SGX unveils detailed rules on new IP rights disclosures

Listed companies better sit up and listen.

In a regulator's column piece, SGX head of issuer regulation Mohamed Nasser Ismail outlined the new need for listed companies to discloe their material IP rights, including patents, trademarks, industrial designs, trade secrets and copyright, among others.

This is following the SIngapore Ministry of Law's adoption of recommended regulations designed to enhance the country's transparency and certainty in IP transactions in a bid to become a more attractive IP hub in the region.

Just exactly how are listed companies going to be affected by the new adopted recommendations, and how can they comply?

Here's the complete advisory from SGX:

In today’s knowledge-based economy, intellectual property plays an increasingly important role in a company’s portfolio. As businesses move up the value chain, intangible assets exert greater influence on growth, processes and activities. On 1 April 2013, the Singapore Ministry of Law announced the acceptance of the IP Hub Master Plan recommendations, where one of the key strategies includes enhancing transparency and certainty in IP transactions. In this regard, the Exchange considers this an opportune time to provide guidance on disclosure of intellectual property rights by listed companies.

Intellectual Property Rights

According to the Intellectual Property Office of Singapore (“IPOS”), intellectual property rights (“IPRs”) includes patents, trademarks, industrial designs, trade secrets and confidential information, plant varieties, layout-designs of integrated circuits, geographical indicates and copyright. In some instances, information on IPRs owned, obtained or acquired by listed companies may be considered material information.

Singapore’s disclosure-based regime requires listed companies to disclose all material information for investors to make informed investment decisions. Companies seeking listing are required to disclose information on their IPRs in their prospectus if their businesses are, or will be, materially dependent on such IPRs. Likewise, listed companies that are or will be materially dependent on any IPR shall, taking into account commercial sensitivities, disclose this material information as required under Listing Rule 703. In making disclosures on IPRs, as like all material information, it is necessary and important for listed companies to provide descriptive and quality content that explain the value of IPRs to their operations and business.

Benefits of Disclosures – Beyond Regulatory Requirements

Disclosing of material IPRs allows investors to have clearer and better insights into the intangible assets of the company, and understand the legal rights the company retains over certain activities. While IPRs do not necessarily indicate economic returns, they may represent opportunities for growth, intelligence that tangible assets and reporting figures are unable to communicate. A clear, thoughtful and structured disclosure on IPRs allows the market to better determine a listed company’s value. By disclosing material IPRs, listed companies can protect the knowledge and legal rights it may have as it becomes publicly available information. This helps the listed company to differentiate itself from competitors.

A Balanced Approach

Listed companies should also take into account relevant commercial considerations as IPRs may contain trade secrets that are commercially sensitive. The feasibility of such disclosures must be considered carefully. In some instances, disclosing the information may be prejudicial to the interest of the listed company and adversely impact its application for patents and licenses. In such instances, listed companies may consider the disclosure of IPRs without the inclusion of details that are commercially sensitive.

For effective disclosure of IPRs, listed companies should take the following considerations into account:

(1) Disclosures on IPRs should be easy to understand, free from jargon with minimal technical language. The content should be understandable to lay investors as they are readers of the prospectus and announcements;

(2) Address how the IPRs fundamentally affect the listed company’s operations, business as well as the overall impact on profitability and prospects of the issuer and its subsidiaries; and

(3) Other relevant laws and regulations that may prescribe requirements and restrictions on disclosures relating to IPRs