Some Issues of the Estonian Innovation and Intellectual Property Policy

Author:Aleksei Kelli
Position:Magister iuris, Lecturer of Intellectual Property Law, University of Tartu

1. Introduction - 2. Interrelation of innovation and intellectual property - 3. Implications of a specific innovation context for the design of IP policy - 4. Proposed areas of focus for Estonian IP policy - 4.1. State-level IP policy - 4.2. A need to enhance the IP competencies of Estonian entrepreneurs - 5. Conclusions


Aleksei Kelli

Magister iuris, Lecturer of Intellectual Property Law, University of Tartu

Some Issues of the Estonian Innovation and Intellectual Property Policy

1. Introduction

The global economic trends characterised as the transformation into a knowledge-based economy have had remarkable implications for entrepreneurs and the society at a larger level. The Estonian business environment is no exception. The main consequences of this transformation are that knowledge is perceived as a valuable commercial asset and innovation has become a core process for value creation within a knowledge-based economy and a means for tackling social and environmental problems. Since protection of intellectual property (IP) constitutes an essential condition for innovation, the transformation has had an impact on the IP system as well. As a result, the enhancement of innovation should be regarded as a central IP system objective. Therefore, the value of an intellectual property system lies in its ability to foster innovation.

In this article, the author analyses some aspects of innovation and intellectual property policy that need to be considered to support innovation in Estonia. For the purpose of this article, innovation policy refers to actions taken to extend and accelerate innovation. Intellectual property policy forms an integral part of innovation policy.

The author suggests that innovation and IP policy is country- and region-specific, which means that almost every country and region has its unique conditions that need to be considered in designing innovation and intellectual property policy measures. The article focuses mostly on some essential aspects of Estonian IP policy.

The paper addresses problems related to IP protection at two levels: the first level concerns state-level IP policy, and the second level of discussion addresses actions that Estonian entrepreneurs may be able to take to enhance their IP competencies and foster innovation.

The author presumes that the profile of Estonian entrepreneurs should be considered in the design of the state-level IP policy. The author suggests that utility models and trade secret protection are very useful IP tools for Estonian entrepreneurs and therefore it would be appropriate to review critically the existing regulations on utility models and trade secrets.

The author recommends that, in addition to state-level IP policy measures, there must be entrepreneurs developing their IP competencies. Entrepreneurs could start with the adoption of internal IP regulations that address issues such as ownership of IP created during employment, strategies for managing IP, and the like.

2. Interrelation of innovation and intellectual property

The term 'innovation' is derived from the Latin word innovare, which means 'to renew'. As a rule, policy documents and legal acts do not provide an exhaustive and universal definition of innovation. For instance, in EU documents, the terms 'innovation' or "innovation in a broad sense"2 is used. The Estonian Research and Development and Innovation Strategy3 (more simply referred to as the Estonian innovation strategy) describes activities that could be summarised as innovation: "Innovation includes implementation of the latest results of scientific research as well as existing knowledge, skills, and technologies in an innovative manner."4 Section 2 of the Organisation of Research and Development Act5 defines innovation as "the utilisation of new ideas and knowledge in order to implement innovative solutions". The definitions referred to seem to exclude knowledge creation by means of innovation. The author argues that knowledge production constitutes an integral part of innovation. It is not reasonable to assume that knowledge comes from somewhere else and innovation means only its implementation. For the purpose of this article, the author defines innovation as a process that includes both creation of knowledge and its subsequent utilisation.

Objectives of innovation can be analysed from different perspectives. The most visible and noticeable outcomes of innovation are new products and services. The purpose of innovation, however, is not limited to the creation of commodities. Innovation is also believed to have an impact on the economy. Therefore, it has been suggested that innovation is "one of the most important factors in economic competition"6. It is possible to place innovation in an even broader context by arguing that it generates wealth and tackles social and environmental problems. Supporting innovation is seen as a way to surmount challenges (problems related to ageing populations, environmental issues, mounting competition, etc.) facing Europe. At least the European Commission believes so: "innovation in a broad sense is one of the main answers to citizens' material concerns about their future"7. Not surprisingly, innovation is sometimes thought to be one of the factors influencing the world's future trends8.

In view of the complexity of the objectives of innovation and the fact that innovation policy can be implemented on different levels (e.g., regional, country, sector, and industry levels), it becomes evident that innovation policy encompasses a variety of components. Therefore, in order to enhance innovation, it is necessary to invest in human capital, improve the legal framework, stimulate business research, facilitate knowledge transfer from academia to industry, etc. Depending on the implementation levels and specific objectives, the role and importance of innovation policy measures vary. However, the author assumes that protection of intellectual property constitutes an essential condition for innovation.

Intellectual property is traditionally defined as legal rights resulting from intellectual activity9. The traditional approach places IP in a legal context. The role of intellectual property, however, has changed. Knowledge as a subject of IP protection has become a valuable commercial asset to many firms, other organisations, and individuals. This development has shifted the emphasis from the legal aspect of IP (that is, IP as legal rights) to its economic aspect (IP as a commercial asset). Consequently, intellectual property is considered rather more as an economic asset than in terms of legal rights. The author argues that the contemporary notion of IP should incorporate both - the economic (IP as an asset) and legal (IP as rights) aspects10. Without any doubt, it is important to acknowledge the economic nature of intellectual property and its interrelation with innovation. At the same time, the legal nature of IP is no less important. The great relevance of the legal aspect of intellectual property is caused by the fact that knowledge by nature is a public good11. This means that knowledge does not have any attributes that could facilitate the exclusion of others from exploiting it. In the absence of an adequate protection, any investment made in creation of new knowledge is prone to become lost. Since the economic system does not offer sufficient control mechanisms to protect the valuable knowledge generated, it is up to the legal system to fill the gap. The IP system provides legal tools to control the utilisation and commercialisation of the knowledge created. Analysing the essence of IP, one can state that, despite the fact that the utilisation of knowledge takes place in business settings, the control over it is established by the legal system. To sum up, the term 'intellectual property' in this article refers to a combination of the economic (an asset) and legal (rights) concepts. To emphasise the legal aspect of intellectual property, the author uses the term 'intellectual property rights' or the abbreviation 'IPRs'.

The EU innovation strategy is based on the assumption that protection of intellectual property is a sine qua non for innovation12. It is obvious that profit-oriented actors are interested in securing their investments13. Intellectual property is certainly a suitable tool to package some results of innovation. Therefore, the European Commission assumes the existence of a correlation between the use of IPRs and good innovation performance14.

In order to analyse correlation between the use of IPRs and innovation performance, one must first highlight some key elements. The mere existence of a large number of IPRs does not necessarily represent outstanding innovation performance. Still, some policy documents prioritise formal indicators such as the number of patents granted. For instance, the strategy document 'Estonian Success 2014' sets forth the following objective: "[T]he number of patents registered per 100,000 inhabitants in Estonia will be multiplied by 10"15. The author personally has doubts regarding formalistic goal-setting. A high number of IPRs neither guarantees wealth generation nor certifies innovation performance as excellent. Furthermore, it is also useful to take into account that the number of IPRs could be influenced by other factors and trends. For instance, K. Hussinger hypothesises that "the increase in patents rather is motivated by their heightened strategic value"16. In other words, the growing use of IPRs is not necessarily a result of improved innovation performance and a substantial rise in R&D investments; it could reflect a change in business behaviour. The underlying cause of the changed behaviour might be that business actors have started to regard knowledge as a valuable asset that has to be protected. This line of reasoning is supported by Estonian economists, stating that, among other things, "[t]he growing...

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