In today’s blog post, we are taking a closer look at IP protection in South-East Asia’s textile industry, which is developing fast and offering many opportunities to European SMEs. You will learn how to protect your newest fabrics, your textile machinery or your brand in South-East Asia.
Textile industry in South-East Asia offers many promising business opportunities to European SMEs as garments are one of ASEAN’s largest export articles and textile industry is still growing in the majority of South-East Asian countries with fastest growth rates registered in Vietnam and Cambodia. Furthermore, Thailand that has traditionally been strong in textile manufacturing has now set its sights on becoming a fashion hub for the ASEAN region as its textile and garment exports to other ASEAN countries have been steadily growing for the past few years. Similarly, Indonesian government is committed to preparing several incentives in a bid to boost the textile sector and making Indonesia one of the top five global textile exporters.
South-East Asia has been the production hub for many European companies that would then export apparel and accessories back to the European Market. At the same time South-East Asia also offers market opportunities for European products as European design is becoming more well-known in the region. Singapore for example has become Asia’s second fashion capital, offering a variety of high-end international brands. As Asian consumers are becoming more affluent and cities like Bangkok or Kuala Lumpur are becoming more established in the fashion world, there will be more opportunities to European SMEs in the region.
At the same time, South-East Asia’s textile industry is both an opportunity and threat to European businesses. It can be a major market for those supplying production technologies and on one of the key supply bases for textiles and finished goods. However, foreign technologies and brands that are not adequately protected often fall victim to counterfeiting and other IP violations that are still commonplace throughout the whole South-East Asia.
Protect your Brand in South-East Asia
Brand protection is of utmost importance to textile industry since brand recognition, i.e. customer’s ability to distinguish one SME’s products from competitors’ products, is crucial to SMEs producing garments and accessories. It could be damaging to SMEs if third parties started producing substandard products under the same trade mark as this could lead to the loss of clients due to decreasing trust in the quality of SME’s products. Similarly, companies that are producing textile machinery can lose their reputation and market share once third parties start producing their textile machinery under the same brand name. Thus, it is crucial for European SMEs to register their trade marks in South-East Asia to protect their brand. Furthermore, trade marks can also become an important asset with significant monetary value for SMEs. For example, IP financing schemes have been developed in Singapore to enable companies with IP rights to monetise their IP for business growth and expansion.
Trade mark regimes in South-East Asia generally adopt the ‘first-to-file’ system, which means that the first person to file a trade mark application in a particular South-East Asia country will own that right in the country once the registration is granted. Thus, if an SME does not apply for protection on time, others may do so first and benefit from the trade mark creator’s investments and reputation. Furthermore, it is especially important to register a trade marks in South-East Asian countries as soon as possible because trade mark piracy due to ‘bad-faith’ registration is a serious problem in the region. Bad-faith registrations exist where a third party (not the legitimate owner of the mark) first registers the mark in South-East Asian countries, thereby preventing the legitimate owner from registering it in the country. Usually these unscrupulous entities aim to sell the trade mark back to its legitimate owner at an inflated price. In garments and accessories sector, it is also not uncommon that these unscrupulous entities either try to sue the legitimate owner for trade mark violations or demand a share of profits in order to allow the legitimate trade mark owner to continue production in South-East Asia and export their products back to Europe.
SMEs registering their trade mark in South-East Asia should keep in mind that there is no common trade mark registry for all South-East Asian countries and SMEs would thus have to register their trade mark in each and very South-East Asian country, they foresee doing business in. At the same time, many South-East Asian countries like Thailand, Singapore, Indonesia, Philippines and Vietnam are parties to the Madrid Protocol, allowing SMEs thus to use single international trade mark application to apply for trade mark registration in all of these countries.
Certain South-East Asia countries, such as Singapore, allow protection of unregistered trade marks based on laws which protect rights against passing off (i.e. someone misrepresenting their goods or services as being affiliated with your brand, even if your trade mark is not registered but has built up a reputation and goodwill) or rights against unfair competition. However, in contrast to the well-defined rights of a registered trade mark, several factors will need to be established for a case of passing off, one of which is proof that goodwill has been acquired by the unregistered trade mark. In addition, a local judge may prefer to recognize establishment of trade identity protection through national registration. As such, the primary protection should still be trade mark registration.
In recent years, most ASEAN countries have tried to reduce the timing for trade mark registrations such as Brunei, Cambodia, Laos, Vietnam, Thailand and the Philippines. Currently, it takes about one to two years in those countries to complete the registration. In countries such as Indonesia, the process will take as long as two to three years for an application that does not encounter any objections, says Valentina Salmoiraghi, IP Business Advisor.
As the registration of a trade mark in original Roman characters does not automatically protect the trade mark against the use or registration of the same or similar trade mark written in local scripts used in particular countries of South-East Asia, such as Tamil, Thai, Lao, Burmese or Khmer, it is highly advisable for SMEs to additionally register a version of their trade mark in the script used in the South-East Asian country of interest. Furthermore, if there is no existing character name for SME’s brand in a local script, it is very likely that one will be adopted by local consumers either by way of translation or by transliteration, and not necessarily with the right connotations or image that the SME would wish to convey. It is thus also recommended that local equivalent trade mark should be carefully developed with the help and guidance of local trade mark, marketing and PR experts, as well as native speakers and translators.
Patents Protect Textile Producing Machinery
Even though changes in textile machinery are normally quite incremental, new inventions are still created on a regular basis. Latest inventions include for example a novel prewasher to maximize removal of surface contaminants that uses a vertical counter-flow arrangement which optimizes the use of water and energy. Similarly, some new fabrics and production methods could be patented. Companies that manufacture innovative textile machinery or use innovative production methods should apply for patents in South-East Asian countries to protect their products from being copied. A patent provides protection for the invention to the owner of the patent, meaning that the invention cannot be commercially made, used, distributed or sold without the patent owner’s consent. Patent rights are enforceable in courts and obtaining patent protection is therefore a crucial aspect of business in the modern global economy.
In Cambodia, Indonesia, Laos, Malaysia, the Philippines, Thailand and Vietnam, inventions can also be protected by ‘simple patents’ besides using standard patents. The name for simple patents, however may differ – Petty Patents (Laos), Utility Models (the Philippines and Cambodia), Utility Innovations (Malaysia) or Utility Solution Patents (Vietnam). Simple patents typically cover products and tools, and rarely cover technologies. In some cases there are no requirements for an inventive step (Indonesia, the Philippines, Thailand and Vietnam) and in others the degree of innovation required is lesser (Malaysia and Laos). ‘Simple patents’ can help to protect rather incremental changes to technologies which is quite typical to textile industry. The process for obtaining a simple patent is generally shorter than in case of standard patents. There is however a reduced term of protection (10 or 7 years from the filing date), continues Valentina Salmoiraghi.
The costs of obtaining a patent in different South-East Asian countries can vary quite significantly – from EUR 650 to EUR 7,000. Patent applications can be filed in English in most of the South-East Asian countries, but the SMEs should keep in mind that Indonesia, Thailand and Vietnam require the applications to be filed in their respective languages. Similarly to trade mark system, patent system also functions under the ‘first-to-file’ rule in the majority of South-East Asian countries, meaning that the first SME to file a patent application will usually be granted the patent, should the application be successful.
SMEs, wishing to apply for patent protection in several South-East Asian countries, can benefit from using the Patent Cooperation Treaty, which most South-East Asian countries are signatories to, except for only Myanmar. The PCT makes it possible to seek patent protection for an invention simultaneously in several countries by filing a single international patent application instead of filing several separate national applications. The PCT route also allows for a longer ‘wait and see’ period before the applicants decide on the countries in which they require patents.
SMEs should bear in mind that it is important to use Confidentiality and Non-Disclosure Agreements (NDAs) when they have to disclose technical information related to their invention to possible investors or partners before it has been granted a patent. It is essential, because if the investing partner discloses information about the invention before the patent is granted, the invention will lose novelty and would not be eligible for patent protection anymore. A further reason to sign an NDA is because some South-East Asian countries have legal rules whereby typically novelty destroying disclosures made in breach of confidence can be disregarded within a limited period of time from the disclosure, and this is a very important legal aspect to take into consideration in the IP strategy. Therefore, in the situation where someone breaches the NDA and discloses SME’s invention, in limited scenarios, SMEs may still be able to protect it with a patent.
Use Design Patents to Protect your Product Design
SMEs engaged in textile industry can also protect the design of textile machinery or the pattern of apparels with design patents or registered industrial designs as they are called in most of the South-East Asian countries. It is useful to also protect the design of the textile machinery as competitors in South-East Asia may copy the design and shape of the machinery and its components and mislead customers to believe that the machinery has the same functions or quality as the original, often resulting in losses in sales for the original European manufacturer.
An industrial design constitutes the ornamental or aesthetic aspect of a product. It may consist of three dimensional features, such as the shape of a product, or two dimensional features, such as patterns, lines or color. Protectable aspects of industrial designs might slightly differ in various South-East Asian countries, as for example, color per se is not protected by industrial designs in Singapore, so it is important to check the requirements of each country before filing a registered industrial design application.
Industrial designs regimes in the South-East Asian region generally adopt the ‘first-to-file’ system, which means it is recommended to apply for the registered industrial design in South-East Asia as early as possible because if SMEs do not apply for protection on time, others may do so first and benefit from the industrial design creator’s efforts.
Designs should be novel in order for them to be protected as industrial designs in majority of South-East Asian countries. However, what is considered ‘novel’ may differ among South-East Asian countries. In most South-East Asian countries, public disclosure of the design before the first filing of the application for registration will prevent the applicant from obtaining industrial designs protection as the novelty is deemed to be lost in such circumstance. However, some South-East Asian countries such as the Philippines, Indonesia and Cambodia offer a grace period, during which the applicant’s own public disclosure will not invalidate an industrial design registration. This grace period is 6 months in the Philippines and Indonesia, and 12 months in Cambodia. Therefore, European SMEs should carefully check such requirements and local laws of the relevant countries before conducting business in these countries in order to ensure that their applications for registered design protection will succeed.
European SMEs should also bear in mind that in some countries like Malaysia and Singapore, products cannot be simultaneously protected by copyright (which can also protect the appearance of products) and registered industrial design. In these countries, once the design is registered as industrial design, it loses copyright protection. In case of Malaysia European SMEs could make a choice as to whether they wish to rely on industrial designs or copyright protection to protect their designs should the design qualify for both copyright and industrial design protection. This is particularly relevant for the part of textile industry focused on creating new fabrics. Obtaining design patents could take 7-12 months, which might not always be ideal for seasonal designs.
In case of Singapore, however, where the design is registrable, all steps should be taken to register it. Otherwise, copyright protection and registered design protection are neither available when the design is industrially applied and exploited commercially.
South-East Asia IPR SME Helpdesk
The South-East Asia IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to South-East Asian countries, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (firstname.lastname@example.org) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days.
The South-East Asia IPR SME Helpdesk is co-funded by the European Union.
To learn more about the South-East Asia IPR SME Helpdesk and any aspect of intellectual property rights in South-East Asia, please visit our online portal at http://www.ipr-hub.eu/
 Invest in ASEAN, “Textile and Apparels: Where to Invest?” available at: http://investasean.asean.org/index.php/page/view/textiles-and-apparels