This article was first published by Intelligent SME Tech in February 2022.
The European Union Intellectual Property Office (EUIPO) has launched a new fund that offers vouchers for EU-based SMEs to help them protect their intellectual property (IP) rights, with IP playing a key role in SME growth. Erik Oskarsson, Principal at Rouse Consultancy, spoke to us about the fund, IP and how it all impacts SMEs.
Can you provide some wider context as to the recovery that many [European] SMEs are currently going through following the COVID-19 pandemic?
Nearly all businesses, from start-ups to multinationals, have experienced tough times over the last two years. Yet, for SMEs, the challenges brought by the pandemic were exacerbated.
If we look at supply chains, for example, SMEs don’t typically have multiple chains in place. In practice, this has meant that interruptions because of the current supply crunch have overall had a more direct and critical impact on the business operations of SMEs that rely on hardware than on their larger competitors.
Securing funding, which is vital to business growth, is another regular challenge for SMEs. However, the post-pandemic rise in interest rates that we are seeing will make the situation even more difficult over the coming months, as adequate funding becomes relatively harder for them to obtain.
All of this has left many SMEs in a more precarious position than larger businesses and made the need for a swift recovery even more important.
When it comes to IP rights, what challenges have SMEs encountered historically?
IP is a rich man’s game. Thanks to their ability to move faster and choose more unconventional paths, SMEs are typically more innovative than larger companies, but they hit a cost barrier when it comes to IP. A registered patent can cost around 10,000 euros for every market you enter, and many SMEs understandably feel they don’t have this money to spare.
Even when they can afford it, there are challenges stemming from the intangible nature of intellectual property (IP). With more restricted finances, SME leaders tend to be value-sensitive: every investment they make must translate directly into value, and if they can’t foresee the value, they won’t make the investment. Identifying the value of IP is not so clear-cut and therefore, particularly in the earlier stages of growth, we often see business leaders repeatedly allocating budgets to other priorities instead. It’s a cycle that can be hard to break.
A related challenge is that most SMEs don’t know how to use IP strategically to their benefit. Most people have a basic understanding of patents and trademarks and can see how prosecuting infringers could have financial advantages. But the potential of IP to deliver value goes far beyond patent and trademark enforcement. It can be used as currency in negotiations, to communicate company value to investors or potential buyers and to bolster a business’ reputation. It’s important that we – in IP services – help to educate business leaders about the varied potential of IP and how it can be used most effectively to meet their business goals.
Tell us more about the EUIPO’s new fund and what this means – at face value – for SMEs?
The new fund offers vouchers to EU-based SMEs, enabling them to be partially reimbursed for certain IP services. It covers some of the costs of IP scan services, trademark and design registration and fees charged by national patent offices and the World Intellectual Property Organisation. It’s a much-needed source of support and will help to close the gap for those businesses that wish to invest in IP but are finding the cost prohibitive.
More broadly, the fund also serves as a bold statement about IP services. Its introduction shows that the European Commission recognises that investment in IP is a key tool for supporting SME growth. By providing funding in this space, it is putting IP services firmly on the agenda for SMEs and this will hopefully encourage more businesses to consider the value that IP can bring them.
What are the limitations of the new fund?
While it represents a positive step forward, this fund will only scratch the surface of the financial support that SMEs need to invest effectively in IP. It also makes assumptions about the nature of businesses’ IP needs. In reality, SMEs have very different needs and the ideal solution would be for businesses to be able to apply for funding without any caveats on how that funding is used if it is for IP services. Under such a model, one business could use the funding to apply for a patent, while another business (which may not have an immediate innovation protection need) could instead invest in analysis or support with their long-term IP strategy.
A more dynamic system like this would be harder for the EUIPO to administrate but would help to eradicate bias and ensure that SMEs can get the support they need, encouraging growth and ultimately spurring genuine competition.
Can you tell us about the need for IP funds on a national level in the UK and elsewhere and what can be learnt from IP support in China and Sweden?
Introducing and improving national-level IP funding would provide an additional source of support to SMEs. Some countries have already introduced leading policies in this space as part of plans to fuel innovation. But so far, most are missing a trick by only funding or supporting certain elements of IP.
For instance, the Chinese government heavily subsidises the operational elements of IP, such as the cost of applying for a patent. In Sweden, meanwhile, businesses can apply for funding towards IP strategy, up to a total of €10,000. The policies are two sides of a coin, with neither country offering support for IP in the round.
In the UK, the government recently introduced an IP Access Fund which offers up to £5,000 to help SMEs protect and commercialise their IP. This funding has a broader remit and can be used for services ranging from the management of IP assets to IP valuation, IP insurance and professional fees for IP services more generally. This fund better reflects the varied needs of different SMEs but could be more ambitious in the allocation it offers; £5,000 is less than the amount provided to SMEs in countries like Sweden and, while still helpful, does not stretch far in the world of IP.
What advice would you offer SMEs who aren’t sure where to start?
IP needs vary substantially from industry to industry. In some sectors, the connection between IP and product is strong and, when this is the case, patents tend to be the most useful form of IP to pursue. For example, this is true of the pharma industry and the invention of new drugs. An IP strategy meanwhile might be less crucial for pharma companies than businesses in the telecoms industry, which is already overflowing with patents and has much IP overlap.
For tech SMEs, there’s a wealth of opportunity in the IP space, with much value to be captured. The downside of this is that it can mean tech SMEs don’t know where to begin. The first challenge is prioritisation and IP services specialists can help with that.
It’s also important for leaders of tech SMEs to get a fundamental understanding of IP early on. We’ve increasingly been seeing a trend in which small companies and scale-ups are only having their first real exposure to IP when they’re informed of an issue, such as an accusation that they are infringing on another company’s rights. When this is the case, businesses are exposing themselves to significant financial risk. We’re also seeing many businesses missing out on the opportunity to patent innovations and actively protect their trade secrets because they lack the knowledge of how to do this or are not acting early enough.
How do you see this issue evolving, and what else needs to be done to properly address it?
The launch of this EUIPO fund will hopefully be the first of many new policies that we see implemented to support SMEs with IP services.
As has been widely recognised, SMEs are vital to post-pandemic economic recovery – particularly as they are usually on a stronger growth path than larger corporations. I believe SMEs are also the future of environmental technology and their innovations will be central to whether we can achieve the 2030 climate goals.
However, if access to IP services is not adequately supported, the ability of SMEs to capitalise on their innovations, contribute to the economy and climate and, ultimately, challenge larger businesses and multinationals, is limited.
Governments should view this fund as a foundation of support but seek to provide additional and more flexible funding. Above all, they must look at measures to support IP on the whole, rather than only supporting certain services.