What happens if your product goes global in a single bound? Do you have the infrastructure and knowledge in place to expand? Our three experts outline the issues faced by small and medium-sized enterprises seeking to successfully navigate the pitfalls of global expansion.
Take advantage of your opportunities
Marice Cumber, Project Director, Own-it
Imagine you’re a small business, perhaps focusing in the creative arts, you know that your IP is important and you want your business to grow, but the ownership implications of expansion can be difficult to comprehend, let alone manage. Who do you turn to?
Expanding abroad necessitates an often fear-inducing leap of faith, particularly for small- and medium-sized enterprises (SMEs), and it is never taken lightly. Informed use of IP can enable businesses to develop and grow on an international scale, but SMEs need help and advice if they are to successfully navigate the legislation and regulations involved.
Most SMEs are creative innovators first, business people second. They need advice on how to best select and work with partners in other territories, and how to export their products and services, license their IP Rights and offshore the manufacturing of their products. They also need to understand how to protect their IP in such situations – and understand how to value it to ensure that they negotiate the best deal.
The complications of contracts and transactions, the fear of losing control of the products they own, the worry that they won’t be able to properly manage the licensing or manufacturing negotiations... all of these tend to scare many SMEs away from grabbing the opportunity to expand abroad. But it doesn’t have to. Education and support does exist to help businesses chart their growth in the global marketplace. Only by providing this education and support to businesses fearful of taking the leap can the sector itself expand.
For example, here in the UK, Own-it is a support network for London businesses that provides free advice and insight to SMEs on all aspects of their IP Rights. And it’s advice that they want and need. Our IP seminars are booked up weeks in advance and our on-line tools are used by businesses, not just in London, but throughout the UK and worldwide.
Of course, if you’re a billion-dollar business, you will have your own IP department or out-of-house counsel, who will manage your IP transactions and draft and check your contracts for you. However, SMEs don’t benefit from the same support, so how are they supposed to know how to draw up a contract? On our website, we provide 270 different contract templates, which are free to download and can be adapted to meet a business’s needs. We also provide access to IP lawyers, who give up their time free of charge to support the project. It’s a great way to get started and also supports the knowledge economy in the process. We are finding that companies of all shapes and sizes are becoming increasingly astute about how valuable IP is, and they want the tools to help them understand more. It’s fantastic that they find the knowledge that Own-it provides useful, but it’s also alarming that they’re not getting it from elsewhere.
Do your homework
Christopher Panas, Adviser Team Manager, UK Trade and Investment
In our experience, there is a knowledge and skill gap in the relations between IP and business in the SME sector, and business needs assistance in order to bridge that gap. Most SMEs are looking for guidance and support in terms of expanding abroad, but a lot of it comes down to education and expectations. The main questions that these businesses should be asking themselves are: Which markets do I want to move into and why? What type of arrangement am I looking to establish overseas? What information and help do I need to support this expansion? What set-up do I need in terms of third-party firms or manufacturers to assist me?
Sometimes people bite off more than they can chew. Many SMEs come to UK Trade & Investment (UKTI) asking for assistance to expand into the US. But the US is a vast territory and cannot be conquered in one fell swoop. Such an expansion needs to be prioritized; often it’s a question of focusing on one state or city in the first instance, to test the water, and then adapting the business model to expand elsewhere.
At UKTI, we use a diagnostic tool to help us to establish realistic expectations for businesses who want to expand into new territories and marketplaces. The tools help our advisers to understand where a company is and help us establish how best to get a client company to where it wants to be. Of course, there is no failsafe solution, but a lot of it comes down to thorough planning, research and getting sensible advice. Different countries approach business support in differing ways, but many have a network of support similar to UKTI that can provide on-the-ground information from key territories, translation and interpreting services and access to appropriate professional advisers, including legal and financial. SMEs should look into using these services, as they can assist them establish a strategy for growth.
Some of our clients turn to us for verification that what they are doing is right. We have a free advisory service manned by specialists in certain industries, and are also able to call on the services of others within our network with specific in-market knowledge and experience. We will also signpost people to others who can help. Some of the calls we receive are quite straightforward; for example, advice on how to move physical product to another country. However, as businesses become increasingly aware of the benefits of commercialising IP, many are looking for help finding opportunities for technology transfer or licensing transactions. For a novice, it’s not always easy to understand the regulatory frameworks of exploiting IP abroad. Even simple differences can cause problems if not managed correctly; for example the difference between first-to-file in the UK and first-to-invent in the US.
Without the research in place, companies risk mismanaging their IP Rights; but it’s never too late to ask for help.
Expanding abroad necessitates an often fear-inducing leap of faith, particularly for small- and medium-sized enterprises (SMEs), and it is never taken lightly.
Protect your IP
Margaret Briffa, IP lawyer and founding partner, Briffa
The route to market success is changing. Business today isn’t just about the right product or service, it’s also about the best way of producing and profiting from it. A company may have a great invention, but that’s only the first step. The next question is what they do with it.
Ultimately, it’s a lifestyle choice. Companies should be asking themselves: Do I want to expand my business, if so how? What is the best method of increasing productivity without making the actual product? How can I get to the next level safely?
Growing safely is all about looking after your IP as you go forward. SMEs need to understand their portfolios, audit the rights they own and register additional rights in the territories they are looking to expand into. If they’re thinking about using a third party to manufacture their goods, they also need to understand and monitor the commercial agreements they are about to make. So where should they start?
My advice would be: always get it in writing. Before even opening any discussion, companies should sign a Non-Disclosure Agreement; after all, they will be revealing key information to a company which they may then decide not to use. If they do decide to enter into an agreement, it’s equally important to establish a sample or prototype agreement to ensure that they are contracted to match specifications and price. It should also outline requirements for delivery and any future IP that may come out of the arrangement. For example, if the factory modifies the design, who then owns that IP? The inventor needs to make sure that they do; otherwise they risk handing their IP Rights and future revenue stream over to the new manufacturer.
If making products will involve the manufacturer in making a bespoke set of tools, it’s also important to consider a tooling agreement to protect the ownership and control not only of the equipment, but also of the investment and know how. Similarly, a full manufacturing agreement once prices and specifications have been agreed should set out the essential commercial and legal terms, including financial provisions, procedures and approvals, service level agreements and risk reduction measures. Such agreements are invaluable in cases of disagreements or a fall in standard. If the relationship isn’t working, the rights holder needs to be able to change supplier with minimum disruption.
Producing these agreements isn’t as complicated as it may sound, but SMEs do need legal support from an IP expert – not just in terms of structuring the agreements, but also when it comes to understanding the IP regulations of foreign jurisdictions. The rights afforded and enforced by popular offshoring locations such as China do not always match those in the EU or North America. SMEs need to make sure they’re informed of the differences to ensure they benefit from the investment they make in expanding their business.
This article was first published in IP Review, issue 16
