“SMEs that have made use of intellectual property rights have +21% chance of growth in subsequent years compared to SMEs that have not invested in intellectual property rights, and +10% chance of high growth in subsequent years.”
“IP matters for the European economy,” said Yann Ménière, the chief economist for the European Patent Office (EPO), who provided the opening keynote presentation at the EPO’s High-growth technology business conference 2019 on November 4 in Dublin, Ireland at Aviva Stadium. Leading off a packed two-day program, Ménière released the results of an EPO study on how Small-to-Medium Enterprises (SMEs) used intellectual property rights, specifically patents.
SMEs typically file European patents for high-potential inventions that find their way to market, the EPO study finds. Therefore, not surprisingly, the EPO report also shows that SMEs that rely on patents have an above average number of employees, and those employees are higher paid and contribute more to European GDP.
“Employees in these industries are more productive, and as a result are better paid, and as a result these employees are truly an engine of the European economy,” Ménière explained. Indeed, 45% of the EU GDP and up to 39% of employment is attributed to SMEs who invest in protecting their innovations with intellectual property rights.
Patents Equal Growth
Perhaps the most remarkable correlation found by the EPO study relates to the likelihood that an SME with intellectual property rights will experience growth or high-growth. The report reveals that SMEs that have made use of intellectual property rights have +21% chance of growth in subsequent years compared to SMEs that have not invested in intellectual property rights, and +10% chance of high growth in subsequent years. Even more remarkable, if the patent portfolio includes European wide rights, SMEs have a +26% chance of growth and a +17% high growth compared with SMEs not investing in patents, which according to Ménière makes sense because these companies are setting themselves up for success on a European wide and global scale.
In the United States, we have repeatedly heard from those calling for increased patent reform that SMEs are holding big tech hostage, and they have been maligned as not being “true innovators” because they do not actually commercialize. This is not what the EPO study found with respect to SME use of intellectual property rights.
Sixty-seven percent of SME patents are, in fact, commercialized, nearly half the time via partnerships. More specifically, according to the EPO report, of those SMEs that do commercialize their patents, some 34% will commercialize their patents in cooperation with external partners. Another 15% will rely on external partners to commercialize the patents. The remaining 51% of those SME patents that are commercialized are commercialized by the SME themselves.
A Holistic Approach
Not only are SMEs commercializing their own patents, themselves and in cooperation with partners, but they also have a holistic approach to the use of patents in general. While 83% of SMEs surveyed use patents to prevent imitation, a majority of SMEs aim to use European patents for “transactional” purposes. More specifically, 69% of SMEs rely on European patents for reputational purposes, 59% rely on patents for freedom to operate, 53% for contracts, 46% for licensing, and 35% for financing. Indeed, there are many valid, legitimate business reasons for SMEs to obtain patents even when they have no interest in offensive patent enforcement in the courts.
Still another of the interesting facts contained within the EPO report is the magnitude of reliance on European patents by SMEs and universities. “SME and universities represent 20% of patent applications filed at the EPO,” Ménière said. He would go on to explain, however, that this is an under representation of the reliance on patents by both universities and SMEs because both SMEs and universities tend to file first in their own domestic patent offices and then file outside their domestic office only for those applications that show the most promise.
Challenges Remain for SMEs
Of course, not all is roses and rainbows for SMEs. There are persistent challenges that need to be addressed, such as SMEs’ lack of ability of to find partners (cited by 31% of SMEs in the EPO study) and the cost and complexity of negotiations (cited by 30% of SMEs). “Given the role that patents play in supporting our economy and bringing forward new technologies, efforts have to continue in finding ways to tackle successfully the challenges revealed in this study,” said EPO President António Campinos in a press release.
The conclusion of the EPO report is that SMEs matter for the European community and patents matter to SMEs, which means that patents matter for growth in Europe, explained Ménière.