3 July, 2017
The ICT sector is considered to play a pivotal role in supporting regional integration and connectivity efforts between the countries in South-East Asia. The latest ASEAN ICT Industry Masterplan 2016-2020 aims to propel ASEAN towards a digitally-enabled economy that is secure, sustainable, and transformative and to enable an innovative, inclusive and integrated ASEAN Community[1]. The ICT industry is one of the sectors presenting major business growth opportunities for EU SMEs in South-East Asia.
With a combined population of about 620 million, ASEAN’s aggregate GDP reached US$2.5 trillion in 2014, with average annual GDP growth of around 6% over the past decade. The ASEAN region is considered as the seventh largest economy in the world, with experts estimating that it will become the fourth largest single market in the world by 2030, after the EU, US, and China. With extensive market size, coupled with a committed focus to increase broadband penetration, affordability and ICT usage in the region, numerous economic opportunities have opened up to ICT businesses in the ASEAN region.
European SMEs engaged in ICT industry need to pay special attention to protecting their IP rights, because IP infringements are still relatively common in South-East Asia. IP rights are a key factor for business success and neglecting to register these rights in South-East Asia could easily end SMEs’ business endeavor in the region. Thus, a robust IPR strategy is needed, when entering the promising markets of South-East Asia.
Patents Protect your Inventions
When ICT companies want to market their new inventions in South-East Asia they should consider applying for patents in South-East Asian countries, where they want to sell their products, because patent owners acquire, for a fixed period, the exclusive right to prevent others from using, commercializing or importing the patented inventions which are in the form of products or processes in a specific jurisdiction.
Generally, in order for an invention to be patentable, the invention must meet all three requirements: (1) novelty; (2) having an inventive step; and (3) industrial applicability. In some South-East Asia countries, like Cambodia, Indonesia, Laos, Malaysia, Philippines, Thailand and Vietnam, there exist “simple patents” as opposed to standard invention patents. In Malaysia and Laos, a lesser degree of innovation is required for simple patents; in others, like Indonesia, Philippines, Thailand and Vietnam, no inventive step is required at all. It should be noted though that simple patents typically cover products and tools, and rarely cover technologies.
Simple patents are generally easier to grant and they can be obtained faster than standard invention patents, which would suit well for SMEs engaged in the fast developing ICT sector. Their downside is the relatively shorter length of period of protection and lower certainty of validity for countries that grant simple patents without substantive examination such as Thailand. EU SMEs may consider simple patents more appropriate for the products with a shorter life span and/or with a lesser degree of innovation.
ICT companies wishing to patent software should at first check whether it is possible in the specific country that they wish to sell their products in. In the Philippines and Thailand, it is explicitly provided in IP laws that computer software or programs are not patentable. On the other hand, in some countries, like Singapore and Cambodia, software may be protected by patents.
European SMEs should be aware of that patent application process in some South-East Asian countries may take a considerably long time, even as much as various years. ICT products on the other hand are characterized by high obsolescence rates, resulting in very short life cycles and therefore shall require a faster protection process.
However, strategic motives may still outweigh the short product lifecycle and be the reason for applying for patent protection. In ICT, patents are used as “bargaining chips” in order to improve the outcomes of licensing/cross-licensing negotiations with other companies. Also, large patent portfolios may provide a good defensive strategy against the possibility of competitors taking legal actions for patent infringement, or they can be used aggressively in order to battle competitors in the market.
Be Aware of Patent Trolls
Due to the limited resources and understanding of IP issues, EU SMEs may overlook the need to conduct patent infringement analysis before entering new markets. Competitors or even patent trolls that have already obtained patents in overlapping technologies to EU SMEs’ business can potentially halt their plans to expand into South-East Asia. Patent trolls are entities that accumulate patents purely to make money out of them by imposing inflated prices for a license or suing possible infringers for patent infringement. These entities are a threat to companies, especially SMEs, as they may not have the resources to go to trial and are forced to settle or exit the market. It is always advisable to carry out a patent search to determine if the innovation may infringe any patents.
Copyrights Protect the Expression of SMEs’ Ideas
Since the ICT sector features cumulative innovations with short product cycles, businesses may wish to also take advantage of other IP rights, such as copyrights. One of the main values of copyright protection is simplicity, as copyright protection arises automatically as soon as a work is created. It must, however, be brought in mind that copyright protection extends only to expressions of ideas, and not to ideas per se, thus patents and copyrights are not equal.
With the exception of Myanmar, Philippines and Thailand, high-tech products, software programs and databases are expressly protected by copyright in South-East Asia. Aside from this, multimedia products such as videogames, information kiosks or interactive webpages and content in computer disks or CD-ROM are all eligible for copyright protection. It is especially useful for software applications characterized by rapid and cumulative innovation, as it provides a relatively easy and inexpensive approach in obtaining protection.
SMEs should bear in mind that to bring an infringement suit in the case of a copyright violation, one must be able to prove originality, ownership and substantial imitation or copying. There is no fixed manner of proving originality and authorship. In many South-East Asia countries (except Brunei and Singapore), a voluntary registration of copyright is available to owners.
Businesses must take advantage of this process, as it can facilitate the establishment of proof or ownership and originality. In many cases, South-East Asian countries like Indonesia would not even start infringement procedures if SMEs don’t have the local copyright registration certificate.
Take Advantage of Registered Designs to Protect the Appearance of your Products
Registered designs are used primarily to protect designs for industrial use, wherein an exclusive right to control the use thereof is granted to the owner. A design protects the aesthetic aspects of products, not their functionalities. This is increasingly used in the ICT industry to protect the appearance of products, like smart phones, tablets, and media players. In the Philippines, Singapore, and Thailand, a graphic user interface (GUI) may also be registered as a design. In Singapore, when filing an application for a GUI, the applicant must indicate the article (i.e. smartphone) the GUI is applied to.
A design differentiates products in a unique manner, and it makes products visually appealing to consumers, so this effect should be taken advantage of. By registering a design in South-East Asian countries, SMEs are given the right to prevent others from using the design without permission and potentially exploit that design by licensing it to third parties for commercial returns, or sell the design.
In the Market the Brand is Often Most Important
EU SMEs should note that consistency in adopting a branding strategy from the onset would facilitate the establishment of a brand that has a robust reputation and goodwill in the market. Considering that ICT products tend to have shorter product cycles, and at the same time, improvements are added at a consistent pace, businesses will benefit if the products and all its versions are branded consistently. Since there is a strong interaction and interoperability among ICT products in the market, having a consistent source identifier would be useful to drive business value. Along with the branding strategy, it is essential to undertake the protection of such brands through trade mark registration.
During the initial lifespan of a new product, patent registration is useful to prevent unauthorized reproduction of the product.
However, the term of a patent is finite and once the patent expires, the trade mark may take on a more crucial role, allowing companies to benefit from the goodwill built, while the patent was in force. Trademark protection is essential for companies to capture returns from its products once the patent has expired and can serve as a main driver of revenue in the long run.
Keep your Trade Secrets
The importance of trade secret protection cannot be overemphasized in high-tech companies. By protecting trade secrets, most businesses can take advantage of lead time—particularly, ”first to market” approach or the ability to commercialize the innovation well ahead of competitors, so that substantial revenue can be captured before copycats are introduced in the market. This is especially helpful for companies with products that are expected to have a short run in the market.
EU SMEs should usually first consider whether there exist other mechanism to protect the secret information, for example, by filing a patent. However, considerations should be made on a case by case need. In some occasions, it might be disadvantageous to keep an innovation a secret, especially if it can be protected by a formal type of IPR. This is because if the innovation is embodied in a product, third parties that get hold of the product may be able to “reverse engineer”, dissect and analyze to arrive at the secret innovation. In addition, trade secret protection does not provide the exclusive right to exclude third parties from making commercial use of it. Only patents and utility models provide it.
However, in many cases trade secrets are a good way of protecting inventions and the key to trade secret protection is keeping it secret. EU SMEs should control the number of people who know the secret and that all those who do are well aware that it is confidential information. Companies should include confidentiality clauses within employee contracts covering not only the duration of employment, but if possible, even after the employee has left the employment. It should also be of paramount importance to ensure that confidentiality agreements are signed with business partners whenever disclosing confidential information.
Take-away Messages
It is worth considering whether patenting software-related innovation is the best way to protect ICT company’s product. The possibility and feasibility of using other types of intellectual property, such as copyright, industrial designs and trade secret protection, must also be considered.
SMEs should carefully identify the essential part of their invention. Such exercise may help the company to assess what type of protection is needed and is available to the company.
It is very important to draft a good patent application, because once it is filed, the possibilities of amending it subsequently are not easily available. Drafting “claims” in the application is crucial, as the claims define the subject matter for which the applicant seeks patent protection. Once patented, the exclusive rights conferred by a patent can be enforced to the extent the invention is defined in the claims.
Adopting a consistent branding strategy across all versions of a product may prove to be valuable, especially once patent rights
have lapsed. Commercial value may be derived from the goodwill and reputation built through effective use of trade marks.
Vigilance is required in ensuring that trade secrets are protected. At times, adopting a ”first to market” approach may be more valuable rather than awaiting a lengthy process of patenting.
Take advantage of available copyright registration mechanisms in some jurisdictions to facilitate proof of authorship and novelty in case of infringement proceedings.
[1] ASEAN ICT masterplan 2020 http://www.asean.org/storage/images/2015/November/ICT/15b%20–%20AIM%202020_Publication_Final.pdf
Helika Jurgenson, China IPR SME-Helpdesk
