OECD report on SME Innovation and Intellectual Asset Management

Lucia CusmanoExecutive Secretary Working Party on SMEs and EntrepreneurshipOECD Centre for SMEs, Entrepreneurship & Local Development (CFE)

5th SessionTeam of Specialists on Intellectual Property

United Nations Economic Commission for EuropeGeneva, 7-8 July 2011

Rationale

• In the knowledge economy Intellectual Assets (IA) are key to competitiveness and growth

• Management of Intellectual assets (IA) critical for turning SMEs’ innovation potential into market value

• Intellectual Property Rights (IPRs) facilitate the creation of value

But…

Lack of information about SMEs’ practices in managing IA

SMEs’ evolving needs in rapidly changing markets

Impact of regulation on SMEs’ access and use of IPRs

Objectives

Explore in different sectoral and national contexts

• IA Management methods used by SMEs

• Types of innovation supported

• Effectiveness in IP regulatory framework in supporting SMEs’exploitation of innovative and creative capacity

- Analysis of IP landscape and recent reforms

- Obstacles and challenges to SMEs in different IP frameworks

Identify best practices and provide policy recommendations

Methodology (1)Sectoral focus: relevance of SMEs to innovation, IA management

as a strategic issue, variety of IPRs

• Australia: creative (publishing and film) and manufacturing (clean-tech);

• Italy: manufacturing and crafts (design-based and equipment manufacturing);

• Nordic region (Denmark, Finland Iceland, Norway and Sweden): creative (film production, design);

• United Kingdom: knowledge intensive business services and manufacturing (ICT);

• United States: knowledge intensive business services (including R&D) and manufacturing (biomedical devices and ICT).

Methodology (2)

Research method

• Analysis of IP regulation

• IP expert interviews

• In-depth case studies of SMEs

• SMEs survey (Nordic countries , UK and US)

IP Regulation landscape (1)Reforms in the IP regulatory framework are under way across all countries…

and some reforms are expected to have implications for SMEs

Examples

Australia: Innovation Patent System

• Lower inventive threshold than standard patent, formalities check rather than examination, 1 month for filing, 8 years max. protection period

• Supposed to stimulate innovation among SMEs, however

» larger companies using to broaden their competitive position

» goes against international trends to standardize and tighten patent processes

IP Regulation landscape (2)

Italy

New IP Code (since 2005)

Rationalisation: substituting previous about 40 laws

Focus on “quality” in application: bilateral agreement with EPO for patent search service

IP litigation specialised sections in Courts

Increase the level of expertise in the judiciary system

International Network of IPR desks (Pilot)

In strategic areas for Italian export

Information and assistance for registering and enforcing IP

IP Regulation landscape (3)

Nordic countries

Historically, cooperation in regulation and policy development, however, increasing differences related with EU membership

IP enforcement: alternative administrative dispute mechanisms (Denmark)

United Kingdom

Set up of Patents County Court (1989) and simplification of litigation procedures

Patent Opinion Service (2005) to assess in advance patentability or potential infringement

IP Regulation landscape (4)

United States

US IP ‘Czar’ appointed in 2009 (first White House Intellectual Property Enforcement Coordinator)

Patent reform Act in 2011: from first to invent to first to file principle; fee reduction for micro firms

Accelerated examination process (for specific inventor’s categories or sectors, i.e. green industries)

Ombudsman Pilot Program: senior examiner supporting the examination process, when unresolved issues

SME IA Management Practices (1)

SMEs use strategic methods (secrecy, trust) and confidentiality agreements rather than formal IPR

Use of IPR differ widely across industries

High tech: patent intensity similar or greater than large firms (US)

Clean tech: patents as the main assets on which financing and commercial strategies are built (Australia)

ICT: decreasing relevance of patents (new innovation modes) (UK)

Creative industries: trademarks, patents and and copyrights (Nordic countries)

Design-based manufacturing: secrecy, rapid innovation cycles, trademarks (Italy)

Broad range of objectives: o Protecting

o Accessing knowledge markets to

Trade (source of revenue)

Collaborate

o Signalling to investors (e.g. venture capital, asset based lending)

o Opening up and segmenting markets

SME IA Management Practices (2)

Obstacles and Challenges (1)‘Internal’

SMEs lack awareness and a coherent IPR strategy (ad hoc approach)

Lack of knowledge and inadequate management practices hamper SMEs full participation in the IP system

• Lack of resources dedicated to IP, lack of use of available expertise

• Lack of understanding of how IP can be exploited for competitiveadvantage, for both formal and informal methods

• Inability to consider assets as a portfolio

• Focus on patents ignores leverage obtained from other methods (problem especially in creative industries)

Obstacles and Challenges (2)‘External’

The IPR system is not ‘SME-friendly’ (cost, time, complexity)Time more relevant than cost

Costs that are more relevant are those for accessing support services (e.g. Legal, consultancy)

The greatest challenges are faced in the stages of IP monitoring, litigation and enforcement

Lack of confidence in enforcement discourages application

Using IPR when operating internationally is especially troublesome

Information, knowledge, expertise to handle cross-border transactions

Differences across systems

Highly difficult enforcement

Digitalisation poses new challenges to the IPR system

Policy recommendations (1)

Awareness and knowledge

Raise awareness about the strategic opportunities offered by IPRs

Diffuse knowledge about the variety of IP instruments and the strategic objectives they serve

Foster IP education and training, bringing services and expertise closer to SMEs

Target professionals that typically work with SMEs (accountants, lawyers, engineers, architects, designers, etc.)

Training based on sound assessment of target SME population

Engagement of SME representatives and associations

Policy recommendations (2)

Access and use

Address SME financial constraints in the access to IPR

Supporting ‘first time’ access

Combining funding measures with consultancy support (e.g. ‘IP Angel’)

Make the IPR system overall more ‘SME-friendly’Streamlining procedures and reducing time

Adequately structuring fees and costs

o Balance between incentives to access and discouraging frivolous or low-quality filing)

Improving litigation and enforcement mechanisms

o Improve quality of applications, insert expertise in the system,explore alternative dispute mechanisms (e.g. Monitoring and mediation services at specific events/programs)

Policy recommendations (3)

Internationalisation

Improve cross-border information, coordination and enforcement

Regional arrangements

Simplification and harmonisation on semi-formal protection mechanisms (i.e. contracts)

Information and support to SMEs internationalising, particularly in the enforcement stage

Monitoring and assessment

Improve the metrics for measuring SME IA and IPRs use (beyond patents and financial flows)

Areas for further studyAssessment of ongoing reforms and SME-friendly initiatives (mainly at small scale or pilot stage)

Evaluation of policies and programmes to strengthen SMEs’ IPRs enforcement across borders

Analysis of new modes of innovation in SME dominated industries in which business models are largely based on intangibles and collaborative, open modes of knowledge development