Bruno Nunes of BN IP explains how patent prosecution and licensing works in Macau, a market dominated by gaming and pharma

Macau is one of two special administrative regions of the China, the other being Hong Kong. Macau is currently the world’s biggest gaming destination, recording in 2016 a gaming revenue of $28 billion (2.5 times more than Las Vegas), 30 million visitors of which 67 percent were from mainland China.

A yearly average GDP growth of 14 percent in the past 10 years has made Macau the world’s fastest growing economy.

Because of this, international companies have raced to protect their intellectual property rights in Macau, driving a steady increase in filings. To be successful in Macau, a Macau registration is essential as China and Hong Kong protection does not extend to Macau.

Macau possesses comprehensive laws that ensure the protection of IP, mainly in two legal acts: the Industrial Property Code and the Copyright and Related-Rights Code, both strongly based on the Portuguese law.

Protection derives also from international treaties in force in Macau such as: the Berne Convention for the Protection of Literary and Artistic Works, Geneva Universal Copyright Convention, Paris Convention for the Protection of Industrial Property, Nice Agreement (International Classification of Goods and Services), and the Agreement on Industrial Property Rights in Relation to Trade (TRIPS). Macau is not a party to the Patent Cooperation Treaty.

Protection in Macau is obtained after successful registration of an application, made by a Macau resident, company or attorney, with the local IP office.

Patent prosecution and protection

In Macau any inventions, in any area of technology, pertaining to products or processes for obtaining products, substances or compositions, even if they involve a product composed of biological matter or that contains biological matter or a process that permits the production, processing or use of biological matter, are patentable.

To be patentable, an invention must be novel, involve an inventive step, and be industrially applicable. It must not belong to any of the categories of excluded subject matter. Macau also acknowledges both invention and utility patents.

Furthermore, the applicant or holder of a patent in China may request the extension of the application or the patent to Macau, within three months of an application being made or a patent being granted in China.

Registration of an invention patent takes three years from receipt of application and two years for an utility patent provided that there are no deficiencies in the application and no objections are raised.

Invention patents (or extended invention patents) are protected for 20 years, from the date of application (or the date of application in China) and utility patents for six years (plus four-year extensions).

Substantive examination is requested in Macau’s IP office but is conducted by China’s State IP Office (SIPO). All documentation will need to be filed in Chinese and SIPO will not only conduct an international search but will also proceed with its analysis and report.

Macau has traditionally been a jurisdiction where more than 90 percent of all filings relate to trademarks. In 2016, only 51 invention patents were filed but 452 patents applied for or granted in mainland China were extended to Macau, an 18 percent increase over 2015.

Since all substantive examination needs to conducted by SIPO in China, applicants opt to file it in China first and extend to Macau as it is easier and more cost effective.

The majority of direct filings in Macau relate to invention patents that pertain to gaming as they could not obtain patent protection in mainland China.

The majority of direct patent filings in Macau relate to the gaming industry while most extensions pertain to the pharmaceutical industry, which is taking advantage of the huge number of visitors from mainland China who benefit from the low taxation regime in Macau.

Patent licensing: The prosecution procedure

As any other IP right, patents can be licensed partially or completely against the payment of a fee or for free. One can even license a patent that has been applied for but not yet granted.

A licence or the documents that prove an assignment must be in writing, signed by or on behalf of the licensor and licensee with their signatures duly notarised.

Its particulars must be recorded with the Economy Services Bureau to be effective against any other party that acquires a conflicting interest in the IP right or its application without knowledge of the earlier assignment.

The procedure to register a licence takes approximately two months from the filing of all documents.

The Macau government is aiming to diversify the economy and has been incentivised by China’s central government to focus on start-ups, technologies and medicine and make Macau a platform for trade between China and the Portuguese speaking countries.

While the majority of patents and licences relate the gaming and pharmaceutical industries, more and more filings are coming from other technology sectors.

However, licensing is dominated by gaming and pharmaceuticals, meaning there is an untapped market for most sectors to explore.

Patent licensing: The nature

In Macau, a patent licence agreement is construed as an agreement between its owner (licensor) and a third party (licensee) that is authorised to use a patent against a payment (retribution, royalty or other form of compensation).

The patent licence agreement differs from a patent assignment both in nature and in form.

While a patent licence agreement enables a third party (licensee) to use the patent, contractually defining the terms and conditions of this use (namely price, term, territory and type of use allowed), an assignment agreement has the virtue of transferring the ownership of the patent.

The main reasons to enter a patent licence agreement are to enable market development, through a third party avoiding having to do that directly, or to promote proprietary technology or fiscal optimisation.

When entering a patent license agreement the main aspects to consider are:

  • Licensed entity;

  • Types of use allowed, particularly whether the licence will allow the distribution of the product, its manufacturing, import, or its use as a component of another product, or all;

  • Jurisdiction;

  • Term of the contract;

  • Compensation;

  • Complete or partial exclusivity;

  • Contractual guarantees;

  • Liability limitation clauses, to the extent they are accepted in Macau notwithstanding the applicable law agreed;

  • Contract infringement; and

  • Competent court and applicable law.

When negotiating a patent licensing agreement, the licensor will be able to avoid the common pitfalls if adequate due diligence is carried out on the licensor, specifically its skill and knowledge in regards to the patent being licensed.

This is as well as experience, reputation and economic conditions.

In a market like Macau, where focus, skill and experience are focused on gaming and its associated industries, careful due diligence will avoid the major problems that arise from contracting with a unskilled party.

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