Monday 2 February 2015
IP strategy crucial to export success
For many New Zealand SMEs, the domestic market offers the right mix of opportunity and risk for business. It's small enough to achieve a first mover advantage, it's relatively easy to get a new product or service to market, and depending on the industry you're in, it's big enough to build a decent sized business.
But when it comes to exporting, only a few flourish on the international stage. There are several reasons for this, not least access to capital and the inability to scale quickly or profitably. There's another, less obvious reason, and that is the intellectual property environment that exists here.
New Zealand ranks number 20 globally for number of patents filed, which generally means there is plenty of freedom to operate for many areas of technology - the patent thicket is not so thick. And because the patent portfolios of many international companies do not extend to New Zealand, the risk of being sued for infringement when designing and commercialising technology here is vastly reduced.
However, what some New Zealand companies fail to realise is that freedom to operate here doesn't mean freedom to operate elsewhere. In larger overseas markets, where patent filings are more prolific, there is a proportionately higher risk of infringing the IP rights of others.
Australia, for example, ranks at number 10 for patent filings globally. Nearly four times as many patents are filed there than in New Zealand. Further afield, in China and the United States, the numbers are even more staggering.
In 2012, 652,777 patents were filed in China, and in the US it was 542,815. Very crudely, this means you are roughly 76 times more likely to be sued for patent infringement in the USA. This is of course a generalisation - some industries are more prolific at filing patents and some countries receive more patents in some areas of technology than in others.
The point is that many New Zealand businesses fail to fire on all export cylinders because they don't have freedom to operate in the markets they wish to enter or they haven't got sufficient IP protection in place to protect their international expansion from the 'me-too' companies out there.
Add in the sheer number of competitors in other countries and the lack of capital to be competitive, and it's easy to see how some New Zealand companies struggle to make inroads abroad.
If a Kiwi company copies your product or technology here at home, you might very well be able to resolve it over a chat and a beer.
Repeat offenders soon get a bad reputation. Bad reputations are hard to shake in a small country like ours. But that approach is unlikely to work overseas where the stakes are much higher and the competition stronger.
Look closely enough and you'll likely discover that our most successful exporters have robust IP protection in place for all their major markets. Sure, in some technology areas, patent protection is irrelevant. Short life cycle products such as certain software and smart phone apps fall into this category. But even with narrow
IP protection and short life cycles, software and app patents can be incredibly valuable, particularly because of the mass market access that is available for products of this kind, and where distance to market is not an issue.
The lack of patents owned by foreigners in New Zealand means New Zealand companies are not as exposed to the patent world and the possibilities of what patent protection can do for their business.
Some companies, like PowerbyProxi and Lanzatech, have got it right. Both have invested wisely in patent protection to help them get on a much steeper, faster escalator to growth internationally. But they're still in the minority unfortunately.
If you want to increase your chances of export success, think very carefully about your IP position and whether you have the freedom to market, sell, or license it in the markets you wish to enter. Getting this right will be well worth the time and money - providing you take action early on in the game.
An edited version of this article appeared in the November/December 2014 issue of Idealog as part of 'The 2014 Idealog export guide'.