Intellectual property rights and SME performance

by | Apr 15, 2021 | General, Insights | 0 comments

The European Patent Office (EPO) and the European Trademark Office (EUIPO) have published a new study titled “Intellectual property rights and firm performance in the European Union”. The study examines the prevalence of IP rights (IP rights included in the study were limited to patents, trademarks and designs) in European companies and the performance of companies holding IP rights compared to companies without protected IP rights.

What does the study say about SMEs?

According to the study, companies that protect IP rights have more employees, turnover per employee, and these companies pay higher wages per employee.

The bad news is that only about 9% of European SMEs have protected IP rights. According to the study, the importance of IP rights is particularly important for SMEs.

SMEs that own IPRs have 68% higher revenue per employee than SMEs that do not own any IPRs at all. Thus, while the majority of SMEs in Europe do not own IPRs, those that do have significantly higher revenue per employee.

Although the findings of the study do not prove a direct causal link between IP rights and company performance, the correlation between them was considered to be very strong:

The results of the analysis strongly suggest that there is a systematic, positive relationship between ownership of IPRs and economic performance at the individual firm level.

This is also supported by a study conducted in the US a few years ago (“An Anatomy of U.S. Firms Seeking Trademark Registration”), which found that companies that register a trademark in their first year grow significantly faster than other companies and employ more.

The EU study also shows that owning IP rights is very beneficial for all businesses, and especially for SMEs. The biggest benefit of all is for companies that use all forms of protection.

The study also contains a lot of country-specific data, enabling a comparison of SMEs in different countries.

Country statistics and insights

Highest level of IPR ownership:

Malta (16.9%)
Portugal (13.78%)
Cyprus 13.07%)
Germany (12.42%)
Spain (11.64%)
Austria (11.58%)
France (11.08%)
Poland (10.14%)
United Kingdom (10.07%)
Denmark (9.99%)
Lithuania (9.75%)
Greece (9.43%)
Luxembourg (9.26%)
Belgium (9.06%)
Estonia (8.68%)
Sweden (8.44%)
Czech (7.8%)
Slovenia (5.99%)
Slovakia (5.02%)
Finland (4.93%)
Netherlands (4.92%)
Bulgaria (4.13%)
Romania (3.99%)
Italy (3.95%)
Latvia (3.68%)
Hungary (3.39%)
Croatia (3.09%)
Ireland (2.87%)

Since national trademarks are the most common type of IPR owned by European SMEs, the above list corresponds closely to the ownership of national trademarks.

Another way of interpreting the data is to see which SMEs have the most EU trademarks. Presumably having an EU trademark is an indicator of the international nature of a company’s business. For European companies with any international aspirations, an EU trademark is a logical first step.

With that in mind, here’s how different European SMEs rank in respect of having an EU trademark:

Luxembourg (6.23%)
Belgium (3.74%)
United (Kingdom (3.52%)
Germany (2.89%)
Austria (2.78%)
Cyprus (2.56%)
Denmark (2.49%)
Netherlands (2.43%)
Sweden (2.02%)
Spain (1.99%)
Malta (1.98%)
Poland (1.58%)
Finland (1.54%)
Ireland (1.51%)
Estonia (1.5%)
Italy (1.25%)
France (1.17%)
Slovenia (1.09%)
Greece (0.84%)
Portugal (0.77%)
Lithuania (0.75%)
Czech (0.56%)
Bulgaria (0.44%)
Slovakia (0.39%)
Hungary (0.38%)
Romania (0.19%)
Latvia (0.14%)
Croatia (0.05%)

Luxembourgian SMEs have by far the most EU trademarks, followed by Belgian, UK and German companies. Luxembourgian companies were also the only ones that had more EU trademarks than national trademarks. In addition to Luxembourgian companies, the highest number of EU trademarks in relation to national trademarks were with Dutch, Irish and Belgian companies. The lowest number of EU trademarks in relation to national trademarks were with Croatian, Latvian, Romanian and Portuguese companies. On average, only 1,67% of SMEs have registered an EU trademark.

By comparison, here’s how SMEs rank with respect to having a national patent.

Germany (1.6%)
Austria (1.4%)
Finland (1.2%)
Netherlands (1.1%)
Spain (0.7%)
United Kingdom (0.7%)
Poland (0.7%)
Sweden (0.7%)
Czech (0.6%)
Slovenia (0.6%)
Italy (0.4%)
France (0.4%)
Denmark (0.3%)
Greece (0.2%)
Latvia (0.2%)
Slovakia (0.2%)
Bulgaria (0.2%)
Estonia (0.2%)
Lithuania (0.2%)
Belgium 0.2%)
Luxembourg (0.1%)
Hungary (0.1%)
Portugal (0.08%)
Romania (0.06%)
Ireland (0.05%)
Croatia (0.02%)

Here are some picks from all of the above statistics:

  • Irish and Croatian companies rank poorly for both national trademarks and patents
  • Portuguese companies rank very highly for trademarks but very poorly for patents
  • Belgian companies rank very highly for EU trademarks and European patents (patents granted by European Patent Office) but use less domestic protection mechanisms

Combining all IPR protections (national trademarks, EU trademarks, national patents, European patents, national design registrations, EU designs) and adding them up shows which companies use the IPR protection mechanisms most widely.

Malta (18.02%)
Germany (17.25%)
Cyprus (15.47%)
Austria (15.02%)
United Kingdom (14.9%)
Portugal (14.88%)
Spain (14.09%)
Denmark (13.27%)
France (13.07%)
Poland (12.13%)
Belgium (11.99%)
Sweden (11.42%)
Luxembourg (11.22%)
Lithuania (10.9%)
Estonia (10.07%)
Greece (9.83%)
Czech (8.83%)
Slovenia (7.69%)
Finland (7.62%)
Netherlands (7.33%)
Slovakia (5.33%)
Italy (5.18%)
Bulgaria (4.62%)
Romania (4.25%)
Latvia (3.91%)
Hungary (3.69%)
Ireland (3.66%)
Croatia (3.41%)

The above list does not automatically mean that Maltese or German companies use various protection mechanisms at the individual level. It could be that a particular segment is active in trademark protection, while another segment uses patents and other designs. Also, because trademarks are much more common than other IPRs, the list favours those countries where SMEs protect a lot of trademarks. In aggregate, however, the above list probably gives a good indication of countries where SMEs use various mechanisms to protect their IPRs.

One particular point to note is that German companies are in the top 6 in every category.

Final comments

Taking into account that IPRs have been shown to be highly beneficial for SMEs, it is very concerning that a very low percentage of EU SMEs are taking advantage of protecting their IPRs. Many studies have shown that the biggest reason is the lack of knowledge and awareness. In this, all interested parties, both in the private and public sector, must do much better work.

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