The Australian Government’s Department of Industry, Innovation and Science (DIIS) has launched a consultation ‘to better understand the needs of innovative Small and Medium Enterprises (SMEs) in managing and exploiting their intellectual capital’. If my experience is anything to go by, the first challenge will be finding Australian SMEs with an understanding of what intellectual capital is, let alone how to manage and exploit it in any systematic way. Fortunately, DIIS has provided its own definition of the term: ‘by intellectual capital we mean things like ideas, know-how, branding, data, trade secrets and copyright and also registered intellectual property (IP) rights such as patents, trade marks, designs and plant breeder’s rights.’While potentially patentable inventions may form only a small part of a company’s intellectual capital – and there are, of course, many businesses that are not at all involved in the generation of new technology – patent filings are nonetheless widely seen as one indication of innovative activity within the national economy. Additionally, applying for IP protection is a clear signal that a business has some awareness of its intellectual capital, even if only informally. In the case of a patent filing, someone has at least identified the existence of an invention, and made a conscious decision that it is of sufficient value to warrant protection. I recently wrote about Australia’s poor performance in patent filings, which I attribute to a generally negative mind-set, arising from a combination of ignorance, aversion, and lack of appreciation of the value of patents (and other forms of IP). Relatively low rates of patent filing might therefore be a reflection of an absence of awareness, processes, and strategies for actively managing and exploiting intellectual capital within the vast majority of Australian businesses.
According to a 2016 report published by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), there were over 2.1 million businesses operating in Australia in 2015. Just 0.2% of these (around 3,700) were classified as large businesses, employing over 200 people. A further 2.4% (just under 51,000) were medium-sized enterprises, employing between 20 and 199 people. The majority of businesses smaller than this – 60.6%, or just over two million – are non-employing sole traders (like me). As I demonstrate in this article, however, even on the most generous interpretation of the available data, less than 0.3% of SMEs and sole traders filed any kind of Australian patent application in 2015. On average, SMEs filed around 1.5 applications each (if they filed at all), while the typical individual applicant filed only a single application. By comparison, just over 5% of large firms filed patent applications in Australia, and on average these firms filed over five applications each.
I fear, therefore, that DIIS will not receive too many responses to its consultation, and those businesses that do respond are unlikely to represent a broad cross-section of Australian SMEs. Businesses for which intellectual capital is barely on the radar are unlikely to become aware of the consultation, or take the time to respond to questions set out in the Submission Guide, such as: ‘What does “intellectual capital” mean to you?’; ‘What role does it play in your business strategy?’; ‘How does your business exploit its intellectual capital?’; ‘Can you tell us about any successes or failures?’; ‘Do you seek advice on how to manage and exploit your intellectual capital?’; and ‘If not, why not?’.
For those SMEs, and other stakeholders, with an interest in the fate of Australia’s innovation patent system, this consultation provides a further opportunity to make their views known. When provisions to abolish the innovation patent were recently dropped from legislation introduced to Parliament, IP Australia announced that the Government had ‘decided to undertake further industry consultation targeted at better understanding the needs of innovative SMEs before the phase out of the innovation patent occurs’. The Submission Guide does not expressly mention the innovation patent, however the consultation is explicitly linked to the Productivity Commission’s inquiry into Australia’s IP arrangements, noting that the Government is ‘committed to continue to further explore the overall needs of Australian SMEs in relation to exploiting their intellectual capital, and securing, utilising and enforcing their IP rights.’ Filing numbers presented in this article show that, for whatever reasons, SMEs have made increasing use of the innovation patent system over time.
While the consultation is primarily directed to SMEs, the Submission Guide also appears to envisage that submissions may be received from ‘professional organisations providing service or advice to SMEs.’
