IP: The importance of intellectual property in economic development

This article first appeared in The Edge Malaysia Weekly, on October 26, 2020 - November 01, 2020.
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The significance of intellectual property (IP) isn’t always appreciated, especially the role it plays in an increasingly knowledge-driven economy.

For Malaysia to reach its ambition of becoming a developed country, it is crucial to encourage domestic innovation as well as the protection and commercialisation of this innovation, says Rama-

krishna Damodharan, managing director of Adipven (M) Sdn Bhd, a leading IP consultancy and commercialisation firm in the region.

IP protection provides the owners of industrial design, copyrights, patents, trademarks and geographical indications as well as utility innovations a monopoly over an invention or an original work for a specific period of time.

Apart from ensuring the owners have unrestricted rights over their inventions or works, the protection also serves as a means to secure a return on investment from the innovation, explains Ramakrishna.

He adds that Malaysian companies need to step up their game when it comes to developing and protecting IP. “Only one-third of patent applications in Malaysia are filed by local companies. The rest are filed by foreigners and foreign business entities, which means we are still importing technologies.

Photo by Shahrin Yahya/The Edge

“In developed countries, they file more patents than trademarks. In China, they receive 1.2 million patent applications on average each year. Comparatively, we only get around 8,000. Singapore receives about 10,000, the US sees about 600,000 and Japan, around 560,000. Europe as a region receives about 400,000 applications and South Korea gets around 300,000 a year.”

However, when it comes to trademark applications, the number in Malaysia is on a par with that overseas, says Ramakrishna. On average, there are close to 25,000 applications a year.

“Our mission is to get Malaysians to look at IP as a tool to improve their standing 

internationally. We want them to be able to convert their IP into monetary value, which is why the commercialisation bit becomes very important,” he says.

“It is very difficult to achieve this goal because creating is one thing, but commercialising or making people accept your invention is a different ball game altogether.”

Ramakrishna would know. He has been working in the field of IP since he graduated from the University of Malaya in 2000 with a degree in applied chemistry. He did not plan to venture into this sector, but when he was offered a job at Shearn Delamore & Co’s IP division — one of the few law firms in the country that provided such a service at the time — he could not resist the challenge.

“I like learning new things. I was given the option of joining an engineering firm based in Negeri Sembilan as well as an Australian firm in Shah Alam. The Shearn Delamore offer was the third,” he says.

“I was young and didn’t know what IPs were back then because internet access wasn’t really that widespread yet. I got the basic details and nothing more. So, I wanted to give it a try and figured that if it didn’t work out, I could always switch careers.”

But in the early 2000s, as Malaysia’s transition towards becoming a knowledge-based economy started gaining momentum, the role of IPs was seen as paramount. As a result of the development, MyIPO (which was then known as the Intellectual 

Property Corporation of Malaysia) was corporatised in 2003 and enforced in accordance with the Intellectual Property Corporation of Malaysia Act 2002.

Prior to the setting up of MyIPO, IP rights in Malaysia were administered by Pejabat Cap Dagangan dan Jaminhak. In 1983, the department was renamed Pejabat Cap Dagangan dan Paten and tasked with enforcing the Patents Act 1983 and, subsequently, the Trade Marks Act 1976 and Copyright Act 1987.

The Industrial Designs Act 1996 came into force in 1999, followed by the Layout Designs of Integrated Circuits Act 2000 and the Geographical Indications Act 2000.

“Even though the patent system in Malaysia officially started in 1989, not many people were filing for patents or offering related services because there weren’t many lawyers with the appropriate technical background,” says Ramakrishna.

“It is understandable because there were patents being filed for pharmaceuticals, biotechnology and much more. These are all very technical areas and the applications were coming from foreign countries with established patent systems and portfolios.”

Merely a month into the job, he made up his mind to stay. “It was very challenging and I was the only one with the technical qualification,” he says.

“I learnt so much that I fell in love with the job. I never thought of joining another company or moving to another industry. Beyond just how patents work, I understood how companies utilise their patents as their biggest business tool.”

It also motivated him to read law, which he undertook 1½ years after joining the firm as he wanted to have both the legal and technical knowledge required. Ramakrishna went on to work for several other firms specialising in IP practice before founding Adipven in 2011.

While there is a lot more awareness of what IPs are now, there isn’t sufficient understanding of their importance, he says. “Many still think that if they have a patent registered, nobody can copy their designs. But it doesn’t work that way.

“What it means is that when you have a patent registration under your name or your company’s name, it gives you a legal tool to take patent infringement action against imprints. So, if you look at it from a different angle, you need someone to infringe on your patent in order to take them to court.”

Patents generally protect technologies. “When I say technologies, I mean processes or products that are new, inventive and industrially applicable. These are the three requirements that a patent application must comply with,” says Ramakrishna.

“When you file for a patent, you need to prove that your invention is new worldwide. Next, your invention cannot be a minor improvement on an existing product or process. Third, your invention must be applicable to the industry, it must work and it cannot merely be an idea.”

In contrast, trademarks protect logos and brands. As at 2019, there were about 500,000 trademarks registered. “The other types of IP, for example copyright registrations, are pretty low. The top two IP filings are generally patents and trademarks,” he says.

The usual suspects are the likes of IBM, Microsoft and Google. But even the remaining one-third of applications originating locally are usually filed by government-linked companies and organisations such as research institutions and universities.

“That’s unfortunate because in developed countries, private companies are actually the front runners. Generally, in developing countries, including Malaysia, it is the other way around because R&D isn’t exactly a cheap exercise, especially as success is not guaranteed,” says Ramakrishna.

“Even though they own IPs, public universities and the organisations struggle with commercialisation. That is why Adipven focuses on both IP and commercialisation.”

Meanwhile, he set up Robomy Sdn Bhd, an R&D and artificial intelligence (AI) company, to assist clients in taking product development from the lab to the pilot stage and eventually, to the marketplace. “It takes a lot to scale an invention to pilot and eventually to the industry. It actually involves a lot of money, resources and time,” he says.

“I audited a university here that spends an average of RM500,000 a year. Over 10 years, it would have easily spent a minimum of RM5 million. But it has only made around RM200,000 from the IPs.

“The university is not even looking at breaking even. It is just looking at some money to show that its projects are being commercialised.”

This is not sustainable in the long run as government funding for research is shrinking every year, which will impact the standing of local universities, says Ramakrishna.

Using AI, Robomy helps Adipven’s clients to commercialise their inventions at a reasonable cost. “We have successfully completed four projects with local universities and all four products have been commercialised,” he says.

This way, inventors are motivated to file for IP rights for their products or processes as they can evaluate the monetary value of these in the long run, he continues. “Patent filing for the very first invention, for example, is normally easier to go through, but the subsequent processes get more difficult as your prior inventions can be used against you for your subsequent invention.

“So, the entire process could cost up to RM25,000 and it is not one-off because a patent is valid for 20 years in the country of interest. Also, there is no such thing as a worldwide patent. In order to protect your invention, you have to file patents in the countries of interest.

“So far, no one has filed in every country that recognises patent laws. In a nutshell, at least 75% of the cost is incurred in the beginning stage.”

Obviously, this is a substantial upfront cost for small businesses as there is no guarantee the patent will be granted, with applications rejected 50% of the time. This is after they have gone through an examination of proof to determine whether the invention is new worldwide or that it is a major improvement on the original invention, even though the patenting is only in Malaysia, says Ramakrishna.

There are instances when an inventor’s own disclosure is used against the inventor’s patent application, he points out. “Unfortunately, many of the small businesses here have the mindset that IPs are like insurance, that you only need them when you face a problem.”

Often these inventors or business owners tend to think that they are too small to be copied. “The people who said this to me have come back to me saying a couple of companies are copying their inventions. You must remember, people don’t copy start-up products — they copy successful products,” says Ramakrishna.

“As a business owner, you would have spent the time, effort and money to market the product or process and build customer awareness. When consumers know of your product and it gains momentum, surely someone will copy it at a very minimum cost.”

He encourages businesses to view IPs as an investment. “It is the same as spending on fixed assets for your office. IP as an intangible asset must also be protected,” he remarks.

“The law says whatever is not claimed is disclaimed, which means that if you don’t protect your IP, you have effectively disclaimed your rights to the IP and therefore, third parties can copy [your product] if you don’t have that trademark, copyright or patent.

“So, this is what small companies have to realise and appreciate, that IP is not what you require when you’re in trouble. IP is something you need when you are still small because you never know when you will get hit.”

At the very least, the name of a company should be trademarked, says Ramakrishna. “The biggest risk a company takes is always its employees. You train your employee and five years later, after he has learnt everything, he leaves to establish his own company. He could meet your clients and say he is still representing you or is still linked to your company to push his products.

“How do you protect your business then? That is why it is important for small companies to secure their IP.”

He adds that small businesses can only recover their cost if and when their product is in the market. “The bottom line is that small companies, universities and organisations cannot keep spending money on IP. They can have 10 patent applications and 200 trademarks but if they don’t commercialise their invention, these will remain a cost because there is no return on investment.

“Let’s say one of their 10 inventions is commercialised, that will probably be enough to cover the cost of the nine other inventions they have filed patents for.”