Does owning IP rights improve economic performance?
A recent study performed by the European Patent Office (EPO) and the European Union Intellectual Property Office (EUIPO) has shown that companies which own at least one patent, trade mark or registered design generate on average 20% higher revenues per employee and pay their staff on average 19% higher wages compared to companies that do not own any of these intellectual property (IP) rights.
Previous studies have investigated the relationship between owning IP rights and economic performance. However, this is the largest study of this kind to date. The study analyses the economic performance of over 127,000 companies across all 27 EU member states and the UK between 2007 and 2019. A comparison was made between the economic performance of companies that own at least one patent, trade mark or registered design with companies that do not. The main indicator of economic performance was based on “revenue per employee”, which removed effects due to firm size. The large representative sample size allowed robust and representative conclusions to be drawn.
Some of the key findings of the study are listed below.
- Firms that own IP rights have, on average, 20% higher revenue per employee than firms that do not.
- The correlation of strong economic performance is most pronounced for small and medium sized enterprises (SMEs). SMEs that own IP rights have, on average, 68% higher revenue per employee than SMEs that do not own any IP rights. However, less than 9% of SMEs in the study owned any patents, trade marks or registered designs at all.
- Firms that own IP rights pay, on average, 19% higher wages than firms that do not. Most strikingly, firms owning patents pay, on average, 53% higher wages than firms that do not own any IP rights.
- The highest revenue per employee was associated with firms that own a combination of different IP rights. Firms owning a combination of trade mark and designs showed, on average, a 63% increase in revenue per employee compared to firms not owning any IP at all.
- Firms that own IP rights tend to have more employees than firms that do not (13.5 vs. 5.1 employees on average).
- The most IP-intensive sector is manufacturing, with 69% of large companies owning at least one patent, trade mark of registered design. This was closely followed by the information and communication sector, in which 63% of large companies being IP rights owners.
This study shows a strong relationship between owning IP rights and strong economic performance. However, there are many factors and variables that could influence the economic success of a business, so caution is needed when drawing direct conclusions.
Nevertheless, it is expected that the positive relationship between owning IP rights and economic performance could partially be due to creating incentives to engage in innovative activity. The exclusive (monopoly) rights conferred by patents, trade marks and registered designs can also lead to reduced competitive pressure, which is expected to lead to increased profitability and sales. Furthermore, licensing can create an additional income stream without having to engage in direct manufacturing activity, and so can provide a further boost to a company’s revenue.
If you would like to find out more about whether your company has any IP that could be protected, please get in touch.
- The full report published jointly by the EPO and EUIPO can be found here.
The executive summary of the report published jointly by the EPO and EUIPO can be found here