IP/C/W/622
27 January 2017
(17-0561)
Page: 1/3
Council for Trade-Related Aspects of
Intellectual Property Rights
Original: English
INTELLECTUAL PROPERTY AND INNOVATION 2017: INCLUSIVE INNOVATION
AND MSMEs
COMMUNICATION FROM AUSTRALIA, THE EUROPEAN UNION, JAPAN, SWITZERLAND
AND THE UNITED STATES
The following communication, dated 23 January 2017, is circulated at the request of Australia,
the European Union, Japan, Switzerland and the United States.
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1. Intellectual property rights (IPRs) reside at a critical juncture with respect to achieving
essential priorities such as catalysing innovation and creativity, promoting economic growth and
development, creating and growing jobs, improving the quality and enjoyment of our lives, and
combatting the manifold challenges we face as individuals, as nations and as a global community.
2. Among this multitude of positive contributions, IPRs provide a critical conduit for inclusiveness
in local and global trade. In particular, IPRs help micro, small, and medium-sized enterprises
(MSMEs) to channel the potentially boundless contributions of a wide array of innovators and
creators in different economic sectors and from diverse communities. IPRs also enable MSMEs to
spur innovation and creativity, to structure partnerships, and to join global value chains.
3. MSMEs demonstrate the power and importance of inclusive innovation, which is the creation
and absorption of innovation for those entering into the development mainstream, particularly
those from low income economies. MSMEs play an essential role in diffusing economic growth and
innovation throughout our societies, including with respect to the percentage of the total workforce
they employ, their net job growth, their contributions to innovation and creativity, and their
reliance on IPR protection. In fact, approximately 95% of business around the world are SME,
which account for 60-70% of private sector employment, rising to significantly higher levels in
numerous countries and regions.1
4. MSME-driven inclusive innovation has a significant social as well as economic impact in both
developed and developing economies. According to a joint World Trade Organization and
International Trade Centre report, "[i]n developing economies, SMEs are strongly linked to
employment, poverty reduction, women's economic empowerment, and income distribution. SMEs
are integral to private sector development, particularly in LDCs, and an essential component of
inclusive, sustainable development."2 With IPRs, innovative SMEs play a critical role in including
our populations, and the diverse communities therein, not only into our respective national
economies, but integrating them into global trade and export markets generally.
5. IP must be considered as a relevant aspect for innovative micro-sized enterprises also. The
absence of reliable IP protection can reduce or eliminate incentives to improve product-quality and
to pursue business expansion. In their study about the informal economy, de Beer, Fu & Wunsch1
"SME Competitiveness and Aid for Trade: Connecting Developing Country SMEs to Global Value
Chains"; World Trade Organization and International Trade Centre; Document Number DMD-14-264-E; 2014;
page viii.
2
Ibid; pages viii, 1, and 7.
IP/C/W/622
-2Vincent (2013: 39) note that "entrepreneurs are unable to develop their businesses beyond a
certain stage as they lack exclusive rights to or control over their innovations. Therefore, they
have fewer incentives to invest in machines or human capital (e.g., training new apprentices), and
are unable to reach certain economies of scale."3
6. The TRIPS Council is positioned at the cross-roads of inclusive innovation where trade and IPR
protection converge, and is well-placed to serve as a laboratory of ideas regarding this significant
topic. Over the course of 2017, TRIPS Council delegations could explore how IPRs can drive more
inclusive innovation, including through specific laws, practices and other initiatives that promote
MSME participation in local and global trade in particular. During the three TRIPS Council meetings
to be held in the coming year, delegations could exchange experiences regarding three aspects of
the life cycle of innovation – collaboration, growth, and trade – with a focus on MSME-related
policies and practices.
7. This three-part exchange would consist of the following topics, which each offer the opportunity
to demonstrate how IPRs can promote inclusive innovation through MSMEs.
IP & Inclusive Innovation: MSME Collaboration (February/March 2017): Collaboration and
cross-border partnerships are increasingly critical for innovative MSMEs, particularly with respect
to R&D. IPR protection can provide an essential means to structure partnerships and other
cooperative undertakings and to drive inclusive innovation. Such collaboration can be between
MSMEs and a variety of entities within the innovation ecosystem including universities, start-ups,
spin offs, other MSMEs, larger companies, and facilitated by government entities, including
intellectual property agencies and public R&D programs. Over the last years – and supported by
the effects of globalization and digitalization – there has been a trend towards a world of globally
distributed knowledge. Hence, it is beneficial for firms to not solely rely on their own, firm-specific
research. Accordingly, businesses are eager to find ways to increasingly use external knowledge
and integrate it in their research activities and broader business strategies, including through
researcher-MSME partnerships. As a result, stronger cooperation in the innovation process and
incentives to achieve this have emerged. Consequently, a coherent IP strategy becomes crucial.
Members could share experiences on how MSMEs have successfully collaborated with other entities
to spur inclusive innovation and how IPRs have fostered this collaboration.
IP & Inclusive Innovation: MSME Growth (June 2017): Given the vital role MSMEs play in
promoting innovation and development, encouraging their growth is a priority for all economies,
whether developed, developing or least developed. There are a variety of policy and other tools
used by governments to encourage entrepreneurs to start a business and to engage in innovative
activities, including IP laws and enforcement procedures, mechanisms and programmes,4 vibrant
incubator and accelerator networks, innovation clusters, information and awareness-raising
schemes and access to personalized support services5 and low cost finance, such as the use of
intangible assets as collateral for lending institutions (see United Nations Commission on
International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on Secured Transactions,
2016). Several questions emerge including: how can MSME growth assist in addressing societal
challenges and improving people's lives?; and what is the role for IP and inclusive innovation in
this context?; for example, what is the role of IP in promoting development and diffusion of
agricultural technology for rural development? Innovative technology and business models
supporting the technology's diffusion are significant factors which help small and medium-sized
agro-enterprises grow. In an ever-changing environment farmers and agro-enterprises need to
constantly adapt and make use of new opportunities. IP is often critical both to the development of
new, more effective and sustainable agricultural technology and to ensuring its diffusion and the
transfer of related knowledge to the user.
3
De Beer, J., Fu, K., & Wunsch-Vincent, S. The informal economy, innovation and intellectual property Concepts, metrics and policy considerations. WIPO Economics and Statistics Series, Economic Research
Working Paper, No. 10(2013), p.39.
4
E.g. specialization of courts, simplified enforcement procedures, arbitration and mediation schemes,
insurance schemes.
5
Personalised support services can assist individual SMEs in their specific needs. Support services may
range from providing answers to questions on registration procedures and best available IP options, to auditing
the intangible assets of a business with view to developing and following-up on an IP strategy.
IP/C/W/622
-3IP & Inclusive Innovation: MSME Trade (October/November 2017): An essential feature of
inclusive innovation is that it facilitates the integration of MSMEs into international trade. Many
firms and countries have developed specialized production methods and/or products that led to an
implicit unique selling proposition (USP). However, USPs for specific technology, products or
production methods can only be maintained and exploited if the underlying IP is properly and
credibly protected. IPRs therefore provide the legal means to use comparative advantages to their
full capacity: IPRs create value added and export opportunities to the local economy, international
licensing generates new revenue streams. This can also mean a shift in export composition from
low-productivity manufacturing to products with higher value added. Members could share
successful strategies of how MSMEs can benefit from their product's underlying IP, thus exploiting
their comparative advantages.
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