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					     15th INTERNATIONAL CONFERENCE ON SMEs
                     July 19 to 22, 2004, Abuja, Nigeria


Enhancing SMEs Competitiveness Through Effective Management and
    Utilization of Intellectual Property System: WIPO Initiative


Christopher M. Kalanje, Consultant, SMEs Division, World Intellectual Property
                                Organization
Slide 1 Overview

        The presentation will start by introducing intellectual property. In doing so the
presentation will introduce the basic intellectual property rights and briefly look at their
protection mechanism and duration of protection.

       The presentation will then discuss the increasing importance of IP in business and
provide examples of increased share of IP assets vis-a-vis physical assets in overall
corporate assets.

        Intellectual property management (IPM) is important if an enterprise is to make
effective use of IP assets. The paper will look at specific features of IPM. It will discuss
the role of IPM team in realigning IP strategy with the overall business strategy.

        Effective use of IP is what makes the difference between enterprises which place
the necessary importance on their intangible assets and those who do not consciously
seek to benefit from IP system. This section will highlight strategies that can be used by
enterprises in benefiting from IP assets.

        WIPO’s SME initiative was launched in October 2000. The SMEs division, which
was established to implement the initiative has undertaken several activities, aimed at
enhancing SMEs competitiveness through effective use of IP system. The paper will
address the WIPO initiative and how WIPO through its SMEs division has worked with
other inter-Governmental and non-Governmental organizations in assisting Governments,
SMEs, SME support institutions and other stakeholders in realizing the benefits of IP
system.


Slide 2 Basics of Intellectual Property

        Intellectual property can simply be defined as intellectual creations of the human
mind. Unlike physical property, intellectual property can potentially be used or enjoyed
by many people at any moment in time without depriving the owner of its use or
enjoyment. However, like physical property, the creation of intellectual property involves
costs be it in terms on money or time. In order to motivate creation of such property there
need to be a system that would enable creative minds be rewarded. The intellectual
property system provides such a facility.

        It is important to note that intellectual property rights are territorial i.e. protection
is limited to country/coutries where protection has been granted.

        Basically IP is divided into two branches

        (a) Copyright and related rights

        (b) Industrial Property



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Slide 3 Basics of IP contd.

        Before moving to the two main branches of IP it is important at this juncture to
introduce a very important aspect of IP which cuts across the two IP branches. This is
what is known as trade secrets

         In order to take advantage of IP system one has to know about trade secret. Any
idea, which has the potential of benefiting from IP system, has to be kept as a secret in
the initial stage. Divulging useful ideas without adequately protecting may be a sufficient
cause for the idea not being protected by IP system.

      Broadly speaking, any confidential information, which provides an enterprise with
a competitive edge, can qualify as a trade secret

       A trade secret can on relate to different types of information e.g.,

       (i) Technical and scientific information such as formulas for producing products;
       technical composition of a product; manufacturing methods and specifications
       designs; drawings, architectural plans, blueprints and maps; computer codes;
       know-how necessary to perform a particular operation, test data; laboratory
       notebooks etc.

       (ii) Commercial information such as lists of suppliers and clients; customer
       buying preferences and requirements; consumer profiles; supplier arrangements;
       marketing and business plans; marketing and business strategies; advertising
       strategies; marketing research results; sales plans and methods; distribution
       methods

       (iii) Financial information such as internal cost structure and price lists

       (iv) Negative information such as details of failed efforts to remedy problems in
       the manufacture of certain products; dead-ends in research; abandoned technical
       solutions; unsuccessful attempts to interest customers in purchasing a product etc.

        Three essential legal requirements are important if information is to be considered
as trade secret, these are,

       - The information must be secret i.e. “not generally known among or readily
accessible to persons within the circles that normally deal with this kind of information
       - It must have commercial value because it is a secret
       - The holder must have taken reasonable steps to keep it secret

       There is no requirement to register or disclose the information. Its protection can
be maintained as long as it remains a secret.




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Slide 4 Basics of IP contd.

Copyright

        As mentioned above copyright is one of the two main branches of IPR. Copyright
is a legal term describing rights given to creators for their literary and artistic works.
Literary work include, novels, poems and plays, films, databases, computer programs,
musical woks etc. Artistic works include, drawings, paintings, photographs and
sculptures, technical drawings, architectural designs etc.

       Acquisition of copyright protection is usually automatic i.e. once a work is fixed
in some material form. Duration of copyright protection commences upon the creation
and fixation of the work and lasts not less than 50 years after the death of the creator.
National laws may offer longer protection period.

        The main treaty dealing with the protection of copyrights is the Berne Convention
for the protection of literary and artistic works.


Slide 5 Basics of IP contd.

Related rights

       These are rights related to copyright. They provide similar or identical rights to
copyright though sometimes are more limited and of short duration. Related rights cover
three types of rights i.e. (a) rights of performing artists in their performances e.g.,
musicians and actors, (b) rights of producers of sound recordings (e.g., audio cassettes,
video cassettes, music CDs, etc) in their recordings, and (c) rights of broadcasting
organizations of their radio and TV programs.

       The duration of protection of related rights is at least until the end of a period of
twenty years computed from the end of the year in which (a) the fixation was made-for
phonograms and for performances (b) the performance took place-for performances not
incorporated in phonograms; (c) the broadcast took place-for broadcasts.

       The treaty dealing with the protection of related rights is known as the Rome
Convention for the protection of performers, producers of phonograms and broadcasting
organizations (October 26, 1961)




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Slide 6 Basics of IP contd.

Industrial Property

        This is the second branch of intellectual property. It includes patents, trademarks,
industrial designs and geographical indications. In addition, industrial property covers
Utility models (sometimes known as innovation patents), Integrated circuits and
Protection against acts of unfair competition.

Patents

        These are legal rights granted by the Government, in exchange of full disclosure
of an invention (new way of doing something or a new solution of a technical problem).
An invention could relate to a product or a process. Usually a patent is granted if an
invention meets the following criteria (a) new or novel (b) inventive step (non-obvious)
and (c) capable of industrial application. The duration of protection is usually not more
than 20 years from the date the patent application was filed.

          Benefits of patents

- Competitive edge in the marketplace
- Potential new source of revenue (outright sale or licensing)
- Increases chances for partnership and strategic alliances for production, distribution
and/or selling the product
- Greater market value of the business


Trademark

       A trademark is a distinctive sign, which identifies a certain product or service as
that produced or provided by a specific person, enterprise or a group of
persons/enterprises, and it allows a consumer to distinguish between competing goods or
services. The duration of protection may vary but can be renewed indefinitely.

       In addition to trademarks identifying the commercial source of goods or services,
several other categories of marks exist. Collective marks are owned by an association
whose members use them to identify themselves with a level of quality and other
requirements set by the association. Examples of such associations would be those
representing accountants, engineers, or architects. Certification marks are given for
compliance with defined standards, but are not confined to any membership. They may
be granted to anyone who can certify that the products involved meet certain established
standards. The internationally accepted "ISO 9000" quality standards are examples of
such widely-recognized certifications.




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       Benefits of Trademarks, collective marks and certification marks

- Competitive edge in the marketplace by distinguishing your product or service from
those of your competitors
- Identifies the source of a product
- Associate the product with superior quality
- Facilitates advertising and marketing


Industrial Designs

        Industrial design is a legal right granted by the Government to protect a new or
original ornamental or aesthetic aspect of a useful article (visual appeal to the naked eye).
Industrial design my be three or two-dimensional: Shape or surface, pattern, lines or
color. Some examples of industrial designs are industrial products and handicrafts (car,
cycle, pen, clock, watch, jewelry, furniture, kitchenware, electrical appliances, carpets,
textile designs, bamboo products, architectural structures, etc.)

         Generally, like other IPRs protection, industrial design protection is limited to the
country in which protection is granted. However, under the Hague Agreement
Concerning the International Deposit of Industrial Designs, a WIPO-administered treaty,
a procedure for an international registration is offered. An applicant can file a single
international deposit either with WIPO or the national office of a country which is party
to the treaty. The design will then be protected in as many member countries of the treaty
as the applicant wishes. The maximum duration of protection is generally 15 years

       Benefits of Industrial design

- Competitive edge in the marketplace by making an article attractive and appealing so as
to win the hearts of customers
- Enables enterprises to respond to changes in consumer taste and preferences
- Distinguish enterprises’ product from those of their competitors (Product identity)
- Enhances the market value of your business


Geographical Indications

        Geographical indications are signs used on goods that have specific geographical
origin and possess qualities or a reputation that are a result of their place of origin.

        Geographical indications are protected in accordance with national laws and
under a wide range of concepts, such as laws against unfair competition, consumer
protection laws, laws for the protection of certification marks or special laws for the
protection of geographical indications or appellations of origin. In essence, unauthorized




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parties may not use geographical indications if such use is likely to mislead the public as
to the true origin of the product.

          Benefits of geographical indications

- Identify the origin and quality of a product
- Facilitate access to market due to popularity of location


Slide 7 Why intellectual Property?

        The twin forces of globalization and liberation combined with the revolution in
the field of information and communications technology has resulted to increased
competition in both intensity and extensity. Both SMEs and large enterprises have found
themselves competing not only for almost the same market but also with domestic and
foreign based companies. On the other hand, the forces of globalization and liberalization
and ICT have also brought about potential business opportunities.


Slide 8 Why IP contd.

         Currently IP assets are increasingly taking the central stage in determining
enterprise value. (Why)? It has been realized that the market value of most enterprises is
significantly greater than their book value. This realization has made some enterprises to
examine the contribution of their intangible assets to the total market value. The exercise
has unveiled the importance that intellectual property assets play in the creation of total
market value of enterprises. In the late nineties a study showed that the value of
intangible assets of Disney, Heinz, Johnson & Johnson, Merck, Microsoft, Nike and
Procter & Gamble was to the north of 80% of total market value of each the companies 1.
More recently the BusinessWeek online published a 2003 list of ten most valuable brands
Coca-Cola (US $ 70.45 billions), Microsoft (US $ 65.17 billions), IBM (US $ 51.77
billions), GE (US $ 42.34 billions), Intel (US $ 31.11 billions), Nokia (US $ 29.44
billions) Disney (US $ 28.04 billions), McDonald’s (US $ 24.70 billions), Marlboro (US
$ 22.18 billions) and Mercedes (US $ 21.37 billions)2. The said brand value are said to be
on the north of 70% of the total market value of the said companies. For more examples
visit http://www.wipo.int/sme/en/case_studies/index.htm


Slide 9 Why IP contd.

        There is a change in perception on factors determining competitiveness and
market value of an enterprise/firm. As mentioned above increasingly intangible assets
(e.g. IP, human capital, corporate competence etc.) are taking the central stage in
determining market value of enterprises e.g. in 1982 corporate assets in the USA

1
    Parr, L. Russell (1999) Intangible Assets Dominate Hidden Corporate Value
2
    BusinessWeek Online http://www.businessweek.com/magazine/content/03_31/b3844013_mz046.htm


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consisted of 62% in physical assets and only 38% was intangible assets. Less than twenty
years later (2000) there have been a complete reversal of the situation where 70% of
corporate assets were intangibles and 30% physical assets3.
Slide 10 Why IP contd.

       Increasingly companies of all industries and size are appreciating the importance
of IP. Most companies now take keen interest in issues related to intellectual property
compared to the last few years.


Slide 11 Intellectual Property Management

       Unfortunately, there remains a big number of enterprises big and small, which do
not benefit from IP system. Several reasons are attributed to this situation the main being
inadequate awareness of IP. There also exist companies, which consider IP ownership
and protection as costly exercise without any value.

        IP rights are very useful business tools and if properly managed they can be
transformed into profitable assets e.g. Texas Instruments Corporation


Slide 12 IP Management contd.

       For a company to successfully manage and make effective use of its IP assets, it
needs to have an IP policy in place. The IP policy should set a framework on how the
company would treat IP issues e.g. internally generated IP, confidentiality agreements
with employees and business partners, exist contract with employees etc.


Slide 13 IP Management contd.

        Traditionally IP issues where viewed as too legalistic and where left to
companies’ legal departments or simply avoided. However, it has been realized that IP
issues are more than legal tools and that they have to be managed effectively if an
enterprise is to benefit from its use.

        Effective management of IP assets requires the establishment of a
multidisciplinary team. The team should include representatives from the following
departments/divisions, marketing, design, R & D, legal, finance, manufacturing,
accounting, taxation, human resources, security and other technical experts. If an
enterprise does not have the said departments/divisions then it should at least take into
consideration issues that would have otherwise been addressed by the said
departments/divisions.

Slide 14 IP Management contd.
3
    Idris K, 2002, Intellectual Property- A Power Tool for Economic Growth


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        The establishment of IP management team is a step closer toward effective use of
IP assets. The main tasks of the team include (i) conducting IP audit/review i.e.
identifying existing and potential IP assets owned by the enterprise. The team should also
ascertain legal and business status of the identified IP assets. In addition the team should
identify IP assets owned by other enterprises but used by the enterprise and status of such
use (ii) understand potentials of the identified IP assets e.g. which should be licensed,
sold, donated or just left to lapse (iii) formulate an IP strategy (e.g. deciding to protect
ideas as trade secret or patent them, establishing a licensing strategy) and integrate it with
the overall business strategy and (iv) oversee the implementation of IP strategy and
ensuring that it is well informed of market conditions and changing nature of competition
in the marketplace.


Slide 15 Effective use of IP assets

        Left on their own IPR has a real possibility of remaining costly legal papers.
However when used effectively IPR can be transformed into dependable business assets.
Licensing of IP assets can be an effective strategy for generating a stable flow of revenue
in the form of royalties. The Australia-based Bishop group, well known for its power
steering technology, currently has more than 500 patents and patent applications from
which it earns more than $7 million each year in royalties. Ninety per cent of this comes
from licensees overseas and 25 per cent of motor vehicles produced every year
incorporate Bishop technology4. IBM is a well-known example of such companies, which
have made significant amount of revenue, (upward of US $ 10 billion since 1993 through
licensing5. Merchandizing is another way in which enterprises can generate revenue
enterprises could make big business, for example by simply marketing their brand, label,
image, or any other IP right on simple, less expensive goods like t-shirts, posters, coffee-
mugs etc. An enterprise can also generate revenue through the sale of its IP assets e.g. in
November 2001 Be incorporated, creator of the Be IA and Be OS operating systems, sold
its IP on the technology asset to Palm inc. 6.


Slide 16. Effective use of IP assets

Formation of Partnerships & Alliances

       Using IP rights to underpin the creation of joint ventures may be a useful strategy,
especially for innovative SMEs. Ownership of patent and trade secrets may play a crucial
role in attracting potential partners. Sometimes, an enterprise with patented product
and/or valuable trade secrets may find it strategically beneficial to enter into a joint
venture arrangement with an enterprise with a strong trademark so as to secure more
sales. A prudent IP management team should formulate a strategy which pay close
4
  http://www.wipo.int/sme/en/case_studies/bishop.htm
5
  Teresko, J. (2003) http://www.industryweek.com/CurrentArticles/asp/articles.asp?ArticleID=1400
((February 18, 2004)
6
  http://lair.xent.com/pipermail/fork/2001-September/004769.html (July 15, 2004)


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attention to what competitors are doing and seek to take advantage of its own IP assets by
entering into strategic alliances in favorable terms. In this manner, an enterprise may
benefit by getting access to R&D facilities owned by its partner or to its distribution and
sales network. An enterprise may also benefit from further development of its IP
protected products, as part of the strategic arrangement may also include further product
development.


Slide 17 Effective use of IP assets contd.

Enhances Competitive Position

        Ownership of IP asset can also facilitate market entry. This can be done through
licensing, joint venture as shown above or through direct entry especially when an
enterprise introduces an innovative product protected by an IP. Such a product could be
an alternative to an existing one or a new competing product. A closely related potential
of IP asset is the strengthening of market position. IP assets like patents or trademark can
play a significant role in enhancing an enterprise market position. In addition IP asset like
industrial design can play an important part in securing a niche market.


Slide 18 WIPO Initiative

       In October 2000 WIPO launched its SMEs initiative and established the Small
and Medium-Sized Enterprises Division. The primary objective of this initiative is to
enhance awareness, improve access, and enable effective use of the tools of the IP system
by SMEs in the increasingly knowledge-driven and competitive business and trade
environment.


Slide 19 WIPO Initiative contd.

        The strategy use by the SMEs division in achieving its objective involves bringing
IP issues to SMEs events, bringing business perspective to IP events and establishing new
networks and partnerships. Such strategy would have impact in strengthening the
capacity of governments to develop strategies, policies and programs to meet IP needs of
SMEs.


Slide 20 WIPO Initiative contd.

        The     SMEs    division   has    launched     a    user-friendly   web     site
(http://www.wipo.int/sme), which provides practical IP, related business guidance to its
users. The web site has already become a key reference portal on business related IPR
issues for all concerned around the world. In addition the SMEs division circulates a
monthly e-newsletter in six languages (Arabic, Chinese, English, French, Russian and



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Spanish), which provide an up-to-date and very useful information on different facets of
the IP system from a business perspective. So far around 7,800 people from different
walk of life have subscribed to the newsletter.

        The WIPO SMEs division has already published two guides “Making a Mark: An
Introduction to Trademarks for Small and Medium-Sized Enterprises” and “Looking
Good: An Introduction to Industrial Designs for Small and Medium-Sized Enterprises”.
In addition, the SME Division of WIPO and the International Trade Center
UNCTAD/WTO have jointly published “Marketing Crafts and Visual Arts: The Role of
Intellectual Property- A practical guide” and “Secrets of Intellectual Property: A guide
for small and medium-sized exporters”. The SMEs division has also contributed IP
aspects in the ITC publication “Exporting Automotive Components: An answer book for
small and medium-sized enterprises” and provided input to the International Labor
Organization (ILO) five studies on culture sector in the Southern African Development
Community (SADC). The division has also organized and participated in several events.


Slides 21 and 22 WIPO Initiative contd.

        The SMEs division has also been involved in looking at new areas which include
IP for financing; IP services to SMEs (incubators, technology parks, chambers of
commerce, SME associations); Accounting and Valuation of IP Assets; Fiscal Policies
and IP; IP Needs of SMEs in Visual Arts and Handcrafts; and IP Insurance.


Slide 23 WIPO Initiative contd.

        The SMEs Division of WIPO is also actively partnering in a number of ways with
many other intergovernmental organizations in the United Nations system, such as the
International Labor Organization (ILO), United Nations Industrial Development
Organization (UNIDO) and the International Trade Center (ITC). As mentioned above
the partnership with ILO and ITC have resulted in the creation of a number of practical
guides and manuals that have been widely acclaimed for the simplicity and practical
value. Having recognized the value of teaming up with civil society, WIPO, through its
SMEs Division, has joined hands with NGOs such as WASME, International Network
for SMEs (INSME) and the International Association of Science Parks (IASP) in
reaching out to SMEs.




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