Role of Intellectual Property Rights in Micro, Small and Medium Enterprises (MSMEs)

Micro, Small, and Medium Enterprises (MSMEs) play a pivotal role in India’s economy. Today, the supply chain for products and services is largely dependent on MSMEs. As a result, MSMEs generate employment on an enormous scale while facilitating the modernization and industrialization of rural areas in India. Upon recognizing the cruciality of MSMEs for the Indian economy, the Government of India has introduced several schemes and programs that are specifically targeted to encourage MSMEs. For instance, the ‘Make in India’ initiative was introduced in order to heavily incentivize and encourage MSMEs. Like any other business, MSMEs also foster several assets that are of paramount importance to their respective business models. This may include novel inventions, an MSME’s brand name, or an industrial design. Thus, it would be right to say that in order to protect these assets that are of utmost significance to MSMEs, Intellectual Property Rights (IPRs) would have to play an imperative role. MSMEs are in the continuous pursuit of creating innovations, brand images, and trade secrets that have to be protected considering the competitiveness of dynamic business environments. For example, this may imply that IPRs would play an important role in protecting the brand image and logo through trademark registrations, protecting inventions with the help of patents, and protecting appealing designs by legally registering the design, thus granting a level of exclusivity to the MSME in a competitive market.

The Government of India has time and again recognized the importance of IPR for MSMEs. Subsequently, several schemes and initiatives have been introduced in order to encourage MSMEs to protect their Intellectual Property (IP). In 2019, the Government introduced a relaxation in IPR filing fees for MSMEs. This included reducing the amount required to file a patent and a design by 60 percent and 50 percent respectively. Moreover, the fees for trademark applications were also reduced by 50 percent. The Government has also introduced the Bilateral Patent Prosecution Highway Programme that would expedite patent filing processes. Most recently, with an objective to encourage MSMEs, innovation hubs, and women entrepreneurs, on the 1^st of August 2021, Mr. Piyush Goyal mentioned that there will be a reduction in IP filing fees as well.

There are innumerous benefits attached to protecting your business’s IP, especially when it is an MSME. MSMEs who aspire to expand their business on a large scale are especially advised to protect their IPs since this could translate to licensing it to bigger corporate entities in the near future. The importance of MSMEs protecting their IP are as follows:

Exclusivity over protected IP

In a competitive market, it is crucial to legally protect one’s brand and its associated assets. Brand recognition plays a pivotal role for any business that aims to expand itself. For the same, corporate conglomerates invest millions in protecting their IP. Similarly, if an MSME aspires to expand its business, it should inevitably consider investing in protecting its IP since it comes with several advantages. This may include protecting an MSMEs’ trademark, copyrights, or patents right when it is in its nascent stage itself. Protecting an MSME’s IP gives the owner an exclusive right over the IP. Here, the owner of the MSME would have sole ownership over his/her IP. As a result, if another entity attempts to use the MSME’s IP in an unauthorized manner, a large array of legal remedies would be available at the IP owner’s disposal. This could keep several other competitors at bay who may attempt to steal an MSME’s business model, innovations, or ideas.

Competitive advantage

Protecting an MSME’s IP may also result in a competitive advantage. A competitive advantage is crucial for an MSME’s growth and expansion pursuits. For instance, getting a trademark for an MSME’s products or services may reflect the quality that it accounts for. This would establish trust and goodwill associated with the brand among consumers. Additionally, this may also accelerate consumer loyalty. Thus, protecting an MSME’s IP is an effective strategy to set it apart from other businesses in a particular industry. Furthermore, this protection of an MSME’s IP can later translate into an asset for their business. Upon legally registering their IP, MSME owners may also license, sell, assign or franchise their IP for monetary benefits. For instance, if an MSME comes up with an innovation that has been patented, they may disclose the innovation and possibly license the patent to investors who may be interested in investing in the MSME. This could significantly accelerate the growth of an MSME.

Legal protection for MSMEs involved in the manufacturing of GI products

In a broad sense, Geographical Indications (GIs) can be defined as signs that are used on specific products that possess certain qualities, that arise as a result of being from a particular region. Some of the most popular examples of GIs in India include Salem Fabric, Chanderi Sarees, Navara rice, Darjeeling tea, and Mysore Silk. GI products are largely manufactured by MSMEs. Granting a GI tag on a product that is produced by an MSME could facilitate their trade-in in numerous ways. For one, this could add to the goodwill and reputation of that product which may result in profitability for an MSME that manufactures a product that has acquired a GI tag. Moreover, by acquiring a GI tag for a popular regional product, the MSME may also take legal actions against entities who counterfeit and sell unoriginal versions of the product on online or physical platforms.

Investing in further research and development

Protecting an MSME’s IP could also fuel further research and development which is crucial for the growth of the MSME. For instance, a patent holder may commercially exploit his/her innovation. This results in gaining some level of recognition for their innovation as well as the generation of additional revenue which could be invested back in the MSME. This investment can be utilized for research and development that may lead to the advancement of an MSME’s innovation which eventually results in growth.

In sum, it can be concluded that IPR is of vital importance in the MSME space. Protecting one’s IP could result in the eventual growth of an MSME. This growth is facilitated by a competitive advantage that IPR could provide with, exclusivity over protected IP, Legal protection over GI products, and investing in further research and development to name a few. With the Government of India relentlessly encouraging MSMEs to protect their IPs through fee relaxations and initiatives, it can be anticipated that more MSMEs may begin to protect their IPs which could eventually lead to the country’s economic growth.

Author: Sanjana, a BBA LLB student of  Symbiosis Law School (Hyderabad), in case of any queries please contact/write back to us at [email protected]. or IIPRD