Technological Adoption & Innovation for SMEs: Towards a Smart IP Strategy

17. February 2022

Press / Interviews

by Lavinia Meliti

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1. Introduction

Relatively all major businesses in today’s world have one thing in common, with this thing in common being that they started out small. Jeff Bezos started operating Amazon from his Seattle garage. Bill Gates and Paul Allen also started Microsoft in their small New Mexico garage, while Google owes its start to a Stanford University dorm where Larry Page and Sergey Brin were studying computer science. Although these companies had very humble beginnings, all went on to achieve great success and billions in revenue. And while it is true that not everyone manages to build a multi-billion-dollar empire, what is true is the fact that without small and medium enterprises, the global economic regime would be very different from what it is today.

SMEs are the backbone of most economies, and their survival and prosperity are vital for a healthy economy.[1] Although they are small, they are giants in terms of economic impact. The World Trade Organization reports that small businesses constitute more than 90% of businesses in developed economies,[2] providing 60-70% of national employment and generating 55% of Gross Domestic Profit.

With that being said, SMEs also have to face an uphill battle when it comes to achieving success. According to the World Bank, access to finance is a significant challenge for small businesses and is their second most cited roadblock to growth.[3] Put simply, SMEs can benefit from added revenue opportunities, and this is where tech adoption and innovation can be pivotal. Although innovation in tech drives investment, more often than not, innovation is unavailable to SMEs due to budget constraints and the competition that large companies represent.

However, with a smart IP strategy, SMEs have an opportunity to level up the playing field. They can enjoy easier access to groundbreaking patents, letting them pursue innovation efforts that are affordable and potentially lucrative.

2. The importance of Intellectual Property for SMEs

IP is advantageous for any company, regardless of its size. With strong IP strategies, large companies can create market-leading products, and open new streams of revenue. Likewise, SMEs that invest in the right IP strategies grow faster and are more likely to succeed.[4] Solid IP protection puts small businesses in a better position to enjoy significant benefits. Chief amongst these is the fact that a stronger IP footing offers security, ensuring that their business outlook is more assured. This in turn allows SMEs to pursue further innovation which will lead to a larger market impact. As the impact continues to grow, so too will the licensing revenue that SMEs get from license sales and royalties.

3. How can SMEs access IP?

There are three primary pathways through which SMEs access IP: by creating their IP, licensing it from a third party, or buying a third party’s IP outright. But there are multiple significant challenges in pursuing these pathways.

a) Creating own IP

Proprietary IP is often the most lucrative option for SMEs. But in many ways, this can also be the most challenging. Due to financial restrictions, many SMEs are unable to devote significant resources to innovation. Even if they can develop unique technologies, obtaining a patent is a major stumbling obstacle. Proper registration frequently necessitates seeking legal guidance on patentability, documents, and registration locations, a process that is both costly and expensive.

b) Third-party licensing

Licensing is a potentially cheaper way to access IP for SMEs. With licensing, small companies essentially pay to rent another company’s IP in exchange for a royalty. However, licensing also brings challenges including ones of cost and viability. When it comes to cost, it is noted that apart from the actual price charged for a license, funds are also needed for professional support. Moreover, patents often cannot be applied in vacuo. They must typically be applied alongside other patents and tracking down the owners of these patents and conducting licensing arrangements is an extremely difficult and time-consuming endeavor that even large companies struggle to accomplish.

c) Third-party IP purchase

IP purchase creates stronger rights over intellectual property than licensing does. This is because it gives the purchasing SME an exclusive right over the subject matter patent. But it’s even more expensive than licensing since the selling company will likely want to recoup its investment through the transaction.

d) Challenges Remain

Although considerable options are available, SMEs face obstacles related to enforcement challenges over their intellectual property. Furthermore, in today’s world industries are constantly changing, and IP access options are constrained by the threat that they will be overtaken by new industry developments, which also presents significant headaches for SMEs.

4. Time has come to re-think innovation and IP strategies

Protecting and promoting innovation has never been so complex, costly, and misaligned with the needs and capabilities of those at the source of innovation: small and medium enterprises (SMEs). The time has come to re-think innovation and IP strategies: Smart Pools.

Smart Pools are tech-enabled (AI and Blockchain-based), modern patent pools that deliver the benefit of technologies to innovators that want to encourage adoption, maximize business opportunities, and generate a return on their investment.

But first, what are Patent Pools?

Patent pools are not a novel idea: as a matter of fact, they are over 150 years old. A patent pool is a patent license vehicle that accumulates patents from multiple parties and offers them for license to consumers of the technology represented by these patents that we call “members.”

Why are Smart Pools better than traditional pools?

While traditional pools are formed around matured technologies, Smart Pools are formed in tech areas that are at a very early stage, where adoption is in its earliest phases. Since they are formed while a technology is still emerging, they can help to build an environment of adoption, innovation, and cooperation: a single license to a wide patent portfolio encourages implementers to adopt these new technologies. In the Smart Pools, tech leaders contribute important innovations that SMEs can access at standardized licensing terms, at the lowest rates available, while being protected from abusive patent practices.

But why should SMEs join Smart Pools?

Smart Pools allow SMEs to access cutting-edge technologies on standardized terms, without the need to pursue licensing on a one-to-one basis and the exorbitant expense that this might entail. In doing so, SMEs can benefit from a more efficient process that reduces transaction costs and enables a better structured and more coherent licensing strategy. The SME is then free to continue to innovate, benefit from freedom to operate and respond in RFPs, investor presentations and other materials that they have significant technology under license.

5. Conclusion

Innovations create more value for corporate shareholders than for those creators at the source of innovation: SMEs. The aim is to remove all barriers to innovation for SMEs, and with that, all the challenges they face when competing with much larger companies having more resources and a much larger bank account. While multinationals strive to outplay their competition by spending more, SMEs can compete by spending better and spending smart. It is for this reason that through a smart IP strategy, adoption of tech and innovation by SMEs is encouraged. In a world where disruption is happening at all levels of society, Smart Pools evens out the odds for those who weren’t born with a silver spoon. Everyone deserves a chance to prove their worth, and at the end of the day, Smart Pools ensures that they’ll get that chance.

About the blogpost author:

Lavinia Meliti is Global Head of Business Development at IPwe. She leads strategy and execution of IPwe’s business initiatives worldwide. She holds two Juris Doctor degrees in Europe and in the United States, and previously worked as an Attorney in Miami, Florida, focusing on IP and Competition Law matters.