Market insights

Strong IP rights regime a boon for businesses

28 November 2016 by Liew Hanqing

As businesses look to innovation to continue growing and thriving in an increasingly competitive marketplace, a sound IP protection strategy is essential for ensuring these plans are watertight. This is especially so for companies looking to expand their footprint in Asia, a region in which IP protection still lags behind countries in the West.

The 2015 Intellectual Property Index published by the Global Intellectual Property Centre found that IP protection regimes in Asean as a whole were generally lacklustre, with a couple of exceptions: Singapore and Malaysia led the pack with 25.38 and 14.62 out of a possible 30, while countries like Indonesia and Vietnam trailed, with 8.61 and 7.84 respectively. 

A far cry from its erstwhile dubious honour of being the world’s “piracy capital”, as a former US senator put it in the 80s, Singapore now ranks among the world’s best in terms of intellectual property rights. The World Economic Forum (WEF)’s Global Competitiveness Report 2014-2015 ranked the country top in Asia, and second in the world for intellectual property protection – the fourth consecutive time the country has retained these placings.

Leaders in the IP protection arena enjoy a clear advantage: a commitment to the protection of IP rights contributes to a good business environment which supports innovation. Singapore’s FDI inflows have risen not only in quantity, but in quality: a strong business environment has attracted top multinationals to Singapore across various industries, including the life sciences, digital media and manufacturing. MNCs with a presence in Singapore include pharmaceutical giants Pfizer and Novartis, media giants Electronic Arts and Lucasfilm, as well as automotive giants Continental and Rolls Royce – and the list is growing.

There are two main reasons why strong IP protection laws are essential for businesses to thrive. IP protection enables companies to retain a competitive advantage in the long run by protecting trade secrets and know-how, while copyrights enable firms to protect key creative works.

Keeping ahead of the competition

Singapore’s strong IP protection regime has been a boon for businesses which frequently need to develop proprietary technologies to stay ahead of their closest competitors.

One such company is food giant Nestlé, whose R&D spokesman said Singapore’s strong IP rights regime has bolstered the company’s global R&D efforts. Said the spokesman: “Our Singapore Nestlé R&D Center has been developing proprietary technology on solid state fermentation of food materials since the early 80s and is protected by at least 8 patents.”

The spokesman added that a robust IP rights regime is crucial in encouraging innovation, creativity and progress in both industry and commerce in Singapore. “Developing strong IP protection is therefore very important for Nestlé to develop and apply proprietary technologies, such as biotransformation, for food manufacturing in the region and globally,” the spokesman said.

Others, such as food giant Mead Johnson, have invested heavily in the country in no small part due to its strong IP protection. The company set up a US$325 million industrial manufacturing plant in Singapore – the largest capital spending in the company’s 100-year history. Charles Urbain, Mead Johnson’s President – Asia and Europe, said that the additional capacity and important technologies and capabilities in the region would help the company keep its competitive advantage.  Urbain added that Singapore was chosen for its strong IP protection, high-quality production and well-developed infrastructure.

Procter & Gamble, a major producer of household and personal care products, also invested US$192 million in the P&G Innovation Centre in Singapore – one of two such centres in Asia. The company also inked an agreement with Singapore’s Agency for Science, Technology and Research (A*STAR), allowing the company to further leverage the country’s strong research and development capabilities.

The country’s innovation-friendly business environment also led P&G to choose Singapore as the site for its first perfume manufacturing facility in Asia, which features state-of-the-art features such as advanced real-time inventory and production control systems.

P&G’s then-president for Asia Deb Henretta said at the time that Singapore’s pro-business environment and strong IP protection rights were key in the decision to locate the facility in Singapore.

Indeed, a sound IP strategy – coupled with a supportive environment – is essential, as Swiss shoe company Masai Group International (which was acquired by a Singapore firm in 2012) has learnt. The company, which has developed shoe technology that involves simulating walking barefoot on soft earth, has struggled significantly with protecting its technology from being ripped off.

Masai’s CEO Andy Chaw told the Straits Times in an interview that protecting his IP was “a constant battle”, but that the company has managed to get financing to defend its IP, invest in R&D, and promote its brand. The loan was a result of the Intellectual Property Office of Singapore’s IP Financing Scheme, which allows companies with rich IP to raise funds using their patents, trademarks or copyrights as collateral.

Those to whom intellectual property is an afterthought should think again – IP protection is the top challenge for multinationals operating out of other Asian regions, particularly China. The US government estimated that IP thefts from US-headquartered organisations in 2013 resulted in a whopping US$300 billion in lost business, while European businesses suffered a loss in potential profits of 20 percent.

Singapore firm Trek 2000, credited with inventing the ThumbDrive storage device, learnt this the hard way. The product was launched while its patent was still pending, and numerous similar devices flooded the market soon after. Henn Tan, Trek 2000’s CEO, told the Straits Times that the ThumbDrive fiasco was the company’s single biggest mistake.  Since then, the company has made IP protection a priority – and now owns over 600 patents.

Others looking to thrive in Asia would do well to follow suit. As businesses move forward in an age of continuous innovation, a sound intellectual property protection strategy – particularly in a business environment that supports and advocates for IP protection – is essential for businesses who need to develop innovative products for an increasingly discerning consumer base. This is possibly the only way companies can stay ahead, keeping a competitive advantage over their closest competitors. 

Edited by Tan Yi Xuan