MOST SMEs are started by persons who were once employees in an organisation where they had acquired the necessary technical skills and knowledge to manufacture the product their employer was manufacturing. These same individuals had the entrepreneurial spirit burning deep inside them, and so, armed with the skill/knowledge and a little capital (usually from personal savings, a little help from family members or friends), they venture out on their own to start a business, usually in competition with their previous employer.
There’s nothing wrong with that, of course, unless they are in breach of their employment contract or misuse their employer’s trade secrets or confidential information. The entrepreneur is now on his/her own to conquer the business world.
Initially, the entrepreneur or company started by the employee turned-entrepreneur will compete in the market on price and perhaps superior service to attract new clients. However, one cannot use price advantage for long if one intends to remain in business or for the business to grow bigger. The entrepreneur of the new SME has to secure other competitive advantages to remain in business and for the SME to grow and expand into new territories. This is where Government sanctioned “monopolies” come to assistance. Yes, we are referring to Trademarks, Patents, Industrial Designs and Copyright (collectively referred to as Intellectual Property Rights (IPRs).
Anyone who obtains a registered trademark or a grant of patent or certificate of industrial design has a virtual monopoly over the usage of the right for a limited period of time. The proprietor of these IPRs has the exclusive right to stop others from using an identical or substantially similar trademark or from using their patent-protected technology. With this exclusive right to the IPRs, the proprietor can charge a premium price to their product or service to recover their investment – R&D costs, branding costs, etc.
Many entrepreneurs and SMEs perceive the costs of obtaining IPRs as expensive and IPRs themselves as difficult to enforce. Plus there are other misconceptions about IPRs too, and it would probably take an entire article in itself to address these. The fact is, the cost of obtaining IPRs – at least in Malaysia – is not high and is affordable by most SMEs. It is more costly to the business if IPRs are not secured.
Imagine spending thousands of ringgit and years to build up a brand name and yet neglecting to spend a thousand or two more to protect the brand as a registered trademark, the registration of which enables the SME to sue any infringer. Let us cite an actual case that happened in Malaysia: A restaurant business was set up in a prominent part of Kuala Lumpur. Business boomed. The partners never bothered to register the name of the restaurant as a trademark. Unknown to them, some ex-employees registered the business name as a trademark, and it did not end there. After obtaining the registration, they sued the restaurant for infringement of “their trademark”.
The restaurant had to face a long trial in the High Court. Not only did the partners suffer loss of sleep, they (along with the restaurant) were also made to look bad in the media (thus affecting their reputation) and incur thousands of ringgit in legal costs. However, they did finally manage to “get back” their trademark. Their ignorance in not recognising the market power of their trademark nearly cost them the loss of their business. So SMEs, no matter what business they are involved in, should always seek their IP consultants’ advice on obtaining IP rights for the competitive advantages they enjoy.
In the current business world and rapid globalisation of trade, IPRs have come to play a crucial role in the very survival of SMEs. Unless entrepreneurs and SMEs fully appreciate the strategic role IPRs play in the existence or survival of their business, they may be wiped out from business by their competitors who have learnt to use IPRs as a business weapon to destroy or maim rival businesses.
Contributed by P. Kandiah (Founder and Director of KASS International)
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