Impact of the Patent System on SMEs

From P2P Foundation
Jump to navigation Jump to search

= 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)