Intellectual Property is Big for Small Business
Jul 27, 2016
The future of intellectual property will be essential for the future of the United States. In a country that prides itself on its entrepreneurial drive, providing protection for ideas and developments will be crucial for businesses to compete. While many assume that intellectual property is for large companies, in many ways the little guys are the businesses who truly benefit from strong IP protection.
First, as the saying goes, a rising tide lifts all boats. Strong intellectual property protections allow for innovations that will help all consumers. In the medical industry, it costs over $2.5 billion and 12 years to bring a drug to market. Without knowing that there will be protections for their gamble companies would be unwilling to take the expensive risk to develop new drugs. After new drugs are created companies benefit from increased revenue while society profits from living longer healthier lives – a new malaria treatment is predicted to save up to 100,000 lives a year.
In the technological world, patents give an incentive for young entrepreneurs to make their own startups. Companies like Apple and Google all started with a risk. If that risk is not mitigated by intellectual property protections, the world will miss out on new inventions and technologies that not only support inventors, but bring more options and products to consumers.
U.S. consumers benefit directly from IP protections when they purchase the latest smart phones and live healthier thanks to precision medicine. They also benefit as producers. IP intensive industries employ 55 million in the U.S., mostly in small businesses, where they earn around 30% more in income than their counterparts in non-IP fields. Small businesses account for 65% of the net new jobs since 1995. Furthermore, the pace of business is changing. Small businesses used to start locally and grow outward, but with the rise of e-commerce the field has changed. A small business can now start with a few employees each on separate continents and undertake operations anywhere they wish– an emerging trend dubbed going micro-multinational.
Unlike large companies, however, small businesses do not have legal departments to rely on for protection. Thus, they rely on patent protection more heavily than large companies which have other means of protecting their intellectual property. Earning a patent can cost as much as $22,000, putting it out of the reach of many small businesses.
With the high cost of protecting intellectual property, small businesses need strong government policies that protect patents, copyrights, trade secrets, and trademarks. Laws like the Defend Trade Secrets Act (DTSA) are a step in the direction for that protection. The DTSA increases protections for trade secrets that do not require the high costs of filing for a patent.
For a growing company, any bad reputation can push them out of the game. The company must establish a reputable brand that is linked to quality. Protecting intellectual property through trademarks and copyrights can eliminate any confusion for consumers in recognizing a growing brand which eliminates the threat of being mistaken for a similar business. Similarly, trademarks help consumers find a product and to engage with the company on social media.
In a globalized world intellectual property protections cannot stop at the border. As small businesses expand from Main Street to the global stage they are confronted with murky rules and poor enforcement. Recently, it was calculated that counterfeiting costs the global economy $461 billion, a number larger than the gross domestic product of more than one-hundred and sixty countries, or about three percent of the world’s exports. Small businesses are not exempt from this either as their trade secrets are readily stolen by foreign firms who can manufacture the product cheaper. For example, the inventor of an extendable camera stick (commonly referred to as “selfie sticks”) found five Chinese versions selling the same product including images of the inventor’s family showcasing the product.
With the threat of international counterfeits domestic policies are not enough. The United States must continue to seek out agreements around the world that include provisions to increase intellectual property protections. This is already happening with agreements such as TPP which has led Vietnam to comply with stricter regulations on protecting intellectual property.
Intellectual property is not just for corporations; it is essential for small businesses and the innovation and economic growth that accompany them.