*THE VALUE OF INTELLECTUAL PROPERTY (IP) FOR SMALL AND
MEDIUM ENTERPRISES (SMEs)
Suraiya Osman∗, Zinatul A. Zainol∗, Noor Inayah Yaakub∗, Kamal H. Hassan∗, Jamal
Osman∗∗, Fariza Ahmad∗∗, Nazlia Omar.∗∗∗
∗Faculty of Law, Universiti Kebangsaan Malaysia. ∗∗Faculty of Economics and Business,
Universiti Kebangsaan Malaysia, ∗∗∗ Faculty of Information Science and Technology,
Universiti Kebangsaan Malaysia.
Corresponding author’s email: [email protected]
Abstract
The value of Intellectual Property (IP) is often underestimated and not appreciated by Small and
Medium Enterprises (SMEs). According to the SME Annual Report 2006, various existing
programmes and initiatives for SMEs development would be intensified in order that SMEs
contribution to the country’s export value can reach 22% by 2010. Despite such initiatives, the
value of IP and its significance to SMEs was not expressly mentioned. It is important that SMEs
recognize that IP can turn their intangible assets into valuable business assets and exclusive
property rights. These exclusive property rights although for a limited period of time, allows
SMEs to claim ownership and take advantage of their intangible assets through licensing, sale or
commercialization of IP protected products or services.
Keywords: Small and Medium Enterprises (SMEs) - Intellectual Property (IP) –
Entrepreneurialism.
1. Introduction
Globalization and trade liberalization has made it crucial for most enterprises including
SMEs to become internationally competitive even when operating wholly in the domestic
market. To become and remain competitive, SMEs need a coherent business strategy, which is
inclusive of acquiring intellectual property protection. SMEs should consider how to use the
intellectual property (IP) system holistically to their own benefit in almost every aspect of their
business activity from product development to product design, from service delivery to
marketing and from raising financial resources to exporting or expanding the business abroad
through licensing or franchising.
While it is noted that SMEs should exploit the IP system to the fullest, the number of IP
registered by SMEs is not very encouraging. According to the Assistant Manager of Malaysian
Intellectual Property Organization (MyIPO), Prof Madya Rohazar Wati, in 2007 only 3% of
100,000 SMEs Enterpreneur had patented their products. This is due to the fact that the
Malaysian SMEs are not fully aware of their IPR and they do believe that the procedure involve
in acquiring the patent and trade marks are costly and complicated whereas the true fact is not so.
(BERNAMA, 2007)
Thus, this paper addresses the IP system in Malaysia and its relevance to the SMEs. It
focuses on four types of IP, i.e. trade marks, patents, industrial design and copyright. It is
believed that SMEs could effectively use these IP to enhance their competitiveness in the
marketplace, both locally and globally.
2. An Overview of Intellectual Property Systems in Malaysia
According to World Intellectual Property Organization (WIPO) (May, 2007), intellectual
property refers to creations of the mind i.e inventions, literary and artistic works, symbols,
names, images, and designs used in commerce. WIPO also categorizes IP into two kinds:
(i)
industrial property that comprises patents, trademarks and industrial designs; and
(ii)
copyright that comprises literary, musical, artistic, photographic, audio-visual and
derivative works, giving some exclusive rights to control some reproduction of
authorship
Bainbridge (2002) on the other hand, defines IP as the area of law which concerns legal rights
associated with creative effort or commercial reputation and goodwill (p 3). Accordingly, these
creations of the human mind can be in the form of products or services, creative works or
technical solutions, tangible or intangible, encompassing a broad scope of legal, business and
technical matters.
IP also confers a bundle of rights to the owner. These rights give the owner of IP the
exclusive rights and monopoly to control or exploit the IP to the exclusion of others. At the same
time, he may take infringement actions whenever his IP rights are violated. On this note, it is
very important for SMEs to realize that their products or services may potentially be protected in
various ways under the IP system. These IP are trademark, patents, industrial design, copyright
and trade secret.
It is important to illustrate how IP provides benefit for the SMEs. For example, a new
product or a new process used to produce an existing product can be protected under patent. The
brand name associated with the product can be protected as a trademark. The product may be
placed in a new package before it is distributed to customer. The packaging, on the other hand,
may be protected under industrial design. Any drawings on the packaging may also be protected
under copyright. Additionally, the law of confidential information or trade secret can give
protection to any secret recipes or information as well as the marketing strategy involved.
Finally, it is noted that despite being intangible in nature, IP can be sold, bought, leased
or rented, passed under a will or assigned to other people or legal entities. But, it must be noted
that IP rights are territorial in nature. This means that basically, the exclusive rights and
enforcement of these rights could only be enforced in the country where the IP are registered or
created.
2.1 Trademarks
In Malaysia, trademarks remain the field of IP that is most familiar and have greatest interest to
Malaysian businesses. Trademarks in Malaysia are governed by the Trade Mark Act 1976 and
the Trade Mark Regulation 1997 (Amendment 2000). Section 3 of the Act provides the definition
of the trade mark. A trademark is a distinctive mark which identifies certain products or services
as those product or services of a specific person, enterprise or a group of persons/ enterprises. It
allows consumer to distinguish the goods or services of one enterprise from similar goods or
services. A trade mark can be any letter, word, slogan, name, signature, numeral, device, brand,
heading, label, ticket, shape, colour or a combination of these. For businesses in the service
sector, the mark is called service mark.
® and ™ are common symbols associated with trademarks.® indicates that the mark is a
registered trademark, hence protected under the trademark law. ™ is just a symbol used to
indicate that a company / individual / partnership claims it as a trademark. It does not denote that
the mark is registered nor protected under the trademark law. A trademark is usually seen on the
product or its packaging.
According to section 10(1) of the Trade Mark Act 1976, in order for trade mark to be
registered it must contain at least one of the following particulars:
(a) the name of the applicant or the company;
(b) the signature of the applicant;
(c) an invented word or word;
(d) a word having no reference to the goods or services; or
(e) any other distinctive mark.
A registered trademark grants the owner a statutory monopoly i.e once registered, no one
may use the mark without the consent or authorization of the trade mark owner. Otherwise, it
will be considered as an infringement (Section 35(1) of the Act).Uunregistered trademarks may
still acquire protection under the common law action of passing off (section 82(2) of the Act).
However, this action is quite difficult since it requires the owner of the mark to prove the
establishment of sufficient reputation and goodwill.
In the case of Lam Soon (M) Bhd v Forward Supreme Sdn Bhd & Ors [2001] 6 MLJ
651, the plaintiff applied for an interim injunction to restrain the defendants from using the Lam
Soon Knife Label based on passing off and infringement of its copy right in the Lam Soon Knife
Label. The plaintiff's claim in passing off was based on the goodwill it has generated and the
artistic work in relation to the Lam Soon Knife Label while its claim in copyright was based on
the ownership of the Lam Soon Knife Label by Lam Soon Oil and Soap Manufacturing Sdn Bhd
which had assigned the same to the plaintiff by virtue of a deed dated 12 February 2001.
The defendants disputed all the aforesaid claims of the plaintiff and contended that they
were entitled to use a label which contained the same features, the entitlement being founded on
the assignment by one Whang Tar Choung, the proprietor of the registered trade marks which
comprised identical knife device. The defendants claimed that the said Whang Tar Choung had
managed, owned and/or controlled the plaintiff for a long time and had also licensed the use of
the knife device to the plaintiff and which use by the plaintiff accrued to the benefit of Whang
Tar Choung qua licensor. The defendants claimed that this benefit had been assigned by Whang
Tar Choung to the defendants.
It was held that:
(1)
The defendants were entitled to use the trade marks under licence from
Whang Tar Choung. By virtue of s 231 of the Trade Marks Act 1976, the
defendants were also entitled to use the trade marks with additions and
alterations not substantially affecting the identity of the trade marks.
There was nothing legally or inherently objectionable to the use by the
defendants of its version of the knife trade marks. The defendants had
derived its entitlement to use its knife trade marks not merely from the
trade marks but also from the assignment to it by Whang Tar
Choung of all goodwill associated with the business which was conducted under his
licence.
(2)
Since the plaintiff was merely using the 'Lam Soon Knife Label' under
the
licence
of
Whang
Tar
Choung,
the
goodwill
generated by the plaintiff in relation to its use accrued for the benefit of
Whang Tar Choung. The plaintiff had acquired no independent goodwill in its business
conducted under the knife device. That being the case, there could be no
misrepresentation to the public by virtue of the defendants' use of the trade marks and
their accompanying backdrop. Similarly, the plaintiff could not say that its goodwill had
been injured or misappropriated by the defendants. Thus, there was no triable issue
relating to the alleged cause of action based on passing off.
2.2 Patents
A patent is an exclusive right granted for a product or process that provides a new way of doing
something or offers a new technical solution to a problem. It is a monopoly right granted by the
government to the owner of an invention for a stipulated period in exchange for the disclosure of
technical information of the patent. This will enable the owner to prevent others from exploiting
the invention during the patent term without his consent, in the country in which he has obtained
patent protection. The term of a patent is 20 years from the date of filing application and its
certificate must be renewed annually for it to be valid. Upon its expiration, anyone is free to use
the invention.
For an invention to be patented, it must fulfill several requirements as required under Section
11 of the Patents Act 1983 which are as follows:
•
•
•
Novelty/New – not published or in public use in any form, anywhere in the world.
Inventive step (Non-obvious) – would not have occurred to a specialist in a particular
field to find a solution to that problem
Industrial applicability – it can be industrially manufactured or used.
It is advisable to file patent application as soon as possible since Malaysia adopts the first-tofile system i.e the first person to file application will be given the right regardless of the actual
date of invention.
The main provision that deals with infringement to patent is section 58 of the Act. Section 58
reads:
Subject to subsections (1), (2), (3) of s 37 and 38, performance of any act referred to in
subsection (3) of s 36 in Malaysia by a person other than the owner of the patent and without the
agreement of the latter in relation to a product or a process falling within the scope of protection
of the patent.
In the case of Rhone-Poulenc AG Company & Anor v Dikloride Herbicides Sdn Bhd &
Anor [1988] 2MLJ 323, it was held that a person can be found liable for infringing a patent by
supplying products containing an active ingredient that constitutes the main constituent element
of a patented product.
2.3 Industrial Design
Industrial designs are compositions of lines or colors or any three-dimensional forms which give
a special appearance to a product or handicraft. It may also be referred as the features of shapes,
configuration, pattern or ornamental aspect of an article that may be reproduced by industrial
means (section 3 of Industrial Designs Act 1996). If this aspect is missing, the creation may
come under the category of artistic work whose protection is assured by copyright laws.
According to section 25 (1) of the Act, a registered industrial design is given an initial
protection period of 5 years from the date of filing and is renewable for a further two consecutive
terms of 5 years each. An industrial design registered in Malaysia is only protected in Malaysia.
In order to have the designs protected in other countries, applications for registration will have to
be filed within six months from the date of its first filing in any of the Paris Convention member
countries.
2.4 Copyright
Copyright is the right given to the owner of a copyright for a specific time frame, enabling him
to control the commercialization of his work and to restrict unauthorized reproduction or
exploitation of an original work. Section 7 of Copyright Act 1987 lists the types of works eligible
for copyright i.e literary, musical and artistic works, films, sound recording, broadcasts,
derivative works and published editions. According to Khaw (2001) copyright entitles the owner
to control the economic rights (the reproduction and the performance of a work) as well as
protecting what are known as moral rights which are essentially rights belonging to the author,
and include the right of the author to be identified as such and the right to object to any
derogatory treatment of his work (pp 1-2).
While it is not mandatory to use the symbol ©, its use acts as a notice of an assertion of
copyright. Normally, when a piece of work has the appropriate copyright, it will feature the
following - ©, the year copies of the work were first made available and the name of the
copyright owner. For example, © 2008 ABC Sdn. Bhd. Section 26(4) of the Act further assumes
that the name on a work purporting to be the name of its author shall be considered as such,
unless the contrary is proved.
Copyright of an original work vests initially with the author (writer, composer, maker of
the work, etc). However if the work is made by an employee in the course of employment, unless
there is a contrary agreement, the copyright lies with the employer. If there is no contrary
agreement and the author is an independent contractor, he will own the copyright even though he
was commissioned to create the work.
According to section 13 of the Act, the copyright holder has the exclusive rights to:
•
reproduce the work in any material form (including photocopying, recording, etc).
•
communicate the work to the public
•
perform, show or play the work to the public
•
distribute copies of the work to the public by sale or other transfer of ownership
•
commercially rent the work to the public
There is no registration of copyright. All original works which are expressed in a material
forms, such as put in writing and records on tape or disk are automatically protected irrespective
of their quality and purpose of creation. Copyright subsists during the life of the author and shall
subsist until the expiry of a period of 50 years after his death (section 17 of the Act). Protection
however, does not extend to ideas, procedures, methods of operation or mathematical concepts.
In the case of Rock Records (M) Sdn Bhd v Audio One Entertainment (M) Sdn Bhd [2005] 3
MLJ 552, the plaintiff's cause of action was for copyright infringement against the defendant.
The relevant category of works in the present case is 'sound recordings' as provided for in s
7(1)(e) of the Copyright Act 1987. Here, the 'author' of the sound recording was Suara Cipta
Sempurna (Marketing) Sdn Bhd, and the copyright in the works had been assigned to the
plaintiff on 21 November 1996 via a sale and purchase agreement. The first argument raised by
the defendant was that the licence dated 1 April 1994 between itself and Audio Scope Video
Product Sdn Bhd as justifying its right to reproduce the works. The second argument put forth by
the defendant was that the karaoke VCD qualifies to be protected as a 'film' under the Copyright
Act 1987 and that the defendant was the copyright owner of the film which included the 'sound
track' of a film. The defendant also argued that it was the owner and the exclusive right holder in
the works after 1996 and that the plaintiff had no right to litigate for past infringement.
In this case the court held that:
1)
2)
The defendant had infringed plaintiff’s copyright since the copyright was belong to
plaintiff by the way assignment by Suara Cipta Sempurna (Marketing) Sdn Bhd and the
defendant had not produced any evidence to rebut or challenge the validity of the
assignment.
The defendant had, without the licence or authority of the plaintiff, reproduced the
plaintiff's works in that sound recordings and incorporated it into its karaoke VCDs. The
defendant was not licensed to reproduce the plaintiff's works in VCD format. Liability for
copyright infringement attached the moment the defendant produced VCDs containing
the plaintiff's sound recordings.
2.5 Core features of the statutory intellectual property rights
Qualification
Length of
criterion
protection period
Novelty
20 years max
Patents
Strength of
Monopoly
Absolute monopoly
Copyright
Originality
Life of the author + Monopoly over the
50 years
expression of one’s
own creation
Registered designs
Novelty
15 years max
Trademarks
Capacity
to
distinguish goods or
services of right
holder from those of
another trader
+
No conflict with
earlier trademark
Monopoly over use
of design as it is
applied to articles
for which protection
has been sought and
granted
Initial 10 years. Monopoly over use
(potentially
in of mark in respect
perpetuity, subject of goods or services
to renewals)
for which it is
registered
If mark is “well
known” right holder
can prevent use on
‘dissimilar’ goods
3. Value of Intellectual Property
In the new digital environment, it is crucial for any business, including SMEs to have IP
awareness and actual use of IP assets. At the same time, SMEs must make sure that they do not
inadvertently infringe the IP rights of others, as innocent mistakes are generally no excuse in the
court of law. But more importantly, SMEs must actively seek opportunities and exploit the
environment to remain and grow in business (“The Importance”, 2002). This brings us to the
main subject of this writing. In this part, the benefits of having a proper IP management system
to SMEs will be discussed. Specifically, it addresses the way IP system could contribute to boost
the competitiveness of the SMEs.
3.1 Enhances the market value and the competitiveness of SMEs
The strategic utilization of IP assets can enhance the competitiveness of SMEs. Like physical
assets, IP assets must be acquired and maintained, accounted for, valued, monitored closely and
managed carefully in order to extract their full value. This is because when IP is legally
protected, IP can become a valuable business asset. IP may generate income for SME through
licensing, sale or any other types of commercialization. IP rights can further enhance the value of
SMEs in the eyes of investors as in the event of sale, merger or acquisition, IP assets may
significantly raise the value of the enterprise (WIPO, nd).
(i) Business asset
Enterprises assets can be divided into two, namely physical assets ranging from buildings,
machinery, etc and intangible assets including human capital, ideas, brands, designs and other
fruits of company creative capacity. Presently, intangible assets are often becoming more
valuable than the physical assets.
IP turns these intangible assets into exclusive property rights which enable the SMEs to claim
ownership and exploit them to the maximum potential. These assets can also be traded in the
marketplace.
(ii) Investment
Investment in developing good IP portfolio is crucial for enhancing the market value of SMEs.
For example, the acquisition of patents will be valued in the same way as physical assets of the
company. Similarly, a good trademark with good reputation among consumers may also enhance
the company’s current value and may contribute to make the company’s product and services
more attractive.
At present, investors and financial advisors are becoming aware of this reality and have
begun to value IP assets highly and on occasions have included them in balance sheets. Many a
times, IP assets are worth more than physical assets especially for the enterprises operating in
knowledge-intensive and highly innovative sectors or companies with well known brand names.
3.2 Profit making
Innovative and creative ideas are crucial in building successful business. In addition, these
innovative and creative ideas can provide greater benefit if they are protected under the relevenat
IP, such as through patent protection. This is because an enterprise may earn royalty or revenue
by licensing their patented inventions to other enterprises. The owner will be able to get extra
income when others have to acquire licence from them. Other IP such as copyright, trade secret
and trade mark may equally generate income for the SMEs (WIPO, nd).
(i) Patent
The key reasons why SMEs should consider patenting an invention (provided it meets the criteria
of patentability) are:
•
Exclusive rights to exploit and use it for 20 years from the date of filing of the patent
application.
•
Reducing competition and establishing itself in the market through its exclusive rights.
•
Higher returns on investment by commercializing the invention.
•
If the SME chooses not to exploit the patent itself it may license or sell the invention and
earn revenue from it.
•
Increase in negotiating power (if both parties in the arrangement have their own patent
rights, it is possible to make cross licensing or to exchange the patent rights between the
two parties.
•
Patent may create positive image of the SMEs
•
Power to take action against any infringers.
(ii) Patent Information
Patent information refers to the technical, commercial and legal information contained in patent
documents that are published periodically by national and regional offices and by the World
Intellectual Property Organization under the Patent Cooperation Treaty. A patent document
includes the full description of how patent invention works and some other details of the owner.
More than 90% of the information contained in patent documents is in the public domain, hence
anybody may access it without prior approval of anyone (“The Importance”, 2002). Most SMEs
are not aware of this patent information and thus rarely benefit from it. In fact, learning to use
patent information is the first step towards sustainable technological progress of any SMEs. This
technical knowledge provides SMEs the following opportunities:
•
Information on new or alternative source of inputs, components or machines for its
products or services which is valuable in determining the price, quality and terms of
delivery of its product to ensure its competitiveness.
•
Information about potential new markets i.e the SMEs can identify other enterprises that
can use their products or services.
•
Avoiding unnecessary costs: the information contained in patent documents may save
time and financial resources from being wasted on non viable product as someone else
has patented the invention. It may also avoid any unintentional infringement on others
patents.
•
Information on the market intelligence: by analyzing the patents owned or acquired by
competitors it is possible to assess the trend of market and to plan the enterprise future
strategy. As for example to exit business lines and products that would soon be obsolete
with the emergence of alternate product in the market.
(iii) Trade secrets
Globalization, rapid advancements in technology and telecommunications, as well as mobile,
networked strategic business relationships and other related factors causes major challenge to
businesses. With such rapid changes, trade secret protection may be the most attractive and
easily available IP right which is essential for the company’s growth, competitive advantage and
further, its survival.
A trade secret refers to information of any type that is actually or potentially valuable to
its owner, not generally known or readily ascertainable by the public and the owner had made
reasonable effort to keep it secret. Even negative information such as research results which have
found to be worthless can be trade secrets. Inventions and processes that cannot be patented can
be protected under trade secret law. Examples of trade secrets are business plans or strategies,
marketing plans, financial information, formulas for producing products are trade secrets.
Trade secret can create an advantage over the competitors in many ways. The right to
trade secret may also be licensed or sold and it never expires as compared o patents, industrial
designs and copyright.
(iv) Copyright and Related Rights
In most countries worldwide 80 to 90% of the creative industries are SMEs. The creative
industries sector includes publishing, software, music, television and radio. architecture,
advertising, designer fashion, visual arts, crafts, etc. Protecting copyright and related rights is
important because it enables creators and users of such works to support themselves from their
artistic work as well as to generate profits to reinvest in tomorrow’s creators.
The owner of a copyright is the only person who has the right to make copy of it or to
permit someone else to do so. The owner has the sole right to control any used of his work and
this control maybe exercised for a fee termed royalty. As for example, each time a radio station
plays an eligible sound recording, a royalty is paid to the composer, the maker of the sound and
the performers.
Most multimedia companies are SMEs and as users of copyright these companies need to
understand the proper use of the IP system in all facets of their business. With multimedia
technology, graphics, video, animation, text, still images, sound and data can simultaneously
appear on a computer screen and the user can interact with the content. These images are of
course protected by copyright and to exploit them in an interactive multimedia product, it is
important to obtain authorization from the owner of the rights. It is usually in the form of a user
license in writing granted by the owner.
3.3 Tool for Marketing
After creating a product, the SMEs should consider marketing it. Marketing a product is a major
challenge for most SMEs. What SMEs should consider is to establish a clear link between the
product or service and the SMEs as the producer or provider which enable the customer to
distinguish between one product and another (WIPO, nd).
This is where IP plays it role. IP, especially trade marks creates an image for the SMEs as
well as positioning the SMEs in the market. Trade marks are crucial for:
•
Differentiating products and services and making them easily recognizable
•
Promoting products or services and creating loyal clientele
•
Diversifying market strategy to various target groups
•
Marketing products in foreign countries.
(i) Trademarks/ service marks
According to Kwang (2001) trade marks and service marks are amongst the oldest forms of
recorded IP, going back to ancient times. The earliest form of identification mark seems to have
been the branding of livestock with some design. The Industrial Revolution decisively
established the importance of trade marks as an identification criteria and a guarantee of quality
and advertising means. Thus, under the modern trade mark regime, it basically serves as a kind
of indication of the connection between the goods and its trader or manufacturer (pp 18-19).
A trade or service mark may play an important part in the ability of a product or services
to penetrate a new market. Therefore, care must be taken while selecting or creating the mark so
that it appeals to the target market. To develop trust confidence and loyalty in its products or
services, every forward looking SMEs has to develop and maintain distinct identity, image or
reputation to distinguish them from their competitors. At the same time, they must also provide a
mechanism for linking the provider to the valuable business assets of trust and goodwill. Every
SMEs must instill brand awareness among the customers and further change them to brand
preference and finally to brand insistence where the customer refuses to accept alternatives and is
willing to pay at even higher cost for the desired product or service.
(ii) Industrial Designs
The terms design, design patent or industrial design when used in IP law and practice have a
specific connotation. In most cases they refer to the eye appeal of i.e the features of shape,
configuration, pattern or ornament or any combination of these features – of a finished article
made by hand, tool or machine, as opposed to functional features which may be protected under
other IP protection such as patent or trade mark.
Industrial designs issues affect various types of business decisions of an SME. For
example the type of protection and its cost or effectiveness may affect which details should be
disclosed to the designer especially when the designer is employed by a contractor. In today’s
highly competitive global economy, a visually attractive design alone may enable an enterprise
to captivate a demanding clientele. It is the reason why the smart SMEs take great pains to timely
protect the new or original aesthetic aspect of its products so as to prevent such designs from
being copied by competitors even though functionally the product of an SME may be superior
than those of its competitors.
3.4 Enhancing the Export Value of SME
In order to enjoy IP protection in foreign markets, the SMEs should seek and apply IP protection
from that particular country. This is because most IP rights are territorial in nature. The main
reason why acquiring IP protection abroad is important are as below:
•
IP rights especially patents may open up new export opportunities
•
Trade mark and industrial design may help in developing an advantageous market
position in export markets
•
IP rights increase the opportunity of winning loyal clientele abroad
Patent protection abroad allows an enterprise to enjoy an important competitive advantage in the
export market. Depends on each SMEs strategy, the SMEs will earn additional revenues
either through direct selling or license it to the company abroad. Among the options are:
•
The SMEs have an option whether to produce the goods domestically and export it
directly or through intermediaries
•
Licensing the invention to a foreign firm that will manufacture the product locally, in
exchange for a lump sum payment and/or royalty fees.
•
Setting up joint ventures with other firms for manufacturing and/or commercialization of
the product in the selected foreign markets.
The benefit of acquiring IP protection in the domestic market applies the same to the export
market i.e it enables the SMEs to maximize product differentiation, marketing strategy, as well
as to establish a direct link with foreign consumers and etc. To market a product or services
abroad, the SMEs can also opt for franchising as well as licensing as discussed earlier. Brand and
design plays important roles as unbranded products will generate lesser income for the SMEs
since consumer demands lower prices for unbranded goods. It will also cause difficulties in
marketing the product or service abroad since there is no easy identifier and thus causing lack of
consumer loyalty.
3.5 Becoming and Remaining Competitive in the Global Market Arena
A major characteristic of the new economy is the increasing pace of globalization with increase
in the intensity of international competition. SMEs can no longer focus only on the local or
domestic market. In fact, high-tech and SMEs in e-commerce very early begin to operate in the
international market. At the same time, the traditional SMEs are facing competition in the
domestic market from enterprises abroad. To compete, SMEs have to become IP-smart to realize
to their full potential.
The protection of copyright and related rights in digital environment, the protectability of
e-commerce business methods by patents, the use of trademarks as metatags and keywords and
other IP infringements on the internet are those challenges that SMEs has to face.
To compete globally, every SMEs should used the internet as a tool of marketing i.e by
creating an internet address which technically known as a domain name. The SMEs should
choose a domain name which is distinctive and resembles their trade mark.
The case of Petroliam Nasional Bhd & Ors v Khoo Nee Kiong [2003] 4MLJ 216 may
provide an illustration for domain name infringement. In this case, the first plaintiff was a wellknown national petroleum corporation. The defendant was an individual carrying out trading
under the trade name 'Araneum Consulting Services'. Sometime in 2001, the plaintiff made a
series of searches of domain names on the Internet and discovered that the defendant had
registered
the
domain
names
'petronas-dagangan.com',
'petronasgas.com',
'mypetronasdagangan.com' and 'mypetronas.com' ('the said domain names') for purposes of sale.
The defendant had also maintained a website under the name 'www.petronasgas.com' ('the
Petronas website') which provide information on the locality of the plaintiffs' service stations.
The plaintiff in its action has requested the defendant to transfer to the plaintiff the
registration of the said domain names on the ground that 'Petronas' was the plaintiff's trade name
worldwide and the intellectual property rights in the trade name belonged to the plaintiff. In its
claim the plaintiff also sought an injunction among others to restrain the defendant from passing
off any website with a domain name comprising the word 'Petronas' which was not related to a
website connected with the plaintiff.
In this case the court had granted the injunction sought by the plaintiff on the ground that
the plaintiff had sufficiently demonstrated that since the said domain names contained the word
'Petronas', the court can assume that the intention of the defendant in using the said domain
names was to deceive the public by passing off himself as part of the Petronas group of
companies or his business or products as those of the plaintiffs'. In the circumstances, the
plaintiff had shown that there was a threat of passing off and trademark infringement on the
defendant's part which was likely to cause confusion in the minds of consumers of the plaintiffs'
products, thereby resulting in irreparable injury and damage to the plaintiffs' trade, business and
goodwill.
5. Conclusion
Indeed, the IP system offers great benefits and protection for the SMEs. But, the SMEs
themselves must make full use of the IP system. It should be noted that the successful use of IP
depends largely on the readiness of SMEs to embrace them. Apart from that, SMEs support
institutions must also be ready to give SMEs with IPs added benefits.
8. References
8.1 Books
1.
MacQueen, H. (2007) Contemporary Intellectual Property: Law and Policy. Oxford
University Press.
2.
Bently, L. & Sherman, B. (2002) Intellectual Property Law, 2nd Edition, Oxford
University Press
3.
Salter, M. & Mason, J. (2007) Writing Law Dissertations, An Introduction and Guide to
the Conduct of Legal Research, Pearson Education Limited
4.
Bainbridge D.(2002) Intellectual Property, Fifth Ed, Pearson Education, UK
5.
Tee, K.L (2001) Copyright Law in Malaysia, Second Ed, Malayan Law Journal, KL
6.
Kwang, T.B. (2001) Trade Mark Law and Practice in Malaysia, Butterworths
7.
May, C. (2007) The World Intellectual Property Organization, Resurgence and the
Development Agenda, Routledge, UK
8.2 Articles, Newspaper and Magazine
1.
BERNAMA (2007, August 12,). Hanya Tiga Peratus Usahawan IKS Patenkan Harta
Intelek. , Utusan Malaysia
2.
Normah Mohd Aris, SMEs Building Blocks For Economic Growth, presented at National
Statistics Conference, Department of Statistics, Malaysia, 4-5 Sept 2006
3.
(2007, July/August). Bank Negara Malaysia’s SME Development Initiatives, MalaysianGerman Chamber of Commerce & Industry (MGCC) Magazine.
8.3 Journal Article from Databases
1.
Document prepared by the International Bereau of WIPO, The Importance of IP for
SMEs, WIPO Interregional Forum on SMEs and IP, May 2002, Moscow. Retrieved
March 30, 2008, from World Intellectual property Organization(WIPO)Website:
http://www.wipo.int/portal/index.html.en
2.
Amibola, T. & Kocak, A. (2007) Brand, organization identity and reputation: SMEs as
expressive organizations. Qualitative Market Research: An International Journal, 2007
Volume: 10 Issue: 4 Retrieved Feb 24, 2008, from Emerald Group Publishing Limited
database
3.
Ali Salman Saleh & Ndubisi N. O (2006). An Evaluation of SME Development in
Malaysia. Vol 2. No. 1 August 2006, pp. 1-14
Retrieved Feb 13, 2008, From International Review of Business Research Papers Database
8.4 Websites
1.
Intellectual Property for Business. Retrieved Feb 20, 2008, from World Intellectual
Property Organization (WIPO) Small and Medium-sized Enterprises Division. Website
http://www.wipo.int.sme
2.
3.
Intellectual Property for SMIs/SMEs, Retrieved March 1, 2008, from SMI Business
Directory. Website: http://www.smibusinessdirectory.com.my/
Malayan Law Journal, Retrieved April 1, 2008, Website: http://lexis.com
8.5 Statutes
1.
Trade Mark Act 1976
2.
Patents Act 1983
3.
Copyright Act 1987
4.
Industrial Designs Act 1996