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Firms that own Intellectual Property Rights (IPR) such as patents, trade marks and designs tend to be larger than firms that don’t and generate on average 20% more revenue per employee, according to research by the European Union Intellectual Property Office (EUIPO) and the European Patent Office (EPO) and analysed in Intellectual property rights and firm performance in the European Union 2021.
In terms of individual IPRs, the average performance premium experienced by IPR-owning firms is 36% for patents, 21% for trade marks and 32% for designs. Firms that own IPRs also pay on average 19% higher wages than firms that do not.
The impact of owning IPRs is even more marked for SMEs than for bigger companies. The research found that SMEs that own IPRs have 68% higher revenue per employee than SMEs that do not own any IPRs at all.
Unfortunately, less than 9% of the SMEs in the research sample own one of the three types of IPR included in the study.
Martin Brassell, CEO of UK IP experts Inngot, says: “The EUIPO/EPO’s well-evidenced analysis shows a direct correlation between IP and performance. The clear conclusion is that where anyone (like a financier) is seeking to understand whether a business is strong and viable, intangible assets are predictive, to a degree that can’t be ignored.”
He adds: “Sustainable growth simply will not come from tangible assets. Their use as collateral simply obscures the reality. Lenders and investors must lift their gaze from them, so they can finally see the (intangible) elephant in the room that has been patiently sitting there for so long.”
Martin Brassell has explored the EUIPO/EPO research further in a post on LinkedIn, The elephant in the room: the link between IP and firm performance.
Isolating the effect of IPR ownership from other factors, such as the size of a firm or the countries and sectors in which it operates, makes the positive association between IPR ownership and economic performance even more obvious, with revenue per employee 55% higher for IPR owners than for non-owners.
An earlier survey of European SMEs (EUIPO, 2019) looked at why there is such a low uptake of IPRs amongst small to medium sized businesses. It found barriers to adoption including:
- a lack of knowledge about IPRs;
- a perception that registration procedures are complex and costly;
- and the high cost of enforcement of those rights, seen as a particular burden for SMEs.
The EPO and the EUIPO are taking steps to address those concerns in order to enable European SMEs to take full advantage of their innovation and intellectual property.
Intellectual property rights and firm performance in the European Union 2021 is the fourth study of the impact of owning IPR carried out by the EUIPO and the EPO since 2013. Its in-depth analysis of the positive impact of IPR on business performance makes it clear that companies without such rights are at a major disadvantage.
The IPRs included in the study are patents, trade marks and designs (or any combination of the three). It does not cover copyright, plant variety rights and geographical indications. It includes both European and national IPRs, which the authors say is an important enhancement to the data. Data was collected from 28 EU member states covering 2007 to 2019 (including the UK, as it was still in the EU during this time period). Data on 127,199 companies was included.
Inngot has a range of cost-effective and easy-to-use tools to help companies, particularly SMEs, identify and value their intellectual property and other intangible assets. In the past 10 years, companies have used Inngot’s tools to identify at least £799m (€927m) of such assets. In 2019, companies using Inngot’s tools found on average £2.1m (€2.4m) of previously unaccounted-for assets.
