An introduction – understanding the dual concepts of intellectual property (IP) and small and medium scale enterprises (SMEs)
The integrality of SMEs to a country’s economic development and aspirations cannot be overemphasized. In the Nigerian context, for instance, the National Bureau of Statistics estimates that SMEs contribute 48% of the gross domestic product (GDP). The Central Bank of Nigeria broadly defines an SME as a business with a turnover of less than N100mm per annum and/or less than 300 employees.
The World Intellectual Property Organization (WIPO) recognizes IP as a category of property (intangibles). These intangibles are creations of the mind, which include inventions, literary and artistic works, designs, symbols, names, and images used in commerce.
Categories of IP that are protectable are artistic and literary works, musical works, computer programs, and advertisements. Symbols, logos, names owned and used by businesses are also categories of IP that can be protected by trademarks or service marks. Industrial designs protect ornamental or aesthetic aspects of an article which may consist of three-dimensional features like the shape of an article or two-dimensional features like patterns, lines and colors.
How SMEs can leverage IP as a driver of commercial growth
IP is important in the day to day running of any business. It is therefore no surprise that developed and developing economies have taken keen interest in the protection of IP assets. If well protected and managed.
- IP can act as a catalyst for economic development, as well as a driver of commercial growth for the concerned entity. If unprotected, it may lead to intellectual property infringements, loss of customers, finance, goodwill, and revenue for the concerned business.
- IP can be traded, licensed, and sold by an SME, thereby creating additional revenue streams for such SME. Trademarks, service marks, industrial designs, and confidential information such as recipes, business methods and processes, patents/inventions can each be licensed in consideration for periodic royalty payments to the licensing SME.
- An SME’s IP assets also make such an SME attractive to prospective investors. This is because IP assets increases the worth of a business as it hunts for investment injection, as such, IP assets can be valued and listed as part of the assets of an SME.
- A well-managed IP portfolio enables an SME to obtain high returns on investments made on its assets. IP, according to the Institute of Entrepreneurship Development, helps stimulate innovation and growth, and assists in the generation of brand visibility, which can in turn be further translated to increased profitability for the concerned SME.
- IP helps an SME to establish enterprise and business identity through branding strategy. IP also protects innovations through patents, utility models and trade secrets. This is in addition to the IP’s capability to assist in preventing competitors from imitating an SME’s products or services.
- IP enables an SME to have exclusivity over the exploitation of its innovative products, creative designs, and brands, whilst further creating an adequate incentive for investing. In short, IP, if adequately leveraged and well-managed, adds value at every stage of the innovation and commercialization process, WIPO has, in publications, made no secret of the fact that IP assists SMEs to market and build their innovations, position themselves competitively for trading in the global markets and access knowledge, networks, partners, and new commercial pathways.
Channeling IP for commercial exploitation: observed challenges SMEs face
In Nigeria, it is often the case that SMEs underutilize their IP. Challenges faced by SMEs in IP management and commercial exploitation are wide-ranging, some of which stem from a below-par understanding of the mechanics of IP and means of exploiting it for the purpose of growing the SME’s business. Nigerian SMEs are typically, for instance, unaware of the different categories of IP available for protection, as well as the importance of protecting their IP, using the registration platforms and methods made available by law. Unfortunately, there exists the common perception that the registration of IP is irrelevant to businesses. WIPO has posited that some SMEs’ attitude toward the management of their IP may stem from such SMEs’ concerns about the high cost of obtaining registration, combatting counterfeits, and enforcing their IP rights.
At the WIPO, OAPI and ARIPO (WAO) conference, 2019, it was observed that, on a general level, SMEs’ IP awareness and technical knowledge is low, and as a result, there is a minimal usage of IP protection by SMEs. In fact, most SMEs do not have a developed IP strategy. Thus, in as much as SMEs are taking steps to register their companies and business names at the companies’ registry, it is also important to take cognizance of their IP rights and seek to register these rights in the relevant IP registries.
The way forward
On the strength of the foregoing observations, it goes without saying that it has become necessary to raise awareness on the importance of IP rights to SMEs. Governmental institutions (IP registries), chambers of commerce and stakeholders can do much more to educate SMEs on the importance of IP rights, on the processes of obtaining registration, and means of monitoring and enforcing their IP rights. An example can be gleaned from the European Union, which is taking positive steps to help in the creation of awareness and the provision of training and technological information to SMEs for the purpose of boosting commercial growth and driving innovation in relation to such SMEs.
In the Republic of Korea, the Korean Intellectual Property Office (KIPO), the chambers of commerce, the government SME support agency, the Korean Patent Attorneys’ Association, public and private partners, financial institutions, business training centers cooperated and established a network of support for SMEs on IP matters. The objective was basically on IP acquisition campaign for SMEs, assisting with the creation of IP, reducing the cost of obtaining IP amongst other measures for the commercialization of IP.
At the WAO conference, it was recommended amongst others that awareness should be raised on the strategic opportunities offered by IP rights, and that IP education and training should be brought closer to SMEs to address issues around SMEs’ constraints in the access to IP rights, and make the existing IP regime more SME-friendly.
It is important to note that in 2003, the SME division of WIPO stated the objectives of a National IP Strategy for SMEs. Some of the objectives are meant to enhance SMEs’ competitiveness through a wider and more effective use of the IP system, by promoting awareness amongst SMEs on how to exploit their innovations. WIPO further committed to improving its policy and institutional support framework and business environment to make it conducive and easier for SMEs to exploit their IP rights. The propounded National IP Strategy revolved around six policies, namely the innovation policy, SME development policy, export policy, education policy, taxation policy and cultural policy.
In the final analysis, Nigeria can take a leaf from the above cited examples of actions that countries and organizations have taken to encourage the exploitation of IP rights by SMEs. We specifically recommend the following:
- The creation of a national IP strategy for SMEs to promote awareness on intellectual property matters and how to exploit their innovations.
- The provision of policies, institutional support, a workable framework, and a conducive business environment which will allow SMEs to exploit their IP rights.
- IP registries should produce layman-friendly materials on IP on their websites. (The Intellectual Property Office (United Kingdom) and the KIPO both have such materials on IP on their social media platforms and websites.)
- The provision of financial assistance/programs to help SMEs exploit their IPR. WIPO has particularly commended Singapore’s Patent Application Fund, which finances 50% of legal and administrative cost for patents/innovation.
- The erection of IP enforcement and border control measures to forestall counterfeiting and piracy, and enable SMEs enjoy returns on their investments on products developed.
- Furthermore, one of the tax policies for WIPO’s SMEs-dedicated division is centered on making available tax incentives for research and development activities such as commercialization of IP rights and licensing regimes. This can be replicated in Nigeria.
- Stakeholders, the government, chambers of commerce, and financers can aid SMEs on matters relating to protection, management, and commercialization of IP rights, by raising awareness, conducting IP rights training for SMEs, providing technological information services, and financial assistance on IP exploitation and commercialization.
Similoluwa Oyelude is a Senior Associate in G. Elias & Co.’s “New Economy”, technology, media and entertainment practices. Similoluwa’s practice covers managing the firm’s clients’ IP portfolios, advisory work on unfair competition practices and advising clients on IP rights, protection and commercialization. She can be reached at firstname.lastname@example.org
Fidelis is an Associate in G. Elias & Co., and a member of the Nigerian Bar Association. He frequently manages the IP portfolios of a diverse range of clients, and often writes and negotiates contracts by which intellectual property rights are assigned or licensed. He can be reached at email@example.com