TAIEX Conference on Intellectual Property Rights for Small and Medium-Sized Enterprises Istanbul, Turkey January 2005

Using the IPR System for Enhancing the Competitiveness of SMEs Cherine Rahmy Counsellor, SMEs Division, WIPO

Topics 1. About WIPO 2. Intellectual Property in Today’s Economy 3. What are Intellectual Property Rights? 4. IP Rights and Competitiveness

1. About WIPO International organization - One of 16 specialized agencies of the United Nations Dedicated to promoting the effective protection and use of Intellectual Property (works of the human spirit) HQ in Geneva, Switzerland 180 Members States Administers 23 international treaties on different aspects of IP protection

About WIPO Goal: Progressive development of international IP Law Goal: Integrate IP in national development policies Goal: Enhance accessibility and affordability of global IP protection systems Goal: Promote an IP culture

Creation In October 2000, WIPO established the SMEs Division WHY FOCUS ON IP FOR SMES? –Worldwide: more than 90% of enterprises in all economies are SMEs –EU 19 million SMEs, representing 99,8% of all EU enterprises, employing more than 74 million people –These enterprises are a source of employment, innovation, entrepreneurship and growth

Why Focus on IP for SMEs SMEs largely under-utilize the IP system as many studies show due to: –Lack of awareness of the IP system and its usefulness –Perceived high costs and complexity –Lack of easily accessible assistance

2. Intellectual Property in Today’s Economy

Some figures … Since 1993, patent applications at the European Patent Office have increased by 8.3% a year. Companies such as IBM, Motorola, Philips, Mitsubishi, Canon, Hitachi, Kodak apply for over 1000 patents a year.

IBM earns over US$ 1 billion a year from patent licensing revenues. US Patent License Royalties (in billions US$):

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.

The previous figures show that the IP System is one of the cornerstones in the knowledge-based society of this millennium. Therefore, understanding the legal and economic foundations of the IP System is a prerequisite for comprehending its increasing importance in national strategies for enhancing competitiveness of enterprises.

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 (knowledge economy) Outsourcing of manufacturing by large enterprises Legislative changes (national, regional and international) Expansion of patentable subject matter (e.g. biotechnology) Universities and public research institutions have entered the patenting game

3. What Are IP Rights?

Its main branches Industrial Property Rights –Patents –Utility Models (or “short-term patents”) –Trademarks –Industrial Designs –Geographical Indications Copyright and Related Rights

Patents Definition: A patent is an exclusive legal right granted for an invention that is: –New –Involves and inventive step (non-obvious) –Is 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 European 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 (azythromycin) –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

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.

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 –Examples: champagne, roquefort, tequila, chianti. –Most commonly, a geographical indication consists of the name of the place of origin of the goods.

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, weather-resistant and resistant to vandalism. 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.

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 the death of the author Does not require registration (however…)

Case Study on copyright protection Uruguayan software developer Memory®: accounting programs for SMEs Global presence Copyright belongs to company Registered its software in the different countries in which it operates Each copy of the Memory Software includes a license for use with copyright notice Technological protection measures Permanent innovation (only to “legitimate customers”)

4. IP and Competitiveness

What are the factors that determine the success of a new product in the marketplace? The product provides functional advantages Price Attractive design Reputation of brand Available in the main retail shops Consistent product quality After-sales services

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 them and maintain its exclusivity over their use?

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, GI

Example 1 Patent for the fountain pen that could store ink Utility Model for the grip and pippette 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 player protected by patent Brand on CD player protected by trademark Design of CD player protected by industrial design Music played on CD player protected 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 requires 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.

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.

Welcome to visit WIPO’s website for SMEs :

Thank You!