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September 13, 2005, Kuala Lumpur: Mindvault Sdn Bhd, a leader in Intellectual Property (IP) and Intellectual Asset Management (IAM) solutions, today signed a memorandum of understanding (MoU) with US based PetrashWilliamson to license and deploy best practice Intellectual Property Asset Management (IPAM) tools in Malaysia. This is the first time that these tools will be made available in the South East Asian region.

The tools, LighthouseTM and CompassTM, which are targeted at growth companies, R&D Institutions and large corporations, are the first of their kind to be deployed in the South East Asian region. When deployed, these tools will enable organizations to better measure, manage, and leverage their Intellectual Assets.

LighthouseTM is a ready-made IPAM Intranet Portal. It is a database of IPAM knowledge, including process and methods; standard forms and agreements; training documents; contacts; Q&A’s; strategy and tactics; terms and definitions; and links to other IPAM resources.

CompassTM is a comprehensive library of IPAM resources. It consists of Microsoft Word, Excel, PowerPoint, and PDF documents. The organization of the documents is indexed and can be key word searched for easy retrieval and finding of pertinent information.

Speaking at the signing ceremony, Mindvault Chief Executive Officer Renuka Sena said: “Properly managed intellectual assets can yield ROI from IP for products and technologies developed by local companies. Intellectual Assets need to be managed systematically in order to reap long-term rewards. These tools go beyond knowledge management, document management and data mining which is often seen as a means to capture and manage corporate intellectual property.”

“Knowledge capture alone does not equate valuable intellectual assets. It is the ability to recognize the value each Intellectual Asset brings to the organization and the implementation of effective routes to commercialization that will yield economic value.” Renuka added.

“This partnership with PetrashWilliamson, a world leader in IPAM, signifies our commitment to partner with and assist local organizations to create a competitive edge for their business and pro-actively manage intellectual property to compete in the global market.”

PetrashWilliamson co-founder and partner Gordon Petrash said: “The Pacific Rim will be an even more important world player in technology and resulting Intellectual Property in the near future. PetrashWilliamson is looking forward to participating in this growth via its partnership with Mindvault. The combination of both firms brings a comprehensive set of experiences and competencies that will greatly help companies in Malaysia and other countries successfully reach this exciting future.”

Further commenting on the tools, PetrashWilliamson co-founder and partner Rob Williamson added: “The PW tools aid companies with proven best practices based on leading companies’ methods and techniques. It allows a company to jump start their IP management programme.”

Statistics between 2003 and 2004 from the Intellectual Property Corporation of Malaysia (MyIPO) indicate that the top 10 foreign countries that filed patents in Malaysia are the United States, Japan, Germany, the United Kingdom, Switzerland, France, the Netherlands, Taiwan, Sweden and Australia.

In 2003, there were approximately 1500 applications from US entities, approximately 900 from Japan, 500 from Germany and approximately 400 from the UK. The number of applications from Malaysian entities stood at only 500. However in 2004, filings by Malaysian entities rose to approximately 750 Patent applications which shows not only increased awareness of IP but also the determination of Malaysian companies to protect the economic value of their R&D efforts.

Renuka added: “This trend in Patent filings is encouraging and signals the coming of an era for local organizations. These tools from PetrashWilliamson will be customized by Mindvault to suit the Malaysian environment thereby helping to foster creativity and innovation to assist growing organizations achieve a competitive edge.”

About PetrashWilliamson

PetrashWilliamson is an intellectual property asset management advisory that partners with clients in the development of their Intellectual Property Asset Management (IPAM) tactics, organization, and processes in support of their corporate and business strategies. These efforts are often global and comprehensive and emphasize direct measurable links between the key value drives of Shareholder Value and IAM. Strategy, organization, and process are best understood in the context of the PetrashWilliamson’s IPAM approach. PetrashWilliamson experiences include Fortune 100 companies, mid-size and start ups.

About Mindvault Sdn Bhd

Mindvault Sdn Bhd is a recognized leader in Intellectual Property and Intellectual Asset Management in Malaysia. The Company which was founded in 2000 comprises three main divisions namely Protection, Commercialisation and IAM. Mindvault’s goal is to empower their client’s to protect, grow and realize the value of their Intellectual Assets through innovative, solution-oriented and a systems-driven approach to identifying, managing and commercializing Intellectual Assets.

By Mindvault Sdn Bhd

Kuala Lumpur, 28 October 2004 – The recent announcement by the Ministry of Science, Technology and Innovation (MoSTI) to introduce a new Bill modelled after the United States’ Bayh-Dole Act (the Act) is seen as a positive step towards helping local scientists reap commercial benefit from their research efforts.

“This move by MoSTI signals a paradigm shift that is expected to fuel the commercialisation of government-funded R&D” said David Oh, Director of Mindvault Sdn Bhd, an Intellectual Property consulting firm specialising in the strategic management and commercialisation of intellectual assets.

“In the US, the Act allows universities and businesses to own the Intellectual Property rights in government-funded inventions for the purpose of further development and commercialisation.”

Prior to the Act, the US government was reluctant to relinquish ownership of federally- funded inventions to the inventing organisation. Without exclusive rights that come with ownership, companies were reluctant to invest in and develop new products if competitors could also acquire licenses from the government and then manufacture and sell the same products.

Following the introduction of the Act, the Association of University Technology Managers (AUTM) conducted surveys which demonstrated clear evidence of increased innovation and commercialisation activity. Analysis of the 1991 and 2000 surveys show that invention disclosures increased by 84%, new patent applications by 238%, licence agreements by 161% and royalties by more than 520%.

“Early criticism that the Act sanctioned the government to give away rights to inventions paid for by taxpayers were easily set aside because the effect of the Act was to force universities to strengthen their technology licensing policies, resulting in new jobs, new companies, tax revenues and greater economic development,” said Oh.

“We do not know whether the Malaysian version of the Act will stimulate the same follow-on effect but it is hoped that the Government will expedite its implementation and help propel the R&D environment in Malaysia to greater heights” Oh added.

By Mindvault Sdn Bhd

Kuala Lumpur, Mon – The IP Academy of Singapore and Mindvault Sdn Bhd are conducting a joint seminar on “Commercialisation of Research & Development in Universities and Public Research Organisations” in Kuala Lumpur on October 5. The seminar will be facilitated by Dr Kwa Siew Hwa, whose expertise lies in the realm of ‘technology transfer’.

Dr Kwa was the Interim Director of INTRO, the Technology Transfer Office of the National University of Singapore and was also a key advisor in the setting up of a Technology Transfer Office for the National Research Institutes in Singapore. Her seminar aims to cover the following areas: definition of research and intellectual property in universities; formation of the Technology Transfer Office; IP policies, commercialisation strategies and much more.

According to Mindvault director David Oh, Budget 2005 signals the Government’s focus on promoting commercialization of R&D by setting up a RM300 million seed capital fund to build relevant skill sets in the agriculture industry.

“Budget 2005 further alludes to the fact that researchers may finally expect to directly reap the benefits from the commercialization of their research activities – via ‘royalties’ or equity in ‘commercial vehicles’,” said Oh.

For these initiatives to succeed, “it is imperative that the appropriate structures, policies and skills are built to identify the routes to commercialization for all research and development conducted in Malaysia, regardless of industry sector”.

“We seek to learn from a seasoned practitioner such as Dr Kwa, to share with us her experiences in the area of technology transfer,” he ended.

The IP Academy sees this as “a great opportunity to cooperate with other IP educators and research institutes from around the region and we hope that participants will gain a good overview of a university’s technology transfer function”.

The seminar will be conducted on Tuesday, 5th October 2004, at Crystal Crown Hotel, Petaling Jaya from 8.30 am to 1 pm. To register, please call 6203 5070 or email [email protected].

By Mindvault Sdn Bhd

When an organization knows which intellectual property rights to protect, when to protect them and in which forms, it may well find another viable channel to profitability.

A far cry from the narrow view of protecting an author’s or creator’s claims of ownership towards their work, developments in the field have transformed IP into a valuable commercial monopoly for organizations.

How to assess and exploit value from IP for profit was the focus of a recent seminar conducted by David Oh of Mindvault Sdn Bhd, Malaysia’s current leading intellectual property consultants, jointly organized with the Technopreneur Development Flagship division of the Multimedia Development Corporation Sdn Bhd.

With over 20 software and technology companies present it was clear that the protection of IP rights has consolidated into the proper management of intellectual assets, or intellectual asset management (IAM), fast becoming an area that can no longer be ignored.

“Intellectual asset management involves the integration of business, legal and technological expertise to leverage an organisation’s intellectual assets to increase profitability and maintain competitive advantage,” said Oh.

“The measures taken to protect IP rights must be commensurate with its commercial value,” continued Oh while illustrating the IAM life cycle that enables an organisation to continually identify, assess and exploit their IP assets for profitability.

Sharon Haron, Finance Manager for Devcorp Technologies that develops Java games said that “the seminar was very interesting. I never knew that IP extends to other areas and that there were so many layers that you have to protect.”

“We are often confused by all the terminology in IP and this seminar session clarified a lot of issues. They were well-explained and expressed, the examples given were very pertinent,” said K Kuppusamy, vice-president of Pentasoft Malaysia Sdn Bhd.

Another participant, Agnes Ngiow, assistant accountant for IFCA MSC Berhad, a member of the IFCA consulting group, said the seminar title “Profiting from Intellectual Property” attracted her to participate.
“The seminar was very useful. It is quite a new topic, and I was interested to find out how to profit from IP,” said Ngiow, adding that IFCA MSC keen to know about the developments in software patenting.

Another seminar will be held again in August for TDF/MSC companies and forms part of Mindvault’s ongoing nation-building and community service to educate the ICT industry on how to leverage on their IP rights.
The seminars are also in line with TDF’s objectives, and are extended to their companies and technopreneurs as part of TDF’s enrichment programme.

“We feel that it is important for our companies and some of them have also voiced their need for it,” said Felix Kuek, Head of Lead Generation of the TDF programme/division at MDC.

By Renuka Sena
Director
Mindvault Sdn Bhd

An edited version of this article was published on 28 June 2004 in the [email protected] pullout of The Edge, Malaysia’s leading Business & Investment Weekly.

In today’s exceedingly competitive markets, the use and protection of Intellectual Assets is often the difference between continued success, and impending failure of a business. This is particularly seen in hi-tech companies as compared to traditional business because hi-tech companies only have minimal tangible assets but a multitude of Intangible (or intellectual) assets.

In a traditional business (e.g. manufacturing), the assets of the company generally lie in its physical assets namely its production lines and plant and machinery. Whilst these traditional businesses may also have intangible assets such as know-how, product brands and distribution/customer lists, on balance when compared to high tech companies, the assets of a traditional business primarily is reflected in its tangible/physical assets. Compare this with a hi-tech company where the assets of the company are largely reflected in knowledge and experience of management, R&D capability and intellectual property (patents, copyrights). These high-tech companies therefore have less “assets” to show in the books even though they may potentially have higher growth rates than a brick and mortar business.

In the search for capital and investment, the challenges faced by a new economy company, therefore, are numerous. Let’s face it, whether old economy or new, cash is still king. The value of either type of business stems from its ability to generate revenues. The second consideration is that the basic fundamentals of investment whether from angels, VCs or even in IPO subscriptions is for the “investor” to analyse the potential of the business to survive and generate sustained revenues.

Factors that influence investment are founded on analyses of past track record, management abilities, business models, assets (both physical and intangible) market acceptance and competitive landscape. These factors are usually analysed from a risk and rewards perspective. In today’s fast paced and competitive landscape, it has now become critical for investors to also evaluate the Intellectual Assets portfolio of a company to ascertain how these assets can increase the revenue or life-cycle of a business so as to CONTINUE TO GENERATE RETURN ON INVESTMENT.

Valuation of Intellectual Property

Most intangible assets generate premium returns for the businesses that own them, either through increase in revenues or through cost reduction. The key to utilising these assets to generate returns therefore lies in the alignment of strategies for Protection, Management and Commercialisation of these intellectual assets.

Despite the fact that Intellectual Property is increasingly bought, sold and licensed in return for revenue, valuation of IP generally attracts a degree of scepticism. This arises principally because there is doubt as to whether IP can be valued RELIABLY. This doubt has certainly held back the recognition of the value of Intellectual Assets in financial statements. In transactions where Intellectual Assets have been bought together with a business, purchasers prefer to refer to this value as “goodwill” instead of placing a value on these assets in their balance sheets.

There are many methods used to value IP but unfortunately there is a lack of global consensus as to which methods are preferred. Due to the difficulty in analysing and making forecasts of the “value” of intellectual assets, MORE THAN ONE valuation approach should be utilised. Typically the approaches used in valuation are:

1. The Cost Approach

2. The Market Approach

3. The Economic Benefit Approach

When valuing IP, is it more important however to understand the factors that influence the risks associated with the IP – be it technological, market or competitive. Here therefore reliable and timely information is key.  Access to the right information will allow investors to evaluate the risks associated with the business and the ability of management to mitigate and manage these risks – thus making valuation more an “art” as opposed to “pure speculation”.

Where to Start?

An IP audit is the most cost effective solution to identifying your hidden assets. An audit allows for a systematic examination of what is owned, what is being created by employees or independent contractors, what is used and what is acquired from third parties. The audit report will assist in the evaluation of current and ongoing commercial significance of the IP assets to the companies’ present and future plans. This assessment will allow the business to focus on the commercial potential of a particular IP asset.

In addition to the above, IP audits may reveal vulnerabilities in ownership and protection of IP and therefore is useful as a risk management tool or mechanism.  Therefore it can be seen that audits are a very necessary step in a chain of related steps that will ensure that your IP asset is contributing to your company’s bottom line.

However as with the financial audit, it is advisable to conduct the IP audit with the assistance of an experienced IP specialist that not only can recognise the IP but also can put in place an Intellectual Asset Management (IAM) Plan that will assist in monitoring and commercialising these assets.

How IP can be used in commercialisation

1. As leverage to obtain better purchase price or other benefits;

2. To increase the valuation of a company when seeking venture capital or strategic investment. The value of a company can sometimes be many times the value of its physical assets or stock, because of the strength of its IP.

3. Strategic partnerships can be formed between 2 companies that have complementary IP to jointly create and commercialise a better product.

4. To block out competition in this increasingly competitive world where market share is often volatile.

5. As security for loans from financial institutions or as collateral for debt financing.

Conclusion

The above issues and challenges will be dealt with in a seminar held on 1st of July 2004 by Mindvault Sdn Bhd and supported by Bursa Malaysia.  At this seminar participants will gain:

• An understanding of differences between various forms of IP rights and how each IP contributes to the overall value of the Assets/Technology

• Knowledge of how IP can drive earnings through commercialisation strategies

• “Tools” that can be used to predict market penetration of new products/technologies

• Insights on how to assess IP portfolios with the best chances of success

• An appreciation of factors to consider when valuing IP

By Renuka Sena, John Chong, Benjamin Thompson & David Oh
Directors
Mindvault Sdn Bhd

This is the first in a two-part series published on 23 December 2003 in the [email protected] pullout of The Edge, Malaysia’s leading Business & Investment Weekly.

In our first article last week, we examined several areas that need to be considered when building a one-stop intellectual property (IP) infrastructure, namely, IP information resources, IP enforcement, IP marketplaces and IP registration. This week, we look at training, commercialisation and funding.

IP Training

While IP is becoming a more popular topic at seminars and conferences, overall, the approach is too fragmented and very often targets the legal community. To fully equip people with IP knowledge, a more structured and long-term approach is required. While an IP training centre already exists and IP is being taught as a subject to law students in universities, there is a need to set up an institute dedicated to IP. This could serve potentially as a one-stop training agency.

For such an institute, training should not only be aimed at the traditional recipients – IP examiners at the Intellectual Property Corporation of Malaysia, enforcement officials and the judiciary – but also at creating a pool of specialist patent drafters. The latter need not have legal training or be legally qualified because the skill set required is more technical or scientific in nature.

A patent drafter would be required to understand the field of invention and articulate the novel and inventive characteristics of the invention to ensure that successful registration of the patent is achieved. As such, patent drafters traditionally have science, engineering and, in recent times, information and communications technology (ICT) backgrounds.

Currently, tens of thousands (if not more) of ringgit flow through our borders into countries like the UK, the US, Australia and Singapore to obtain the services of specialist patent drafters. Such expertise does not exist in Malaysia but there is no reason why it cannot. Perhaps, the relevant authorities should consider IP training for ICT or science graduates as an alternative to traditional job prospects. IP training may even be offered to our existing pool of unemployed science or engineering undergraduates who can, as a start, understudy foreign experts providing such services to legal firms. This will ensure new skills and job opportunities are created and reduce the amount of ringgit flowing abroad for such services.

IP Commercialisation and Funding

In Malaysia, it is difficult to separate funding from commercialisation and as such, we have decided to consider them together. The government has sought to set up an enabling infrastructure to spur research and development (R&D) via venture capital funds from Malaysia Venture Capital Bhd and Malaysia Technology Development Corporation, and government grants from the Multimedia Super Corridor’s R&D Grant Scheme; Intensification of Research in Priority Areas; Industry R&D Grant Scheme; Commercialisation of R&D Fund; and, more recently, Strategic ICT Thrust Areas.

However, government-funded R&D has no commercial thrust, as recent articles [email protected] show. One article reveals that of the 5,232 R&D projects implemented under the Sixth and Seventh Malaysia plans, only 5.1% were commercialised – an appalling figure since these projects were funded with public monies.

In response, the government has made Sirim Bhd the agent to match industry and market needs, although it is unknown at this juncture what model Sirim will adopt. In addition to this, the government has offered remedies, such as tax exemptions for income received by researchers and waiver of fees for filing patents.

Many other challenges have been highlighted by the [email protected] team, such as:

• The lack of pre-seed and seed stage money;

• Expanding existing programmes to encourage more collaboration between government-funded research and industry; and

• Harmonising national IP management with the setting-up of a one-stop agency within the Ministry of Science, Technology and Environment, namely, the National Innovation Centre.

In addition to reports on the lack of commercial focus at universities, there has been an ongoing tennis match between venture capitalists (VCs) and technopreneurs with regard to “commercialisable” business plans. VCs say the quality of business plans that are submitted for funding are below par while technopreneurs lament that the VCs are risk-averse.

So what does all this mean? Commercialisation of IP (which is usually the end product of R&D), put simply, is about planning how you will take your good idea to the marketplace. It involves working your idea into your business plan, consideration of protection options and determination of how to market and distribute the end product.

As practitioners who champion the importance of commercialising IP, it seems to us that before we forge ahead, we should take a couple of steps back and examine why we are facing the challenges that have been much publicised recently. Malaysia is said to be a nation in a hurry but perhaps in our haste to become a developed nation, we are forgetting some basic requirements that need to be met first.

For example, do we have an enabling infrastructure that supports the growth of technopreneurs and entrepreneurs in Malaysia? Does our education and business culture encourage innovation among students and employees? Is there ready access to market and industry research and statistical data that can assist entrepreneurs and researchers make informed and calculated decisions prior to undertaking R&D projects? Do inventors and researchers understand that protection of IP prior to publication can result in numerous sources of income via a multitude of channels, such as licensing, assignments, joint ventures, strategic alliances and technology pooling?

In a study conducted by the Organisation for Economic Cooperation and Development, it was revealed that across its member countries, laws and policies governing ownership of IP generated with public research funds are being re-examined. However, even with such changes, it can be seen that although legal instruments are important, a change in culture and mindset is imperative.

What steps can we take to bring about such changes in mindset and culture to ensure that the nation benefits economically and socially from R&D and commercialisation? For one, we should consider the setting-up of institutions that can nurture young firms and budding entrepreneurs to help them survive and grow during the seed and start-up stage when they are most vulnerable. Such institutions could take the form of incubators, technology transfer offices or collaborative research centres (CRCs) as in the US, the UK and Australia.

To provide an enabling infrastructure, the following should be considered:

• Establishment of CRCs or institutions between the government, the business community and educational institutes in targeted industry sectors. At present, R&D appears to be conducted in silos, with no pooling of resources, both financial and human, to undertake focused research in industry sectors. Such focused research requires input from the private sector and the expertise and infrastructure of universities to create research data/findings, which can then be utilised to produce end products ready for commercialisation.

• Formation of inter-disciplinary teams. The success of such CRCs requires a myriad of skills and disciplines. It is suggested that the CRCs recruit or encourage secondments from universities and the business community to form two related but distinct teams that focus on R&D and commercialisation, respectively. The R&D team would require multi-disciplinary science and technology teams, marketing experts and IP practitioners. The commercialisation team would provide advice and assistance in relation to new business formation, capital development, technology transfer, access to industry and market research as well as provide hands-on management assistance.

• Clear guidelines and policies. For all parties in such ventures to benefit or to be encouraged to come together, there must be clear guidelines that equally reward researchers, the private sector and the CRC. Such guidelines should rule that ownership and commercialisation of IP resulting from CRC research be owned by the CRC. However, to benefit all parties involved, there can be guidelines regulating floor and ceiling percentage returns via royalty or equity shares (depending on how the R&D is intended to be commercialised) to researchers, the private sector and universities and the CRC, reflecting efforts/resources contributed by all parties.

• Access to critical research and data. At present, while the Internet does, to some extent, provide limitless research potential, access to industry-focused market research, global trends and statistical data regarding, for example, purchase patterns within customer segments is only available to those who can afford to commission research houses. Therefore, all such industry related/focused data should be commissioned or aggregated (from other available sources like Malaysia External Trade Development Corporation) by CRCs and compiled into databases that can be provided to budding entrepreneurs and the business community at an affordable cost.

• Developmental funding and the creation of a complete and integrated funding value chain. It is a known fact in Malaysia that we do not have a vibrant angel network to provide pre-seed or seed funding, which is critical to create early-stage idea formation and prototypes, and generally provide access to industry networks. The CRCs may be well placed to provide such “institutional angel funds” and provide a strong business-building environment, especially at the seed stage, considering that the bulk of Malaysian entrepreneurs is in this stage.

• Grants, financing schemes or incentive schemes for IP. While there are government grants that allow for IP-related expenses like patent and trademark searches and filing in overseas countries, such funds do not adequately meet the funding needs of budding inventors or entrepreneurs in terms of quantum and timing. Inventors or researchers need data on patents filed overseas in the early stages of R&D to determine whether to continue to focus R&D in the selected field or abandon R&D because of lack of commercial potential (because there is an existing third-party patent right).
  Although some foreign databases allow free access and search facilities, this in itself is not the stumbling block. An unskilled person reviewing search results may not be able to accurately establish whether or how to design around patents or whether his R&D would be infringing a third-party right. This requires the expertise of specialist IP practitioners, but the fact is those inventors and entrepreneurs rarely have the funds to pay for such services. As such, the usual modus operandi would be to defer such services until seed or grant funds are obtained to finance such services. By then, it may well be too late and the inventor (and investor) may find that his IP right has been compromised.
  It is ironic that funds are available to finance foreign IP registration but no incentives of financing are available for the inventor to draft and file local patent applications. It is suggested therefore that funds are made available to carry out such activities if the nation is to benefit from a local IP pool.

Perhaps the first task of the CRC (or any other institution identified to conduct the exercise) would be to review the 5,232 R&D projects that have been funded and ascertain why they were not commercialised. It may be necessary to rescue some of these now “orphaned” R&D by bringing in experts from unrelated industries to see if new uses may be identified. One way of doing this would be to set up a closed R&D marketplace and invite subscribers or local/foreign corporations to assess and evaluate R&D findings that may be beneficial to them.

A recent [email protected] article, entitled “Strategic Roadmap for Universities”, highlighted possible solutions to the problems faced by universities in commercialising R&D. A study should perhaps be conducted to ascertain what incentives or policy changes would stimulate the private sector’s collaborative involvement with the universities.

Conclusion

Early this year, there was a debate on whether we should continue to adhere to the “Look East” policy established by Tun Dr Mahathir Mohamad. An area that was not addressed was Malaysia’s failure to “look east” at the development of the IP arena. Japan, whose economy was destroyed by World War II, rebuilt itself into an industrial giant because it learnt to exploit the IP right (known as industrial property rights in Japan) system to its advantage.

Why can’t Malaysia do the same? If there is enough political clout and industry commitment to deal with the issues raised in this article, “Made in Malaysia” will soon become a catch phrase of innovation and quality for the rest of the world.

By Renuka Sena, John Chong, Benjamin Thompson & David Oh
Directors
Mindvault Sdn Bhd

This is the first in a two-part series published on 15 December 2003 in the [email protected] pullout of The Edge, Malaysia’s leading Business & Investment Weekly.

It is encouraging to see the increasing number of articles and issues being raised about intellectual property (IP) in the media. A few weeks ago, there was even a call for a “one-stop shop” to enable entrepreneurs to fully protect their works. To an IP practitioner, the idea of a one-stop shop in Malaysia begs the question: Are Malaysians ready for one? And if so, what is the mandate that will be given to this body or agency for it to fulfil the needs of our local IP inventors and creators?

Current approaches to IP in Malaysia focus primarily on legal aspects, for example the introduction of cyberlaws, amendments to existing IP legislation, increased anti-piracy activities and the formation of the Malaysian Intellectual Property Corporation (MIPC).

In order for Malaysia to fully embrace the knowledge economy and to create a vibrant and sustainable environment for the creation of knowledge assets and workers, an integrated IP system needs to be built. By this, we mean a centre where the many different aspects of and provisions for IP are present, of which law and protection make up only one component of the whole infrastructure.

Let us consider what it would take for Malaysia as a nation to create such an infrastructure that will eventually lead to the formation of an integrated and comprehensive one-stop shop.

IP Information Resource

With the advent of the Internet, there are numerous websites that can be accessed to obtain information on the various types of IP. Type “intellectual property” on Google and literally hundreds of links can be accessed. But let’s face it, the reality is that many of these sites are foreign-based and to the uninitiated, this information overload results in confusion as opposed to enlightenment.

It would certainly be beneficial to all Malaysians and foreigners seeking information on Malaysian IP if there was an official website or portal on Malaysian IP laws, local initiatives and service providers and so on.

IP Enforcement

Recently, in response to a survey conducted by the Malaysia Venture Capital Management Bhd (Mavcap)-inititated Cradle Investment Programme (CIP), one of the major concerns that was raised by potential applicants to the fund was the safety of their ideas. The apprehension was that potential applicants were afraid to submit their ideas for fear that they would be hijacked. Why is this an issue? Are we a society of hijackers and thieves? Perhaps the answer can best be articulated in this sentence which was sent around on Merdeka Day in a blog entry entitled “We are We” where the author said, “We condemn the drug addict who stole our RM2 slippers but it’s okay when we steal other people’s intellectual properties”.

This sums up the general attitude towards IP – we want others to respect our IP but we don’t respect the IP of others. Something has to give and in order to create an environment of mutual respect and protection of IP, we as a society need to foster mutual recognition and respect for IP.

A report published by the New Economic Impact Study on April 3 states that “strong IP protection spurs creativity which opens up new opportunities for businesses. When local entrepreneurs have a legitimate way to sell their innovations, they can grow their businesses and hire more people. This in turn drives up spending in the local economy and increases tax revenues to help fund public services”. As such, it can be seen that an effective enforcement regime does not only ensure protection of our intellectual assets but is a crucial step towards economic benefit to all.

So how do we create such an environment? It is suggested that a one-stop enforcement centre be set up, which would have, among others, the following features:

• Information pertaining to the enforcement of IP rights in both the civil and criminal jurisdictions;

• Database of service providers for civil enforcement;

• Online and offline receipt of complaints and information pertaining to IP infringement;

• Simplified procedures for criminal enforcement including a unified system that is implemented nationwide; and

• A specialised dispute-resolution tribunal that is not only well-versed in the law but also the technical aspects of IP.

This centre would be the first port of call for all complaints on IP infringement and would manage the entire enforcement process. The centre would also spearhead a nationwide awareness campaign to foster a greater understanding of IP rights protection, conduct specialised skills training for local enforcement, police and customs officials and finally monitor administrative, civil and criminal sanctions in the courts.

IP Marketplace

More than 80% of the worth of most New Economy companies comprise of intangible intellectual assets, Hence IP is known as the new asset of the New Economy. However, what is the use of an asset if it cannot be exploited? After all, IP assets are created for commercial purposes: to produce multiple revenue streams for the company.

In order for an asset to be fully exploited, it must be a liquid asset. In other words, it must be easily disposed off or at least its full revenue potential must be easily realised. For example, if a company would like to use its IP as collateral for a loan, the financial institution can only accept such a collateral if it can easily liquidate the IP in the event the company defaults on the loan. Otherwise, the financial institution would be left with a paper asset with no realisable value and thereby cannot recoup its losses.

IP marketplaces have sprouted all over the globe to provide a forum where IP can be listed, bought, sold, auctioned and licensed. Some of these marketplaces focus on specific IP rights like patents or on specific fields like biotechnology and semiconductors. Other marketplaces list IP from specific sources like universities and public research organisations. There are also region-specific IP marketplaces like in Japan and South Korea.

Malaysia needs its own IP marketplace if it wants to extract maximum value from its innovations. This marketplace should be a one-stop forum which includes the following features, and more:

• A listing of all local IP that is available for sale or licence;

• A place where companies can list IP that they need;

• Introductions to a panel of accredited expert service providers to assist in the commercialising of IP; and

• Linkages with other IP marketplaces to ensure exposure of Malaysian IP to the rest of the world.

The use of this marketplace should be priced competitively to ensure that it is accessible to not only the large companies with means but also to the cash-strapped individual inventor and even innovative students in schools and universities. It should be a place where Malaysians can also share ideas to further their research and development in creating more indigenous IP and pool their resources to create world-class IP.

IP Registration

Like most countries, Malaysia has a central agency – the MIPC – responsible for the registration of IP rights. Where registration is concerned, its role is to receive the applications filed by the public, examine whether such applications comply with and are acceptable according to the law, formalise the registration documents (where granted) and maintain the records and renewals. However, registration involves more than just the foregoing and much more preliminary work needs to be done before the application is submitted, such as:

• Giving advice on what form of IP should be applied for. Many people do not understand the difference between patents, trade marks and industrial designs and need help in knowing what they have and what type of application they should submit;

• Searching for prior rights. IP is such that if someone else has earlier applied for or registered something similar, this will negatively impact your own application. Many people do not realise this nor do they realise that they are able to search for such prior rights before they spend their time and money in making their application; and

• Preparing the documents for submission. Like all official applications, there is a level of complexity in completing the forms and knowing what to fill up or insert. Incorrect or insufficient documentation can result in the application being rejected or even if granted could result in lesser protection being granted than expected.

Traditionally, the MIPC does not deal with pre-application matters such as the above and the public is required to seek the help of IP professionals, who are few and mainly concentrated in the Klang Valley. The idea behind a one-stop registration agency is a place that can handle all matters relating to IP registration from the pre-application to post-application matters.

As can be seen, the construction of a single one-stop shop which integrates all of the above requires the concerted efforts and contribution of various government and private sector bodies. Despite the mammoth task, the demand for such an integrated infrastructure is one that we very much need if we are to transition to the k-economy gracefully. In the next instalment, we will consider the challenges faced in the commercialisation of IP, consolidated training in IP and the need for government funding for IP-focused initiatives.

By Renuka Sena
Intellectual Property Consultant and Director
Mindvault Sdn Bhd

This is the final in a four-part series published on 21 July 2003 in the [email protected] pullout of The Edge, Malaysia’s leading Business & Investment Weekly.

Knowledge is the currency of the future. In today’s exceedingly competitive markets, the use and protection of intellectual property (IP) is often the difference between continued success or impending failure of a business. This is true of high-tech, low-tech and even no-tech industries. Making strategic use of IP as a competitive differentiator is now a financial necessity.

We have finally arrived at the last leg of our journey. Having audited, analysed and protected your strategic IP assets, you can now finally get down to the business of making money. It is at this point that we can explore how to achieve spectacular financial results with IP.

The Strategy

There are several distinct strategies to leverage on IP but we will only focus on three:

• Utilising IP at the core of business strategy;

• Value partnering; and

• Licensing out of non-core IP.

In devising an IP strategy, a company may use any one or any combination of all of the above strategies. In deciding which strategy to execute, it is imperative to integrate or align the above strategies with your business plans.

IP as the Core Business Driver

Traditionally, the role of IP has been to assist in innovation or to enhance product or service offerings. IP therefore forms the core of research and development (R&D) efforts to create new or cutting-edge technologies in order to effectively compete against other players in the market. This could take the form of enhanced formulas which will achieve better results as exemplified in the detergent or oil and gas industries; creation of more efficient processes or software that can deliver on better service levels as seen in the manufacturing and information technology sectors, or even the discovery and patenting of novel drug targets as demonstrated in the pharmaceutical industries.

Use of IP in this way is usually coupled with strategic protection mechanisms for brands or patents and hence forms a strategy that is built around a company’s core competency. However, as industries evolve and consumers become more savvy, this strategy necessarily involves allocating vast sums of money to R&D and branding budgets in order to remain competitive.

It is not always the superior technology or product that captures the highest market share. Sometimes, it is the less than superior product with an ingenious marketing strategy that wins. Many companies are beginning to realise that using IP purely in this manner does not always translate into sustainable business models.

Enter, Value Partnering

As industries merge and products and services become more competitive, the race for the consumer dollar is an increasingly difficult one to run. Whilst it would be ideal if we were able to conquer global markets purely from business expansion, this is not always the best or quickest method of growth.

Strategic partnerships and alliances have long been used as a means to capture and leverage on individual strengths. However, this trend is evolving into more dynamic structures where IP is used as a tool to deliver new products or services or to reach new markets with existing technology whilst simultaneously optimising revenue from IP.

Licensing is a proven model for achieving market penetration and yet this strategy is surprisingly not widely exploited by local IP owners. Perhaps what is not widely understood is that IP rights are territorial in nature and the IP owner can therefore maximise return on investment by structuring licensing or other equally beneficial arrangements with various parties for the same IP. This is exemplified in technology transfer, cross-licensing, franchising and even industry consolidation via mergers and acquisitions. Decisions on methods and the extent of licensing transactions very much depend on business strategy, and vary from company to company.

Obtaining Revenue from Non-core Assets

An alternative but less-utilised model can be seen in the licensing of non-core IP. As market requirements and competitive dynamics in industries change, companies often evolve their business strategy in order to remain competitive. These decisions sometimes lead to abandonment of IP — resulting in a body of non-core IP.

Another source of non-core IP comes from R&D efforts. The process of R&D often leads to innovations with valuable applications in industries that are not directly related to the company’s core business. These innovations are sometimes protected but more likely written-off.

Whether the decision is to abandon IP that is no longer utilised or to write off innovations that do not contribute directly to core business, the fact of the matter is that resources have already been spent on IP. Would it not make better financial sense to leverage on these pools of non-core IP to generate passive income?

Perhaps this concept is best explained with an example. Procter & Gamble owned a molecule called “Olestra” which was hailed as a low-fat ingredient for snack foods. But unpleasant side effects (since corrected) caused sales to fall flat. Instead of being stuck with a multimillion-dollar plant equipped to produce the molecule, Procter & Gamble sought another application for it – environmental remediation: poured on contaminated soil or sludge, the Olestra molecule binds itself to pollutants, which can then be removed easily. Thanks to these alternative applications, Procter & Gamble has salvaged its investment in research and infrastructure.i

The Value of IP

We hope that this 4 part series has given you an insight as to the value of IP and an understanding that effective safeguarding of your IP and innovations through the various means of protection and actively managing the resulting portfolio can lead to significant new revenue streams, strategic market advantages and increased shareholder value. Overlook these assets and you run the risk of being shut out of developing markets, losing previous market share and undermining your R&D efforts – whilst your competitors strategically build barriers around key technologies. Who the winners and losers of the impending global marketplace are will depend on who has the best IP strategies.

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Endnotes

i Sourced from “The McKinsey Quarterly, 2002 Number 4 Technology” by Jeffrey J. Elton, Baiju R. Shah, and John N. Voyzey.

Lastest News! On 1 August 2003, it was announced that the Food & Drug Administration (FDA) will no longer require companies that sell snacks and other foods containingOlestra to warn that it can cause gastrointestinal distress (http://reuters.com/financeNewsArticle.jhtml?type=governmentFilingsNews&storyID=3206423).

By John Chong
Intellectual Property Consultant and Director
Mindvault Sdn Bhd

This is the third in a four-part series published on 14 July 2003 in the [email protected] pullout of The Edge, Malaysia’s leading Business & Investment Weekly.

The road to managing a company’s intellectual property (IP) as a strategic asset begins with identifying, analysing and understanding those assets which can be classified and utilised as intellectual property, which was the subject of last week’s article. The next step is to protect them and this usually begins with the process of registration.

Registration

In Malaysia and most other countries there are statutory mechanisms to register intellectual property. The purpose of registration is to formalize the company’s legal rights over the intellectual property. Just as a homebuyer lays claim to his house by registering his name on the land title, a company can lay claim to its IP by registering them. Without a registration, a company’s claim over a piece of intellectual property may be disputed, as Microsoft found out in 1995.

In December 2002, OneStat.com reported that Internet Explorer held 95% of the global browser market share. For a browser that is now found in millions of personal computers and notebooks around the world, it is surprising to know that the name Internet Explorer did not originally belong to Microsoft – it was the property of a small internet company called SyNet, who had applied to register the name Internet Explorer as a trade mark earlier. In 1995 SyNet sued Microsoft over the latter’s use of Internet Explorer for its browser but the case was settled in 1998 when Microsoft paid US$5 million to end the suit and take over the name. SyNet’s trade mark registration for Internet Explorer was a key factor in its favour.

Trade marks are just one main form of IP that may be registered, the other main ones being patents and industrial designs. The rules and procedures for the registration of trade marks, patents and industrial designs are different and too involved to be contained in this article, but several general issues should be borne in mind:

• Registration is typically country specific. For example, if you perform a registration in Malaysia then your rights only cover Malaysia. To protect your rights in another country you must register there also. While there are some treaties (such as the PCT and Madrid Protocol) which enable multinational registrations, Malaysia is not part of them yet

• Registration costs money and overseas ones more so. The company ought to have a budget set aside for registration and more importantly, an action plan to ensure that the right intellectual property are selected for registration, that the registrations are managed properly and within the budget.

Registration Action Plan

Many Malaysian companies approach intellectual property registration in a haphazard manner, which may result in: IP not being registered in the right places, the wrong IP being registered, the right IP not being registered, etc. In order to maximize the results of a registration exercise, the company should work on a registration action plan that should include among other things:

1. A listing of all IP owned by the company (an IP audit will reveal this). This list should classify the IP into categories of importance; those which are most important (the so-called Strategic IP) should be registered first and registered in all the countries where the company will exploit the IP.

2. Rationale for registration – why do you want to register that particular IP? Registration is typically used to protect a company’s IP assets and revenue stream by making that IP exclusive to the company. However, some companies may use IP in a more aggressive manner, e.g. to block a competitor’s technology development, or to gain business leverage to negotiate with bigger companies.

3. A cost benefit analysis – is the cost of registration and maintenance of that registration justified by the commercial returns from that IP? Revenue forecasts for the IP should be compared against the registration costs.

4. An obsolescence analysis – seeing that the registration process can take years, the lifecyle of the IP ought to at least outlast the time it takes to obtain the certificate of registration. For example: in the textile industry, it is not feasible to register every textile design when the customer trends change in the short term, and by the time the registration is completed the design may be out of fashion. That is, unless you have a classic design which survives for many years.

5. Roll out strategy – the decision on where to register should be linked to the company’s export and expansion plans. Registration should be effected first in those countries where the company is going to export to shortly and in the major economies.

Protection Without Registration

While registration plays an important role in protecting your intellectual property, there are some situations where protection can exist or should exist without registration. A classic example is in the food & beverage industry, where recipes are jealously guarded and may be handed down a family for generations. The Coca

Cola formula, which has remained a trade secret for over a century, is one of the best known cases.
The decision on whether to keep something a trade secret usually depends on how well the secret can be kept. If the product can be easily ‘black-boxed’ and difficult to reverse-engineer, you may be better off keeping it a secret rather than apply for a patent over it (assuming it is patentable) and disclosing the product to the world.

The second major example of IP protection without registration is copyright. Copyright is one form of IP that exists without registration, yet it is an important and valuable right especially in the software and entertainment industries. Because there is no registry for copyright works, the method of claiming copyright ownership in Malaysia is usually by way of a statutory declaration.

Protecting your IP can be a complex issue, yet it is a vital early step in the entire chain of managing your IP. The next instalment will progress onto the issue of commercializing and making money from intellectual property.

By David Oh
Intellectual Property Consultant and Director
Mindvault Sdn Bhd

This is the second in a four-part series published on 7 July 2003 in the [email protected] pullout of The Edge, Malaysia’s leading Business & Investment Weekly.

By John Chong
Intellectual Property Consultant and Director
Mindvault Sdn Bhd

This article was published in April 2001 in The Star, Malaysia’s leading daily newspaper.

The K-Economy has received much attention in the Third Outline Perspective Plan (OPP3) and in recent press and events. There is substantial political will behind a move towards the K-Economy. To make it a reality though will require more than political motivation; it will demand considerable development and investment in all aspects of the national infrastructure.

While the shortcomings of the current physical infrastructure are often highlighted, what is often not mentioned is the dearth of significant intellectual property (IP) in this country. The wealth of the K-Economy lies in IP and its creation, protection, management and exploitation must be a priority for countries and businesses that wish to advance into and reap the benefits of a K-Economy.

The largest economies in the world have a lot of their wealth and influence tied up in IP. Think of the most valuable brands in the world (like Coca-Cola, ranked no.1 by Interbrand and worth US$72.5 billion), whose pull affects consumer spending decisions around the world. Think of where the latest technologies come from, technologies that impact the way we live and work. Think of who conducts cutting edge research and development, the people and companies who will continue to chart the course of commerce in future. And you will think of the first world nations. They are first for a variety of reasons, one of the most important being leadership in the field of IP.

What is IP? In basic terms IP represents creations of the intellect, be they products or services, inventions or discoveries, tangible or intangible. IP can take an incredible array of forms – brands, software, consumer goods, content, art, music, film, etc. – and can be found in virtually any industry – food, entertainment, fashion, biotechnology, information technology, manufacturing, pharmaceuticals, media, etc.

IP has been and is under-developed in Malaysia. There are too many ‘me too’ products and not enough distinctiveness and innovation. In some cases, good ideas have not been commercialized successfully. Rather than command a premium for quality and uniqueness, many companies compete on price with fairly generic products. With places like China looming large on the economic front and other Indochina countries in the shadows, competing on price alone can be disadvantageous. Hence companies must harness the power of IP, a process which involves 4 steps: Create, Protect, Manage and Exploit.

Create
Creation of IP is the most fundamental step. It should be part of the corporate vision and be supported by the commitment of corporate time, manpower and resources towards the creative function. The strength of the human resource is critical, each division should be staffed with the right talent – researchers for product development, designers for product aesthetics, marketers for product branding and the like. Each of these divisions generates their own IP and contributes towards the overall IP portfolio of the company.

A reasonable budget should be provided for the development of IP. Many times research, development, and marketing efforts are hampered when not enough funds are allocated. More importantly, management must give the creative team the latitude and flexibility to work and also be prepared to review their efforts with an open mind – too many times a good idea is defeated by a conservative management. The term ‘think outside the box’ should be as important to the management as it is to the creative team.

Lastly, it must be remembered that innovating and creating is an ongoing concern. The best companies sustain their research and development year after year; constantly pushing the envelope and staying ahead of the competition.

Protect
Valuable IP must be protected against infringement otherwise its worth will be diluted. Protection for IP rights is governed by legislation in Malaysia and the four main rights – trade marks, copyright, patents and industrial designs – are recognized in this country.

In order to qualify for protection, the IP has to be capable of being ‘pigeon-holed’ under one of the four main rights mentioned above. It should be noted that there are peculiar exceptions under each piece of legislation and not everything can be protected. For example: colours per se cannot be registered as a trade mark, copyright will not cover ideas, and a patent cannot be granted for rules or methods for doing business. There are many more exceptions and professional advice should be obtained when in doubt.

To obtain the protection itself the IP rights must be registered except for copyright, which accrues automatically. Registration is a process that takes time (usually measured in years) so it is prudent to make the application as soon as possible.

It is worth mentioning that IP protection is a matter of sovereign national legislation. Hence, registration in one country only protects you in that country. There is no such thing yet as an international registration that gives you worldwide coverage. However, there are certain protocols and treaties that aim to provide a common filing system that helps cut down the paperwork for registration in multiple member countries.

Management & Exploitation
Like any other corporate asset, IP needs to be managed. Management involves keeping a diary system for rights like patents, trade marks and industrials designs because they need to be periodically renewed. It also involves keeping track of how the rights are used and presented and monitoring the marketplace for competition or infringers. Scrupulous records should be kept for the IP, including any licenses, agreements, or legal documents that are relevant. Even press clippings, advertisements, articles or write ups about the your products and services should be filed as they can serve as supporting documents when there are disputes or litigation; this is especially true of cases involving trade marks and branding.

Beyond management is aspect of exploiting your IP, putting it to work to generate income for the company. Think of the business and revenue model – will the product be manufactured in house or licensed out to others, perhaps domestic production can be supplemented by contract manufacturing abroad. Different considerations apply to different goods and services and each of the various IP can be leveraged and applied differently. Managing and exploiting IP in the right manner ensures maximum returns.

The above is a very brief overview of the role of IP as an important component in the K-Economy. Pursuing an IP strategy that addresses the four areas above is a prerequisite for companies intending to make their way into the K-Economy.