Mapping out an IP strategy

By Gabey Goh September 23, 2013

Malaysia moving towards enabling IP rights to be valued and also used as collateral to obtain financing
Companies must look at their IP assets and prepare to either leverage or protect what they have created

Mapping out an IP strategy I RECENTLY sat in on a ‘Teh Tarik’ session – the Malaysian equivalent of a ‘fireside chat’ – hosted by the Technopreneurs Association of Malaysia (TeAM) on the topic of intellectual property (IP) and its importance to startups, and in fact, any company.

One only needs to look at the global chess game of lawsuits and countersuits played by global technology giants like Apple and Samsung to see what’s at stake.

In the spring of 2011, Apple began litigating against Samsung over patent infringement. By July 2012, the two companies were still embroiled in more than 50 lawsuits around the globe, with billions of dollars in damages claimed between them.

Launches of new smartphone models have famously been delayed by such ligation. And it has been pointed out by more than one observer that this translates to a short-term bonus for the company seeking compensation for the infringement of their IP.

Closer to home though, Malaysia is seeking to move even closer to its vision of developed-nation status and the high-income, services-driven economy that comes with it. Part of that entails taking IP seriously in a country with a history of high software-piracy levels and uneven conviction of such infringements.

This year’s national budget outlined the country’s own intention to create a valuation model that would enable IP rights to be valued as well as be used as collateral to obtain financing from financial institutions.

An Intellectual Property Financing Fund scheme amounting to RM200 million (US$63.3 million) has been created and currently offered through Malaysian Debt Ventures.

The Malaysian Government will provide a 2% interest rate subsidy and a guarantee of 50% of the intellectual property rights value through the Credit Guarantee Corporation Malaysia Bhd. The rest will have to be borne by banks.

A representative of the Intellectual Property Corporation of Malaysia or MyIPO was also present at that Teh Tarik session and shared that work is already under way to build the necessary ecosystem of IP valuers and acceptable valuation models with banks in the country.

To date, seven have passed the requirement examinations to be qualified IP valuers and about six companies have applied for the IP financing scheme and are undergoing evaluation.

A good start, but as always more needs to be done. Companies themselves must take a good look at their IP assets and prepare themselves to either leverage or protect what they have created.

IP lawyer Wong Jin Nee, who was conducting the talk that day, said that 80% of companies today are based on intangible assets.

“It is important to think about your IP strategy. You need to know exactly what you have and need to be able to exploit it in multiple ways to your advantage. Getting the IP claim and filing it is not a strategy,” she said.

When asked about the cost for filing IP claims, ranging from trademarks to copyrights and patents, Wong admitted that it could be considered a costly process for any startup.

According to her, it could cost a company less than RM3,000 or, depending on the complexity of what’s being claimed, up to between RM30,000 and RM40,000. [RM1 = US$0.30].

However Wong pointed to the case of Spanx to illustrate the value of taking IP seriously.

Mapping out an IP strategy In 2000, Sara Blakely, the creator of Spanx, a brand that specialises in ‘body shaping’ undergarments and bodysuit shapewear, did her own research into trademarks and patents before drafting the claim herself to keep costs down.

She had initially approached several lawyers who thought her idea was so crazy that they believed themselves to be a victim of a practical joke and turned her away.

Blakely later found a lawyer who helped write the claims and successfully trademarked the name Spanx online.

Today the company and brand, which has become synonymous with body-shaping undergarments, are now valued at more than US$1 billion (RM3.25bil).

Wong pointed out that by making the investment to stake her IP claim early on in her fledging business’ lifecycle, Blakely protected her assets during the company’s rapid rise and was also able to further leverage the branding to maximise exposure and potential revenue.

“As a startup, you may not need to go all out at the beginning. But be sure to have the basics covered such as the name of your company and then move on to protecting the innovative aspects of your product as your company grows,” she said.

Sometimes, especially in the case of ICT companies where solutions are typically developed upon base technologies created by others, a patent may not be the best approach.

“Filing for copyright protection would be better approach though it doesn’t protect the idea or concept. Depending on your product, filing for utility innovation would be cheaper and easier to get granted rather than a patent,” said Wong.

“You have to think about your product’s own lifecycle as well as the process of getting patents granted might take longer than your product’s lifespan as the pace of change in the technology game is so rapid,” she added.

So what’s the message of today’s column? As a startup, it is wise to start thinking about your IP strategy as soon as possible.

It is up to founders to map out the delicate balance of cost and benefit as the company grows to ensure that they don’t lose out in any potential IP clash.

And if you’re still thinking that a small entity whose future is still not set in stone does not need to think about issues such as this, allow me to point you to a recent development.

In July of this year, Apple filed applications with MyIPO to trademark the term ‘startup’ in the country under various computing, mobile and educational classes.

The company is on track to be granted these marks unless an opposition is filed by early October. Concerned members of the startup community are already scrambling to address the potentially wide-ranging impact of a successful registration.

So the question I pose to you is this: If behemoths like Apple are leaving no stone unturned in the quest to lay claim to, hold and protect IP assets they deem crucial to their business, why aren’t you?

This column originally appeared in the Metro Biz section of The Star and is reprinted here with its kind permission.

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