Practical IP considerations for SMEs on their journey to market

By Audrey Yap, President, Licensing Executives Society International (LESI), Singapore

The ability of small and medium-sized enterprises (SMEs) to embrace intellectual property (IP) and all it represents, as they continue to evolve and innovate, will be key to the economic future of many industries and countries.

In these times, we cannot talk about the economy without mentioning the impact of the Covid-19 pandemic. Many companies, and SMEs in particular, have been hit hard, especially those operating in sectors involving physical interaction and travel. In most countries, SMEs make a significant contribution to the economy. They represent 90 percent of businesses and more than 70 percent of employment worldwide. So, understanding and supporting SMEs is critical.

Digitization gathers pace

A recent survey conducted by Ocean Tomo, published in LESI's les Nouvelles February 2021 edition shows that Covid-19 has accelerated the digitization of the global economy. Telemedicine, telework and online education have become commonplace during the lockdown of many countries.

Online shopping has grown exponentially and working from home, which is now "the new normal," is accelerating demand for online conference services such as Zoom, Skype, WebEx, WeChat, DingTalk and many others. These developments underscore the importance of r IP. Indeed, it is thanks to the incentives embedded in the IP system that we have been able to readily access these and other technologies and to stay in touch with each other.

IP commercialization on the radar

In the post-Covid world, IP will remain an enduring focus as companies continue to prioritize investment in business models built around digital technologies. This trend will continue to drive the economic inversion that the growing ascendancy of intangible assets represents as they displace tangibles as the key source of market value in the global economy. Ocean Tomo estimates that intangible assets now account for 90 percent of all business value.

While SMEs are creative and innovative, many forget to think about building a portfolio of IP rights to protect the very ideas that help them generate revenue and wealth.

It is most timely, then, that WIPO has chosen IP and SMEs: Taking your ideas to market as the theme for this year's World Intellectual Property Day celebrations. When nurtured and supported in the process of translating their ideas into marketable products and services, SMEs can emerge stronger and more resilient.

Commercialization of IP has been the business of the Licensing Executives Society (LES) for over 50 years. Training, education, sharing best practices and, in particular, expanding the number of IP deals that take place around the world, is what has enabled LES to progress. I am proud to serve as President of LES International (LESI), an LES umbrella organization with 33 chapters covering 90 countries.

Encouraging greater use of IP by SMEs

Getting products and IP assets to the market raises myriad issues and requires a coherent and well-oiled ecosystem; one that WIPO is well placed to influence through its work. LESI is happy to partner with WIPO in moving towards that goal.

Achieving that goal, however, will hinge, in large part, on convincing the global SME community that IP rights are central to their business interests. While SMEs are creative and innovative, many forget to think about building a portfolio of IP rights to protect the very ideas that help them generate revenue and wealth.

IP rights encompass a bundle of different categories in law that protect different aspects of an invention or a creative work. For example, patents protect innovative technologies while trademarks help protect the reputation, goodwill and identity of the producer (the source of goods or services) and ensure quality for consumers. SMEs need to understand what IP rights do and how they can help them achieve their business goals.

Building a portfolio of IP rights that bears fruit requires forethought and careful planning; the seeds need to be planted at an early stage for the trees to grow and bear fruit.

Perspectives on IP

IP rights are legally driven; they do not operate without the existence of a strong legal infrastructure at national, regional and international levels. Arguably, however, the intellectual assets that IP rights protect are people-driven, covering all products of the mind.

Some commentators argue that the potential value of technology and intellectual assets can only be fully realized if accompanied by people-centric perspectives (see People as Enablers, by Thomas Bereute et al, les Nouvelles June Edition 2020 ). The authors submit that management of the human factor is what achieves value realization through business transactions that are innovation and IP driven. Why? Because business owners, decision makers and IP managers support and complement each other throughout the process. That is why SMEs need to:

• know what IP is and have a clear idea of the intellectual assets they may possess to drive the growth of their portfolio of IP rights;
• get their people involved early and preferably in an integrated fashion; and
• protect their intellectual assets with IP rights to create a strong foundation for IP-driven commercial transactions.

Building a portfolio of IP rights that bears fruit requires forethought and careful planning.

Commercialization means knowing how to become “IP attractive”

In today's hyper-competitive global market, it isn't enough to invent great breakthroughs or useful products; businesses need to understand the value of what they have, how to sell their intellectual assets, and indeed, how to price them.

A quote from Douglas C Engelbart, computer pioneer and inventor of the mouse, underscores the importance of understanding the market and when and where to deliver a product. He wrote:

“Stanford Research Institute patented the mouse but they really had no idea for its value. Some years later I learned that they had licensed it to Apple for something like USD 40,000”.

What sum might Stanford Research Institute have been able to command from Apple with a better understanding of the commercial potential of its invention?

Building a portfolio of IP assets: an important first step

Interestingly, the main way for companies to get the support they need to take their ideas to market successfully is to build up a portfolio of IP rights. If there are no IP rights to begin with, then a company is unlikely to attract investors (who need assurances that they can make a return on their investment) or licensees. A savvy licensee will ask, why pay for something when it can be copied or reproduced for free?

When commercializing IP assets, it is important to remember that filing an application for IP rights is just one, albeit important, step in the process. Commercialization goes far beyond owning a patent or a trademark. That is why it is so important for SMEs to develop cohesive IP strategies that put IP management systems into place and that anticipate the need, as required, for the valuation of their IP portfolio.

When licensing technologies from others for use in their company, especially when budgets are tight, SMEs need to have a clear understanding of the technology they are licensing or have acquired.

Using IP to bridge innovation gaps

The journey to market is one that it is best not to undertake alone. There are a huge number of commercial opportunities out there. A company's ability to take advantage of them often means working with others to resolve technical problems and bridge innovation gaps.

A willingness to collaborate with others and to exchange technologies with them through cross licensing deals, for example, can enable businesses to scale up their operations.  Some may query the value of open innovation, but it has its role in the emerging IP ecosystem that enterprises need to work and play in if they want to grow. How entrepreneurs harness open innovation is part of the all-important IP strategy that all businesses need to have in place when taking their ideas to market.

A more integrated approach to IP can yield dividends

Entrepreneurs often worry about “speed to market” and push for quick development of products and services; a concern that is further compounded by the breakneck speed of technological development.

A deeper appreciation of the need for rapid innovation will help smaller businesses develop a more integrated approach to securing access to the technology they require to remain, or indeed, excel in the market.

In this context, the question of whether to license a technology (from another company), either to advance in-house product development or to monetize existing IP assets, becomes a strategic decision. That's what large companies like Apple, Facebook and Google do. Why shouldn't SMEs do the same? Owners of smaller businesses need to start asking these same questions. But that's just the beginning. When licensing technologies from others for use in their company, especially when budgets are tight, SMEs need to have a clear understanding of the technology they are licensing or have acquired. This is crucial.

Renewed focus on technology transfer

One remarkable outcome of the Covid-19 pandemic is that governments around the world, especially those with limited R&D capabilities, are starting to encourage technology transfer for their local companies.

In Transfer of Technology: UNCTAD’s Code of Conduct (International Lawyer Vol 19. No. pp 689-707), Pedro Roffe defines technology transfer as:

“The transfer of systematic knowledge for the manufacture of a product, for the application of a process or for the rendering of a service. Transactions involving the mere sale or the mere lease of goods are specifically excluded.” (Emphases mine)

Many countries are now seriously looking into this to see what needs to be licensed to create local capabilities, spur business growth and support economic recovery.

WIPO's continued engagement with IP offices and other stakeholders around the world to strengthen innovation and IP ecosystems is extremely important and to be applauded.

Singapore's drive to enhance its innovation capabilities

In Singapore, where I am based, the national IP Office (IPOS), on whose Board I sit, takes technology transfer very seriously. Indeed, it is at the heart of the national master plan to guide Singapore towards becoming a Global IP Hub in Asia and to enhance the country's innovation capabilities. As a result of significant investment in developing the country's innovation ecosystem, Singapore consistently ranks high in various independent innovation indexes, including WIPO’s Global Innovation Index and Bloomberg’s annual equivalent.

These rankings underscore the co-relationship between technological change and economic impact. Notwithstanding the significant progress made in its innovation journey, Singapore and other similar countries continue to face challenges, including in terms of their capability to understand and absorb the more complex aspects of technology transfer. It is important, therefore, to continue to drive efforts and to implement policies that effectively address these challenges. Such a focus will help ensure that investments made in R&D, innovation and technology transfer generate economic and social value.

Building strong local companies, especially SMEs, in core sectors is crucial for all countries.

SMEs can steer their own IP journey

For their part, SMEs can help themselves by working with professionals who understand how to transfer technology cost effectively. They can also support their interests by joining networks, such as publicly funded research institutes, universities, SME associations or even a group like LESI, which is engaged in the business of educating and training businesses to advance IP globally.

Building strong local companies, especially SMEs, in core sectors is crucial for all countries. Helping SMEs understand the underlying value of the IP assets they create and the importance of protecting and effectively managing and using them to generate revenue or to scale up, is important work that needs to continue across the globe.