proportion than any other region in the world included in the survey.<sup>5</sup> Developing nations must balance incentives to file patents with threshold standards for patent quality in order to truly capitalize on IP as a value generator.

Overall, the degree of IP ownership in middle-income and high-income countries is gradually equalizing. Low-income countries remain behind but they are catching up. Though the gap in patent ownership is starting to close for technologically sophisticated developing countries, the gap in commercialization remains significant.

# **A Growing IP Commercialization Divide**

An important consideration affecting patent commercialization potential is that of patent quality. China’s ecosystem of incentives has drastically increased the total number of patents filed by residents. Yet, this growth has not resulted in a proportional rise in licensing revenue. The commercial value of a patent depends on its quality, which in turn relies on patent validity in terms of its claims (Noveck 2006), but also includes important measures such as forward citations, scope of claims, prior art, extent of patent family, and applicable territories. Poor quality patents will hinder the ability to monetize them because, whether or not a country has suitable policies, there will be no market demand for patents with little commercial value. The USA and other developed economies have had significant difficulties with patent quality, which result in litigation costs exceeding returns from patents and inhibit the development of upstream innovations. As emerging economies such as China, India and Brazil strengthen their IP systems, they have adopted more stringent standards towards qualification criteria such as novelty and disclosures of origin (Reichman 2009). In this manner, they hope to avoid the issues that have arisen in developed economies. This example suggests that, in implementing IP regimes, developing countries should look to the experience of developed economies in order to streamline the process and achieve the desired results.

It is not always the size of the patent portfolio that matters. For example, China ranks fourth worldwide in terms of patents for green technologies according to a recent analysis of patent applications filed in 76 countries between 2000 and 2005 but it falls to tenth rank when the analysis is restricted to patents filed internationally (i.e. _claimed priorities_ in more than the home country). Brazil also ranks eleventh and then plummets to thirty-first according to the same criteria (Dechezleprêtre et al. 2011). Some patents are also simply less valuable than others in terms of their commercial potential. The fact that Kenya and Botswana pay more in royalties than they receive could suggest both countries simply own IP of lower commercial value or technological relevance. This raises important questions as to why the patent application was filed in the first place. Again, the critical issue of patent quality arises. However, assuming adequate patent quality, the situation suggests the necessary skills and infrastructure to monetize IP internationally do not exist in Botswana or Kenya.

The IMF data provides a rough picture of global monetary flows associated with IP but it is inadequate to make concrete statements regarding the state of each national IP system in detail. Yet, the figures do suggest that the majority of nations struggle with IP commercialization. The

> 5 http://www.economist.com/node/17257940

9