13.31. The representative of Brazil thanked the delegations of Chile, Korea, Chinese Taipei and the United States for having proposed a debate on IP and innovation in relation to SMEs, and said that his delegation welcomed the opportunity to discuss that topic. SMEs were among the most affected by flaws in an IP system. Weak patents increased transaction costs and IP dispute settlement entailed high costs, both of which were especially burdensome for SMEs. Those woes took a toll on individual companies. That toll was ultimately paid by their national economies.
13.32. There was evidence that innovative SMEs were the bigger source of productivity gain and job creation in developed economies. In that process, IP was a useful tool not only to generate added value, but also to avoid other companies capturing the value of innovation. The two main IP tools used by SMEs were trademarks and patents. Trademarks were cost-effective tools used to differentiate companies and add value to products. Through trademarks, SMEs could promote the quality of their products and reach consumers, especially niche consumers. The patent system was, however, not always cost-effective. Weak patents with undisclosed patent data could eventually (a) mislead SMEs to invest in unnecessary research; (b) hide possible technologies already available for licensing; (c) hinder innovations that "invent around" other patents; or even (d) lead to violation of patent rights that were not clearly stated.
13.33. Brazil strongly believed that SMEs were necessary for the effective implementation of Article 7 of TRIPS, which provided that the IP system should be a tool that contributes "to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations." To take full advantage of innovation in order to implement Article 7 of TRIPS Agreement, SMEs had to face the challenges of: (a) reducing costs of registration/application of IP to SMEs; (b) lowering costs of legal advice on IP strategy; (c) enhancing the quality of patents; (d) reducing backlog; (e) establishing effective exceptions and limitations to patent rights; (f) fighting anti-competitive practices; and (g) differentiating "non practicing entities" from "patent trolls". They needed to respond to those challenges to ensure that the patent system was not only cost effective, but also development-effective for SMEs.
