The impact of the Patent System on SMEs. Report for the UK Intellectual Property Office, London.

The authors consider evidence from a range of sources about the propensity of small and medium-sized enterprises (SMEs) to patent their innovations. Drawing on UK, European and US data sources, they use new analysis to show that small firms are less likely to use patents as a means of protecting their investment than other means such as confidentiality, secrecy or being first to market with a new idea. SMEs are also less likely than larger firms to use patents as a source of innovation themselves, preferring conferences and trade journals. Reasons for these differences include the cost of filing patents and of maintaining specialist intellectual property staff. Cost and capacity pressures also explain why small firms license out more of their patents to other firms. In joint research with the Massachusetts Institute of Technology (MIT), the authors find that small firms in the United States are twice as likely as those in the UK to patent innovations, but are still much less likely to do so than larger firms. However, patents are seen as increasingly important factor in investment decisions by venture capitalists, which may influence patenting decisions in the future