1. Intellectual Property and Incremental Innovation in OECD Countries An Overview 14 September Annual WIPO Forum on IP and SMEs in OECD countries Geneva, Switzerland
Christoph Spennemann, Legal Expert, IP Team
Division on Investment and Enterprise
UNCTAD

2. Overview of Presentation
SMEs and incremental innovation
Incremental innovation & patent protection
One alternative: utility model protection
Trade secrets protection
Conclusions

3. SMEs and incremental innovation
Large SME presence in industries that depend on cumulative/incremental innovation
E.g. toy manufacturing; clock & watch making; optics; microtechnology; micromechanics
Lower standard of inventiveness than in high tech industry (e.g. biotech; ICTs)
Inventions easy to copy

4. Incremental innovation and patent protection (1)
Risk of free riding  need for protection
Patent system
Effective protection
Cost factor
Low degree of inventiveness  should the patent system be adapted?

5. Incremental innovation and patent protection (2)
Example US: lower standards of patentability since 1980s
Many small scale innovations become patentable
US Federal Trade Commission in 2003: balance too far in favor of exclusive rights; competition is needed for innovation
US Supreme Court in KSR/Teleflex (2007): tighter standard of non-obviousness

6. One alternative: utility model (UM) protection (1)
Objective: rapid & inexpensive protection of sub-patentable inventions
Common traits (no TRIPS standard)
Exclusive rights for inventor
Mostly registration instead of examination
Novelty & industrial application requirements apply
Based on « Utility Models and Innovation in Developing Countries », by Uma Suthersanen, UNCTAD-ICTSD Issue Paper No. 13, Geneva, 2006.

7. One alternative: UM protection (2)
National laws differ in important respects
Protected subject matter: technical solution to a problem (products & processes); or limitations to three-dimensional forms
Novelty standards vary (worldwide, national)
Inventive step requirement does not always apply; standards vary
Term of protection: 6 – 25 years

8. National experiences in UM protection (1)
Germany: continued high use of UMs; but R&D investment by SMEs decreasing since 1998 (as of 2006)
Japan: high use until 1980s; strong decrease
191,000 applications/year in 1980s
8,000 in 2003
Industry unhappy with modified UM regime
Registration instead of examination  legal uncertainty
Shorter terms of protection
Less focus on incremental innovation

9. A different approach: trade secrets (TS) protection (1)
Minimum standards in Article 39.2, TRIPS Agreement
Any information that is
Secret
Has commercial value due to its secrecy
Subject to reasonable efforts to keep it secret

10. TS protection (2)
Protection against misappropriation through unfair commercial means
But no protection against independent development or discovery through honest commercial means  no exclusive right
Reverse engineering possible, as opposed to patents and UMs  promotes follow-on innovation & competition

11. Conclusions SMEs depend on protection of small scale innovation
Patents often inappropriate (inventive step; cost; effect on competition)
Utility models appropriate alternative, but domestic laws need to correspond to industry needs
Trade secrets offer tool to balance protection and competition

12. Contact Christoph Spennemann Legal Expert Intellectual Property Team
Division on Investment and Enterprise (DIAE)
UNCTAD
Tel: ++41 (0)
Fax: ++41 (0)