Supply Chain Relocation and Intellectual Property Protection after COVID-19: Why Vietnam and What to Watch Out For?

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WRITTEN BY XUAN NGUYEN

 

The global economy has recently witnessed unprecedented blows due to the US–China trade war and COVID-19. Many countries (especially in Europe and the USA) have struggled against the pandemic, but Vietnam has managed the crisis effectively — an official count of 327 cases and zero deaths to date. Local authorities have eased social distancing measures, and most business activities, including shops and restaurants, are back to normal. However visa controls are still in place and international flights are still banned.

How businesses think about supply chains is changing. This article reveals our latest insights on the evolving situation; how it is turning Vietnam into a new manufacturing hub for the global economy. We also provide some useful tips and things to watch out for to help protect your intellectual property (IP) in South-East Asian market like Vietnam. Let’s explore.

The US–China trade war and the COVID-19 crisis: Urging businesses to diversify their supply chains

Photo source: https://www.pexels.com

Photo source: https://www.pexels.com

The trade war between the US and China (often seen as the factory of the world) has made production in China more expensive due to increased tariffs. This has driven companies to look for safer and more competitive options. HSBC economist Yun Liu pointed out that, ‘Likely due to the trade tensions that have accelerated multinational corporations’ relocation decisions, many tech giants, including Apple, Google, Nintendo, and Kyocera, have now followed in Samsung’s footsteps and plan to move parts of their production to Vietnam’[1].

At the height of the trade war tensions, COVID-19 broke out on a global scale, affecting millions of people. Governments have intervened, applying numerous safety measures that forced many businesses to close. Amid this chaos, companies with supply chains mainly dependent on China have started to realise how vulnerable they are.

In a recent article on CNBC[2], Mark Mobius, founder of Mobius Capital Partners, said the pandemic was already prompting a rethink as businesses sought to mitigate supply shocks from any future events of a similar scale: ‘A lot of buyers and a lot of the people depending on the supply chain in China are now having second thoughts, and are beginning to diversify their supply chain as much as possible to be closer to home’. ‘But at the end of the day, I think there’s going to be a diversification where these supply chains get moved into places like Vietnam, Bangladesh, Turkey, even Brazil, so that these companies can have a more diversified supply chain,’ he added.

Meanwhile, IMA Asia’s Richard Martin said that, although manufacturers across several industries had begun moving operations out of China before COVID-19, the pandemic was adding ‘a nationalist spin’ to considerations around supply chain restructuring.

EU Commissioner Phil Hogan declared that ‘we need to look at how to build resilient supply chains, based on diversification, acknowledging the simple fact that we will not be able to manufacture everything locally’[3].

When the pandemic ends, people will get back to work, businesses will be reopened and factories will operate again, but the world will not the same as before. It will be a ‘new normal’ era. No one knows exactly what will happen. But one thing is certain: businesses must learn the importance of altering their supply chains to avoid similar shocks in the future.

Why Vietnam?

  • Dynamic economy with stable growth
Photo source: https://www.pexels.com

Photo source: https://www.pexels.com

With a population of about 97 million people (15th in the world) and based on decades of stable growth, Vietnam has one of most dynamic economies in the region. Supported by a robust manufacturing sector, GDP expanded by about 7% in 2019[4]. According to PwC’s ‘The World in 2050’ report[5], Vietnam is expected to be among the top 20 economies in the world by 2050.

  • Young population and competitive labour cost

Vietnam has a young population (70 % under 35)[6] and a large workforce (52 % are of working age)[7]. The middle class has been quickly expanding; it currently accounts for 13 % of the population and is expected to reach 26% by 2026[8].

According to Statista[9], labour costs in Vietnam are more competitive than in China. Manufacturing labour costs per hour are estimated at USD 6.5 in China, more than double that of Vietnam at about USD 3. In the ‘new normal’ after the COVID-19 crisis, when the global economy has slumped and consumer incomes have declined, manufacturing costs are expected to be one of the critical factors influencing investors.

  • Free trade agreements (FTAs): Shaping stable and open economies

Vietnam has shown a strong willingness to integrate into the global economy through numerous FTAs (13 signed and ratified, 3 more under negotiation).

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CTPPP) and the EU–Vietnam FTA (EVFTA) are two major advancements. The CPTPP took effect in January 2019, covering 11 member countries and accounting for about 14 % of global GDP[10]. CPTPP members are bound to comply with a number of commitments, from tax removal to improvements in legal frameworks that encourage sustainable investment and protect labour, environment and IP.

The EVFTA[11], signed in June 2019, is expected to be approved by the Vietnamese government in early summer 2020. It will eliminate 99 % of all tariffs on goods traded between the two sides. It also includes important provisions related to environmental protection, labour rights, IP protection and climate change. Vietnam will protect 169 Geographical Indication (GIs), such as Champagne, Parmigiano Reggiano cheese, or Feta cheese, at a comparable level to EU legislation.

These FTAs are expected to mitigate protectionism and encourage openness, cooperation and coordination, creating a favourable and stable environment to do business in Vietnam.

  • Pool of opportunities

When the supply chains shift, the supporting sectors and services will go with them. In the PWC report, ‘Doing Business in Viet Nam’[12], the sectors that will provide the most opportunities for companies entering this market are: manufacturing, retailing, e-commerce, tourism, modern agribusiness, food, solar and wind energy. As an emerging manufacturing export hub, total export revenue was estimated at USD 244.7 billion in 2018, up 13.8 % from 2017. FDI companies contributed 71% of it (equivalent to USD 175.5 billion), up 13% from 2017. Retailing is expected to reach USD 173 billion by 2023, an increase of 61 % (USD 108 billion) from 2018.

IP protection in Vietnam: Things to watch out for

An IP protection strategy is essential for any plan to relocate your business to prevent others from copying or using your IP assets and eventually enable you to take enforcement actions against the infringers. Even if you don’t plan to establish your physical business in Vietnam, technology transfers and licensing are good ways to increase revenues. However, they also expose your intangible assets to certain risks.

Photo source: https://pixabay.com

Photo source: https://pixabay.com

To comply with the binding commitments in the CPTPP and EVFTA, Vietnam has been working on amending its IP law and the relevant guiding documents, and enhancing the effectiveness of enforcement agencies. Stronger and stricter measures against IP infringers will soon be put into practice.

The first step in the transition is to understand what your IP rights are, and see how to get the best out of them in the new market.

  • Why and when should I register my IP in Vietnam?

Counterfeiting, piracy and cybersquatting are quite popular in Vietnam, especially in the thriving e-commerce era. Like other Asian countries, there are already many local counterfeit manufacturers available in the market and significant trade exchange with nearby China. Vietnam is very high risk in terms of counterfeits and its anti-counterfeiting agencies still need improvement.

IP protection is national. Even if you have already registered your IP, it doesn’t mean that it is protected in Vietnam. To proceed with an enforcement action in Vietnam, local registration is a must.

Similarly to China and other South-East Asian countries, IP registration in Vietnam operates under a ‘first-to-file’ system; the first person to file an IP application in the jurisdiction owns the rights once the application is granted. This encourages bad faith registration: a local company, or even your distributor, may file an application to register your IP (especially trade marks) before you, and then become its legitimate owner. They may start doing business with your IP or offer to sell it back to you. Taking legal action against these infringers is expensive and, without owning the IP registration, not always easy. This time-consuming process threatens your reputation and decreases your economic benefits. You can even find yourself excluded from the market.

Registration is the prerequisite step for the protection and enforcement of your IP rights. You may prioritise exploring the market and prefer to postpone registration until your business is well positioned, but spending a few hundred euros to file a patent, trade mark or a design application before entering the market is strongly advised. The table below summarises the basic registration costs (excluding services and legal fees) and timelines.

Type Government fees Average time
Patent VND 2 130 000 (approx. EUR 84) 36–48 months
Trade mark VND 1 360  000 (approx. EUR 54) 15–18 months
Industrial design VND 1 810  000 (approx. EUR 71) 12–15 months
Copyright VND 100 000 to VND 600 000 (approx. EUR 5 to EUR 25) 15 days

It is also advisable to run a pre-filing search to establish the availability of your IP. You can search a national databank at the IP Vietnam portal (http://iplib.noip.gov.vn/WebUI/WLogin.php) and access the WIPO IP Portal for international registrations designated Vietnam.

  • Should a non-disclosure agreement (NDA) and IP clauses be included in the contract?

While exploring business opportunities in Vietnam, you are likely to present innovations and ideas to potential local partners for purpose of technology transfer, licensing or research and development (R&D). Disclosing your technology and know-how (e.g. manufacturing processes, technical drawings, and specifications) to local partners exposes you to risk.

A rule of thumb rule is to always sign an NDA and include IP clauses in contracts with local companies to secure your IP. For more information, you can check out our relevant guides, such as Technology Transfer Guide, Research & Development (R&D) Activities and Using Contracts to Protect your Intellectual Property.

  • Is it compulsory to use a local agent to register my IP in Vietnam?

IP protection is national and the laws and practices are not the same as in the EU. Seeking advice from a local lawyer with expertise on the topic is strongly recommended. Please note that, if an applicant doesn’t reside in Vietnam, appointing a local agent to file your application and work with the IP office of Vietnam is compulsory. You can refer to our list of local experts here — they can guide you through the legal procedures and provide strategic advice.

  • Can I register my IP from my home country?

Apart from registering your IP directly with the IP office of Vietnam, there are some international treaties that can help companies to obtain simultaneous protection in multiple countries:

–  Patent Cooperation Treaty (PCT):   The PCT system helps applicants seeking patent protection internationally for their inventions. By filing one international application, applicants can simultaneously seek protection in a very large number of countries, including all ASEAN countries except Myanmar. The biggest advantage of the PCT procedure is that you have up to 30 months from the earliest filing date of your initial application to decide which countries you wish to enter for protection.

– The International Trademark System – Madrid: A convenient and cost-effective solution for registering and managing trade marks worldwide. Under the Madrid system, you can file just one application in one language through your home office, and pay one clear set of fees to seek trade mark protection in up to 122 countries. All South-East Asian countries (except Myanmar) are members.

– The Hague System for the International Registration of Industrial Designs provides a practical business solution for registering up to 100 designs in 73 contracting parties covering 90 countries, through the filing of one single international application. Four South-East Asian countries (Brunei, Cambodia, Singapore and Vietnam) are party to the Hague System.

Now supply chains are being relocated, Vietnam is a promising destination for business expansion. Investing some time in exploring IP protection and having a well-prepared strategy are critical factors in your success and sustainable growth in Vietnam. Neglecting IP protection might cost you more than you imagine.

For more information about IP protection in Vietnam, you can check out our IP Country Factsheet or contact us for free IP advice.

The South-East Asia IPR SME Helpdesk is an EU initiative that provides free, practical IPR advice to European SMEs in South-East Asia. EU companies can send questions to question@southeastasia-iprhelpdesk.eu and receive a reply within three working days.

[1] https://www.voanews.com/east-asia-pacific/us-china-trade-war-seen-boosting-vietnam-growth

[2] https://www.cnbc.com/2020/04/21/supply-chains-will-move-away-from-china-after-coronavirus-mark-mobius.html

[3] https://ec.europa.eu/commission/commissioners/2019-2024/hogan/announcements/introductory-statement-commissioner-phil-hogan-informal-meeting-eu-trade-ministers_en

[4] https://www.worldbank.org/en/country/vietnam/overview

[5] https://www.pwc.com/gx/en/world-2050/assets/pwc-the-world-in-2050-full-report-feb-2017.pdf

[6] https://www.worldbank.org/en/country/vietnam/overview

[7] https://www.pwc.com/vn/en/publications/2019/pwc-vietnam-dbg-2019.pdf

[8] https://www.worldbank.org/en/country/vietnam/overview

[9] https://www.statista.com/statistics/744071/manufacturing-labor-costs-per-hour-china-vietnam-mexico/#statisticContainer

[10] https://www.pwc.com/vn/en/publications/2019/pwc-vietnam-dbg-2019.pdf

[11]  https://ec.europa.eu/trade/policy/in-focus/eu-vietnam-agreement/

[12] https://www.pwc.com/vn/en/publications/2019/pwc-vietnam-dbg-2019.pdf

COVID-19 and overwhelming amounts of counterfeits online: What businesses should do — right away!

Written by Xuan Nguyen

 

According to an update from the World Health Organization (WHO), by 15 April 2020 the coronavirus disease (COVID-19) had already infected 1 918 138 people in 213 countries, territories and areas, resulting in 123 126 deaths. Various governmental interventions have been applied, including border closures, strict quarantines, travel bans, and the forced closure of many businesses. 

It is expected that a deep economic crisis will follow the pandemic (which is still evolving and unpredictable). So far a dramatic slump in economic activities has been witnessed, affecting not only the supply chain (production of goods and services) but also demand (consumption and investment). Many people are forced to stay at home, factories have stopped operating, restaurants, shops and public places are closed. Consumers are being driven toward online shopping marketplaces. While major parts of the world, including, Europe, the USA and a lot of Asia, are struggling to fight against the crisis, in China the situation is now apparently under control and factories are gradually returning to normal.

Photo source: https://pixabay.com

Photo source: https://pixabay.com

The current situation has also created fertile ground for the sale of counterfeit goods online, especially in sudden upsurge sectors such as pharmaceuticals and medical devices. According to Interpol, during one week of action (3–10 March 2020), authorities in 90 participating countries seized more than 4.4 million units of illicit pharmaceuticals, more than 37 000 unauthorised and counterfeit medical devices, and closed down more than 2 500 web links, including websites, social media pages, online marketplaces and online adverts for illicit pharmaceuticals[1].

In South-East Asia all 10 countries have reported a substantive number of COVID-19 cases. Since there was already a high number of local counterfeit manufacturers available, and a significant trade exchange with nearby China, the region is very high risk in terms of counterfeits invading the market. Recently, Thai police seized 45 000 fake COVID-19 test kits, 350 000 medical masks, and 1 200 infrared thermometers that were smuggled into the country by two Chinese men. All products sold online claiming to be COVID-19 test kits at the moment are fake, according to the Thai Food and Drug Administration (FDA)[2].  Vietnamese authorities also found that a company in Vietnam had been making masks out of toilet paper amid the coronavirus outbreak and skyrocketing demand[3].

These figures are just the tip of the iceberg. There are overwhelming numbers of counterfeit products. This article will discuss how counterfeits are being fueled by an online market and what the brand owner should do to mitigate the impact.

Why have counterfeits surged in the shadow of the COVID-19 outbreak?

  • The COVID-19 crisis has resulted in a spike in demand for essential products, such as personal protective devices (facemasks, hand sanitizers and antiviral medication), vitamins, pharmaceuticals, foods and beverages, as well as non-essential products, such as cosmetics and personal care items, household products, electronics, work-from-home tools, entertainment technology and children’s toys. Meanwhile, the majority of factories are being shut down, causing the shortage of supplies of genuine products. ‘In moments of high demand and rushed buying decisions, counterfeiters can jump on the opportunity and sway buyers in their direction[4].’
  • People are shopping online much more than ever. According to analysis by ACI Worldwide, ‘The COVID-19 crisis is driving the global growth of e-commerce sales, with millions of consumers worldwide in quarantine shopping for goods, services and entertainment online. Transaction volumes in most retail sectors have seen a 74 percent rise in March compared to the same period last year.’ The dark side of this phenomenon is that people can be more easily tricked. Many sellers use photos of genuine products while offering extremely low prices to attract online buyers during a time of crisis, and then provide fake products to consumers. It can also create a backlash for brand owners, leading consumers to mistakenly believe the product quality is very low and to lose interest in the brand.
  • The crisis has caused an immediate reduction in the income of many people across the globe, and consumers are looking for the cheapest possible versions of goods because of their reduced budgets. While the pandemic is still evolving, millions of people have lost their jobs following business restrictions and closures. According to a report by the International Labour Organization (ILO), if we are experiencing a ‘“High” scenario where COVID-19 has serious disruptive effects, reducing GDP growth by around 8 percent: Global unemployment would increase by 24.7 million, with an uncertainty ranging from 13 million to 36 million[5].’ Given the current environment of uncertainty and fear, and the real threat of significant declines in income, consumers in many economies are unable to purchase branded goods and services as before; buying cheap counterfeit products can be a tempting option.
  • Many counterfeit suppliers are concentrated in China where the situation is under control and factories have gone back to their normal operations. This means counterfeiters may be in a better position to jump onto the upsurge in demand before legitimate sellers can reopen production. Amid the panic of the crisis, a lot of companies, especially small and medium-sized enterprises (SMEs) are concentrating on solving critical issues such as declines in revenue, insolvencies and job cuts, rather than keeping an eye on monitoring the marketplaces for fakes. As a result of the lack of the legitimate owners’ attention, counterfeiters can more easily flood the market with fakes.
  • Customs checks, market investigations, and raid and seize activities have been reduced following social distancing and safety measures. In the same way as many other public services during this health crisis, officers involved with anti-counterfeiting activities have been physically limited to avoid the risk of infection. This means that infringers have more opportunity to take a free ride on the market.

What should brand owners do?

During volatile market conditions and the resulting increase in online shopping, consumers easily become targets for counterfeiters. Brand owners need to stay on top of monitoring and combating fakes more than ever. Otherwise, they may lose sales to counterfeiters.

  • Focus on monitoring e-commerce and social media platforms and proactively communicate with the customers. During the current social distancing measures and travel bans, a majority of customers has been using the internet for buying stuff instead of shopping physically, you need to keep a close eye to the net to protect your revenue and maintain safe channels for your business during the crisis, and after it ends. When some sectors have a spike in demand while genuine supply chains are being disturbed, fakes become a more serious issue. Brand owners should be more protective about their communications with their consumers, guiding them to available supply channels with authentic products and warning them about fakes.
  • Conduct an investigation and gather facts. Don’t make a groundless claim, it will cost you both time and money. Once you have found a suspected infringement on the internet, the first step is to quickly collect evidence on the infringer, e.g. basic information (name, address, other contact details, the scale of their business and the origin of their products).
  • Take-down Notices and Warning Letters: Utilise the available complaint functions on the e-commerce platforms and encourage social media operators to quickly take down infringing products. In the meantime, as a legitimate brand owner, you can also consider sending Warning Letters to the counterfeiter to ask them to stop their illegal activities.
  • Inform the competent authorities: In South-East Asian countries, local governments have recently made many efforts and improvements in combating online counterfeits. Brand owners can find available complaint tools — such as hotlines, emails or complaint submissions on the websites of customs, market police departments and other relevant national bodies — to promptly notify the authorities.
  • Seek advice from local IP experts. In critical cases, companies are usually advised to consult with local experts that are familiar with infringement cases and have close relations with enforcement bodies such as customs, investigators and the police. It is worth noting that many counterfeits are advertised in local languages or posted on local websites, so monitoring using detection software or search tools (usually in Roman characters) doesn’t work effectively.

The COVID-19 pandemic is unprecedented. Our lives, and the way we do business, have changed in recent weeks. Brand owners should swiftly adapt to the new situation to protect their businesses against counterfeiters. Neglecting this during the crisis might cost you more than you imagine, i.e. from losing your faithful customers to losing your entire share of the market. Keeping your company safe amid the chaos, and getting ready for normal business to resume, is the only way to retain both your revenue and your reputation.

[1] https://www.interpol.int/en/News-and-Events/News/2020/Global-operation-sees-a-rise-in-fake-medical-products-related-to-COVID-19

[2] https://thethaiger.com/coronavirus/big-arrest-on-price-gouging-of-covid-19-safety-gear-and-fake-test-kits

[3] https://www.insider.com/vietnam-company-using-toilet-paper-for-coronavirus-masks-faces-penalty-2020-2

[4] https://www.redpoints.com/pdfs/market-research-impact-of-covid-19-on-ecommerce-sales/?utm_campaign=HS284-market-research-survey-impact-of-covid-9-on-ecommerce-sales&utm_medium=email&_hsmi=84691783&_hsenc=p2ANqtz-_KXO0X8sOU11ZaL9gXi53LxFBQjYdtj-ZtCHwLlocKYxHxgibn05yKKsXyfyIzVAccGKAF&utm_content=84691783&utm_source=hs_automation

[5] https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/briefingnote/wcms_738753.pdf

EU–Singapore FTA: Highlight of improvements on intellectual property

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WRITTEN BY XUAN NGUYEN

 

Singapore and the EU are key trading partners. The EU is Singapore’s third-largest trading partner in goods, accounting for 10 % of its total trade with the world. Singapore is the EU’s largest trading partner in ASEAN, representing close to a quarter of the total EU–ASEAN trade in goods and over half of the EU–ASEAN trade in services. Over 10 ,000 EU companies are established in Singapore, and use it as a hub to serve the whole South Pacific.

The EU–Singapore trade and investment protection agreements were signed on 19 October 2018. The trade agreement entered into force on 21 November 2019, while the investment protection agreement will enter into force after it has been ratified by all EU Member States according to their own national procedures.

Photo (create by piktochart)

The trade agreement is expected to increase opportunities for cooperation, and foster future growth and progress for all the parties involved. In the immediate future, the companies will benefit from the removal of tariffs and non-tariff barriers to trade in goods and services, the liberalisation of investments and public procurement, and a boost in competition and sustainable development. In addition, the agreement contains important improvements on intellectual property (IP) protection that will contribute to strengthening the position of Singapore as one of the most profitable and secure destinations in Asia for business investment and the expansion of EU companies.

Following a commitment in the agreement, Singapore has strengthened its existing Geographical Indication (GI) protection regime by setting up a system that allows GIs to be registered. The agreement contains one annex with a list of 196 European GIs that will be applying for protection in Singapore. Champagne from France, Parmigiano Reggiano from Italy, and Scotch Whisky from Scotland are some examples of iconic EU GIs to be protected in Singapore. EU GIs will enjoy the same level of protection as in the European Union. In the long run, better protection by Singapore’s authorities will also raise local consumer awareness around authentic, top quality GI products from the EU. As of 1 February 2020, a total of 139 European GIs (mainly covering wines, spirits, foodstuffs, and agricultural products) have been registered in Singapore.

Regarding copyright, the agreement provides for equitable payment for both performers and producers of recorded music played on the radio, TV or in places open to the public (such as shops, restaurants, bars). This will be implemented within two years of the trade agreement entering into force.

The enforcement chapter sets out detailed provisions on civil enforcement measures, including general obligations related to the availability and the application of these measures, provisions on preserving evidence in disputes, injunctions, damages and on the liability of intermediary service providers.

With regard to border enforcement, EU companies can now request that Singapore’s customs seize counterfeit trade mark goods and pirated copyright goods. Within three years from the entry into force of the trade agreement, holders will also be able to request that Singapore’s customs seize counterfeit GI goods and goods with pirated designs when they are being imported or exported.

Singapore and the EU also committed to putting ex officio procedures by the authorities into action. This means that the authorities may act on their own initiative to suspend the release of counterfeit trade mark goods, pirated copyright goods and counterfeit GI goods. With regard to counterfeit GI goods, Singapore will implement this commitment within three years of entry into force of the trade agreement.

The agreement aims at creating favourable conditions and a sustainable environment for EU companies to take full advantage of the opportunity Singapore provides as a business and transport hub in South-East Asia.

Singapore has a very comprehensive and robust IP framework, which is considered to be one of the best in Asia, and the best in South-East Asia. The supplementary commitments on IP protection and enforcement in the agreement will further reinforce Singapore’s competitive position, attracting more investment for innovation and start-up activities from EU companies.

Reference: https://ec.europa.eu/trade/policy/in-focus/eu-singapore-agreement/

Online IP Infringement in South-East Asia: How to protect your business

Quote

WRITTEN BY XUAN NGUYEN

 

The South-East Asian internet economy has witnessed a striking increase

According to the latest report by Google, Temasek and Bain & Company, the number of internet users in South-East Asia (SEA) has increased rapidly, reaching 360 million in 2019 — 100 million more than in 2015. Powered by rapid adoption and changing consumer preferences, the South-East Asian internet economy has leapt nearly 40 % from last year to exceed USD 100 billion, and is on track to hit USD 300 billion in 2025. The region has seen booming development, especially in the e-commerce sector. In 2015, 49 million people bought or sold items online. Today, that number has tripled to 150 million.[1]

Photo source: https://pixabay.com

Photo source: https://pixabay.com

The internet is fueling a dramatic rise in counterfeit and pirated products

It is obvious that the internet has brought enormous opportunities for companies, especially Small and Medium-sized Enterprises (SMEs) to develop and expand their business internationally. However, on the other hand, digitalisation also creates fertile ground for online intellectual property (IP) infringement, such as counterfeiting products, pirated goods, cybersquatting, stolen trade secrets, etc. As a result, it has caused various negative impacts on the sales, profits and reputations of affected companies as well as having broader adverse effects on the economy and public health, safety and security.

‘The Economic Impacts of Counterfeiting and Piracy’ report from Frontier Economics pointed out that the estimated value of total counterfeit and pirated goods in the world was USD 923 billion – 1.13 trillion in 2013 and is forecasted to reach an astounding USD 1.90 – 2.81 trillion in 2022.[2]

As it is now easier for everyone to buy and sell goods online, fake and pirated products are booming in SEA, across various e-commerce platforms, social media channels (Facebook, Instagram, TikTok) and a number of local websites. Consumers are offered a wide variety of counterfeit and pirated products. These items can be labelled with a counterfeited trade mark or just replicate the appearance of the original goods, and they are sold at any price-scale. Products majorly exposed to online counterfeiting are fashion retail, electronics, perfume and cosmetics, pharmaceuticals, FMCG, baby products, alcohol and automotive.[3] The origin of the fake products being sold in SEA varies, they can be produced locally or imported from  other countries notorious for manufacturing counterfeits, such as China, India and Turkey.

Online counterfeit and pirated goods have caused serious damage to the sales and profits of IP owners, jeopardised brand reputations and rendered the consumer less interested in authentic products. Vendors often use pictures of the original goods to attract consumers and then provide a counterfeit product. Ultimately, customers start to lose interest in affected brands.

An even more serious concern is connected with the use of fake products in the pharmaceutical, chemical, foods and beverages sectors. These products are not subject to controls like the original ones, and can seriously affect the consumers’ health.

How to combat online infringement

Online IP infringement is growing exponentially in SEA, for many reasons. IP rights are territorial, however online IP infringement is borderless. ‘While there is a degree of harmonization of the laws and regulations governing IP rights and their enforcement, these are not unified. Varying laws and practices in different jurisdictions make it difficult to navigate the legal landscape, fuelling legal uncertainty about outcomes.’[4] In any jurisdiction, the internet itself makes it harder to track down infringers effectively and stop them, but it is particularly difficult in SEA. The effectiveness of IP enforcement in the region is still a major concern. As a result, online trading is quickly becoming more and more attractive for IP infringers as they are less likely to be caught in SEA. In addition, although laws and regulations in South-East Asian countries generally prohibit the sale of counterfeit and pirated products, they do not specifically deter the sale of these products online. There is a lack of effective laws against online IP infringement, and the authorities have little experience in dealing with it.

The majority of the online trade in counterfeit products and pirated goods is at the retail scale, it means there is a huge number of infringers that companies must monitor in order to combat them. The internet makes it easy for anyone to set up a new online business. This means that even if  the culprits agree to stop their infringing actions after receiving a warning from the IP owner, e-commerce operators or enforcement authorities, it is still possible that they will quickly set up a new shop to continue with the illegal selling.

However, taking no action is inadvisable for companies seeking to safeguard their business in SEA. If your products have been infringed and sold in various places, a ‘no actions’ strategy will have a negative impact on your global business and jeoparadise your reputation.

To protect IP effectively, a company should build up a proactive and multi-faceted strategy to act swiftly and effectively against online infringers. The following options can be considered.

  • Actively monitor the online marketplace, and shopping and social media platforms, to identify infringement: Companies can do this by themselves or hire service companies with expertise in the field. In addition, today there are many advanced technological tools for searching and detecting sources of IP violation.
  • Conduct an investigation and gather facts: Don’t make a groundless claim, it will cost you both time and money. Once you have found a suspected infringement on the internet, the first step is to collect evidence on the infringer, e.g. basic information (name, address, other contact details, the scale of their business and the origin of their products).
  • Take-down Notices and Warning Letters: The majority of online infringers in SEA are small businesses, therefore sending a Warning Letter to online infringers has often proved to be a time- and cost-effective option. Also, submitting a Take-down Notice and Infringement Complaint to the e-commerce platform and social media operators can be another effective approach. Read and understand the IP policy against online infringment of each platform so that you can provide the appropriate information and documents as required to ensure the take-down is fast and effective.
  • Work with local enforcement agencies: Companies should be well prepared, with at least a basic understanding of the enforcement agencies available in each country in SEA and of how companies are eligible to use the enforcement options in the jurisdiction. It is worth noting that to enforce your rights in SEA, you are usually required to register your IP with the IP office of the country where you seek enforcement. Raid actions to seize infringing products, filing a claim to a court, or using customs to block counterfeit and pirated goods are also enforcement options that companies may consider in specific cases.
  • Seek advice from local experts: There are still many differences between IP laws and practices between the EU and SEA, and even within SEA inconsistencies abound. As many of the counterfeit and pirated products for sale are advertised in local languages or posted on local websites, monitoring by detection software or searching tools (usually in Roman characters) doesn’t work effectively. Therefore, companies should always seek advice from local experts who are familiar with local cases of infringement and who have close relations with enforcement bodies such as the courts, police and customs authorities.

SEA is a promising destination to expand your business in. However, there are still major concerns there relating to IP protection, especially in the digital era. European companies should be aware of the risks and prepare their IP strategy before going abroad. A proactive and well-prepared IP protection programme will secure sustainable business growth in SEA.

By Xuan Nguyen – Project Officer, South-East Asia IPR SME Helpdek

[1] e-Conomy SEA 2019: https://www.bain.com/insights/e-conomy-sea-2019/

[2] ‘The Economic Impacts of Counterfeiting and Piracy’ by Frontier Economics: https://www.inta.org/Communications/Documents/2017_Frontier_Report.pdf

[3] Industries exposed to online counterfeiting: https://www.group-ib.com/brandprotection/anticounterfeiting.html

[4] ‘IP Infringement Online: the dark side of digital’: https://www.wipo.int/wipo_magazine/en/2011/02/article_0007.html

 

Using the Madrid System to register your trade mark in Malaysia

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WRITTEN BY XUAN NGUYEN

 

On 27 September 2019, Malaysia became the 106th member of the Madrid system upon depositing its instrument of accession to the Madrid Protocol with the World Intellectual Property Organization (WIPO). The protocol will enter into force in Malaysia on 27 December 2019, extending the Madrid System to cover 122 countries. With the addition of Malaysia, all the countries in the South-East Asian region, except Myanmar, are now members of the Madrid System.

After the protocol comes into force, foreign companies will have two options for registering their trade marks in Malaysia, i.e. filing a trade mark application directly with Malaysia’s IP office, or filing an international trade mark application with the IP office of their home country and selecting Malaysia as one of the designated countries. Before you decide which option is more convenient for you, we would like to provide an overview of the advantages and disadvantages of the Madrid System.

What is the Madrid System?

The Madrid System, administered by WIPO, is a convenient and cost-effective solution for registering and managing trade marks worldwide. The system allows brand owners to protect their trade marks in up to 122 countries by filing one application, using one language (English, French or Spanish) and paying one set of fees.

Under the Madrid System, you need to submit an international trade mark application with the office of the home country in which refers to the national application or registration in respect of the same trade mark and select the countries where you want to register your trade mark as designated countries. After receiving the international trade mark application, your office of origin will check, certify, and then submit it to WIPO. WIPO will examine your international application in term of formalities (e.g. the applicant’s name and address, the quality of the image of mark, the classification of goods/services according to the Nice Agreement, application fees, etc.). If your application meets all the formal requirements, WIPO will record the mark in the International Register, publish it in the WIPO Gazette of International Marks and notify all the IP offices in the designated countries so that these offices can begin the substantive examination of the application at a national level in their jurisdictions. A result concerning the protection or refusal of the trade mark will be made within the time limit of 12 months or 18 months (for certain countries).

Advantages

  • Centralised and simplified registration and management system

To have your trade mark protected in multiple countries, instead of going to each country to file your trade mark application, when using the Madrid System the applicant just needs to file one international trade mark application to the office of origin, using one language and paying a single set of fees. Any amendment, such as changes (name, address, ownership, etc.), cancellation or licenses can be recorded in the International Register by simply submitting one request. Likewise, when the trade mark registration is due for renewal, the trade mark holder can renew it with WIPO in respect of all the designated countries or only some of them.

Overall, the Madrid System enables the brand owners to register and manage their trade mark portfolio in multiple countries via a simplified and convenient system.

  • Cost-effective and time-saving

By filing only one application rather than various applications in various countries, the applicant can save time and money. For example, it is not necessary to pay for translations of the documents or local agent fees which are normally incurred if an application is filed directly with the IP offices of the target countries. In many countries, the examination of trade mark applications at the national level can take up to 4 years due to backlogs. Under the Madrid system, however, the designated offices have to decide within 12 months or 18 months.

  • Subsequent designation

The Madrid System allows trade mark holders to designate additional countries alongside their existing trade mark registration. This subsequent designation procedure is very beneficial to brand owners who want to expand their business scope to new markets as they do not need to file separate applications in the new target countries.

  • Global system

With the Madrid System, you can register and manage your trade marks in up to 122 countries, representing over 80% of world trade.

Disadvantages

  • Central attack

Under the Madrid System, international registration remains dependent on the  basic application/registration in the country of origin for a period of 5 years from the date of its registration. Therefore, if the national application is rejected or withdrawn, or if the the national registration is canceled during this period, the international registration will no longer be protected unless within 3 months of the cancellation, the holder files trade mark applications for registration with the offices in each of the designated countries.

  • Refusal by national office

Laws and practices differ from country to country. It is still possible that you receive a refusal decision from some of the designated countries. In this case, the holder cannot communicate through the International Bureau but has to directly respond to and work with the national offices where the protection is rejected. In some countries, it is mandatory to use a representative agency to respond to the national office. Refusals may be avoided if, before filing, the trade mark holder identifies the countries in which rejection is likely and consults a local lawyer with expertise on the topic in order to develop a registration strategy.

Summary

Thanks to its centralised and simplified registration and management procedures, the Madrid System is a convenient solution for brand owners to protect their trade marks when doing business internationally. Nevertheless, brand owners should consult with local lawyers to develop trade mark registration strategies in certain countries where there is a high possibility of refusal by the national office.