Creative Destruction

Jose Eduardo T. Genilo

In the book Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James A. Robinson, the authors argue that the prosperity of a nation is not primarily based on geography, climate, or culture. The authors, rather, point to the existence of inclusive political and economic institutions, as opposed to extractive institutions, as the primary aspect that will foster the prosperity of a nation.

According to the book, an inclusive political institution is where “[political] power [is] broadly distributed in society” thus constraining its arbitrary exercise. This then results in inclusive economic institutions. Inclusive economic institutions are “those that allow and encourage participation by the great mass of people in economic activities that make best use of their talents and skills,” featuring, among others “secure private property” and a system that permits the entry of new businesses.

For a true inclusive institution and sustained prosperity, the authors claim that “creative destruction” must be allowed. Creative destruction is where new technologies create economic wealth although the same may disrupt existing businesses. Recent examples can be seen in internet-based businesses such as ride hailing apps which caused disruption to the public transportation business, sharing economy schemes for room rentals that disrupted the hotel industry, and online marketplaces which disrupted the business of shopping malls and physical stores.

In the Philippines, creative destruction is fostered in part by its patent system which allows anyone that has created an invention to enjoy its economic fruits. Thus, an inventor, even if he does not have capital to go into business, can “secure his private property” and enter into “new business.”

An invention, if it is new, novel, and industrially applicable can be registered with the Intellectual Property Office. Once registration is granted, exclusive rights are acquired by the registrant. These exclusive rights may involve the sole right to use, manufacture and/or import the invention. Additionally, the patent registrant may opt to have another person use, manufacture or import his patented invention through a license agreement, subject to a fee.

Further efforts to encourage research and development towards the creation of inventions, is seen in the Philippine Technology Transfer Act. This law provides a mechanism for government or private entities to enjoy patent rights of the development even if the invention was facilitated by government funding.

The Intellectual Property Office, with assistance from the World Intellectual Property Office and World Economic Forum, also offers an Inventor Assistance Program. The program seeks to ease the financial burden of inventors in securing patent registration by referring them to local patent lawyers.

Apart from securing patent registration, the enforcement of patent rights has also been given much importance. This is seen in the Supreme Court’s recent issuance of the 2020 Revised Rules of Procedure for Intellectual Property Rights Cases. The new rules provide ways to promote the expeditious resolution of intellectual property cases such as the submission of position papers, memoranda and draft decisions, among others.

While efforts to promote research and development as well as the protection of patent rights over inventions have increased, the percentage of local inventors that actually filed patent applications in the Philippines is still small. The Intellectual Property Office lists the following number of filings from local inventors: 293 in 2015; 248 in 2016; 284 in 2017; 469 in 2018; and 434 in 2019; a small number compared to the more than 3,000 average number of applications by foreign applicants.

The number of local filings jumping in 2018 and being sustained 2019 though, provides hope that there is already an increased activity in research and development, as well as awareness on patent laws. With continuing efforts of the government to promote patent protection, it is expected that local patent filings will continue to increase and, perhaps, the next technology to give rise to creative destruction will originate from a Philippine patent.

The views and opinions expressed in this article are those of the author. This article is for general information and educational purposes, and not offered as, and does not constitute, legal advice or legal opinion.

Jose Eduardo T. Genilo is a Partner of the Intellectual Property Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW) located at Bonifacio Global City, Taguig City, Metro Manila, Philippines.

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