Intellectual Property: A Business Asset

Introduction

In this cut-throat competition and global market, “knowledge”, “idea” and its commercial use has turned up to be an essential and important asset for any business to succeed and flourish. Ideas can also be referred as an intangible asset or an Intellectual Property (IP) of a business which brings commercial value by innovation, invention and creativity.

For a business to flourish, both tangible and intangible asset plays a significant role. With various MSMEs carrying their business across several industries by using different assets for their valuable work, it is evident that needs of all assets are not same and hence, not everything can be governed and protected under a single roof. IP being of such great importance to a business also needs to be protected similar to the tangible assets, hence Intellectual Property Rights (IPR) comes into picture.

Economic Importance of MSME

According to the MSMED Act, 2006, any unit having plant and machinery not amounting more than Rs 25 lakh is termed as Micro, that amounting more than Rs 25 lakh but less than 5 crore is referred as Small and that having an investment made of amount not less than Rs 5 crore but not exceeding Rs 10 crore is considered as Medium Enterprise.[1]

With over 28 million enterprises and about 60 million employees, MSME contributes for about 8% to nation’s GDP, 45% to manufactured outputs and 40% to exports.[2] It is evident from the above statistics that the sector has grown to produce a variety of products from raw materials to finished goods and has also become a major supplier of goods having mass consumptions. MSME has manifested its ability to survive and adapt to the recent changes in the economy and recession, through its dexterity and efficacy.

Importance of IP in Business Strategy

In past, intangible assets were not given as much credit for the development and success of the business. It was considered that it is the physical asset that leads to the overall growth of the business. However, with the advancement and increased use of information technology and growing significance of IT based products and upcoming service industry, the intangible assets have gained significance importance and value as compared to the physical asset of any corporation.

Owing to AI taking over human employment and eminent software and advanced technologies taking the place of factories and warehouses, significant IP and intangible asset of MSMEs have helped them emerge stronger than big firms with physical assets. In the light of it, it can be said that acquiring, creating and protecting IP can make it as valuable as other tangible assets which can be traded in the market, for if the ideas and IP of MSMEs are not legally protected by IPR, it can be copied and misused by any third party or rivalry without giving any credit and benefit to the real owner of the said IP.

Intellectual Property as an asset to business

Broadly, business assets can be categorised as tangible and intangible. While tangible or physical asset includes infrastructure, capital, machines and equipment, and other economic assets, intangible assets includes knowledge and innovative and creative ideas, patents, designs and similar, collectively forming the intellectual capital of the company, thereby enhancing its ‘brand reputation’.

Various intangible assets are acquired and created by a company during the business that enhances the goodwill of the company, in the form of patents, trademarks and designs. To enhance the creative and innovative potentiality of the unit, MSMEs tend to invest the funds in Research and Development (R&D). Such investment enables them to design new outputs and thus, gain profits out of the same. Having invested so much on the idea and the invention, the enterprise may move to IPR as a recourse to protect their Intellectual Property, so that the efforts made do not get wasted because of someone copying their idea or invention.

IPR and benefits to the business

Any enterprise has a logo or a trademark which distinguishes them from all other enterprise dealing in the same segment or industry. If such trademark is legally protected under the IPR laws of the country, it shall ensure that no other individual or organisation can use such or similar trademark to carry out business in that industry or segment. Protecting of trademark, thus, gives MSMEs exclusive rights over that mark that further enables them to attach the company’s goodwill and reputation to that mark.

Industrial Design Rights relates to designs, ornamentation and shape of any product or article. This IP Right protects the aesthetic part of any product or article, for instance, new design of shoes, mobile phones, bags or dials of clocks and wrist watches.

Patent is a right, exclusively granted to an invention which either is a product or a process, that provides a new way to do something or new solution to an already existing problem.[3] Patent is generally preferred in enterprises dealing in manufacturing and engineering having potential of inventions and creating other patentable products. Having inventions and innovations legally patented provides an edge to the company in the market as patent is a negative right which restricts or prevents any unauthorised third party from using or creating such patented product or process, indirectly, providing the company a monopoly over the patented work.

Copyright as a protection is preferred by businesses dealing in literary and artistic work such as books, music, photograph, movie, and likewise. Any kind of a literary work by MSMEs, from brochures, pamphlets to product manuals and books all our covered under and can be protected by copyright.

GI is an IP protection which is not granted to an individual but is granted collectively to some association of industries or handicraft makers. GI enables MSMEs of a specific geographical region to use these marks preventing any other organisation from using same or similar marks for similar products. For instances, Banarasi Saree, Darjeeling Tea, Chikankari, etc.

1. Trademark

Any enterprise has a logo or a trademark which distinguishes them from all other enterprise dealing in the same segment or industry. If such trademark is legally protected under the IPR laws of the country, it shall ensure that no other individual or organisation can use such or similar trademark to carry out business in that industry or segment. Protecting of trademark, thus, gives MSMEs exclusive rights over that mark that further enables them to attach the company’s goodwill and reputation to that mark.

2. Industrial Design Rights

Industrial Design Rights relates to designs, ornamentation and shape of any product or article. This IP Right protects the aesthetic part of any product or article, for instance, new design of shoes, mobile phones, bags or dials of clocks and wrist watches.

3. Patent

Patent is a right, exclusively granted to an invention which either is a product or a process, that provides a new way to do something or new solution to an already existing problem. Patent is generally preferred in enterprises dealing in manufacturing and engineering having potential of inventions and creating other patentable products. Having inventions and innovations legally patented provides an edge to the company in the market as patent is a negative right which restricts or prevents any unauthorised third party from using or creating such patented product or process, indirectly, providing the company a monopoly over the patented work.

4. Copyright

Copyright as a protection is preferred by businesses dealing in literary and artistic work such as books, music, photograph, movie, and likewise. Any kind of a literary work by MSMEs, from brochures, pamphlets to product manuals and books all our covered under and can be protected by copyright.

5. Geographical Indication (GI)

GI is an IP protection which is not granted to an individual but is granted collectively to some association of industries or handicraft makers. GI enables MSMEs of a specific geographical region to use these marks preventing any other organisation from using same or similar marks for similar products. For instances, Banarasi Saree, Darjeeling Tea,Chikankari, etc.

Management of Intellectual Properties

Intellectual Property Rights help an enterprise to get recognised and have an established identity through its ‘branding strategies’. It protects its innovations, models, logos, and other artistic and literary work by various types of IPR like patent, trademark, design protection, etc. IP Rights being a negative right prevents copying and imitation of the original work of the creator or the inventor by any other individual or an organization. In addition to providing essential technologies through IP information and licensing, IPR also enhances the overall value of the organization aiding them with access to capitals and other economical assets.

An intangible asset when protected under law, plays a vital and important role in the development and success of the business. Hence, in order to avail such growth, MSMEs should maintain an efficient IP portfolio. Intellectual Property must be managed with a strategy with an understanding of the topographical structure of the world of IP either of the industry or geography.[4] A good management of the intellectual properties by a MSME can help it gain an edge in the competitive market and further add to its strategic advantage. Goodwill and market value of a company is also affected by the company’s IP portfolio.

Conclusion

In the era where the economies are mostly driven by knowledge, any business or enterprise, be it big or small, will have to rely on intangible assets for its survival and growth. It is essential to note that from an innovative idea to an invention, at every stage of the chain IP enhances the value of the company. It is high time now, that we understand the real value our intangible assets and protect these assets from being infringed, legally, to build up intellectual capital of the company or the organization.'

Author: Sonal Sodhani,  Legal Intern at Global Patent Filing. In case of any queries please contact/write back to us at support@globalpatentfiling.com.

References:

[1]https://yourstory.com/2009/12/classification-of-small-industries-as-per-msme-development-act2006

[2]http://ficci.in/spdocument/20143/Grant-Thornton-FICCI%20MSME.pdf

[3]https://www.wipo.int/patents/en/

[4]https://www.altacit.com/publication/msmes-and-intellectual-property-rights/