Intellectual property

How Intellectual Property Affects MSMEs

Every business that is privately held (owned or run by individuals other than the government) is either a large enterprise, a Startup or falls within the MSME sector. The MSME sector is believed to be the growth engine of any economy, contributing to its development, job creation, business opportunities, etcetera. In Nigeria, for instance, a survey carried out by PwC in 2020 reveals that MSMEs account for up to 99.8% of businesses in the country, 84% of employment and 49.7% of the country’s GDP. The survey also reports that of the 41.5million MSMEs operating in the country as reported by a 2018 survey conducted by the National Bureau of Statistics and the SME Development Agency of Nigeria (SMEDAN), 41.4million are micro businesses while 73 thousand make up SMEs.

As amazing as these figures tend to be, it is worthwhile to say that most MSMEs in the country are yet to commercialise their products and services in a way that results in a financially-rewarding outputs. This they do by treating their intellectual property rights with indifference. Whether MSMEs owners and stakeholders can explore intellectual property rights to increase their value is the aim of this content.

MSME Explained
“MSMEs” is an acronym for Micro, Small and Medium-sized Enterprises. MSMEs are rampant, omnipresent and make up a large portion of the wholesale and retail trade, tech and non-tech, traditional and contemporary. They are sole proprietorships, partnerships, private limited liability companies and co-operatives.

The difference between micro, small and medium enterprises is often found in employee/staff strength, total assets and annual turnover. Micro-sized enterprises have less than 11 (1-10) employees, assets valued at less than 6million naira (N1 to N5million) and record a yearly turnover (sales/returns/gross income) of not more than 20million naira. Progressively, small-sized enterprises comprise between 11 and 50 employees, have assets valued between 6million and 50million naira and record a turnover of not more than 100million naira yearly. Medium-sized enterprises, then, comprise a staff strength ranging from 51 to 200 employees, have assets valued from 101million to 500 million naira with annual turnover falling between 201 million and 500million in the Nigeria currency

Petty traders, mechanics, vulcanisers, hair stylists, computer repairers, most fashion designers and allied businesses are engaged in micro enterprise and are registered as business names. On the other hand are small and medium-sized enterprises which are mostly companies and co-operatives.

The IP Thrust
IP means Intellectual Property, and it is that creative work of one’s mind. Intellectual property law is the area of law that protects expressions of one’s creativity and other intangible properties. In Nigeria, IP is categorized into copyright, trademark, patent, designs and trade secret. Intellectual property law affords the opportunity to protect works, inventions and creativity, names, symbols and brands. The aim is to encourage uniqueness and creativity, wade off unfair competition and ensure the owner of an intellectual property right is adequately compensated when such right is infringed. Other than copyright and trade secret, other forms of intellectual property require registration for protection and conferment of right.

A fashion business/company, for instance, may opt to protect the name of its fashion line, symbol and logo (as trademark), the unique lines and sketches of its apparel (as copyright) and the entire visual appearance of the apparel (as industrial design). Once registered, no other person can use the name for fashion, or mimic the same lines and stiches or come up with an outfit with close resemblance without the permission of the fashion business. If they do, the fashion business will be heavily compensated and the infringer will be restrained from ever using the copyright, trademark or design.

A business involved in the production or manufacturing of anything (inventions, drugs, wine, toiletries, minerals, converting something from one state of matter to another, etc) can register the process involved in such inventions as patent excluding every other person from using the same process from inventing something similar without permission. The name of the invention can also be protected with trademark, and its appearance as industrial design.

The value of a business is actually the value of its trademark. Large corporations have been able to reach stellar heights by maximising their trademark rights. In 2020, Amazon’s brand value reached 220.8 billion dollars because of the exclusive rights that its trademark brings. Fashion powerhouses like Louis Vuitton, Chanel, Adidas and Nike have been able to stay distinguished owing to their trademarks.

With trademark also comes franchising. Franchising occurs where a business (“the franchisor”) licenses its intellectual property rights and business model to another (“the franchisee”) at an agreed fee (mainly based on the turnover of the franchisee) over a period of time, with the understanding to comply with certain standards, rules and procedures. In franchise, the franchisee company begins and runs its business at an agreed location, leveraging on the trade name and goodwill of the franchisor to expand. Fast-food businesses like Mr. Bigg’s, Chicken Republic, Tantalizer, KFC, Cold Stone, Crunchies have been big gainers from franchising amidst the fact that the franchising sector in Nigeria is still in its infancy. Franchise is important as it helps in the expansion of a business and reduces cost for the franchisor. Businesses in the transport and logistics sectors, among others, could also benefit from franchising.

In addition to trademark, copyright and industrial design, a business which thrives based on a special formula, information or secret can ensure the confidentiality and non-permissive use of the secret formula. This is called a trade secret and is made possible by signing and executing a non-disclosure agreement (NDA) with employees, outsource personnel (contractors) or any other third party who may come in contact with the proprietary information. The Coca-Cola recipe and Google search Algorithm are trade secrets that the companies have protected over time, and there is no doubt that such protection has seen them maintain competitive edge in the marketplace over the years. The 2018 case involving Waymo and Uber stresses the importance of a trade secret to a growing business enterprise.

Even more, copyright is useful for businesses in the creative sphere such as software companies, writing and publishing house, art businesses, music recording and performance labels, every media business, etc. MSMEs can also leverage on licensing agreements to increase their value. This happens when a third party seeks their permission to use their copyright, trademark, patent or industrial design.

With the rampancy and the undeniable importance of MSMEs in Nigeria, the incorporation of intellectual property into the business and corporate strategies of MSMEs would see to an increase in their value and turnover. Whatever industry an MSME finds itself (export, manufacturing, retailing, product delivery, service delivery, and all that), it can leverage its intellectual property rights to protect its goodwill, increase value, avoid exploitation and gain monetary compensation in the event of any non-consenting exploitation. This is also important for Nigeria if the country nurses the thoughts of being mentioned in the same economic pedestal as China and the United States in the coming years.

Ujong Okpa and Ebere Ndubueze are intellectual property Attorneys and Enthusiasts who partly work at IP&Tech, a virtual organisation that creates awareness and promotes trends in intellectual property (IP) and technology. The organization, through its members, also maintains, registers and protects the IP rights of individuals, brands and businesses. They can be contacted via