FUTURE OF MSMEs AND STRATEGIC MANAGEMENT OF IP

By Mr.Jenil R. Shah, (2017-20), ILS Law College, Pune


INTRODUCTION

Intellectual Properties play a very vital role in the form of Patents, Utility Models, Trademarks, Copyrights, Designs, Trade secrets, etc. when it comes to economic growth and social development of a nation. These Intellectual Properties (IPs) have also achieved high economic importance in the modern era and have been given as much consideration as other tangible assets. This shift can also be observed globally where software and technology is replacing large warehouses and factories in terms of the sources of revenue. The current article deals with the Importance of IPRs in shaping the infrastructure for the development of Micro, Small and Medium Industries or Enterprises (MSMEs). It further attempts to demonstrate various facets of strategic IP management in order to achieve competitive advantage over the other players of the Industrial sector.


The MSME sector is one of the most dynamic sectors in our country presently. It plays a crucial role in any developing economy like that of India. MSMEs form the majority portion of the Industrial sectors and are regarded as one of the largest contributors to the GDP of an economy in terms of significant exports, low investment requirements, technology advancement, providing of training, skill development and generating employment opportunities at comparatively lower capital costs. However, due to the overall competitiveness, large-scale Industries tend to get past the MSMEs given the economical privileges, geographical privileges as well as adequate human resources, which in turn puts a lid on the growth of the MSMEs.


ISSUES FACED BY THE MSMEs

Many recent instances have been reported in the telecom, pharmaceutical and technological sectors concerning the inability of MSMEs to strive in such competitive markets. Nevertheless, the importance of the protective and preventive nature of Intellectual Property Rights have proved to be a saving grace for some of the most significant MSMEs by enabling them to revive operations and bounce back. Despite having access to compromised resources and limited premises, most MSMEs consist of either one or two trade names, valuable confidential trade information, original industrial designs, invented or improved products or services, etc. which can be put to utilization. However, the lack of awareness regarding the strategic use and proper utilization of Intellectual Properties amongst these MSMEs restricts the commercialization and growth of knowledge economy.


ROLE OF IPR IN STIMULATING THE GROWTH OF MSMEs

Generally, Intellectual Properties do not hold a significant value by themselves, but subsequently become valuable with their active role in enhancing one’s business strategies.[1] Thus, one of the driving factors of a successful IP model which is the creation of value (IP Exploitation) must be strategized in line with the business strategy while keeping in mind the future growth of MSMEs. An effective IP Strategy can be determined by considering the competitive environment, company’s technological position and nature and size of such enterprise. Some of the relevant strategic models for the purpose of achieving competitive advantage and IP exploitation are Exclusivity model, Profit-Centre model and Cost-Centre model.


“Exclusivity model” also referred to as Creation of exclusivity approach, is one of the most suitable strategic approach for an MSME. In this model, the end goal of the enterprise is to create a unique product and invest in acquiring suitable protection in order to stop others from copying the same. Hence, it creates a barrier to an extent for the competitors from entering into the identical or similar business-lines. This approach helps the business to protect and maintain the quality of products against badly manufactured copies and further gives competitive advantage over others.

Another prominent approach for the strategic use of IP is referred to as “Profit-Centre model”. In this model, an enterprise focuses on extracting direct value from the existing IPs through various ways such as licensing out, franchising, using IP as a collateral against foreign investments, market penetration, infringement enforcement or by way of exploiting key IPs to the best advantage in contract negotiations. Licensing or assignment of Intellectual Properties becomes an important tool for direct conversion of innovation into monetary values. Licensing allows others to exploit the limited IP rights owned by the right holder against royalty while the Assignment amounts to absolute transfer of proprietary interest in IPs from the right holder to another for certain consideration. Strategic licensing or assignment of IP by way of analysing and locating a suitable alliance may also lead to expansion into different markets as well as creating new revenue streams.


For instance, strategic licensing deal which resulted into a great joint venture between the Starbucks Coffee Company and The Tata group in 2012.[2] On the other hand, Assignment of outdated or unnecessary IPRs may save the enterprises from incurring possible expenditure on cost of maintaining and renewals of such Intangibles. Intellectual properties may also be utilised as financial instruments in order to strategically boost the international trade. Several MSMEs with rich intellectual property assets often tend to attract such foreign investments searching for promising early stage innovations to invest upon in collateral to IPs owned by the business. Thus, infusing in product innovation and reserving appropriate protection in export markets through the IP regime may supplement the financial growth of MSMEs.


“Cost-Centre model” or Cost control approach also tends to be a suitable model, wherein a company with restricted capital attempts to obtain protection for its innovations while simultaneously minimizing other costs of creating and maintaining its intangibles.[3] The Cost control approach involves sustainable use of resources by way of avoiding litigation costs and getting access to technology of others or by reducing marketing and other administrative costs. Getting access to technology of others by way of acquiring existing technology would save the time, money and efforts required to be invested in the R&D for the same. Similarly, acquiring key Patents would grant a certain extent of freedom to operate in the relevant markets which would in turn help in the avoidance of litigation.


CASE STUDY

Significance of a well utilized IP arrangement can be observed in the example of UV Waterworks (UVW). UVW is a portable, low-cost, low-maintenance, energy-efficient water purifier that utilizes ultra-violet light to render viruses and bacteria harmless. It enjoys a great share of success in the water purifying sectors around the world in some 15 countries including India, Mexico and the Philippines. UVM was found by Indian-born physicist Dr. Ashok Gadgil in association with Lawrence Berkeley National Lab, University of California (LBNL). UVM was incorporated in response to an urgent environmental health issue in India post “Bengal Cholera” outbreak. The UVM system treats the pollutants with the help of existing UV technology and can treat approximately 15 litres of water a minute. Patenting the UVM system was felt necessary to protect it against badly manufactured copies. Hence, the patents were sought in multiple jurisdiction including the United States and the member countries of European Union. Further, the license for UVM system was issued to Water Health International (WHI) (a US company working on the provision of safe drinking water) for the purpose of suitable delivering of the product and services across the world. Use of accessible UV technology, availing of International Patent Protection and making services available around the world through strategic licensing of the patented technology illustrates the simplicity of innovation and best utilization of IP mechanism.[4]


CONCLUSION

Ultimately, selection and implementation of a suitable strategic IP model within the MSME infrastructure depends upon the demand for prospective future development and by increasing capacity to innovate. The member states of the World Intellectual Property Organisation, have, on several occasion, laid down the importance of encouraging innovation and implementation of effective management of IP amongst the MSMEs for the purpose of growth based on the present situation of industrial sectors.


The Union Cabinet of India has approved the National Intellectual Property Rights (IPR) Policy, 2016 which endeavours to promote strong IP regime in the country and encourages innovation in order to achieve Country’s industrial and economic development goals. Reforms were brought into the Patent, Trademarks, Copyright and Designs laws with regard to simplified registration procedures, expedited examination, adjudication procedures, concessional fee structure for start-ups, etc. These reforms, to an extent, has resulted in improved IP infrastructure, decreased dependency and fast disposal of IP applications. According to the Annual report 2017-18, Filing of patent application amongst Indian start-up and small entities had increased by 75 %. Online filings had increased to 90% in patents and 86% in trademarks. In Designs, Filing of applications increased by 15.9%, while number of registered Designs increased by 21.1%, as compared to 2016-17. There had been a remarkable progress in copyright registrations which increased by 456%.[5] Simultaneously, Ministry of Micro, Small and Medium Enterprises incurred Rs 1.22 crore towards “Building Awareness on Intellectual Property Rights” scheme for MSMEs though conducting of various activities like awareness programmes/Seminar workshop, Reimbursement for registration of IP, International Co-operation & setting-up IP facilitation centre across the country.[6]

[Disclaimer- The views expressed in the article are personal views of the author]

Mr. Jenil Shah, ILS Law College, Pune

[The author may be reached at jenils10@gmail.com]

[This blog is edited by Mr. Jay Kakani|Student Editor||Mr. Nihar Chitre|Content Administrator|| Mr. Nikhil Dubey|Junior Editor||Adv. Advait Shukla|Senior Editor]





[1] PATRICK SULLIVAN & SUZANNE HARRISON, MANAGING IP AS A SET OF BUSINESS ASSETS, 1/2008 https://www.wipo.int/export/sites/www/wipo_magazine/en/pdf/2008/wipo_pub_121_2008_01.pdf, 12/07/2020.

[2] About Us, Starbucks, https://www.starbucks.in/ 12/07/2020.

[3] Supra 1.

[4] Case study resources, WIPO, https://www.wipo.int/ipadvantage/en/details.jsp?id=2564 11/07/2020.

[5] Ministry of Commerce and Industry, Government of India, Annual report 2017-18, available at http://www.ipindia.nic.in/writereaddata/Portal/IPOAnnualReport/1_110_1_Annual_Report_2017-18_English.pdf last seen on 13/07/2020.

[6] Ministry of Micro, Small and Medium Enterprises, Government of India, Annual report 2018-19, available at https://msme.gov.in/sites/default/files/Annualrprt.pdf last seen on 13/07/2020.

#MSME #UVwaterworks