IP protection: a valuable tool for SMEs’ economic upscaleFavour Owhuvwie
Small and medium-sized enterprises (SMEs) are the lifeblood of any growth-driven economy. They play a huge role in job creation and economic development. SMEs constitute about 90% of the world’s businesses and generate up to 40% of national income in emerging economies. Despite their enormous contributions to the economy, SMEs are plagued with several issues and access to finance sits at the top of the lists of challenges facing SMEs. SMEs are less likely to obtain loans from the bank than their larger counterparts as they may lack collateral to access such credit facilities. In the face of a global pandemic, the situation is worse for SMEs.
While SMEs are fraught with their challenges, the situation is not entirely hopeless. Many entrepreneurs fail to harness a vital aspect of their business that can solve some of the challenges they encounter. This vital aspect is intellectual property.
SMEs and Intellectual Property
Intellectual property (IP) is an aspect of a business that every entrepreneur must consider from the very onset of the business as it is one of the most valuable assets for any business. Many entrepreneurs make the mistake of believing that since their business is just kicking off or is small, they do not have to worry much about protecting their IP.
Some others are ignorant of the fact that their businesses have assets worthy of IP protection. Another reason entrepreneurs do not consider IP from the onset is that “IP is too expensive” or that IP protection can be considered some other day. The below quote although said in respect to trademarks describes the disposition of many SMEs’ owners:
“We hear this from business owners all the time: ‘Oh, we’re too small. It’s too early. We’re still thinking. We’ll think about trademarking once we grow bigger…’ Let me be blunt with you, this is utter nonsense on so many levels. You must not make trademarking decisions based on where your business is today. You must make these decisions based on where your business will be if it’s as successful as you hope it might become”. (The Ultimate Insider’s Guide to Intellectual Property)
Beyond being a legal right, IP is a business asset and tool for organizational and commercial advancement. SMEs ought to prioritize securing their IP rights and regarding IP as a tool for making more money. According to Julian Crump, President of the International Federation of Intellectual Property Attorneys (FICPI), “SMEs that apply for patents, trademarks or designs are more likely to grow quickly and succeed than those that do not.” Using IP as a money-making tool is achievable when an organization takes IP seriously and includes it in its overall business strategy.
Identifying your Intellectual Property
IP extends to several intellectual/intangible assets of a business. These may include literary, musical, and artistic elements of a business that are protectable by copyrights such as client lists, customer databases, manuals, brochures, magazines, and explanatory materials for customers’ benefit. The brand identity (logos, slogans, etc) and goodwill of the business are protectable by trademarks. Other aspects of IP that affect SMEs include designs, patents, trade secrets, etc, and are so valuable that when converted to financial terms are capable of raking in capital for the business. If you have difficulty in identifying your IP, seek an expert legal opinion.
Protecting your Intellectual Property
- Integrating IP into your SME’s overall business strategy. This motivates the business owner or entrepreneur to manage their IP with the same seriousness as they would handle funding, infrastructure, etc, and actively take steps to protect and maximize their IP.
- Register your IP with the relevant agencies. IP such as patents, trademarks, and industrial designs in most jurisdictions require registration for protection to avail. For copyrights, depending on the jurisdiction, registration may not be necessary. Using the Copyright © symbol on your copyrightable works is enough protection.
- Take stock of your IP portfolio by conducting an IP audit. Doing this would help you determine aspects of your business that require IP protection. This will also keep you informed as to what IP to commercially exploit.
- Be sure that you own the IP in your business. This is achieved by conducting an IP audit. One area small business owners overlook is the aspect of website development. There is the misconceived notion that since they have paid for the web design, they own all the intellectual property rights to that website. However, that is not the case as the general rule is that rights in works contracted to independent contractors are owned by the contractors unless the parties agree otherwise by a written agreement. Also, you want to be sure that none of your materials including your website are infringing on the IP rights of others.
- Seek expert legal help as it may save you from more costs in the future. Getting sound legal opinion or assistance from the onset of your business is very necessary as this would help you understand the appropriate IP protection measures for your business and its commercial potential concerning IP.
- Use non-disclosure agreements (NDAs) to protect your IP when dealing with others, including in your employment contracts clauses that prevent your employees from disclosing salient aspects of your business, and protect your IP during a pitch.
- Keep your idea a secret until you have had it protected. A secret shared is no longer a secret. Where your business relies on or has trade secrets, take adequate measures to maintain secrecy.
Failure to consider IP early leaves room for rivals to infringe on IP which may be inimical to the progress of your business.
Taking your ideas to the market
While it is highly recommended and commendable that SMEs protect their intellectual property, it is also very important that they maximize the commercial potentials of their IP. Intangible assets of a business, IP being one of such, make up about 30-40% of the profit margin of most businesses today. Also, IP “should be seen as a power[ful] tool for economic growth instead of an obscure legal concept.”
Competitive advantage and larger opportunity in the marketplace
A foremost way of benefiting commercially from an SME’s IP is protecting the IP. A lot about protecting IP has been advocated in the earlier part of this article. Trademarks are one of the most important intellectual property rights for SMEs. Protecting your trademark helps to preserve your brand image, as your consumers/customers are not confused when they encounter your goods or services in the marketplace. Also, by registering your trademark, you reduce the risk of another business hijacking your brand prestige.
By preserving your trade secrets, you can continuously derive economic benefits from the exploration of such secrets, as competitors are not privy to what makes your business tick.
Assignment simply means the sale or transfer of one’s rights or interest in a thing. An SME’s owner can make a profit from their IP by assigning their IP rights in a particular creation, brand, or invention in return for revenue. In 2005, Chad Hurley, Steve Chen, and Jawed Karim created the video-sharing platform YouTube. In 2006, Google purchased YouTube for US$1.65 billion and now earns the same amount in monthly revenue.
Licensing of IP allows IP rights holders to license out their IP based on agreed terms in exchange for revenue. Licensing may also provide the business owner access to new markets and increase consumer awareness of their goods and services. Licensing may take the form of exclusive, non-exclusive, and sole licensing.
Franchising is particularly very attractive in the aspect of trademarks. Here, the franchisor whose brand has gained prominence or reputation among consumers grants the franchisee rights to market their products or services using the franchisor’s brand. A franchise agreement would spell out the terms of the contract. It’s a win-win for the franchisor as they acquire revenue just by letting another use their brand.
Access to funds
Leveraging IP to access venture capital and other financing sources is a viable option for SMEs’ owners to profit from their IP. Having a viable IP portfolio attracts and boosts investors’ confidence to invest in your business.
SMEs play a huge role in the economic development of nations. However, financing is a major challenge plaguing SMEs, with many of them not surviving the first five years of operation. Harnessing IP for business advancement should not be overlooked by entrepreneurs and business owners. The benefits are enormous.
Seek expert legal opinion on how to benefit from your IP rights.
Disclaimer: This article is for educational purposes only, and should not be construed as legal advice. Please consult a lawyer for tailored legal advice.