How IPR can help (or hinder) SME growth in Southeast Asia

By Samuel Sabasteanski

Southeast Asia: A market driving future growth

The Asian Century will see the continent’s middle class grow to account for roughly 60% of middle-class population and spending by 2030. Against this backdrop, ASEAN, a union of 10 countries in Southeast Asia, represents the seventh-largest economy in the world and the second-fastest growing economy in Asia. Yet in recent years, a number of high-profile IPR cases—such as Apple having to pay a Chinese company $60 million for the trademark “iPad” in China—have highlighted that even major companies can face IPR pitfalls in Asia’s economic engines. Proactive protection of IPR and mindfulness of the region’s unique IPR challenges will be critical as SMEs continue to reach out to the 630 million consumers of Southeast Asia’s growing market.

IPR: Value and local challenges

Intellectual property is a driving force behind major economies’ knowledge industry growth. It is what separates innovators and recognizable brands from the hoi polloi of knockoffs and imitators and is a key asset that investors consider carefully.

Yet while many Southeast Asian countries have stringent intellectual property right laws in line with WTO admission requirements, many SMEs meet challenges and setbacks in protecting their trademarks and patents. Lax enforcement by inexperienced bureaucracies in some countries is one issue, but even more common are difficulties rooted in unfamiliarity with Southeast Asian IPR laws themselves, especially ignorance of many countries’ strict enforcement of their ‘first-to-file’ registration systems. In such a system, the first to file an IPR in a jurisdiction (and not simply whoever can prove that he was the “first to use” as is the case of trademarks in many EU jurisdictions) is awarded control of that right. This dynamic creates an easy hunting ground for so-called “trademark squatters”.

SMEs seeking a piece of Southeast Asia’s burgeoning economy may find that such IPR difficulties can weigh on profits. In addition to patent infringements and leakage of trade secrets which corrode competitive advantages, trademark infringement can drain sales and seriously undermine consumer trust and goodwill towards otherwise highly respected brands. Legal battles with trademark squatters are often unsuccessful and can force firms to pay astronomical sums merely to buy back and use their own trademark within a territory or can even leave them unable use those trademarks at all.

Here are some examples of IPR issues SMEs have encountered while operating in Southeast Asia and how they handled them:

• Birkenstock failed to register its trademark in the Philippines, allowing a local trademark squatter to register the mark and fight them in a case that ended up in the Filipino Supreme Court
• A safety products manufacturer filed a civil lawsuit against the Thai Trademark Board, reversing the Board’s decision to not grant a trademark for one of their products
• A British brand used unwise strategies to battle piracy, resulting in loss of sales and an expectation for lower prices among local consumers
• A European language school relied on home legal advice and chose not to register its IP in Thailand before operating with local partners, allowing those partners to steal their curriculum and trademarks

Protecting your IPR in Southeast Asia

The above examples demonstrate the necessity of relying on accurate information, due diligence, and proactive planning to protect an SME’s IPR before and during its operations in a Southeast Asian nation. Oftentimes, registering with international patent or trademark organizations alone is not enough to meet this need and SMEs are advised to seek domestic legal advice.

Although Southeast Asia offers nearly unlimited potential for growth for SMEs, without proper IPR protection an SME could be victim to malicious lawsuits or brand hijacking. SMEs should consult with Southeast Asia IPR experts and take advantage of EU resources such as the boots on the ground in local European Chambers of Commerce or the expertise of the EU’s Southeast Asia IPR SME Helpdesk.

For more information and free, tailored advice on protecting your IPR as you engage in Southeast Asian markets, get in touch with one of our Helpdesk experts.