IP policy for SMEs – but which SMEs?

According to some, national IP policy should support the creative and innovative sectors. The individuals who work in these sectors are often employed (or self-employed) in small and medium sized enterprises (SMEs). They include designers, photographers, artists, musicians and authors. Their creative output is protected by IP rights, including copyright. Often, they lack the financial resources or business scale to challenge misuse of their IP rights by ‘big business’ or by consumers who download their works from the internet.

In a slightly different category are the business sectors that depend on innovation in science and engineering, including computer software. Again, many of the innovators in these sectors are based in SMEs, but others are in major companies such as Apple or GlaxoSmithKline.

Reading the UK Intellectual Property Office’s draft 5-year strategy document, and the Conservative Party’s 2015 Manifesto, it is clear that the current UK Government has sympathy for the creative and innovative sectors. Encouraging the growth of new businesses generally, and IP-focussed businesses in particular, is seen as a route to improve the state of the national economy. The Manifesto includes ringing statements such as “With the Conservatives, Britain will be the best place in Europe to innovate, patent new ideas and set up and expand a business.”

The IPO’s draft strategy document reflects these priorities. It refers, for instance, to:

• making the IP system simpler and less costly
• ‘encouraging’ creators through the IP system
• ensuring that businesses understand how to manage their IP effectively to support growth

These points, and others in the strategy, seem to IP Draughts to be focussed on the needs of small-scale creators and innovators, as distinct from major UK companies such as Dyson whose success depends partly on strong IP laws, or UK businesses that make use of IP rather than creating it, and whose commercial success could be prejudiced by IP laws if they became unbalanced in favour of the small-scale IP creator.

Assuming, for the sake of the argument, that it is right to direct Government policy to the needs of IP-dependent SMEs, which types of SME should be the focus of Government attention and support? SMEs vary widely in their scale, ambitions, financial resources, understanding of technical issues, and dependence on the protection of IP laws. Over the years, IP Draughts has seen Government attempting to ‘reach out’ to SMEs via regional development boards and other quangos, usually with limited success. Many SMEs have no interest in engaging with bodies of this kind; they are too busy running their businesses.

In IP Draughts’ view, if IP-related Government support is to be given to SMEs, it should be focussed on the types of SME that are most likely to produce a return to the UK economy from providing that support. This is not a call for a 1970s-style financial support for ‘strategic industries’, but rather is saying, if we are going to spend Government money on creating new IP systems that support SMEs, let’s take a hard-headed look at which types of SME are most likely to produce a benefit to the UK economy when they receive this support, and design the IP systems to be suitable for them.  For example, focussing on the needs of the ‘inventor in a shed’ may be less useful for the economy than focussing on university spin-out companies. Of course, this assumes that the purpose of Government policy in relation to SMEs is to improve the UK economy, rather than to increase the number of its supporters or out of sympathy for the SME ‘underdog’.

To focus the discussion, let’s take three, fictional examples that represent some of the categories of IP-dependent SMEs that IP Draughts has encountered. Should the Government target its IP policies on Xavier, Yvonne or Zac?

Xavier

Xavier is a self-employed designer and photographer. Most of his work is for large companies, helping them with advertising campaigns and branding projects. He is often asked to provide ideas for campaigns ‘on spec’ (and without charge to the client), on the understanding that if his ideas are selected, he will be commissioned to do further work.  This unpaid work can be very time-consuming, and depressing if the ideas are not accepted. Sometimes, companies ‘steal’ his ideas and use them to create campaigns in-house, without any acknowledgement or financial compensation. Although he has heard that the Intellectual Property Enterprise Court is considered a good and cost-effective court for smaller disputes, he has been told that it might cost him £50,000 to sue a company that takes his ideas, and he might be liable for another £50,000 if he loses the case and the court orders that he has to pay the company’s legal costs. He cannot afford anything like £100,000. The profit on each project is typically in the region of £5,000-£10,000.

Yvonne

Yvonne is the founder of a medical devices company, which is a ‘spin-out’ from the University of Rummidge, where Yvonne is Professor of Bio-Engineering. The company is developing a kit for non-invasive blood glucose monitoring, ie a means of helping diabetics to control their blood sugar levels without the need for taking blood samples or inserting tubes into the blood stream. There is a huge worldwide market for blood testing devices. Non-invasive devices have been attempted over the years but have never succeeded, on technical grounds. The company has received £500,000 in funding from a ‘business angel’. Yvonne knows nothing about  intellectual property. The business angel has indicated that the company will need another £5-£10 million to develop the product to the point where it can be licensed to a major company such as Boehringer, and that raising this amount from venture capitalists should be achievable if the company keeps hitting agreed milestones for developing the product and validating it.

Zac

Zac runs a health-food store in Islington, London. He started the shop after leaving university. Business was very slow for the first 7 years, but he has gradually built up a loyal following for his range of ‘detox drinks’. He would now like to expand the business and a friend has suggested to him that franchising across the UK may be the way to go. He has looked at the IPO’s website and learnt that he should apply for a trade mark for the drinks, which he calls SupaCleanse. He calls up the IPO’s helpline and they guide him through the steps for applying for a UK trade mark. They put him in touch with a commercialisation adviser (not part of the IPO) who confirms that he complies with the British Standard for Commercial IP Services, and who says he can arrange for the drafting of a franchise agreement and a ‘bible’ of technical information on how to run the franchise.

Over to you, dear readers. If you were in charge of Government IP policy, which of these individuals (and their companies) would you target as a ‘type’, when designing SME-friendly IP systems? Or should it target all three? Will it help the economy to focus on the needs of Xavier, Yvonne or Zac? If the Government has limited resources, where should its priorities lie?