IP exploitation strategy in South-East Asia

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Written by Marta Bettinazzi

In these changing times, we all need to find the time to prepare for the future and draft our strategy for success. This should also mean reevaluating our resources to see if we can make better use of them.

A good shift of perspective is to stop considering your intellectual property (IP) only as a cost (registration, maintenance). IP is an asset and you should learn how to make the best out of it. We will briefly look at the options that exist for exploiting intellectual property rights (IPR), then examine both the risks and the best practices to put into place in South-East Asia (SEA).

The best way to exploit your IPR depends on the kind of IP you own, but it can be summarised in two big categories: licensing and selling.man-sitting-near-fruits-723991

Selling means that you permanently transfer your IP (or better, the economic rights connected to it) to someone else. For example, you sell your patent to a bigger company that can mass-produce the invention you have patented or, more commonly, your IP is purchased as part of a merger-and-acquisition operation. In this case one company would acquire all the IPR that were part of your assets (trade marks, copyrights, patents, etc.). A famous example is the acquisition of WhatsApp by Facebook for the unimaginable price of USD 21 billion (more info here).

Licensing means that you, as an IPR owner (licensor), authorise someone to use your rights (licensee) in exchange for an agreed payment (fee or royalty).

This can allow you to expand your global presence and also ensure a source of revenue. On the other hand, the licensee can manufacture, sell, import, export, distribute and market various goods or services that they may otherwise not have had the rights to.

We can group the license agreements in three categories: Technology License Agreement; Trademark Licensing (and Franchising) Agreement; Copyright License Agreement.

Often these kinds of agreements are combined with and/or included in broader contractual settings, for example distribution contracts.

Therefore, the first step in an effective IP strategy is to review the agreements you already have in place with your partners and distributors to be sure that they include clear rules regarding the use of your IP.

In SEA it’s not uncommon for local distributors to register the IP (usually the trade marks) of their international partners under their own name. This way the local company acquires de facto an exclusive license on the product(s) of the SMEs. In fact, if the local company is the owner of the trade mark, it can prevent others from using it, including other companies authorised by the SME (the original owner of the trade mark). It might be said that you are in a marriage with your partner, and you might need an expensive and lengthy divorce (judiciary decision) to be able to leave it.

Before entering any kind of distribution agreement, give special attention to the difference between the registration of the trade mark (and IP in general) and the registration of the product itself. The latter is an administrative step needed to import a ‘new’ product into a country, but it does not ensure any protection for your IPR.

In other words, if your distributor is offering to do the product registration to allow you to import goods into the country, this does not imply that he/she is also going to help you with the registration of the trade mark or patent (or any other IP).

Keep in mind that a formal licensing agreement is possible only if the IPR you wish to license is also protected in the country or countries of interest to you. Without registering your IP in the country, you are not only unable to properly license it, but you also have no legal right to put any restriction on its use by anyone else.

Despite provisions in international treaties, courts and administrative bodies in SEA seldom extend protection to well know trade marks (see, as a reference, the famous IKEA case in Indonesia). Only Malaysia and Singapore ensure some level of protection for de facto trade marks and take into account the use of a non-registered trade mark.

On a side note, do not forget to consider registering your trade mark in local scripts as well, for example in Thailand, Malaysia, and Myanmar. This ensures complete protection for your trade mark, limiting the possibility of cheaper copycats riding on your reputation by using a transliteration of your trade mark. pink-and-white-weighing-scale-3964619

Also, note that many countries in SEA require license agreements to be registered if they are to be enforced. Some countries, like Thailand, also require the registration of trade mark licenses, others, like Vietnam, only require the registration of technology transfers.

To recap, be sure to register your IP before entering into any agreements with local partners. If this is not possible in the immediate future at least include a clause in your agreements to prevent the local company from registering your IP ‘for you’.

Technology transfer agreements can be very remunerative, but can also put your business at risk — you could be creating your own, stronger competitor. Therefore, it is advisable to either license a technology you have patented in the country where your counterpart will operate or you license something (an idea, a technology, some know-how, a recipe, etc.) that is secret. In this case, you have to be sure that your partner is bound by the same level of secrecy.

Reality is not that simple. Even if something is patented (and therefore publicly disclosed, for example in Europe) local companies might not be advanced enough to copy it, and may be interested in entering an agreement with you to acquire the know-how surrounding the patent.

This might present itself as an unpredicted and very welcome source of revenue for you, but you are running the risk of your new partner becoming your competitor in the future.

A good way to balance this issue is to bind your partner to secrecy regarding the unpatented part of the technologies.

As mentioned, technology transfers are not always encouraged by legislation in SEA and can often be subject to registration requirements. This means that if the agreement is not registered at the public office it cannot be enforced (in cases of breach or liability). Some countries have also limitations regarding the kind of technologies that can be transferred to and from their territory.

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In short: the best strategy is always to patent all your cutting-edge technologies in as many countries as possible (including new markets like SEA); combine a good patent strategy with a high level of secrecy and be aware of local legislation.

A final thought: do not forget to prepare all your contractual documents in both English and the local language and be sure to agree and sign the local language version. Most of the courts in SEA can only accept (and understand) documents in the local language. A later translation could be not only expensive but also problematic; your counterpart could propose their own translation of the text, which could lead to endless interpretation problems.

For more information you can have a look at our guides on trade marks, patents and technology transfers, or at our country factsheets.

Do not hesitate to reach out to the Helpdesk if you have any questions on IP in SEA.

Marta Bettinazzi

IP Business Advisor

South-East Asia IPR SME Helpdesk

E: marta.bettinazzi@southeastasia-iprhelpdesk.eu

W: www.southeastasia-iprhelpdesk.eu

 

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.

DIOR: 3D TRADEMARK REGISTRATION CASE

2014 Christian Dior registered its J’adore perfume bottle as a 3D trademark and also an international registered trademark. Following the Madrid Agreement and the Madrid Protocol, Dior applied a territorial extension protection in China through the international bureau of WIPO. The TRAB of the SAIC rejected the application on July 13, 2015 with the reason of lack on distinctiveness. Dior filed a application for review of the refusal, but was also rejected with the same reason. After that, Dior submitted a administrative case to the court against TRAB’s decision, but failed by first and second instance. At last Dior applied for retrial to the Supreme People’s Court. On April 26, 2018 the Supreme People’s Court of China brought in a verdict that Christian Dior won the trial in the administrative dispute with the TRAB about the review of refusal, the TRAB must re-review this trademark application.

Continue reading “DIOR: 3D TRADEMARK REGISTRATION CASE” »

E-Commerce Platforms Up, Trademark Holders Down!

The First China E-Commerce Law lightens the burden of E-commerce platforms when dealing with IPR infringements, while making it more expensive and burdensome for the holders of IP Rights!

The long awaited E-commerce Law of the PRC has been finally approved, entering into force on August 31, 2018. This is the first Law that expressly regulates the relation between IPR owners and e-commerce platforms. The Law seems to favor e-commerce platforms by shifting the whole burden to the right holders to prove infringement in case of disputed takedown notices. Compared to the established business practices, the Law appears to be more e-commerce than IP friendly.

1. An overview of the relevant provisions

Instead of providing strict rules regarding the protection of IP rights online, the new Law has simply codified the current practices on takedown notices. This will leave it to the e-commerce platforms to continue self-regulate the procedures for the takedown of IPR infringing content. In particular, the Law has neither introduced any measure or standards to lighten the burden of proof of infringement of the right holders when filing takedown notices, nor has provided a procedure of effective cross examination of the defenses filed by the alleged infringer in case of disputed takedowns. The platform retains the discretion to examine and interpret the evidence and is free from the burden of having to make a final decision in case of a disputed takedown notice. This is particularly critical in those cases in which the alleged infringer denies liability, shifting the whole burden on the right holders to overcome such refusals by filing judicial or administrative lawsuits!! As we shall see below, this will give counterfeiters a good tactical advantage and will likely increase the number of disputed takedown notices in the future.

Also, the Law does not provide any strict obligation and standards imposing on the platforms the creation of preventive IPR protection systems. Article 45 of the Law only provides a generic obligation for a platform to take appropriate protection measures if the former knows or should have known that a user has infringed others IP rights. Aside from failing to define the standard of “knowledge”, the provision refers to cases where the infringement has already taken place. No specific obligation to prevent postings of obviously infringing content has been introduced, thus freeing the platforms from the obligation and burden of having to take preventive measures. If any such measures are or will be in place, this will be the result of lobbying and self-regulation, and not a consequence of this new law.

As we mentioned above, the Law acknowledges that the IPR holders have a right to request the removal or the block of infringing content by filing a notice with the platform, which must be supported by prima facie evidence of infringement. This is nothing new. It has been the common practice of e-commerce to allow so called takedown notices supported by evidence of infringement.

Like in the consolidated business practice, the Law allows the alleged infringer to defend itself by filing a response to the notice supported by evidence. However, and unlike the text of the 3rd and last draft, the final text of the Law has added to the safe harbor rule of e-commerce platforms, a 15 days time limit for the IPR owner to file a litigation or complaint (maybe with the IP office) or drop the case. If a lawsuit/complaint is filed, the take down measures already taken by the e-commerce platform will remain in place, with the e-commerce platform’s measures becoming a de facto “preliminary injunction”. If not, the measures will be revoked. In practice, an unlike the previous drafts, the platform is taking no further responsibility in deciding who is right or wrong and the law helps her out of trouble by forcing the right holder to escalate the dispute to the judicial level. Continue reading “E-Commerce Platforms Up, Trademark Holders Down!” »

Lafite succeeds in cancelling ‘Lafeite’ used on hotel services

A Chinese hotel named Beijing Lafeite Castle Hotel Co., Ltd. (Lafeite Hotel) in 2007 filed for the registration of the mark “拉斐特” (pronounced as “Lafeite” in Mandarin) for use on restaurant and hotel related services under Class 43, which the China Trademark Office (CTMO) approved for registration in 2015.

Château Lafite Rothschild (Rothschild), the producer of the globally famous wine brand “LAFITE” (“拉菲” in Chinese, pronounced as “Lafei” in Mandarin), filed for the cancellation of the disputed mark before the Trademark Review and Adjudication Board (TRAB) claiming that, as its prior registered trademarks “LAFITE” and “拉菲” (“Lafei”) designated for use on wine products have attained well-known status, the disputed mark “拉斐特” (“Lafeite”), which is similar to the mark “拉菲” (“Lafei”), may damage Rothschild’s interests.

[Note: according to Article 13 of the Trademark Law, well-known trademarks that are registered in China are entitled to cross-class protection to the extent that no mark that is a copy, imitation or translation of said well-known mark may be registered for use in whatever class of goods, if doing so may mislead the public or otherwise damage the interest of the registrant of the well-known mark.]

The TRAB however handed an unfavorable decision holding that the evidence adduced is insufficient to prove that Rothschild’s trademarks “LAFITE” and “拉菲” (“Lafei”) had attained well-known status in China prior to the registration of the trademark; meanwhile, since the restaurant services under Class 43 and the wine products are dissimilar, the disputed mark, as applied for use on restaurant related services, is unlikely to damage Rothschild’s interests. Continue reading “Lafite succeeds in cancelling ‘Lafeite’ used on hotel services” »