New study highlights link between IP and SME success

Small and medium-sized enterprises (SMEs) that apply for patents, trademarks or designs are more likely to experience high growth than SMEs that do not, according to a joint study by the European Patent Office (EPO) and the European Union Intellectual Property Office (EUIPO) released this week (21 May).

It is widely reported that SMEs represent 99% of all businesses in the European Union (EU), and contribute 57% of the EU's Gross Domestic Product (GDP). What is less widely reported is that a large proportion of the value generated by SMEs comes from a fraction of so-called ‘high-growth’ SMEs.

According to the study, ‘High-growth firms and intellectual property rights’, the success of these high growth firms frequently stems from investment in innovation, IP protection and international expansion, as compared with other SMEs.

Indeed, the study shows that SMEs that file at least one IP right are more likely to experience growth than firms without IP rights applications; in particular:

• SMEs that have filed at least one IP right are 21% more likely to experience a subsequent growth period, and 10% more likely to become a high growth firm;
• SMEs that file for IP rights at European level have an even greater likelihood (17%) of becoming a high growth firm;
• The chance of an SME becoming a high growth firm increases by 33% if it uses "bundles" of trademarks, patents, and designs, instead of one single IP right category.

Predicting success

The study also shows that IP activity can be a leading indicator of an SME’s future growth, and identifies the types of IP assets that support that success in different industry sectors. For example, the study found that SMEs in high-tech industries that have filed a European Patent are 110% more likely to experience high growth; in low-tech industries, the figure is 172%.

Patent protection matters to small businesses in these sectors because they can be leveraged to secure higher margins, license technology, establish collaboration agreements, attract investors and compete with larger, established enterprises.

From a trademark perspective, the study finds that SMEs are 62% more likely to experience high growth in consumer non-durable industries (e.g. recorded media, cosmetics and personal care products), if they have filed a European trademark. By contrast, the filing of a national right is a better predictor (+49%) of the likelihood of high growth in consumer durable industries (e.g. consumer electronics, furniture and jewellery).

Growth through IP

As the study makes clear, patents, trademarks, designs and other forms of IP play a key role in the success of SMEs by enabling them to obtain a return on their investments in research and development, and to maximise the potential of their businesses.

In an ideal world, IP will have been diligently captured, maintained and recorded as a business grows and expands; unfortunately, this is not always the case. By overlooking core assets, SMEs risk short-changing themselves when it comes to attracting maximising their future chances of business success. If you’re not sure if you’re making the most of your assets, please get in touch with our experts below. A good starting point is to consider the below checklist.

An SME checklist

• Have patent rights been put in place for all core inventions, including defensive filings where relevant?
• Has the company or product’s brand and/or visual appearance been protected as trademark/design rights in all key jurisdictions?
• Is the IP’s ownership clear and up-to-date; for example, where it has been created by multiple stakeholders or passed from one company to another?
• How crowded is the market and technology space for any new/core inventions – is there a risk of a third-party infringement claim?
• Where does the IP sit in relation to competitor activity – does the portfolio need to be reinforced with additional filings?
• Does additional IP exist in the business that has yet to be protected?
• How do the identified strengths and weaknesses of its IP portfolio impact on a business’s value and potential?

It’s also important to remember that not all IP exists as registered rights and so an assessment of all company documents will generally be needed to locate other valuable intangible assets, such as copyright or confidential information, licences or distribution rights.

For further guidance here, please read our article ‘First steps to exporting: getting your IP rights in order’.