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In a knowledge-driven business environment, protecting and leveraging intellectual property is key to growth, says Richard Bernard.

The paramount importance of protecting a business’s intellectual property is rooted in its use as a means of identification of that business’s product, goods or services, distinguishing the same from those of other competing organisations. To the extent that such intellectual property is protected in the prescribed manner, it also serves the purpose of representing its proprietor’s guarantee of consistent quality by showing the organisation’s commitment to its customers and, in most cases, provides a basis for publicity and marketing.

Indeed, in a predominantly knowledge-driven business environment, intellectual property incentivises human creativity and generally promotes the manifestation of human intellect. Most significantly, intellectual property facilitates commercial exploitation by means of the leveraging of property rights in trademarks and brands, patents, designs and copyright into revenue streams through licensing strategies, royalty structures, merchandising and other dispositions.

Accordingly, intellectual property represents one of the most important assets for a company. It protects its creativity and, most importantly, distinguishes it from its competition.

Richard BernardRichard Bernard
 

Malta’s intellectual property legislative framework was bolstered considerably in the context of the harmonisation exercise undertaken prior to Malta’s EU accession in order to dovetail Maltese rules with corresponding EU intellectual property legislation. Accordingly, Maltese intellectual property legislation may be broadly categorised under the Trademarks Act, Patents and Designs Act, Copyright Act, and Intellectual Property Rights (cross-border measures).

A registered trademark protects brands and the various means of identification (sign or a combination of signs, word/s including slogans, symbols, logos or devices) by which a product, goods or services of an organisation are distinguished from those of others. Entrepreneurs doing business in Europe may opt for a community trademark or CTM registration which offers a cost-effective means of obtaining pan-European intellectual property protection.

The unitary nature of the CTM effectively means that the trademark registration covers the entire EU territory, thereby affording automatic protection throughout all EU member states, a market boasting north of 500 million consumers. A registered trademark is a property right and as such may be transferred, assigned or licensed by its proprietor, who is afforded exclusive rights in the trademark.

The Patents and Designs Act offers a mechanism for the effective protection of designs (novel features and shapes of products) and patents (inventions such as new industrial, technological or mechanical apparatus and processes or new pharmaceuticals). An invention is patentable under Maltese law if it is novel, involves an inventive step and is industrially applicable.

Copyright works are afforded statutory protection by operation of law and broadly cover artistic and audiovisual works, databases, literary works (including computer programs) and musical works.

Consistent with the Maltese legislator’s ongoing drive to bolster the island’s profile as an intellectual property holding jurisdiction and to motivate further investment in research and development by enterprises while encouraging and supporting the exploitation of intellectual property, Malta’s intellectual property offering is complemented by various other aspects of the jurisdiction’s tax system. This allows for the tax efficient structuring of intellectual property holding and licensing activities in Malta.

Intellectual property represents one of the most important assets for a company

Such aspects include no withholding taxes on outbound dividends, interest or royalties paid from Malta and an optional step-up in the base cost of assets from historic cost to fair market value for persons transferring their residence to Malta, as well as for companies formed by way of an EU cross-border merger. There is also the potential mitigation of source country withholding taxes on royalties paid to Malta under the EC Interest and Royalties Directive or one of Malta’s more than 60 tax treaties, as well as possible exemption from capital gains derived from a disposal of intellectual property in intragroup transfers and upon the migration out of Malta of Maltese intellectual property companies.

Intellectual property was a key consideration of the EU’s Lisbon Strategy which aims to make the EU, “the most competitive and dynamic knowledge-based economy in the world”.

Indeed, in a recent joint project undertaken by the European Patent Office and the Office for Harmonisation in the Internal Market analysing the extent of contribution of intellectual property rights intensive industries to economic performance and employment in the EU, it was established that intellectual property rights-intensive industries generated almost 26 per cent of all jobs in the EU between 2008-2010, with almost 21 per cent in trade mark-intensive industries, 12 per cent in design-intensive industries and 10 per cent in patent-intensive industries.

Intellectual property rights-intensive industries generated almost 39 per cent of total economic activity in the EU, worth €4.7 trillion and also accounted for most of the EU’s trade with the rest of the world. Also, 56.5 million Europeans were employed by intellectual property rights-intensive industries with another 20 million jobs generated in industries that supply goods and services to intellectual property rights-intensive industries.

Moreover, consistent with general economic theory which suggests that, all else being equal, industries in which the average worker produces more value added can be expected to pay their workers higher wages than other industries, intellectual property rights-intensive industries pay significantly higher wages than other industries, with a wage premium of more than 40 per cent.

In November 2014, the Government of Malta announced the launch of an initiative to solidify Malta’s presence as an intellectual property hub. The initiative broadly comprises an analysis of current laws, taxes, fiscal incentives, market practices and trends, and a corresponding detailed review of Malta’s legal, judicial and administrative framework with a view to implementing innovative mechanisms for intellectual property proprietors to exploit and trade their assets as well as facilitating their use as a means for obtaining financing and raising capital.

In particular, the legislative review will seek to do away with the separate legislative instruments regulating each different form of intellectual property and consolidate these into a single all-encompassing code of laws, thereby providing the knowledge sector with a holistic and pragmatic legal framework. It is understood that such a code would primarily be geared towards: creating a unified electronic register for all forms of intellectual, where all registrations can be filed and searches conducted electronically from anywhere in the world; the introduction of the concept of voluntary registrations of copyright, which is particularly relevant to industries such as ICT, digital gaming, film, music and the arts; recognition and protection of novel forms of intellectual property, such as image rights and trade secrets; and the introduction of provisions enabling and facilitating the placing of intellectual property as security for financing.

The scope of the initiative is clearly to protect intellectual capital and ensure that those members of society that can contribute to future development are appropriately motivated to support and seek the creation of new knowledge and to incentivise its exploitation.

In recent years, Malta’s intellectual property offering has proven to be especially relevant within the gaming, software development, e-commerce and pharmaceutical sectors and has certainly contributed to attracting several global players in these industries to Maltese shores.

Accordingly, it is anticipated that these initiatives coupled with a sound legal and regulatory framework across several key industries, and various additional tax and non-tax considerations, will continue to reinforce Malta’s position as an intellectual property hub, with a potentially leading role to play in this sector.

Dr Richard Bernard is a managing partner at Be Legal Advocates and is primarily responsible for the firm’s financial services and corporate and commercial law practice.

This article contains general information only and neither Be Legal Advocates nor any of its affiliate/s, partner/s and/or associate/s is/ are, by means of this publication, rendering professional legal advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult with your professional advisors.

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