The Government's aim is to maximise the potential of the intellectual property-related industry but some say we're slipping behind the competition, writes FIONA REDDAN

IF IT’S AN “intangible world”, one in which assets such as intellectual property have become more valuable than traditional assets such as plants and machinery, creating an environment which is favourable to companies developing and monetising IP will be essential to future economic growth. But despite initiatives, such as a protocol which will assist efforts to commercialise IP, is Ireland’s regime in danger of falling behind?

Research would say that an effective, balanced IP protection regime helps create economic opportunities and drive competitiveness – and is a vital part of the creation of Ireland’s “smart economy”.

“It’s fundamental and critical to Ireland’s current development plan and raison d’être as a location for multinational business and in particular for developing high-tech businesses in the IT, internet and life sciences area,” says Alistair Payne, a partner with Matheson Ormsby Prentice, adding that “those sectors are fundamentally based on IP rights, and anybody who’s wanting to inwardly invest in Ireland or develop current investments in Ireland, want to know that they’re not going to be impeded at the very least, and hopefully will be encouraged”.

To date it could be argued that Ireland has been well served by the system in place.

After all, Ireland already has a lot going for it. From a tax perspective income derived from “qualifying patents” is typically deemed to be tax-free, while instruments affecting the sale, transfer or disposition of IP are also exempt from stamp duty and a 20 per cent tax credit is available for RD activities.

Moreover, the Commercial Court is seen as an efficient vehicle for protecting and enforcing IP rights.

“I can get a case on as quickly, or more quickly, than you could in London, and certainly more quickly than continental jurisdictions,” notes Payne.

According to a spokeswoman for the Department of Jobs, Enterprise and Innovation, the Government’s aim is to maximise the potential of IP-related industry in Ireland, “particularly in terms of the contribution it can make to economic growth and job creation”. In this regard the department is undertaking an IP feasibility study, which will examine what policies and structures could be put in place to make Ireland an international centre for managing and trading IP.

It is expected to be completed by the end of June, but implementation of any recommendations may need to follow soon after if Ireland is to protect its international reputation.

According to Forbes’ Best Countries for Business 2011 report, while Ireland may rank in fourth position overall it is 16th in terms of property rights, having fallen back from 12th the previous year – far above competing jurisdictions such as Singapore, which lies in third place.

Raymond Hegarty, vice-president of global licensing, Europe, for Intellectual Ventures, is disappointed at how things have played out. When he first heard of the concept for developing a smart economy back in 2008 he thought it was “inspired”.

“We had an opportunity to carve out a niche for ourselves but the problem is that we didn’t do anything,” he recalls, adding that the concept of a smart economy has since been devalued through its use every time “someone opens a back-office for a betting company”.

For Hegarty, Ireland has missed an opportunity to position itself as a leader in IP, noting that other countries such as Luxembourg and the Netherlands have since “jumped on the bandwagon”.

“Even the Basque region wants to become the global centre for IP,” he notes.

Now efforts are being made to readdress the balance, such as the Government’s recent initiative to make it easier to commercialise ideas developed through publicly-funded research through the creation of a new intellectual property protocol.

This protocol will see a standardisation in IP terms to make it easier to set up agreements between businesses and researchers, and will see the creation of a new central technology transfer office through which industry can learn about research opportunities and IP that has already been generated across the entire publicly funded research system.

However, reaction to the initiative has been mixed.

“The initiative and idea is an important step in the right direction – if the detail is right,” notes Payne, adding that the basic concept of having standardised precedents for every type of transaction only works as a bare starting point because every transaction is different.

For Hegarty the initiative “isn’t at the scale that I’m talking about”.

He wants to see Ireland be the place that “the smarts get commercialised”, and would like a focus on developing capabilities for commercialising RD – irrespective of provenance.

“There has been too much focus on RD and people in white coats. But this costs a lot of money and is a huge risk,” he says, noting that the efforts of RD can take 20 years to bear fruit, and while it should still be considered Ireland might be better off focusing on the commercialisation stage.

For Hegarty opportunities lie in the areas of valuation and monetisation of IP given that “nobody has really cracked it yet”.

This could see Ireland look to initiatives such as the Intellectual Property Exchange International (IXPI), a new financial exchange that lets companies buy, sell and hedge patent rights just like any other asset. It aims to create “a new approach to technology licensing that overcomes the inefficiency of traditional bilateral technology licence negotiations”, and so far has 27 members including Philips Electronics, Sony and Ford Global Technologies.

The exchange is a reflection of just how the value of companies has shifted towards the intangible.

Back in 1975 a study of SP 500 companies showed that just 20 per cent of the value of their market capitalisation was derived from intangible assets – by 2005 this had flipped to the extent that just 20 per cent was tangible.

“It’s become an intangible world,” notes Hegarty, adding that if Ireland wanted to get the “symbolism” of its commitment to IP right it would have 80 per cent of the board of the IDA charged with promoting intangibles.

IP is fundamental and critical to Ireland’s current development plan as a location for multinational business and in particular for developing high-tech businesses