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Tuesday, September 07, 2004
Intellectual property protection for SMEs
By Andrew Michael S. Ong
Senior Partner of Ong Bagay-Villamor & Fabiosa Law Firm
IN the past, whenever businessmen talked of property, they referred only to land, factory buildings, vehicles, warehouses, equipment and all other tangible physical assets.
However, nowadays, one can hardly account for business assets without also valuing a company’s popular brands, innovative technologies, best-selling designs, business software solutions, secret trade information, unique operational know-how and special competence, which comprise the intangible assets or intellectual property used in business.
A company’s intellectual capital, as well as its creative and innovative capacity, has become more difficult to attain and requires huge investments in money, time and other resources of the company.
For example, long and expensive researches have to be undertaken to continually develop new product designs and upgrade technology. Huge advertising budgets are required to market brands and make them popular. Software programs are expensive to design, test and deploy.
Hence, the big global players are focusing more and more on the creation, management and protection of their intellectual property, rather than on their physical assets.
Small and medium enterprises (SME) should likewise take stock of their intellectual property and see how to best manage them.
Almost every business has built a reputation, an image, or perhaps, a brand or a trade name, through which it is able to attract and retain its loyal clientele.
Certainly, SMEs have acquired their unique competence, trade secrets and market information.
In fact, quite a number of SMEs may have developed their own product design and their model of services, improved on existing technology or published literature, and so on.
SMEs start by looking at the following intellectual properties, which they can apply for legal protection:
* For brands (trademarks and service marks)—through trademark protection
* For innovations and inventions (in products and services)—through patent or utility model protection
* For designs (of products and equipment)—through industrial design protection
* For literary and artistic works (in published or advertising materials, music, graphics, literature)—through copyright and related rights protection
* Trade secrets (knowledge, technology, know-how and competence)—through the protection of undisclosed information of commercial value.
By applying for the legal protection of their intellectual property, SMEs will enjoy exclusive property rights over the same and prevent competitors, here and abroad, from exploiting them to their disadvantage.
Legal protection of intellectual property will also increase the net worth of a company and help bring in future profits.
SMEs can enter into franchise or license agreements, lease, sell or commercialize their intellectual property in whatever manner they wish, bringing in additional profits and business. Legally protected intellectual property also makes the business more attractive to prospective investors, partners and creditors.
Take the case of brands. If SMEs are selling their products or services without a distinctive name or mark, they can start thinking of using one. Brands enable SMEs to effectively market their products and services, project an image that appeals to customers and generate goodwill.
A customer who is pleased with a product will naturally look for and continue to buy not just the same product but also other products originating from the same source.
SMEs should not select a brand name that is identical or similar to brands existing in the market. This way, they can apply for trademark registration and appropriate the brand for their exclusive use.
With a trademark registration, when the brand becomes popular, SMEs can go into franchising or other forms of licensing to expand their business.
SMEs can also scout for investors, partners and creditors more readily with a powerful brand because the brand’s equity will increase the net worth of the SMEs and make them more attractive.
As an exit strategy, if SMEs decide to merge, sell or become publicly listed, a legally protected powerful trademark will also greatly enhance their prospects of getting a better deal.
The same can be true with the technology and design applied to the products and services churned out by SMEs.
Through patent and industrial design registrations, SMEs will be rewarded, albeit for a limited period of time, with a monopolistic privilege to use, manufacture and import exclusively these products and services. As such, SMEs may choose to earn royalties from technology licenses they may grant to other entities to use their patents.
They can likewise attract investors and joint venture partners for the commercialization and exploitation of the patented inventions because they have exclusive rights over the same, or even use patents as collateral to obtain additional capital from creditors. Alternatively, SMEs may also sell their patent to interested buyers or use it to cross-license with other companies to avail of and use the patents of others.
(September 7, 2004 issue)
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