Presentation on theme: "1 WIPO Information Meeting on IP Financing Geneva, Switzerland 10 March 2009 IP Financing in the Field of Trademarks Case Study of Malaysia Presented By:"— Presentation transcript:
1 WIPO Information Meeting on IP Financing Geneva, Switzerland 10 March 2009 IP Financing in the Field of Trademarks Case Study of Malaysia Presented By: Jern Ern CHUAH
2 Agenda -Introduction -An overview of Malaysia and its Economy -The National IP Policy -Trademarks in Malaysia -An overview of financing in Malaysia -Trademark Financing in Malaysia -Conclusion and Summary
3 Malaysia – An Overview Located in South East Asia 27 million people Newly Industrialized Country Top 30 largest economy in the world GDP between 5-7% average Export oriented 91% of businesses are SMI-SME
4 Malaysia – An Overview Private Enterprise and Ownership are encouraged Government influences economic direction through the Malaysia Plan (9 th to date), the Economic Planning Unit and Sovereign Wealth Funds The Malaysia Plans target specific sectors and industries for accelerated growth To bolster this, Malaysia developed the National Intellectual Property Policy (NIPP)
5 The National IP Policy (NIPP) Launched in April 2007 Main Purpose – the harnessing of IP as a new engine of growth in Malaysia Transformation to a knowledge based economy Promotes the development of a proper financial infrastructure for IP transactions Supported by a RM5 billion fund
6 The National IP Policy (NIPP) Development of IP financial infrastructure includes:- –the review of current laws and regulations in company law,securities regulations, banking and finance law –development of IP-based banking and financial instruments for the mortgaging of IP assets –promoting the use of IP as collateral and security; –the creation of an IP exchange to stimulate the trading of IP and develop a more liquid market for IP trading –setting up a specialised IP Financing house.
7 The Malaysian TM Regime Fairly Conservative No specific provisions which allow for the specific use and recordal of IP as an asset in financial transactions IP Office will not record nor receive a trust Historically, local ownership falls very much behind foreign ownership (2.5 to 1), but this may change.
8 The Malaysian TM Regime Out of 184,612 registered trademarks, only 52860 are owned by locals YearApplicationRegistration MalaysiaForeignTotalMalaysiaForeignTotal 1983 – 199977,41599,122176,53714,03746,37160,408 20006,30312,50018,8034491,3281,777 20016,52510,07816,6031,5705,3416,911 20027,6618,78516,4464,0567,07211,128 20038,3279,43917,7663,0149,10812,122 200410,40610,33720,7433,2438,47311,716 200510,47911,66822,1473,6837,77111,454 200611,20912,84024,0495,65110,10815,759 200712,28913,60525,8948,10817,38225,490 200812,56213,47226,0349,04918,79827,847 Total163,176201,846365,02252,860131,752184,612
9 An Overview of Financing in Malaysia IP financing is well in its infancy, and not yet developed.
10 TM Financing in Malaysia: Government and Govt-backed Grants The primary means of recognised external financing for trademarks in Malaysia Case #1– MATRADE Brand Promotion Grant –For development of local brands outside Malaysia –Eligible only to marks identified by the Brand Grant Committee –Steep evaluation curve –Large grant by Malaysian standards for brands –50% reimbursable grant up to max of RM2 million per company per brand –100% reimbursable grant up to max of RM1 million per company per brand for SMI-SMEs
11 MSC Malaysia – an initiative to springboard Malaysia through ICT into a knowledge economy Case #2 – MSC Malaysia IP Grant Scheme –Open to local MSC Malaysia Status companies –Very few requirements to obtain –Designed to subsidize up to 70% of initial costs incurred in filing IP whether locally or overseas –Relatively small sum of RM17,500 per applicant per annum TM Financing in Malaysia: Government and Govt-backed Grants
12 TM Financing in Malaysia: Banks Banking industry in Malaysia very conservative and prudent, with strict credit culture No specific limitations to TMs being used as collateral, but actual acceptance of TM as sole collateral for a loan is almost unknown Corporate Guarantees for loans a known pre-requisite
13 TM Financing in Malaysia: Banks Confluence of factors leading to non-use of TM as sole collateral by banks in Malaysia:- –lack of awareness of IP in the local banking industry –reluctance to accept intangible assets except as part of a larger collateral base; –insufficient manpower to execute non-traditional sales; –illiquid nature of trademarks as an asset; –lack of a local marketplace for the trading of IP; –large discounts in the determination of value and in loan figures which make it pointless for trademarks to be considered as sufficient collateral to stand by itself; –no history of transactions; [Contd…]
14 TM Financing in Malaysia: Banks Contd… –inability to establish proper trademark valuation; –insufficient local resources and experts providing acceptable valuations; –high cost of overseas trademark valuations; –relatively small pool of local owned trademarks (numbering under 53,000 only) –relatively new pool of local trademarks and local owners most of which are SMI-SMEs –local pool of trademarks not yet properly established in the local and foreign marketplace; [Contd…]
15 TM Financing in Malaysia: Banks Contd… –lack of a proper infrastructure for the recordal of trademarks as collateral and security; and –ease in the near past of obtaining easy offshore financing.
16 TM Financing in Malaysia: Securitization Very rare and always customized, few recorded transactions Applicable mainly to medium sized private companies with a pool of known trademarks established in local market Normally open only to private investors.
17 Conclusion Malaysia expects a surge of IP related activity in the near future. With the amount of focus provided to IP, IP related financing is also expected to arise. As trademarks form the largest component of registrable IP in Malaysia, it is expected to play a large role in financing activities. The need to convert IP assets from an unnoticed asset to a front runner in terms of security and collateral is critical.
18 Conclusion The development of a proper IP financing structure as proposed by the NIPP must take root, and the government and its related agencies must take advantage of their position to champion such initiatives as well as other private initiatives.
19 Conclusion The fundamental issue now is to alter the perception and conservatism of the local banks that IP, and TMs in particular, cannot form the basis of safe collateral.
20 Summary -An overview of Malaysia and its Economy -The National IP Policy -Trademarks in Malaysia -An overview of financing in Malaysia -Trademark Financing in Malaysia -Conclusion