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Picture this. Your start-up company has recently developed a new sports drink using a secret proprietary recipe. Your R&D manager informs you that this new sports drink provides more energy to athletes and doubles up as an alternative slimming product that carries no side effects. You are so excited and decide to speed up the launch of the new product. After much deliberation, your company decides to introduce the product to the local market under the name of SlimDrink.
This new sports drink quickly gains widespread popularity and is even featured in the media as the top selling drink of the month. Not long after celebrating the successful launch and outstanding sales of the drink, you discover that your closest competitor is also launching the same product, but calls it LeanDrink. Your competitor’s product offers exactly the same benefits as your SlimDrink, but is sold at half its price. Soon, you realize that your market share has diminished as your buyers have switched to LeanDrink as a cheaper alternative. You are suspicious and know that it’s impossible for your competitor to produce the same drink in such a short time. It all made sense when you find out to your surprise that your company’s R&D manager has just left and was headhunted by your competitor. At the same time, you receive a cease and desist letter stating that you have infringed someone else’s trademark.
You then seek legal counsel from an IP Lawyer. After a long discussion with your lawyer, you then realize that there’s nothing much you can do as you didn’t take any initial steps to protect yourself and yours is not the only company that faces such a predicament.
The fictional story above could very well be a true one as most of the Small and Medium Enterprises (SMEs) in Malaysia lack awareness in protecting and safeguarding their IP. Therefore, it is advantageous for new business owners to understand the functions of various IP rights before commencing their businesses so that they can manage and enforce their IP rights, by formulating a thorough IP strategy.
OVERVIEW OF IP RIGHTS IN MALAYSIA
There are various types of IP rights that confer protection for the intellectual effort, labour and investment of creators. IP rights are territorial in nature. Hence, the grant and enforcement of IP rights are governed by national laws, and also by international treaties, whereby these treaties have been given effect by the national laws. The following chart gives an overview of the different types of IP rights:
Patents
A patent is an exclusive right granted for an invention. The invention has to be new, involves an inventive step and can be industrially applicable in order for a patent to be granted in Malaysia. The invention, for example, can be a product, chemical composition, article of manufacture or a process that offers a new technical solution to a problem. Patents rights excludes others from making, importing, offering for sale, selling or using the patented invention in Malaysia for the term of the patent (i.e. 20 years from the date of filing the patent application). In order to have effect against third parties that infringe the exclusive rights of the proprietor of the patent, the patent has to be renewed annually after the grant of the patent. A patent is a legal monopoly that the government offers to the patentee during the term of the patent in exchange for their agreement to share the details of their inventions with the public. Therefore, anyone is free to use the invention once the term of the patent has lapsed.
Malaysia adopts the first-to-file patent system like most of the countries in the world. The first-to-file system confers the grant of a patent to the first person that files a patent application for protection of his invention, regardless of the actual date of invention. Thus, it is advisable to protect your invention by filing a patent application with the Intellectual Property Corporation of Malaysia (MyIPO) as soon as possible. In addition, a patent applicant from Malaysia is able to use its first filing date as the effective filing date or priority date in another country party to the Paris Convention, provided that he files another application within 12 months from the first filing.
Utility Innovations
Utility Innovations provides an alternative for SMEs in Malaysia to protect their invention. Sometimes, the invention from SMEs can be a minor improvement of an existing product or process and may not be able to meet the stringent requirements for the grant of a patent. The registration of a utility innovation is relatively less stringent as an inventive step is not required. The procedure for registration is relatively faster and acquisition and maintenance fees are generally lower than that of a granted patent. Hence, utility innovations serve as a preferred alternative especially for products with “minor” improvements and short shelf-life.
The term of protection of utility innovation is 10 years from the date of filing an application for utility innovation. It can, however, be extended for another 5 + 5 years upon proof of use.
Apart from protecting the invention in Malaysia, SMEs can also consider protecting their inventions in overseas via several routes such as national route, Paris Convention or the Patent Cooperation Treaty (PCT). This is particularly beneficial to SMEs such that they can enjoy an important competitive advantage in their export markets.
Trademarks
A trade/service mark, in particular, enables SMEs to maximize product differentiation, advertising and marketing such that recognition of SMEs’ products or services in local or international markets can be enhanced. A trade/service mark, for example, can be a distinctive sign, or any combination of signs, which identified certain products or services as those produced by a specific person, enterprise or a group of persons allowing the consumers to differentiate their goods or services from those goods or services of others. A trademark includes any distinctive words comprising personal or company’s name, letters, numerals, pictures, colours, logos and labels. In some countries, sounds, smell and three dimensional marks (shape) can be registered as trademark. However, there are no explicit rules in Malaysia which allow these features to be registered as a trademark at the moment.
Industrial Designs
Features of shape, configuration, pattern or ornament applied to an article or handicraft by any industrial process, being features which in the finished article appeal to and is judged by the eye can be protected by industrial design. Industrial design gives protection to the external feature of an article which possesses ornamental or aesthetic appearance. However, a design can only be registered if it’s new. The term of protection given to a registered industrial design is five years. However, the period of protection may be extended for two further consecutive terms of five years each. Hence, registration of industrial design provides legal protection for a maximum of 15 years to the owner of the registered design.
Copyright
Copyright grants authors, composers and other creators legal protection for their original works that includes literary works, musical works, artistic works, films, sound recording, broadcasts, derivative works and published editions. It confers protection for the originality of the subject matter as aforementioned. Nevertheless, any discrete idea, procedure, and method of operation or mathematical concept as such cannot be protected under copyright.
Copyright belongs to the creator of the work. However, if the work is created by an employee during the course of employment, the copyright lies with the employer (unless there is a contrary agreement). If there is no contrary agreement and it is an independent contractor, the creator himself will own the copyright even though he was commissioned to create the work. Copyright differs from patents and other intellectual property, as it is merely a right to prevent others from reproducing and not a monopoly right to do something.
Trade Secrets
Trade Secret protects information (for example, the secret recipe for SlimDrink above), practices, processes, designs, instruments, patterns, or compilations of information which is important to the business and is not known to the public. The law on trade secrets is about the protection of confidential information. It offers SMEs an alternative method to protect information that has commercial value in a more economical way as no registration is required to protect trade secrets. There are several ways to protect confidentiality of information. Signing of non-disclosure agreements with your employees and joint developers, for example, would be a good practice to deter leakage of information.
IP STRATEGY
After understanding the differences between various types of IP rights and funding schemes available, SMEs can then formulate a comprehensive IP strategy and integrate it with their business plans. There are several steps of which SME owners can practise internally to minimize the cost of IP protection and yet maximize the utilization of IP to create wealth. To best protect a company’s intangible assets, an IP audit may appear to be a good first step to identify all company’s valuable information and develop an IP strategy. Companies are often unaware of the wealth of assets they posses in the form of information, creative ideas and know-how and therefore, may not take adequate steps to protect them.
If a company has an R&D department that invents and develops products, it is advisable to identify patentable subject matters. It is always safer to ensure that the invention is patented early to avoid losing the invention to competitors. As filing a patent can be costly, the inventor should conduct a patentability search to find out whether a similar invention has already been published or patented. In cases where the invention has already been patented, the inventors can consider coming up with ideas of improving the existing invention, so that utility innovations can be used instead. Alternatively, the inventor can discontinue the development of his own invention at an early stage. This would definitely save considerable costs incurred for R&D and fees for patent protection.
Continuous education should be provided to educate the inventors to ensure that patentable inventions are not shared with others or published before filing a patent application. As previously mentioned, the invention must be new in order to be granted a patent. Early disclosure of an invention, for example, through publications, exhibitions or presentations will compromise the chances of the invention being considered new, and therefore it may jeopardize its chances of being patented.
While conducting your own patentability search, the patent information available in patent databases can be a useful tool to develop your business strategies. The patent information is useful for SME owners to discover recent technological developments and new technologies, to identify new licensing partners or suppliers, to new market opportunities and to monitor competitors’ activities.
Companies with small budgets for patents can consider keeping the invention or its method of production as a trade secret. However, they are advised to keep their trade secrets within the enterprise and prepare, where appropriate, confidentiality agreements when negotiating and sharing information with business partners. Likewise, when conducting a joint research with other enterprises or research institutes, the same measure should be taken. Also be clear beforehand and agree in writing on the party who will own the potential IP generated from the research project.
If a company’s product is tied to a company’s trademark, it’s often a good practice to conduct a search in the trademark database to avoid using an existing trademark. Meanwhile, if the existing trademark is found to be unique, steps should be taken to protect the trademark before launching a new product or service with a new brand name. It is also important to consider export markets when doing so and to avoid using brand names that are the same or similar to those found overseas.
SME owners should not only rely on custom officers to monitor and take action against infringements. In fact, SME owners can monitor the market themselves and make sure that their IP assets are not being infringed. If you detect a violation of your IP rights, call your lawyer as soon as possible before any further damage is done to your business.
CONCLUSION
Do not always view IP protection as a cost. In fact, you can use your IP portfolio as leverage when seeking funds for your business. Always be on the lookout for information and ideas on how to create and maximize wealth with your intangible assets.
To find out more about intellectual property in Malaysia, contact:
Intellectual Property Corporation of Malaysia (MyIPO)
Tingkat 32, Menara Dayabumi
Jalan Sultan Hishamuddin
50623 Kuala Lumpur, Malaysia
Tel: 603-2263 2100 (Operator) 603-2274 5113 (Helpdesk)
Fax: 603-2274 1332
Website: www.mipc.gov.my
