'MSMEs' IPR Exchange' being sponsored by Foreign ...

F
FISME
FEDERATION OF INDIAN MICRO AND SMALL & MEDIUM ENTERPRISES
B – 4 / 1 6 1, S A F D A R J U N G E N C L AV E, N E W D E L H I – 1 1 0 0 2 9
Tel: +91-11- 46023157, 46018592, 26187948, 26712064 Fax:+91-11-26109470
e-mail:info@fisme.org.in
Web: www.fisme.org.in
Call for Papers
under Project ‘MSMEs’ IPR Exchange’ being sponsored by Foreign
Commonwealth Office (UK ) through British High Commission, New Delhi
Background paper
“Identification and Valuation of IPRs in MSMEs”
Introduction
1. Small and Medium Enterprises (SMEs) are the back bone of economies of all
major nations. They constitute bulk of business enterprises in most countries
and contribute significantly to industrial production, exports and employment.
2. The 2006-07 census of Micro, Small and Medium Enterprises (MSMEs) in
India estimated that there were more than 26 Million MSMEs in the country.
At 2012, the number would have surpassed 30 Mn. MSMEs are termed as the
backbone of Indian economy for they contribute 45% towards Indian Industrial
production, account for over 40% of Exports and employ largest number of
people after agriculture. Since 1991, they have been consistently outperforming
the average industrial growth by at least 200 basis points.
3. The MSME sector is a highly heterogeneous sector. They produce over 8000
types of products ranging from simple processed food (like papad, pickles) to
processing of ‘Leh barries’ using patented technologies of DRDO; from serving
neighbourhood markets to high-technology-intensive global markets such as
of Defence and Aerospace and from employing very basic make-do manual
processes to cutting edge technologies including robotized processes. They
are almost evenly distributed in rural and urban areas. It is a highly inclusive
sector: half of MSMEs are owned by SC/ST and backward communities and
similarly half of them employed therein also come from disadvantaged
background. Around 10% of them are owned by women.
4. However, the defining characteristic of MSMEs is ‘informality’: Close to 96%
of them are unregistered units; over 97% of them are proprietary or
partnership firms and an average unit employs less than 2 people! Also only
1

F
FISME
FEDERATION OF INDIAN MICRO AND SMALL & MEDIUM ENTERPRISES
B – 4 / 1 6 1, S A F D A R J U N G E N C L AV E, N E W D E L H I – 1 1 0 0 2 9
Tel: +91-11- 46023157, 46018592, 26187948, 26712064 Fax:+91-11-26109470
e-mail:info@fisme.org.in
Web: www.fisme.org.in
around 6% of them have access to institutional funds and rest of them work
with their own capital.
IPRs and SMEs
5. Intellectual capital and intangible assets now drive the world economy. In
1970, intangible assets represented less than 20% of the market value of the
majority of U.S. public corporations. Now they represent 90%. Recent IPO of
Facebook- an internet based social media website, has created history by
touching the market capitalization of over US$ 100 Bn. In less than 10 years it
has become bigger than such iconic companies as Siemens, HP, Boeing,
PepsiCo, McDonald, Hyundai, BMW, Toshiba etc. Over 90% of Facebook’s
assets are intangibles locked in Patents, Copyrights, Trademarks... !
6. While the awareness about IPRs and their value rose rapidly among the
corporate sector especially in technology intensive sectors in India such as IT
& BT, Pharma, Automobile, Electronics, Engineering, Electricals, Chemicals
and Plastics etc, the situations did not change much among MSMEs.
7. At the same time, this is also true that in spite of handicaps of infrastructure
(lack of adequate industrial space, electricity etc) and limited capital to deploy
expensive technologies, they do have to face global competition both on terms
of quality and price. Ingenuity and innovation become the driving force
among large number of MSMEs to survive. In the process they do create
Intellectual Property (IP) of various kinds. Most of them however remain
unaware of this ‘property’ which lay scattered or hidden among MSMEs in
products, processes, practices or in the minds of entrepreneurs. Their
innovative and creative capacity is not therefore fully exploited as many SMEs
are not aware of the intellectual property system or the protection it can
provide for their inventions, brands, and designs.
8. Realizing overwhelming evidence of positive correlation between innovation,
IPRs and competitiveness among SMEs, a comprehensive IPR support
programme was envisaged under the aegis of the National Manufacturing
Competitiveness Commission (Government of India). With support of the
programme, FISME set-up three IP Facilitation Centers (IPFCs) in 2011-12 at
New Delhi, Bangalore and Hyderabad to spread awareness among MSMEs
and hand-hold them to protect their IPs. The FISME IPFCs are also
2

F
FISME
FEDERATION OF INDIAN MICRO AND SMALL & MEDIUM ENTERPRISES
B – 4 / 1 6 1, S A F D A R J U N G E N C L AV E, N E W D E L H I – 1 1 0 0 2 9
Tel: +91-11- 46023157, 46018592, 26187948, 26712064 Fax:+91-11-26109470
e-mail:info@fisme.org.in
Web: www.fisme.org.in
developing a cadre of ‘IP Auditors’ who are to help unravel the IPs - the hidden
treasures, in MSMEs.
Need for business case of IPR and criticality of ‘valuation’
9. There is a growing consensus among the SME support agencies worldwide
today that the emphasis of government support programmes on IPR Rights
(especially Patents) in SME context has been rather misplaced. A more
successful, demand driven and sustainable approach places greater emphasis
on the ‘business case’ of IPR for SMEs.
10.A business case- evaluating a business decision from the perspective of
profitability, demands that for the protected ‘Intellectual Property’ to be bought,
sold, assigned or transferred like any other physical property, its ‘value’ ought
to be ascertained. There can be no business case without valuation.
11. Valuation of IPs and related Rights, however, is not a new concept. There is
plenty of literature1 produced in the West on the subject. IPRs are
increasingly taken into account while valuing companies. But the subject
remains a ‘work in progress’. Still, there are many white-spots in our
understanding of valuation of IPRs particularly related to MSMEs in developing
countries such as India where the bulk of MSMEs operate in an unorganized
or informal sector.
Research competition: Effective Valuation Methodologies for IPRs in Indian
MSMEs
12.As discussed before, while the traditional support programmes for IPRs focus
protection, MSMEs showed little enthusiasm as the business case- why
should they invest time and money in acquiring and maintaining IPRs- has
remained weak. No wonder, in India the current levels of IPRs among SMEs
are very low. Of the total number of patents filed in 2010, only 17 per cent
account for Indian applications and share of MSMEs were around 2 per cent,
according to the Ministry of Micro, Small and Medium Enterprises (MSMEs).
1 World Intellectual Property Organization (WIPO) (2003), “Valuation of Intellectual Property: What, Why and
How” & VALUATION AND EXPLOITATION OF INTELLECTUAL PROPERTY STI WORKING PAPER
2006/5 Statistical Analysis of Science, Technology and Industry Shigeki Kamiyama, Jerry Sheehan, Catalina
Martinez
3

F
FISME
FEDERATION OF INDIAN MICRO AND SMALL & MEDIUM ENTERPRISES
B – 4 / 1 6 1, S A F D A R J U N G E N C L AV E, N E W D E L H I – 1 1 0 0 2 9
Tel: +91-11- 46023157, 46018592, 26187948, 26712064 Fax:+91-11-26109470
e-mail:info@fisme.org.in
Web: www.fisme.org.in
13.In 2011, the Prosperity Fund (Foreign and Commonwealth Office, Govt. of UK)
accepted to support FISME’s initiative to develop in ‘IP Exchange’ in India.
While it is the buyers and sellers who ultimately determine value of
commercial exchange, one of the most important features of any exchangeplatform
is standard mechanism to determine a base value of an asset. This
element has so far remained weak and hence a need for the proposed study.
14.The study therefore attempts to explore the answers to the following five broad
questions:
i. Is case of MSMEs different from large/ corporate sector or R&D
institutions so far as creation, protection and valuation of IP is
concerned? If yes, how?
ii. How can the intangible assets and IPs could be classified in
manufacturing or service units, especially MSMEs?
iii.
iv.
What are prevalent IP protection methodologies globally? Which ones
are more suited for MSMEs?
What are the prevalent IP valuation methods both Quantitative and
Qualitative globally? Which ones are more suited for MSMEs?
v. Keeping all the above mentioned factors in view, what could be the best
‘Model’ for valuation of MSME IPRs in India?
Recognition and rewards
15. Research Excellence Award of Rs. 1,00,000/- will be given to the best Research
Paper and consolation prizes for all shortlisted entries. The selection will be done by
a jury comprising of IPR experts, officials from British High Commission, Govt. of
India and industry.
16. Paper to be published by FISME
Submission Procedure
17.Stage-I: Submission of Abstracts: Authors are requested to submit an abstract
of 400-500 words in English (in MS -Word, Font-Arial, Size- 12, 1.5 line
spacing) detailing their understanding of problem and methodology to be used
and along with their bio data. The abstract should reach latest by 16 th June
2012. Also refer the Terms and Conditions Para-18.
4

F
FISME
FEDERATION OF INDIAN MICRO AND SMALL & MEDIUM ENTERPRISES
B – 4 / 1 6 1, S A F D A R J U N G E N C L AV E, N E W D E L H I – 1 1 0 0 2 9
Tel: +91-11- 46023157, 46018592, 26187948, 26712064 Fax:+91-11-26109470
e-mail:info@fisme.org.in
Web: www.fisme.org.in
18.Stage-II: Submission of Final Research Paper: Authors of shortlisted abstracts
would be called for submission of final papers. The final paper should also be
in English (in MS -Word, 5000 to 7000 words, Font-Arial, Size- 12, 1.5 line
spacing) and should be sent in by 31 st July 2012. The abstract of the final
paper, usually not exceeding 200 words, should accompany the final paper
and indicate the scope and method used in the paper, highlighting the
principal findings and conclusions.
19.Important Terms and Conditions:
o
The abstract as well as the final manuscript should have a covering
letter under the signature of the corresponding author. It is mandatory
on the part of the author(s) to furnish the following declaration:
This to certify that the reported work in the paper entitled
“…………………….” submitted is an original one and has not been
submitted for publication elsewhere. I/we further certify that proper
citations to the previously reported work have been given and no
data/tables/figures have been quoted verbatim from other publications
without giving due acknowledgement and without the permission of the
author(s). The consent of all the authors of this paper has been
obtained for submitting the paper. I/We agree that all the materials once
provided electronically or as a hard copy will be the property of FISME
and all intellectual property rights related to the study and its
subsequent thereof in any form will rest with FISME” (The declaration
should be duly signed)
o Submission: The manuscript can be submitted through e-mail with
attachment through the following email ID: ipfc@fisme.org.in
o
Hard copy can be sent to:
The National Coordinator- IPFCs
FISME
B-4/161, Safdarjung Enclave
New Delhi -110029.
Tel: 011-26712064, 46023157
5