British SMEs on the warpath ...

The IPKat has just received a "Dear Interest" email from John Mitchell of the SME Innovation Alliance ("SMEIA"). Putting aside his dislike of emails so addressed -- he is a Kat, not an Interest and even his heartless bank hasn't yet begun writing to him as "Dear Debt" -- he thought he'd take a look at it and share it with you.

Right: an SMEIA advance guard prepares to storm the UK IPO's Newport outpost

The email contains a Press Release dated Tuesday, which reads as follows:
"On the 28th September 2009 a national meeting of SME Innovative companies
decided to form a representative body to be known, at least initially, as the SME Innovation Alliance ("SMEIA"). Government has said that it has no such representation [but there certainly is a need for a representative body of this nature, if only to stop government experts, academics, business gurus etc claiming, on their behalf, that they know what's best for them]. The key points that SMEIA will focus on are as follows:-

1. To produce a series of reports on the problems actually facing innovative SMEs, the first of which is already produced and entitled "The Economic Failure of the Patent System" (available on request). [That's quick! The Kat would love to see it, if only to judge the criteria by which the patent system, of which he is quite fond, is deemed to have failed]

Current lobbying is something that aids corporates and skews Government policy unfairly [Says the Kat, that's the whole point of lobbying. Merpel wonders, can you skew government policy fairly ...?]. A lot of change is necessary to achieve even a reasonable balance so SMEIA hopes that these reports are given proper consideration ['Reasonable balance' is an interesting concept because it depends on the players. Take the patent system: is the 'reasonable balance' to be struck just between big corporates and SMEs, or between both of them and 'competitors', or between all the foregoing and 'consumers', or what?].

2. To tackle the serious misunderstanding in Government that innovation is somehow linked to UK Universities [Three cheers! At last someone has the guts to say it. There is a link of sorts, but it's quite different from the link between innovation and both big and SME industrial sectors]. The huge sums that irrationally continue to be spent [Hmm. It's not actually irrational, but the premises upon which the spending is based are hugely dabatable and, like any article of faith, difficult to question] would be of far better value if put into SME innovation along the lines of the US Small Business Innovation Research (SBIR) programme US which funds 100% of qualifying project R&D costs [If SMEIA achieves this alone, it will have the Kats' undying admiration]. The UK Small Business Research Initiative, which attempts to mirror the US model, is unfunded by either the Treasury or BIS. At least £100m needs to be committed to this scheme over the next 12 months.

3. To campaign for fair taxation rates, e.g. the "small companies rate" currently applies to ALL businesses according to profit - not to size - thus encouraging massive corporate avoidance schemes. For a profit exceeding £300K the full rate is applied to ALL the profit, hitting many SMEs at often the wrong time after perhaps a one-off event [Indeed. The IPKat believes that gentle taxation in the early years, plus easy credit and as little red tape as possible, will do more to foster viable innovation in the SME sector than any amount of tweaking the patent system or fast-tracked trade marks].

To campaign for a competitive royalty/licensing rate that our competitors enjoy including international corporates with large incomes here but who move their royalty income elsewhere via complex accounting methods [A little clarification is needed here: presumably this refers to taxation of royalties].

4. The patent system could hardly be worse for UK SMEs [Oh yes it could! Let's go back to pre-grant oppositions ...]. There are no penalties for patent infringement in the UK [Oh, no, not the "barking mad" criminal sanctions debate again: click here for a short post and 30 comments] and that unusual "system" [er, it's not so unusual, is it? It looks a bit like the norm ..] alone breaches the TRIPS agreement as the UK HAS to have a system that discourages infringement [Has the Kat's copy of TRIPs got a page missing?]. The UK court "security of costs" feature involving an SME v a more wealthy opponent also breaches TRIPS as it prevents justice in ALL cases [Hold on, does it not provide a measure of protection to any SME being sued for patent infringement by a foreign company? And aren't a very large proportion of patents in the UK held by foreign companies, Merpel wonders]. While business wants a more robust examination process with the UKIPO taking at least some responsibility for their decisions, which SMEIA knows would cost more per patent application, the UKIPO in the past few days instead announced a "faster, cheaper patent system" [Ah, but people have called for a "faster, cheaper patent system" to aid SMEs which, they maintain, can't afford and don't like the "slower, more expensive" one].

There are several solutions available to rapidly solve some of the UK barriers that could be implemented quickly [We look forward to hearing them] but the UKIPO steadfastly plots a different course [This is a bit unfair on the UKIPO, which doesn't exactly have carte blanche to pick its own course and stick to it].

5. Whitehall tends to support those who do not entirely support the UK economy (e.g. corporate tax avoiders and their advisors, patent infringers, universities on innovation, bankers [and Members of Parliament, adds Merpel]) while declining to support UK SMEs that, for example, want the same support as offered to foreign corporate inward investors, eg a manufacturing facility. If the policy is not to pick SME winners, that rule should apply to organisations of all sizes [The Kat agrees that any support that is offered to non-UK investors should also be offered to the domestic variety. After all, if something's not an attractive investment for foreigners, it might just not be an attractive investment for the locals either -- and we Europeans are in a single market].

6. SMEIA is aware that Government tends to ask those whose interests lie in maintaining complexity, eg accountants about simplifying taxation, the UKIPO about patenting, Universities about Innovation, lawyers and judges about legal matters (eg patent enforcement) [This is childish rubbish and is quite unworthy of any organisation seeking to represent SMEs. In over 35 years in IP, this member of the IPKat team has yet to meet anyone in the professions or in government who wants to maintain complexity as a matter of self-interest]. SMEIA will look at how it might address this fundamental Whitehall problem to actually achieve a reduction in "red tape".

7. Despite a wealth of rhetoric on supporting innovation, the nearest Government seems to come to doing this in recent times has been to support "innovative" bankers [Really? So much for the enthusiastic efforts to implement recommendations of the Gowers Review, for support for the patent prosecution highway and for the government's deification of Wallace and Gromit]. Frankly that is not what anyone expects the Government to mean and there remains a serious funding problem for SME Innovation that SMEIA will aim at addressing through specific, detailed and costed policy proposals [which the IPKat looks forward to reading].

We would be appreciative of any publicity that you could offer to SMEIA to ensure that as many UK SMEs join and are thus well represented [Well, a Thursday posting on this weblog will attract the attention of 3,650 email subscribers, 2,500+ RSS feeders and another 2,400+ casual visitors within 24 hours]. For details of membership please email in the first instance to

The IPKat would have loved to give SMEIA his unqualified support, but can't do so till the silly bits are eradicated. SMEs in the UK have had, and continue to have, a horribly rough time -- but that's no excuse for some of the assertions made here.
British SMEs on the warpath ... British SMEs on the warpath ... Reviewed by Jeremy on Thursday, October 08, 2009 Rating: 5


  1. Item 6 is, I agree, childish rubbish. But I think there is a point to be made about professionals tending to support the status quo (but not for self-interest reasons) rather than initiating radical change.

    The document gives the impression of having been drafted by a non-lawyer and, yes, it does lapse into silly rhetoric. It has not been made watertight in the way that one would expect an IP lawyer to draft a document. So what? Perhaps they couldn't afford an IP lawyer to help them with the drafting...

    I agree that much of the document is worthy of support.

  2. Anybody care to comment on the differences between:

    1. The size of the innovative manufacturing SME sector, in England and Germany

    2. English (adversarial) common law and German civil/Roman law

    3. patent (including Gebrauchsmuster) litigation in England and Germany.

    4. how long it would take an alert patent-owning SME, with a limited budget, to get an injunction to restrain infringement.

    To help you, I remind you of the press reports of the booth set up at the recent Hannover Messe (Trade Exhibition), set up by the local District Court, for granting such injunctions.

    That said, SME's need to get real. They want to take market share from a big boy who sees the market as his right. The big fella's going to fight with all means at his disposal, regardless whether the intruder is also a multi-national conglomerate or an SME. Life is inevitably hard for the new boy. Ask James Dyson.

  3. I agree wholeheartedly with the Kat's comments excepting perhaps the one regarding the link between universities and innovation, where there is, I feel, a link. It may be a different link than the link between businesses and innovation, but it is no less important for all that.

    Additionally, I wonder how some of the measures implied in this statement would stand up to the rules on State aid?

    Finally, I note that the statement does not list the number of SMEs involved, or name any of them. Such statements usually love to boast of their degree of representation, and the importance of their members, so one cannot help but assume that this organisation doesn't have much to boast about.

  4. To campaign for a competitive royalty/licensing rate that our competitors enjoy including international corporates with large incomes here but who move their royalty income elsewhere via complex accounting methods [A little clarification is needed here: presumably this refers to taxation of royalties].
    Presumably, this aspect of the campaign is inspired from jurisdictions wherein patent-derived revenues are partially exonerated from taxation. Such as Ireland. I can't argue that such a measure would do wonders for levels of activity in the profession, but whether this would actually foster innovation (in the simplest sense of the term) is highly debatable, and quite an assumption to make.


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