View source for Impact of the Patent System on SMEs


'''= a study published by the Centre for Business Research for the UK’s Intellectual Property Office (IPO)
explores themes of patent ownership and usage, but from the specific point of view of SMEs'''

URL = http://www.cbr.cam.ac.uk/pdf/WP411.pdf

=Discussion=

Brian Loudon:

"The Impact of the Patent System on SMEs from 2010
a study published by the Centre for Business Research for the UK’s Intellectual Property Office (IPO)
explores similar themes of patent ownership and usage, but from the specific point of view of Small
to Medium sized Enterprises (SMEs).

They point out that SMEs may find that the costs associated with patents are relatively higher as
compared to a large corporation, and they may struggle to find the capital funding to take advantage
of a given innovation and enforce the resulting patent. As a result they find that SMEs will very often
use other means to achieve returns on R & D investment, through secrecy, being first to market,
using skilled labour or specialist equipment.

“Patents provide the inventor with legal protection but, as public documents, they also reveal to
competitors most of the details of any given invention. It is often the case that imitation is still
possible without infringing an incumbent innovator’s rights: the nature of the technology might make
it possible to „invent around‟ a particular design or technical specification (Mansfield, 1986). From
the viewpoint of the inventor, this is a case where secrecy can be a more appropriate means to
capture the returns to R&D.”

The report also highlights that the total cost of obtaining and defending a patent is of great concern
to SMEs with limited resources.

“litigation rates vary significantly by sector and firm size. SMEs, which tend to have smaller patent
portfolios, are more vulnerable to litigation and tend to be sued by, as opposed to sue, larger firms
15 (Lanjouw and Schankerman, 2004, Ball and Kesan 2009, among others). This is probably because
of their inferior bargaining power, information asymmetries about the IP process, or the higher
marginal value they attach to their patents. That said SMEs may have some bargaining power that
can be used to settle disputes with large firms out of court.”

“cost allocation rules need to lower the risk that frivolous litigation is instigated by cash-rich parties
against financially less well-off opponents.

This is as true for the European patent and litigation system as it is for national systems, including
the UK. On average, the costs of applying for a patent in the European area are between three and five times higher than in the US and Japan. A solution to this, as Harhoff again clearly points out, is
not only to reduce costs but also and above all to create a quality-oriented system on the principle
that innovation does not need stronger patents but rather an IP system that gives good protection to
high quality inventions in a cost-effective manner.”

They conclude that there should be further studies carried out to quantify the costs and benefits of
patent protection in order to encourage their adoption by SMEs.

Why is it important that patents are dominated by large corporations and that SMEs and lone
inventors find it difficult to enter into this knowledge market? Apart from any discussion of income
distribution, this concentration of R & D development means that there is a huge human resource in
the wider world outside the large corporations lying unused or under-utilized. If technical innovators
are drawn from a very narrow slice of the population and cultures, within a limited remit, surely
society is missing out on opportunities and potential solutions?"
(email, December 2014)


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