The global value of fake goods hit an estimated $653bn in 2014 – with drugs, electronics and software accounting for the most commonly counterfeited products. But SMEs are often ignorant of their intellectual property (IP) rights and only16% of SME owners place a specific monetary value on the IP associated with their brands, logos, websites and product designs. What are the implications of this?

1. Supported by:
SMALL AND MID SIZED ENTERPRISES
ON THE FRONTIERS OF EXPORTING
DEFENDING INTELLECTUAL PROPERTY ABROAD

2. 1 © The Economist Intelligence Unit Limited 2015
Defending intellectual property abroad
1
“Counterfeit Goods Market
Value,” Havocscope: Global
black market information
website.
2
“IP Insights: July 2014,”
UK Intellectual Property
Office.
Peter Lord, the director of the golfing equipment maker Professional Golf Europe, was
surfing the Internet when he came across some low-priced Vega golf accessories listed
for sale on the online retailer eBay. Since he owns the European Union trademark for Vega
products, he knew these were fakes. He complained to eBay, sending it proof that he was the
registered trademark owner and EBay removed the products. “”Without a registered trade
mark,” he says, “we wouldn’t have had a leg to stand on.”
Lord’s experience is not uncommon. The global value of fake goods hit an estimated
$653bn in 2014 – with drugs, electronics and software accounting for the most commonly
counterfeited products. But SMEs are often ignorant of their intellectual property (IP)
rights.1
Only 16% of SME owners, for example, place a specific monetary value on the IP
associated with their brands, logos, websites and product designs – even though between
70% and 80% of the value of their businesses may reside in such intangible assets.2
Taking defensive action is probably easier than most SMEs believe. The World Intellectual
Property Organisation, the European Commission-funded Intellectual Property Rights
Helpdesk, and the UK’s Intellectual Property Office (IPO), among others, publish extensive
information on IP rights for SMEs. But the range of legal instruments that can protect a
single product can be bewildering, and the cost of obtaining those protections can be
opaque.
At the most basic level of protection, SMEs are covered by unregistered rights, which are free
and exist automatically in law. The Berne Convention protects international copyright for
articles of literary and artistic merit, and common law protects unregistered trademarks and
designs in the UK and some other countries.
However, such unregistered rights are not the best choice for SMEs exporting into
foreign jurisdictions, since the onus of proof of IP ownership falls on the exporter. “With
unregistered copyright and design rights, you have to prove that your material has been
copied, which can be a colossal task,” Martin Neilson, a Patent Attorney at the UK law

3. 2 © The Economist Intelligence Unit Limited 2015
firm Urquhart-Dykes and Lord, says. “Registered rights, on the other hand, give an SME a
monopoly right, so it need only prove that a business has infringed its right to be able to take
action.”
Registered IP protections fall into four main categories—and often a single product may
require more than one category of protection. Registered copyright covers works of literary
or artistic authorship; industrial design rights cover the look and style of products; patents
protect against the unauthorised use of a company’s innovative products or processes; and
trademarks define and defend the words, phrases, symbols, designs and colours a business
associates with its goods or services. Companies can also protect trade secrets and the rights
associated with celebrity.
An IP audit early in the development process can be a valuable tool for exploring the
protections available, Neilson says. This is especially true for start-up businesses, where
inventors risk accidentally giving away their IP by publishing commercial information in
academic journals. Tanya Ewing, for example, approached the UK’s Intellectual Property
Office during the development stage of her digital display system that helps consumers
and businesses monitor energy consumption. Her Edinburgh, Scotland-based company,
Ewgeco, filed patent applications and secured international design registrations well before
launching its product.
“The visual design of our energy monitoring system was as important to us as the technology
we created, so we initially applied for design registrations, a patent and a trademark,” Ewing
says. Competitors have scrutinised the technology, she says, but not infringed her rights.
There were other commercial advantages too. “By submitting these early on in our product
development, long before they were granted, we were able to put a value on our idea and
raise capital from investors to develop our product.”
Financial penalties for infringing the IP of registered goods and services help deter
counterfeiters; SMEs can also seek compensation from a business that accidently breaches its
rights. Even where a patent is pending, protection applies. At least in the UK, any damages
awarded for infringement accrue from the date the application is filed.
The choice of what protection to seek depends not only on the features of the product that
create value for the SME, but also on where the business is looking to trade. Only large
corporations have the funds to cover all countries, so SMEs have to plan carefully.
Lawnsalted, a Kent-based start-up company in the software development and internet sector,
decided it did not have enough money to register all of its potential IP rights, so relied
on unregistered copyright protection, as well as on a measure of secrecy. For the latter, it
created non-disclosure clauses in employee, supplier and client contracts, according to a case

4. 3 © The Economist Intelligence Unit Limited 2015
study prepared by the European IPR Helpdesk. While this strategy has been effective in the
UK, in 2013 the company discovered that the owners of a patent he had exclusive license to
use had missed a deadline to register that patent in countries where Lawnsalted planned to
trade. This poses a risk to Lawnsalted, since it means that its service can be freely copied in
some potential markets, with the consequent loss of competitive edge in those markets.
Relying on national registration for IP protection is best where SMEs export to just a few
countries. This can be a long-term process: Registering for national patent protection can
take up to 31 months in some countries. Neilson says a straightforward patent application
in the UK would cost about £5,000, including administration and lawyers’ fees. Translation
costs, when required, can add £2,000 or more to each application.
Registering a trademark—to associate specific products with a specific mark—costs about
£1,000 for a simple mark in some of the 34 goods classes and 11 service classes. Neilson
advises SMEs to begin with a broad but realistic set of classes and be prepared to strike off a
few, if necessary, as objections from competitors can double the cost. Adding classes to an
existing trademark application also increases the cost.
The Treaty of Paris set up different mechanisms for applying for IP protection either across
the EU, or globally. For example, a trademark registered at the European Union’s Office
for Harmonization in the Internal Market protects the mark across the EU, while a patent
application to the European Patent Office for EU-wide filing streamlines co-ordination
between national patent offices. The patent still has to be granted separately in each
jurisdiction.
Neilson estimates a European patent application could cost £20,000, including legal and
official fees, depending on the number of countries covered. A simple Community Trade Mark
application averages £2,000. Extensions of such applications beyond the EU must specify the
countries in which the SME seeks protection, and these generate additional costs.
Once an IP strategy is in place, SMEs must carefully monitor infringements and enforce
their rights. At a buyers’ fair in 2013, the London-based UK Talking Tables, an up-market
party accessory business, was surprised to find products similar to its own at the stand of
competitor Ginger Ray. The firm claimed Ginger Ray had infringed its unregistered design
rights. After a flurry of lawyers’ letters, Ginger Ray agreed to pay £5,000 in damages and
costs and to cease to display, sell or market the disputed products.
“Unfortunately this is not the first time we have had to take legal action,” Mark McCormack,
director of Talking Tables, was quoted as saying, “but we will continue to do so wherever
necessary to protect the investment in our design originality.”

5. While every effort has been taken to verify the accuracy
of this information, neither The Economist Intelligence
Unit Ltd. nor Novartis can accept any responsibility or
liability for reliance by any person on this white paper or
any of the information, opinions or conclusions set out
in this white paper.

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