IP/C/W/662  
 
24 January  2020 
(20-0621) Page: 1/3 
Council for Trade -Related Aspects of  
Intellectual Property Rights  Original: English  
 
INTELLECTUAL PROPERT Y AND INNOVATION:  
2020 THEME OF MAKING  MSMES COMPETITIVE  - 
MAKING MSMES COMPETI TIVE THROUGH TRADEMA RKS 
COMMUNICATION FROM AUSTRALIA; CANADA; CHILE; THE EUROPEAN UNION; JAPAN; 
SWITZERLAND;  THE SEPARATE  CUSTOMS  TERRITORY OF TAIWAN, PENGHU,  
KINMEN AND MATSU ; AND THE UNITED  STATES  OF AMERICA  
The following communication, dated 24 January 2020, is circulated at the request of Australia; 
Canada; Chile; The European Union; Japan; Switzerland; The  Separate Customs Territory of Taiwa n, 
Penghu, Kinmen And Matsu; and the United  States  of America.  
 
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1  INTRODUCTION  
1.  The management of IP assets is a key consideration for businesses, and is particularly critical for 
MSMEs, which tend to be new entrants to the IP environment. I P-holding businesses, including 
MSMEs, tend to be more active internationally (such as through stronger export performance) than 
non-IP-holding firms. Therefore, a better understanding of the relationship between IP rights and 
MSMEs, as well as the sharing  of best practices by Members in this regard, could help identify 
pragmatic ways to make the IP system more accessible to MSMEs and, in turn, enhance their 
competitiveness and trade performance.  
2  MAKING MSMES COMPETI TIVE THROUGH TRADEMA RKS 
2.  In public and tra de-policy discussions, trademarks tend to attract less attention than other IP 
rights. Yet, trademarks are key for MSMEs, as they can be the first IP right they encounter, which 
can then support their growth and expansion into more sophisticated IP portfol ios. As a reliable 
means to convey information to consumers regarding the quality and safety of products and services, 
trademarks can be a determinant of firm growth and of trade performance.  
3.  Trademarks are the most widespread form of registered IP rights.  Statistics from the World 
Intellectual Property Organization show that in 2018, there were 14.3 million applications for 
trademarks globally, compared to 3.3 million applications for patents. In addition, there were, in 
2018, 1.1 million trademark applica tions from lower -income economies, compared to 87,200 patent 
applications from those same economies. This represents a trademark -to-patent ratio of 12.6, which 
drops to 4.2 among higher -income economies. While the underlying causes for these different rati os 
are a separate issue, where MSMEs play a particularly major economic role, means that an enhanced 
understanding of the needs and realities of MSMEs regarding trademarks can help MSMEs access 
the IP system and generally make them more competitive.  
4.  There  is indeed a need for an enhanced understanding of the role of trademarks – including as 
brands – in competitiveness and international trade, because there is arguably less economic 
research on trademarks as opposed to patents, despite the much wider use o f the latter. However, 
a number of findings provide useful indications. For example, Fink et al. note, pointing to work by 
Abud et al., that  "the use of trademarks is far more widespread [than patents] among companies 
across a large range of industries ", also indicating that contrary to the distribution of patent filings, IP/C/W/662  
 
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  in developing economies  "a large share of trademarks is held by domestic as opposed to foreign 
companies ".  
5.  With respect to innovation and firm growth, Fink et al. also find, with specific  reference to Chile 
as a middle -income economy, that  "there is widespread use of trademarks even among 
non-innovating firms " but that trademarks still  "help firms in appropriating returns to innovation ", 
including as trademarks " can attract consumer demand  and increase sales " as well as  "improve 
productivity performance ". Research from Europe shows for example that SMEs that have filed at 
least one IP right are 21 % more likely to experience a subsequent growth period. The likelihood of 
experiencing a high -growth period is also 13 % higher for SMEs that have filed at least one trademark 
(a figure that is higher than the one for patents, which stands at 9 %). In consume r non -durable 
industries, European MSMEs are 62 % more likely to experience high growth if they have filed a 
European trademark than none or a national one, suggesting a link with trade. Notably in a trade 
context, figures from Canada show that there are th ree times as many exporters as non -exporters 
among SMEs holding trademarks. Trademarks play a crucial role in the internationalization of 
MSMEs. Overall, these statistics suggest that trademarks are versatile tools that can promote the 
competitiveness, exp ort performance and growth of firms of all sizes, including MSMEs, in various 
industries and with varying degrees of innovativeness.  
6.  Understanding why MSMEs file trademarks is also important, although compounding the overall 
scarce literature on trademarks  is the lack of research focusing on developing economies. Work by 
Block et al. does provide a number of insights, not the least of which being that  "SMEs differ from 
large firms with regard to trademarking ", also pointing to research showing that  "SMEs ar e relatively 
more active in trademarking than large firms are  ". Block et al. identify three motives for 
trademarking among their sample of SMEs, namely exchange (e.g., to obtain capital), marketing 
and protection . The trademarking behaviour of MSMEs also differs from that of large firms; Block et 
al. also indicate that  "SMEs often focus on product differentiation or niche strategies " and also  
"leverage their assets, enter new markets, or obtain additional financial resources ". This 
demonstrates that tradem arks are useful certainly not only as tools for the differentiation of products 
and services among consumers, but also as leverage for growth and enhanced competitiveness.  
7.  The informal nature of MSMEs, particularly in lower -income economies, is such that a s Block et 
al. note, "informal protection mechanisms " such as lead -time advantage and secrecy  "are more 
important to SMEs than formal protection mechanisms ", also pointing to a need to investigate  "the 
interplay among different IP protection mechanisms, tr ademarking motives, and types of 
trademarks ". At the TRIPS Council’s May 2020 meeting, the Friends of IP and Innovation will seek 
to discuss these and other considerations related to the IP management strategies of MSMEs.  
8.  However, the research referred to above naturally focuses on those MSMEs that do hold 
trademarks. One particular challenge to the use of trademarks among MSMEs is that awareness and 
use of IP rights, including trademarks, among MSMEs, are low. Low awareness can inhibit business 
growth and global competitiveness, or cause legal difficulties in export markets, while low use itself 
can mean lost business opportunities. Additionally, at times there is also a reluctance on the part of 
MSMEs to acquire and use IP rights in the first place as IP i s seen as too complex and costly. It is 
therefore important for governments to work in partnership with businesses, trade groups, academia 
and other business -facing organizations to raise IP awareness among MSMEs, ensuring that MSMEs 
receive information on  IP rights not only from IP offices, but also from other sources like financing 
organizations. However, governments also need to ensure balance promoting accessibility to, and 
ensuring the quality of, trademarks.  
9.  In the meantime, Members could discuss the following regarding trademarks and MSMEs:  
• Differences between MSMEs in developing and developed Members regarding 
trademarking behaviour and needs, including an understanding of the role of trademarks 
for MSMEs in international trade;  
• the best practices of  Members in raising awareness of IP rights among MSMEs including, 
in a trade context, awareness of their territorial nature; and  
• exploring the WTO’s current and prospective activities with Members and cooperation with 
other international organizations rega rding IP awareness raising and the role of 
trademarks in trade.  IP/C/W/662  
 
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  References  
Abud, M. J., C. Fink, B. H. Hall, C. Helmers, The use of intellectual property in Chile  (Economic 
Research Working Paper No. 11), WIPO, 2013  
Block J. H., C. O. Fisch, A. Hahn, P. Sandner,  "Why do SMEs file trademarks? Insights from firms in 
innovative industries " in Research Policy (44, 1915 -1930), 2015  
European Union Intellectual Property Office and European Patent Office , High -growth firms  and 
intellectual property rights ¸ 2019  
Fink, C; Hall, B. H.; Helmers, C., Intellectual property use in middle income countries: the case of 
Chile (Economic Research Working Paper No. 43 ), WIPO, 2018  
Innovation, Science and Economic Development Canada, Summary of the Survey on Financing and 
Growth of Small and Medium Enterprises , 2017 , 2018  
Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises , 2017  
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