Why SMEs Should Pay Attention to their IP Assets
By Faith Azinwi Galabe, Bsc., Msc., Patent Scientist
The Importance of IP to SMEs
When I set out to write an article on the importance of intellectual property (IP) assets in business, I thought I needed to narrow down my target audience in order to be more efficient. In most world economies, job and wealth creation comes through small and medium sized enterprises. In Sub-saharan Africa and especially in Cameroon, they make up more than 90% of all firms. So why should small and medium sized enterprises (SMEs) understand the importance of intellectual property anyway? I mean they have got enough on their plate already and a small budget to manage that, already. But what do you even mean by intellectual property? Do SMEs even have those? And the questions keep coming… But it is safe to say that every SME needs to be able to identify, protect, manage and exploit its IP assets.
So what is intellectual property?
The World Intellectual Property Organization defines Intellectual property as “creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce” – WIPO (https://www.wipo.int/about-ip/en/). In fact if you are operating any business venture, you are creating and using intellectual property. When you thought of starting your own business you chose a name for your business (tradename). As an innovative SME, you may bring or use an improved product or innovative product or business process, for which you need a utility model or a patent to protect your invention.
Sometimes, to differentiate your product from others, you may have added some decorative aspect to it which you can protect under industrial design rights. Literary and artistic works such as novels, paintings, sculptures, carvings, music and film productions are often produced by creative SMEs and protected under copyright and related rights. Softwares, databases, articles and other publications are also be protected under copyright law. You may have noticed that I mentioned different types of intellectual property which may then be protected. The fact that you have a “new” idea, invention, design, art creation does not mean that you have the right to exploit it. Before you can exploit it you must have a corresponding IP right over it or buy the license to use it.
Why should SMEs care about IP?
If you work at, manage or own an SME, and have read this far, you would have noticed that you do create and or use intellectual property. The good news about using IP is that you can make your business more efficient and profitable. The bad news is that if you are using IP that belongs to some other company without a license, you are liable to losing huge amounts of money in a litigation or disadvantageous negotiation or out-of-court settlement.
Companies have previously relied on their tangible assets such as machinery, land, financial resources, buildings and so on to evaluate their companies. Intangible assets were scarcely represented on the balance sheets. But in an increasingly knowledge-based global economy, intangible assets including know-how and intellectual property assets are finally gaining more attention. The reason is simple. If you are going to compete in the national and international market, you are not only going to need the muscle power (tangible assets), you need the brains (intangible assets) to focus your limited effort and make the most profit. Intellectual assets are unlimited whereas tangible assets can be depleted.
The size of SMEs in terms of tangible assets and number of employees is both an advantage and a disadvantage since SMEs have to compete with larger companies in national and international markets. SMEs have to constantly improve efficiency, reduce costs of production and their reputation. Of course, all these come at a cost; investment in R&D, acquisition of new technology, better management, development of creative and appealing designs as well as product and service marketing. All these endeavours would be wasted without IP protection. IP protection grants exclusivity over exploitation of your own innovative products, creative designs and brands. In the absence of this protection, larger companies with more capital can freely exploit them for their own profits without any benefits to the SMEs.
Why would I buy chocolate from company A and not company B? Consumer choice is often influenced by the quality or perceived quality of the product or service. Most consumers want a good deal for the money they spend. But what happens when company A copies company B’s brand name or when company A copies the trademark of company B’s chocolate products? Company B may lose its sales volume because their loyal customers are now buying its competitor’s chocolate because of unfair trade practices. And if company B produces lower quality chocolate, company A may also lose its good reputation in the market. Company B has invested so much in its branding and production but loses in sales for poor IP management. If you care about your reputation/brand and sales, you should definitely pay attention to your IP assets.
For SMEs in highly innovative sectors like information Technology, IP is a HUGE deal. Why would you spend millions in R&D for a product or technology that the next company can use to improve its sales. The protection supplied under patents, utility models and industrial designs grants exclusivity to SMEs and thus ability to gain revenue from their investments in R&D.
Apart from simply protecting different inventions, industrial designs, and trademarks, SMEs can also benefit from different combinations of IP protection in order to prolong exclusivity over a product or service application. For example, for SMEs in the agricultural sector, it is possible to afford exclusivity over collective marks or geographical indications. A good example is the Penja white pepper which is sold at about 14,000 FCFA (US$24) per kilo compared to as low as 600 FCFA prior to its certification. Other examples of highly priced products include Ethiopian coffee and Bordeaux wine.
Another type of protection of interest to SMEs in agricultural, cultural and phytomedicine industry is cultural knowledge. The rich culture and traditional medicine knowledge in Africa has afforded the discovery of a number of medicines as well as much appreciated artistic works. Communuties can benefit from financial returns and recognition through the protection afforded by cultural knowledge.
Proper management of IP can also help SMEs avoid wasteful investments in research and development. While it is important to carry out R&D, it is even more important to save costs on R&D for technology that has already been developed and can be accessed through IP information or through licensing deals.
It is important to notice that SMEs can exploit their IP in innovative ways to improve their brand recognition, protect their investements and improves their sales and revenue. They can also use their well-managed IP portfolio to secure loans or external funding, or trade this through licensing deals of patents, trademarks or copyrights for example.
Dayspring Law Firm advises, assists and represents IP rights holders and SMEs in the protection, maintenance and enforcement of their IP rights. We also help rights holders to negotiate and settle IP disputes, draft licensing contracts, and conduct IP assets audits for SMEs, etc. Our law firm covers all of Africa, including the AIPO and the ARIPO regions. We also facilitate protection of rights outside Africa through partner corresponding IP law firms.