Intellectual Property: the lifeblood of SMEs

Much has been written about why a startup company should invest in Intellectual Property (IP), or why it is vital for a global organisation to maintain its IP portfolio; but what about the other 5.9 million SME businesses operating in the UK alone, employing over 99 per cent of the workforce? What can IP do for them?

Here John Lawrence, senior partner at Barker Brettell, discusses why IP should be at the core of a SME’s strategy and how, if your business falls into this category, IP can work harder for you.

Growth and investment

Statistically, SMEs who have filed at least one patent, trade mark or design right demonstrates 21 per cent more growth than those businesses that do not, and 10 per cent of those are more likely to become a High Growth Firm (HGF). These already impressive figures increase to 33 per cent if the business ‘bundles’ a combination of patent, trade mark or design rights.

However, these numbers simply demonstrate the effect of IP: how does this translate on a day-to-day level?

Market share

The purpose of IP is to prevent or slow potential imitation, allowing the inventor time to secure a bridgehead in the marketplace, position the price of the product and create market share. By creating this ‘breathing space’, a business has an opportunity to recoup research and development (R&D) costs and create an environment which encourages innovation.

Getting noticed: opening doors and expanding business network

Patents, and indeed pending patent applications, raise a company’s profile in the market and enhance its reputation as trailblazing and innovative. Should a SME want to proactively approach a larger enterprise, having a patent application adds kudos, making the larger player more receptive to the approach.

An innovative business is an attractive proposition to other companies wanting to start a conversation with like-minded enterprises who may already be in the position to work together or on future research projects. IP helps plant the seed that a company is a leader with unique technical knowledge.

Attracting investors and suitors

An IP portfolio lends confidence to investors that the target company can fend off competitors and projected sales figures will not be unexpectedly undermined. This makes the decision to invest much easier and, as mentioned in the introduction, private equity houses know that businesses which already hold a portfolio are an attractive prospect. Experience has shown that a portfolio of around ten patents which are used by a business, rather than one or 50, is an ideal target.

Tax benefits

There are two tax benefits related to innovation and R&D.

The first is R&D tax credits. This is a scheme which, in some instances, covers patents. An accountant will talk you through the process as it works on a case-by case-basis, but in some instances the costs relating to the development of a technological advance can be eligible. The benefit can be considerable to an SME working on tight margins.

Patent Box tax relief is another reason for patenting. It is possible to reduce corporation tax on income from patented products to ten per cent. This is obviously good for profits and shareholders. Once again, the process can be complicated, but many of Barker Brettell clients successfully use the Patent Box scheme.

Want to find out more?

These are just some of the reasons why Barker Brettell is passionate about helping SMEs capture the innovation they have created and reap the financial benefits they are entitled to. If you would like to discuss any of the issues raised in this article, please do not hesitate to contact the author, John Lawrence, or you usual attorney.