The Mechanical and Electrical Engineering Industries in the Philippines
EU-Philippines trade reached 12.47 billion Euros in 2014, with major EU exports to the Philippines including machinery and transport equipment (58.8%) and chemicals and related products (11.5%). Machinery in particular dominates several bilateral economic relations, forming 77% and 61% of Philippine exports to Germany and the Netherlands in 2014 respectively, although electronics trade growth has rapidly outpaced that of machinery trade recently.
The dominant position of machinery and electronics in EU-Philippines trade has made the Philippines into a centre for outsourced manufacturing and assembly for EU firms, and the country boasts a number of prominent districts dedicated to these industries. Awareness of IP challenges inherent to the machinery industry and the Philippines can help to protect SMEs as they integrate themselves into this intercontinental value chain.
The most salient IP challenges for firms operating in the mechanical engineering sector are, of course, infringements of patents. However, beyond patents and industrial designs, trade mark counterfeiting and illegal reproduction of promotional or other material are also serious issues facing EU SMEs. All of these problems can crop up fairly simply as a result of reverse engineering or simple mimicry—many products produced within the Philippines are simple appliances and electronics which are easily replicable or distinguished primarily by their branding. For these reasons, in addition to early registration of IP, constant monitoring for counterfeit products or materials is also essential.
Trade marks and industrial designs: brand protection
A staple of any IP strategy should be protection of trade marks. This is especially true for the Philippines, where much trade with the EU centres on small, easily-replicable items such as music players or audio recorders. For many of these smaller items, individual unit performance can be difficult for a consumer to gauge. As such, consumers will rely almost entirely upon the trade mark on the product—your branding logo, colours, etc.—and the product’s industrial design—its unique shape, etc.—to distinguish among products.
As with all applications to be addressed within this article, trade mark and industrial design applications are governed by the Philippines’ “first to file” system—whoever files for rights over this IP will be granted them. South-East Asian countries in general are different from Europe in that their enforcement of this rule is much stricter. Although famous and long-established brands such as Birkenstock or Le Cordon Bleu have won trade mark cases even when they were not the first to apply for or even use the marks, in general it will be much harder to win a case if a local manages to apply for IPR before an EU SME. When registering a trade mark in particular, also be sure to list all potential goods to which the trade mark will be applied. It is possible for a company to win a trade mark for certain types of goods but fail to mention other, linked goods in which the trade mark will also be used. In these cases, halting infringers will also become more difficult.
All registrations can be completed with the Philippines Intellectual Property Office. Applications will require that there is an individual within the Philippines who can serve as the point of contact for the government. This individual can be from the SME or a paid agent; however, if an SME chooses to hire an agent, it should be careful to ensure that the agent is filing the applications on behalf of the SME, rather than filing the applications under his or her own name.
Patents and semiconductor topographies: the nuts and bolts of IPR protection
Securing the patents used to protect an SME’s machinery is another key area for action in the Philippines. Much EU-Philippine trade revolves around machinery, pumps, engines, and other sophisticated devices. While the Philippines represents a great opportunity for manufacturing these items, without proper protection for patents, unscrupulous local partners could easily begin production of technology incorporating an SME’s IPR or, worse yet, apply for patents incorporating an SME’s IPR once they have begun a contract with the SME. In this case, the local partner will be in an extremely strong position to force the SME to renew the contract or to simply to ditch the SME and continue producing the goods once the contract has expired.
Semiconductor topographies (or, as they are known in the Philippines, integrated circuit layout-designs) are analogous to patents in that they protect specific ways of arranging components. Because the Philippines is home to manufacturing for a large number of electronic components used in EU appliances and optical and medical instruments, protecting semiconductor topographies can be a key part of cutting infringement off at the source.
Applications for patents can be made to the Philippines IPO and can receive priority if based on an international application which was filed in another country earlier—however, you will still need to file a patent application in the Philippines. For smaller components with less innovativeness, utility models can be used to protect IPR which would otherwise not qualify for a patent. Finally, smaller pieces with most of their value deriving from their outside appearance (certain control layouts, button placements, etc.) can still be protected by means of industrial designs which will prevent other firms from copying their aesthetics.
Trade secrets: what they don’t know can’t hurt you
In the Philippines, a trade secret is commercially exploitable information which is not public knowledge and is protected by confidentiality measures. These confidentiality measures ideally include non-disclosure agreements and clauses in contracts with partners and employees; internal guidelines distributed to employees regarding maintaining trade secrets; clear marking of confidential information; and physical separation of trade secrets from personnel not authorised to know them.
Trade secrets are fragile because they lose all value once divulged. For this reason, it is critical to be proactive in their protection. Clearly indicating to partners and employees which information is protected and forcing them to sign NDAs can help keep these secrets safe. A local partner which claims that NDAs are contrary to the local business culture or are considered a sign of distrust is likely just a firm attempting to scam SMEs out of their IP.
Trade secrets may seem like fragile IPR protection, but in many cases they are the best form of protection available. In particular, many firms’ advantages come not from their particular products but rather from their particular production methods. Especially for simpler products such as many made in the Philippines, the outward appearance of these products alone may not be enough to determine the method of production, making infringements of IPR regarding production processes very difficult to detect. In these cases, carefully guarding trade secrets related to production can be a firm’s best way of maintaining its IP advantage.
SMEs should be mindful that the best way of protecting trade secrets is to be proactive and to physically prevent other firms from gaining access to them. This is accomplished through carefully guarding related documents, preventing employees from using video phones in areas with secret production processes, etc.
Whilst copyright may not seem immediately applicable in the mechanical and electrical engineering sectors, it is an important tool for protecting your marketing material, manuals, packaging, and ultimate market share.
Most common copyright infringements in this sector consist of copied product images featured on the infringer’s website to advertise their products. However other examples include copies of sections and occasionally entire brochures, product descriptions, packaging and also manuals and instruction materials. Packaging in particular can serve to distinguish between the smaller, less distinctive electronic products produced by Philippine factories on behalf of EU firms.
Copyright is also where all computer coding is protected in the Philippines. Due to institutional restrictions, the Philippines does not have the capacity to protect code based on function. As such, it is possible for a firm to reverse engineer a product’s source code and build new code which will accomplish the same goals. SMEs can still protect themselves by notarising their code as copyright, however. This will protect the code in the form it is expressed (its original coding) and will bolster an SME’s case during litigation.
Whilst copyright is an automatic right in the Philippines, not requiring registration, voluntarily notarising evidence of copyright can strengthen an SME’s case in court.
In the Philippines, the Intellectual Property Office can respond to complaints by cancelling or reviewing applications for IPR such as patents or industrial designs. In order to capitalise on this opportunity, SMEs operating in the Philippines should regularly review the Philippine IPO’s electronic gazette in which it publishes new patents, industrial design certificates, etc. SMEs can otherwise go through other dispute resolution mechanisms, including customs seizures, to make immediate impacts on counterfeiters’ supply chains or continue action via means not offered by the IPO. Before taking any enforcement action, SMEs are urged to always seek out professional legal advice. Mediation can also be a cost-efficient and quick method of settling IP disputes in a region with at times lacklustre bureaucracies and judicial processes.
The South-East Asia IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to South-East Asian countries, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (firstname.lastname@example.org) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days.
The South-East Asia IPR SME Helpdesk is co-funded by the European Union.
To learn more about the South-East Asia IPR SME Helpdesk and any aspect of intellectual property rights in South-East Asia, please visit our online portal at http://www.ipr-hub.eu/.