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01-09-2012

How SMEs exploit their intellectual property assets: evidence from survey data

Author: Gaétan de Rassenfosse

Published in: Small Business Economics | Issue 2/2012

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Abstract

This paper seeks to understand how motives to patent affect the use of the patent portfolio with a particular focus on motives aimed at the monetization of intellectual property. The analysis relies on data from an international survey conducted by the European Patent Office. There are three main results. First, small- and medium-sized enterprises (SMEs) exhibit a much stronger reliance on ‘monetary patents’ than large companies and nearly half of the SMEs in the sample patent for monetary reasons. Second, SMEs tend to use their patents more actively than large firms. Third, smaller companies generally have a higher proportion of their portfolio that is licensed, but the licensing rate is significantly higher in the USA. An American SME is twice as likely as a European SME to have a high share of its portfolio that is actually licensed, witnessing a fragmented market for technology in Europe.

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Excellent reviews on the financing of innovation are provided by Hall (2002, 2009) and Harhoff (2009). See also Myers and Majluf (1984) for a theoretical discussion on the financing of investments.

It may seem counter-intuitive that a firm facing financial constraints will engage in patenting. After all, one may think that a company which lacks money to invent will also lack money to patent—if it has any invention to patent at all. Obviously, ‘monetary patenting’ can occur only if the firm: (1) has an invention that meets the patentability requirements and (2) has money to patent. Given that patenting costs are a fraction of R&D costs, it is realistic to assume that a firm facing financial constraints may have some money left to apply for a patent—the last $5,000 that a firm can spend on R&D may be more valuable if it is spent on patenting.

Sale and license-back is very similar in spirit to the sale and lease-back of capital equipment. Put simply, the owner of the assets sells the IP to the investor and takes a license-back to use the IP. This mechanism has fiscal advantages for the initial patent holder. The securitization of IP rights typically consists of transferring the royalty stream of one or several IP assets to a bankruptcy remote vehicle which, in turn, issues securities to investors. David Bowie’s US$55 million deal and Guess? Inc.’s trademarks securitization are well-known examples (Huston 2004).

The complete description of the survey is available at: http://www.epo.org/patents/APS.html.

The drop in sample size from 772 applicants to 392 applicants (94 SMEs + 298 large companies) comes from missing information on key variables. See Appendix for more details.

The patent portfolio is defined in the survey as the number of patents filed in 2000–2005 that were still valid at the time of the survey (2006).

The attentive reader will have noticed that the dependent variables relate to the patents filed over the period 2000–2005 while the regression controls for the size of the patent portfolio with the number of patents filed in 2005. This is due to the fact that no information is available on earlier patent filings.

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Title: How SMEs exploit their intellectual property assets: evidence from survey data
Author: Gaétan de Rassenfosse
Publication date: 01-09-2012
Publisher: Springer US
Published in: Small Business Economics / Issue 2/2012
Print ISSN: 0921-898X
Electronic ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-010-9313-4

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