Intellectual Property Protection for SMEs Venturing Abroad

Date: 19 December 2016

by Pravind Kumar from KASS International (Source)

The idea of going global and venturing into the export market seems to be a rather unnerving and formidable endeavor for most local SMEs (small and medium enterprises) in Malaysia. This is evidenced by the fact that SME contribution to export is fairly low at 19% despite accounting for 99% of all business establishments in the country. Financial constraints and fear of uncertainty in potential markets are among the main reasons which contribute towards their hesitance to step foot into the export market. Most SMEs yearn to explore beyond the home market but have either no means of doing so or lack sufficient knowledge with regards to the required know-hows and ideal business strategies.

One major obstacle which most SMEs face upon going global is that they either unknowingly infringe a third party’s intellectual property rights (IPR) or that their own IPRs are infringed upon by others and they are faced with very expensive means of defending or taking remedial actions. Intellectual property rights are territorial in nature and as such, it is vital that SMEs get their IPRs registered in the countries that they are venturing into. Possessing sound knowledge about the laws of target markets will help SMEs save time and money and also serve to act as a foundation for future prospects of licensing, mergers and joint ventures.

Among the fundamental issues which need to be considered when going global are whether the IPRs in question are compliant with laws of the foreign country, ensuring that rights of others are not infringed upon and tackling the issue of claiming any monopolistic rights in that particular jurisdiction. Patent, trademark and industrial designs registration laws and regulations differ according to jurisdictions and it is vital that professional advice is sought as experts in the field can offer sound strategic advice with regard to developing beneficial IP execution strategies for SMEs.

Intellectual Property is not a global system and although there seems to be harmonization to a certain degree, each different market operates in distinct ways and this is usually how SMEs are caught off guard. For example, there are countries which utilize the first to use system as compared to countries which use the first to file. So if an SME is the first to use their mark in Malaysia, they have superior rights over someone who infringes it later. In Indonesia or China, rights are given to the first person to register the mark.

A clear-cut first step to overcome unnecessary IP obstacles would be to conduct a clearance search (through an IP associate/agent) in a target market to ensure that there are no potential infringement issues which may arise from the usage of an IP right there.

When IPRs are not given priority, it could possibly be the case that years of research and development costs, initial market introduction costs, and regulatory approval expenditure which are borne by SMEs be taken advantage of by third parties in target markets. As such, it is highly advisable that SMEs who are keen on venturing into the global market take positive action from the get-go and be diligent with regard to the protection of their intangible assets from unscrupulous third parties.