Fraunhofer Working Paper published: "Shortcomings on the Market for Intellectual Property"

Qualitative study among intellectual property service providers on various problems related to intellectual property markets

As the market for intellectual property and related services grows faster every year, its deficiencies become more visible each day. Transparency over IP ownership is scant, access to IP services seem prohibitive costly, their quality doubtable, illiquidity remains a persistent problem and the global IP law is highly fragmented. Many potential market participants are still unaware of or unwilling to exploit the opportunities of well managed IP portfolios.

IPR_market_smallBy consequence, many IP are unused, with estimates ranging from 15 to 30% overall, and investment in IPRs lackluster, leading to a poor quality of patents of which a shocking 50% are invalidated in the courtrooms. Such gloomy outcomes further raise the hurdles to an efficient IP market system.

In a recent study, Liina Tonisson, Raymond Millien and Lutz Maicher from the Fraunhofer Center for International Management and Knowledge Economy investigate the causes for IP market malfunctions and how they relate to each other. Through analysis of prior research and expert interviews with employees of global IP service providers they developed a causal network that highlights the interplay of malfunctioning market elements and provides a tool to uncover how improvements in one area might lead to improvements in other parts.

The core problems of the IP market form a golden triangle, where inefficiency, lack of transparency and illiquidity enhance each other and contribute to the underdevelopment of IP culture, ie. the awareness of and unwillingness to integrate IP in business strategies. Long time spans from application to grant of a patent, underwhelming quality of the patents and lacking IP education together with a highly fragmented and at times contradictory legal environment exacerbate shortcomings in the IP culture, resulting in a huge amount of IP that is neither actively nor passively used. This is enhanced further by the difficulties with valuing IP and often poor IP services quality.

These malfunctions make activity in the IP market a costly endeavour, hurting especially SMEs and individual inventors that nonetheless are together by far the largest contributors to innovation. Tonisson, Millien and Maicher find that improved IP service quality might be the key to address this conundrum. As the IP service quality affects most of the other malfunctioning areas, improving the value of services and access to them is likely to instigate improvements in other areas and increase the use of IP for the benefit of the whole economy.


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