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The wind of change

Oon Yen Yen and Lim Eng Leong of Henry Goh & Co examine recent amendments to IP law in Malaysia that will make 2011 an exciting year for IP in the country

Already on par with international standards, Malaysia intends to improve its IP system by introducing various legislative reforms that IP owners, local and foreign, will appreciate.

Copyright – voluntary notification

In early 2010, the Government indicated that it was serious about providing better protection for IP rights, especially copyright matters, and was working towards amending the Copyright Act 1987.

Concerns include balancing the rights of stakeholders, the role of collecting societies, the liability of internet service providers, the power of the copyright tribunal and internet and technology development. There was much media exposure when the Minister of Domestic Trade, Cooperatives and Consumerism hinted that his Ministry was proposing stiffer enforcement provisions on buyers of pirated materials.

Section 41(2) of the Copyright Act states that it is an offence for: "any person who has in his possession, custody or control, three or more infringing copies of a work or recording". The proposal was to make owning even a single copy of pirated work an offence and to make those caught pay a fine equivalent to five times the price of a genuine product.

A proposed provision to make landlords liable for any tenants found to use the tenanted property/premise for IP and copyright infringement activities also received a lot of criticism. Business and real estate associations made their objections known, and even went to the extent of saying that such a move may negatively affect foreign direct investment.

Following these protests, the Copyright Bill that is expected to be presented in the forthcoming Parliamentary sitting has now dispensed with these controversial items. Instead, the Bill will incorporate, among others, the following:

1. limitations and exceptions for internet service providers and application service providers;
2. a greater scope of power for the Copyright Tribunal;
3. compliance with the WIPO Performances and Phonograms Treaty as well as WIPO's Copyright Treaty;
4. clarification on the overlap between copyright and industrial designs; and
5. voluntary notification on copyrighted works.

Of particular interest is item (e). As a member of the Berne Convention, Malaysia provides automatic protection for copyright once the qualifications are met as prescribed under Section 10 of the Act.

Since there are no formal requirements for registering ownership of copyright, owners usually rely on the statutory tool under Section 42(1) of the Act. A person claiming to be the owner of the copyright may make an affidavit or statutory declaration with a true copy of the work annexed to it stating that at the time specified, copyright exists in the work and he is the owner of the copyright. An affidavit or statutory declaration made under this Section is admissible as evidence in any proceedings under the Act and is prima facie proof.

The introduction of voluntary notification will provide an added degree of comfort and assurance to copyright owners. It may resemble a register maintained by the Malaysian IP Office (MyIPO), lowering the burden of proof on owners in instances of infringement.

Overhauling the Designs Act

In September 2009, Malaysia celebrated a decade of independent industrial design law. After 10 years, there is a need for modernisation of the law to bring it more in line with international standards.

The first sign of change came with the release of a draft parliamentary bill for a new Designs Act 2010. The draft bill proposes changes not only in the substantive law, but also in the process of its administration.

The key changes concern the definition of a design, the standard for it to be registered, the term of protection and a clearer demarcation between the jurisdictions of MyIPO and the High Court. That the amendments require a whole new act, rather than merely changes to the existing one, shows the scale of the reform.

As proposed, a product can obtain design protection for its appearance as a whole or in part arising from the features of, in particular, the lines, contours, colours, shapes, textures or materials of the product or its ornamentation. A product is defined broadly and includes packaging, get-up and graphic symbols. It is no longer confined to tangible articles.

In order to be registered, a design must be novel and have individual character. This means that it must create a different overall impression on an informed user from prior designs. In considering individual character, the degree of freedom of the designer is to be taken into account.

Under the Industrial Designs Act 1996, only local novelty is required. The draft bill specifies a worldwide novelty standard for the first time, though this is tempered by a wide-ranging 12-month grace period that allows for market testing.

As for the term of protection, it is proposed to extend this from 15 years to a maximum of 25 years.

Regarding administration, under the 1996 Act, rectification of the register and revocation of a design registration are principally matters for the court. According to the draft bill, an application for invalidation of a registration on the grounds of lack of registrability or non-entitlement would be made first to the registrar, with the registrar's decision appealable to the court. This change is aimed at more efficient administration, with fewer burdens on the court and lower costs for third parties that need to challenge a design registration.

The substantive registrability requirements will be familiar to European practitioners as they largely adopt the wording of EU and harmonised European national laws on design protection. Harmonisation is normally seen as a good thing that simplifies securing IP rights in multiple jurisdictions. However, the substantive provisions on infringement in the draft bill remain the same. A finding of infringement still requires the infringer to have adopted the same design or an obvious or fraudulent imitation of it.

Both local and foreign designers face a future broadening of the scope of protectable subject-matter in Malaysia, coupled with a higher registrability bar. Whether the official objective of stimulating the creation and registration of more designs can be achieved in this way will only be known years from now, once the shape of the final Act has been decided by parliament and the new law fully tested by its users.

Waiting for Madrid

More light has now been shed on the long-awaited Trade Marks Bill 2010. Various areas of Malaysian trade mark law stand to benefit if the proposals are taken up.

IP stakeholders and practitioners will rejoice once examination procedures are simplified so that applicants no longer bear the burden of having to make a positive case for registration as required under the present Section 10 of the Trade Marks Act 1976. Instead, if presumption fails, the mark will be refused on either relative or absolute grounds. This can be further refined if examiners specify clearly and elaborate the reasons behind any objection.

A smooth trade mark registration takes approximately 24 months to complete. The new law will provide for expedited registration with a fast track period (additional fee and provision of acceptable grounds required) in order to assist IP owners in instances of infringement and licensing. With the proposed amendment, IP owners can look forward to earlier enforcement of their rights.

Applicants will also soon be able to file a multiple class application instead of paying more for separate applications in each goods or service class. In line with international practice, an application may also be divided instead of filing again.

MyIPO proposes to do away with the acceptance form (TM29) and create an official IP journal to include publication of all accepted IP applications. An increase in the speed of publication and possibly making the journal available online for easy reference would be ideal.

The Bill provides for recognition of trade marks as intangible assets capable of being collateral for monetisation and securitisation in finance. However, long-drawn discussions and input from Bank Negara are expected.

Malaysia will also finally recognise non-traditional marks, for example, three-dimensional, colour, scent and sound marks, which have long been accepted for registration in many other countries. This will more accurately reflect the changing face of creative trade marks adopted at present to identify owners' goods and services.

The call for Malaysia to accede to the Madrid Protocol continues. Accession to this international trade mark system makes sense as more Malaysian trade mark owners are moving overseas and looking beyond local protection. Much preparation will be needed by MyIPO.

The Act does not spell out the remedies available to a successful plaintiff in the case of trade mark infringement. It is hoped that a specific provision for injunction, damages, account of profit, or order for disposal will help to guide the courts in determining the appropriate relief.

For border measures already provided in the Act to be effective, Customs authorities need to play a more active role in combating IP piracy and to comply with Article 51 of TRIPs. This is important to enforce and make registered trade mark rights meaningful. Change may entail shifting responsibility to Customs.

Improving patent quality

Apart from the provisions for Malaysia's accession to the PCT, the last substantial amendment to Malaysia's Patents Act was made in 2001. A raft of new provisions and amendments are being proposed to the Act to improve the efficiency of the delivery system, enhance the quality of granted patents and to strengthen the enforcement network already in place.

In recent years, MyIPO has made a concerted effort to overcome the backlog of pending applications by bringing on board a number of new patent examiners. The inclusion of a formal provision for expedited examination is another step in the right direction. Applicants will have the option of a fast track prosecution lane with payment of additional fees.

Also in the pipeline is a provision to extend a patent term similar to that adopted by the USPTO. When implemented, this will allow for an extension of the patent term for up to two years, for any delays in prosecution on the part of MyIPO.

To fulfil Malaysia's responsibilities as a signatory of the Convention on Biological Diversity, provisions to formally recognise and include traditional knowledge (TK) and genetic resource (GR) documents in the substantive examination procedure are also proposed. This new provision would require the submission of evidence of prior informed consent and certificate of origin during examination. TKs and GRs would be recognised as relevant prior art.

A provision to define man-made or modified microorganisms and biological materials is also proposed. The definitions set out in the European Patent Convention (EPC 2000), particularly EPC Rules 27 to 29, as well as the EU Directive 98/44/EC are likely to be adopted by MyIPO. It is hoped that this amendment will signal Malaysia's long awaited accession to the Budapest Treaty.

As an expansion to the existing provisions for generic drugs, there is now a proposal to allow generic manufacturers to export and import generics without the prior consent of patent owners, as provided for under the Doha Declaration. Details on the implementation mechanics of this provision are not yet known.

In a further effort to enhance the quality of patents granted, a provision to allow for pre-grant third party observations during substantive examination is expected. However, opposition-type proceedings are not envisioned.

Enhanced enforcement

A number of new provisions are expected on the enforcement front. Of particular interest are proposals to introduce provisions to recognise contributory infringement and innocent infringement. Also, in the future, those affected by accusations of infringement may be able to take action against patent owners who issue groundless threats. It is further proposed that the non-registration of transactions (licences) by patent owners should have an effect on infringement proceedings.

Regulations amended

The first round of reforms began on February 15 2011, when amendments to the patent and trade mark regulations came into force. A summary of the changes brought on by these amendments is provided below.

Official fees were increased across the board by about 30% to 60%. This is the first fee increase in more than 13 years for trade marks and 15 years for patents.

Formal provisions have been made for requesting expedited examination of both trade marks and patents. For trade marks, a request has to be filed within four months of the initial application date, but for patents, there is no time limit, provided the application has already been laid open to public inspection and a request for examination has been submitted. In either case, justification for the expedited examination is required in the form of a statutory declaration. A non-refundable official fee is also payable. The grounds on which expedited examination may be considered are:

• national or public interest;
• evidence of potential infringement or infringement proceedings;
• registration is a condition for obtaining monetary grants from the government or institutions recognised by the registrar; or
• other reasonable grounds.

The above grounds apply to both trade marks and patents. For patents, two additional grounds are available:

• The invention has already been commercialised or the applicant intends to do so within two years of requesting expedition.
• The invention relates to green technologies that will enhance the quality of the environment or conservation of energy sources.

Upon approval of the request by MyIPO, the applicant must pay another official fee for the expedited examination.

For trade marks, the examination of the mark is expedited, not its registration. The mark is still subject to acceptance and open to opposition and final registration. Moreover, the new process is only expected to be of value if there are no or minimal objections, since the real backlogs in trade marks are applications where an objection has been maintained and a hearing is necessary.

For patents, the applicant can expect an office action within four weeks of paying the expedition fee. A term of three weeks is given to respond and no extension of time will be allowed. In view of the considerable expense, the expedited examination is not expected to be used frequently. There is no indication from MyIPO that, apart from the tighter timeframes, the examination will be conducted any differently from normal. Substantive examination of patents in Malaysia relies heavily on prosecution results from counterpart foreign applications. As such, using the existing modified examination option based on a granted foreign patent may be a more cost-effective route to early grant for many applicants.

MyIPO has introduced an online system to allow certain transactions to take place electronically. As an incentive, official fees for e-filing are discounted. The system is new and most agents have concerns about its reliability and capability, so there may be a lengthy transition period before the majority of applications are filed and prosecuted electronically. Nevertheless, the first steps have been taken.

A new official fee is now payable when an applicant requests an ex-parte hearing to prosecute their trade mark application further should the registrar maintain any objection(s) previously raised. IP professionals hope that with such fees imposed, hearing dates will be set promptly so that deserving trade mark applications can proceed to registration.

For patents, the term for requesting examination of a direct (non-PCT) application has been reduced to 18 months from the filing date. MyIPO has advised that the previous two-year term can still be relied on for applications filed before February 15 2011. The term for requesting examination of a PCT national phase application remains four years from the international filing date.

The new regulations are an optimistic indication of prospective amendments to the Patents and Trade Marks Acts later this year. The next wave of IP reform is expected to be in copyright, with a Copyright Bill due to be tabled in parliament in March 2011.