Intellectual Property Costs Deter Innovation
Intellectual property (IP) costs should be taken into account in the business plan. Few entrepreneurs know exactly which rights relate to their business and even fewer know how much it will cost to protect them. The cost of IP protection involves paying official fees, and legal fees.
Litigation is not a cost that all businesses need to spend money on, and therefore, need only be planned if there is an actual dispute involving the business. Indeed, protecting a company’s IP will often reduce the likelihood of litigation.
Costs involved in protecting your ideas
When compared to the costs involved in litigating to protect your ideas from being copied, the cost of protecting your rights through registration or contracts are insignificant. As we wrote in our previous blog “SMEs And IP – FSB Reports They Struggle To Protect Their Intellectual Property”, that is the case especially with small-to-medium enterprises (SMEs) which do not have the budget to protect their IP rights. They suffer losses as a consequence.
Think about the following interesting comparison made by the Financial Times. To fund the International Space Station over ten years’ costs about €100 billion. The patent war in the smartphone industry, on the other hand costs $20 billion over two years. That is a lot to spend even for giants like Apple, Samsung or Motorola who all battle to protect their IP. Such costs are unbearable for start-ups and SMEs. As the Financial Times interestingly states, “the costs of litigation are astronomical and the outcome, too uncertain”.
The Vicious Circle Of Intellectual Property Costs
This is why companies end up in a vicious circle. If a company cannot afford to protect its IP rights, it suffers losses as a result. If it invests in IP protection, and cannot afford to litigate its rights should that be necessary, it cannot protect what it owns.
The research of the Federation of Small Businesses (FSB) surveyed more than 1,000 of FSB’s 200,000 members. Only 32% had actually spent money to secure their IP rights within the last five years, 22% of whom invested more than £5,000. Furthermore, around 25% of the businesses surveyed responded that they have suffered some form of violation or misuse of their IP and a third of them took no action over the theft because of lack of resources and information as to the correct routes and costs involved.
Governmental Actions Needed
The reality, therefore, is that IP law must adapt to change because, as the Hargreaves Report warned, innovations are stifled by the current framework.
The onus is on the Government to better promote the IP services available and install effective instruments that will enable adequate protection. The Hargreaves Review suggested that “there are outstanding uses that need to be resolved”. Therefore, there is a need for a collective action to resolve this problem. However, given that the UK Government is planning to double the fee for issuing civil lawsuit, it will be another deterrent to small businesses to protect their intellectual property.
Nevertheless, businesses should make sure their IP rights are protected adequately and be on the safe side if they need to litigate them. Litigation is more unlikely if intellectual property is effectively protected. Therefore, IP protection should be top priority for any ambitious business.
