The Role of Intellectual Property Law (IP) In Small, Medium Enterprises (SMEs)

Creativity is the bedrock of most economies in the world. Entrepreneurs through SMEs have provided greater employment and improved standard of living for people globally. SMEs are regarded as the engine of economic growth and development in most developed and developing countries while Creativity, through. IP is the very oil that lubricates the economic engine of growth and development. It is therefore apposite to note that, SMEs have the huge potential and great capacity of increased national development only through creative and innovative activity.

This reasoning is not far fetch especially with every product or service used every day in the world being a result of some innovations, whether crude, mechanical or howsoever we consider them. These innovations regardless of how small and insignificant were and are carried out 95 % by SMEs. Therefore, with IP laws to guarantee SMEs the ownership, and control of their creativity and innovation just in the same manner to which they own physical property, SMEs will have the needed guarantees, protections and encouragement to benefit from their creative and innovative activities thus further encouraging them to create and innovate to the general benefit of society.

The scope of Intellectual Property is very wide and considering the given topic, I will not succinctly analyze or discuss every component of IP. Regardless, we must understand what IP is, the general purposes of Intellectual Property Rights and Laws (IPR & IPL), and the role of IP in SMEs. That will be the scope of this presentation.

So first, what is IP? As the name implies, property of the intellect. Those intangible properties created by the mind. WIPO (World Intellectual Property organization) defines IP as “Creation of the mind: inventions, literary and artistic works and symbols,names,images and designs used in commerce”.So simply put, IP is the product of one’s intellectual activity. It is categorized into different areas of Creativity such as Copyright, Industrial Property: Patent, Trademark, Trade or business Secret, designs, Related rights etc.

COPYRIGHT :is the exclusive right vested in an author of literary, artistic, music, sound recordings, photographs, cinematography, to publish, sell and benefit economically for his creative work

These invariably are the most common IP concepts in Nigeria, but there are more,with as much profit potential waiting to be explored in the Nigerian Economy. The primary IP Laws operational in Nigeria includes the Trademark Act, Copyright Act, Patent and Design Act. All this Laws are generally purposed at ensuring that the owner of a creative and innovative activity benefits morally and economically from his/her creative activity.

I must quickly state here that IP does not apply to creative works automatically. To enjoy the guarantees and protection offered by the various categories of IP, SMEs must determine the requirements and procedures to qualify for such protections. This procedures and requirements will be a discussion for another day.

SMALL AND MEDIUM ENTERPRISES (SMEs).

There are no universal definitions but they are most effectively understood by the role the play in each country. SMEs may however be categorized by the number of employees, amount of annual turnover, capital and asset worth of a business enterprise.

In Nigeria, the Small and Medium Industries Enterprises Investment Scheme (SMIEIS) puts SMEs to be any enterprise with a maximum asset base of N200million. The CBN for the purpose of accessing loans puts SMEs as Enterprises having an annual turnover not exceeding N 500, 000. It is however accepted and more ideal in Nigeria to define SMEs base on number ofemployees. Regardless of the above, we will consider SMEs for the purpose of our discussion to be enterprises with asset-worth of less than N1million (fiscal Capital inclusive).

In America, in the late 19th Century, John D.Rockefeller discovered oil and how kerosine can be used to give light to America; he invariably became the wealthiest man in the world, after he forced (illegally) a monopoly in dealing with oil. The catch is not that John D. Rockefeller goes down in history as the world’s richest, but that his wealth came about as a result of the monopoly he enjoyed which invariably spurred other industrialist i.e. Cornelius Vanderbilt, Andrew Carnegie, J. P. Morgan to seek other creative ideas. The end result, America was developed.

Many SMEs are not aware of IP rights and do not appreciate that they can

commercially exploit their IP Rights or that IP Rights are valuable assets. So to ease our appreciation of IP roles, I have drawn up scenarios which I will make reference to as the presentation continues.

Mr A is a Caterer. He is the owner of A’s Kitchen, a restaurant in Abuja well known for the special and impeccable taste of its jollof rice. Mr A makes his spices and food recipes by himself. Recently, Miss B, who was formerly an employee of Mr A and his former girlfriend decided to open her own restaurant using the skills and recipes she learnt while in the employment of Mr A to make her food. Mr A soon discovers the sudden decline in income and learns of the “new competition”. Mr C, a regular customer at A’s Kitchen visited B’s Kitchen and noted that her Jollof rice looks everything like the one prepared at A’s Kitchen, except of course for the taste which seems inferior.

Mr John is an engineer, after 6 long years to trying and failing, he recently

fabricated a garri processing machine. 6 months later, one Mr Bello fabricated and sold over 100 of such machines using Mr John’s model. Mr John on his part was only able to make and sell about 70 of the machines before the Banks came demanding for the loans given to him. After paying up the loans, Mr John is now bankrupt and struggling to keep himself in business while Mr Bello continues to make money from his invention.

Mallam Yahaya is a renowed shoe maker skilled in all forms of leather work. He makes all kinds of male and female shoes and bags using well-polished and refined animal skin and other leather materials. Mallam Yahaya has a large and wide clientele. However, because of the wide spread of shoe making in Zaria,his customers always have difficulty in identifying his products in the market.IP assist SMEs in almost every aspect of business development,management, capital generation, marketing andcompetitive strategy. From business plan to actualization etc. I will briefly consider three areas of importance of IP to SMEs below.

BRANDING : Many SMEs are focused only on their primary product or service not knowing that a business always needs a face. A face, or better put, a brand is a powerful tool for marketing and a key asset for creating value for a business of any kind. Any SME that must survive in a competitive market needs to develop a brand image alongside its primary business product or service. This brand may be a trade name, a sign, symbol, Slogan or anything that is used to identify and distinguish a

specific product, service or business. It is not just a logo or name, it is the primary identity of a product or service which communicates a feeling of trust and responsiveness to its customers. It serves to create associations and expectations among products made by a producer.

Branding is more or less a promise of service and quality, recognition of investment, a presentation of a vision and mission statement as well as a tool for business pride. It has severally been used as a promise of an experience that conveys to consumers a certain assurance as to the nature and quality of the product or service they will receive and the standards the supplier or manufacturer seeks to maintain. I believe the brand of Nike, Adidas, Shoprite, Honda, Toyota, etc rings a bell here.The Cocacola brand is believed to be one of the oldest in the world at the moment. It was registered sometime in the 1890s and is presently valued at over $800, 000.

In Scenario 3 above, mallam Yahaya can get such a design, mark to be printed on his products which will distinguish his products from that of others in similar trade. Distinguishing his products helps his customers to, with ease buy and refer his products to others in any part of the country and greatly increasing or stabilising his income.

GENERATION OF CAPITAL : IP can conveniently provide alternative means of capital to SMEs. Any SMEs that appreciates its IP assets such as patents, copyrights, trademarks, trade secrets etc can multiply its capital base by licensing, leasing, assigning and even putting them up as collaterals or security for loans. IP assets like, trademarks also help innovative firms gain easy access to potentials investors. The trademark or design signals and presents the SME’s quality, vision and future target to unwitting but sceptical investors.

In scenario 1 above, Mr A, to satisfy his growing customer demand, can by

binding his employees to his trade secrets, license this very secret to a restaurant in any part of the country and gain some income from them. He could also agree to supply to many restaurant as will want his special spices thereby raising more capital to expand if he so wishes. And of course, more capital means increase in his tax to government and expansion would mean employing more hands. Either way, he benefits and the economy grows as well.

ENHANCING BUSINESS  COMPETITION: Competition increases base on firm’s ability to provide high-value-added products and services at a competitive price. Globalization has made it crucial for SMEs to become

internationally competitive even when competing in domestic market. In order to survive in a highly competitive market such as Nigeria’s, SMEs need to constantly improve in efficiency, reduce production cost and enhance their reputation by acquiring new technology, develop new designs, which are appealing, improve their marketing strategies and invest in research and development.

It is of paramount importance that SMEs make significant investment in IP in order to sustain it’s business and without IP protection, there is a strong risk that investment will be wasteful. IP enables SMEs to have exclusive use over the exploitation of their innovative.

In Scenario 2 Above. If Mr John had patented his invention, the only way Mr Bello will produce such machine is if Mr John leases, license, or assign his Patent to the machine. This protection by IP laws on Mr John’s invention assures him of being economically rewarded of his creative effort and it encourages him to do more.

REGARDLESS of these positive roles of IP in SMEs, and the existence of IP Laws to ensure that IP Rights are respected, the situation is not always smooth as presented above. This is solely due to some factors that affect the economy and makes it difficult for SMEs to maximize their IP rights. I will mention just two which I feel are the primary and basic of such challenges.

 On available IP Rights is a major problem in the Nigerian economy. Many businesses start up and are run without the legal advice of a legal practitioner to talk of a well-drawn business plan. This is so widespread, that many SMEs have no idea of the existence of IP and how it can significantly affect their businesses positively. Because of this ignorance, such SMEs, also do not respect the IP rights of other SMEs thus stagnating their growth and that of the national economy.

PIRACY : Piracy is another daunting challenge faces SMEs. With technological growth, it is very easy to pirate someone’s works. This needs no further explanation, as I believe every Nigerian must have in one way or the other, seen pirated works. From books, to movies, to phones, etc. the National Copyright Commission and the Standard Organization of Nigeria are two bodies are making great effort in curbing the menace of Piracy in the nation.

AS RECOMMENDATION, I will also give two, which I consider basic and primary to us. First, increased advocacy of IP rights and its importance to national Development as well as SMEs will help educate the masses of the existence of these rights. You can decide to tell your friend who is a business owner of the existence of IP rights and how it can help improve his business and how important .It is to always get legal advice from qualified legal practitioners. Second, cooperate with, encourage and report any act of piracy you discover to the NCC and SON.

BY WAY OF CONCLUSION, SMEs account for the most employment of labour, and for over 45% of Nigeria’s GDP, second only to oil, which is the major contributor. Development and the growth of the nation’s economy is very much dependant on SMEs. IP on the other hand is a tool that ensures SMEs profit from their creative and innovative activity and are encouraged to do more. It therefore, needs no further saying that IP plays important roles in helping SMEs maximize their great development potential.

Kefas Chakura Gang is an Associate at P.D. Mann & Co, a commercial law firm with offices in Abuja, Jos, Bauchi and Lafia. He is a seasoned Legal Practioner with particular interest in Corporate and Commercial Law, Intellectual Property and Dispute Resolution. He has advised on several commercial transactions and have countless appearances in Nigerian courts. He is a graduate of the University of Abuja.

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