1. 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. 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. 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. 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. 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. 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. 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. 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. 9 An Overview of Financing in Malaysia IP financing is well in its infancy, and not yet developed.

10. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

21. 21 © 2009 Advanz Fidelis Sdn Bhd NOTICE :ALL RIGHTS RESERVED. All content included in this handout and the presentation on which the handout is based, such as text, visuals, graphics, logos, images, audio clips, digital downloads, data compilations are protected by Malaysian and international copyright laws and belong to various entities. A full reference of the source and ownership of the above is maintained by Advanz Fidelis Sdn Bhd (Advanz Fidelis) and can be obtained by written request. All graphics, logos and images (visuals) are used for illustrative purposes only. Advanz Fidelis makes no representation relating to the same and use of said visuals should in no way be considered as importing any reference or connection between the owners of the said visuals and Advanz Fidelis. The compilation of all content in this handout and in the presentation on which the handout is based is the exclusive property of Advanz Fidelis. No part of this handout may be reproduced in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this handout) without the written permission of the copyright owners except in accordance with the provisions of the Copyright Act 1987. This information contained in this handout is intended to be of a general nature and to address the specific interest of the reader. The information contained herein does not constitute legal or other professional advice or services. Advanz Fidelis assumes no liability for information contained in this handout and disclaims all liability in respect of the information provided herein. It is important for you to note that the information contained in this handout should not be used as a substitute for a comprehensive consultation with a qualified specialist in the respective field. We have tried to exercise due care in ensuring that all information contained in this handout has been obtained from what we consider to be reliable sources. However, we make no guarantees as to the accuracy and completeness of any information in the handout. We assume no liability nor responsibility for any errors or omissions or any consequences, damages, costs and/or losses arising from use of the same. ADVANZ FIDELIS is a trademark belonging to Advanz Fidelis and has been applied for and/or registered in Malaysia and overseas. All other trademarks not owned by Advanz Fidelis that appear in this handout and in the presentation on which the handout is based are the property of their respective owners, of which Advanz Fidelis makes no representation as to whether or not such owners are affiliated with, connected to, or in any way commercial deal either directly or indirectly with Advanz Fidelis.