Intellectual Property Intellectual Property Rights Rights

as a tool to enhance as a tool to enhance competitiveness of SMEscompetitiveness of SMEs

Mohammad Thoriq BahriMohammad Thoriq BahriIndonesian DelegationIndonesian Delegation

Turkey CSMEs Meeting 2014-2015Turkey CSMEs Meeting 2014-2015

Structure of the Presentation

1. Intellectual Property in Today’s Economy2. What are Intellectual Property Rights?3. IP Rights and Competitiveness

Intellectual Property – A Power Tool for Economic

Growth• Intellectual property is a “power tool” for

economic development and wealth creation that is not yet being used to optimal effect in all countries, particularly in the developing world.

Contribution of intangible assets to firm value –

Trends over time

Intellectual Property in Today’s Economy

• Over 80% of the market value of Microsoft derives from its intangible assets, especially its intellectual property

• The value of the Coca-Cola trademark exceeds US$ 50 billion.

Intellectual Property in Today’s Economy

• IBM earns over US$ 1 billion a year from patent licensing revenues

• US Patent License Royalties (in billions US$:

$0

$20

$40

$60

$80

$100

$120

1980 2002

Dr. Horst Fischer, Corporate Vice President, Siemens AG

“Any company wishing to prosper in the next millennium will also have to efficiently manage its IP portfolio”.“For this reason it has become essential that every manager in the enterprise - not just those working in the corporate legal department - appreciates and understands not only what IP is, but how it can be more effectively exploited."

Why have IP rights become so important?

• Intangible assets as main source of competitive advantage for firms

• Outsourcing of manufacturing by large enterprises• Legislative changes (national, regional and

international)• New types of patentable subject matter (e.g.

biotechnology, software, business methods)• Universities and public research institutions also

beginning to focus on IP, especially patents

What are IP Rights?• Industrial Property Rights

– Patents and Utility Models (or “short-term patents”)– Trademarks– Industrial Designs– Geographical Indications– Trade secrets– Topographies of integrated circuits

• Copyright and Related Rights• New Varieties of Plants

IP Rights: Patents• Definition: A patent is an exclusive legal right granted

for an invention that is:– New (Novelty)– Involves an inventive step (Non obvious)– Capable of industrial application

• Duration: 20 years from filing date• Territorial right• Requires disclosure of the invention• Can be licensed to third parties• Utility Models (or short-term patent): up to 10 years

Patents• Why do SMEs apply for patent protection?

– Market exclusivity– To recover R&D investments– Facilitates licensing– Advantageous negotiating tool– Financing opportunities (venture capitalists, etc)– Favorable image and credibility– Freedom to operate– Higher market value and publicity– International expansion

Case study on patent protection

• Case study on the commercialization of a patented product– Croatian pharmaceutical company (Pliva)discovers new

antibiotic (azythromicin)– Pliva applies for patent protection in Croatia and in various

potential export markets– Large pharmaceutical multinational Pfizer searches patent

databases and discovers the Pliva patent– Pliva licenses Pfizer to produce the antibiotic in the US as well

as in some other countries in Western Europe while Pliva maintains the exclusive right to commercialize the antibiotic in Eastern Europe

IP Rights: Trademarks• Trademarks:

– A sign capable of distinguishing the goods (or services) produced (or provided) by one enterprise from those of others

– Crucial to differentiate products from those of competitors– Basic pillar of any marketing strategy– Important for enhancing recognition and reputation of the product and for

creating a loyal clientele• Trademark registration:

– Provides exclusive right to prevent others from making identical or similar products under the same or a confusingly similar mark

– Duration: 10 years. Can be renewed indefinitely.

Case study on trademark protection

• An Italian businessman buys unmarked t-shirts from manufacturers of generic clothing, attaches his trademark and begins to sell them to retail stores

• Started in a garage in the periphery of Rome• Today the Pickwick trademark is perceived by Italian

teenagers as a synonym of style and quality• Pickwick has exports its products across Europe• Its trademark is its most valuable asset.

IP Rights: Geographical Indications

• Geographical indications:– sign used on goods that have a specific

geographical origin and possess qualities or a reputation that are due to that place of origin

– most commonly, a geographical indication consists of the name of the place of origin of the goods.

– Examples: champagne, roquefort, tequila, chianti.

Case Study on geographical indications

• Tequila– In 1977 Tequila was registered as a geographical

indication in Mexico– Tequila registered through Lisbon agreement and mutual

recognition agreements with the EU– Only Mexican producers from 5 specified regions of the

country (where the raw material “agave” grows) are entitled to produce Tequila

– Over 190 million liters of Tequila are produced annually, giving direct employment to over 36,000 Mexicans

IP Rights: Industrial Designs • Industrial Designs

– Aesthetic features of a product– Must be new, original and have an individual character– Adds value to the product by making it more appealing to consumers.– Enables customization of products to specific markets or target groups (e.g.

women, children, etc.)• Design protection

– Provides exclusive rights to prevent others from making, offering, importing or selling any product in which the design is incorporated

– Duration: in the European Union up to 25 years (unregistered design: 3 years).

Case Study on industrial design protection

• Trax® is a system of public seating manufactured by OMK Design Ltd.

• Originally designed for British Rail. Had to be visually appealing, comfortable and weather-resistant.

• In 1990 it was installed in railway stations in UK • 14 years later it is installed in over 60 airports.• Industrial design protection in UK, France, Germany,

Italy, Benelux, Australia and the US has guaranteed a degree of exclusivity keeping imitators away.

IP Rights: Copyright

• Rights given to creators for their literary and artistic works

• Protected works: books; newspapers; computer programs; databases; films, musical compositions; choreography; paintings; drawings; photographs; sculpture; architecture; advertisements; maps and technical drawings.

• Generally protected for 70 years after te death of the author• Does not require registration (however…)

Case Study on Copyright Protection

• Uruguayan software developer Memory®: accounting programs for SMEs

• Copyright belongs to company• Each copy of the Memory Software includes a license for use• Registered its software in the different countries in which it

operates• Technological protection measures• Permanent innovation• Franchising of Memory business model

IP and Competitiveness

What are the factors that determine the success of a new product in the

marketplace ?

Factors determining the success of a new product

• The product provides functional advantages

• Price• Attractive design• Reputation of brand• Available in the main retail shops• Consistent product quality• After-sales services

How should SMEs Respond?

• If functional improvements, attractive designs and a well-positioned brand are some of the features that may determine the success of a new product, what can an SME do to protect these and maintain its exclusivity over their use in the marketplace and deal with free riders?

Legal protection of IP grants exclusive rights

• Innovation - improvement of functional aspects or fabrication process of the product

• Design - the product’s appearance

• Brand - commercialization / marketing of the product

Patents, Utility Models

Industrial Designs

Trademarks

Intellectual Property Rights

• Innovative functional features

• Design / aesthetic aspects

• Brands

Patents or utility models

Industrial designs

Trademarks

Example 1

• Patent for the fountain pen that could store ink

• Utility Model for the grip and pipette for injection of ink

• Industrial Design: smart design with the grip in the shape of an arrow

• Trademark: provided on the product and the packaging to distinguish it from other pens

Source: Japanese Patent Office

Example 2

• Invention of CD playerprotected by patent

• Brand on CD playerprotected by trademark

• Design of CD player protected by industrial design

• Music played on CD playerprotected by copyright

SMEs and Global Economy• In the new knowledge economy, intangible

assets, including innovative ideas, information and know-how have become central business assets.

• In the US, SMEs contribute 2.38 times more innovations per employee than do larger firms (Source: OECD)

• SMEs are proven innovators in the broad sense

SME Competitiveness

• In the new knowledge economy competitiveness is increasingly based on firms ability to provide high-value-added products and services at a competitive price

• Globalization and trade liberalization has made it crucial for SMEs to become internationally competitive even when competing exclusively in domestic markets

SME Competitiveness• In order to be internationally competitive SMEs need to

constantly improve their efficiency, reduce production costs and enhance the reputation of their products by:– Investing in research and development– Acquiring new technology– Improving management practices– Developing creative and appealing designs– Marketing their products and services

SME Competitiveness• The above require SMEs to make significant

investments. • Without intellectual property protection there is a

strong risk that investments in R&D, product differentiation and marketing will be wasteful

• Intellectual property enables SMEs to have exclusivity over the exploitation of their innovative products, their creative designs and their brands, thus creating an appropriate incentive for investing in improving their international competitiveness

How can IP ‘add value’ to your business??

• Providing exclusivity over product or design: greater market share

• Increasing revenue (through licensing)• Enhancing market value of the firm• Enhance image of the company• Help in raising funds• Access to new markets

Conclusion

By establishing a culture of identifying, cultivating and strategically using its IP assets, an enterprise can increase its revenue, have an edge over its competitors and position itself well in the market.

Ignoring IP altogether is in itself an IP strategy that may prove costly to the enterprise in the long-term.

Thank You!