EMERGING IP RIGHTS COUNTRY REPORT - MALAYSIA ASIAN PATENT ATTORNEYS ASSOCIATION 15TH General Assembly 17-20 November 2007 Adelaide, Australia T. Kuhanandan BADRI KUHAN YEOH & GHANDI Advocates & Solicitors (since 1986) Registered Trademark, Industrial Design & Patent Agents Intellectual Property (IP) IT, Corporate & Commercial Attorneys Suite No 44-2, TK & G Chambers 44, Jalan Kemuja, Bangsar Utama, 59000 Kuala Lumpur, Malaysia Tel: 603 22834145 / 22828246 Fax: 603 22835284 Email: bkyg@bkyg.com Website: www.bkyg.com Emerging IP Rights - APAA, Adelaide 2007 Country Report – Malaysia T Kuhanandan 17 -20 November Biotechnology and Development As Malaysia is one of the 12 mega bio-diversity countries in the world, one of the core technologies identified to turn it into a developed nation is biotechnology. Biotechnology work centres on the needs of the nation like improving food production while ensuring the safety of humans, animals and plants. As local companies are raring to use genetically modified organisms (GMO) regulation of the biotechnology industry is imperative. In its varied forms biotechnology combines the genetic elements of two or more living cells by using the techniques of gene splicing with recombinant DNA technology where lengths of DNA are taken from one organism and placed into another organism and injecting nucleic acid into cells causing the fusion of cells beyond their taxonomic group. By such the Malaysian Agricultural Research and Development Institute (MARDI) modified rice to resist the tungro virus; papayas to resist the ring spot virus infection besides having a prolonged shelf life; pineapples to resist the black heart syndrome, bananas and papayas to delay ripening and chili for virus resistance. Palm oil produces value added products such as high oleate and stearate oil, nutraceuticals (Vitamin A and E] besides being genetically engineered to produce biodesel and bioplastics. The Malaysian Palm Oil Board (MPOB) collaborating with PETRONAS researched into palm biodiesel since the 1980s. A technology developed in 1983 transforms crude palm oil through the process of transesterification into palm methyl ester oil as a diesel substitute. The product was tested for efficacy through laboratory assessment, stationary engine testing and field trials on taxis, trucks, cars and buses. Commercial buses with Mercedes Benz engines completed 300,000 km each, the life span of each engine. The field trials proved advantages of no modification to the engines, good engine performance, cleaner exhaust emission and fuel consumption comparable to diesel. Temperate countries had a pour point problem of palm biodiesel, pour point = 15ºC due to the weather. The winter season necessitated the installation of a heating device in trains running on palm biodesel. MPOB developed a process to produce low pour point, -21ºC-10ºC, palm biodesel that does not require the device. This Palm biotechnology was licensed to several local companies producing biodesel mainly for the global transport and agriculture market besides exporting the technology to a company in Korea. The palm biodesel could be used on its own or blended with petroleum diesel in any proportions. The new palm biofuel blends 5% processed palm oil with petroleum diesel to cover a mileage of about 850 000km. It provides a safety net for the Malaysian palm oil industry when there is a glut in the market by removing the excess stock thereby increasing the price. A mere 10% palm oil allocated for the biofuel project stimulates the local palm oil industry and stabilizes the palm oil price in the global market. Palm biodesel could produce carotenes, pro-vitamin A, tocopherols and tocotrienols - Vitamin E, co enzyme Q, phospholipids, phtosterols and squalene to generate more revenue. Operating in a state of ignorance Although transgenic crops through biotechnology maybe grown with less use of pesticides and herbicides, experts are concerned about the transfer of genetic material through cross-pollination and impact on other species. Ministry of Natural Resources and Environment (MNRE) secretary general Datuk Suboh Mohd Yassin in expounding the socio economic impact said GMOs could lead to the loss of biodiversity by displacing naturally occurring wild species and contaminating crops. While not commercially producing GMOs yet, Malaysia imports GMOs in animal feed and food for humans. The NGO Third World Network biosafety coordinator Lim Li Lin opined Malaysia was operating in a state of ignorance as there was nothing legally binding people to declare GMOs neither was there anyone testing for GMOs. However, a central scientific committee known as the Genetic Modification Advisory Committee (GMAC) staffed by the Agricultural Research & Development Institute, MNRE and Ministry of Science, Technology and Innovation (MOSTI) besides legal personnel deals with the application and approval of GMOs but it operates on a voluntary not binding basis. Risk assessment was conducted in reference to The National Guidelines for the Release of GMOs into the Environment in regard to regulation, assessment and management of risks. UM law professor and a member of the committee Gurdial Singh Nijar pointed out due to its voluntary basis GMAC was bypassed in several cases. If for instance part of a shipment of GMO animal feed or food being imported was contaminated they would not be able to get to the particular consignment to minimize risk to people and animals. Quarantine, health and agriculture laws at present do not deal adequately with GMOs he explained. Even with the Regulation on Genetically Modified Foods (GMF) requiring GMFs that are to be imported must be marketed in the country and overseas and prepared for sale in line with stipulated provisions including labeling which has to be approved by the Director General of Health. The stipulated provisions based on the Codex work on GMOs, in which Malaysia participated is mainly labeling requirements for GMFs under the Codex Committee on Food Labeling and the Principles for the Risk Analysis of Foods Derived from Modern Biotechnology and Guidelines for the Conduct of Food Safety Assessment of Foods Derived from Recombinant-DNA Plants and Recombinant-DNA Microorganisms. Another issue concerning the industry is the stem cell banking business which has to be regulated. Stem cell storage companies like StemLife collect and preserve umbilical cord blood stem cells from newborns. Stem cells are claimed to be able to replace damaged cells and to treat heart disease, thalassaemia, blood cancers and chronic wounds. Currently these companies operate the business without any regulation but StemLife finance director Michael Lim urges regulation for companies to operate credibly. The issue arose when StemLife was ordered by the Medicine Advertisement Board (MAB), under the Ministry of Health’s Pharmaceutical Services Division to withdraw its advertising material as they did not comply with approved content matter for advertisements. Reviewing applications for advertisements relating to services, appliances and remedies with medical claims, the MAB found advertismental matter on cancer treatment fell under its ban list. Upon removal of the offending material and submission of new material the approval was still held back as MAB stated StemLife needed a licence to operate this business. As there was no legislation which regulated stem cell banking, StemLife insisted they didn’t need a licence for the business. However, they applied for a licence under the Private Healthcare and Facilities Services Act which came into force in 2006 but their application is pending as the Ministry sorts out the regulation for stem cell banking. The MAB verbally approved the new advertisement materials with StemLife planning to carry on advertising about its business. Another example of the lack of regulation of the biotechnology industry was the curtailment of officials at ports of entry in carrying out their duties for identification of products with GMOs unless they are for planting. Further, once in the country there was no required labeling of products. Malaysia raised the issue of biosafety in 1991 during negotiations for the Convention on Biological Diversity (CBD), passed in 1992, with ratification of the Cartagena Protocol on Biosafety 2000 in 2003. The international acknowledgment of that which Malaysia initiated necessitated The Biosafety Act to be in place, Nijar said, instead of lagging behind the European Union, several countries in Asia Pacific and Africa which already have laws covering the release and marketing of GMOs. The Bio Safety Bill tabled for debate frameworks managing bio safety and bio security issues, for genetically modified (GM) products. Prime Minister Datuk Seri Abdullah Ahmad Badawi expressed concern for the country’s level of preparedness in addressing bio safety and bio security elements linked to biotechnology development. The Bill ensures technology development does not compromise human and environmental safety. Asians as they race to obtain a share of the lucrative biotechnology market may not be vigilant to set in place precautionary and preventive measures Badawi stressed. Administrative procedures available to ensure safety of GM products was ineffective without the appropriate tool of the law to enforce them read Home Affairs Minister Datuk Seri Mohd Radzi Sheikh Ahmad from Badawi’s speech at the Biosafety and Biosecurity Asia 2007 Conference. Biosafety comprising safe practices in handling biological agents, managing the risks of food chain contamination and promotion of safety standards in research must concord with Biosecurity. Bio security involved efforts to protect the population and food sources from epidemics whether occurring naturally or from the use of biological weapons. Measures included monitoring patterns suggesting emerging epidemics, having sufficient stockpiles of suitable vaccines in case of outbreaks besides intensifying public health education. With the Biosafety legislation any food product, animal feed, crop or animal containing GM organisms, which Malaysia does not intend to ban, would be approved by a government panel comprising experts. Malaysia imports genetically modified soya, corn, rice, animal feed and fruits but generally no labeling was required. In a related development Minister of Natural Resources and Environment Datuk Seri Azmi Khalid said the government will not back down from its position to make labeling of products containing GMOs mandatory under Section 61 of the Bio Safety Bill. US biotech companies have been pressuring Malaysia to drop the clause, which was reported to be one of the 58 contentious points on the US-Malaysia FTA. Furtherto, MNRE’s principal assistant secretary K. Nagulendran clarified GM food in which genes have been tinkered with such as a tomato being modified with organisms could affect the environment, health and religious practices as to whether it is ‘halal’ (kosher) or not. As the Bill is still being fine tuned at the time of writing it is not sure when it will eventually be passed. In 2006 MNRE and the UN Development Programme launched a 4 year US5.2 million (RM19.5 million) biosafety project to fortify existing regulations, to assist future board assessors to prepare manuals on obligations of private companies to manage risks. Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure (1977) is a source of regulation of the biotechnology industry, which Malaysia was supposed to ratify but to date there is no information on its status. MyIPO Guideline on biotechnological innovations The local Office was supposed to inform the public on such a guideline to assess biotechnological innovation but to date there is no information. Data Exclusivity Act Another piece of legislation being drafted by the Ministry of Health which is relevant to the biotechnology industry but there is no information or very little on it. However, in relation to it Malaysia recently set conditions in agreeing to the US request for data exclusivity (DE) for new pharmaceutical products in the bilateral free trade agreement (FTA) negotiations said Health Minister Datuk Seri Dr Chua Soi Lok. The conditions being the DE was for a 5 year period effective from the time a product obtains a DE from its country of origin and it can only be granted by Malaysia’s National Pharmaceutical Control Bureau (NPCB). “The US wants DE for 5 years for pharmaceutical products and 3 years for new clinical information,” he added. The DNA database The Chemistry Department is the ASEAN reference centre for GMO testing and is equipped to begin monitoring once the Biosafety Bill is passed and enforced. In the works is the DNA database which would ease investigation work by the police, Health Ministry, Customs Department, Department of Environment and Domestic Trade and Consumer Affairs state offices. When the DNA Identification Bill is passed it is a mode of reference as civil liberties are concerned with the Department testing samples in criminal cases for drugs, murder and rape with the evidence to be adduced in court. New Plant Varieties Agriculture and agro-based industry Minister Tan Sri Muhyiddin Yassin in explaining the National Agriculture Policy (1998-2010) said quality planting materials are requisites for the sustenance of productivity and competitiveness of the agriculture sector. Consonant with this approach the government encouraged breeding new varieties of plants which required investment of time, skills, labour, material resources and capital by providing exclusive rights to plant breeders to reap the benefits of their efforts and innovative skill. To carry out its obligations under the Trade Related Aspects of Intellectual Property Rights Agreement (TRIPs) Malaysia had to provide intellectual property rights protection for new varieties of plants by a patent, by a sui generis Act or a combination of both. The result was The Protection of New Plant Varieties Act 2004 which came into force in 2007. The Act protected contribution by farmers, local communities and indigenous people in the creation of new plant varieties. It encouraged investment in the development of the breeding of new plant varieties by the public and private sectors. The main provisions of the Act was based on the Union for the Protection of New Plant Varieties (UPOV) models with reference to the Convention of Biological Diversity and intellectual property rights systems in Japan, Australia, India and Thailand. Legal practitioners in IP identified the need for clarification on the Act pertaining to two issues – a) the test for new plant variety as opposed to an essentially derived plant variety. The Act does not state how the test is to be applied and the criteria for a plant to be registrable as a new plant variety; b) the test to distinguish a registered plant variety that is new, distinct, uniform and stable from a new, distinct and identifiable variety. While Section 32(1) of the Act provides for 20 years registration for a new, distinct, uniform and stable plant variety (stable variety] and 15 years for a new, distinct and identifiable variety [identifiable variety], the test in Section 14 of the Act to distinguish the 2 remains unclear. Nanotechnology Nanotechnology deriving from Greek with nano referring to ‘dwarf’ is the next technology to push Malaysia to industrial status. As all matter is derived from atoms, by manipulating atoms or molecules nanotechnology produces materials, devices and machines. Through science foundations, health institutes, ministries of defence, environment protection and many others the government spends funds in Research & Development operations. Malaysia launched the National Centre for Nanoscience with amongst others University Malaya under the Combinatorial Technology and Catalysis Research Centre looking to develop high performing nanocatalysts; University Teknologi Malaysia undertaking research in nanochemistry and Sirim under its Advanced Materials Research Centre (Amrec) works on nanocomposites. Ranging across varied disciplines nanotechnology effects novel foods, medical devices, chemical coatings, personal health testing kits, sensors for security systems, water purification units for spacecraft, displays for handheld computer games and high resolution anemia screens. The beauty business is not left behind with nano enhanced skin creams and suntan lotions besides the sports world with nano improved products like tennis balls with better bounce. Nanoelectronics is supposed to innovate a multitude of consumer and industrial applications like computers and transistors with better power reception in telephones, cars and domestic appliances. In the case of health, nano research produced the development of biosensers, biomaterials and a new breed of biochips for treating life threatening conditions including cancer and heart disease. Bioengineered devices in the form of body implants like stents deliver drugs to repair damaged tissue is being manufactured in the country. Nano structures yield materials with new and improved properties to be used in solar panels, anti-corrosion coatings, tougher and harder cutting tools, chemical catalysts and other applications for the transport and energy industries. It includes developing textiles with changing functional properties: keeping one cool in summer and warm in winter. Also in the works are materials that are highly resistant and light to make cars which use much less energy but last longer. Partnering global firms to Build a Biotechnology Industry To roundup the status of emerging rights as Biotechnology and Nanotechnology it is necessary to look at some of the aspects of development currently undertaken. Malaysian Biotechnology Corporation (MBC) was established to generate economic activity by commercialization of biotechnology innovation through network collaboration with companies and suppliers that create money spinning opportunities. The biotechnology value chain centers on meeting customer expectations by way of motivating industry players with incentives like grants further supported by funding mechanisms like banks with private equity and capital besides developing a framework to sustain intellectual property rights. However, the country needs to be wary in selecting the right biotechnology investments due to safety issues including mitigating risks as there are many foreign pseudo technology companies intent on getting rich quickly. Instead of following a neighbouring country which brings a company to set up a giant manufacturing plant then gets into the import and export business MBC plans to build the country’s own biotechnology industry, said CEO Datuk Iskandar Mizal Mahmod. Hoping to collaborate with other countries to add value to the healthcare, agriculture and industrial service sectors, MBC, plans to expand the BioNexus status companies to 70 from the current 36 by the end of the year. Such status earns companies tax breaks and grants for research. So far, MBC distributed RM10million of the RM100million it handles in seed funding, loans and other grants over a 5 year period. Developing the biotechnology industry requires efforts from the private and public sectors. One BioNexus status company is Inno Biologics owned by the Ministry of Finance Inc and Malaysian Industry Government Group on High Technology (MIGHT) operating a RM100 million biopharmaceutical plant in Nilai, Negeri Sembilan. It signed a US$2million (RM7million) deal with Indian biotechnology company Avestha Gendraine Technologies, a biotechnology and bioinformatics integrated company focusing on blending food, pharmaceuticals and clinical genomics to treat degenerative conditions, metabolic disorders and infectious diseases. The group plans to invest the amount over the next 6 months as the firm contracted Inno Biologics to manufacture salines. Inno Biologics produces generic drugs for other companies to substitute expensive imported drugs. It expects to generate revenue up to RM100million annually mainly from the 500 million ASEAN population. The Avestha deal was important as it is one of the first few clients to use up Inno Biologics entire capacity. Another instance of such collaboration was property developer TH Properties that inked an agreement with China’s Xian Hi Tech Industries Development Zone (XHTZ) to lure its aviation and biotechnology companies to their 317ha industrial park at Bandar Enstek. It aimed to have the largest biotechnology cluster in Malaysia with an investment of RM1billion to emerge as a leading centre for aviation maintenance, repair and overhauling operations disclosed CEO Syed Mohamed Ibrahim. Besides a Halal complex, the biotechnology cluster would develop the Health Ministry’s Institute of Natural Products, Vaccines and Biologicals. With its companies XHTZ could use the technopark as a gateway to reach the Muslim countries through the Organisation of Islamic Conference (OIC) in which Malaysia is involved. Investors could also build on the park’s natural resources, skilled human capital and connectivity to beat their global competition. The medical device industry targeted for promotion and development in the Third Industrial Master Plan (2006-2020) is another potential. About 3% of the gross domestic product is allocated to healthcare as it is a priority of the government, with the government setting aside RM5.4billion under the 9th Malaysian Plan (2006-2010) to build new hospitals and upgrade existing facilities. Between January and November 2006 exports of medical devices and products amounted to RM5.8billion against RM5.3billion in 2005. Malaysia has 170 locally owned medical device manufacturers in the country with the majority involved in the production of surgical and examination gloves while major foreign-owned companies produce higher value products like catheters, intravenous cannulae and needles, orthopedic products, medical electrodes, dialysers and contact lenses. One of the selling points for Malaysia is its strategic position that allows its manufacturing and research development resources to serve the Asian markets. Research development, opined experts like Massachusetts Medical Device Industry Council (Mass Medic) president Thomas J. Sommer was of world class standard which gave the country an edge in the business. Malaysians were comprehensive in their approach to build up the economic apparatus to develop the industry compared to countries like the US. Malaysia employs reasonably low costs to produce quality innovative products he noted. This was also unlike Singapore which is big on the biotech industry but not visible in medical devices, Japan with the requisite manufacturing development but into cost costing measures and China though vast in capabilities lags in regard to quality. Other efforts by the government included increasing its pool of experts by luring foreign based Malaysian scientists through allowing them to own up to 80% IP rights in their innovations. Cutting Bureaucracy by harmonizing InterMinisterial Efforts Unlike the IT industry biotechnology due to safety consideration is complicated by a web of requirements and regulations. There needs to be a pushing forward together by: - The Ministry of Health with its resource base of clinicians, pharmacists, technical support staff and patient pool conducting clinical trials, drug approvals, regulation and enforcement. Its related bodies like the Institute of Medical Research, National Research Council, Drug Control Authority and the National Institute for Natural Products, Vaccines and Biologicals aid the commercialisation aspect; - The Ministry of Agriculture and Agro Industries as biotech featured prominently in agriculture. Related agencies like MARDI and a slew of state agricultural bases invest in R & D including ways to commercialise products; - The Ministry of Higher Education monitoring Universities where R & D is conducted including efforts to increase the generation of income; - The Ministry of International Trade and Industry’s acumen of the global marketplace and what is necessary; - The Ministry of Finance as biotechnology like other industries rests on the base of finance; - The Ministry of Natural Resources with its Forest Research Institute of Malaysia that is active in the sphere of biotechnology. By getting rid of interministerial bureaucracy it enables biotechnology to achieve the 5% GDP target by 2020. Boosting the morale of staff and cutting friction across ministries will progress biotechnology if all involved including the scientific community, fund managers, exporters and importers and the related move in tandem with the government’s initiatives as biotechnology is a complex industry unable to function speedily due to the safety and risk mitigation aspects which no country should compromise on. Reference 1. Regulate Industry says StemLife by Doreen Leong, The Edge 2. www.fao.org/DOCREP/MEETING/006/AD699E.HTM 3. www.nbbnet.gov.my/BioArticle/2006(Sept12).html 4. Bright Prospects for the Biotech Products Industry by a Senior Research Officer in the Malaysian Institute of Economic Research (MIER) 5. mpob.gov.my/html/issue/issue08.htm 6. News excerpted from The New Straits Times, The Star, The Sun and The Edge 2006 - 2007