Towards Europe’s industrial & digital sovereignty: the role of Intellectual Property Rights for innovative SMEs

This guest post was written by Federica Masucci in the context of her internship.


Today’s global digital economy is founded upon intangible assets protected by Intellectual Property Rights (IPRs), and IP management and protection have become part of any successful business strategy. IPRs play an essential role for innovative SMEs, as they protect the value of their ideas and secure a return on risky investments. Smart IP strategies are key to supporting the EU’s industrial & digital sovereignty in key areas of the economy.

 

Intangible assets protected by IPRs are the cornerstone of today’s global economy

In today’s aim to advance towards inclusive knowledge societies for sustainable development, the protection of intellectual property (IP) plays an essential role. The notion of intellectual property refers to all creations of the mind and usually takes two forms: industrial property and copyright. They provide creators and innovators with statutory rights over their works, and at the same time balance them with the public interest in accessing the same works, thus promoting innovation, and economic and social development.

In this sense, IPRs encourage human creativity and invention. The current digital transition has shown that intangible assets protected by IPRs are the cornerstone of today’s global economy and that IP management and protection have become part of any successful business strategy. As a matter of fact, European investments in such “intellectual property products” increased by 87% in the last two decades. Formal IPRs create an incentive for further investment in innovation, which in turn increases economic growth and the supply of high quality and sustainable jobs. In addition, the positive association between IPR ownership and economic performance is particularly strong for SMEs.

 

EU SMEs using IPRs are more likely to achieve high growth

At the same time, SMEs across sectors and markets do not take full advantage of the opportunities offered by IP protection. In the EU, just around 9% of EU SMEs have registered IP rights, compared with 40% of larger companies.

According to Ms. Silvana Marcotulli, DIGITAL SME’S WG Software Patents & Intellectual Property Rights’ Co-Chair, the limited use of IPRs by EU digital SMEs is caused in the first place by a lack of awareness of the benefits of IPR protection; besides, it depends on the fragmentation of institutions granting patents and on the perception that the procedures are costly and complex. “It is important that digital companies start to look at IPRs as an opportunity to grow and disseminate technologies. Since most part of artificial intelligence is composed of softwares, it is then key that a company’s business model includes also a comprehensive IP strategy, encompassing not only patents, but also copyright and related rights”. “It is unsurprising – she adds – that large American and Chinese companies have great IP strategies. EU companies have to change their approach to IP”.

IPRs are key for SMEs growth, considering that innovative SMEs are more likely to experiment and generate new inventions and processes compared to large-sized companies. SMEs tend to have more flexibility in adapting to challenges brought by technological changes. On the other hand, innovation may also increase the chances for them to fail: they may lack skills and financial resources, as well as physical assets, distribution channels or marketing expertise.

This is precisely where the potential of IPRs for innovative SMEs comes into play, in particular patents, trademarks and industrial designs, often combined with additional protection measures, such as confidentiality and complexity of product design. They not only secure the exclusive commercial and financial exploitation of innovative ideas in the market: they also compensate the initial resources constraints, generate returns on risky investments, facilitate technology transactions and collaborations or licensing agreements. Indeed, EU SMEs are willing to license up to 48% of their patented inventions and actually license about a third of these inventions, while large companies are willing to license only 16% and in fact license only 9%. SMEs that have filed at least one patent increase their own likelihood to become high growth firms (HGFs) by 9%, and by 13% compared with SMEs that have filed at least one trademark. Overall, IPR filing make SMEs 23% more likely to growth in the following three years, and 10% more likely to become an HGF.

 

IP management is key to ensure EU digital sovereignty

IP is a key asset for the EU to compete globally. In its new Industrial Strategy for Europe, the Commission calls for the need to decrease dependence on external providers for, among others, critical materials and technologies. The revision of our single market legislation, well-functioning standardisation and certification systems, and a reviewed EU competition policy are pivotal. A robust IP policy also should also be there to support Europe’s autonomy. Specifically, IP management can help Europe to be at the forefront in the development and deployment of artificial intelligence (AI) and blockchain solutions.

As specified in the new European Investment Bank (EIB) 2021 report, European SMEs are lagging behind in these two sectors for a total investment gap of about €5-10 billion per year in comparison to their competitors from the US and China. Appropriate IP management means transforming R&I results into ground-breaking technological solutions, and enhancing open innovation ecosystems. Consequently, Europe must ensure an effective intellectual property system and strong safeguards, enabling innovators to bring new products to the market. It also needs to protect the Union’s patent system against abuse, which is detrimental to innovative AI developers. Overall, Europe needs also to be connected to the world’s export markets and supply chains, therefore refraining from adopting protectionist tendencies.

If you want to be inspired by more discussions on intellectual property, check DIGITAL SME’S WG Software Patents & Intellectual Property Rights’ activities. Read also the  DIGITAL SME’S White Paper on Digital Sovereignty.

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Author:

Federica Masucci

This guest post was written by Federica Masucci in the context of her internship. She is passionate about media, intellectual property, and digital policies.

You can follow her via her LinkedIn.

 

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