Olena Orliuk, Director of the Ukrainian National Office for Intellectual Property and Innovations.
A whole range of factors creates a favorable environment for foreign investors, such as legislation, business climate, banking system and more. One of the most crucial among them is intellectual property protection.
Ukraine understands the importance of reliable IP protection and is actively working to build effective mechanisms. The ongoing Russia-Ukraine war, along with Ukraine’s active movement toward European and Euro-Atlantic integration, has significantly catalyzed these changes. We recognize that strong IP protection is a cornerstone of the investment attractiveness of Ukraine’s economy, which requires rapid recovery after the war and innovative development in the future. The Ukrainian IP Office takes a proactive position in this process, implementing state policy in the field of intellectual property rights (or IPR) protection and innovation activities.
In this column, I will discuss why IP protection is so important to investment attractiveness in general and share some IP considerations for business leaders looking to expand into new markets.
The Knowledge Economy Creates New Investment Opportunities
A comprehensive assessment of intangible assets, where IPR plays a leading role, is presented in the annual Global Intangible Finance Tracker report. According to the 2024 edition, a new record has been set for the value of intangible assets held by publicly traded companies worldwide—$79.4 trillion, the highest figure since the study began in 1996. Compared to 2023, intangible asset value has grown by 28%. Industry-wise, the largest share of intangible asset value in 2024 belongs to the Internet & Software sector ($7.7 trillion), followed by Pharmaceuticals ($7.1 trillion).
Intangible assets are becoming an increasingly important driver of innovation and economic growth. This is confirmed by research from the World Intellectual Property Organization (WIPO) in partnership with the Luiss Business School, which also demonstrated that over 15 years, intangible investments grew three times faster than investments in physical assets.
Investors’ Motivation
Why does the level of IP rights protection play such a crucial role in investors’ decisions? Here are the key reasons:
• Long-Term Planning: A developed IP legal framework indicates a state’s commitment to protecting innovative ideas, inventions and products in the long run. Such a policy creates a green light for investment, significantly easing strategic planning.
• Risk Mitigation: The next advantage logically follows from the previous one—minimizing the risks of theft and exhausting litigation with competitors and IP infringers (for example, pirates or patent trolls), which could arise in the event of an incomplete legislative framework.
• Resiliency: An additional risk-avoidance factor is the resilience of intangible investments during times of economic crises and downturns, as documented in the aforementioned WIPO/Luiss Business School study. That is, capital investment in assets based on intellectual property is significantly more advantageous compared to material investments—especially in the context of the market’s high sensitivity to external influences, such as a turbulent geopolitical situation.
• Strong IP Culture: Moreover, strong protection of IP rights is usually correlated with a high level of IP culture and a developed creative and innovative environment—both of which, in turn, are among the key components of a favorable business climate. Its defining characteristics include fair competition and the stimulation of high-tech enterprises actively engaged in R&D (in the fields of pharmacology, biotechnology, IT, etc.).
• Increasing Profits: The primary motive of investors is profit. And that generally grows in proportion to a company’s IP portfolio. Why? Primarily because companies that own IPRs typically outperform their competitors. This is evidenced by a study conducted by experts from the European Union Intellectual Property Office and the European Patent Office. Its findings are based on data from 119,000 firms in 27 EU member states over 10 years (2013-2022). According to these findings, owning IPRs contributes to increased firm revenue, market competitiveness and employee wages. In particular, companies with IPRs generate “23.8% higher revenue per employee” and “pay on average 22% higher salaries.”
• Simplicity And Resource Savings—Both Human And Financial: A company’s IP portfolio is often incomplete and requires improvement. Consequently, a potential investor faces three options for protecting IP rights. The first is relying on the legislation of the country where the investment object is registered. The second is developing specific agreements for each case. The third is leveraging relevant international treaties and agreements (provided they have been ratified by the “home” country of the investment object). The first and third options are far more cost-effective, but they are only available in countries with an effective legal and institutional framework. Otherwise, investors have to hire significantly more lawyers and IP specialists to draft agreements that account for all possible “pitfalls.” Not everyone is willing to overcome this additional barrier when many other attractive options are available.
Business Considerations
For business leaders considering expansion into new markets, IP protection should be a key factor in their decision-making. Before entering a new country, investors should assess its IP framework, including the strength of its legal protections, enforcement mechanisms and overall IP culture. A strong IP system reduces risks associated with idea theft, patent disputes and unfair competition.
Additionally, well-protected IP fosters an environment of innovation and sustainable business growth. Companies should prioritize markets with clear patent and trademark regulations, active enforcement of IP laws, government support for R&D and also an effective IP rights protection system. Ultimately, robust IP protection translates into greater business security and long-term profitability.
The intellectual potential of every country should bring financial returns—to individual entrepreneurs and investors as well as to state budgets. For this system to function and drive progress, it is crucial to ensure reliable IP rights protection at the state level.
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