How Embracing Intellectual Property Rights Can Unlock SME Growth in Liberia

Why do so many small and medium enterprises (SMEs) fail in Liberia? The answer for many would be inadequate financing, but an often-neglected factor is the underutilization of intellectual property rights (IPR) among SMEs in the country.

IPR protection, if sought after by most of the country's SMEs, would have strategically positioned them to capitalize on the EU-Africa trade agreements as well as the African Continental Free Trade Area (AfCFTA), which provides duty-free access to vast markets for growth. These trade agreements, however, had at their core the protection of IP rights as a key requirement for trade. 

Studies by the European Union Intellectual Property Office and the European Patent Office have revealed that IP protection is not just key to market competitiveness but also boosts the revenue of SMEs that have IP rights protected, compared to SMEs that do not.

The failure of Liberian struggling SMEs to, therefore, take full advantage of the benefits of IP rights has resulted in a significant number of them missing out on opportunities for growth and income generation. By this time, they should have been generating income from licensing or selling their IP rights to other enterprises in exchange for lump sum payments or royalties, which would have strengthened their cash balance.

This is why a healthy SME sector is critical to the overall prosperity of Liberia since half of the country's employed population is found in the informal sector, largely controlled by SMEs, making IP protection and commercialization key.

Each SME entering the Liberian market potentially harbors a unique product or invention capable of revolutionizing the country's economic landscape. However, the limited utilization of IPR among them poses a significant barrier to this transformative potential.  IP rights, legally enforceable rights over inventions or creative works, include trademarks, patents, utility models, industrial designs, copyrights, plant breeders’ rights, layout designs of integrated circuits, geographical indications, new plant varieties, and traditional knowledge.

These rights, which are intangible assets, are key to the competitiveness of businesses in the global economy, serving as the primary method of securing a return on investment in innovation, creativity, and reputation. This is why history has shown that SMEs that identify the value of their IP while adopting a strategy for growth not only remain competitive but also grow in monetary value as investor confidence is boosted.

The first type of IP protection for SMEs is trademarks, which protect the name, logo, slogan, or other identifying marks of business. Trademark protection can be used to prevent others from using similar or identical marks that cause confusion among customers or dilute the distinctiveness of the SME's brand.

Another type of IP protection is patents which protect inventions, such as products, processes, or machines, and can provide a monopoly on using that invention for a limited period.  Also, trade secrets are another type of IP protection that protects confidential information, such as formulas, processes, or customer lists, giving your business a competitive advantage. Trade secret protection; therefore,  can prevent competitors from using or disclosing confidential business information without the SME's permission.

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So, if SMEs in Liberia must compete with their African counterparts and the larger global knowledge economy, utilization of IP protection is key to maintaining a competitive advantage in markets at home and beyond. Studies have shown that SMEs with an effective IP strategy enjoy a stronger negotiating position, achieving greater success from royalties, licensing IP assets, and having a higher market value than those that do not. 

This is particularly true in a highly competitive global market where cross-licensing is prevalent. Only then will it be possible for Liberian SMEs to succeed in reversing existing trends – where the country imports most of what it consumes – and to start adding value to the products for exports.

According to the EUIPO/EPO, companies that own at least one patent, registered design, or trademark generate, on average, 20% higher revenues per employee than companies that do not own any of those IPRs. However, amidst the poor utilization of the IP legal system among SMEs in Liberia and beyond, there is hope that the Liberia Intellectual Property Office (LIPO) will strengthen its awareness programs among SMEs. Little or no awareness in times past has continued to serve as a hindering factor that has made it quite difficult for SMEs in Liberia to access IP protection, leaving their innovative ideas vulnerable.

As a result, all future awareness campaigns should involve a practical explanation of the process of acquiring and assessing IP assets for SMEs; identifying areas of vulnerability and developing a plan to protect their creations and innovations, to boost their commerce across the African continent. The result is that SME founders in Liberia will gain the knowledge needed to overcome challenging situations at the moment of protecting IP rights.

Additionally, the costs associated with IP registration and legal protection can be prohibitive for SMEs with limited financial capabilities, ultimately reducing protection. Even among SMEs that are fully aware of the benefits of IP rights for their business operations, high IP protection costs are a major hindrance. For example, the cost of a patent or trademark application typically comes in at around US$1000, including legal fees – a sum that accounts for the entire capital of some SMEs. As finances are a problem for many SMEs, these high costs are also a major deterrent for IP protection.

In this regard, LIPO needs to work with the World Intellectual Property Organization; European Union Intellectual Property Office; African Regional Intellectual Property Organization; and the Intellectual Property Rights and Innovation Project in Africa to develop a special legal assistance initiative for SMEs. This means partnering with law firms willing to provide free advisory services to SMEs on patent or trademark filings.

As legal services often constitute the bulk of the costs incurred while filing for IP rights, such a strategy would lift a major financial burden from the shoulders of SMEs, incentivizing IP protection. The greater beneficiaries of this sacrifice are not just the IP rightsholder but society as a whole. IP rights support the process of bringing a product to market, thereby providing consumers with access to an expanding range of innovative products and services. Of course, IP rights also safeguard consumers from counterfeit and pirated goods. Such illegal activity undermines legitimate businesses and their ability to invest in product development. It also puts consumer health and safety at risk.

Editor's note: This article was made possible by the kind support of the Intellectual Property Rights and Innovation in Africa (AfrIPI) project, to raise awareness about IP rights among SMEs in Africa AfrIPI aims to boost intra-African trade and attract African-European investments. Focused on creating, protecting, and enforcing Intellectual Property Rights across Africa, it aligns with global standards and supports the African Continental Free Trade Area (AfCFTA) and the African Union's Agenda 2063.

For more information visit: https://afripi.org/en

About the author: Robin Dopoe is an Intellectual Property Ambassador of the Liberia Intellectual Property Office.