Small and medium-sized enterprises (SMEs) greatly contribute to economic growth and development. Through entrepreneurial innovation, imagination, and application, SMEs create new products and services that continue to grow economies globally. To keep this engine of growth running, protecting innovation is critical.
Protecting innovation starts with an efficient and effective intellectual property (IP) strategy. A comprehensive IP strategy can help SMEs become more competitive. It can also create revenue sources for their businesses. These are two major reasons why SMEs need to develop the right IP strategy for their enterprises. This article, “Developing IP Strategy for SMEs”, can help SMEs see the big picture.
Millions of SMEs have weak or non-existent IP management because they have no IP strategy.
Unlike large businesses, millions of SMEs around the world have poor internal management practices, lack knowledge of what IP regimes offer, and lack adequate protection for their IP.
The challenges SMEs face in IP protection do not stop there. The Organization for Economic Development (OECD) also observes that SMEs face four major problems as follows:
- SMEs are often too driven by short-term thinking because they want to secure immediate commercial advantage from their investments, thus less concerned with the strategic use of their intellectual assets;
- SMEs fail to adapt their operating practices and resources to current regulatory landscapes;
- SMEs lack the finance and skilled manpower to manage their IP for adequate protection; and
- SMEs have difficulties managing the large (and increasing) IP-related information flows, leading to an ad hoc approach on IP issues.
SMEs that want to succeed in business must have strategies for acquiring, exploiting, monitoring, and enforcing IP, if they want to take full advantage of their IP assets.
SMEs that want to maximize their products or services know-how should develop the right IP strategy for their businesses. To be meaningful to their businesses, SMEs must integrate their IP strategy into their entire business operations—from conception to production; production to marketing; and marketing to sales (in some cases, after-sale services as well).
According to the World Intellectual Property Organization (WIPO), SMEs need to have a basic IP strategy that includes policies on IP acquisition, IP exploitation, IP monitoring, and IP enforcement.
For SMEs to take full advantage of IP, SMEs must own the IP assets first. SMEs should take steps to acquire IP by registering their IP rights according to the legal requirements in the country they operate. Procedures for acquiring IP differ from country to country, but the procedures and principles are basically the same. In Nigeria for instance, patents are registrable for new inventions according to the provisions of the Designs and Patents Act. Similarly, trade marks are acquired by brands according to the Trademark Act. For copyright, though granted automatically based on the provisions of Berne Convention, it is the Nigerian Copyright Act that governs copyright in Nigeria. Bilateral and multilateral agreements on IP have also ensured that SMEs can expand to other countries, taking advantage of both regional and international conventions on IP.
Acquiring IP also requires planning. To plan well, SMEs need to invest in creating a comprehensive IP portfolio. And since SMEs don’t usually have fat budgets, SMEs should assess the costs and benefits of every IP they acquire.
But SMEs face three major problems in acquiring IP. First, many SMEs lack the skills required in applying for IP protection in the various IP offices they are located. Conducting searches and filling IP documents may require some level of experience that SMEs don’t have. Second, protecting some types of IP involves long processes and high costs. Good examples are patents and designs. Third, many SMEs, especially in developing countries like Kenya and Nigeria don’t understand the concept of IP and how it can help SMEs succeed.
After acquiring IP, SMEs enjoy the right to exploit the IP exclusively. There are both direct and indirect ways SMEs can exploit their IP. Direct IP exploitation enables SMEs individually exploit their products and services and compete with others in the market. This involves making or producing copies of their products or introducing their services to customers and selling them; reproducing the products or services in different types of packages; exhibiting the products or services in fairs, online catalogs, etc., and suing persons who infringe on their IP rights.
Indirect IP exploitation involves commercialization of IP assets with third parties. Here, SMEs enter contractual relationships with third parties who want to sell the product or service to make money. SMEs can indirectly exploit IP through franchising, licensing, merchandising, joint venture, or other strategic partnerships. Under any of these contractual arrangements, SMEs may choose to assign or license their registered IPs, including copyright, industrial designs, patents, trade secrets, and trademarks.
Both direct and indirect IP exploitation present some challenges to SMEs. For direct IP exploitation, though SMEs enjoy direct quality control and keep all the money from sales, there are high-costs and high-risks disadvantages. And for indirect IP exploitation, though this gives SMEs low-investment and low-risks advantages with potentially high returns on investment, there is a major challenge—SMEs lack control and invest heavily on contracting and compliance.
With a strategic IP exploitation plan, SMEs can reposition their businesses to access finance locally and internationally.
SMEs have serious challenges monitoring their IP. SMEs don’t often have the resources they need to effectively monitor their competitors. Again, if the small business owner or management has a poor IP awareness, monitoring IP may not even be in the plan. So, one way of ensuring that acquired and exploited IP is monitored is to ensure that the SME owner or management integrates IP management into the overall business operation. This means that without a sound IP management strategy early on, commercial success will be greatly limited.
SMEs can set up an in-house IP monitoring team. It will regularly consult IP databases in the jurisdiction(s) the SME operates. This will enable SMEs discover recent IP registrations. Through this, SMEs will know about any new technologies, licenses, market opportunities, competitors’ activities, and real or potential IP infringements. It is also through this monitoring mechanism SMEs can avoid infringing competitors’ IP rights.
Perhaps patents information best exemplifies how essential IP monitoring is to SMEs. Because patents are disclosed to the public when granted, patents usually provide technical information that SMEs study to know the current research and developments. WIPO lists the benefits of studying patents information for SMEs as follows:
- Avoid unnecessary expenses in researching what is already known;
- Identify and evaluate technology for licensing and technology transfer;
- Identify alternative technologies;
- Keep abreast with the latest technologies in your field of expertise;
- Find ready solutions to technical problems; and
- Get ideas for more innovation.
From a commercial-strategy point of view, patent information would help to:
- Locate business partners;
- Locate suppliers and materials;
- Monitor activities of real and potential competitors; and
- Identify niche markets.
And from a preventive point of view, patent information could also be used by SMEs to:
- Avoid possible infringement problems;
- Assess patentability of your own inventions; and
- Oppose grant of patents wherever they conflict with your own patent.
The same way SMEs can use patent information as a compass before making any business decisions about their own inventions, SMEs can also monitor other IPs- copyrights, designs, and trade marks by competitors.
If you don’t have an in-house IP team that can monitor IP for your business, I advise you contact an IP lawyer or expert who can.
One of the major reasons for monitoring IP is to enable the IP rights owner identify infringements and take appropriate actions to protect its IP. Without enforcement, SMEs risks having their IP illegally exploited by infringers and counterfeiters. So enforcing IP is crucial to SME business.
As part of their IP strategy, SMEs must put an effective enforcement mechanism in place to protect its IP rights in the marketplace.
In ‘Creating Effective IPR Enforcement Support for SMEs’, two major factors are mentioned as challenges SMEs face in IP enforcement:
- Litigation costs are usually beyond the means of many small businesses; and
- Lack of access to specialized information and research to enable SMEs identify real or potential infringements.
SMEs as IP right holders should have IP-enforcement mechanisms that are budget-friendly. It should identify any IP infringement (or counterfeiting) that violates its IP rights. It should then weigh its legal options, whether to sue for damages, initiate criminal action, or both. While infringements on copyright, design rights, patents, and trade marks generally call for civil actions, criminal actions are more appropriate for counterfeiting and piracy. SMEs may also decide whether negotiating or going to arbitration is more appropriate. Alternative Dispute Resolution (ADR) is particularly useful when the dispute is between parties in a contract that requires that parties resolve disputes by mediation or arbitration. This is increasingly becoming the preferred dispute-resolution tool for businesses around the world.
IP strategy protects SMEs’ goodwill and reputation, and business and industrial associations can also help protect members’ IP rights.
SMEs need the right IP-enforcement strategy to avoid IP disputes that can damage their goodwill and reputation. The right IP-enforcement strategy also ensures SMEs take action to get compensation for any actual damages resulting from any infringements.
SMEs may also consider forming business or industry associations that assist members in IP enforcements. These kinds of associations exist in Nigeria and they can be very useful where law-enforcement bodies don’t have proactive mechanisms for enforcing IP rights.
By Senator Iyere Ihenyen.
 ‘Innovative SMEs and Entrepreneurship for Job Creation and Growth’, Bologna + 10’ High-Level Meeting on Lessons from the Global Crisis and the Way forward to Job Creation and Growth, 17-18 November 2010, Issues Paper 1, OECD Publishing, Paris, 2010, 7.
 ‘Using Patent Information for the Benefit of Your SME’, WIPO http://it4b.icsti.su/1000ventures_e/business_guide/ipr/sme_guide_patent_info_bywipo.htm
 ‘Creating Effective IPR Enforcement Support for SMEs’, IPeuropAware and The Danish Patent and Trademark Office, Center for Strategy and Evaluation, April 2010 http://www.ipeuropaware.eu/public_documents/Creating%20effective%20IPR%20enforcement%20support%20for%20SMEs.PDF.PDF