Effective IP is necessary for innovation and growth

The report recognizes that innovation—the process through which new ideas are generated and successfully introduced in the marketplace—is a primary driver of U.S. economic growth and national 2 competitiveness.1 U.S. companies’ use of patents, copyright, and trade secrecy to protect their creations, and trademarks to distinguish their goods and services from those of competitors represent important supports for innovation, enabling firms to capture market share, which contributes to growth in our economy. The granting and protection of intellectual property rights is vital to promoting innovation and creativity and is an essential element of our free enterprise, market-based system. Patents, trademarks, and copyrights are the principal means used to establish ownership of inventions and creative ideas in their various forms, providing a legal foundation to generate tangible benefits from innovation for companies, workers, and consumers. Without this framework, the creators of intellectual property would tend to lose the economic fruits of their own work, thereby undermining the incentives to undertake the investments necessary to develop the IP in the first place.2 Moreover, without IP protection, the inventor who had invested time and money in developing the new product or service (sunk costs) would always be at a disadvantage to the new firm that could just copy and market the product without having to recoup any sunk costs or pay the higher salaries required by those with the creative talents and skills. As a result, the benefits associated with American ingenuity would tend to more easily flow outside the United States. The report finds that IP is used everywhere in the economy, and IP rights support innovation and creativity in virtually every U.S. industry. While IP rights play a large role in generating economic growth, too little attention has been given to identifying which industries produce or use significant amounts of IP and rely most intensively on these rights. The report was written to give policy makers and the public more information about the impacts of IP protection in the U.S. economy on which to base sound policy.