Essay to Celebrate World Intellectual Property Day on April 26, 2021. The Role of Intellectual Property in SMEs: Taking your Ideas to Market

Essay to Celebrate World Intellectual Property Day on April 26, 2021. The Role of Intellectual Property in SMEs: Taking your Ideas to Market
2021-05-25

Small and Medium Enterprises (SMEs) are the strength of most economies worldwide, making up about 90% of national and regional Gross Domestic Product (GDP).SMEs contribute to the national economic growth through tax, poverty alleviation, export generation, and sustainable economic development by creating a valuable source of employment.  For instance, before the Covid-19 outbreak in 2020 in the United Kingdom, there were about a 5.9million SMEs with a range of 0-49 employees accounting for three-fifth of employment and around half of the turnover of its private sector. Conversely, SMEs in Nigeria contribute about 48% to the national GDP with about  17.4 million enterprises, accounting for about 50% of employment. Despite the enormous contribution of SMEs to the Nigerian Economy, persistent economic challenges hinder the sector's growth in the country, which calls for a practical reorientation, awareness and need for acquiring Intellectual property rights (IPRs) protection to enable SME take their idea to the market.

The acquisition of IPRs is essential for SMEs to protect innovation and improve their competitive advantage. IPRs consists of copyright, trade marks, patents, industrial designs, trade secrets, plant variety rights and geographical indications.

Copyright protects an original expressive piece of work against unauthorised reproduction and does not require registration but enures throughout the author's lifetime and 70years post-mortem. A trade mark is a distinctive mark that distinguishes certain products or services as belonging to a particular brand and enures for ten years subject to the payment of renewal fees and can be renewed indefinitely for a successive period of ten years. A patent is an exclusive right granted for protecting inventions, which include the outcomes of R&D activities. Patent exclusivity over an invention enures for a period of 20years, subject to the payment of renewal fees in return for disclosing the invention. However, patents may be expensive and time-consuming. Utility model, which is a patent-like right suitable for SMEs depending on their economic profile, also protects the functional aspects of a product.  An industrial design protects the ornamental aspect of a product. A trade secret or undisclosed information has commercial value since it has been subjected to reasonable steps to keep it secret by the person legitimately in control of the information. A geographical indication is a form of community IP. It protects products from a particular geographical origin that possesses a reputation due to that place of origin. Enterprises seem to attach more importance to patents and trademarks due to the increasing patent and trademark applications in IP offices.

It is important to state that many SMEs have undermined the potentials of IP in increasing their competitive advantage, which most high growth firms (HGFs) have leveraged through the fundamental roles of IP valuation and audits etc. The role of IP to assist SMEs in taking ideas to the market cannot be over-emphasised as IP enhances the market value of a product, technology transfer, exploitation, and innovation sharing. IPRs, in combination with modern trademark functions such as advertisement, quality, communication and investment, differentiates one undertaking from another, making it distinctive and distinguishable, thus creating a good clientele.

The preceding means that IPRs create a corporate identity for the SMEs using trademark and brand development strategy, preventing reverse engineering and reproduction of a right holder's product or service. IPR helps to mitigate or ameliorate wasteful investment in marketing and R&D, negotiating and bargaining licensed and other contractual agreements. IP adds value to SMEs' innovative and creative ways of putting a new and better product or service in the market.

IP plays a significant role in the growth and sustainability of SMEs as it can be instrumental for new and existing SMEs to appropriate the value of their innovation and secure adequate return on their investment and higher revenue margin. SMEs can leverage IP through commercial exploitation and prevention of reverse engineering and imitation by acquiring a patent that will further ensure the freedom of such SME to operate and engage in partnership with other companies by using the partner's expertise and resources to fill in any gap. Also, in the event of infringement, litigation or negotiating licensing agreements. For the growth of SMEs to be a potential HGF, IPRs are a prerequisite as investors are often unwilling to support or sponsor unprotected ventures.  According to the EUIPO and EPO, SMEs with registered  IPR perform better and tend to have a higher growth rate with about 40% higher revenue than SMEs without IPR. Alternatively, in internationalisation, SMEs with international  IPRs tend to outperform HGFs without international IPRs. Furthermore, based on a  2019 analysis of the EPO, the likelihood of an SME becoming an HGF is 17% higher for SMEs with one European IPR than SMEs with national IPRs only, especially for patent.

It is essential to note the high costs of acquiring and enforcing IP rights, perceptions that the IP system is cumbersome and time-consuming, and translation cost when filing an international patent application. Some stakeholders believe that the cost of getting patent protection exceeds the potential benefit of protecting their business as most inventions are unlikely to sell for twenty years—e.g., calculator wristwatches, floppy disc, GPS Devices, Dial-up Modem, etc. Favourable business conditions contribute immensely to SMEs' growth and invite HGFs to invest directly through business development or partnership. That is to say, SMEs, through direct investments of a world-class company or enterprise, will be susceptible to competition either at the global or regional market due to the direct investment of an HGF or at the national level due to their innovative nature.

However, for an SME to be competitive and remain in the market, it requires business improvement. This will enhance the SMEs' reputation and goodwill by investing in R&D, acquiring modern technologies, and developing creative/innovative and aesthetic designs to market their products. Amidst all these, information management and protection are crucial including through trade secrets or confidential agreements. Information management touches on the SME's intellectual wealth, which allows a product or process to be free from unfair competition.  IP protection prevents competitors from reproducing a right holder's product or service, thereby preventing wasteful investment in R&D, litigation and payment of damages, and corporate identity creation due to trademark and brand development strategy, sharing and licencing through contractual agreements and assignments.

For example, according to Brendan Hogan of Aerogen, "Our partners expect strong IP that the company is prepared to defend. They performed a due diligence investigation of our IP during negotiations." Aerogen is an innovation-driven company that produces a drug delivery technology in the UK with about 14 patent portfolios, bringing tangible and intangible benefits to the company. These patents are essential because they enable Aerogen to defend its technology in event of competition. The IP also support the customer's perception that they invest in such a technical product with a superior quality which has served as a valuable marketing tool used to promote its reputation.

In addition to maximising IPR for the growth, sustainability, and competitiveness of SMEs, various intellectual property offices have set out a range of resources and support for SMEs. For instance,  in the United Kingdom, IP support for SMEs include but is not limited to; Design leadership programme, which is a mentorship programme that advises SMEs on the design strategy that is suitable for their business.

Also, there is a Catapult centre and technology strategy Board that creates a mass for SME by focusing on a particular technology that can potentially go to the global market. England recently has come up with a growth accelerator initiative in partnership with the government to help SMEs achieve their goals and achieve robust and sustainable growth.  

In taking an SME to the global market, the passport to export service is also available to build SMEs to an international standard and create awareness on the stage of export concerning a particular SME.

Additionally, there is also a manufacturing Advisory service that helps SMEs grow, mitigate manufacturing waste, and offer a business review to formulate a plan for the growth of the business and improve its supply chain.

In Scotland, there is also an intellectual Assets service that assists the business to identify and manage its values. The intellectual asset service to SMEs develops a new product and service to build a brand, sale, and investment and assist in licensing the product or service.

Business innovation programme is another support programme for businesses funded by the EU that assists businesses in identifying and exploiting their intellectual property, helping businesses commercialise their products and processes, and improving efficiency in manufacturing. There is also a tax reduction for sale or licensing of certain patented inventions across the UK and the SMART Technology Strategy Board's financial grants for research testing and prototype development, technical feasibility studies, trials, and demonstration.

Additionally, there are also innovation vouchers, technology strategy board that encourages the SMEs to go for new knowledge beyond their network to grow.

Finally, other initiatives such as IP Advisory service (pro bono) and online health check initiative help SMEs to conduct a basic assessment of innovation. The online health check also provides a tool and master class on how SMEs can best protect and exploit their IPR, ranging from licensing and evaluation of IP, Non-Disclosure Agreements, and dispute resolution.

Published by School of Law, University of Aberdeen

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