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IP and MSMEs: The Climacteric Role of Intellectual Property in the Future of MSMEs

By: Rushika M

“Intellectual Property is the oil of the century. Look at the richest men a hundred years ago; they all made their money extracting natural resources or moving them around. All (of) today’s richest men have made their money out of intellectual property.”

-Mark Getty

  1. Introduction

Intellectual property is an important legal and cultural issue.[1] The increasing speed of technological advancement and economic integration in recent years has highlighted the importance of intellectual property[2] and put great stress on the knowledge and ability of persons, businesses and entities to protect their intellectual property rights. One of the sectors of society most affected by its lack of cognizance and perception of intellectual property is the Micro, Small and Medium Enterprises (hereinafter “MSME”) sector. Therefore, the importance and pre-eminence of intellectual property for the MSME sector is the keynote of this article.

  1. What are MSMEs?

As previously mentioned, MSME stands for Micro, Small and Medium Enterprises. As the term suggests, MSMEs essentially refer to small businesses in the private sector. Across the world, regulators and financial institutions apply parameters such as the strength of employees, annual sales valuation, fixed assets valuation, loan size proxies and similar parameters to define MSMEs and classify entities accordingly. Even the World Bank classifies MSMEs based on three criteria: (i) employee strength; (ii) size of assets; and (iii) annual sales.[3]

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In India, the classification of MSMEs is made under the Micro, Small and Medium Enterprises Development Act, 2006 wherein, the three categories of entities are defined under section 6 of the Act,[4] in respect of their investment in Plant and Machinery or Equipment and their turnover value as follows:

  • Enterprises whose investment does not exceed one crore rupees or turnover does not exceed five crore rupees are Micro enterprises;
  • Enterprises whose investment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees are Small enterprises; and
  • Enterprises whose investment does not exceed fifty crore rupees and turnover does not exceed two hundred crore rupees are Medium Enterprises.

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  1. Role of Intellectual Property in MSMEs

Across the world, the MSME sector significantly contributes to socio-economic growth and development of nations. In India alone, an approximation of 6.3 crore MSMEs contribute to 29% of India’s GDP from national and international trade operations.[5] Their contribution to entrepreneurial development and employment in the country is also tremendous. In light of the same, it is of considerable prudence to secure and protect the interests of MSMEs as they are also consequential to the economy at large.

Conventionally, MSMEs have relied on the creation and accumulation of tangible assets such as land, machinery and office equipment, along with their revenue and receivables, to boost their financial standing, valuation and prestige in the industry.[6] However, by dint of scientific and technological developments in the recent past, MSMEs have been catapulted into a quest of an entirely different nature wherein each entity is competing to amass intellectual property of the greatest value. It is hence the actuality of the present day that intellectual property shall play a colossal role in determining the ensuing path of the MSME sector.

Primarily, intellectual property enables MSMEs to protect their ideas and innovations. MSMEs spend large amounts of money, time and resources in the research and development of various works, technologies and products. However, their work is often taken advantage of and commercially exploited as their ideas are copied, or cheap replicas or imitation products are produced and passed off as the product of the MSME or sold by competitors. In either case, MSMEs are the entities that suffer great economic losses and setbacks. Intellectual property rights protect and safeguard MSMEs against these very dangers apprehended, and in cases of violation or infringement of rights, provide MSMEs with adequate remedies and reliefs to secure their interests.

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Secondly, intellectual property allows MSMEs to harness the commercial value of their work in the form of revenue verticals, licensing agreements, further research and development arrangements, etc. thereby allowing MSMEs to recoup their investments and also encouraging further investments in innovation and scientific advancement.[7]

Thirdly, intellectual property plays a significant role in the establishment and promotion of the MSME’s brand identity.[8] Not only does it prevent other entities from imitating the MSMEs creations, it also protects the image of the MSME from being tarnished or impersonated by others. Thus, intellectual property enables MSMEs to retain the authenticity and originality of their identity.

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Further, intellectual property adds to the value chain of business at each level, may it be the stage of ideas and innovations, research and development, or the actual production of the good or commodity. Even at the marketing and distribution level, intellectual property constantly adds value to the product and to that of the MSME. Some intellectual properties hold a greater individual valuation than the sum total of all the other tangible assets of the enterprise combined.[9] Therefore, effective intellectual property management is key to enhancing the corporate and monetary worth of the MSME.

Finally, effective intellectual property management also aids MSMEs in attracting potential investors, in accessing financial resources and in entering new market areas.[10]

  1. Conclusion

From the above, it is evident that intellectual property plays an indispensable role in securing the socio-legal and economic interests of MSMEs. Not only does intellectual property provide a clearly discernable competitive advantage to MSMEs, it is in fact quintessential to the growth and subsistence of MSMEs in the future. Inadequate knowledge and protection of intellectual property could quite possibly result in the closure of various MSMEs as large corporate entities with massive resources dominate the industry and create legal monopolies under the garb of intellectual property protection. Therefore, the acute need of the hour is for MSMEs to recognize and appreciate the role of intellectual property in determining the future of the MSME sector and in preventing its apprehended downfall.

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[1] BCS, The Chartered Institute of IT, “Leaders in Computing: Changing the Digital World” (BCS, The Chartered Institute of IT, 2011)

[2] HE Dr. Talal Abu-Ghazaleh,,effectively%20serve%20the%20global%20community.%22 (last visited April 25, 2021).

[3] International Finance Corporation, “Micro, Small and Medium Enterprise Finance in India”, (International Finance Corporation, 2012).

[4] Micro, Small and Medium Enterprises Act, 2006, §6, No. 27 of 2006, Acts of Parliament, 2006 (India).

[5] India Brand Equity Foundation,,2.1%20million)%20units%20in%202019 (last visited April 25, 2021).

[6] Rahul Bagga, “Why MSMEs should treat Intellectual Property Rights assets”, Economic Times (April 25, 2021, 11:58 p.m.),

[7] National Institute for Micro, Small and Medium Enterprises, (last visited April 25, 2021).

[8] Siddharth Mahajan, “MSMEs must protect their ideas; investment in IP protection is asset not expense”, Financial Express (April 25, 2021, 11:58 p.m.),,%26%20Medium%20Enterprises%20(MSMEs).

[9] Altacit Global, (last visited April 25, 2021).

[10] DK Sinha, “Need of Intellectual Property Rights (IPR) for MSMEs”, Your Article Library (April 25, 2021, 11: 58 p.m.),