To introduce the importance of legal and regulatory issues to entrepreneurs To consider the regulatory environments of the Asia–Pacific within which a new venture must exist To examine intellectual property protection, including copyright, patents, trademarks and domain names To recognise the important international protection regimes for intellectual property To critically examine the IP practices of Asia–Pacific countries To compare the common legal forms of business organisation in the Asia–Pacific, such as sole proprietorship, partnership and corporation To be aware of the signals that foreshadow insolvency and bankruptcy To examine the trend for environmental regulations that will affect business entrepreneurship This chapter has a broad remit in considering the four types of legal and regulatory challenges that entrepreneurs will face in the Asia–Pacific region. We begin with a look at the various regulatory regimes that make up ease of doing business, from starting a company to closing it down. We then examine one of the most critical aspects for entrepreneurs: how to protect your intellectual property. Equally important is to then consider under what legal form to incorporate the firm. Finally, we look at regulations concerning climate change and global warming, regulations that are becoming increasingly troublesome for entrepreneurs. In typical legalistic style, we do need to note that the Asia–Pacific region includes many different countries and the scope of this text is limited to general knowledge. For specific information on legal matters particular to a country and your venture always seek the advice of appropriately qualified professional persons knowledgeable about the jurisdiction of your operations.

1. Political instability and corruption
World rank / Country
1 New Zealand
5 Singapore
9 Australia
14 United Kingdom
15 Hong Kong
18 Japan
19 United States
36 Taiwan
46 South Korea
53 Malaysia
80 China
94 India
94 Philippines
102 Thailand
114 Indonesia
116 VietnamEntrepreneurs need to be aware of the potential impact of political
instability and corruption. It is possible, but more difficult, to do business
in a country with transitory governments or inconsistent policies.

3. Chapter 13
Legal and regulatory challenges
for entrepreneurial ventures

4. Objectives
1. To introduce the importance of legal and regulatory issues to
entrepreneurs
2. To consider the regulatory environments of the Asia–Pacific within which
a new venture must exist
3. To examine intellectual property protection, including copyright, patents,
trademarks and domain names
4. To recognise the important international protection regimes for
intellectual property
5. To critically examine the IP practices of Asia–Pacific countries
6. To compare the common legal forms of business organisation in the
Asia–Pacific, such as sole proprietorship, partnership and corporation
7. To be aware of the signals that foreshadow insolvency and bankruptcy
8. To examine the trend for environmental regulations that will affect
business entrepreneurship

5. But first
•Have you ever had to deal with legal or regulatory
challenges in a business?
•If you have, what did you decide/do?
•If you haven’t, what legal and regulatory challenges do
you think that many entrepreneurs might face?
•Has anyone ever had to deal with local city councils, the
tax office, or intellectual property authorites in your
country?
•Has anyone ever applied for an internet domain name?
•Has anyone had any IP nightmares?
?

6. Why is it location, location, location?
•Why makes an economy the home base for competitive
globally oriented entrepreneurs?
•What makes Australia a global leader in wine exports?
•What made Malaysia a world leader in palm oil production?
•How did New Zealand become home for creative industries?
•What propelled South Korea into the forefront in electronics?

7. Understanding
regulatory
environments
World Bank’s yearly Doing business index

8. Ease of
doing
business•a
• Being the ‘best
country to do
business in’
does not mean
there is no
regulation.
2015

9. Top and
bottom
In the Asia-Pacific,
Singapore, New
Zealand and Hong
Kong top the list
followed by the
Korean Republic, the
US and Australia all
occurring in the top
ten.

10. Political instability and corruption
World rank / Country
1 New Zealand
5 Singapore
9 Australia
14 United Kingdom
15 Hong Kong
18 Japan
19 United States
36 Taiwan
46 South Korea
53 Malaysia
80 China
94 India
94 Philippines
102 Thailand
114 Indonesia
116 VietnamEntrepreneurs need to be aware of the potential impact of political
instability and corruption. It is possible, but more difficult, to do business
in a country with transitory governments or inconsistent policies.

11. Intellectual
property rights
(IPR)
•Have you ever
had your
intellectual
property stolen or
violated?
•Have you ever
used pirate
software or
movies?
?•How can you protect
new products, services
and innovations?
• The continuing growth
of IPR theft and trade in
fakes and pirated
materials threatens
innovative and creative
economies worldwide.

12. IP theft and piracy
•30% of medicines sold in
developing countries are
counterfeit.
•An astonishing 24% of all Internet
bandwidth was devoted to
copyright infringement
•Unauthorised copying of entire
textbooks (including this one) is
common
IP black market rankings
(US $ billions pa)

13. • Global piracy and
counterfeiting thrive
• Thailand’s red zones
include Panthip
Plaza, Klong Thom,
Saphan Lek and
Baan Mor (Bangkok)
• Large marketplaces
selling pirated and
counterfeit goods.
IP theft and piracy
Panthip Plaza, Bangkok

14. IP and the
entrepreneur
• Ideas and knowledge drive the economy.
• IP protection a two-way street.
–You can legally obtain and exploit IP. Or you can protect it
• Asia–Pacific is net importer of intellectual property.
• Entrepreneurs need to be knowledgeable about
intellectual property protection.
This image is the world famous coke bottle patent lodged with
the New Zealand patent office in 1938.

15. Top
Protectors
of IP

16. Patents
•Contract between society and an inventor
•A temporary monopoly on the invention
•Exclusive rights to hold, transfer and
license
•For products or processes that are ‘new,
involve an inventive step and are capable
of industrial application’
•Granted through registration under
national laws

17. A general patent process
•One of the several benefits of the
PCT system is that it essentially
provides a buffer of up to 30
months during the ‘international
phase’ before having to file in
individual countries (the ‘national
phase’).
•Figure 13.1, outlines the indicative
timing of these phases.

18. ‘an electric lamp for giving
light by incandescence
consisting of a filament of
carbon of high resistance …
enclosed in a receiver made
entirely of glass . . . from
which receiver the air has
been exhausted …
‘a flying-machine, a normally flat aeroplane
having lateral marginal portions capable of
movement . . . so as to present to the
atmosphere different angles of incidence, and
means for so moving said lateral marginal
portions, substantially described’.
Examples of a
patent specification

19. Example of a
patent specification
• ONLINE REVIEWERS CAN EARN REWARDS, POINTS
AND MONEY FOR WRITING REVIEWS
• US 7,788,128 B2: A system for generating a reward
for information rendered by a service provider to a
user:
• means for identify the user,
• operator of the system receives a query from the
user,
• operator delivers a response to the query to the user,
• voluntary reward means for allowing the user to
provide a first reward to the operator,
• value determination means to provide a system
rating of the user based upon at least one of the first
reward provided by the user, a history of rewards
provided by the user, and an assessed value of
previous queries made

20. Six rules of patent strategy
1. Create an IP-protective environment
2. Pursue patents that are broad, are
commercially significant and offer a
strong position.
4. Prepare a patent plan in detail.
5. Take actions related to your original
patent plan.
6. Establish an infringement budget.
7. Evaluate the patent plan strategically.

21. Understanding
copyright protection
•You cannot copyright an idea, but you can copyright
the particular way that an idea is expressed.
•This expression can take many forms, including
books, music, audio, film, and computer programs.
•Extends beyond the death of the author typically 50
or 70 years.
•Automatically granted
•Each of these rights, or a portion of each, also may
be transferred.

22. Understanding
copyright protection
•Must be in a tangible form (written or recorded)
•Must be the author’s own work
•Before bringing a lawsuit, register with the National
Copyright Office of the resident country
•‘Fair use’ or ‘fair dealing’ provisions exist
•Normal remedy is recovery of actual damages plus
any profits the violator receives
•Always use the copyright notice (©), although you
are automatically protected

23. Trademarks
•A distinctive name, mark, symbol or motto
•Trademarks identify and distinguish goods.
•Service marks identify and distinguish services.
•Certification marks denote quality, materials of goods and services
•Collective marks are trademarks used by members of groups or
organisations to identify their goods and services.
•A trademark can be a design, like the Nike swoosh. It can be a colour
like purple for Cadbury.
Levi’s jeans
trademark
and colour
MGM lion’s roar is trademarked

24. Types of trademarks
• Fanciful: No meaning before they became
trademarks
• Arbitrary: These are common words that have an
arbitrary relationship to the product
• Suggestive: Suggestive trademarks indirectly
allude to a quality of the product
• Descriptive: Describe the goods or service they
market
• Generic : Generic trademarks describe a whole
class of products – examples include Personal
computer (for a personal computer) and Milk (for
milk).24

25. Advantages of trademarking
•Gives notice of the owner’s right to use the
mark
–It is still recommended to mark the goods or
services with the ® symbol.
•Protection against importers using the mark
•Trademark registration lasts for 10 years.
•You need to file in overseas countries
• If properly registered, you can obtain an injunction against abuser
• A monetary award may be given to the trademark holder in the case of
violation.
• See more guides in the book.

26. Who owns the copyright
to a monkey’s selfie?
•Selfie shot by a cheeky black
macaque
•What did the US Copyright
Office rule in the “Monkey
Selfie case? Why?
•Read the case on p. 471
?

27. Domain names
•Internet domain names are important business
identifiers.
•‘Cyber squatters’ offer domain names for sale
back to the rightful owner
•Uniform Dispute Resolution Policy (UDRP) has
been accused of favouring large corporations.
•Search entire USPTO Trademark Database to
instantly secure your brand on the internet.
Image: Visualization of routing
paths through the Internet

28. Trade
secrets
•Business processes and
information that are:
–unpatentable
–patentable but not enforceable
–patentable but you do not wish to
disclose them.
• Trade secrets, such as the
formula for Coca-Cola,
Kentucky Fried Chicken or
WD-40 have been in effect
for many years
• If the recipes had been
copyrighted, the formula
would have long been in the
public domain.

29. Changing IP attitudes
•Advances in technology have opened up whole new areas of patentable
products
•Technology development is making it increasingly difficult to enforce many
conventional forms of intellectual property
–e.g. MP3 file-sharing on the Internet.
•Responses:
–Toughening protection to halt piracy and the decline in revenues and profits for
established firms
–The creation of new business models such as Apple’s iTunes
•Time for a radical rethink of traditional IP?

30. Legal structures for entrepreneurial ventures
Which legal form is best for start-ups?
Why not start out as a sole trader?
What are the advantages of a partnership?
What is the difference between a proprietary
limited and a corporation?
Are there tax advantages?
What other advantages and disadvantages
might there be?
?

31. Legal structures for entrepreneurial ventures
•Choosing a legal
structure is complicated
and involves
consideration of a range
of factors.

32. Important factors
to consider
•Asset protection
–Risk to personal assets
•Limited liability
–Personal liability for debts
•Distribution flexibility
–Different types of payment to
different participants
•Financing
–Ease of future financing
•Taxation
–Minimising tax burden
•Business environment
–Regulatory approval systems and
technological risks
•Personal and community relationships
–Shared ownership

33. Incorporated companies
• Has similar legal
rights and
obligations to ‘a
natural person’.
• Incorporation is
the birth of a
company; it
means giving
legal form to a
company.
Abbrev. Where used
Inc. Australia
United States
LLC Worldwide (not Australia)
LLP Worldwide
Ltd Australia
PLC Commonwealth (not Australia)
Pty Ltd Australia
PT Indonesia
PT Tbk Indonesia
Bhd Malaysia
Sdn.Bhd Malaysia
HUF India
PVT.LTD India
PSU India
LTC New Zealand
PTE LTD Singapore

34. •Private company (in Australia Pty Ltd)
–As opposed to Public company (in Australia Ltd)
•Assets in the event of bankruptcy are limited to assets of the company.
•Creditors cannot seize the private assets of the directors
•Directors can start new business immediately afterwards.
•A Pty Ltd is the opposite of a public company.
–Pty Ltd cannot invite the public to invest or deposit money with it, whereas a
–Public company can raise capital by offering shares to the public by issuing a
prospectus.
Private companies

35. Private companies
Advantages
•Liabilities of shareholders and
directors limited to capital share
•Company is a separate legal entity
•Retained profits are taxed at the
company income tax rate
•Ease of ownership change
•Shares are transferable
•Continuity– not dependent on the
owners.
Disadvantages
•Set-up, administrative and operating
costs are high
•Increased statutory requirements for
taxation and corporation law
•Revenue and capital losses must be
retained by the company – these
cannot offset the owners’ incomes.

36. Public companies
•Shares may be offered for sale to the public.
•Ltd or PLC status is roughly equivalent to a US corporation.
•Many float (so shares can be traded)
•Statutory requirements on public companies more rigorous than private.
Advantages
•Those of a private company, plus …
•Increased potential for raising
finance by share issues or through
other investors
Disadvantages
•Most expensive to set up
•More open to hostile takeover
•Tighter levels of regulation
•Minority shareholders have no control

37. Partnerships
• Limited partnerships
–Capital investment
–No responsibility for management
and no liability for losses beyond
initial investment
• Limited liability partnership
–Liability of a partner limited to their
financial contribution
–Common in oil exploration and
motion picture ventures
• Incorporated limited
partnership
–Flexible investment vehicles for
venture capital and private equity
investors

38. Sole traderships
•Because of its ease of formation, sole
tradership is the most widely used legal form
•A business owned and operated by one
person (also known as ‘sole proprietor’).
•No legal existence independent of its owner.
•Individual has a right to all of the profits and
liability for all the debts.
•Liability is unlimited.
•Business and personal assets stand behind
the operation.

39. Sole traderships
Disadvantages
• Few tax concessions
• Unlimited liability
• Lack of continuity
• Lack of personal freedom
• Less available capital
• Difficulty obtaining financing
• Limited viewpoint and
experience
Advantages
• Ease of formation
• Losses reduce personal taxes
• Less formality, fewer restrictions
• Sole ownership of profits
• Decision making in one owner
• Flexibility respond quickly
• Relative freedom from
governmental control
• Freedom from corporate taxes
• Easy to wind it up

40. ‘Looking back on it, my judgement was often terribly
wrong’, said one entrepreneur who had burned
through more than $20 million trying to launch an
Internet-based business. ‘Unfortunately, I was never
in doubt.’

41. Regulating
climate change
• ‘Asian brown cloud’
• Trend of CO2 emissions
for these countries will
continue to grow due to
impact of increasing
wealth in countries like
China and India
• Governments have a key
role to play in attempting
to manage this situation

42. First regulated in 1987
• 1987: Montreal Protocol on Substances that
Deplete the Ozone Layer.
• Shows how business can benefit by taking up
the challenges imposed by regulations.
• Tremendous impact on business
–refrigeration and air-conditioners
–solvent to clean electronic equipment
–a propellant in aerosol sprays
–foaming agent in packaging.
The largest Antarctic ozone hole
recorded as of September 2006
• DuPont alone produced one-
quarter of the world’s CFC,
which it marketed as Freon.
• There are signs that the ozone
layer will recover within the next
100 years.

43. Just 90 companies caused two-thirds of man-
made global warming emissions
•The Kyoto Protocol caps
greenhouse gas emissions.
•Was an important step, but a
dramatic ramp-up is the next
big thing that entrepreneurial
businesses must tackle.
•Nearly two-thirds of historic
carbon dioxide and methane
emissions can be attributed to
business such as Chevron,
Exxon and BP.

44. Stay tuned for further developments
•The United Nations Framework Convention
on Climate Change and the Kyoto Protocol
embody the principles of multilateral response
to climate change
•All participating countries pledge action to
reduce greenhouse gas emissions.
•Intergovernmental Panel on Climate
Change (IPCC) confirms that climate change
is a real concern and that human activities
were likely to be contributing to it.

45. Stay tuned for further developments
•Expect policy and regulatory
environment to produce such policies
–introduction of carbon pricing schemes
–support for research and development in
zero-carbon technologies and processes
–mandatory energy efficiency standards
–raising investment in network
infrastructure such as public transport
systems and smart electricity grids.

46. Key concepts
(close your books)
1. How can you protect your
intellectual property?
2. What are the legal forms
available for
entrepreneurs structuring
their ventures?
?