Over 90 percent of UK and overseas based businesses can be categorised as SMEs. Many of them regularly produce innovative products, brands and creative designs as they seek to maintain consumer appeal and stay ahead of the competition.
Despite the significant contribution made by SMEs, the potential offered by the intellectual property system and the protection it can provide is often overlooked by many of them.
This is often simply due to a lack of awareness or understanding of the intellectual property system and its effectiveness, or a concern that the costs involved in obtaining or enforcing any intellectual property rights will outweigh any of the advantages obtained from seeking protection in the first place.
However, when managed effectively, intellectual property can provide a significant commercial advantage and need not become an unrealistic cost burden to an SME.
Left unprotected, a new product or process may be copied by a competitor leaving the SME who has developed it with no financial benefit or reward for their labours. The investment in time and effort, as well as the expense involved in the development of a new product or process is therefore lost.
Adequate intellectual property protection is therefore critical if a company is to protect their investment and profit. By ensuring that an SME has at least an opportunity to obtain a return on their investment, intellectual property serves to encourage further investment, innovation and increases competitiveness.
A patent can be used to seek protection for the underlying concept to a new product or process. The term ‘invention’ can be misleading as it implies that a product for which protection is sought must be entirely new and groundbreaking.
Consequently, it is apparent that many SMEs doubt that patent protection is available for their new ideas and fail to realise that a patent may be obtained for relatively small modifications or improvements to existing products or processes, especially if that modification provides an advantage over a known product or process.
As a general rule, it should be remembered that if an SME has developed a new or improved product and/or process and is concerned that others may want to copy it to gain a commercial advantage, then it is likely that a patent should be sought.
A patent provides an SME with an exclusive right to exploit an invention for a period of up to twenty years, which means that an SME is able to prevent others from commercialising the patented invention, reducing competition and enabling the SME to establish itself as a market leader resulting in a higher return on its investment.
There are some costs involved in seeking patent protection but with careful management these should not become too onerous, especially when compared to the costs involved in developing and marketing a new product or process. It may also be possible to offset some of the costs against research and development tax credits or the tax relief available through the UK government’s ‘patent box’ tax relief scheme, both of which will be covered in more detail in the second part of this article.
Whilst the cost of enforcing a patent against an infringer can often be high, it should be remembered that many competitors will be deterred from copying merely due to the existence of a patent application. As the number of patents that end up in litigation is very small, the premise that it is not worth seeking patent protection because of the high cost of having to enforce it is largely untrue.
In addition to deterring copying, patent ownership also provides an SME with an opportunity to seek revenue from licensing or by sale of the rights covered by a patent. Patents can also be used as a negotiating tool when an SME is seeking to acquire the right to use a patent belonging to others.
The existence of a patent portfolio can also demonstrate a high level of knowledge and expertise within an SME and so increase its market value. Consequently, the acquisition of venture capital or access to finance may be made easier.
As well as filing patent applications to seek protection for an SMEs own products and processes, a search through existing patent literature can also reveal valuable information relating to competitor activity and may help focus design and development efforts to ensure that time is not being spent ‘inventing’ something which has previously been described in an existing patent.
A review of existing patent information can also generate new ideas and act as an incentive for further improvements to known technology, as well as identify existing patents that are still in force to ensure that an SME will not infringe any patents belonging to others. Patent databases can therefore act as a very useful tool for SMEs.
Whilst a patent can be used to protect a new product or process, a trade mark or brand is a distinctive sign which distinguishes certain goods or services as those produced by a particular SME. Today’s consumers are extremely brand-aware and they rely heavily on trade marks to help them identify the source of a product or service and trade marks are often a key factor in their purchase choice.
By registering a trademark, an SME can obtain exclusivity to that mark and can seek to create a corporate identity that can be used to maintain a competitive edge by preventing competitors from taking advantage of the goodwill and reputation that has developed in relation to a particular sign or brand name associated with an SME.
It is well-established that consumers are strongly influenced by the visual appearance of a product. Often, the appearance of a product is more important than its ability to perform its function. As a result, it is common for SMEs to put further effort into the design and visual appearance of products. A registered design provides a monopoly over a distinctive design and is an effective way to protect the visual appearance of a product to prevent it from being used by others. It can also be a very cost-effective way of obtaining protection.
Effective management and awareness of intellectual property rights and how an SME can use them to deter or prevent competitors from copying products, trade marks or designs, and to increase return on investment and portray a positive image is therefore important for any SME involved in the design and manufacture of new or improved products or processes.
Ian Grey is a Chartered and European Patent Attorney at the Patent and Trade Mark firm Venner Shipley LLP