IP Considerations For The Automotive Industry In South-East Asia.

30 October, 2017

 

In today’s blog post we are taking a closer look at IP protection in South-East Asia for the Automotive Industry, which continues to offer many business opportunities for the European SMEs. You will learn about patent protection and when it would be wiser to relay on trade secrets instead. We will also discuss how you can protect the design of your products and how to take care of your brand. 

 

The automotive industry in South-East Asia has exhibited robust growth over the last few years. According to the latest statistics from the ASEAN Automotive Federation, combined motor vehicle sales in 7 major ASEAN countries (Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam and Brunei) reached 3.16 million in 2016[1], almost double the sales figure in 2006. Underpinned by increasing disposable income throughout the region and increasing demand for motor vehicles South-East Asia’s automotive market is expected to continue to grow rapidly. This also means that there will be promising business opportunities for European SMEs whose expertise and technology are especially sought after.

 

Taking into account the constant innovation that is at the forefront of the automotive industry, the importance of intellectual property as well as its protection and enforcement, are undeniable. Thus, when exploring the possibility of investing or expanding into the South-East Asian markets, European SMEs should be aware of the IP risks that they will face when operating in this region, in particular with respect to the new technologies and the ability to protect these technologies from local competitors. A comprehensive IP strategy is needed for succeeding in South-east Asia’s markets.

 

Patents protect your inventions

 

With constant innovation and the introduction of new technologies, patent protection remains one of the most important forms of intellectual property for many automotive companies. Patent owners acquire the exclusive rights for a limited period of time (usually 20 years) to prevent others from making, using, commercializing or importing the patented inventions during the term of the patent.

 

Generally, in order for an invention to be patentable in most South-East Asian countries, the invention must meet the following three requirements: novelty, inventive step, and industrial applicability. Besides standard innovation patents, some South-East Asian countries also allow granting of utility models or petty patents, for which no or a lesser degree of innovation is required to qualify for protection. For example, utility model in Cambodia and the Philippines (both for a period of 7 years), simple patent in Indonesia (for a period of 10 years), and utility solution patent in Vietnam (for a period of 10 years) require no inventive step at all. At the same time Utility Model in Malaysia requires inventiveness, albeit at a lesser degree.

 

Utility models are generally easier and faster to obtain than standard patents. However, there’s a trade off as they protect the inventions for a shorter period of time than standard patents. Furthermore as utility model options do not require substantial examination, they are less effective when enforced and may be exposed to a higher risk of invalidation. At the same time, application process for standard patents in South-East Asian countries may be lengthy and require substantial resources to support the patent applications through to grant. Many European SMEs thus opt for applying for both utility model option and standard patent simultaneously for the same invention. Once the standard patent has been granted, SMEs may abandon the utility model patent. This strategy allows SMEs to take advantage of the faster approval of the utility model option, which would provide first level of protection until the standard patent is granted.

 

In addition to patent protection European SMEs are also strongly advised to complement patent protection with appropriate contractual arrangements to ensure that their contractors and suppliers protect the confidentiality of specifications and production detail, because many infringements happen through production of ‘overruns’ of automotive components, or the sharing of certain production details or specifications to potential counterfeiters by contractors who are hired to produce original automotive components for vehicle manufacturers.

 

Industrial design protects the appearance of your product

 

Generally, an industrial design refers to the aesthetic features of a product. It may consist of three dimensional features, such as the shape of the product, or two dimensional features, such as patterns, lines or colors.

 

In the automotive industry, protecting industrial designs is of utmost importance as it prevents competitors from copying the design of vehicles and simply rebranding the vehicles under a different name. Industrial design protection should be sought not only for the general look of the vehicles, but also the vehicles’ spare parts such as tires, rims, steering wheels or bumpers with a distinctive appearance.

 

Industrial designs in South-East Asian countries generally have the novelty requirement and follow the ‘first-to-file’ system, which grants protection to the first person to file the industrial design application. Therefore, European SMEs should apply for protection of industrial designs as early as possible, before others do so first and benefit from the original creator’s efforts. Before applying for the industrial design, EU SMEs should also conduct prior searches on designs (by consulting the ASEAN DesignView) in the countries of interest to ensure that the designs they wish to protect have not been registered in the relevant countries already.

 

Some things are better to be kept secret 

 

Although patents are effective in protecting innovations, they are made available to the public through mandatory publication by the patent offices. Therefore, while patents offer European SMEs legal protection in South-East Asian countries, they also increase the risk of copying by their competitors. In some cases, European SMEs may consider protecting their technologies by avoiding disclosure to third parties, thus maintaining their trade secrets.

 

In most of the South-East Asian countries, to qualify for trade secret protection, it is generally required that: (a) the information is secret or only shared in a confidential context; (b) the information has commercial value derived from its secrecy; and (c) the information’s owner has made reasonable efforts under the circumstances to maintain the information’s secrecy.

 

Some ASEAN countries have also enacted a specific law or intellectual property laws for the protection of trade secrets (including Indonesia, Laos, Thailand, and Vietnam). Some on the other hand rely on existing laws to protect secret information, such as contract law, tort law, and laws on breach of confidence (including Brunei, the Philippines, Malaysia, and Singapore). Generally, both damages and injunctive relief are measures to prevent unauthorized and intentional disclosure of a trade secret.

 

As far as possible, European SMEs should limit physical access to their technologies. Important documents describing the technologies should be kept in a safe place, with adequate security measures being put in place, and with few parties being given access to such documents. At the same time, those parties that are given access to the technologies should in turn be bound by obligations of confidentiality with high penalties in case of breach to serve as deterrence against disclosure.

 

European SMEs should also protect trade secrets with contracts. Specifically, SMEs should consider having their employees, consultants, vendors, suppliers and other individuals related to the company sign Non-Disclosure Agreements or add confidentiality clauses to their contracts. Well-drafted confidentiality clauses, which comprehensively define “confidential information” and clearly provide for the confidentiality obligations, as well as the penalties that will result if such obligations are breached, may help European SMEs create an additional layer of legal protection to their trade secrets.

 

Don’t forget to protect your brand

 

Branding is important to the business’ success in South-East Asia’s automotive market. A good branding strategy may help European SMEs leverage the reputation that they have built up in other markets, allowing them to compete with local suppliers. Therefore, European SMEs wishing to enter the region, should ensure that their trade marks are registered in the respective local markets.

 

Furthermore, patent registration is usually important in preventing unauthorized reproduction of the product. However, once the term of protection of the patent expires, trade marks will play a crucial role in allowing European SMEs to benefit from the reputation and goodwill built during the term of the patent protection and can thus serve as a main driver of revenue for EU SMEs in the long run.

 

The trade mark regimes in the South-East Asia region generally adopt the first-to-file system and therefore it is advisable to register trade marks in South-East Asian countries as soon as possible, preferably even before accessing these markets. Early registrations help to avoid ‘trade mark squatting’ where third parties register the trade marks first in order to profit from such registrations.

 

Additionally, European SMEs should consider registering their trade mark also in local languages, because registration of a trade mark in original Roman characters does not automatically grant protection against the use or registration of the same or a similar trade mark written in local scripts used in particular South-East Asian countries, such as Thai, Burmese, Lao or Khmer.

 

Regional trade mark registration for the ASEAN Economic Community is not yet available in South-East Asia, therefore, separate trade mark applications have to be filed in each jurisdiction in South-East Asia, where one wants to obtain trade mark registration. It is very important for EU SMEs to be informed of the local trade mark registration rules and practices because rules and practices in this region differ from country to country. It is thus recommended for the European SMEs to consult with local IP experts before filing trade mark applications in South-east Asia.