Study underlines the value of IP for growing businesses

Ever wondered if intellectual property rights deliver real value? A study has confirmed they can bring significant benefits to growing businesses.

According to a study published by the European Patent Office (EPO) and the European Union Intellectual Property Office (EUIPO), small and medium-sized businesses, which own at least one intellectual property (IP) right, are 21 percent more likely to experience a growth spurt. They are also 10 percent more likely to become a high-growth firm.

Despite the benefits they can bring, only nine percent of SMEs in Europe own registered IP rights, compared to 40 percent of larger companies. Lack of awareness is often cited as a key reason for this underinvestment in IP by SMEs.

The benefits of IP protection can be considerable. Small businesses can use IP rights to protect their business model at different stages of development and to support them in realising their growth potential. At concept stage for example, the business can rely on ‘trade secrets’ to protect any market-sensitive formulas or recipes. After investing in an R&D programme, the business should consider filing patent applications to protect their innovation – once granted, each will give them a 20-year period of exclusivity during which to leverage the value of their innovation to the full.  It is also important to seek protection for the invention before disclosing it to any third parties or bringing it to market, as such disclosure could render it unpatentable.

Prior to market launch, the business should consider whether the aesthetics of their innovation require protection to prevent rivals from copying the appearance of their product. Registered designs are generally granted more quickly than patents, so this type of IP right could be used to facilitate a speedy market entry where necessary. Trade mark registration is also vitally important and should be obtained at an early stage to protect the brand name and identity of the business.

As an owner of IP rights, SMEs can use them to prevent rivals from copying their innovation or its design, and to protect their brand. It is important when seeking any form of IP protection to think ahead and consider any markets where the business might seek to expand in the future. Even if the business is focused solely on its domestic market for example, it may be worth considering filing for protection in other territories, in case a decision is taken to license its IP to third parties overseas in the future.

Licensing deals can be a lucrative option for lean, innovative businesses that want to avoid the need to invest in global expansion. Instead, they can stay focused on what they do best whilst benefiting from a new revenue stream of royalty payments. Some businesses may choose to structure their business model around such licensing deals, in which case, IP rights ownership has a vital role to play in de-risking agreements with third parties and strengthening investor confidence.

Rather than just relying on one form of IP protection, businesses should consider building a multi-faceted portfolio of rights, giving them robust commercial protection, for as long as possible.

Many businesses have found that bundling IP rights together in this way has allowed them to fend off infringers seeking to exploit their innovations in the same markets or overseas. By layering different forms of IP protection, it may be possible to extend the term of commercial protection well beyond the 20-year period, which typically accompanies a granted patent.

Interestingly, the study confirms the value of bundling for SMEs, as accumulating a portfolio of different IP assets indicates they are more likely to achieve high growth. In fact, the findings show that SMEs with a collection of patents, trade marks and registered designs are 33 percent more likely to achieve high growth in their chosen market.

In summary, SMEs should consider IP protection a core part of their growth strategy. By bundling rights together and seeking protection in the relevant geographies from the start, businesses will be better placed to secure investment and scale successfully.

David Elsy is a partner and patent attorney at intellectual property firm, Withers & Rogers LLP