IP/C/W/ 622 
 
27 January 2017  
(17-0561) Page: 1/3 
Council for Trade -Related Aspects of  
Intellectual Property Rights  Original: English  
 
 
INTELLECTUAL PROPERT Y AND INNOVATION  2017 : INCLUSIVE INNOVATI ON  
AND MSME s  
COMMUNICATION FROM A USTRALIA,  THE EUROPEAN UNION, JAPA N, SWITZERLAND  
 AND THE UNITED  STATES  
 
The following communication, dated 23 January 2017 , is circulated at the request of Australia, 
the European Union, Japan, Switzerland and the United States.  
 
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1.  Intellectual property rights (IPRs) reside at a critical juncture with respect to achieving 
essential priorities such as cataly sing innovation and creativity, promoti ng economic growth and 
development, creating and growing jobs, improving the quality and enjoyment of our lives, and 
combatting the manifold challenges we face as individuals, as nations and as a global community.  
2.  Among this multitude of positive contribu tions, IPRs provide a critical conduit for inclusiveness 
in local and global trade. In particular, IPRs help micro, small, and medium -sized enterprises 
(MSMEs) to channel the potentially boundless contributions of a wide array of innovators and 
creators in  different economic sectors and from diverse communities. IPRs also enable MSMEs to 
spur innovation and creativity, to structure partnerships, and to join global value chains.   
3.  MSMEs demonstrate the power and importance of inclusive innovation, which is th e creation 
and absorption of innovation for those entering into the development mainstream, particularly 
those from low income economies . MSMEs play an essential role in diffusing economic growth and 
innovation throughout our societies, including with resp ect to the percentage of the total workforce 
they employ, their net job growth, their contributions to innovation and creativity, and their 
reliance on IPR protection. In fact, approximately 95 % of business around the world are SME, 
which account for 60 -70% of private sector employment, rising to significantly higher levels in 
numerous countries and regions.1   
4.  MSME -driven inclusive innovation has a significant social as well as economic impact in both 
developed and developing economies. According to a join t World Trade Organization and 
International Trade Centre report, "[i]n developing economies, SMEs are strongly linked to 
employment, poverty reduction, women 's economic empowerment, and income distribution. SMEs 
are integral to private sector development,  particularly in LDCs, and an essential component of 
inclusive, sustainable development. "2 With IPRs, innovative SMEs play a critical role in including 
our populations, and the diverse communities therein, not only into our respective national 
economies, b ut integrating them into global trade and export markets generally.  
5.  IP must be considered as a relevant aspect for innovative micro -sized enterprises also. The 
absence of reliable IP protection can reduce or eliminate incentives to improve product -quality and 
to pursue business expansion. In their study about the informal economy, de Beer, Fu & Wunsch -
                                                
1 "SME Compet itiveness and Aid for Trade: Connecting Developing Country SMEs to Global  Value 
Chains "; World Trade Organization and International Trade Centre; Document Number DMD -14-264-E; 2014; 
page viii.  
2 Ibid; pages viii, 1, and 7.  IP/C/W/622   
 
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  Vincent (2013: 39) note that "entrepreneurs are unable to develop their businesses beyond a 
certain stage as they lack exclusive rights to or control over the ir innovations. Therefore, they 
have fewer incentives to invest in machines or human capital (e.g., training new apprentices), and 
are unable to reach certain economies of scale. "3 
6.  The TRIPS Council is positioned at the cross -roads of inclusive innovation where trade and IPR 
protection converge, and is well -placed to serve as a laboratory of ideas regarding this significant 
topic. Over the course of 2017, TRIPS Council delegations could explore how IPRs can drive more 
inclusive innovation, including through  specific laws, practices and other initiatives that promote 
MSME participation in local and global trade in particular. During the three TRIPS Council meetings  
to be  held in the coming year, delegations could exchange experiences regarding three aspects o f 
the life cycle of innovation – collaboration, growth, and trade – with a focus on MSME -related 
policies and practices.  
7.  This three -part exchange would consist of the following topics, which each offer the opportunity 
to demonstrate how IPRs can promote i nclusive innovation through MSMEs.   
IP & Inclusive Innovation: MSME Collaboration (February/March 2017):  Collaboration and 
cross-border partnerships are increasingly critical for innovative MSMEs, particularly with respect 
to R&D. IPR protection can provi de an essential means to structure partnerships and other 
cooperative undertakings and to drive inclusive innovation. Such collaboration can be between 
MSMEs and a variety of entities within the innovation ecosystem including universities, start -ups, 
spin offs, other MSMEs, larger companies, and facilitated by government entities, including 
intellectual property agencies and public R&D programs.  Over the last years – and supported by 
the effects of globalization and digitalization – there has been a trend t owards a world of globally 
distributed knowledge. Hence, it is beneficial for firms to not solely rely on their own, firm -specific 
research. Accordingly, businesses are eager to find ways to increasingly use external knowledge 
and integrate it in their res earch activities and broader business strategies, including through 
researcher -MSME partnerships. As a result, stronger cooperation in the innovation process and 
incentives to achieve this have emerged. Consequently, a coherent IP strategy becomes crucial.  
Members could share experiences on how MSMEs have successfully collaborated with other entities 
to spur inclusive innovation and how IPRs have fostered this collaboration.  
IP & Inclusive Innovation: MSME Growth (June 2017):  Given the vital role MSMEs play  in 
promoting innovation and development, encouraging their growth is a priority for all economies, 
whether developed, developing or least developed. There are a variety of policy and other tools 
used by governments to encourage entrepreneurs to start a bu siness and to engage in innovative 
activities , including IP laws and enforcement procedures, mechanisms and programmes,4 vibrant 
incubator and accelerator networks, innovation clusters, information and awareness -raising 
schemes and access to personalized s upport services5 and low cost finance, such as the use of 
intangible assets as collateral for lending institutions (see United Nations Commission on 
International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on Secured Transactions, 
2016). Several q uestions emerge including : how can MSME growth assist in addressing societal 
challenges and improving people 's lives? ; and w hat is the role for IP and inclusive innovation in 
this context? ; for example, what is the role of IP in promoting development and d iffusion of 
agricultural technology for rural development? Innovative technology and business models 
supporting the technology 's diffusion are significant factors which help small and medium -sized 
agro-enterprises grow. In an ever -changing environment farm ers and agro -enterprises need to 
constantly adapt and make use of new opportunities. IP is often critical both to the development of 
new, more effective and sustainable agricultural technology and to ensuring its diffusion and the 
transfer of related knowl edge to the user.  
                                                
3 De Beer, J., Fu, K., & Wunsch -Vincent, S . The informal economy, innovation and intellectual property  - 
Concepts, metrics and policy considerations. WIPO Economics and Statistics Series, Economic Research 
Working Paper, No. 10(2013 ), p.39.  
4 E.g. specialization of courts, simplified enfo rcement procedures, arbitration and mediation schemes, 
insurance schemes.  
5 Personalised support services can assist individual SMEs in their specific needs. Support services may 
range from providing answers to questions on registration procedures and best  available IP options, to auditing 
the intangible assets of a business with view to developing and following -up on an IP strategy.  
 IP/C/W/622   
 
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  IP & Inclusive Innovation: MSME Trade (October/November 2017):  An essential feature of 
inclusive innovation is that it facilitates the integration of MSMEs into international trade. Many 
firms and countries have developed specialized pro duction methods and/or products that led to an 
implicit unique selling proposition (USP). However, USPs for specific technology, products or 
production methods can only be maintained and exploited if the underlying IP is properly and 
credibly protected. IP Rs therefore provide the legal means to use comparative advantages to their 
full capacity: IPRs create value added and export opportunities to the local economy, international 
licensing generates new revenue streams. This can also mean a shift in export co mposition from 
low-productivity manufacturing to products with higher value added. Members could share 
successful strategies of how MSMEs can benefit from their product 's underlying IP, thus exploiting 
their comparative advantages.  
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