29 May, 2017
In today’s blog post we will discuss the IP protection in the Logistics and Transportation industry – one of the fast-growing industries in the Philippines that is also expected to offer promising business opportunities to European SMEs whose top-notch technology is especially sought after. The blog post offers some practical tips on IP protection to keep in mind before entering the promising market of the Philippines.
The logistics and transportation industry in the Philippines is growing steadily due to strong economic growth in the country and gradual increase in domestic demand fueled by the rise of the country’s middle class and increase in remittances from workers abroad. According to various studies, the industry is expected to grow as much as 16.7% by 2020.[1] Opportunities for logistics providers also continue to expand thanks to the steady growth in the Philippine’s e-commerce sector.
However, transportation costs in the Philippines are still significantly higher than in many other ASEAN countries, notably in Malaysia and Thailand. This is due to the geographic challenges that the Philippines faces as a conglomerate of islands, but also due to unclear regulations imposed by different government agencies that sometimes induce informal payments.[2] The transportation and logistics industry also faces some infrastructural challenges as the country still suffers from congestion on the roads in urban areas and at seaports. For example, clearance time for shipments at ports is more than twice as long in the Philippines than in many of its neighboring countries.
On the other hand, this year the Philippine government has put forward an ambitious plan of modernizing and improving the country’s infrastructure such as building new roads, railways, airports and improving the situation of seaports. The government has also committed itself to improving the regulations and to fight corruption in transportation sector.[3] This means that the transportation and logistics industry would offer lucrative business opportunities for European SMEs in the near future.
European logistics and transportation SMEs wishing to enter the Philippines’ market need to keep in mind that despite the improvements in the Philippines’ IP laws and regulations, counterfeiting and other IP infringements are still commonplace in the country and thus a robust IP strategy is needed to grow their business in the Philippines.
Brand Protection – the Foundation of Business Success
Logistics companies’ branding strategies are highly important in an industry that is built on the ability to persuade customers that their valuable goods will be shipped smoothly and safely by the chosen logistics company. It could be very damaging to SME’s reputation if someone would use a similar or an identical brand to provide substandard services, as it could directly translate into loss of clients’ confidence in the original service provider. It is thus of utmost importance for EU SMEs operating in the logistics and transportation industry to protect their brand through trade mark registration when planning to do business in the Philippines.
SMEs planning to enter the Philippines market should register their trade mark in the country well in advance before even starting their business there because the Philippines applies the first-to-file’ trade mark registration system, meaning that the first person to register a trade mark owns that mark, regardless of the first use. It is especially important to register trade marks in the Philippines because trade mark piracy due to ‘bad-faith’ registration is still a major problem. Bad-faith registrations exist where a third party (not the legitimate owner of the mark) first registers the mark in the Philippines, thereby preventing the legitimate owner from registering it in the country. These unscrupulous companies would normally try to resell the trade mark back to its legitimate owner at an inflated price.
At the same time owners of well-known marks may benefit from the Philippines membership to the Paris Convention. Foreign nationals may request the refusal or cancellation of a registration of a trade mark which constitutes a reproduction, imitation or translation of a well-known mark in another country that is also a member of the Convention. This process can, however, be costly.
European SMEs should also keep in mind that according to the Trade Mark Law of the Philippines, in order to maintain the registration of a mark, a Declaration of Actual Use of the mark together with the proof of use of the mark must be filed after 3 years from the application date of the mark and then again within 1 year from the 5th anniversary of the registration.
Don’t Forget to Protect your Internet Domain Name
Most logistics companies rely on their website when managing their day-to-day communication with clients and to attract new customers. As the Philippine domain name can be the key to business growth locally, it is advisable to register internet domain names in the Philippines. It is also important to register internet domain name in the Philippines because problems like ‘cybersquatting’ and typosquatting are a serious concern in the country.
Cybersquatting means that a third party registers a domain name that is identical to European company’s product or trade mark name, with the purpose of selling the domain names back to the rightful owner at a premium price.
Typosquatting refers to registering a domain name with misspellings, or typos of famous brands, or company names.
The registrant or the ‘domainer’ benefits from the traffic generated when people mistype a URL into a browser. As an example, if an internet user mistypes the URL – e.g. www.euroap.eu instead of www.europa.eu – the user reaches the website of www.euroap.eu, where the domainer can place a number of sponsored links. If the internet user then clicks on one of those exposed links, the registrant of the domain name receives a portion of the advertising revenue paid by the advertiser. Most importantly, typosquatting may lead to consumer confusion or lost web traffic, as internet users may be directed to either fraudulent websites or competitor’s websites.
Internet domain names can be registered with the Internet Domain Name Registry of the Philippines (dotPH).
Registrations should be done as soon as the company envisages doing business in the Philippines because internet domain name registration also functions under the ‘first-to-file’ system. Indicatively, it costs around EUR 34 per year to register internet domain names in the Philippines.
European SMEs should also keep in mind that the Philippines Internet Domain Name Registry has a domain name dispute resolution system and that cybersquatting is illegal under the intellectual property laws of the Philippines. Thus, companies should monitor similar domain names and enforce their domain name rights in case of confusion or cybersquatting.
Protect your Technology or Business Processes with Patents
In the era of innovative applications to businesses, patents can become significantly important in the logistics and transportation industry, as they help to protect technological inventions and thus increase the competitiveness of companies. Logistics companies can protect not only their technological inventions but also their business processes. As recent examples, DHL obtained a patent for its ‘GoGreen’ service which allows customers to be carbon neutral, or Amazon obtaining a patent for anticipatory package shipping, which allows the packages to be shipped before the order has been placed.
The Philippines adopts a ‘first-to-file’ patent system, meaning that the first person to file a patent in the jurisdiction of the Philippines will own that right within the country once the application is granted. The Philippines also allows utility model registrations for an invention with lesser degree of inventiveness. The process for obtaining a utility model is shorter, however, there is a reduced term of protection – as patents are protected for 20 years after filing whilst utility models are only protected for 10 years after filing. Utility models should be considered by the transportation and logistics companies, as a lot of technology these companies use consists of improved versions of the technology already in use.
Domestic patent applications in the Philippines should be registered with the Intellectual Property Office of the Philippines. The cost of the application fee is based on whether the applicant is considered a small-medium or large entity. Entities with assets worth PHP 20 Million (approximately EUR 385,000) or less are considered small entities while entities with assets exceeding the said amount are considered large entities. In practice, foreign companies are presumed as large entities unless they are able to prove the quantitate requirement regarding their assets. In order to qualify as a small entity, the foreign company must submit an affidavit stating that it is in reality a small entity. Application price starts from EUR 70.
Furthermore, logistics companies wishing to make their patent protection more far-reaching may opt to file for a patent through the Patent Cooperation Treaty (PCT) route which allows for patent protection in PCT multiple member states by filling out just one patent application. The PCT application route also gives applicants an extra 18 months to assess the commercial viability of the invention and the likely market.
Always Enforce your Rights
Entering a new market also means being ready to enforce or defend IP rights in order to ensure that business objectives are met and therefore budget planning for enforcement is key to a successful and comprehensive business strategy. When European SMEs identify that their products are being infringed, they should actively enforce their rights in the Philippines through the various avenues available. If an SME builds a reputation for being prompt and reactive, then unscrupulous companies will be less likely to infringe its rights in the future.
In the Philippines, there are three avenues to enforce intellectual property rights: administrative actions, civil litigation and criminal prosecution. As civil litigation and criminal prosecution tend to take longer time and become costly, administrative actions are often the preferred means of enforcement for small-medium businesses. Administrative authorities have the power to impose preliminary injunctions, preliminary attachments (a provisional remedy wherein the court/administrative body is asked to take custody of the property of the adverse party as security for satisfaction of any judgment) as well as damages and administrative fines. In many cases, however, negotiations between the parties can be a more viable option as they are cost effective.
Helika Jurgenson, China IPR SME-Helpdesk
