Challenges faced by SMEs (Small, Medium Enterprises) in acquiring and maintaining IP Protection

Abstract

“An investment in knowledge, always pays the best interest.”
Benjamin Franklin

The World Intellectual Property Organisation,has define Intellectual property as creations of the mind which include inventions, literary and artistic works, and symbols[1]. These rights promote growth and innovation in the economy. The MSME enterprises not only contribute to the economy but are growing and innovating along the way. Protecting these ideas is crucial for this sector to sustain their business. 

The research article will elaborate on the role of MSME sector in the Indian economy as well as the importance of Intellectual property in the MSME sector. The article will then reflect upon the challenges and hurdles that are faced by the sector in procuring such rights. Lastly, the report will deal with the suggestions and ways in which the challenges can be overcome.

Introduction       

Indian economy has many sectors which contribute towards the GDP of the country. The Micro and Small Enterprise sector which is often referred as MSMEs are about 12.8 million units and have a total labour strength of 31 million people. Not only does it employee large number of people but contributes to 33% of the total exports of the country. Liberalisation has made the market a cut throat place. Thus has become a concern for the MSME sector with respect to cost, quality of the product/service being offered and the delivery of the product/ service.[2]

The dynamics of business have undergone a change, from valuing and recognizing tangible goods has changed to valuing intangible assets such as technology and innovations.

Importance of Intellectual property in MSMEs

In today’s, digital era innovation is the path to success and the driving force behind innovations are often the MSMEs of the economy.[3] Intellectual property helps in preserving these ideas which lead to innovation and lets the maker reap benefits of his idea such benefits are yet to be explored by the MSME[4]

Intellectual property is the oil for the twenty first century[5]. Intellectual property provides the MSME units with an alternate business model in licensing, sale and commercialization of their product or services thereby, increasing the market share and profit margin[6]. In terms of valuation and assets realized of the industrial unit Intellectual property acts as an intangible asset which increases the valuation of the unit considerably.

Furthermore, intellectual property helps MSMEs get an edge over the other brands by marketing their product/ service in a unique manner. The combination of intellectual property with marketing tools can help customers and potential customers distinguish the MSME product/service in comparison to other brands. It is an intangible asset that is more powerful than the real product/ service.[7]

The rising competition andliberalisation, makes it difficult for the MSMEs to survive with domestic and international brands. Having such rights, the MSME owners will be able to create a monopoly for their product/ service. This monopoly could be created with respect to its utility or design, and will help them raise their market share.

Challenges faced by MSMEs:

The MSMEs face a lot of difficulties while using the Intellectual Property [8]system. This is primarily, due to the lack of knowledge. They do not possess the adequate information.Thus, the industry does not have the vision and the clarity of utilizing these rights in their businesses.

Secondly, the accounting cost i.e. application and publication fees, legal advice, translation costs and the maintenance fee associated with obtaining intellectual property protection is exorbitant thus acts as a barrier. These industrial units are not clear with the perks of getting such protection it is perceived as a high risk which may not yield the results desired.

The application process is a lengthy and time consuming which prohibits them from obtaining intellectual property protection. The rise in the number of application further disincentives the MSMEs as for them a delay for obtaining a patent leaves a great degree of uncertainty and delays the possibility of finding potential licensees or partners for exploiting an invention[9]

Thirdly, these industrial units have limited access to legal advice which is crucial. In order to have an efficient and effective intellectual property management the MSMEs will require legal,technical and commercial skills which most MSMEs may not have access to.

Lastly,with changing time information technology has become the new norm.  Most business capitalists value the intangibles i.e. the ideas, design and technology in comparison to the physical assets i.e. machinery, building etc. Therefore, a shift from valuing not just physical and tangible assets to valuing intangible assets is required. The dependence of MSMEs on intellectual property has to be nurtured and grow.However, it’s easier said than done. In reality, the MSMEs have to surpass several barriers to procure such rights.

Suggestions and Recommendations

These challenges need to be overcomes in order for the MSMEs to obtain a substantial market share, sustain the share as well as for growth. A few suggestion and recommendations are enlisted in light of the challenges stated above. 

The MSMEs have to be made aware of not only the perks of intellectual property rights as well as the varied kinds of property rights available to them such that they can opt for the intellectual property which suits their product or service in the best possible manner. For instance, for industrial units which deal in handicrafts should obtain a geographical indication mark as per the Geographical Indication Act 2000 and Geographical Indication Regulation 2001which can be done via an agent as well.

Governments are responsible for establishing a favourable environment to develop the competitive spirit among the MSMEs. The policies play a vital role in promoting conformity with global market requirements by building their capacity to supervise the implementation of international quality standards. [10]

The Indian Government has placed several schemes and plans to facilitate the process of obtaining Intellectual property for the MSMEs such as the scheme “Building Awareness on Intellectual Property Rights (IPR)” for the MSME.[11]Having said that, most MSMEs do not possess the technical exposure and knowledge, thus an advisory cell can help them a long way and ease the process out. More incentives should be offered to make it more appealing for these industrial units to procure intellectual property. For instance, while taking business loans and insurance policies more emphasis and value should be given to intellectual property and consider it as a   collateral or while valuing the concerned MSMSE unit.

Furthermore, the legal fraternity should also take up such cases wherein they can help these small industrial units procure their intellectual property rights and these cases should be mandated to be  considered as a pro-bono case or charge a meager amount.

Conclusion

The importance and the value of the MSMEs in the Indian economy needs to be emphasized. The process to overcome these challenges and instill a mechanism which will ease out the process for the MSMEs to obtain intellectual property rights will be possible when all the stakeholders i.e. public sector, private section and civil societies come together and help these industrial units get their due. The creation of the Intellectual Property centres by the government will help raise awareness about the registration and protection of goods under Intellectual property regime in India. It is only then, that the MSME industry will be able to compete with the business conglomerates and be able to sustain in the market.


[1]World Intellectual Property Organisation Magazine, “ What is Intellectual Property?” <https://www.wipo.int/edocs/pubdocs/en/intproperty/450/wipo_pub_450.pdf&gt; accessed on 19 June 2020

[2]NeerajParman, “ Commercialization of Intellectual Property (IP) for Small and Medium Enterprises (SMEs) in India” (2008) MPRA https://mpra.ub.uni-muenchen.de/8232/1/MPRA_paper_8232.pdf accessed on 4 June 2020

[3]Sati Salmah Sukarmijan and Olivia De Vega Sapong, “ The importance of Intellectual Propertyfor SMEs ; Challenges and moving forward” (2013) 1 IAMC < https://www.researchgate.net/publication/270875011_The_Importance_of_Intellectual_Property_for_SMEs_Challenges_and_Moving_Forward&gt; accessed on 4 June 2020

[4] Kamil Idris, “Intellectual Property A Power Tool For Economic Growth”(2003) WIPO Magazine < https://www.wipo.int/edocs/pubdocs/en/intproperty/888/wipo_pub_888.pdf&gt; accessed on 4 June2020

[5] Mark Getty

[6]Supra 4

[7]Prof Dr. Rashmi Gulati, “The role of Intellectual property for SMEs, Innovation and Economic Growth in India” (2017) 5 (7) IJMR < https://www.researchgate.net/publication/333131593_The_role_of_Intellectual_property_for_SMEs_Innovation_and_Economic_Growth_in_India&gt; accessed on 4 June 2020

[8]Supra note 2

[9]Esteban Burrone, “ Intellectual Property Rights and Innovation in SMEs in OECD countries” (2005) 10 < http://nopr.niscair.res.in/bitstream/123456789/3612/1/JIPR%2010(1)%2034-43.pdf&gt; accessed on 4 June 2020

[10]Supra note 2

[11] R Saha, “ National Study on Intellectual Property and Small and Medium Sized Enterprises India” (2012) WIPO Magazine < https://www.wipo.int/edocs/pubdocs/en/wipo_natstudy_sme_india.pdf&gt; accessed on 19 June 2020

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s