Contracts Regarding Intellectual Property Rights (Assignments And Licences) And Third Parties

Question 1
What forms of property right do IP rights take in Malaysia?

Answer 1
In Malaysia, IP rights take the form of
i) Patents;
ii) Trade Marks;
iii) Industrial Designs;
iv) Copyright;
v) Geographical indications; and
vi) Integrated circuits

Question 2
Is it required an assignment or licence of IP rights in order for it to be effective;
a) between the parties; and
b) against third parties?

Answer 2
a) between the parties
Patents
An assignment or a licence does not need to be registered in order to have effect between the parties.

Trade Marks
An assignment must be registered. A Trade Mark which is not recorded with the Intellectual Property Corporation of Malaysia shall not unless the Court otherwise directs, be admissible as evidence in Court to prove title to a registered Trade Mark (Trade Marks Act 1976, s47).
It is not compulsory to record a licence arrangement under the Trade Marks Act 1976.

Industrial Designs
An assignment or a licence of Industrial Design does not need to be recorded in order to have effect between the parties.

Copyright
Assignment – An assignment of copyright is not required to be registered, however it needs to be in writing to be effective (Copyright Act 1987, s27).
Licence – A copyright licences does not need to be registered, however it needs to be in writing to be effective (Copyright Act 1987, s27).

b) against third parties
Patents
Yes, an assignment must be recorded in the Register of Patents in order to have effect against third parties – s39 of Patents Act 1983.

Trade Marks
An assignment must be registered. A Trade Mark which is not recorded with the Intellectual Property Corporation of Malaysia shall not unless the Court otherwise directs, be admissible as evidence in Court to prove title to a registered Trade Mark (Trade Marks Act 1976, s47).
It is not compulsory to record a licence arrangement under the Trade Marks Act 1976.


Industrial Designs
Yes, an assignment must be recorded in the Register of Industrial Designs in order to have effect against third parties (Industrial Designs Act 1996, s30).

Copyright
Assignment – An assignment of copyright is not required to be registered, however it needs to be in writing to be effective (Copyright Act 1987, s27).
Licence – A licences does not need to be registered, however it needs to be in writing to be effective (Copyright Act 1987, s27).

Question 3
Does the
a) exclusive and
b) non-exclusive licensee of an IP right have a right to bring proceedings for infringement, and if so, what conditions must be satisfied for the right to arise?

Answer 3
a) Exclusive Licensee
Patents
Any licensee (unless the licence contract provides otherwise) and a beneficiary of a compulsory licence may bring proceedings for infringement if he proves that the owner refused pf failed in institute proceedings within 3 months from receipt of request from the licensee/beneficiary.

Trade Marks
Pursuant to section 51 of the of the Trade Marks Act 1996, subject to any agreement subsisting between the registered user of a Trade Mark and the registered proprietor of the Trade Mark, the registered user is entitled to call upon the registered proprietor to take proceedings for infringement of the Trade Mark, and if the registered proprietor refuses or neglects to do so within two months after being so called upon, the registered user may institute proceedings for infringement in his own name as if he were the registered proprietor and shall make the registered proprietor defendant. A registered proprietor so added as a defendant is not liable for costs unless he enters an appearance and takes part in the proceedings.

Industrial Designs
Any licensee and a beneficiary of a compulsory licence may bring proceedings for infringement if he proves that the owner refused of failed to institute proceedings within 3 months from receipt of request from the licensee/beneficiary. The owner has a right to join in such proceedings.

Copyright
In an action for infringement of copyright, pursuant to section 38 of the Copyright Act, the exclusive licensee has the same rights of action and is entitled to the same remedies as he would have if the licence had been an assignment, and the exclusive licensee's rights and remedies are concurrent with the rights and remedies of the owner of the copyright. Section 38(3) provides that where the copyright owner and exclusive licensee have concurrent rights of action in relation to an infringement, neither the copyright owner nor the exclusive licensee is entitled, except with leave of court, to proceed with the action, unless the other party (i.e. the copyright owner or the exclusive licensee as the case may be) is joined as a plaintiff or added as a defendant. Where the other party is not joined as a plaintiff but added as a defendant, the other party is not liable for any costs in the action unless he enters an appearance and fakes part in the proceedings [s38(8)].

b) Non-exclusive licensee
Patents
Any licensee (unless the licence contract provides otherwise) and a beneficiary of a compulsory licence may bring proceedings for infringement if he proves that the owner refused or failed to institute proceedings within 3 months from receipt of request from the licensee/beneficiary.

Trade Marks
Pursuant to section 51 of the Trade Marks Act, subject to any agreement subsisting between the registered user of a trade mark and the registered proprietor of the trade mark, the registered user is entitled to call upon the registered proprietor to take proceedings for infringement of the trade mark, and if the registered proprietor refuses or neglects to do so within two months after being so called upon, the registered user may institute proceedings for infringement in his own name as if he were the registered proprietor and shall make the registered proprietor a defendant. A registered proprietor so added as a defendant is not liable for costs unless he enters arm appearance and takes part in the proceedings.

Industrial Designs
Any licensee and a beneficiary of a compulsory licence may bring proceedings for infringement if he proves that the owner refused or failed to institute proceedings within 3 months from receipt of request from the licensee/beneficiary. The owner has a right to join in such proceedings.

Copyright
A non-exclusive licensee may sue provided that he joins the owner of the copyright - Television Broadcasts Ltd v Mandarin Video Holdings Sdn Bhd [1983] 2 MLJ 346 at 366, Television Broadcasts & Ors v Seremban Video Centre Sdn Bhd. In these cases, reference was made to 9 Halbury's Laws of England 4th Ed, para 880 and Young & Anor v Odeon Music House Pty Ltd (1976) 10 ALR 153.

Question 4
Is a licence transferable;
a) by the licensor and
b) by the licensee?

Answer 4
Generally, whether the licence is transferable will depend on the contractual terms agreed upon by the parties.

In respect of patents, the licensee may not grant to third parties any of the rights of the patent owner to third parties (i.e. by entering into sub-licences), unless his agreement with the patent owner expressly allows him to do so (section 43(2) of the Patents Act 1983).

In respect of Trade Marks, it is not compulsory under the Trade Marks Act 1976 to record a licence arrangement. However, it is possible under the Act to be registered as a user the licensee or distributor of the Trade Mark provided that the Registrar was satisfied that the criteria of the section were met. A registered user may not transfer the right to use the registered Trade Mark to any third party (Trade Marks Act 1976, section 52).

In respect of copyright, if a licence agreement involves rights and obligations of a personal nature, then, in general, the benefit of the agreement is not assignable. Whether or not the licence agreement is of a personal nature involves a question of construction of the licence agreement.


Question 5
What is the effect on an assignment or licence of the invalidity of the underlying IP rights?

Answer 5
The invalidity of the underlying IP right would mean that the assignee or licensee will lose the benefit of the assignment or licence respectively.

Question 6
Can IP rights be used to provide security? If so what formalities are required?

Answer 6
In theory, IP rights may be used to provide security as they are a form of assets which is of value. However, in practice banks and financial institutions do not generally accept UP rights as security due to the difficulty in valuing IP rights. There are no special formalities for perfecting security of an IP right. The usual requirements to perfect any intangible asset are applicable.

Question 7
Does the bankruptcy law explicitly provide for the effect of bankruptcy on IP rights and contracts concerning them?

Answer 7
The bankruptcy legislation in Malaysia does not explicitly provide for the effect of bankruptcy on IP rights and contracts concerning them. There have not been Malaysian cases which considered this question. The English High Court case of Performing Rights Society Ltd v Rowland [1997] 3 All ER 336 would therefore be persuasive authority in the Malaysian courts. This case provides that royalties and licence fees payable to the bankrupt under a licence to use the bankrupt's intellectual property, will pass to the Official Assignee.

Question 8
Do all Intellectual Property Rights form part of a bankruptcy, or are some exempted?

Answer 8
Yes, all intellectual property rights form part of a bankruptcy. Intellectual property rights are a form of intangible assets which fall within the notion of property available for distribution among creditors, for the purposes of section 48(1) of the Bankruptcy Act 1967 which provides for the description of bankrupt's property divisible amongst creditors.

Question 9
What is the effect of the insolvency or bankruptcy of the licensor and the licensee on a contract regarding intellectual property?
a) Does one party have a right to terminate on the insolvency of the other?
b) Can the insolvent party assign the rights concerned?
c) What effect do express contractual terms have in this situation?

Answer 9
a) The legislation does not provide for the rights of termination on the insolvency pf a party. The position would depend on the contractual terms which the parties have arrived at.
b) Given that intellectual property rights form part of the bankruptcy and will pass to the Official Assignee upon bankruptcy, the insolvent party is unlikely to be able to assign the rights concerned.
c) In the case of a) above, express contractual terms will determine weather a party has a right to terminate on the insolvency of the other. In the case of b), the express contractual terms will be subject to the rights of the Official Assignee.

Question 10
Is there any statutory or other protection for a licensee/licensor in the event of the insolvency of a licensor/licensee?

Answer 10
There is no statutory or other protection afforded by in terms of Intellectual Property Law. The position of the licensor/licensee will be determined under bankruptcy law. In the event of the insolvency of a licensor/licensee, the licensee/licensor will rank as a creditor of the licensor/licensee and will be subject to the priorities of debts under insolvency law, as provided for in Section 43 of the Bankruptcy Act 1967.

For additional information, please visit www.myipo.gov.my.