New Report Highlights Intellectual Property's Value to Small- and Medium-Sized Enterprises

Feb 3, 2010

Last week, United States Trade Representative (USTR) Ron Kirk announced the designation of an Assistant USTR for Small Business, Market Access, and Industrial Competitiveness. The newly created position will help address the challenges facing small-and medium-sized enterprises (SMEs) that sell their goods abroad and promote the global export opportunities these businesses need to create jobs here at home. Why is this new position important?  Because these businesses employ just over half of all private sector employees and have generated 64 percent of net new jobs over the past 15 years. As a whole from 1998-2004, small businesses produced half of private nonfarm GDP.

This announcement also recognizes the importance of SME's and their dependence on trade, and its release couldn't be more timely. A recent report from the United States International Trade Commission (USITC) entitled Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports maintains that U.S. small and medium-sized enterprises accounted for approximately 30 percent of known U.S. merchandise exports between 1997 and 2007. The top merchandise export categories for SMEs in 2007 were electrical products, machinery, and chemicals, with wood products and apparel and accessories as the sectors with the highest concentrations of SME exports.

A major point of this study is the importance of protecting intellectual property—those inventions and creations of the mind that are protected by patents, copyrights, and/or trademarks—in our export markets.

The study found that, "SMEs are an important source of innovative processes, products, and services. One way to measure a firm's propensity to innovate is through patent filings. A recent study released by U.S. Small Business Administration Office of Advocacy demonstrates that small firms produce significantly more patents per employee than large firms and that their patents are more technologically important, according to patent impact metrics." The SBA study also found that small and medium sized businesses tend to be more profit-and cost-efficient, producing more innovations for a specific amount of R&D. These companies also hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers). In short, their business processes can be more efficient in the innovative process. As a result, protection of their IP is absolutely essential to their livelihood, which in turn creates jobs and helps grow our economy.

Policies that help benefit small and medium-sized firms are an important component of any effort to reinvigorate our economy. The U.S. Chamber's Global IP Center (GIPC) has profiled over 100 American companies across the country that have a compelling story to tell about the importance of IP and innovation to their business. These "Profiles of IP" champion the American spirit of innovation and highlight the successes of SMEs that rely on strong intellectual property rights. These companies come from every industry highlighting the importance of patents, copyrights, and trademarks in driving economic growth and job creation. The GIPC's goal in this project is to educate the public, lawmakers, and government officials about the importance to our economy of protecting IP and enforcing IP rights for small and big businesses alike.

Earlier this month, in the U.S. Chamber's annual State of American Business address, Chamber President Tom Donohue spoke of the "ambitious goal of creating at least 20 million new jobs over the next 10 years." Donohue explicitly stressed the importance of seizing the potential of small and medium-sized businesses to export and bringing thousands of smaller firms into the international marketplace by assisting them with expertise, promotion, and financing. Most importantly, we cannot assure the expansion of SMEs in the global marketplace without guaranteeing the vigorous protection of IP for those businesses wishing to capitalize on their export potential and create jobs in the United States.

As SMEs are important to our economy, so too are IP rights important to SMEs. The two are directly correlated. So if 2010 is going to be the year of job creation and economic recovery, stronger IP protections must be part of this equation.

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