SMEs underestimate the importance of IPR

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Only nine percent of SMEs recognize the importance of protecting their immaterial rights, according to the EU Commission. That is too few and it can lead to big consequences for many businesses, says the Confederation of Danish Industry and IP consulting firm, Plougmann Vingtoft.

Patents, trademarks and design protection – also known as IP or IPR (Intellectual Property Rights).

For a lot of businesses – and maybe in particular for SMEs with limited resources – IP sounds dull and as something that can wait until you are more financially stable.

They couldn’t be more wrong, says both the Confederation of Danish Industry and the CEO of Plougmann Vingtoft, Finn S. Madsen:

“On the contrary, IPR is something SMEs need to integrate into their business model and in their product development from day one, unless they want to run the risk of their ideas being copied or of violating other businesses’ rights”.

Frustrating – and expensive

Finn S. Madsen points out that Plougmann Vingtoft find themselves in a situation two to three times a month where they have to advice clients to withdraw products from the market because they are violating other businesses’ IP rights.

It is frustrating and often very expensive, he says:

“After all, it means that everything you have invested in the product is lost. Further, it indicates that you didn’t perform the necessary due diligence and you are not on top of things, he says and adds that the consequences can actually become even more severe.”

For example, if the product is not withdrawn in time:

“The losses in investment that are associated with withdrawing a product from the market can be overwhelming. Facing trial and the accompanying costs will definitely not make things easier,” says Finn S. Madsen.

Competitive edge

Protecting your business’ investments is by no means the only reason to include IPR in your overall business strategy, says senior chief consultant in the Confederation of Danish Industry, Lars Holm Nielsen, and adds:

“One of the biggest advantages is that it is easier to attract both investors and collaborators when you focus on IPR. This way, you don’t expose your investors to any unnecessary risks. Ultimately, a business with IPR will have easier access to the market and several competitive advantages.”

CEO of Plougmann Vingtoft, Finn S. Madsen, agrees:

“Actually, we are often asked by investors to perform due diligence assessments of new businesses, which they consider investing in. In these assessments, IPR is a very important parameter in terms of the risk assessment,” Finn S. Madsen says, and brings up yet another perspective.

“Society as a whole also benefits from IPR. Businesses that use their IPR actively grow faster than the ones that don’t and they create more jobs.”

Breaking down the myths

The question is then, why, according to the EU Commission, only nine percent of SMEs make their IP a priority.

According to Lars Holm Nielsen and the Confederation of Danish Industry there are several explanations:

“Many businesses are simply not aware of the importance of IPR. The lack of awareness points to the fact that we fail to teach students about the value of IPR at the educational institutions.”

Another explanation has to do with myths, Lars Holm Nielsen says. Some of the common perceptions of IPR reflect how the system worked 25 years ago but they are no longer accurate.

“The most common myth refers to IPR as a very complex and expensive deal. It might have been like that before, but things have changed for the better thanks to harmonization and digitization. Today, the rules about IPR are easier to grasp and more financially manageable,” says Lars Holm Nielsen.

He adds that the Confederation of Danish Industry has in fact suggested that the expenses for IP consultancies should be made tax-deductible.

“Even though the world of IPR has become easier to navigate, it is still not something you can comprehend within a day. Therefore, our recommendation is still that you join forces with an IP consultant. And if the costs spent on IPR could become tax-deductible, it would help a lot of SMEs well on their way,” says Lars Holm Nielsen.

This article was originally published via Business Insights on 14 April 2020 (Danish).