India: Intellectual Property And Small And Medium-Sized Enterprises

Last Updated: 5 December 2012
Article by Aayush Sharma

INTRODUCTION

Today, in this progressively knowledge-driven economy, Intellectual property (IP) is considered a magical word that can be understood only by the experts or the skilled people. There is no surprise in asking why and how IP is going to provide an emerging platform in Small and Medium Enterprises (SMEs) sector? At present, the Small and Medium Enterprises (SMEs) in India are at a crossroad and there is a strong debate over the questions like what would be the future of these SMEs? How these SMEs can endure in the international trade ring? What role the government should play in making these SMEs more competitive? How can the Intellectual property (IP) generate wealth in the business? In order to know the answers of all these questions there is a need of writing this article and it is concerned with the recognition and analysis of current approaches of SMEs towards the Intellectual property (IP), the hurdles that they face; and the available & possible solutions.

SMEs at a Glance

Small & Medium Enterprises are the pillars of the Indian manufacturing sector and have become significant in the stable monetary growth of India. There are more than lakhs of SME units in India with investment of above Rs. 1 lakh crore. The sector has recorded strong growth during the past fiscal years and contributes approx 40 percent to industrial production and 6 percent to country's GDP. Approximately 70 percent of the employment growth comes from the SMEs in the Asian region and they contribute towards 90% of industrial units in India and 40% of value addition in the manufacturing sector. In India they accounts for 90% of the industrial units in India1. As the name suggest these businesses are varied from small organization and trading concerns to large retail chains. According to the estimate, there are over 13 million SMEs in India providing employment to 42 million peoples2. Therefore, it is far more vital for these companies to develop and invest in their own IP so that these can commercially exploited to the benefits of all connected with them.

Intellectual property is a rising out of one's idea, thoughts and intellectual influence. Today, government and law makers, identifying its power and wide operation, gave it legal protection in terms of patents, trademarks, copyrights, industrial designs and geographical indications. IP can assist SME to grow worldwide as big as their competitors in all aspects of their business. IP will assist SMEs to develop their industry and aggressive management policy. For example by adopting unique trademarks and brand names, every trader can create a strong recall value and a position for its product and/or service in the market.

In the past era, only tangible assets were given great importance in value count of a business. However, at present, intangible assets, like Intellectual Ventures (IV), Innovation and Technologies form an enormously important part in value addition to a business, maybe even more than the tangible assets.

Further, IP rights have strong potential to raise the value of business through Mergers & Acquisitions, Joint Ventures and various collaboration schemes. A potential IP right may open door to various financial institutions, venture capitalist and banks for SMEs to enhance their growth and to help financially.

Hurdles before SME s

SMEs hold 90% of the total industrial power, however with the opening of trade borders and overall effect of globalization made this industry on a slow track. Due to tough liberalization norms, this industry is facing competition from global counterparts which make SMEs away from IPR awareness and knowledge. Some of the main hurdles are discussed below:

  • In India many SMEs export raw materials to large companies and manufacturing units, and they do not realise the importance of IPR in the business to protect their ideas and innovation of their product as they are more concern on production and operation of raw material. If these SMEs hold their knowledge on IPR, then they would definitely create an asset and huge profits on their ideas and innovation.
  • In India many SMEs operate their business without having technical knowledge on their product and they manufacture it without concerning of IPR issues and profits.
  • Lacks of business intelligence drown this sector from the global counterparts.

How IP Helps Small & Medium Enterprises

In India, Intellectual property plays an important role in SME development and protection. They should identify various prospects viz. how to best use an IP structure for own payback and profits? IP may support SMEs in every part of business development and competitive strategy which ranges from product development to product design, product marketing to service and from raising financial resources to export or mounting business abroad through IP assignments i.e. franchising and licensing. SME can identify various potential such as improvement in the market values and competitiveness of SME by generating an income for SME through IP assignments of IP protected products. IP helps in enhancing the value or worth of the company in the eyes of investors and financial institutions. At the time of sale or merger and acquisitions IP assets plays an important role in increasing the SMEs value to certain level which cannot be achieved without considering IP assets. A successful IP management enables companies to recover their IP system properly and in a profitable way. In a very initial stage acquiring IP may sometimes crucial and costly but if started in a systematic way profits a lot for a company. It involve company's ability to commercialise their inventions, market their brands and license it know how to other companies. Today major steps are to be taken for the upliftment of the SME; some of the major steps are as follows:

Awareness programmes on IPR: In this changing global scenario the issues of IPR have gained special importance in the Micro Small & Medium Enterprise [MSME] Sector. It is felt that different aspects of IPRs require greater understanding and attention by the industry. MSMEs by protecting their intellectual property can increase their competitiveness in a variety of areas. In order to prepare MSME sector to face the present challenges of liberalization one day awareness/ sensitization programmes on IPR are proposed to be held at various parts of the country. The approach of these programmes will be to give an overview of IPR issues with detailed sessions on patents, trade mark, copyrights, industrial design and geographical indications.

Interactive seminars/workshops on specific issues like patents, trademarks, copyrights, industrial design, trade secrets and geographical indications, etc: There is a great need of IP knowledge oriented programmes which are designed for MSMEs in order to shield their IP rights that will be product specific and cluster based. Industries which are proposed to be covered under these programmes are of life sciences, biotechnology, automobile components manufacturers, drugs and formulation industry, chemicals and Dye industry, leather products, electronic products, sports goods etc. These programmes are knowledge rich programmes where every aspects of IP should be taught and their pros and cons are to be added in favor of the industry. These programs help in gaining expertise to the representatives of MSME to understand the product specific to IPR related needs. Apart from various local agencies seminars must include International agencies likes WIPO, European Union various Patent Offices, etc. will also interact with the participants.

Setting up of Intellectual Property Advisory Cell: Size of SMEs in India are not so much bigger in getting all the benefits from the IP system. Although most of the SMEs don't have ample assets to develop own IP resources, however, they exists a huge potential in rising and protection of ideas/inventions. Setting up of IP Advisory Cells will solve some issues and this will assist in developing the data-base of MSME which have significant role in updating the IP system. It will also assist SME for developing system for international patent search.

Specialized training on IPR related issues for the entrepreneurs/ officers, members of industry associations: To generate awareness on IPR issues concerning patents, trademark, copy right, industrial designs, trade secrets and geographical indications, it is proposed to conduct long term and short term training courses for the benefit of MSMEs manufacturers, members of the Industrial Associations, persons engaged in R&D activities, Government officials associated with the implementation of IPR projects and students of the management and engineering institutions. The basic aim is to train participants in the area of IPR who will act as resource persons and serve the various needs of the different target groups, who are involved in the IP value change

Financial assistance on grant of patent: An encouragement given in any way more too as a financial assistance was considered to be best in terms of SME development. Government should organize more financial assistance packages to SME in filling patent and in whole IP process may be domestic or foreign patents.

Interaction with International Agencies: In most mature economies, the exploitation of IP is legally protected through the use of IPRs, which evolved from property rights on land, capital and labour. The global network economy requires that both matters of protection and visibility be addressed at a worldwide level. Initiatives of awareness and actions of harmonization in various fields could be initiated by extending co-operation in the area of Science & Technology (S&T) between various countries3.

Conclusion

This article emphasize on the actual condition of SME system in India where these companies are lacking in lot of strategies and rules and the effect of IPR system to Small and medium enterprises. In the past era Government formed lot of new reforms for the upliftment of the SME, The Government of India has taken several initiatives in the field of IPR, including amendments in patent laws and modernization of the IPR / Patent Offices, as a strategic response to the globalization and liberalization of the Indian economy which not only affects SME growth in the country, now these companies are start adopting IP as a major tool in their business regime. Today SME are holding good position in the country in terms of growth, profits, technology and exposure.

Footnotes

1 http://www.legalera.in/Front-Page/ip-issues-importantfocus-for-smes.html

2 http://mpra.ub.uni-muenchen.de/8232/1/MPRA_paper_8232.pdf

3 http://www.wipo.int/edocs/mdocs/sme/smes/wipo_smes_cju_07_topic

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