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KPMG Warns UK Businesses To Protect Innovation

by Robin Pilgrim,, London

11 October 2006

Investment in research and development by middle market businesses across Europe could be vulnerable to duplication due to a lack of protection for the resulting intellectual property (IP), according to research commissioned by KPMG International and Microsoft.

Though the research, published this week, found that 86% of businesses are innovating, formal methods of safeguarding the results of R&D, such as patenting and trade marking, are only pursued by a minority (44%), despite far more acknowledging their importance.

For example, 68% of business leaders questioned stated that patents are of high importance when it comes to protecting innovation, yet only 41% actually utilize them.

Instead, the most commonly employed tool for safeguarding innovation is a confidentiality agreement, relied upon by 66% of businesses, while 51% simply referred to secrecy as their IP protection.

Furthermore, the majority of companies that do employ methods of innovation protection fail to seek external advice regarding their implementation. According to KPMG, only 30% of businesses that use patenting call upon third party involvement, while just a fifth of those who rely upon trademarks or confidentiality agreements seek specialist input.

Steve Hollis, KPMG’s Head of Markets in the EMA Region, stated that:

“Given that innovation is the lifeblood of entrepreneurial businesses, generating both product enhancements and production efficiencies, it’s great to see such prolific levels of R&D, creating dynamic conditions for growth and prosperity."

“However, the attitude to protecting the outputs of R&D, highlighted by this research, concerns me."

“The businesses in question are Europe’s smaller companies to whom every penny must surely count and who cannot afford to lose the competitive advantage their R&D offers them."

“Therefore I’m surprised more resource isn’t put into ensuring their IP is protected. External advice on this topic should be considered a sound investment given the difference it can make to the robustness and therefore usefulness of protection methods."

He concluded by observing:

"And as emerging markets, such as China, become increasingly important trading partners for European businesses, IP should be guarded ever more fiercely. The lack of respect for IP exhibited by some businesses in these developing economies is well documented, so companies without suitable protection for their R&D risk being more cruelly exposed by competition from these markets than on the domestic playing field.”

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