Trademark conundrum | Daily News

Trademark conundrum

Delays in local trademark registrations are leading to many Sri Lankan businesses from not being able to fully reap the benefits of the Madrid Protocol and access international markets, revealed a recent study by Verite Research. The Protocol is a centralised global system that simplifies the process Sri Lankan businesses have to undergo when registering trademarks abroad. The Government 2016 budget however allocated Rs.100 million to speed up accession to the Madrid Protocol.

Executive Director, Verite Research Dr. Nishan De Mel highlighted that Sri Lankan business go through a lengthy and costly process to register their trademarks abroad.

“Trademarks help consumers to easily recognise specific products or services and it is a valuable business asset. It reduces the time, inconvenience and cost incurred by companies that try to ensure international recognition and protection of their trademarks,” explained De Mel.

He said not only huge businesses but even the small companies have realised the need for trademark registration and added that the concept of export, building trademarks and branding has widely increased in Sri Lanka and this shows how important it is to have an efficient system for trademarks.

The Madrid Protocol is a centralised, simplified system of registering trademarks abroad. It is administered by the World Intellectual Property Organisation (WIPO). Currently, there are 98 members in the Madrid Protocol covering 114 states and organisations. It is a convenient process as it allows companies to register their trademark in multiple countries by filing a single application in one language while paying a single set of fees. Further, the system guarantees that applications would be processed within a fixed period of one to one and half years. It also removes the need to hire local attorneys, thus saving a lot of money spent as legal fees.

NIPO of Sri Lanka stands as a barrier to the potential success abroad

According to Dr. De Mel, the National Intellectual Property Office (NIPO) of Sri Lanka takes around 3-5 years to process trademark applications.

He pointed out that despite significant growth in resident trademark applications during the last decade, the number of trademarks registered a year have stagnated.

“Registering trademarks at home is an important first step for a company that seeks to register its trademarks abroad. Therefore, to get the full benefits of accession to the Madrid Protocol, Sri Lanka needs to first take measures to address the problems within the local trademark registration system,” he added.

Dr. De Mel explained that a market economy was expected to generate price reductions and quality improvements for consumers by creating competition between produces to deliver the best value for money. For producers to compete and distinguish themselves amongst buyers their product should be uniquely recognisable; that means other producers should not be able to mimic their trademarks. Trademarks are words, images or a combination of these and act as unique identifiers. When the product of a company comes to be trusted and valued for its quality, the trademarks of the company become the repository of that value; this is how the customer recognises the historically established credibility of the product.

This competitive drive for improvement and trust among producers can only be sustained by allowing trademarks to be protected from imitation, he added.

He further explained that if the government wanted to accede to the Madrid Protocol, then they should take initiatives to quicken the local registrations.

“If the country joins the Madrid Protocol, it becomes compulsory for the companies to have the local registrations in place to get international registration. Global applications will be rejected if the company has not registered locally. Local registration at NIPO is the starting point, the whole process will be jammed if that is not efficient,” he said.

He noted that Sri Lanka fared poorly compared to other middle income countries like the Philippines, Bulgaria and Vietnam given their inability to get trademarks registered locally at a much faster pace. The number of local trademarks registered as a percentage of applications a year was over 50 percent in these countries prior to their accession to the Madrid protocol, whereas in Sri Lanka it is as low as 14 percent.

Verite Research found that the requirement the Madrid Protocol imposes on Sri Lanka in return for its benefits was simple. That is, to demonstrate its ability to process foreign trademark applications within a short, fixed period of one and half years.

“The benefits Sri Lanka can gain from the Madrid Protocol is severely undermined by the slow process of trademark registration in Colombo,” said Dr. De Mel.

He also highlighted the lack of stakeholder consultation and transparency of the accession process and added that even though a year has passed since the proposal to accede was made, stakeholders are unaware of the progress that has been made.

However, publicly available information revealed a large gap between the number of applications that the National Intellectual Property Office (NIPO) received, the number of trademarks issued and the time taken to register trademarks.

Verite Research pointed out that on average, during the last decade, NIPO received 4,540 trademark applications a year from within Sri Lanka but only issued an average of 755 registrations per year. That is 17 percent of the average number of applications. The number of trademark applications has increased over the years but the number of registrations have remained stagnant. In contrast, the Intellectual Property office of the Philippines received on average 12,949 resident trademark applications from within the country and registered 8,320 trademarks a year during the same period. That is 64 percent of the average number of applications. Vietnam received on average 22,700 resident trademark applications a year during the last decade and registered 13,053 trademarks a year during the same period. That is 57.5 percent of average applications a year.

Meanwhile, consultations with the private sector had revealed that institutional and process inefficiencies were the key reasons for the delay.

“The NIPO did not respond to requests for information or for meetings with senior officials despite numerous phone calls, emails and faxes. Therefore, it is not possible to provide a full analysis of the duration-data and the reasons for the very low number of trademarks registered in Colombo. Identifying the reasons and addressing them remains vital for the country to benefit from the Madrid system,” said Dr. de Mel. He further said that at present, there was no mechanism in place for the private sector, a key stakeholder in the process, to regularly interact with the NIPO. Hence, one instrument is to put a system in place for the private sector to be an active participant in the process. In addition, another instrument could be the involvement of the oversight committees of Parliament, regularly enquiring and monitoring the bureaucracy on its local trademark registration performance and status of accession to the Madrid Protocol.

NIPO Responds

Director General, NIPO, G.R Ranawaka speaking to the Daily News however denied allegations that they were the main obstacle to Sri Lanka realising its full potential through the Madrid Protocol.

The DG stressed that her work was complex and made even more difficult with an extremely short staffed department.

“We have to check whether there are similar trademarks and also check the subjective and objective grounds on whether the mark is acceptable. Then we inform the applicant. After the applicant has paid the application fee we publish it in a government gazette. Thereafter it has to be kept for three months for the public to make objections if there are any. If no objections, the applicant would be granted the certification once the registration fees are paid,” she explained.

Ranawaka stated that the time consumed to issue certification depended on the goods.

There are 45 classes and they are distributed to the officers. Depending on the classes, the number of applications received vary. In the Food class (starch, tea and coffee) there is a backlog of two years which needs to be cleared. Sometimes it takes one year or two years to finalise an application because of the backlog. Before 2013, there were some applications that we couldn’t even touch due to the shortage of staff,” she added.

Ranawaka further said there were only 10 officers even though they should have 20. The vacancies have not been filled thus far.

“After I took over office in 2012, we managed to get down development officers through the graduates scheme. The Management Services Department do not allow NIPO to recruit directly- it is government policy. They were not trained in IT, so we had to train them to work in this field and we had 20,000 to 30,000 applications to be cleared. We worked on them in 2014 and 2015 and the certifications are being issued now,” she said.

She noted that NIPO had a backlog of about 12,000 applications which were filed in 2014, 2015 and 2016.

They are currently working on a project to clear all the applications before the end of this year as the government is planning to accede to the Madrid Protocol.

NIPO has recruited some officials on an outsourced project also to quicken the process, she added.

“Madrid accession is a 3 to 4 year project in any given country. WIPO says a country cannot access the Madrid protocol within a year and they have advised to spend minimum three years on this project. The government allocated 100 million for 2016 and I requested the funding to be divided into two years, the treasury agreed and we got Rs.50 Million. We have done a lot of work with IT upgrading and the e-filing systems are now in place. Many awareness sessions were conducted and though we invited many, they were unwilling to attend these events,” she said.

Ranawaka claimed that shortage of staff was one of the reasons for the delay in issuing the trade mark certificates.

“Even now we have a shortage of staff and I am struggling to meet targets. I am the only official in the senior level; there are no directors or deputy directors as it is only the Public Service Commission that can appoint. It is through the Ministry of Industry and Commerce that NIPO can send requests. Generally, in the executive category the procedure is to recruit to the assistant director level first. They can become deputy directors only after 10 years and the deputy directors will be promoted as directors after another seven years. Directors have to spend five years before becoming the Director General,” she said.

Ranawaka noted that she spent over 20 years at NIPO to become the DG and in the last 20 years there have been no recruitments to the assistant director level.

She explained that there was a huge service gap between her and the junior level officers.

“After I became the DG, I promoted an official as the assistant director and there were two more vacancies as legal officers. An examination had to be conducted by the Examination Department to recruit them and they took nearly one and half years to conduct it. But to the senior level, NIPO does not have the authority to conduct examinations directly.

Public Service Commission has to approve to recruit senior officials from the government service. It is now that the PSC has given the approval for recruitment,” she added.

“When officers are not recruited on time the problem persist through out. It is now that we see some measures being taken. We receive nearly 9,000 to 10,000 applications every year and only 3,000 applications reach the registration level. There are more 12,000 applications that need to be cleared before the end of this year and we are working towards it,” said the DG.

Importance of trademarks for Sri Lankan business

Trademarks help consumers distinguish one product from another and provide an important competitive edge for companies over similar products from their rivals.

“Protecting trademarks by registering them at home and abroad is a vital first step in safeguarding the reputation and brand value in respective markets,” said Chairperson and Chief Executive of the Sri Lanka Export Development Board (EDB), Indira Malwatte .

She noted that this would help prevent others from copying or misusing the trademark and tarnishing the reputation of the company and added that the proposal made by the government in 2015 to join the Madrid protocol is a step taken in the right direction.

Dr. De Mel also pointed out that registering trademarks abroad is cumbersome.

“It entails submitting multiple applications in multiple languages to multiple intellectual property (IP) offices in multiple countries. The time each IP office takes to register trademarks is not fixed and can vary between a year to ten years. The trademark owners have to hire IP lawyers in each country and spend considerably on legal fees,” he said.

Malwatte said if the benefit of a hard-earned reputation can be stolen by copying it, there will be little incentive to earn that reputation and a company’s success in registering trademarks and developing a brand image at home is likely to increase the probability of success abroad.

“As there are delays in the process, the product we take to the international market are copied and sold by the time the company gets the international trademark registration. This is the reason for having a system of national and international registration of trademarks and providing concomitant protection.

Registration normally takes place with the intellectual property (IP) offices in each country,” she noted.

Verite Research further revealed that calculations made by the International Trademark Association of the United States as far back as in 2003 shows that the cost to register a trademark in the USA and 10 other countries under the national route (by applying through individual IP offices in each country) amounts to US $ 14,600 and only US $ 5,800 under the Madrid route. “There are two constituencies that directly benefit through Sri Lanka’s accession to the Madrid Protocol. The first are international companies in Madrid member countries that are keen to supply to Sri Lanka but have not yet registered their trademark in Sri Lanka.

They are helped by Sri Lanka’s accession because, then, if they lodge their application through WIPO, their application will be processed within 18 months in Sri Lanka. The second group that benefits are Sri Lankan exporters who have already registered their trademark in Sri Lanka,” claimed Dr. De Mel.

According to Malwatte, accession to the Madrid Protocol will enable Sri Lankan exporters to develop their product and brand with confidence, knowing that the investment in consumer confidence is duly protected.

This in the longer term also encourages them to develop and sell products under their own trademarks/brand names in export markets, rather than being invisible to customers and remaining a supplier to brands/trademarks owned by others. 

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