness. Advancement in knowledge broadly conceived is a key driver of economic prosperity in the twenty-first century. The ongoing revolution in information and communication technologies (ICT) has dramatically reduced the costs of creating, processing and transmitting knowledge, both nationwide and across borders. The pace of innovation has accelerated significantly. These developments lead to closer international economic integration and more rapid innovation which create new challenges for IP regimes and policy making.At the same time, both the innovation processes itself, and the production activities of firms are globalizing rapidly. To be competitive in the globalized economy, the United Nations member states (UN) have to maintain, adapt and create institutional and legal frameworks conducive to the creation of knowledge and its commercialization (Adewopo, 2000).Certain rights are thus allowed to these properties which are used to control the usage.

Intellectual property rights have a key role to play in this regard. This raises challenges in terms of managing, protecting and enforcing intellectual property rights across borders. Belle, (2006) observes that countries with economies in transition face additional challenges to the challenges experienced by developed countries. They struggle to integrate into the increasingly global production networks and to find their own niche in the increasingly global value chains. To be successful, they need to assign high priority to developing their own innovative capacities, as well as their ability to absorb and adapt technological innovations from abroad, and to move up the value chain over time. Again, Intellectual property regimes have a key role to play in this regard.Like other property, intellectual property may be commercially exploited.

There are laws on intellectual properties but most people do not know about the existence of such laws while those that know about it do not know how to enforce it when violated due to ignorance or so many other factors militating against it.This situation is applicable mainly to developing countries in which Nigeria is one. Large organizations, industries and manufacturing firms are increasingly seeking intellectual property through investments and research and development. Again, this is applicable mainly to developed countries. In the third world countries, most manufacturing firms do not even have a research and development, (R&D), department. Huge amount of money is spent on research and development and these investments are meant for breakthroughs such that protection against competitors and intruders becomes necessary. In the advanced world, companies invest billions annually in research and development also to differentiate themselves from their competitors and ultimately to offer superior products in terms of quality, cost and future superiority. The result of such efforts however include both tangible and intangible asset such as intellectual property. Intellectual property is thus a significant contributor to a firm’s value.  Gassman, Zeigler, Ruther, and Bader(2012:18), believe that intangible asset can account for more than 70% of a firm’s value. It is therefore a considerable valuable asset for most companies but managers often do not fully appreciate and extract value from those assets. The problem then lies on how to manage and/or implement a plan to successfully turn this substantial market value into cash to meet needs.  Secondly, how does one significantly extract value from it so that it will contribute to a firm’s sustainability, efficiency, and general performance? It is therefore obvious that management of any organization cannot be effectively and efficiently done without protection of these properties.  To protect them, intellectual property rights are obtained as tools to use. These rights also act as incentives to invent or innovate, enhancement of technology innovation andas tools for ensuring equitable and fair utilization of genetic resources (Gassman et al.,2012).

The first industrial property protection in Nigeria was in respect of Trademarks. This was with regards to the trade mark proclamation in 1900 by which the UK Trade Mark Act was made applicable to the then Protectorate of Southern Nigeria. This was extended to the entire country following the amalgamation of the Southern and Northern Protectorates in 1914 (Wakhungu. Nyukuri, and Sikoyo, 2009)

 

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