Wednesday, 20 July 2016

More than words can say: how IP fares in the GAO Glossary

A fresh version of the Glossary of Terms Used in the Federal Budget Process, first issued in the United States by the Government Accountability Office (GAO) in 2005, has just been released. Most readers of this weblog, being involved in the development of business strategies that are supported by intellectual property portfolios or that seek to create them, will have little or nothing to do with the activities of the GAO. However, US policymakers, legislators and civil servants in the USPTO and elsewhere will be familiar with it, and anyone involved in tax-efficient investment and the harvesting of trade-driven profits is likely to feel the GAO's breeze.

The 20-page Glossary has four entries that refer directly to intellectual property. They are, in alphabetical order:
business fixed investment: Spending by businesses on structures, equipment, and intellectual property products, such as software. Such investment is labeled “fixed” to distinguish it from investment in inventories.
The use of the word 'products' as a qualifier is probably not intended to limit the reference to IP in such a way as to exclude 'services', since the implication is that the IP is itself the 'product'.
capital: Tangible and intangible resources that can be used or invested to produce a stream of benefits over time. The capital stock consists of land and the stock of products set aside to support future production and consumption, including business inventories and fixed capital (residential and nonresidential structures, producers’ durable equipment, and intellectual property products, such as software). Human capital is the education, training, work experience, and other attributes that enhance the ability of the labor force to produce goods and services. The capital of a business is the value of the instrument that is put at risk by the business’s owners. In an accounting sense, capital is a business’s net worth or equity—the difference between its assets and liabilities. Financial capital comprises funds raised by governments, individuals, or businesses by incurring liabilities such as bonds, mortgages, or stock certificates.
There is no specific reference to know-how and trade secrets, so it is unclear whether they fall within the ambit of IP or not. It may well be, though, that know-how which resides within the personal knowledge and experience of employees will fall within the category of "human capital".
federal investment: Expenditures by the federal government for long-lived assets that produce a stream of benefits over time. Those assets include structures, equipment, and intellectual property products (such as software and research and development).
The addition of the words "research and development" (R&D) may be significant here, in that expenditure which is designed to create IP products will still be regarded as "federal investment" if it is directed at R&D from which no IP results.
investment: Physical investment is the current product set aside during a given period to be used for future production; it represents an addition to the capital stock. As measured by the national income and product accounts, private domestic investment consists of investment in residential and nonresidential structures, producers’ durable equipment, intellectual property products, such as software, and the change in business inventories. Financial investment is the purchase of a financial security, such as a stock, bond, or mortgage. Investment in human capital is spending on education, training, health services, and other activities that increase the productivity of the workforce. Investment in human capital is not treated as investment by the national income and product accounts.
Here IP investment nestles among the tangible items in which investment is made. /This does not of course mean that IP has ceased to be an intangible asset.

So what does all of this actually mean? In the great scheme of things, probably very little. But in terms of the general incremental rise in awareness of IP, its significance, and the comfort with which those outside the IP community recognise and use the term themselves, it's good to see not only that reference is made to IP but that it is presumed to be sufficiently familiar for there to be no perceived need to add it to the list of terms defined.

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