Does the IP system work for SMEs?

The arguments run something like this:

  1. Small and medium-sized enterprises (SMEs) are the economic life-blood of the nation, contributing more jobs and prosperity than any other part of the economy.  In a time of recession, more needs to be done to encourage them and make them successful.  We should focus G0vernment efforts on this sector rather than the bloated banking sector or other areas that can and should take care of themselves.
  2. We can no longer compete with countries such as China for basic manufacturing, and we are not as good as Americans at sales.  Our “added value” comes from professional services, from basic science, inventions and R&D, and from the creative industries.  In many of these sectors, intellectual property (IP) is of central importance.
  3. The IP system – particularly protection and enforcement – is designed for the needs of major companies.  While it may work well for huge disputes between tablet computer companies, or between a pharmaceutical company and its rivals, it works less well for SMEs, who cannot afford to protect or enforce their IP or defend themselves from predatory multinationals.

Put these arguments together, like sand and cement in a concrete mixer, tip up the mixer, and out comes a slurry of quick-setting political conclusions.  Now let’s slake the mix with some further ingredients:

  • the fact that many SMEs are ignorant of how to manage IP assets
  • the fact that the UK Intellectual Property Office’s traditional role of administering the filing of patents and trade marks is diminishing, as larger and more experienced companies choose to file at a European level, leaving the IPO to deal mostly with the said, ignorant SMEs
  • the fact that Government largely doesn’t understand IP, as it is a technical subject that has little in the way of populist appeal; it is difficult to reduce it to soundbites that can be traded with John Humphries on the Today programme
  • the fact that successive Governments have commissioned expensive reports on how to improve the IP system, mostly chaired by journalists (why?), none of which has provided the simple panacea that Government was looking for
  • the only people who seem to really understand the IP system are IP lawyers, but Government doesn’t much like listening to IP lawyers – thinks they are just an interest group, and one with few votes – and prefers the advice of business people and journalists; lawyers have largely been excluded from the bodies writing the expensive reports
  • when Government does have to tackle the subject, it relies too much on the only branch of Government that understands the technicalities – the IPO; the IPO relishes this responsibility, like any good civil service department, as it increases its influence within Government, but its skills are better suited to administering IP filings than advancing the policy debate

Extending the concrete analogy to breaking point, the ‘muck’ is now used to build the foundations of a Government IP policy.  The focus is to be on the needs of SMEs – educating them about the possibilities of IP, and making it easier and cheaper for them to manage their IP assets.  The IPO is given responsibility for the education role, and for being the decision-making arm of Government when it comes to changes to the IP system that favour SMEs (eg the introduction of the small-claims court for IP litigation).  Money is pumped into start-up businesses in an area of East London that is quickly dubbed Silicon Roundabout.

IP Draughts believes that the above description is a reasonable summary of how the IP policy debate has run.  Some of it seems to make sense, eg the introduction of a small-claims track for IP claims, but much will depend on how efficiently the court works in practice and how litigants use it.  It is too early to come up with a soundbite that the new court rules are good or bad.

Other parts of the debate and conclusions don’t make much sense.  SMEs cannot be reduced to a single body, with a unique set of aspirations and requirements.  The market-stall that sells hot food probably doesn’t need to care too much about IP, unless its owner has ambitions to sell a version of the food to supermarkets, like Levi Roots and his Reggae-Reggae sauce.  This type of SME usually has very different ambitions to a biotech start-up like Biovex, which was spun out of University College London and which IP Draughts advised for several years (but not on corporate matters!).  Biovex was purchased by Amgen last year for a price stated to be “up to $1 billion“.  IP was very important to Biovex, and its management understood IP issues well.

SMEs, like joints of meat, are not all of the same quality, and need to be treated differently

So, the SMEs that need to be educated about IP are actually a subset of the total number of SMEs: the ones that are not running sophisticated, IP-intensive businesses, and yet are not local shopkeepers and traders who have no real need to understand IP.  IP Draughts is concerned that current “awareness raising” by the IPO is not focussed enough on educating specific types of SME and is too general to be useful.  IP Draughts would target specific categories of SME, eg young graduates starting their first business.  IP Draughts fears that the IPO’s focus is on the needs of self-filers who are too poor, mean or ignorant to take legal advice when they apply for patents, trade marks or registered designs.  The IPO understands these people because it has to deal with them, but they are probably the last category of SME that IP Draughts would focus Government training and support on.

It is also of concern that the IPO runs its training activities (or did, when last IP Draughts discussed the matter with them) through its marketing department.  Education and training is a specialist discipline and needs to be treated as such.  If the IPO is to continue with this training role, it needs to recruit  people who are dedicated and experienced in management training, or work with an outside body.

To come back to the title of this article: does the IP system work for SMEs?  That is too general a question to get a meaningful answer.  It is like asking, does the tax system work for SMEs?  The answer depends partly on who you ask, and what their particular business needs are.

IP Draughts believes that the IP system is essentially not broken, so doesn’t need any major “fix”.  And that it is important for the economy to have a stable system that is consistent over time and doesn’t change to meet short-term political preferences.  And that the system should not focus exclusively on SMEs – important as they are, they probably contribute less to the economy in IP-intensive sectors than major companies do.

The biggest issue for many SMEs, apart from understanding the system, is the cost of enforcement, and real progress is being made in this area in England and Wales with the Patents County Court and its excellect judge, Colin Birss.  It remains to be seen how the (very) small claims track, currently being introduced, will work.

Could more be done, and more importantly should more be done, to help SMEs make use of the IP system?  Yes, in some cases it should.  IP Draughts would like to see a short course on IP in every degree course, and particularly in subject areas such as science, engineering, the creative arts, media and business.


Filed under Intellectual Property, Legal policy

3 responses to “Does the IP system work for SMEs?

  1. Reblogged this on IP Draughts and commented:

    This article, from nearly 5 years ago, still reflects IP Draughts’ views. The Patents County Court is now called the Intellectual Property Enterprise Court, and has lived up to its promise, particularly since fees were capped at £50,000.

  2. This blog is truly honoured to have its first comment from an MEP and a member of the Pirate Party!

    The question of patent pools, investing in patents to provide a bag of negotiating chips, and associated cross-licensing, is one that I would like to understand better. At a professional level, I have mainly come across this in the engineering sector. Like most people, I have read about patent portfolios being auctioned in the US to provide companies with a war chest of IP, particularly in the computer industry and in the case of Kodak.

    These activities seem a long way from the original purpose of patents, and I agree that regulation may be necessary to avoid market abuse.

    On the question of what is perceived as morally right, I guess you might be thinking of examples like private downloading of material from the internet, or private recording of TV programmes and other content. In these cases, if IP laws are used as a sledgehammer to crack a nut, it brings IP law and IP lawyers into disrepute. Private individuals may not think they are breaking the law, or may regard their transgressions as minor – “everyone is doing it”. In the UK we had the case of ACS Law which sent letters demanding money, to people who were on a database of downloaders of pornography. The English legal system eventually found ways of dealing with this over-aggressive behaviour – both as a matter of professional conduct (see the BBC news report here: and in the court itself – eg see article about one aspect here:

    I agree that IP laws should be aligned with public standards of morality, but I am not convinced that the solution to any misalignment is a fundamental rewriting of copyright law. Instead, we may need a few more private-use exceptions to copyright. Personally, I would be in favour of a court protocol for how lawyers must handle IP claims against private individuals.

  3. Interesting post! And good observation about the large diversity of SME:s and likening this question with tax-questions. One over-looked problem I think is that SME:s in Europe, from countries where they don’t speak one of the three big languages (English, German, French) natively and thus rely on (mostly) second-language English for international interactions, become affected by patent office failures to take the global patent system into account. Recently a Swedish SME in an industry that reasonably has an interest in the IP system as such (mechanical engineering was the trade) suffered big losses due to the patent office in Sweden not having sufficient resources to adequately scan East Asian patent databases for prior art. The growing pool of published patents along with many industries turning to incremental innovation I would say suggests an upcoming structural problem for patent law unless we are able to very heavily regulate patent pools to avoid adverse effects on market entrance barriers and competition.

    Copyright law, and for some part trademarks, for me quite obviously are “broken” in the sense that they are disconnected from public perceptions of what is morally right. The combination of very low market entrance barriers online (which means that limiting IP to strictly interactions between commercial entities is tricky – the barriers between commercial and non-commercial are unclear) and big public interest in privately and non-transactionally interacting with objects protected by these IPs is a big challenge. The question is if these transaction-based IP systems (which is my way of understanding licensing – the creation of a transaction which could have occurred without the license but which creates a nice statistic if it is concluded with a license rather than spontaneously) are at all adequate for organising especially online markets.

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