Doing research and development in ASEAN is still rare for most SMEs, however, this trend is changing; with an increasing numbers of engineers, the region is becoming a more attractive location for R&D Moving this function to ASEAN does entail exposure to extensive IP risks which need to be considered and minimised if success is to be attained.
There are a variety of different IP risks to be considered and these include:
Having the right IP protection in place
A thorough assessment of the company's IP situation is needed. If your SME does not have an internal resource to carry out an IP assessment, consider bringing in experts with specific knowledge on securing IP in ASEAN. Performing such an assessment without having experience in both IP and regional-issues is not recommended. For a short introduction to a few of the issues to be considered in an IP audit, please see the "IP Audit Checklist" section.
Read more about how to register IP rights in South-East-Asian countries by reading our country IP factsheets by following this link.
IP risks and business set-up Physically relocating or establishing R&D in ASEAN is a significant business decision. Consider the status or type of entity you plan to establish or work with. There are different issues to consider depending on the type of business entity and how it is owned; for example, a Wholly Foreign Owned Enterprise (WOFE) operated by your own trained employees will be very different to the issues involved in performing R&D in a Joint Venture or by contracting to a domestic enterprise.
Make sure, if you are planning to work with an existing company, it is a properly registered, legitimate business (see the 'Sourcing' section). If you are at the stage of discussing an R&D agreement with a prospective partner make use of confidentiality agreements and non-disclosure agreements to preserve your proprietary information and trade secrets (see the 'Business Partners' section).
Minimising IP risks is largely dependent on who and how you choose to handle the R&D in ASEAN. No matter how you choose to resolve the business set-up, it is important that technology transfer back to the SME is ensured. Steps to ensure this should be made prior to engaging in R&D in ASEAN nations.
Contractual issues in the ASEAN region
When looking to identify a potential R&D partner in ASEAN, you should consider how you want the relationship to work and what controls are needed to secure your rights. These issues need to be spelt out in a written agreement which can form the basis of a contract. It is NOT advisable to start R&D in ASEAN without a signed contract. However, it is important to keep in mind that a contract could be viewed as a "guideline for cooperation" in ASEAN, whereas in Europe a signed contract is viewed as legally binding. Contracts should not be rushed through, but should instead be a process where the contract can work more as a relationship manual.
In the contract, it is advisable to clearly state what Intellectual Property Rights are owned in respect of the items to be supplied and to clearly state that any know-how, discovery, invention (whether patentable or not), design, drawing, computer program, photograph, plan or record relating to the development of prototypes and the subsequent final version of products or any future developments to products which are made, created, developed or acquired by the supplier (together with all Intellectual Property Rights and any future rights in respect of any such matter) will belong to the SME absolutely. It is advisable to have an ASEAN nation-specific specialist forming the contract as there are certain specific issues that should be considered.
Discovering and protecting IP rights - building a systematic approach
When R&D is conducted in ASEAN, there is a need for implementing structures which ensure that IP rights are discovered, evaluated and that an internal strategy for exploitation is made.
Restricting access - preserving trade secrets
Trade secrets can be defined as "Technological information and business information that is not known to the public, derives economic value for the holder, is of practical applicability, and has been subject to steps by the holder to maintain its secrecy". In practice the R&D department needs to be physically isolated and demonstrably secure, and visitors should be monitored closely (if having access at all). Furthermore, consideration should be given to the secure storage of important information.
Monitoring - IP Security Audits
Always take a practical approach to securing valuable know-how and IP rights. Monitoring is therefore an option to check whether the current system in place is actually minimising the risk of leakages.
Helpdesk expert explains the process of auditing sourcing partners for clients
"Through an IP Security Audit, we determine to what extent the IP area and the IP processes within the involved client's organisation are secure. By doing so we can secure data for further optimisation of the client's IP security platform and eventually develop a list of potential IP risks for the company in question."
R&D departments which know they must adhere to controls, procedures and standards will do so if they are subject to checks; those departments which are not subject to checks will rapidly deviate from procedures and standards.
It is important to conduct such audits of potential contract manufacturers and not to take their representations/assurance at face value. Often, the theft and leak may occur at the middle or lower level staff even if the business owners demonstrate that they have the best of intentions.
It is imperative that SMEs consider how inventions made belong to the SME. IP-transfer obligations should be included in all employee contracts while respecting local law. At the same time it is imperative to educate the R&D staff on how to handle valuable information to ensure that they are aware of confidentiality details.