S'pore's new IP regime a boost for businesses

S'pore's new IP regime a boost for businesses
Key attributes: A patent that lacks quality or commercial value may ultimately deprive its owner of either the opportunity to use it as collateral for financing or the fruits of commercialisation through licensing, or both.
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SINGAPORE released its Intellectual Property (IP) Hub Master Plan on April 1, 2013.

Among the three strategic outcomes set out in the Plan, two are highly pertinent to businesses seeking to leverage IP for future growth.

They are the establishment of a hub for "quality IP filings" and the setting up of a hub for "IP transactions and management".

Key initiatives have already been embarked upon to kickstart the process of achieving these two strategic outcomes.

The first involves overhauling Singapore's previous patent registration regime to transform it from a "self-assessment" system to a "positive grant" system. This initiative came into effect on Feb 14, 2014. The second was the announcement by the government in August 2013 of an IP Financing Scheme. Both key initiatives are inter-dependent.

Prior to Feb 14, 2014, an application for a Singapore patent to be granted for an invention had to undergo a substantive examination to ascertain whether it met the three patentability requirements of novelty (new), inventive step and industrial applicability.

While the requirement for a substantive examination is very much in line with established international norms, the previous patent system allowed the applicant for a Singapore patent to consider the results of the substantive examination, and then assess whether to take further steps to have the patent application granted.

As such, the grant of the patent application was not contingent upon the outcome of the substantive examination, but solely on whether the applicant had met the statutory requirement of having the patent application examined, followed by fulfilling other administrative and procedural requirements. In other words, you could get a Singapore patent granted for just about anything!

It is of little surprise then that the very liberal approach taken has resulted in a rapid growth in the number of granted patents in Singapore over the last 10 years, including patents which are of little or no real merit. Accordingly, in line with the strategic outcome of improving the quality of IP filings, the first key initiative was implemented by way of an amendment to Singapore's patent laws on July 10, 2012.

From Feb 14, 2014, only patent applications for inventions whose subject matter has been examined and determined to have met the criteria of novelty, inventive step and industrial applicability may be granted henceforth. The legislative amendments effectively align Singapore's patent system with those in the United States, Europe and Japan, and ensure that unmeritorious patent applications are filtered out, thereby improving the overall quality of granted Singapore patents over time.

In tandem with changes to the patent laws, the government announced plans on Aug 27, 2013, to assist companies in unlocking the value of their IP assets via an IP Financing Scheme. On April 8, 2014, further details of the IP Financing Scheme were released. Companies incorporated in Singapore and in possession of granted patents may utilise such patents as partial collateral for loans from participating financial institutions.

To-date, DBS Bank, OCBC Bank and United Overseas Bank are on board and will refer any patents offered as collateral for valuation by a panel of approved valuers, following which the loan, if granted, will be co-underwritten by the Singapore government (which has allocated $100 million for such purposes). This initiative is part of a wider strategy to promote Singapore as a hub for IP transactions. A key part of valuing a patent lies in the merits of its claimed invention. A patent that has a positive substantive examination report will likely fare more favourably in a valuation exercise as compared to one granted on the basis of a negative substantive examination report in a self-assessing regime. Hence, a patent that is examined and granted under a positive grant system, even if there is still some risk of being invalidated if challenged in litigation proceedings subsequently, will nonetheless offer much more certainty and assurance than one that is the product of a self-assessing system.

This will in turn impact upon the valuation of the patent and have consequences on the acceptability of the patent as collateral for the loan, as well as the quantum of the financing being offered, if at all. The added factor that public funds are being used to underwrite the loan will also place the onus on the Intellectual Property Office of Singapore to ensure the quality of the patent examination process.

Effect on commercial objectives

Given the significant impact an adverse substantive examination report can have on the value of a patent, businesses seeking to tap the IP financing scheme should be made aware of the new requirements for the grant of a patent. As far as possible, applicants should proactively seek to obtain a positive substantive examination report during the patent application phase.

Therefore, where objections are raised by the patent examiner during the patent application phase, the applicant may have little choice but to amend the patent application by narrowing the scope of protection sought. In doing so, care must be taken to ensure that the resulting patent still offers adequate protection to the invention that is intended to be commercially exploited. A patent whose scope is overly narrow considering its intended commercial exploitation may be of limited value, notwithstanding its positive grant.

As such, the approach towards building up a patent portfolio that can avail of the new IP Financing Scheme and, at the same time, achieve the commercial objectives of having such a patent portfolio requires a balance to be struck between the commercial objectives of the patent owner's business and the desire to pursue a positive substantive examination report in respect of each patent application.

Patents which lack either quality or commercial value may ultimately deprive the owner of either the opportunity of using the patent as collateral for financing, or of the fruits of commercialisation through licensing, or both.

The shift to a "positive grant" system heralds a new phase in Singapore's patent system. The new requirement for a positive substantive examination report before a patent is granted will serve to strengthen and improve the quality of granted Singapore patents.

This in turn offers opportunities to businesses holding such patents the chance to monetise their intangible business assets through the offering of such quality patents as collateral for obtaining financing from selected financial institutions, following which the financing can then be used to fund further research and development activities or other commercial objectives.

The writer is equity partner at Rajah & Tann; his main practice areas are intellectual property, gaming, sports, media and entertainment law.

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