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Why MSMEs should treat Intellectual Property Rights as assets

MSMEs should look at IPRs as legal monopolies- investments which will allow them to be ahead of their competition as IPRs, being negative rights, outrightly stop others from practising.

Last Updated: May 13, 2019, 12.59 PM IST
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Having an enforceable or registered trade mark is an intellectual property right that all MSMEs are capable of creating, protecting and enforcing.
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By Rahul Bagga

Conventionally, Indian Micro, Small and Medium Enterprises (MSMEs) have relied on creating and protecting tangible assets-from land, machinery to office equipment-together with their revenue and receivables, to boost their valuation and prestige among their peers and in the industry. However, as per global experience, MSMEs have catapulted into the big league of large enterprises by transcending borders, that is, Multinational Corporations (MNCs), when they invest in creation and protection of intellectual properties (IP) and intellectual property rights (IPRs).

By creating monopolies globally, either by way of integrating businesses vertically or by creating intellectual property rights, these companies have achieved greater revenues and profits. The former method of obtaining monopoly in the marketplace is now regulated by governments in several countries by laws such as Competition Laws. However, IPRs remain a legal and much desired way of creating and enforcing monopolies in an industry or trade.

MSMEs should look at IPRs as legal monopolies-investments in which will allow them to be ahead of their competition as IPRs, being negative rights, outrightly stop others from practising, using or selling any product or service that infringes on any of their IPRs. Here, it is important to point out that all MSMEs, of any trade or industrial segment, are capable of having one or more kinds of IPRs in their portfolio.

Having an enforceable or registered trade mark is an intellectual property right that all MSMEs are capable of creating, protecting and enforcing. Every business has a trademark or a logo or any mark that distinguishes them from their peers, among their customers/clients, and registering it can just ensure that nobody else in their trade or industry is able to use that mark anymore, and this exclusivity allows the MSME to attach goodwill, of quality product/service, to that mark at lower costs.

Another IP asset that MSMEs can easily acquire is that of Industrial Design rights. This IP asset pertains to shape, design or ornamentation of any article or product. This IP asset is driven to protect only the aesthetics of an article or a product; such as creating a new shape or design or ornamentation of a water bottle; of dials of wrist watches; of a suitcase; of a chair, or of a bag.

MSMEs, especially, those engaged in manufacturing or engineering, are capable of creating patentable assets too. A monopoly of this kind is very likely to put any MSME ahead of their competition as they can stop anyone else in their industry from using that patented product, machine or process in their (competitors’) factories. Such an asset holds the potential of opening another revenue vertical or opening a new market by way of licensing.

Copyright as an IP asset mostly serves those engaged in creation of artistic works such as music, books, photographs, paintings, films etc. It is often underrated as an IP asset by those engaged in creating and delivering products and services; and among those, particularly the MSMEs severely underestimate Copyright as a worthy IP asset. Any original literature, from regulatory to marketing literature such as brochures, pamphlets, package insert, product manuals etc., by an MSME qualifies for protection under Copyright laws.

Another less popular but quite valuable IP asset for MSMEs is Geographical Indications (GI), which is held by a collective such as an association of industries or handicraft makers. The examples of such IP assets would be Banarasi Silk, Darjeeling Tea, Chanderi Fabric, Udayagiri Wooden Cutlery etc. Such an IP asset allows the MSMEs of that geographical region by which these GIs are identified to use the related marks and/or logos on their products, and preclude MSMEs of other regions from branding similar products as such.

Of the above IP assets, the assets such as trademark, industrial design and patents, can be easily acquired by any interested MSME by licensing or purchasing them from universities or peers or even from lone inventors. Indian MSME owners must, therefore, seriously look into acquiring such assets from marketplace, when they think of expansion of their business.

The acquisition of IP assets is actually acquisition monopoly rights in that particular trade. The investment in creating, filing, registering and acquiring IP assets by MSMEs can put them in lucrative position such as that of sole suppliers to their purchasers of their patented product, for example, sole suppliers to defence ministry, universities, public laboratories, automobile makers, pharma companies etc. for their patented products.

The acquisition of such assets and their valuation, as done by a trained and recognised IP valuer, can be included in balance sheets, financial and annual reports for the benefit of investors. In the age of entrepreneurship, MSMEs in India must get on the bandwagon. A one- to three-year-old startup, with no land, or office or machinery or equipment to their name, obtains higher valuation than most MSMEs in business since generations, from serious investors, largely on account of such intellectual monopolies that they hold in terms of trademarks, goodwill, designs, patents and copyrights.

Rahul Bagga is a registered Indian Patent Agent, and Founder-Director of the international IP consulting firm Adastra IP Pvt Ltd. www.adastraip.com. He can be reached at rahulb@adastraip.com. He tweets at @svyambhu.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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