An Overview of Patents for Social Entreprises, Non-Profit Organisations and Entrepreneurs

In general, awareness amongst Malaysian companies and organisations in relation to the importance of patenting proprietary technologies, methodologies and inventions has definitely risen in the last 10 years or so. These days, just about everyone associates “ideas” with “patents”.

Here are some facts, tips and resources on patents in Malaysia, for social enterprises, non-profit organisations, entrepreneurs and small business owners.

Patenting - The Upside

OK so first, the upside.

Even before a patent is granted, there is still some value attached to having filed an application and locked in a priority date. There is an upside to being able to tell potential investors, business partners, customers and other stakeholders while pitching or presenting your business/idea “By the way, I’ve applied for patent on this in (x) number of countries”. It does demonstrate that you are serious about your invention and that you believe in it to the extent that you were willing to cough up the necessary cash to get a patent specification drafted and filed in one or more countries.

And if you are able to pursue the application through to the point of grant, patent protection gives the owner of the patent the exclusive right for 20 years, to stop others from manufacturing, using and/or selling the owner's invention, without the owner's consent (or, more accurately, without a license to do so), in every country in the world in which it is granted. What this translates to is that you, as the owner, can charge royalties, license fees etc to any individual or corporation who approaches you ,wanting to license your patented invention. So essentially, a granted patent gives you the promise of a potential revenue stream for your technology, for 20 years.

Sounds great right? But wait, it’s not all upside. Let’s consider the downside.

Yes, you guessed it – Money Money Money! The ugly truth is that patenting is expensive. If you’re doing it properly, it’s really, really expensive. This is something that patent professionals tend to “gloss” over, as they advocate the benefits of patenting...but the reality is, to see a patent application through from the drafting stage, to the filing stage in Malaysia, followed by the other countries in which you want patent protection, going through the various prosecution stages in Malaysia and in different countries, and paying the yearly renewal fees…yes, it’s all going to cost you big time.  

One of the rather confusing aspects of trying to gauge the total costs involved, is that not all the fees are visible upfront. In fact, you follow the links below to the fees quoted on MyIPOs website, you would probably think that the fees quoted there seem relatively reasonable. However, these are unfortunately not the only fees you will be incurring on your patent journey. Most of the time, what you see on the websites of the various patent offices worldwide, are just the government filing fees for the filing or extraction of actual government department documents in that jurisdiction.

Such quotes do not include the cost of agents/advisors. And you definitely need a patent agent to represent you. You see, the likelihood that you will be able to correctly prepare a specification and successfully prosecute an application yourself with no professional help, is low. Or rather, if you are a scientist or an engineer and believe you have the right technical background, you can give it a shot, but there are so many legal complexities in drafting a watertight patent specification and successfully prosecuting it through a morass of procedural rules and regulations, which you may not be qualified to handle (even if you are an expert in the subject matter of the patent application).

So, assuming you use a patent agent to help you prepare the specification and file your initial application, you will end up incurring fees charged by your Malaysian agent (either a lawyer in a legal firm or a consultant in an IP consulting firm). And later, when you start the process in the other countries in which you want patent protection, you will also have to pay for what are known as “associates’ charges” or rather, the fees of the agents representing you in other countries, who have been appointed by your local agent to prosecute your patent application in other countries. Patents are territorial, meaning to say, a patent granted in 1 country does not give you a monopoly in any other country. You have to apply separately in each country. (Under the Patent Co-operation Treaty (PCT) system, this is easier and cheaper than in the past – but still, there are costs to be incurred in each country in which the national phase is entered).

Basic bottom line is, you will be spending money on that patent application in every country you apply for it in, for the 20 year duration of the patent (yes - there are annual renewal fees to be paid prior to and after the patent is granted).

OK, you might say, so if it’s going to be so costly, I’ll only file in Malaysia and nowhere else. Which is fine as it will definitely be a LOT cheaper, except, it doesn’t really mean much as it doesn’t stop someone practising the patent (another way of saying, using your invention/technology), anywhere outside of Malaysia (ie. Thailand, Singappore, Indonesia…or elsewhere) and there’s nothing you can do about it. So patenting only in Malaysia, is really only a feasible option if you are absolutely certain that your only target market for your product, is Malaysia.

So as the saying goes…Go Big, or Go Home… if you’re going to embark on patenting as an exercise, be prepared to spend big bucks and go the distance. Otherwise, it may just not be the right for your organisation, however much of a breakthrough you believe your idea /product/technology is.

Which brings us to the next sixty million dollar question – is patenting really the most optimal commercialisation strategy for your invention?

Unless you’re, say, a pharmaceutical or tech giant, or a large multinational corporation, just because your idea hasn’t been patented, doesn’t mean it’s game over for you. What if instead of channeling so much time and cash into trying to patent it and get that 20-year monopoly, you used your existing resources to get the product or service out to market faster, made as much as you could as the first to market, and then sold it off or otherwise exited before competitors could catch up?

Because, seriously, unless you’re manufacturing a new revolutionary drug or inventing a new method of space travel, do you really need a 20 year monopoly? The world is changing so fast…at this speed of technological obsolescence, a 20 year monopoly may not necessarily translate to the kind of big bucks you were expecting.

Also, consider this - a patent once granted, is also worth only as much as your infringement litigation budget. If you’ve come up with a breakthrough technology and have an unlimited budget, well then, there could be millions to gain in pursuing infringers. Take Apple and Samsung for example. These 2 mobile tech giants have been slugging it out in a series of Patent Wars for years. The stakes are huge and the infringement issues at the heart of the disputes, massively impact both parties in terms of how and where they can distribute their products globally. (See this webpage.).

However, for a social enterprise, non-profit organisation or entrepreneur just starting out – you’re not likely to have the resources to commence infringement proceedings against an infringer, more so if the infringer is based overseas. Patent lawsuits can be complex and can go on for years. You’ll have to hire lawyers, pay for technical experts to provide expert testimony, etc etc.

Now, the above points should not be taken as indictment against patenting. Far from it. Strategically created and effectively leveraged patent portfolios can be worth billions. If you happen to be part of a  large corporation with a strong R&D focus, a whole panel of external lawyers and a highly-qualified team of in-house legal advisors to structure strategic licensing deals and monitor for potential infringements worldwide, as well as an unlimited IP litigation (prosecution and defence) budget to allow the registered proprietor to go after infringers and defend against invalidation proceedings in all countries in which the patent is in existence, then by all means, patenting is definitely the way to go. 

So in a nutshell, the advice for social enterprises, non-profit organisation and small businesses, is think carefully before embarking down the patent route.

Meanwhile, for background reading, here’s some general information on patenting taken from MyIPO’s website.

General Info on Patenting in Malaysia

Legislation - Patents Act.

The legislation that governs patenting in Malaysia is the Patents Act 1983. Go here for a link to the Act, amendments and regulations. See more here.

Eligibility criteria

Basically, in order to be eligible for a patent, an invention needs to be novel, embody an inventive step, and industrially applicable. What does this mean? Prior art consists of everything disclosed to the public, anywhere in the world, in any way, before the priority date of any application. Inventive step means that the degree of obviousness, to a person having ordinary skill in the art. Industrial application means it can be made or used in any industry.

What is a Utility Innovation?

A utility innovation (“UI”) is similar to a patent in that it involves an exclusive right, but a UI is not a patent. A UI is granted for a minor invention, or rather, one that does not need to satisfy the eligibility criterion of inventiveness.

Patentable inventions

MyIPO has a reference list here : For an invention to be patentable it has to be new, which means that the invention has not been publicly disclosed in any form, anywhere in the world, must involve an inventive step, that is to say the invention must not be obvious to someone with knowledge and experience in the technological field of the invention; and it must be industrially applicable, meaning it can be mass produced.

Non patentable inventions

Not all inventions are patentable. MyIPO has a list of non-patentable inventions, here..

-Discoveries, scientific theories and mathematical methods;

-Plant or animal varieties or essentially biological processes for the production of plants or animals, other than man-made living micro- organisms, micro-biological processes and the products of such micro-organism processes;

-Schemes, rules or methods for doing business, performing purely mental acts or playing games;

-Methods for the treatment of human or animal body by surgery or therapy, and diagnostic methods practiced on the human or animal body.

Filing requirements

For reasons of national interest and security, any Malaysian resident wishing to apply for a patent or certificate protection outside Malaysia must first seek written authority from the Registrar. However, written authority is not required if a corresponding Malaysian patent/certificate has been applied for, and a period of at least two months has elapsed since filing. Contravention of this Section 23A is an offence and is punishable (upon conviction) by a fine not exceeding 15,000 ringgit or imprisonment for a term not exceeding two years, or both.

What’s the procedure for filing?

Option 1 : Direct National Application under Paris Convention

http://www.myipo.gov.my/web/guest/paten-prosedur.

Forms and related fees are here . http://www.myipo.gov.my/web/guest/form-related-fees.

The format of a patent specification is available here :http://www.myipo.gov.my/web/guest/paten-manual

Physical requirements of the specification : http://www.myipo.gov.my/web/guest/paten-keperluan

General procedure and flowchart - http://www.myipo.gov.my/paten-carta

Option 2 : PCT Filing

General information

http://www.myipo.gov.my/web/guest/pct-umum

FAQs

http://www.myipo.gov.my/web/guest/pct-soalan

Procedure

http://www.myipo.gov.my/web/guest/pct-prosedur

Forms and requirements

http://www.myipo.gov.my/web/guest/pct-keperluan

Filing fees

Information on basic filing fees (or what is commonly referred to as “government filing fees’ is available here.

http://www.myipo.gov.my/web/guest/pct-bayaran

PCT Flowchart

http://www.myipo.gov.my/web/guest/pct-carta

Where to Apply?

An applicant must file a patent or utility innovation application with the Intellectual Property Corporation of Malaysia (MyIPO), in Kuala Lumpur or at one of the branch offices located in Sabah and Sarawak.

Applications, correspondence and enquiries should be directed to :

The Registrar
The Patent Registration Office
Intellectual Property Corporation of Malaysia (MyIPO)
Unit 1-7, Ground Floor, Menara UOA Bangsar
No. 5 Jalan Bangsar Utama 1
59000 Kuala Lumpur
Tel: +603-22998400 
Fax:+603-22998989

Once again, this article is aimed at providing some background information only. The patent application process is complex and requires specialist knowledge. It is best to seek the advice of a lawyer or intellectual property consultant. (Note – not all lawyers would be able to advise you on IP matters as it is a specialist area.) To be safe, look for an advisor (either a lawyer or an IP consultant) who is a registered patent agent. For a list of registered patent agents, go to registered patent agents in Malaysia.

An Overview of Copyright - for Social Enterprises & Non-Profit Organisations

“Intellectual property” is an oft-used phrase in the for-profit world.  These days, it’s also quite a familiar term in the social enterprise and even non-profit , arena.

There are a lot of opinions relating to intellectual property, which may or may not, be grounded in reality.  The purpose of this article therefore, is to provide a quick, easy-to-understand snapshot and some links to publicly-available resources, that might help a non-profit organisation or social enterprise understand some of the basics.

Part 1 : COPYRIGHT

So, what exactly is protected by copyright?

Basically, copyright subsists in literary, artistic and musical works. Creative original works such as artwork, drawings, books, musical arrangements and compositions, photographs, films, plays, movies, sound recordings, websites, blogs and (even though this one sounds like the odd one out )…source code. That is to say, the underlying source code in your computer programme is protected by copyright.

How does copyright come into existence or rather, how is it created?

The eligibility criteria for copyright creation is listed here on the Malaysian Intellectual Property Organisation (MyIPO) website here. Essentially, a work must be original, of sufficient skill and effort, reduced to physical form, and created in Malaysia (or in another country which is a Berne Convention member state) by a citizen or permanent resident. There’s a long story behind the Berne Convention which is likely to be of more interest to copyright  lawyers than anyone else, but if you’d really like to know more about it, go here.

How is copyright registered/protected?

Contrary to popular belief, copyright does not have to be registered in order to be protected (there are some exceptions to this general rule, as some countries do require it).  However, as far as Malaysia is concerned, copyright automatically subsists/comes into being upon creation, on condition that the eligibility criteria is satisfied. That said, many countries offer avenues to voluntarily “register” copyright, including Malaysia.

In Malaysia, MyIPO has a copyright registry allowing for voluntary notification.  (See voluntary notification.). There’s a process to follow, forms to fill, etc. While voluntary notification is a good idea, there are other options. You can also just use the symbol  © followed by the name of the owner and the year of publication, on the work itself. Example : ©  XYZ Sdn Bhd 2016. Or, you as the copyright owner could affirm a statutory declaration or affidavit, affixing the copyrighted work (or rather a printout thereof) as an exhibit. But if you’re going to do this, you might as well just go through the whole process for voluntary notification. For a sample statutory declaration, go to sample statutory declaration.

Now, unless you’re a die-hard DIY type , you would be best advised to get the assistance of a legal firm or IP consulting firm, to help you navigate through the paperwork. It may cost you money, but you’ll save time and bureaucratic delays by getting qualified advice. Probably money too, in the long run.

To minimize costs on legal and consulting fees, check whether there are any lawyers or IP consultants amongst your volunteers. Perhaps, you could request their services for free as a CSR programme for their firm/company, or perhaps they might be willing to provide free/pro-bono services in return for publicity as a supporting organisation ie. you could offer to put their logo on your promotional material, social media platforms, etc.

How long does copyright last?

This info is right here at http://www.myipo.gov.my/soalan-lazim-hakcipta. For literary, musical and artistic works, copyright subsists during the life of the author plus 50 years after the author’s death; for sound recordings, films and broadcasts, copyright subsists for 50 years from the year following the publication of the work; and for published editions, copyright subsists for 50 years from the year following the year the edition was first published.

Who is the copyright owner?

OK, this could get a little complicated. In some situations, the copyright owner is not the actual author/creator of the work.  This could happen where a work is created in the course of employment, or in the case of a commissioned work. For example, if you are an employee employed by a company, the copyright in anything you create in the course of your employment vests in your employer (unless you have contracted otherwise in an agreement). The same thing happens if you have created the work as an independent consultant, and you have been paid to create the work.

In such situations, you do not own the copyright in the work (unless you have contracted otherwise in an agreement). By operation of law, the company that hired you owns the copyright in the work that was created. By the same token, if you are the employer (ie. the owner of the company that employs staff), then the copyright subsisting in the works created by your staff and your independent consultants, belongs to your company (unless you entered into an agreement with your staff or independent consultants that says otherwise).

What can the owner do with copyright?

Copyright ownership gives the copyright owner with a variety of exclusive rights. This is the exclusive right (meaning, only you have the right) to control how others “deal” with the product in which your copyright subsists. Dealing covers a variety of uses, such as reproducing/copying, performing, communicating, renting, distributing, selling, performing and others. Basically, it means that without your license or permission, a third party cannot use (or “deal with”) the product.

This is subject to a few non-commercial use exceptions such as fair use, parody or pastiche, personal/private study, non-profit research , etc – you can view the exceptions, under Section 13(2) of the Copyright Act, 1987. What this means is, if a third party uses a product in which you own the copyright, for the excluded purposes , then no cause of action to sue that party for copyright infringement, exists.

How is copyright commercialised?

Meaning to say, how do people make money from it?  Ok so copyright is usually commercialized in the form of licensing. Let’s take software as an example. The source code subsisting in the software is copyrightable.  So in order to commercialise the copyright subsisting in the source code which forms part of the software, the owner could license the software to a customer in consideration for royalties, annual maintenance fees and other fees. The customer will sign a Software License Agreement (such agreements have many names) or, if the software is downloaded online, click “I Accept” on a EULA (End User License Agreement). The revenue stream here in terms of commercialisation, is in the form of the fees (royalties, annual maintenance fees etc) that the licensor charges the licensee. 

Regardless of what the agreement is called or what it looks like, ie. whether it’s a 50-page agreement or a 1-page  online EULA, it is still a copyright license under which the owner gets to control how the customer/licensee uses the software (or rather, how the customer/licensee “deals” with the copyright subsisting in the software). For example, the license agreement may restrict the number of copies the customer can install on his servers, it might restrict the number of users who can access it, or other forms of control.  If the licensee (purchaser) uses the software in a manner expressly or impliedly restricted under the agreement, he is in breach of it and the licensor (you/your social enterprise/your non profit organisation) could explore a number of legal remedies.

What are Collective Management Organisations (“CMO’s) and why does my organisation have to pay them money when I play music for an event?

A write up on CMO's is available here. 

In a nutshell, if for example you purchase a CD, it comes with a license (you won’t see any document that says so in the CD jacket, but that is the arrangement from a copyright perspective). That license is for private & domestic use only, which means, the license does not cover usage in a commercial setting or business premise. If you want to play your CD at an event in a commercial setting, it is deemed a broadcast, and you’ll need a license and will need to pay a certain amount in royalties to the CMO that collects royalties on behalf of the owners of the different layers of copyright in the music on your CD.

A list of CMO’s below:

In Malaysia, the music rights owners have formed the following Collecting Societies:

Name:   Public Performance Malaysia Sdn Bhd ["PPM"] (173608-V)
Year of Incorporation:  1988
Members: Recording Companies
Works Represented: Sound, Music Video and Karaoke Recordings
Website: www.ppm.org.my

Name: Music Authors Copyright Protection Bhd  ["MACP"] (186403-X)
Year of Incorporation:  1989  
Members: Composers, Lyricists and Publishers
Works Represented: Musical Works
Website: www.macp.com.my

Name: Performers and Artistes Rights (M) Sdn Bhd["PRISM"](542747M)
Year of Incorporation: 2001
Members: Recording Artistes and Musicians
Works Represented: Performances embodied in Sound Recordings
Website: www.prism.org.my

How is copyright enforced in Malaysia?

The  Copyright Act 1987 lists out  remedies and enforcement options here.

Technically, if someone infringes your copyright – that is, uses it without your permission or license, you can pursue legal action against them.

This sounds great on paper, but we need to unpack the concept further, and the key question to be addressed here is (as always, for the non-profit organisation or social enterprise), costs.

Civil action

A civil court action could be brought by you in your personal capacity, against the infringer. This starts off with a letter known as a “C&D” or “Cease and Desist” letter, informing the infringer that he should cease the infringement within [x] number of days failing which, you will pursue legal action in court.

Assuming the infringer ignores your letter and continues with the infringing acts, you could hire a lawyer and go after the infringer for damages, an account of profits, and injunctive relief (injunctions are orders that a court could grant to stop the infringer from carrying out certain acts) . Again, this sounds good on paper but what it actually means is, you will end up paying a large legal fee for your lawyers to prepare the necessary documentation and represent you in court, and you will find yourself going through a time consuming and tedious court process, unless you can “broker” a settlement out of court and get the infringer to pay you something to “settle” the case.  All in all, the options to enforce your rights as a copyright owner are definitely available. In an ideal situation where there’s an unlimited litigation budget, then by all means, go for it. 

Criminal action

Some acts of infringement do have criminal ramifications. One good example would be pirated DVDs. It is an offence to make for sale or hire, import, sell, distribute, etc, pirated DVDs. The owners of copyrights subsisting in popular movies, such as the Motion Picture Association of America, representing 6 major studios, are able to exert pressure on governments including Malaysia, usually by invoking the provisions of multilateral trade agreements to which Malaysia is a party, to “step up” enforcement measures to conduct raids in order to round up and charge all those involved in pirating, distributing and selling DVDs. However, given the prevalence of various file sharing torrent sites and apps, such measures are not likely to be that effective in the long run, as many individuals are able to access infringing material directly. Private and domestic use by an individual of material that infringes copyright, does not fall within the ambit of the Ministry’s enforcement powers.

 Large and powerful alliances such as Business Software Alliance which represents Microsoft, Adobe , and several other software giants, can request the Ministry of Domestic Trade to raid business premises where unlicensed software is being used, seize all the computers and charge the directors of the companies concerned, in the criminal courts (see Section 44 of the Copyright Act 1987). For an idea of what happens when the Ministry enforcement officers conduct a raid, read this article.. In fact, the Ministry actually offers rewards to people who are willing to call up and “expose” companies that use unlicensed/pirated software. See this article..So please be reminded to ensure that there is no pirated software on the laptops and PCs used on the premises of your non-profit organisation, or social enterprise, just in case your office is raided. 

The next installment in this series will cover patents. Stay tuned!:-)

Tips for Malaysian non-profit organisations & registered societies on filing the Annual Returns

As mentioned in an earlier post, every registered society in Malaysia must lodge its Annual Returns with the Registry of Societies ("ROS") within 60 days of the date of the AGM or, if an AGM has not been held, within 60 days of the 1^st of March in any given calendar year.

Generally, the Annual Returns consists of a financial report, details of the executive committee and other information pertaining to the activities of a registered society for the year.

Previously, before the advent of the e-ROSES online portal, filing the annual returns involved a lot of paperwork. Now, the entire process has migrated online, and completing the various sections of the portal is quite easy and fast to do.

Here is a quick step-by-step guide that I hope you’ll find useful. 

First, you will first need to create a user ID and password for your registered society, on the eROSES portal in order to log in. The user ID will be the NRIC number of the Secretary of the registered society. (Presumably, you should have created this user ID and password earlier on - around the time of the incorporation of your registered society – as all transactions with ROS are now done via this portal).

So, assuming you already have the user ID and password:

1.Go to the eROSes portal at www.eroses.gov.my

2. Click “Setuju” under “Terma Penggunaan Sistem Elektronik e-ROSES"

3. You will land on a page entitled PROFIL PENGGUNA. If there are updates to the information of the secretary on this page, key in the updates and click KEMASKINI. If no updates, just leave the info as is, and click on the box marked PERTUBUHAN top right hand corner of the webpage.

4.On the left-hand menu, you will see a tab called PENYATA TAHUNAN.

Click on it, and you will be taken to a page where you will see the following sections for you to click on.

a) Maklumat Am Pertubuhan

Number of registered members, details of bank accounts, details of branches /affiliated organisations (if any)

b) Maklumat Mesyuarat Agung

This section requires you to fill in details of the last AGM, ie the date, number of registered members, number of members entitled to vote, etc. Note that it is no longer a requirement to submit the minutes of the AGM, to ROS.

c) Maklumat AJK/Ahli Jawatankuasa

This section requires you to key in or update the details of the Executive Committee, such as name, NRIC number, address and other personal details.

d) Maklumat Juruaudit (Bertauliah & Dalaman)

This section requires you to key in or update, the details of the external auditor (if there is one) and the internal auditor. If there is an external auditor, the external auditor must hold a valid professional license. The internal auditor could be any non-member, of the registered society. The person concerned is not required to be a professional or  licensed internal auditor. The number of auditors must be as set out in the Constitution, or the system will not allow you to proceed to the next section.  

e) Penyata Kewangan

This section requires you to key in all relevant financial information which you may extract from the audited financial statements. Note that it is not necessary to submit a copy of the audited financial statements, to ROS.

The income reporting sections include Operating income, Income from Fund Raising, Investment Income, Receipt of Grants and Other Income. The expenditure sections include Operating Expenses, Activity-related/Fundraising Expenses and Administrative Costs.

There is also a list of assets and liabilities to be completed.

f) Maklumat Pemegang Amanah (jika ada)

This section requires you to key in or update the details of Trustees, if there are any appointed.

5.A detailed step-by-step guide is also available here.

6.Once all sections are complete, you will be allowed to proceed to the final page where there is a declaration as to the veracity of the information submitted (pengakuan) for you to click on. You’ll then be given the option to download and print the annual returns (MUAT TURUN & CETAK), before clicking HANTAR to submit.

7.If your submission has been successful, you’ll receive an auto-generated email from e-ROSES confirming your that the annual returns has been successfully submitted.