page 1 berlin institute of technology expert group meeting on ip and sme geneva, sep 17th/18th...

Berlin Institute of Technology

Expert Group Meetingon IP and SME

Geneva, Sep 17th/18th

Intellectual Property and IP Infringement –

Methodology and Results

of a Survey focusing on the German “Mittelstand“ (SME)

World Intellectual Property OrganizationGeneva, September 17th/18th 2009

Florian Köhler

Berlin Institute of TechnologyFaculty of Economics and Management

Chair for Innovation Economics




Background of the study and key questions

Methodology

Some results

Lessons learned and implications for todays workshop

Agenda




• growing importance of intangible assets and the protection of intellectual property.

• at the same time growing (perceived) increasing threat of product piracy, counterfeiting, patent infringement…

• specific situation of SME (cost factors, low IP awareness, difficult enforcement, situation etc.)

• study commissioned by Federal Ministry of Economics and Technology, division “Patent Policy and Promotion of Inventions”

• timing: May to December 2008

Background and Key Questions




Background and Key Questions

Key Questions

How has the importance of intellectual property changed over the last years?

How high ist the estimated impact on firm and economy level of IP

infringement (product piracy/counterfeiting)?

What are the implications for economic/innovation policy, especially with

respect to Small and Medium Enterprises in Germany?




Literature Review

• Analysis of existing related literature

• Consideration of both scientific papers, “grey” and “white” literature

Secondary Analysis

• Analysis of existing data (Community Innovation Survey, National Accounts etc.)

• Analysis of custom seizure data for estimations of counterfeiting)

Primary Analysis

• Written survey among both small and larger companies as well as patent attorneys

• Semi-structured interviews with experts and stakeholders etc

Methodology




Firm Sample:

around 3000 companies with at least 10 patents filings in 2002-2004

census survey among largest German companies plus random of sample firms with own research and development activities

additionally: participants in relevant conferences on counterfeiting

sampling bias towards patent-active firms (representativity limited!)

Attorney Sample

- 500 patent attorneys (intention was to have a „second opinion“ from outside the company itself; random sample drawn from German patent attorney database)

plus: semi-structured interviews with experts, trade associations, SME general managers etc.

Methodology – The Sample




Methodology – The Sample

• around one third are SME (according to EU definition size criterion), around 50% with less than 500 employees

Sample Description by Size

Company Size (headcount)

No of companies

up to 49 employees 56

50 to 249 employees 52

250 to 499 employees 29

500 and more employees 158

Total 295

• Consideration of both large and smaller companies makes comparative analysis possible

• Focus on research active firms and IP users

• Oversampling of research active companies with high usage intensity of patents and trademarks

92,39%

88,19%

92,25%

53,85%

•20,10%

19,11%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

R&D activity

Use of patents

Use of trademarks

SampleCIS 4




• Method of data collection: Paper & Pencil plus online version

• 2 reminder letters plus reminders calls

• Incentive: Summary of main results (for firm benchmark)

• Mostly closed questions, with ordinal answer scales

Questionnaire structured in 3 modules according to research questions:

• Module A: Importance and Value of Intellectual Property, e.g.

• Importance of different IP protection methods (current situation and retrospective/prospective statement)

• Motives to patent (protection, blocking, licensing etc)

• Technology transfer (frequency and motivation for licensing)

Methodology – The Questionnaire




• Module B: IP Infringement/Product Piracy/Counterfeiting

• Incidence and frequency of counterfeiting cases

• Geographical information on counterfeiting cases

• Enforcement Issues

• Monetary and Non-Monetary Impact of Counterfeiting

• Module C: Support Programmes in the field of IP

• Awareness and use of IP support programmes

• Barriers for usage and perception of support programmes

plus: standard company information (industry, employees, sales, cooperation intensity, function of respondent)

Methodology – The Questionnaire




Some results – The importance of formal IP protection

Importance and Change in Importance of formal IP protection over firm size

•0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

Imp

ort

ance

Trademark

-0,8

-0,6

-0,4

-0,2

0

0,2

0,4

0,6

0,8

1

Ch

ang

e in

Imp

ort

ance

Patents CopyrightIndustrial Design

-1

Up to 49 employees 50 to 249 employees 250 to 499 employees 500 and more employees

Utility Model

TrademarkPatents CopyrightIndustrial Design

Utility Model

• Patents and Trademarks have high relative importance both in SME and in larger firms compared to other IP rights.

• Increase in the importance can be observed to a greater extent among larger size classes.

•Perception of utility models and copyright more equally distributed).




Some results – The importance of informal IP protection

•For SME several informal/strategic ways of protecting IP have become more important.

•Lead Time Advantage and Staff Relationship were given growing importance.

•Larger firms also use implementation of technical solutions to deter counterfeiting / to protect their products from imitation.

Change in Importance of Informal/Strategic protection methods over size classes

-1

-0,6

-0,4

-0,2

0

0,2

0,4

0,6

0,8

1

Lead T

ime

Advanta

ge

Confiden

tialit

y with

Supplie

rs

Use o

f tra

de se

cret

s

Exclu

sive

Cust

omer

Rel

atio

nship

s

Imple

men

tatio

n of t

echnic

al s

olutio

ns

Emplo

yee

loya

lty/s

taff

rete

ntion

Confiden

tialy

with

sta

ff

Defen

sive

Public

atio

n Stra

tegy

Ch

ang

e in

Imp

ort

ance

Imple

men

tatio

n of m

anag

emen

t tools





Some results – Strategic use of patents

•Traditional protection motive plays most important role, but not to the same extent for the smallest companies.

•Strategic relevance of patents for SMEs in licensing motive and access to financing (patents as indicator for credit worthiness or collateral)

Strategic Use of Patents over size classes

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

5

Protection

Offensive Blocking

Differentiation against competitors

Defensive Blocking

Exchange Motive (Cross-Licensing)

Generating Licensing Income

Financing Motive

Imp

ort

ance





Some results – Frequency of Product Piracy

•Around 65% of the companies had experience with counterfeiting/product piracy

•Frequency increases with company size (higher activity abroad, more formal IP, more valuable brands)

•But more than 50% of SMEs with more than 50 employees also affected.

Frequency of Patent or Trademark Infringement over size classes

0% 20% 40% 60% 80% 100%

Patents

Trade-marks

Patents

Patents

Patents

Patents

up

to 4

9 e

mpl

oyee

s 5

0 to

249

em

ploy

ees

250

to

499

em

ploy

ees

500

+ e

mpl

oyee

s T

otal

Often or very often Seldom to Sometimes Never

Trade-marks

Trade-marks

Trade-marks

Trade-marks




Umsatzeinbußen durch Produktpiraterie

0

10

20

30

40

50

60

0% 1-2% 3-5% 6-10% 11-15% 16-20%

Loss in revenue (2007)

Sh

are

of

co

mp

an

ies

(%

)Some results – The impact of IP infringement

Zusatzkosten durch Produktpiraterie

0

10

20

30

40

50

60

0% 1-2% 3-5% 6-10% 11-15% 16-20%

Additional costs in % of revenue (2007)

Sh

are

of c

om

pan

ies

(%)

Loss of revenue as a result of product piracy

Additional expenses as a result of product piracy

Loss of revenue and additional expenditure as consequence of product piracy •Loss of revenue in

the majority of cases under 5% of yearly turnover; but also 12.1% with losses of more than 10%.

•Monetary impact mostly around 1-2% of yearly turnover.

•Total monetary impact for companies is estimated to 6.2% of yearly turnover.




-0,2

0

0,2

0,4

0,6

0,8

1

Cha

nge

in Im

port

ance

bis 49 Mitarbeiter 50 bis 249 Mitarbeiter 250 bis 499 Mitarbeiter 500 und mehr Mitarbeiter

Some results – The impact of IP infringement

Stronger use of informal protection

methods

Stronger use of formal protection

methods

Stronger Efforts in IP maintenance and enforcement

Breakup/Change in relations with

customers

Lower investment in production plants in critical markets

Lower sales activities in critical

markets

•Usage of informal protection methods is increasing in all size classes, large companies also ramp up formal protection methods like patents

•SME are at disadvantage since potential for higher IP maintenance and enforcment is not feasible for them.

Impact of product piracy on management decisions over firm size





Some results – Semi-structured expert interviews

• In general: Low IP awareness

• Most common complaint: time and costs of patenting / examination process, community patent subject

• With respect to IP support programmes: and information gap on existing IP support among many companies

• Lack of coordination between various support offers, e.g. those focused on research support and those focusing on IP topics

• Focus should shift from “patent promotion” to the advancement of IP management skills and IP exploitation

• IP education is the most important component (also in universities and secondary education)




Lessons learned – Methodological Issues

• Combination of large scale survey and in-depth interviews very fruitful.

• Never underestimate the usefulness of pre-testing, especially among SMEs with possibly lower knowledge about IP topics!

• Include definitions of the phenomena (R&D expenditures etc.) under investigation.

• Refusal/unit non-response seem to be higher among entrepreneurs and SMEs than managers of larger companies (lack of time and interest): Keep it short and focused!

• The extra effort of „paper & pencil“ compared to „online only“ paid back with higher return rate.

• Try to ease concerns on releasing confidential information and design questionnaire accordingly to avoid item non-response.(categories for R&D expenditures instead of “naked figures”).




Discussion

Thanks for you attention.

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