Case Experience 4 – IP Audits for SMEs (Project for UNIDO (United Nations Industrial Development Organization))
The case experiences are based on the 120 audits we had performed in India over the last ten years. The audits gave us invaluable insights into the role of IP in business in the Indian context, and we have tried to encapsulate some basic results/learnings at a macro level through these experiences. The names of companies and business details have been consciously avoided to comply with confidentiality covenants and professional obligations.
As a part of its project to help SMEs scale up, UNIDO wanted to help companies build Intellectual Property Assets, and use such assets in business for financial benefit. UNIDO ran a series of IP seminars and training programs, but those did not yield the requisite results. Therefore, UNIDO decided to take a more hands on approach in the form of IP Audits.
A total of 62 SMEs were visited as a part of the UNIDO Project, and IP Audits were performed at most of them. IP Audits were conducted for SMEs among the UNIDO Cluster Companies in Machine Tools, Plastics and Foundry sectors. The audits were conducted at clusters across India including clusters at Bangalore, Hyderabad, Chennai, Mumbai, Ludhiana, Balasore, Ahmedabad, Rajkote, Delhi, Ghaziabad, etc.
The primary objective of the IP Audits was to help SMEs identify Intellectual Assets and use them in business for financial benefit.
Each IP Audit included the following steps:
- Visit to the SME, and review of information/materials including visits to shop floor to see products, review of drawings and other materials, review of marketing materials, study of business operations, etc.;
- Interviews with the proprietor and key employees of the SME; and
- IP Audit Report, which included an IP Inventory, Agreement Templates, best practices, and Recommendations.
The IP Audits were performed by a two-member team – a patent attorney with a strong technology background and business understanding, and an IP Expert with a strong legal and business background. On completion of the IP Audit, the report was explained to the SME, and recommendations were given to help the SME gain financial value from its IP Assets. The IP Audits were performed over a period of two years. At the end, each SME was given IP best practices to be followed.
The results of the IP Audits were very interesting to say the least. Ideas with IP potential were uncovered at almost all SMEs. While Machine Tools and Plastics SMEs had higher number of ideas, the number of ideas in Foundry SMEs was comparatively much less. While SMEs in Machine Tools had ideas that were patentable, ideas in plastics, SMEs were mostly from the design perspective.
At a general level, the numbers are as follows:
- More than 100 patentable ideas were uncovered;
- More than 200 potential industrial designs were identified;
- All companies had huge treasure troves of trade secrets, which were accumulated over the years;
- Less than 15 percent of the SmeS filed for trademarks;
- Almost all SMEs did not have appropriate legal instruments, processes, notices, etc.; and
- Less than 5 percent of the SMEs knew how to use IP in business to gain financial benefits.
Post the IP Audit
After the IP Audit, the follow up indicated:
- All SMEs were aware of the value of IP and how IP can help them. They also know when to, and when not to invest in IP, and Which IP to take forward;
- About 40 percent of them implemented the IP Best Practices given to them;
- About 30 percent of the SMEs went forward with IP protection on their expense. Trade Mark and Copyright filings were done for free, and 90 percent of the SMEs filed for their trademarks; and
- 10 among the 62 companies gained perceivable business and financial value from their IP Assets.
Commonly Reported Problems
SMEs reported the following problems:
- The customer takes the IP from them, and gives the contract to another company. (Appropriate legal instruments and process guidelines were given to address this concern. Several SMEs have been able to retain business by following the guidelines and executing the said instruments.);
- Employees leave, take IP from the SME, start a company and compete with the SME. (Legal Instruments and Protection Measures were suggested. Employment agreement with appropriate IP clauses was provided, and two SMEs have been able to successfully stop their employees through legal action.);
- Filing Patents and Designs is very expensive. (The filings were offered at a discounted fee, and many moved forward with the same.);
- IP requires lot of effort, and key personnel in SMEs do everything from designing to selling, and cannot spare time for IP;
- Once a product is released, there is extensive copying;
- The legal system takes too long and the IP advantage is lost; and
- Using IP as a tool is not very easy owing to the price sensitive market. (Measures were suggested to counter the said problems but results have not been verified.)
Contributed with the support of the IP Strategy and Consulting Division of BananaIP Counsels.
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