As Malaysia gears up to  roll out the 11th Malaysia Plan, innovation is positioned at the forefront of the government’s agenda as a quintessential tool “towards becoming a High Income Advanced Nation.” This was the key theme of ALB’s inaugural Malaysia IP Conference, held on March 12th, that brought together 100 of Malaysia’s finest legal minds and innovators. Peter Wee of the Malaysia IP Association applauded the timely nature of the conference, given that in preparation for the ASEAN Economic Community, Malaysia acts as the Chair for the ASEAN Summit at the end of 2015 in Kuala Lumpur.

IP Financing Scheme and IP valuation

The monetisation of intellectual property is actively advocated and supported by the government to encourage entrepreneurship and develop small and medium-sized enterprises (SMEs). In 2013, the government unveiled the IP Financing Scheme (IPFS), worth 200 million ringgit (approximately $55.2 million) and targeted to enable companies of all sizes, especially SMEs, to access business financing via the monetisation of their IP assets. To date, Malaysia Debt Ventures, the government-backed entity in charge of the IPFS, has disbursed approximately 40 million ringgit worth of funding across 13 companies. Additionally, in June 2014, the government launched a pilot IP marketplacewith the aim of providing a platform to facilitate IP trading. However, concerns remain, especially given that banks have little awareness of the correct IP valuation methodology to use and therefore refrain from funding projects collateralised with IP rights.

IP valuation

In an effort to address these concerns the IP Corporation of Malaysia (MyIPO) has introduced the Malaysian IP Valuation Model, providing guidelines to financiers on quantifying and assessing IP assets as well as rigorous training schemes to expand the base of qualified local IP valuers.  Kherk Ying Chew of Wong & Partners and Michael Nixon of Baker & Mckenzie.Wong & Leow shared a practical overview of IP valuation, weighing the pros and cons of the cost, market and income-based methods according to their complexity, revenue forecast reliability and industry applicability. Nixon concluded that the income method is the most frequently used worldwide due its ability to account for risk factors and cash flow, while the cost method is useful at the early stages of IP development. He warned that there is no one-size-fits-all solution and the valuation method must be selected on basis of an in-depth understanding of the assets, the legal rights protecting the assets and data availability.

SME Masterplan 2012-2020

Technological innovation remains limited in  SMEs with 70 percent of IP owned by foreigners. Scarce knowledge of drafting IP policies and licensing agreements and of alternative financing opportunities besides public funds are some of the contributing factors, said Saifol Bahri Mohamad Shamlan of SME Corporation. To this end, SME Corporation has launched the SME Masterplan for 2012-2020 including the Technology Commercialisation Platform,  which offers incubation facilities, testing services and matching with potential financiers for SMEs at the early stages of IP commercialisation. The Ministry of Science, Technology and Innovation (Mosti) allocated 50 million ringgit under its newly implemented buy-back policy this year, to encourage local players – especially SMEs – to launch innovative products and services, while the Inland Revenue Board of Malaysia offers tax incentives to SMEs to register patents and trademarks.

Technology commercialisation

SMEs and businesses in general must also understand the building blocks of a technology licensing agreement, said Muhammad Suria Doshi bin Abdullah of SIRIM. An optimal technology licensing agreement should determine the purpose, duration and territorial limits for the use of IPR, the renewal, sub-licensing and termination conditions and the clauses on confidentiality, operational and financial risks as well as dispute resolution. Correct terminology serves to avoid the licensor’s future claim of “implied rights.” Employment contracts must also clarify the ownership of business assets — including IP — to avoid cases such as the lawsuit brought by blue LED inventor Shuji Nakamura. Furthermore, a comprehensive IP policy and regular IP audit are essential to uncover under-utilised or unlicensed IP assets and identify potential threats of infringement by competitors.

Patent analytics and business strategy

Analytics from patent and trademark data offer valuable competitor-intelligence and serve as a crucial business strategy tool. Eric Khoo of Thomson Reuters described how patent landscape analysis may help companies pinpoint partnership and licensing opportunities and facilitate due diligence prior to joint ventures, mergers and acquisitions or entry into a new industry or market. Data on submitted patent applications helps companies gain understanding on who the key innovators in their target company/industry are and the rate between pending and granted applications assist in assessing the expectedlevel of IP protection in the sector.

Anti-counterfeiting and brand protection

Companies have recognised the adverse reputational and commercial effects of copyright infringement and trademark fraud and the subsequent need to join forces with government and industry peers. Countries in the Asia-Pacific are increasingly resorting to website blocking, search engine de-listing, advertising restrictions and the so-called 3-pronged graduated response  to combat digital piracy (more on these anti-piracy tools can be found here).

An example of this is Malaysia’s Bersatu Membanteras Cetak Rompak, anti-piracy campaign launched by key representatives of the government and the creative content industry. Ramani Ramalingam of the Recording Industry Association gave an overview of the four main components of the campaign, including the National Moment of Silence, celebrity-driven messages, consumer engagement and legal crackdowns. The first blocks initiated on May 23 2011 by the Malaysia Communications and Multimedia Commission (MCMC), targeting 10 foreign illegal file-sharing websites, however, attracted significant security backlash, leading to the hacking of government websites. Enforcement raids continue, albeit at a reduced rate, while regulations and guidelines on notice and take-down procedures applicable to hosting providers are expected to be introduced in the near future.

Representing a regional perspective, Matthew Kurlanzik of 21st century Fox advocated for collaboration with ad networks to blacklist illicit ads, with search engine providers to remove illegal and promote legitimate content and with governments to legitimise website blocking. In response to a popular dilemma whether website blocking is an infringement on your fundamental human rights, Kwee Tiang Ang of IFPI Asia cited the European Court of Justice’s decision that copyright itself is a fundamental right deserving protection. Ang advocated that website blocking is effective and that it does not unnecessarily restrict information access.

IP-related alternative dispute resolution

Malaysia has made great strides in recent years to create a welcoming environment for alternative dispute resolution (ADR). In most domestic cases dealing with IP infringements and counterfeits, IP owners have leaned towards filing in courts due to the speed and efficiency of the IP Court in reaching decisions and the court’s power to impose permanent injunctions, explained Kherk Ying Chew of Wong & Partners. The government therefore amended its Arbitration Act in 2005 and 2011, repealing the 1952 law that confined the arbitration structure through frequent interference by the courts and limited jurisdiction. With the removal of this judicial red tape, Malaysia aspires to become a respected hub for international ADR.

Arbitration is often considered an optimal choice in the case of complex, multi-jurisdictional IP and technology disputes, offering a time and cost-efficient and well-informed resolution, explained Jessica Park of the World Intellectual Property Organization (WIPO)’s Arbitration and Mediation Center’s office in Singapore. Park also recommended expedited arbitration as an alternative or a hybrid process, combining mediation and arbitration in appropriate cases. When preparing for arbitration as a potential dispute settlement method, stakeholders must evaluate the purpose of the dispute resolution, the number of arbitrators needed (often contingent on budget) and the time commitment of the arbitrators to avoid delays in the conduct of the ADR process.  Yew Kuin Cheah from Baker & McKenzie.Wong & Leow highlighted that both in-house and external counsel have complementary roles to play in procuring an expeditious and effective dispute resolution process. Michael Lee of the International Centre for Dispute Resolution emphasised the importance of selecting the right forum or seat for arbitration based on the perceivedneutrality of the jurisdiction and the extent of support by the local courts. Cheah discussed the importance of rules of privilege in an arbitration setting involving parties from different jurisdictions where laws governing legal privilege may differ. Lee and Park agreed, that while not necessarily bound by  strict rules of legal privilege, some arbitral institutions have implemented rules to allow arbitrators to adopt the most protective standard of privilege ensuring the appropriate level of protection is granted to all parties to the arbitration.

To heed what Nobel Prize winner Edmund Phelps once said, ”it is an innovation crisis that is at the origin of our economic decline.” Innovation is more than just a research and development policy. It is the ability of a system not only to produce new ideas but bring them to markets, and translate them into economic growth and prosperity. This is where IP rights play an important role as businesses learn how to manage and protect their assets. Legal and IP counsel must therfore adopt a pro-active stance to drive IP commercialisation, contributing to the ASEAN IPR Action Plan in achieving “one vision, one identity, one community.”