Introduction

The paramount importance of protection of a business’ Intellectual Property is rooted in its use as a means of identification of that business’ product, goods or services, distinguishing the same from those of other competing organisations. To the extent that such IP 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 and, most significantly, effectively facilitates the commercial exploitation thereof 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.

intellectual property incentivises human creativity and generally promotes the manifestation of human intellect and, most significantly, facilitates the commercial exploitation thereof

Accordingly, industrial property ostensibly represents some of the most important assets for a company, protecting its creativity and, most importantly, distinguishing it from its competition.

Current Legislative Framework

Malta’s intellectual property legislative framework was bolstered considerably in the context of the harmonisation exercise undertaken prior to Malta’s accession to the EU in order to dovetail Maltese rules with the corresponding EU IP legislation. Accordingly, Maltese IP legislation may be broadly categorised under the:

• Trademarks Act
• Patents and Designs Act
• Copyright Act
• Intellectual Property Rights (cross-border measures)

A 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 IP protection. The unitary nature of the CTM effectively means that the Trademark registration covers the entire territory of the European Union, 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 enforceable through the various remedies available in the event of any infringement by third parties.

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. The Patents and Designs Act incorporates the main provisions of the European Patent Convention (EPC) into Maltese Patent law, which is also TRIPS compliant.

Copyright works are afforded statutory protection by operation of law and broadly cover, inter alia, artistic works, audio-visual 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 whilst encouraging and supporting the exploitation of intellectual property, Malta’s IP offering is complemented by various other aspects of the jurisdiction’s tax system which allow for the tax efficient structuring of intellectual property holding and licensing activities through Malta, including:

• No withholding taxes on outbound dividends, interest or royalties paid from Malta;
• Potential mitigation of source country withholding taxes on royalties paid to Malta under the EC Interest and Royalties Directive or one of Malta’s 60+ tax treaties;
• 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;
• 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.

In January, 2010 Malta joined TMclass, a ‘Classification of Goods and Services tool’ developed by the Office for Harmonization in the Internal Market (OHIM), which effectively assists trademark applicants to search for and classify Goods and Services (terms) and also facilitates the translation, into all EU languages, of the full list of Goods and Services and verifies if those terms appear in the classification databases of the relative Participating Offices.

Over the course of 2014, the Maltese National IP Office, which forms part of the Malta Commerce Department, was integrated into the OHIM DesignView database. DesignView is a fully multilingual centralised system providing access to all registered design information (circa 4.2 million designs) held by the participating National Offices, allowing users to perform searches in one common platform.

Moreover, the Malta Commerce Department implemented efficient, user-friendly e-filing systems (compliant with the green policy of the Government of Malta) for Trademarks and Designs in June and September of 2014 respectively.

EU Mission and Economic Impact

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”.

IPR-intensive industries generated almost 39% of total economic activity (GDP) in the EU, worth € 4.7 trillion and also accounted for most of the EU’s trade with the rest of the world

Indeed, in a recent joint project undertaken by the European Patent Office and the Office for Harmonization in the Internal Market analysing the extent of contribution of intellectual property rights (IPR) intensive industries to economic performance and employment in the EU, it was established, inter alia, that:

• IPR-intensive industries generated almost 26% of all jobs in the EU between 2008-2010, with almost 21% in trade mark-intensive industries, 12% in design-intensive industries, 10% in patent-intensive industries;
• 5 million Europeans were employed by IPR-intensive industries with another 20 million jobs generated in industries that supply goods and services to IPR-intensive industries;
• IPR-intensive industries generated almost 39% of total economic activity (GDP) in the EU, worth € 4.7 trillion and also accounted for most of the EU’s trade with the rest of the world.

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, IPR-intensive industries pay significantly higher wages than other industries, with a wage premium of more than 40%.

Malta’s Strategic Vision

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 analyses 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 IP proprietors to exploit and trade their assets as well as facilitating their use as a means for obtaining financing and raising capital.

the Government of Malta announced the launch of an initiative to solidify Malta’s presence as an Intellectual Property Hub

In particular, the legislative review will seek to do away with the separate legislative instruments regulating each different form of IP 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 IP, 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 ITC, digital gaming, film, music and the arts.
• Recognition and protection measures for novel forms of Intellectual Property, such as image rights and trade secrets; and
• The introduction of provisions enabling and facilitating the placing of IP 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 motivated to support and seek the creation of new knowledge and to incentivise the exploitation of such knowledge.

Way forward

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

Accordingly, it is anticipated that the initiatives set out above 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.

This article was first published on the Sunday Times of Malta, May 2015.

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.

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.