WIPO Study: Informal Economy Important To Developing Country Growth, But No IP07/06/2013 by Catherine Saez, Intellectual Property Watch 2 Comments Print This Post During a recent meeting of the World Intellectual Property Organization Committee on Development and Intellectual Property (CDIP), a study on innovation in the informal economy was presented by the organisation’s secretariat. The exercise was conducted in an effort to better understand how innovation occurs and how intellectual property is relevant in that context. The Conceptual Study [pdf[ on Innovation, Intellectual Property and the Informal Economy was presented on 15 May during the 11th session of the Committee on Development and Intellectual Property (CDIP), which took place from 13 to 17 May. The study was prepared by the WIPO secretariat in collaboration with Jeremy de Beer, associate professor, Faculty of Law at the University of Ottawa, Canada, and Kun Fu, research associate at Imperial College, London.According to the study, it is part of a project developed by WIPO’s Economics and Statistics Division, implementing WIPO Development Agenda Recommendation 34.Recommendation 34 states: “With a view to assisting Member States in creating substantial national programs, to request WIPO to conduct a study on constraints to intellectual property protection in the informal economy, including the tangible costs and benefits of intellectual property protection in particular in relation to generation of employment.”The study offers a conceptual framework based on three country case studies conducted in Ghana, on herbal medicines, Kenya, on metal manufacturing, and in South Africa, on the chemical sector.According to the study, as presented to the CDIP by Sacha Wunsch-Vincent, senior economic officer in the WIPO Economics and Statistics Division, little is known about how innovation occurs and how IP is, or could be, relevant to the informal economy. The goal of the project, he said, was to improve the understanding in this field, and “in a subsequent step, to offer policy guidance to delegations on this matter.”The study found that a number of sectors are involved in the informal economy, he said, such as goods, services, agricultural or manufacturing activities. Beyond economics, there is a strong social dimension in the informal economy, which is an important contributor in terms of growth and employment to most developing countries, he added.A lot of innovation in the informal economy is taking place in an environment of scarcity and constraints, he said, where people are trying to overcome a number of barriers to innovating. Innovation in that context is rarely driven by formal research and development, but more by using and adapting existing knowledge to circumvent problems and provide solutions answering customers’ needs and requests.No Formal Protection of Innovation in Informal EconomyKnowledge is not really being protected in a formal way in the informal economy, and there are a lot of limitations in terms of how skills and technologies can be upgraded, according to Wunsch-Vincent.In general, the economic literature shows that there are three different instruments to appropriate innovation, he said. These are: informal means, such as being first on the market, make a product complex to imitate, or have strong after-sale services; semi-formal means, like secrecy; and formal forms of appropriation, such as patents or trademarks.The informal economy relies mostly on semi-formal or informal means of protection, he said.Among limitations to formal means of protection in the informal economy are the relevance and appropriateness of the IP system in that context, he said, citing as an example the need to establish that an invention is novel enough for it to be applicable to the patent system. Another limitation is that actors in the informal economy appear to lack knowledge about their options. They also face high costs, such as those implied by travelling to the capital and getting access to an attorney.The study found that very little uniformity exists among countries in terms of policy framework targeted at the informal economy, Wunsch-Vincent said, adding that no active policy approaches to foster innovation and IP in informal economies was uncovered. However, he said some countries have realised for years that the informal economy is a useful contributor to overall growth and that they should instil more innovation in that field, citing South Africa, Kenya, and some countries in Latin America.Suggestions for new policy frameworks for innovation in the informal economy could include improving infrastructures, facilitating access to finance and to market, he said. An important point, said Wunsch-Vincent, is how innovation systems in the informal economy can be fostered and how to improve linkages between formal and informal actors.In many developing countries, he said, up to 80 percent of formal R&D happens in public research institutions. “But nothing happens to this R&D” because there are no companies that can benefit from this initial research and transform it into some innovation that will impact on growth and employment, he said.On IP, there is a strong need for better needs assessment as to where and how IP can be relevant and how hurdles can be overcome, he said, as “there is a lot of scope for improvement.”The country studies will be completed over the summer, he said, which is expected to lead to some redrafting of the conceptual study as more information will be available, and this will be presented at the next session of the CDIP. 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