The role of Intellectual Property Rights (IPR) in commercialization – a snapshot
Dr. Deepti Malhotra
Advocate | IP Attorney (LL.M.) | Registered Patent Agent | WIPO IP Expert, DL-Tutor & Mentor | Technology expert/Patent Engineer | TIFAC Fellow | Marie Curie/ERS Fellow | NIH Fellow | NIEHS Fellow
Dosso and Vezzani in their paper (titled “Firm market valuation and intellectual property assets”) examine how the innovative activities of top corporate R&D investors, measured by patents and trademarks, impacted the market valuation of over 1,250 publicly listed multinational corporations from 2005 to 2012[1]. The study explores the individual and combined effects of these intellectual property rights (IPR) on market value, distinguishing between the inherent value of having more IPR (within-effects) and the competitive advantage from holding more IPR than competitors (between-effects). Findings indicate that investors value companies higher when both patents and trademarks are used strategically together, viewing this as a sign of innovation and competitiveness, though the impact varies across industries.
Holgersson and Granstrand in their paper (titled “Value capture in open innovation markets: the role of patent rights for innovation appropriation”) challenge the traditional view of patents as solely protective tools for exclusive sales, arguing instead that patents play diverse roles in capturing innovation value across different firms[2]. It highlights that while some firms consider patents crucial, others do not, reflecting varied strategies. Importantly, patents also facilitate technology exchange and trade in open innovation markets, aiding collaboration beyond vertically integrated models. The study uses a counterfactual approach to surveys and shows patents complement other appropriation methods, ultimately showcasing their evolving role in modern business innovation strategies.
Castaldi et al. in their paper (titled “Editorial: why and when do firms trademark? Bridging perspectives from industrial organisation, innovation and entrepreneurship”) introduce a novel framework for understanding the timing and motivations behind firms filing trademarks by integrating three core perspectives: the firm's specific attributes, the innovation life cycle stage, and broader strategies and external factors[3]. The study emphasizes the internal drivers, the role of innovation stages, and the influence of business strategies and external contingencies on trademark decisions. This comprehensive approach aims to uncover the interplay between these factors, providing a foundation for further research into the strategic implications of trademark filings in innovation, entrepreneurship, and industrial organization.
Lyalkov et al. in their paper (titled “Trademarks and their association with Kirznerian entrepreneurs”) highlight the importance of trademarks, alongside patents, as indicators of innovation and entrepreneurship, exploring their connection with entrepreneurial activity in 33 European countries[4]. It finds a positive relationship between higher levels of self-employment, indicative of entrepreneurial activity, and trademark registrations. This suggests trademarks are valuable for understanding entrepreneurial dynamics and should be considered in empirical research. The findings have implications for businesses, emphasizing trademarks as strategic tools, and for policymakers, suggesting that encouraging trademark registration can support economic growth and innovation.
Athreye and Fassio in their paper (titled “Why do innovators not apply for trademarks? The role of information asymmetries and collaborative innovation”) on the other hand examine why innovators may choose not to apply for trademarks for their inventions, using data from UK innovative firms[5]. It identifies several factors explaining this choice, including alleviating information asymmetries through other means, leveraging existing trademarks, relying on intermediaries for distribution, and engaging in open innovation. These strategies allow firms to protect and signal the value of their innovations without formal trademark protection, highlighting that the trademark decision depends on specific circumstances and strategic considerations.
Nicholls-Nixon et al. in their paper (titled “How university business incubation supports entrepreneurs in technology-based and creative industries: A comparative study”) presents a comparative study on the support needs of technology-based (TB) and creative-industry (CI) entrepreneurs within university-based business incubators (BIs)[6]. It finds that BIs are crucial in providing resources such as physical, financial, knowledge, social, and legitimacy-related support. The study, the first of its kind, reveals that TB entrepreneurs primarily need physical capital for proof of concept, financial grants, and specialized knowledge, while CI entrepreneurs require support for product development, financing for smaller projects, and basic business knowledge. External legitimacy is more critical for TB entrepreneurs, whereas CI entrepreneurs rely more on internal social capital. These findings underscore the importance of tailoring incubation programs to meet the distinct needs of different entrepreneurial ventures, enhancing the effectiveness of support within university BIs.
Although previous empirical studies on the influence of existing IPR Laws and enforcement mechanisms on supporting or hindering procurement and protection of IPRs by small entities and startups towards commercialization of IP assets in India are lacking, there have been a couple of studies that provided some useful insights into IP ecosystem for such entities in India.
??????????? The first study on technology startups and IP protection in India identifies several key challenges and recommendations for improving the IP ecosystem for Indian technology startups[7]. It finds that while many startups are active in copyright and trademark protection, fewer engage in patent and industrial design protection due to a lack of awareness and the high costs and complexities involved. Most startups do not have formal IP policies but engage in IP training and seek professional help. Licensing and technology transfer are less common, except in certain sectors like e-commerce. The report highlights the importance of innovation for economic growth and the role of IPR as a strategic asset, noting that startups often fail due to factors like lack of innovation and funding rather than IP issues. It emphasizes the need for policy interventions to support IP awareness and usage, comparing practices from various countries and suggesting that government initiatives could help address these challenges. Despite some increase in patent filings, many startups lack the incentive to pursue full patent prosecution and enforcement.
??????????? The second study examines modern challenges faced by startups and small businesses in India, highlighting funding difficulties, regulatory hurdles, and competition[8]. Despite growth in innovation and entrepreneurship, access to funds remains limited due to reluctance to give up equity and scarce venture capital. Family-owned, traditional businesses also resist change. Regulatory challenges, changing government policies, taxation issues, and compliance requirements further impact operations. The study notes the rise of women entrepreneurs overcoming societal barriers. The main challenges include raising funds, adapting to regulations, recruiting skilled employees, intense competition, and infrastructure/logistics issues.
Based on the understanding drawn from the above studies on IPRs, particularly patents and trademarks positively influencing the commercial and business success of startups and small entities in innovation and technology-driven industries in contrast to creative industries in various Indigenous IP ecosystems across the world including India, dealing with domestic legal and enforcement challenges; there is a need for further immersive studies primarily focused on patents and trademarks along with alternates such as trade secrets as viable and practical options for innovation-centric startups and small entities studied in context of the IP landscape in India.
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[1] Dosso, M., and Vezzani, A. (2020). Firm market valuation and intellectual property assets, Industry and Innovation, 27(7), pp. 705-729.
[2] Holgersson, M., and Granstrand, O. (2022). Value capture in open innovation markets: the role of patent rights for innovation appropriation, European Journal of Innovation Management, 25(6), pp. 320-329.
[3] Castaldi, C., Block, J., and Flikkema M.J. (2020). Editorial: why and when do firms trademark? Bridging perspectives from industrial organisation, innovation and entrepreneurship, Industry and Innovation, 27(1-2), pp. 1-10.
[4] Lyalkov, S., Carmona, M., Congregado, E., Millan, A., and Millan J.M. (2020). Trademarks and their association with Kirznerian entrepreneurs, Industry and Innovation, 27(1-2), pp. 155-183.
[5] Athreye, S., and Fassio, C. (2020). Why do innovators not apply for trademarks? The role of information asymmetries and collaborative innovation, Industry and Innovation, 27(1-2), pp. 134-154.
[6] Nicholls-Nixon, C., Singh, R.M., Chavoushi, Z.H., Valliere, D. (2022). How university business incubation supports entrepreneurs in technology-based and creative industries: A comparative study, Journal of Small Business Management, DOI: 10.1080/00472778.2022.2073360.
[7] Sodhi, Garima and Jain, Akriti and Singh, Rinki, Technology Start-ups and IP Protection in India (December 14, 2019). CUTS Institute for Regulation and Competition, New Delhi - India., Available at SSRN: https://ssrn.com/abstract=3589334 or https://dx.doi.org/10.2139/ssrn.3589334, accessed on 27 May 2024.