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Small companies with patents more likely to grow rapidly than those without

Out-Law News | 04 Jun 2019 | 9:41 am | 1 min. read

Small and medium-sized enterprises (SMEs) that apply for patents, trade marks or designs are more likely to grow quickly and succeed than those without, new research has shown.

A study produced jointly by the European Patent Office (EPO) and the European Union Intellectual Property Office (EUIPO) showed that SMEs which have filed at least one intellectual property (IP) right are 21% more likely to experience a growth period afterwards and are 10% more likely to become a high-growth firm (HGF) than firms without IP rights applications.

HGFs are defined as those which see a three year average growth rate in employment of at least 20%, with at least 10 employees at the start of the growth period.

The research (86 page / 912KB PDF) found that filing for IP rights at the European level meant an SME was 17% more likely to become an HGF.

Companies give themselves the greatest chance of rapid growth by using bundles of trade marks, patents and designs instead of applying for a single trade mark or patent, with this boosting their chances of high growth by 33%.

Even if SMEs fail to achieve high growth after applying for IP rights, they are more likely to grow than those which do not protect their trade marks and designs.

The new data backs up research carried out by Pinsent Masons, the law firm behind Out-Law.com, which found that acquisition and protection of IP rights was a crucial part of many fast-growing companies’ M&A strategies.

The research discovered that the impact of filing IP protection was greater for SMEs in low-tech industries than those in high-tech sectors, possibly because patent filing is rarer in the former. A low-tech SME could boost its chances of growth by 172% if it uses a European patent, compared to 110% chance of growth for a high-tech company.

The EPO and EUIPO said the data was important as SMEs represented the vast majority of all EU businesses, contributing 57% of the union’s gross domestic product.

However only 9% of SMEs have registered any IP rights, compared to 40% of large companies.  

The study analysed demographic information on European SMEs in manufacturing industries from 2005 to 2010 with data stored in the national and European registers for patents, trade marks and industrial design rights.

Although HGFs represented only 6% of the sample, the report said they contributed 28% of net job creation.

EPO president António Campinos said 30% of EPO applicants were SMEs, entrepreneurs, universities or public research organisations.

“It is essential to continue facilitating their access to the European market in order to commercialise their inventions. It has a tremendous impact on growth and job creation, and public authorities at the European and national level should increase their efforts to support this goal,” Campinos said.