114 2. Survey on Reforms toward IP-Based Economic Development

2.1. Brief History of Intellectual Property Laws and Policies in Vietnam

In 1981, Decree number 31-CP on innovations for technical improvement, production rationalization and inventions was issued. This document provided the first regulation relating to intellectual property in Vietnam.

Later, from 1982-1988, more regulations were issued on trademarks, industrial designs and utility solutions.¹ According to these regulations, measures for the protection of industrial property were mainly of an administrative nature. In this period, patents were protected in two ways: the inventor certificate and an exclusive patent on invention. The use of the inventor certificate (an appropriate form of protection for a centrally planned economy) was encouraged, whereas exclusive patents for inventions were mainly granted to foreigners.

In 1989, the Ordinance on the Protection of Industrial Property was approved by the State Council.² Under this Ordinance, the regulations conferred stronger legal protection than those under the decrees.

For the first time, the concept of industrial property was used in a legal document. Apart from the four types of industrial property (inventions, utility solutions, industrial designs and trademarks) protected according to separate decrees issued earlier, the Ordinance stipulated the protection of appellations of origin in order to promote the creation of original products from specific areas, regions or localities.

The measures and remedies for protection of industrial property rights were also broadened. The court system then had legal grounds for enforcement of industrial property rights. One of the important points mentioned in the Ordinance on the protection of these rights was the change in the principles for the protection of inventions, where the form of protection by granting an inventor certificate was abolished and the only form of protection that remained was granting an exclusive patent on invention. This was considered an important milestone in the development of the industrial property protection system in Vietnam, compared with other socialist countries at that time.

Early in 1995, Vietnam filed an application for membership of the WTO. At this time, the industrial property protection system functioned mainly on the basis of “under-law” documents.³. In comparison with TRIPS, at the time when Vietnam filed its application for accession, its industrial property system was not in compliance with the provisions of that Agreement. Therefore, Vietnam developed an IPRs Action Plan whose overall objective was to make the Vietnamese IP system fully compliant by January 1, 2000.⁴ The first important step in implementing the Action Plan was the promulgation of the Civil Code in 1995, where Part VI addressed IPRs and technology transfer. The Civil Code constituted the highest legal organ for comprehensively implementing industrial property activities and it was a major turning point in Vietnam’s history of the protection of industrial property. From 1996-2001, a number of under-law documents were issued to provide guidance for the implementation of the Civil Code as well as additional regulations on other matters such as trade secrets, geographical indications and trade names, protection of industrial property, unfair competition.

However, the IP system is still not fully compliant with the TRIPS requirements. Therefore, the National Assembly decided to continue improving the legislative framework through measures to promote creative activities and enhance the competitiveness of the economy. In 2005, it approved the new Civil Code whose Part VI provided for basic civil aspects of the IPS (owners, subject matter, contents, grounds for

1 These regulations were issued as “decree” forms – the documents issued by the government.

2 The Ordinance relating to copyrights was approved by the State Council in 1994.

3 The Ordinance on the Protection of Industrial Property (1989) and the Ordinance on the Protection of Copyrights (1994).

4 The deadline for developing countries or countries in transition to comply with the requirements of TRIPS.

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establishing IPRs, licensing and assignment of IPRs). Thus, in comparison with the Civil Code 1995, 115 IP provisions in the Civil Code 2005 have been edited and consist of core provisions for regulating civil matters concerning IP assets.

On November 29, 2005, the National Assembly enacted the Intellectual Property Law composed of six parts, 18 chapters and 222 articles. The provisions of this law fully comply with TRIPS and its enactment was a milestone, marking 10 years of effort by Vietnam to prepare for the implementation of its obligations to the WTO.

2.2. Identification of Reforms toward IP-Based Economic Development

The first regulations in 1981 relating to invention protection (Decree 81) can be considered as one of the most important reforms in the history of IP law in Vietnam. As this is the first time invention protection had been regulated under a legal document, these regulations were issued by the government.

In 1986, the Doi Moieconomic reform was started in Vietnam. To attract FDI, the State decided to amend its policies in order to create a good business environment. The issuance of an Ordinance on Industrial Property in 1989 was considered an important move to attract foreign investment. This was also considered as a reform in the history of IP laws and policy in Vietnam. The Ordinance incorporated scattered regulations from several decrees and put them in a more binding legal document. After this reform, the number of patent and industrial design applications increased markedly (see Table 1).

In 1995, Vietnam filed its application for membership of the WTO. In order to fulfill the requirements of TRIPS, IP regulations were incorporated into the Civil Code in 1995. This was a major reform as it was the first time IP regulations had been included in such an important legal document, approved and issued by the National Assembly. It was an acknowledgment that the State was aware of the importance of intellectual property to development. However, there was little evidence of any concrete effect of this reform on economic growth and although the number of patent applications by foreigners increased, other applications changed little (see Table 1 and Fig. 4).

In 2005, the issuance of a new and separate IP law constituted a remarkable reform in the history of IP laws and policies. Though this law was implemented on July 1, 2006, a sharp increase in the number of applications began in 2005. In comparison with 2004, they increased by more than 24 per cent. However, in order to make an exact evaluation on the impact of the IP law of 2005, we need to wait a few more years; although there is no doubt that this has been the most remarkable IP law reform in Vietnam.

Fig. 4.Trend in the Filing of Patent Applications (Source: NOIP)

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116 There were also several technical reforms that helped to improve IP activities in the country in 2005. For NIOP’s technical activities, the use of new technology, the result of the “Modernization of the Industrial Property Administration Project” sponsored by the Government of Japan has been put into operation.

As a result, the number of applications processed in 2005 increased by 25 per cent over 2004. This could be considered as a technical reform that might result in increasing the number of patents granted every year. Also in 2005, there was a program to support enterprises and creators with regard to information, legal understanding, and developing, exploiting and managing methodology. One of the positive advances made is that the number of IP assets in Vietnam increased, as well as the number of Vietnamese inventions and utility solutions: applications increased in 2005 by nearly 80 per cent over 2004.

Source: NOIP, 2005.

In general, from the beginning of the development of IP laws and policies in Vietnam, there have been several reforms that could have impacted on the development of the economy. However, as its development and growth depended on certain policies and strategies, it is difficult to evaluate the impact of IP laws and policies only. It could be said that the most important IP reforms occurred in 1981, 1989, 1995, and 2005. The 2005 reform especially is expected to have a remarkably positive impact on economic development; however, it is still too early to evaluate its effects.

3. Case Studies on Companies utilizing the IP System to Develop Business or Increase Economic Activity

3.1. Comparison of Company Data in Major Industrial Fields

By the end of 2005, there were around 170 enterprises manufacturing allopathic medicines in Vietnam, including some 15 foreign companies. There were around 300 other enterprises producing traditional Table 1.IP Applications from 1990 to 2005

[Impact of the Intellectual Property System on Economic Growth ]

medicines. According to the WHO category, the pharmaceutical industry is now at the level of 2.5-3.⁵ 117 However, the technological capacity of Vietnamese pharmaceutical companies is still limited. Up to now, only 59 companies (33 per cent) have shown GMP (good manufacturing practices). R&D capacity of the companies is also still weak; they are mostly based on imported technology (Cao Minh Quang, 2005).

Therefore, their IP activities are mainly concerned with trademarks, brand names and some industrial designs: there are few inventions and patents in this area. We chose Traphaco, one of the leading pharmaceutical companies for the case study in this sector. Traphaco manufactures both traditional and allopathic medicines. The company produces about 170 products including 60 traditional medicines and 110 allopathic medicines. Their traditional medicines are their best-known products and represent 80 per cent of their profits.

3.1.2. The Automobile Industry

The motorcycle market in Vietnam has grown briskly since 1999. Between 1999 and 2002, it increased almost six fold. Measured by the number of vehicles produced, Vietnam now ranks eighth in the world’s motorcycle market. Motorcycle manufacturers can be divided into two groups: foreign joint ventures such as Honda, Yamaha, Suzuki, and Taiwan’s Sayang Motor (whose Vietnamese subsidiary is called SYM or VMEP) on the one hand and Vietnamese domestic manufacturers on the other. Most of the local companies entered the market by importing and assembling components from China. In the rapidly expanding Vietnamese market, FDI and domestic companies have competed fiercely and their relative market shares have fluctuated greatly. The choice of business practice has had a direct effect on the competitiveness of these companies. Honda Vietnam and Vietnam Manufacturing and Export Processing Company Ltd (VMEP) are cases studied in this research. VMEP was the first FDI company to invest in Vietnam’s motor industry. This is a 100 per cent Taiwanese-owned enterprise, which obtained an investment license in 1992 and started production in 1994. Honda Vietnam was established in 1996 and started operations in 1997.

3.1.3. The Manufacturing Industry

Both pharmaceuticals and automobiles are classified under the manufacturing sector. This sector plays a leading role in the growth of GDP in Vietnam. In order to study the manufacturing sector in general, we chose the two following cases. The first is Duy Loi, a private company established in 2000. Its major product is a hammock with a metal support. The company is very successful in the domestic market and it also exports to Australia, Japan, Korea and the US: It is also a private company, established in 1994.

Sannam operates mainly in the machine sector and produces metal-working machines and equipment.

Recently, it extended its operations to other sectors such as food processing, restaurants, etc.