Intellectual Property Rights and Emerging Markets

Your emerging-markets assets may well include investments in intellectual property, which includes ideas that may be expressed as words, music, software, or designs. This includes books, songs, engineering plans, and logos. Some emerging markets produce extraordinary intellectual property. For example, Taiwan is known for electronics design and India is known for motion pictures. Every country should care about intellectual property, but not every country does.

If you’re investing in an emerging-market nation, you need to know its position on intellectual property. If you’re looking at a company that sells patented, trademarked, or copyrighted products, no matter where it’s located, into a market with weak intellectual property protection, that business will be worth less than if it only dealt with countries that have strong protection.

Because intellectual property exists separately from the paper it’s printed on or the files that contain it, it sometimes doesn’t seem like it really belongs to anyone. It can be difficult to protect, and laws don’t keep up with evolutions in technology. Most countries have patent and trademark laws to prevent theft of intellectual property through unauthorized copying, piracy, and knockoff products. However, these laws aren’t well enforced everywhere.

Different emerging markets have different degrees of respect for intellectual property. Some have no respect at all, which creates all sorts of problems. For example, if someone hands you a business card with his name and a company logo on it, how do you know that he actually works for that company? In some countries, using another company’s name on your card is tantamount to fraud, trademark violation, and a gross breach of trust. In others, it’s no big deal.

In some markets, intellectual property is viewed as inferior to tangible property. People may want movies from overseas, but they don’t think they should have to pay for them. Weak intellectual property may be defended as a way to give poor people access to ideas that they may not come across otherwise. They can’t afford to pay for legitimate movies, so why not just allow them to have pirated copies?

The International Property Rights Index is an annual ranking of the world’s nations based on their political and legal systems and their protections for tangible and intellectual property.

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