2022 Intellectual Property SME Scoreboard Report

Introduction

The European Union Intellectual Property Office (EUIPO) published its latest Intellectual Property (IP) SME Scoreboard report. This report puts forth the EUIPO’s latest statistics regarding the use and registration of IP rights by small and medium-sized enterprises (SMEs) in the EU. The findings of this report are used by the EUIPO to further its action plan to implement and streamline its IP strategy to support SMEs in the EU.

SMEs represent about 99% (24 million[2]) of all businesses in the EU and is the driving force behind the EU’s economy. Understanding how these SMEs protect its innovation and technology is paramount as the revenue per employee is approximately 68 % higher for SMEs that do own and protect its IP rights from those that do not own any IP rights. This makes protection of IP fundamental to the EUIPO’s strategy to support SMEs.

This report sampled SMEs that were considered medium, small and micro sized companies. Companies that were considered medium had a staff count of less than 250 people, a turnover of less than € 50 million and a balance sheet total of less than € 43 million. Companies that were considered small, had a staff count of less than 50 people, a turnover of less than €10 million and a balance sheet total of less than €10 million. Companies were considered micro if they had a staff count of less than 10 people, a turnover of less than € 2 million and a balance sheet total of less than € 2 million. The sample size also included a range of companies who had owned their IP rights and secured ownership rights through registration as compared against companies who did not own any IP. The companies included in this census was selected from a variety of industries including manufacturing, financial and insurance activities, real estate services, information and communication, construction, transportation, accommodation and food services, education, human health, and social work activities, arts, entertainment and recreation and various other service activities.

The report is divided under 4 main sections which are summarised below:

1. Innovation And Business Development

This segment addressed how different SME’s use their IP to develop their business and growth strategies (i.e. how innovative SMEs in the EU are). To evaluate this statistic, the report compared how IP rights owners (through registration and other measures) and non-owners optimised their IP rights through innovation and the disclosure of that innovation.

Compared to 2016, the proportion of SMEs that introduced innovations amongst SMEs have grown. This growth was due exclusively to the non-IP rights owners reporting more innovations, whereas the proportion of IP rights owners that introduced innovations has remained consistent. However, registered IP rights owners were more likely to have introduced innovations per sector than non-IP right owners. IP rights owners are more likely to have introduced new or improved business processes (54 %, compared with 36 % among non-IP right owners), new or improved services (44 %, compared with 30 % among non-IP right owners), and new or improved goods (42 %, compared with 25 % among non-IP right owners).

Internet domains, confidentiality (such as non-disclosure agreements) and trade names (i.e. trademarks) are the top three measures used by SMEs to protect their innovations.

2. Use Of Intellectual Property Protection Measures

This section dealt with how SMEs elect to protect their IP rights. Most SMEs reported that a National trademark is the most owned registered IP right across all sectors. This is followed by EU trademarks and patents. The result also confirmed that 93 % of SMEs that have registered IP rights saw a positive impact of their IP right registration. SMEs with registered IP rights reported that registration improved the reputation or image of the company and that it provided them with a better IP portfolio and IP protection. The most common method of protecting non-registered IP was through domain names and copyrights.

The questionnaire also tested SMEs’ understanding and familiarity of what IP protection entails and there was a clear distinction between SMEs that were registered IP owners and non-IP owners.

The results revealed that SMEs in the transportation sector are most likely to have/use any IP protection measure type (65 %), followed by SMEs in the financial sector (63 %). SMEs in the construction and wholesale sectors are least likely to own any IP protection measure (both 53 %).

The study also indicated that 45% of SMEs that own registered IP rights tried to achieve financial gain by using their intellectual asset by commercialising it through sale, licensing, or by using their registered IP rights portfolio for business development. More than a third of SMEs (36 %) that own registered IP rights have successfully achieved financial gain.

3. IP Rights Registration

Majority of SMEs considered it necessary to register IP rights as they believed registration would prevent others from copying their business know-how, branding, products, or services. Another reason was that they felt registered IP rights will increase the value and image of their company. Many also registered their IP rights to assert legal certainty for the duration and lifespan of their IP rights as they would be able to enforce statutory rights against an infringing party.

SMEs with registered IP rights were asked about the sources they use to gather information about IP registration and other IP related matters. 94 % of the companies reported having used at least one information source to collect information. According to their answers the main sources included : 49 % of SMEs believed the internet was their main source of information, followed by a lawyer (48 %) and then the Chamber of Commerce (34 %).

Approximately 47% of SMEs only registered their IP rights with one national IP office of a single EU Member State. This means that most SMEs only elected to have protection of their IP rights in one of the EU member states. 31% of SMEs have registered their IP rights with the national IP offices of several Member States. This was an improvement from the 2016 results as the Scoreboard revealed an increase in registrations of IP rights in more than one EU Member state. Besides national IP offices of EU Member States the most frequently mentioned organisation for IP rights registration was the European Patent Office (EPO) (24 %). 15 % of SMEs said they have registered their IP rights with the EUIPO.

According to SMEs, the most frequently mentioned deterrent from registering their IP rights was due to the high cost of registration which included high Intellectual Property Office fees as well as high IP agent fees. Another complaint was that the registration in certain EU member states took too long. Many SMEs reported that they do not see the additional benefit of registering their IP rights while other said that they had insufficient knowledge as to how to attend to the registration of their IP rights.

4. IP right infringement

The Scoreboard report reflected that the most infringed IP right is that of trademarks followed by the infringement of patents and plant breeders’ rights. The report also revealed that a considerable percentage of SMEs reported that the infringement of their IP rights led to a notable loss of turnover and damage to the company’s reputation and competitive edge and therefore increased their need to protect their IP rights through registration.

The most used means to enforce IP rights by SMEs were direct negotiations with the infringing parties, submitting a takedown notice, and initiating a court procedure. Interestingly, one of the least common procedures used by the SMEs were mediation/arbitration. The request for an intervention of authorities and initiating other procedures before an IP office were also low when compared to initiating court proceedings.

Among the SMEs that decided not to fight the infringement of their IP rights by way of a court procedure, said that the reason is they believed the court procedure was too lengthy (mentioned by 33 % of SMEs that did not fight the infringement), followed by the fact that the legal fees were found too high (26 %), and that these SMEs saw little chance of compensation (22 %). The least common reasons cited were the risk of losing the case (13 %). Another reason mentioned by the SME’s were the fear of having their confidential information be disclosed in court (11 %) and the reputational damage that could be caused by the public exposure of the case (5 %).

Conclusion

The Scoreboard report by the EUIPO is a clear indication that there is still not enough awareness of the value of IP rights amongst SMEs as only 10 % of EU SMEs reported owning registered IP rights. However, almost all (93 %) of SMEs that have registered IP rights saw a positive impact on their business due to the registration of their IP. This, again, is testament to the fact that not enough SMEs fully understand the value of their intangible assets, nor do they understand how to commercialise their ownership rights to its full potential. Many SMEs also reported that confidentiality is a key consideration when disclosing their IP. In addition many SMEs overlook protection of unregistered IP rights such as copyright and trade secrets, with the latter now enjoying enhanced protection by virtue of the European Union (Protection of Trade Secrets) Regulations[3] which provides legal remedies against the unlawful acquisition and disclosure of trade secrets and know-how. Any IP strategy must also take account of these valuable rights. The most frequently mentioned impact of an IP right infringement by SME’s is that it made them become more aware of the need for IP protection through registration and enforcement as the cost to enforce unregistered rights can be detrimental to the business of the SME. In conclusion, to avoid expensive litigation costs, registration and commercialisation of IP rights are fundamental to the development strategy of any EU SME.

For more information on SMEs and how to protect and commercialise your valuable intellectual property rights please contact Diarmaid Gavin at diarmaid.gavin@rdj.ie or Sonica Legge at sonica.legge@rdj.ie

[1] 2022 Intellectual Property SME Scoreboard Report; Commissioned by the European Union Intellectual Property Office (EUIPO) through the European Observatory on Infringements of Intellectual Property Rights to NTT Data and Ipsos, ISBN 978-92-9156-324-1; DOI: 10.2814/28513; TB-05-22-200-EN-N; full report available at https://euipo.europa.eu/tunnel-web/secure/webdav/guest/document_library/observatory/documents/IP_sme_scoreboard_study_2022/IP_sme_scoreboard_study_2022_en.pdf

[2] SMEs, Start-Ups And Entrepreneurs - A Major Renew Europe Priority; Renew Europe; 12 October 2022; available at https://www.reneweuropegroup.eu/campaigns/2022-10-12/europes-small-and-medium-sized-enterprises-start-ups-and-entrepreneurs-are-a-renew-europe-priority

[3] European Union (Protection of Trade Secrets) Regulations 2018 which implements Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016