Protecting your intellectual property during technology transfers in South-East Asia: Why is it important?

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WRITTEN BY XUAN NGUYEN

The South-East Asian region consists of 10 countries with a combined GDP of USD 3 trillion (the 5th largest in the world) and a population of 649.1 million people[1]. Over the past few years, the region has emerged as a location for manufacturing diversification, particularly as a result of the USA–China trade war and, most recently, the Covid-19 pandemic.

ASEAN GDP

Technology transfers are the key enablers in the supply chain relocation process, and intellectual property (IP) is considered to be the crucial element – the factor that contributes the value. In this article, we will provide you with some tips on how to build and manage your IP portfolio in relation to technology transfers in South-East Asia.

Why is IP important in technology transfers?

A broad definition of technology will be used here, one including not only production technology, but also management expertise, marketing skills and general intangible corporate assets. Commercially exploiting technology across geopolitical borders can be managed through licensing agreements, joint ventures or by setting up your own business in order to share advanced skills, knowledge, or facilities among interested parties.

Companies most commonly transfer their technology by licensing their IP rights (such as patents, trade marks, designs, software, trade secrets, know-how, etc.). Protecting your IP before disclosing it is crucial to ensuring your monopoly on the information in question, allowing you to expand your market presence, providing you with a return on investment in research and development (R&D) and encouraging further innovation. According to the Ocean Tomo survey, today intangible assets have increased their contribution to account for up to 90% of a company’s value[2].

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Secure your IP through registration, non-disclosure agreements (NDAs) and a strategic plan

The first step in managing your IP is to identify it. Therefore, in your transfer strategy, you should think about what kind of intangible assets you are considering disclosing to your potential partners. Based on your resources and target destination, evaluate the elements you want to be part of your technology transfer strategy, and consider whether it is beneficial to monetise the specific IP in question (such as the patent, trade mark, design, software, trade secrets, know-how, or a combination of the above).

For example, in a franchising deal, you not only transfer your brand and business model, but also operating manuals, quality control procedures, training policies, marketing strategies, business advisory support systems and many other confidential aspects of your business. Be aware of all the information you will disclose to your partner during the process – from commencing negotiation until entering into a deal – so that you can anticipate the possible risks and initiate a suitable protection plan.

You must be aware that IP protection is territorial. Therefore you need to formally register patents, trade marks and designs in each country you want to be protected in. An IP protection strategy must be front and centre when considering investing in South-East Asian countries. Obtaining registration before the start of a technology transfer negotiation is ideal. However, even having an application in place before opening talks is worthwhile; it strengthens your position and reduces the risk of a failed discussion ending up with the theft of your IP by your potential local partners.

In the era of digitalisation, the software is a crucial part of the IP involved in many technology transfer deals. You should pay special attention when licensing your software; there are two main ways to protect it, patent and copyright. Patents ensure extraordinarily strong protection but are not easy to obtain, firstly because it’s a long and costly procedure, secondly because not all software is deemed to be patentable.  Therefore, you probably have to rely on protection under copyright law. In almost all South-East Asian countries works are automatically protected by copyright upon their creation, however a system for voluntary registration also exists. Copyright registration is very useful when there are disputes over a copyrighted work. It’s much to better to have it before entering a tech transfer agreement.

There is no registration system for trade secrets, know-how or other intangible assets, therefore companies should always have a strategic policy in place to retain such assets, and their competitive edge. A good starting point is to sign an NDA with your potential partner before entering into any initial negotiations, and ensure that it’s translated into the local language. This is also a way to detect the intentions of your potential partners, and to test their reliability.

It’s an unfortunate truth that people won’t pay for what they can steal. Many licensees attempt to reverse-engineer your products to save costs and gain an advantage in the marketplace (i.e. they are able to sell their products at much lower prices). Under current IP legislation, there is little you can actually do about this process other than to build a strategy that prevents such activities from taking place. For example, in your technology transfer plan, you may consider having certain components of your products manufactured/assembled by different parties, or using separate locations to help reduce the risk of your IP being misappropriated.

Searching for a partner and due diligence

The crucial factor in the success of technology transfers is choosing the right partner. During the negotiation process, you are going to disclose your IP in order to attract potential partners. It is worth spending some time reviewing all the assets in question, including any registered IP belonging to your potential partners, any litigation in which they have been involved, or any issues that could arise in the future when signing a deal with them.

Entering into a contract

The risk to IP associated with technology transfers varies depending on the type of IP you want to transfer and the form of collaboration planned (such as licensing, a joint venture or setting up your own business). You should analyse the potential risks and include the necessary clauses in contracts to prevent IP violation.

pexels-bongkarn-thanyakij-3740400

First of all, make sure a confidentiality clause or NDA is a part of your contract. Taking the fact that the information may be used by your partner’s employees – or that the information might be disclosed to third parties – into account, appropriate measures to protect confidential information should be clearly written into the contract.

It is also worth having a formal procedure in place to deal with the identification of both the existing IP and IP that would arise in the future. In many cases, your partner may be able to improve on your IP and use it to develop another generation of products. Therefore, it is wise to include a clause that deals with the ownership of any potential improvements.

Importantly, companies must ensure that the contract allows local enforcement methods to stop the sources of IP violation, rather than reverting to EU legislation or systems of arbitration. In cases of infringement, you have the right to seek direct remedies from the local authorities. This resource can enable you to quickly obtain emergency injunctions, search-and-seize orders or asset-freezing orders, which are especially helpful in cases of trade secret theft by an employee or a third party. It is common practice to include an accompanying arbitration clause as a secondary means of resolving disputes. In the South-East Asian region, Arbitration in Singapore is usually recommended as the country has the advantage of excellent legal and technological expertise, a highly skilled judiciary and widespread English fluency.

South-East Asia has become a promising destination for supply chain relocation. Technology transfers are the key enablers of this process. However, the risks of IP infringement there always threaten your revenue and reputation. Companies should understand the degree of their exposure to risk and make sure to put the appropriate measures in place to protect their intangible assets when investing in the region.

For more information on technology transfers in South-East Asia, check out our latest guide here.

The South-East Asia IP SME Helpdesk is an EU initiative that provides free, practical IP advice to European SMEs in South-East Asia. EU companies can send questions to question@southeastasia-iprhelpdesk.eu and will receive a reply within 3 working days.

[1] https://www.aseanstats.org/wp-content/uploads/2019/11/ASEAN_Key_Figures_2019.pdf

[2] https://www.oceantomo.com/intangible-asset-market-value-study/

 

Intellectual property violation in Thailand and the Philippines thriving during Covid-19

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WRITTEN BY XUAN NGUYEN

Due to the social distancing measures imposed during the Covid-19 pandemic, people are massively relying on the internet for both their work and their leisure activities. Online shopping has dominated the market as a result of quarantine and isolation.

The Covid-19 emergency has engendered many challenges for intellectual property (IP) protection thanks to the rocketing increase of counterfeit goods being offered for sale on the internet. This is especially prevalent among products in high demand, such as facemasks, hand sanitisers, antiviral medication, vitamins, pharmaceuticals, foods, beverages, household products, electronics, DIY tools, entertainment technology, etc.

In this article, we present some updated statistics reflecting the alarming rise in IP infringement during the crisis in some South-East Asian countries.

Thailand

According to the latest IP Enforcement Statistics for Thailand, the number of raids and seizures between January and April 2020, compared to the same period in the previous year, has risen acutely (by 31.82% and 1 967.6%, respectively).

Thailand

Philippines

The Intellectual Property Office of the Philippines (IPOPHL) recently published 2019 vs 2020 IP rights violation data showing the dramatic surge in complaints that they received in the first 6 months of 2020 compared to the previous year.

Philippines

Suggestions for protecting your IP during the crisis

  • Proactively monitor e-commerce and social media platforms. As counterfeiters overwhelming use online platforms to sell their products, regularly checking to detect fakes and initiating early interventions will save you a lot of money and time. Online shopping makes payments cashless; this also enables companies to easily track and investigate the sources of fake goods. This is a big advantage when it comes to stamping out counterfeiting.
  • Conduct online trainings and encourage the community to report fakes. Providing trainings to consumers on how to distinguish between authentic products and fake ones, and on where they can buy the real ones, is worthwhile. Companies should also encourage the community to report cases of counterfeiting and make online tools available so people can easily submit complaints.
  • Take-down notices. If you have reliable evidence of counterfeit goods being sold on e-commerce or social media platforms, prepare a take-down notice (with the supporting documents necessary) asking the operators to immediately remove the infringing products.
  • Inform the competent authorities. For larger cases, you can consider to inform the competent authorities to promptly stop the infringement, for example by blocking the importation of the counterfeit goods or by seizing them.
  • Seek advice from local IP experts. It is always advisable to consult local experts with experience in enforcement to be sure you are doing things the right way; in South-East Asia, neither the law nor business practices are the same as in Europe.

 

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 3 working days.

Cybersquatting in South-East Asia: What’s happening now?

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WRITTEN BY XUAN NGUYEN

 

Facts and trends

In 2005, when eBay Inc. started promoting their services online in Vietnam, they found that the domain name ebay.com.vn had already been registered by a Vietnamese company in 2003. Between 2005 and 2007 the company, with help of a team of local lawyers, filed three complaints to the Vietnam Internet Network Information Center (VNNIC) asking for the domain name ebay.com.vn to be canceled as it was an infringement of their trade mark. The ‘eBay’ trade mark was registered in Vietnam in 2002. In 2007 eBay’s regional director in South-East Asia became directly involved in pursuing the complaint to try to settle the case. Despite all these efforts, the disputed domain name is still owned by the Vietnamese company[1].

Photo source: https://pixabay.com/

Photo source: https://pixabay.com/

This is not the only case like this, in 2014 a Korean individual registered the domain name instagram.com.ph and two years later she also registered the domain name instagram.ph. These domain names led to pages displaying links to other websites, including ‘Log In Instagram’ and ‘Create Instagram’ or ‘Create an Instagram Account’ and ‘Free Download Instagram APP’. The domain name instagram.com.ph was previously offered for sale on a broker’s website for USD 5 000 while the disputed domain name instagram.ph was displayed on another broker’s website with the message ‘This domain is for sale’ and a system was provided for submitting an offer. Instagram, LLC decided to file a complaint with the Arbitration and Mediation Center of the World Intellectual Property Organization (WIPO) in 2018 and two months later the Administrative Panel assigned the domain names to Instagram[2].

According to a new press release from Business Insider[3], ‘South-East Asian countries outdo most other emerging market regions in the 11th annual Agility Emerging Markets Logistics Index, a broad gauge of competitiveness based on logistics strength and business fundamentals. Business-friendly conditions and core strengths position several South-East Asian countries near the top of the Index, behind giants China (1) and India (2).’ Meanwhile, cybersquatting (also known as domain squatting) has become a critical concern for many companies doing business in this region.

Photo source: https://pixabay.com

Photo source: https://pixabay.com

While setting up businesses in the region, many companies realise that their names or trade marks, in combination with country code top-level domain (ccTLD) suffixes (such as .vn, .id, .th, .sg, etc.), have been previously registered by third parties (cybersquatters).

Cybersquatters often purchase domain names in the hope of selling them to the trade mark owners at an inflated price. The cybersquatters also use the domain names to sell counterfeit products or direct users to their own websites (often but not always containing some sort of illicit content, from pornography to gambling, etc.). Reclaiming the disputed domain name is not always easy, it is a time- and money- consuming process. There are also cases when it isn’t possible to get your domain name back (for example the case of ebay.com.vn in Vietnam).

According to the Domain Name Dispute Statistics from the WIPO, Vietnam (393 cases), Indonesia (263 cases), Thailand (244 cases), Singapore (153 cases), Malaysia (149 cases) and the Philippines (120 cases) are the countries where there are high numbers of respondents involving domain name disputes in the South-East Asian region[4].

Moreover, the COVID-19 pandemic appears to have fueled an increase in cybercrime. ‘As much of the world has been working from home, businesses and consumers are relying heavily on the Internet and related IT resources — whether to engage in their “day jobs”, to shop online, or to inform themselves on staying safe in the current pandemic. Many domain name registration authorities have even reported an increase in the number of domain names registered. These may be used for news/information sites, or even to provide new business offerings, but much like social media platforms, are also being used to spread misinformation and to engage in illegal and fraudulent activities[5].’

How do I protect my domain name from cybersquatting?

Here are some tips for companies to safeguard themselves against cybersquatting while doing business in South-East Asia:

  • Register your domain names in potential future markets. As domain names are assigned based on a ‘first come, first served’ basis (the first-to-file rule), invest some money in registering your domain name at an early stage to reserve your right to it. This is much cheaper than the litigation option.
  • Register your trade mark in potential future markets. Cybersquatting generally involves the bad faith registration of another’s trade mark as a domain name. Therefore, having your trade mark registered in a country is an essential step enabling you to proceed with a request for the cancelation of a disputed domain name.
  • Online monitoring to detect cybersquatting. You should proactively conduct online monitoring activities or hire service companies with expertise in the field. In fact, sometimes cybersquatters are interested in attracting people to their (illicit) businesses by riding on your reputation. This can be detrimental to the image of your company and, on a general level, makes it harder for people to find you on the web. Some things you should check regularly are:

    Photo source: https://pixabay.com

    Photo source: https://pixabay.com

Variations of your domain name. Variations may consist of adding a hyphen if the domain is made up of more than one word, for example race-horsing.com vs racehorsing.com or using the singular and plural versions of your domain, such as product.com vs products.com. Typosquatting (involving mistypes or misspellings of your domain name) is also a popular form of cybersquatting. For example, the disputed domain name ercisson.net registered with Above.com is virtually similar to ‘ericsson’ mark of the Ericsson company (the letters ‘i’ and ‘c’ are reversed)[6].

Combination of additional words. The cybersquatter may combine your trade mark or service mark with relevant products or services in either English or a local language. For example, a Guangdong-based company registered ‘googlelocal.cn’ and ‘googlelocal.com.cn’ in March 2004[7], and a Vietnamese individual registered the domain name quangcaogoogle.com (‘quang cao’ is a Vietnamese phrase meaning ‘advertising’)[8].

More than one extension. There are some common versions of generic top-level domains (gTLDs) such as .com, .net, and .biz, etc. In South-East Asia, popular ccTLDs in some countries are .vn and .com.vn (for Vietnam), .co.th and .net.th (for Thailand), .sg and .com.sg (for Singapore), and .id and .co.id (for Indonesia), etc. Check all possible extensions of your domain name and do not neglect any of them.

What do I do if my domain name is taken?

In the Uniform Domain Name Dispute Resolution Policy (UDRP[9]) adopted by the Internet Corporation for Assigned Names and Numbers (ICANN), the basic requirements for requesting a cancellation or transfer of a domain name are:

  1. The domain name is identical or confusingly similar to a trade mark or service mark for which someone holds the rights;
  2. The other party have no rights or legitimate interests in the domain name;
  3. The domain name has been registered and is being used in bad faith.

Many dispute resolution agencies use these principles as a rule of thumb to settle domain disputes. In light of the above, if you find out that someone has registered a domain name to reap benefits from your reputation, you can consider taking the following steps:

  • Collect evidence of the bad faith registration and use. As a general rule, firstly check to see if the domain name takes you to a website (sometimes no website is found). If there is a real site, these questions arise:

– Is there any offer pertaining to reselling, renting, or transferring the domain name?

– Does the website offer any products or services similar or identical to yours for sale?

– Are there any links to other sites?

Remember to save all of the evidence that you find at the investigation stage because the registrant may change any of the content displayed at any time, especially if they notice that a potential dispute is in the offing.

  • Contact the domain-name registrant and start a discussion. Before jumping to any conclusions, contact the registrant to find out if there is any reasonable explanation for the use of the domain name or if there is a way to reach an agreement with them to obtain the transfer of the domain name.
  • Bringing the dispute to arbitration. If negotiation or conciliation with the registrant doesn’t work out, you can proceed with arbitration for the cases detailed below.

Regarding gTLDs such as .com, .asia, .biz, .info, .net, .org, etc., complaints can be submitted to any of the dispute resolution service providers approved by ICANN under the UDRP proceedings. The WIPO Arbitration and Mediation Center is considered as one of the most time- and cost-efficient mechanisms for resolving internet domain name disputes.

In addition to the above, the WIPO Arbitration and Mediation Center currently also provides domain name dispute resolution services for 76 ccTLDs (including two ASEAN members, Laos and the Philippines). In other words, if there is a dispute related to ccTLDs in Laos or the Philippines, the claim can be brought before an arbitration process initiated by the WIPO.

For Singapore, ccTLDs claims can be submitted to the Singapore Mediation Centre, which uses the Singapore Domain Name Dispute Resolution Policy to settle the case. In Malaysia, the complaint can be brought to the Asian International Arbitration Centre, the dispute resolution provider authorised by the Malaysian Network Information Centre (MYNIC).

  • Taking action through the administrative route or initiating a civil lawsuit at a court. Not all ASEAN countries offer domain name arbitration (the countries mentioned above are exceptions), therefore the complainant can consider proceeding with an administrative action or file a lawsuit with the competent court. If you have to use these routes, contacting and getting advice from a local expert is advisable.

 

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.vnnic.vn/tranhchaptenmien/thongke/tranh-ch%E1%BA%A5p-li%C3%AAn-quan-%C4%91%E1%BA%BFn-t%C3%AAn-mi%E1%BB%81n-ebaycomvn

[2] https://www.wipo.int/amc/en/domains/decisions/text/2018/dph2018-0002.html

[3] https://markets.businessinsider.com/news/stocks/southeast-asian-countries-lead-agility-emerging-markets-index-1028888255#

[4] https://www.wipo.int/amc/en/domains/statistics/countries.jsp?party=R

[5] https://www.wipo.int/amc/en/news/2020/cybersquatting_covid19.html

[6] https://www.wipo.int/amc/en/domains/decisions/text/2010/d2010-0566.html

[7] http://www.pin-dao.com/news5.htm

[8] https://www.vnnic.vn/tranhchaptenmien/thongke/google-v%C3%A0-t%C3%AAn-mi%E1%BB%81n-quangcaogooglecom

[9] https://www.icann.org/resources/pages/policy-2012-02-25-en

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 be 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