Economic benefits are often touted as the key factor for increasing software IPR protection in a country.
Further improvements in software IPR protection in China can lead to economic benefits for the country. Among them are increased revenues from direct software sales and adjacent industries, increased job creation, more taxation revenues and increased investment.
An economic impact model was developed to quantify the various economic impacts of reducing unlicensed usage on the software industry in China, providing an overall picture of the gains to be delivered from strengthening software IPR protection in the country.
| Results from the economic model |
- A 10% decrease in unlicensed software usage could be worth US$ 15b over five years. This significant impact is built upon a cumulative increase in sales volumes of over 54m licences for PCs and servers across China.
- There would be wide-reaching impacts by increasing jobs in the IT sector by over 50,000 a year.
- There would be wide-reaching impacts by adding more than 1.5% to China's total IT GDP per year.
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Here, we take a look at the details of the tangible economic benefits1 that can arise from increasing software IPR protection (which in turn is expected to result in a reduction in the unlicensed software usage rate).
Direct software sales revenues
With an increase in software IPR protection and enforcement, a greater number of consumers and enterprises would purchase software for use legally, hence increasing the revenue generated from software sales.
Revenues from adjacent industries
As the software industry sees a positive revenue impact from the increase in software IPR protection, adjacent industries are also expected to benefit due to the “halo effect”.
Job creation
- Direct job creation
As software IPR protection increases, jobs are created to support not only the software industry, but also in areas such as IPR enforcement and IPR education. - Indirect job creation
As software IPR protection increases, adjacent industries are also expected to create more jobs to cope with the demand generated as a result of the increase in software IPR protection.
Taxation revenues
- Corporate tax revenues
As enterprises move towards utilizing legal software, IT spending on legal software would increase, and hence corporate IT spending revenues would increase. As corporate taxes are derived from the revenues generated by these enterprises, the increase in IT spending revenues results in a greater volume of tax revenues. - Consumer tax revenues
The government would generate more sales tax from consumers as a result of greater software sales from consumer purchases of legal software.
In addition, taxation revenues are also linked to the quantum of job creation. As jobs are created as a result of lower software, additional personal taxation revenues are generated in the economy.
Foreign investment
Foreign investment would be expected to increase as companies realize that an increase in software IPR protection would be beneficial to their companies’ presence in the country, both in terms of revenue and branding. This would directly impact the amount of investment into the country’s economy.
Domestic investment
Domestic investment is likely to increase. An increase in software IPR protection would result in higher barriers to imitation, giving domestic companies added incentive to invest in the software industry.
For example, domestic software companies that have shied away from developing new consumer products, due to the proliferation of unlicensed software usage in the consumer segment, may consider investing in software research and development (R&D) if software IPR protection were to increase.
1 Tangible benefits are defined as benefits for which direct economic value can be measured.
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