INTRODUCTION

The rapid development of Artificial Intelligence (“AI”), particularly through the deployment of large language models such as ChatGPT, has accelerated global demand for data centres and cloud infrastructure. Apart from the fact that AI systems and data centres have become critical drivers of technological innovation and economic growth, they also generate significant Intellectual Property (“IP”) value through proprietary datasets, machine-learning algorithms, AI-generated innovations, specialised hardware, and infrastructure technologies. These assets may be protected through a combination of patents, copyright, trade secrets, database rights, and contractual mechanisms.

However, these unique values of the IP assets of the data centre and AI may also be affected by geopolitical and contractual risks, as they often involve parties across different countries. This article examines the legal risks that may arise from an increasingly interconnected global environment and explores ways to mitigate these risks.

 

THE CONTRACTUAL RISKS AND CROSS-BORDER DISPUTES REVOLVING AI AND DATA CENTRES

Risks In the Multinational Cloud Agreements

A multinational cloud agreement (MCA) is a contract between a customer (such as a company, government, or institution) and a cloud service provider whose operations span multiple countries.

In view of the above, although governed by a single contractual framework, multinational cloud arrangements frequently involve multiple jurisdictions, each imposing distinct legal, regulatory, and compliance obligations upon the parties. The relation between these cloud services and data centres is that they are often used as the service offered by data centres. Without the data centres as their physical infrastructure, there would be no cloud.

Currently, the increasingly globalized cloud computing and data centre operations could be exposed to commercial agreements with significant geopolitical and regulatory risks.  This is due to governments exercising greater control over data infrastructure within their jurisdictions, which may disrupt the contractual arrangements due to changes in law, national security concerns, and competing sovereign interests. Hence, creating legal uncertainty and affects the parties’ ability to perform their contractual obligations.

Geopolitical Disruptions and Force Majeure Risks (Frustrations of Contract)

The geopolitical tensions, economic sanctions, and national security concerns may affect the multinational cloud and data centre projects. This is because governments may impose new restrictions on foreign investment, introduce additional security requirements, or revoke previously granted approvals.

For example,  recent attempts by the US to exert power over extraterritorial conduct could be seen in the proposed US Multilateral Alignment of Technology Controls on Hardware Act (MATCH Act), where the US further restricts the export of ASML’s advanced lithography equipment, which is used to manufacture advanced semiconductor chips for AI data centres, to China.

Such regulatory developments may materially impair the ability of cloud service providers and data centre operators to perform their contractual obligations, potentially resulting in service disruptions, supply-chain interruptions, and disputes concerning force majeure or frustration of contract.

Changes in Data Transfer Regulations and Dependence on Foreign Data Centre Infrastructure

Another significant risk may also arise due to the government changing the rules of cross-border data transfers. This is especially when cloud services often depend on moving data between countries, and any legal restriction on such transfers may render the existing contractual arrangements non-compliant.

Next, it is also a critical risk when organisations rely on data centre infrastructure located outside their home jurisdiction, as the enterprises may also be subjected to the laws and regulatory decisions of the host state and obtain limited decision-making influence.

A notable example can be seen in a landmark decision of the Data Protection Commissioner v Facebook Ireland Limited, Maximilian Schrems (Schrems II)(2020), which invalidates the EU-US Privacy Shield framework with significant ramifications for the transfer of the data of EU citizens to the US as a consequence of the US’s extensive state surveillance and insufficient safeguards protecting privacy. The decision created substantial uncertainty concerning the legality of transatlantic data transfers and exposed organisations to heightened compliance obligations, increased operational costs, and potential regulatory enforcement risks.

Apart from that, the US law on the Clarifying Lawful Overseas Use of Data Act (CLOUD ACT) also allows US law enforcement agencies to access the electronic data stored overseas by US-based technology companies, even though it may be stored in foreign jurisdictions, which may raise concerns about confidentiality, data protection, service availability, and regulatory compliance of the consumers.

Export Controls and Semiconductor Restrictions

Moving on, the increasing export controls on advanced semiconductors and other AI-related technologies also present a growing risk for data centre operators as well. As AI systems may rely heavily on specialised components, restrictions from the government may limit the suppliers that can provide critical hardware to certain countries or entities.

For instance, the US Foreign Direct Product Rule (FDPR) may even apply to products manufactured outside the US if they involve US-origin technology or IP. The 2023 enforcement action against Seagate, which resulted in a civil penalty of approximately USD300 million for supplying hard disk drives to Huawei in violation of U.S. export controls, demonstrates the far-reaching impact of such measures. This also highlights how export restrictions can affect multinational technology supply chains and create significant legal, operational, and contractual challenges for businesses involved in AI and data centre ecosystems.

 

STRATEGIES TO MITIGATE THE CONTRACTUAL RISKS AND GEOPOLITICAL VULNERABILITIES

As AI systems and data centres are heavily exposed to the cross-border infrastructure and influence, organisations can no longer rely on traditional contractual protections alone and must adopt proactive measures to reduce the exposure to geopolitical risks.

Localising Data Through Sovereign Clouds and Data Centres

Data localization refers to a conduct of confining the data within a country’s borders, and this targets a growing range of specific data types and broad categories of data deemed “important,” or “sensitive”, or related to national security.

By reducing foreign control over critical data and digital infrastructure, organisations may significantly mitigate exposure to geopolitical risks, regulatory intervention, and foreign governmental access requests.

Data centres may also adopt sovereign cloud models, where the cloud services are operated by locally owned entities within the relevant jurisdiction. This may reduce the likelihood that foreign governments can exercise jurisdiction over sensitive data through overseas cloud providers.

Similarly, by relocating critical workloads and sensitive data to local or regional data centres, or commonly referred to as “geopatriation”. Organisations may be able to maintain greater control over where data is stored and processed, and can reduce exposure to foreign surveillance laws, cross-border regulatory conflicts, and disruptions arising from geopolitical tensions.

A notable writing in Geopatriation: Ensuring AI Data Sovereignty in the Era of Agentic AI by Sahajmeet Kaur mentioned that by 2030, an increase of over 75% of the European and Middle Eastern enterprises will geopatriate their virtual workloads due to the heightened concerns around AI data sovereignty and vulnerability towards geopolitical turbulence.

Following that, France and Germany have also has been witnessed to enact their plans for European digital sovereignty, including the launch of the cloud computing project GAIA-X, which enables the European data infrastructure to become independent from both the US and China.

Strengthening Contractual Safeguards

Given the rapidly changing regulatory landscape, multinational cloud and data centre agreements should include provisions that specifically address geopolitical and legal risks. For example, contracts may contain change in law clauses that allow parties to terminate, suspend, or modify the agreement if regulatory changes make performance unlawful or commercially impracticable.

Other than that, parties should also clearly allocate responsibility for losses arising from government intervention, data access orders, or regulatory enforcement actions. In addition, the use of recognised cross-border compliance mechanisms, such as Standard Contractual Clauses (SCCs), can help organisations maintain lawful data transfers and reduce compliance uncertainty when operating across multiple jurisdictions.

Beyond traditional force majeure provisions, parties should consider incorporating data sovereignty clauses, regulatory change provisions, mandatory notification obligations concerning governmental access requests, and carefully drafted limitation of liability clauses. Such provisions may provide greater contractual certainty where legal developments or geopolitical events materially affect the performance of cloud and data centre services.

Litigating The Conflict of Laws and Statutory Protections

Moving on, cross-border disputes frequently involve competing legal obligations arising from conflicting domestic laws, data protection regimes, and national security interests.

A mechanism under Section 103 of the United States CLOUD Act, which provides that where compliance with a disclosure order would conflict with the laws of a qualifying foreign government, a service provider may apply to the relevant U.S. court to modify or quash the order. This statutory safeguard recognises that data stored in foreign jurisdictions may be subject to legal protections that are inconsistent with the requirements of a foreign enforcement request. As such, it provides an avenue for operators to resist disclosure where compliance would place them in breach of their obligations under the laws of the host country.

Even in circumstances where no formal bilateral agreement exists between the United States and the host jurisdiction, operators may seek protection through the common law doctrine of international comity. Under this principle, courts are required to consider and balance the competing interests of the jurisdictions involved before enforcing an extraterritorial request. Relevant factors may include the nationality and location of the data owner, the regulatory and national security interests of the host state, and the availability of alternative legal mechanisms, such as Mutual Legal Assistance Treaties (MLATs), through which the requested information may be obtained.

These legal safeguards play an important role in mitigating cross-border enforcement risks by providing data centre operators with mechanisms to challenge foreign disclosure orders and manage conflicts between competing legal regimes.

 

CONCLUSION

AI and data centres are increasingly valuable sources of intellectual property, and it represents as strategic assets in the modern digital economy. However, they are constantly exposed to the evolving geopolitical, regulatory, and contractual risks. Therefore, organisations must adopt robust contractual safeguards and proactive strategies to preserve operational resilience, protect intellectual property assets, and ensure regulatory compliance across multiple jurisdictions.

 

REFERENCES

STATUTES

1. CLOUD Act
2. MATCH Act

JOURNAL ARTICLES & WEBSITES

1. Bogmans, C., Gomez-Gonzalez, P., Ganpurev, G., Melina, G., Pescatori, A., & Thube, S. (2025). Power hungry: How AI will drive energy demand (IMF Working Paper No. WP/25/81). International Monetary Fund. https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025081-print-pdf.pdf.
2. Bureau of Industry and Security. (2023). BIS imposes $300 million penalty against Seagate Technology LLC related to shipments to Huawei. U.S. Department of Commerce. https://www.bis.gov/node/20250.
3. Cory, N., Dascoli, L., (2021). How barriers to cross-border data flows are spreading globally, what they cost, and how to address them. Information Technology and Innovation Foundation (ITIF). https://itif.org/publications/2021/07/19/how-barriers-cross-border-data-flows-are-spreading-globally-what-they-cost/.
4. Daeryun Law Firm. (n.d.). Data centers and AI cloud infrastructure. Daeryun Law Firm. https://www.daeryunlaw.com/us/practices/detail/data-centers-and-ai-cloud-infrastructure.
5. Kaur, S. (2025). Geopatriation: Ensuring AI data sovereignty in the era of agentic AI. TrueFoundry. https://www.truefoundry.com/blog/geopatriation.
6. Mann, M., & Daly, A. (2020). Geopolitics, jurisdiction and surveillance. Internet Policy Review, 9(3). https://doi.org/10.14763/2020.3.1501.
7. Sangfor Technologies. (2026). What is sovereign cloud and why it matters in 2026. Sangfor. https://www.sangfor.com/glossary/cloud-and-infrastructure/what-is-sovereign-cloud.
8. Sterling, T. (2026). Dutch government objects to proposed US law restricting ASML’s China exports. Reuters. https://www.reuters.com/world/asia-pacific/dutch-government-objects-proposed-us-law-restricting-asmls-china-exports-2026-05-14/.

Written by:
Ahmad Hafiz Zubir & Nik Afifah Hana Nik Husni
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
19 June 2026

In the world of innovation, two heads are often better than one. However, when those two heads create a patentable invention or a copyrighted work together, they enter a “legal marriage” known as Joint Ownership.

While sharing the glory is easy, sharing the licensing rights is where things get complicated. If intellectual property (IP) is co-owned by multiple parties, understanding how joint ownership impacts the ability to monetize that IP is critical.

 

The Default Trap and Why It Catches Co-Owners Off-Guard

Many co-owners operate under the assumption that joint IP ownership works like a standard piece of commercial real estate: everything is split 50:50, and both parties must sign off on any major decisions.

In IP law, when a contract is silent, the law steps-in with its own “default settings” and these settings vary depending on geography and the type of IP. For example:

 

The Litigation Reality

Relying on default statutory laws means the business strategy is dictated by whichever country’s court ends up hosting your lawsuit. It turns a valuable corporate asset into a jurisdictional gamble.

 

How Joint Ownership Destroys Licensing Leverage

When an IP owner wishes to license the IP in a licensing agreement, joint ownership introduces three major hurdles:

1. The Veto on Exclusivity
If a licensee requires an exclusive license, all co-owners must sign the agreement. A minority co-owner holding a fraction of the intellectual contribution possesses 100% veto power. A deal can be held hostage for a disproportionate payout demand by a co-owner.

2. The Enforcement Nightmare
To maintain the value of a license, one must be able to enforce the IP rights against infringers. In some jurisdictions, procedural rules governing jointly owned patents may require the participation or joinder of other co-owners before infringement proceedings can proceed effectively.⁷ A reluctant, missing, or uncooperative co-owner can therefore create significant enforcement challenges, potentially delaying or complicating efforts to stop infringers from devaluing the licensee’s market exclusivity.

3. License Dilution
Without a restrictive agreement, a co-owner could grant non-exclusive licenses to anyone. This severely dilutes the market value of the IP. No sophisticated licensee will pay premium rates for a technology license where the exact same technology can be licensed to the licensee’s competitors.

 

The Corporate Solution: Setting Up the Legal Sandbox

When two or more persons co-create valuable IP, leaving the IP asset under “joint-names” is a recipe for litigation. Depending on the budget, timeline, and commercial goals, there are several distinct paths to neutralize the treacherous statutory default laws.

1. Solution 1 (The Gold Standard): A Holding Company (SPV)
Instead of jointly owning the IP as separate individuals, the co-owners can form a completely new corporate entity – a Special Purpose Vehicle (SPV) – and assign 100% of the IP ownership to this new company. The co-owners then become shareholders in this holding company, and their relationship is governed by a Shareholders’ Agreement (SHA).

The Pros:

• The Single-Owner Advantage: To the outside world, the licensees and the courts, the IP has one single owner – the new company. This completely eliminates jurisdictional default traps regarding joint licensing or enforcement.
• Corporate Governance: Decision-making relies on structured corporate law (e.g., board seats, majority votes, or veto thresholds defined in the SHA), rather than messy interpersonal contract negotiations.
• Clean Liquidity: If one co-owner wants out, that person simply sell their shares in the company. The underlying IP remains safely locked inside the company, completely uninterrupted.
• Financial Consolidation: All licensing fees and royalties flow directly into the company’s bank account, making tax handling, expense deductions, and dividend distributions transparent.

The Cons:

• Administrative Overhead: Setting up a new corporation requires legal incorporation fees, separate tax filings, yearly accounting audits, and ongoing corporate secretarial maintenance.
• The “Locked-Asset” Risk: If the company enters into a dissolution or bankruptcy, distributing its assets, including IP, can be a lengthy, court-supervised nightmare.

2. Solution 2 (The Tactical Fallback): The Joint Development Agreement (JDA)

If the co-owners do not have the budget, time, or commercial appetite to birth a new corporation, they must resort to a Joint Development Agreement (JDA). The IP remains in the co-owners’ names, but this extensive contract acts as a “prenuptial agreement” that explicitly strips away and overrides the default laws of the country.

The Pros:

• Speed and Low Cost: There is no company to register, no board to form, no SHA to execute and no company administrative overhead.
• Flexibility: The clauses – operational clauses, milestone deadlines, and individual responsibilities, etc. – can be customised without being bound by rigid corporate statutory rules.

The Cons:

• The Privity Problem: Third parties (like licensees or patent infringers) are not parties to your JDA. To sue an infringer, the reluctant co-owner still has to be dragged into court as a co-plaintiff because the contract does not change the underlying title on the patent registry.
• The Dilution and Rogue Risk: If the Co-Owner A breaches the JDA and grants an unauthorized license behind the Co-Owner B’s back, the remedy is still limited to suing the Co-Owner A for breach of contract. The licensee of the breaching Co-Owner A may still have the right to use the technology in the meantime because the breaching Co-Owner A has the legal title to grant it.

3. Solution 3 (The Clear Divider): The Cross-Licensing Framework

To untangle the operational futures from day one, joint ownership should be skipped entirely. Instead, the Co-Owner A takes 100% sole legal ownership of the core IP asset, and immediately grants an exclusive, perpetual, royalty-free, worldwide license to the Co-Owner B for a specific “Field of Use” or geographical territory (and vice versa for any sub-components).

The Pros:

• Absolute Autonomy: Neither party can hold the other hostage. The Co-Owner A can license the technology in sector A, while the Co-Owner B can commercialize in sector B. Each commands their own sandbox without asking for permission.
• Clean Enforcement (in favour of the Co-Owner A only): Because the Co-Owner A is the 100% legal owner, the Co-Owner A can sue infringers instantly without needing the Co-Owner B to sign onto the lawsuit.

The Cons:

• The Valuation War: Deciding who gets to be the “Sole-Owner” and who has to settle for being the “Exclusive Licensee” creates massive friction during negotiations.
• The Field-Overlap Risk: If the line between the Co-Owner A’s field and the Co-Owner B’s field becomes blurry, the co-owners may inevitably end up suing each other over scope encroachment.
• The Co-Owner B’s Enforcement Dependency Trap: Because the Co-Owner A retains 100% legal title, the Co-Owner B cannot legally sue infringers in its own sector alone. Courts require the legal title holder to be part of the lawsuit. The Co-Owner B is dependent on the Co-Owner A’s cooperation to file a lawsuit.

4. Solution 4 (The Fiduciary Ownership Model): A Trust

Under this equity-based structure, the IP is registered under the Co-Owner A’s name only (acting as the sole legal Trustee). However, both co-owners execute a formal Trust Deed declaring that the Co-Owner A holds the asset for the beneficial, economic interest of both co-owners. The Co-Owner A handles all administrative filings and licensing logistics smoothly as a single owner, but is legally mandated to pass a pro-rata share of all financial fruits back to the Co-Owner B.

The Pros:

• Seamless Dealmaking: Potential licensees only have to negotiate with one person, i.e.. the Co-Owner A, and there is no dual-signature gridlock.
• Low Administrative Friction: It provides the single-owner efficiency of an SPV (Solution 1) without the heavy cost of incorporating and maintaining a brand-new company.

The Cons:

• The Imbalance of Power: The Co-Owner B is entirely dependent on the Co-Owner A’s competence and honesty. If the Co-Owner A makes a bad business decision, mismanages a litigation budget, or fails to pay patent maintenance fees, the Co-Owner B’s economic asset is dragged down with them.
• Audit Dependent: The Co-Owner B must constantly monitor and audit the Trustee to ensure that licensing royalties are being calculated honestly and distributed fairly.

 

Conclusion: The Strategic Matrix – Balancing the Corporate Framework

Ultimately, the commercial value of an innovation should dictate the legal architecture. When navigating joint ownership, the following definitive playbook can be used to select the optimal structural model:

• Form a SPV (Solution 1): If the jointly owned IP is a “crown jewel”, bite the bullet and absorb the initial incorporation overhead to unify ownership under a single corporate vehicle to centralize commercial control and eliminate deadlock in future licensing.
• Deploy a Standalone JDA (Solution 2): Save contractual joint development agreements for short-term, lower-stakes R&D collaborations where commercial exposure is minimized.
• Utilize Cross-Licensing (Solution 3): Deploy this framework only if the respective target commercial markets are entirely distinct and that businesses will never cross paths.
• Establish a Trust (Solution 4): If the co-owners are asset-rich but cash-poor, use a unitary title trust framework to preserve dealmaking efficiency and protect transactional speed.

 

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1. U.S. Patent Law: Under 35 U.S.C. § 262, in the absence of any agreement to the contrary, joint owners of a patent may make, use, offer to sell, or sell the patented invention without the consent of and without accounting to the other owners.
2. The UK, Malaysia, Singapore and Australia Patent Law:

• United Kingdom: Under Section 36 of the UK Patents Act 1977, while a co-owner may exploit the invention for their own benefit without consent, they cannot grant a license, assign, or mortgage their share without the unanimous consent of the other co-owners.
• Malaysia Patent Law: Governed by Section 40 of the Malaysian Patents Act 1983, specifying that joint patent owners must act jointly to conclude licensing or assignment agreements with third parties.
• Singapore Patent Law: Under Section 46 of the Singapore Patents Act 1994, joint proprietors are entitled to exploit the patent individually, but are explicitly barred from granting a license or assigning their interest without the consent of all other co-owners.
• Australia Patent Law: Under the Australian Patents Act 1990 (Cth), a co-owner may exploit the patent for their own benefit but cannot grant a licence or assign an interest without the consent of the other co-owners.

3. U.S. Copyright Law: See 17 U.S.C. § 201(a); joint authors are co-owners of copyright in the work. Under default U.S. principles, a joint owner may grant non-exclusive licenses unilaterally subject to a legal duty to account for and split profits pro-rata.

4. The UK, Malaysia, Singapore and Australia Copyright Law:

• United Kingdom Copyright Law: Section 10 of the Copyright, Designs and Patents Act 1988 defines a work of joint authorship. Copyright in such works is owned jointly by the co-authors, and, absent agreement to the contrary, licences and assignments of copyright must be granted collectively by all co-owners.
• Malaysia Copyright Law: Sections 3 and 13 of the Copyright Act 1987 recognise works of joint authorship and confer copyright ownership jointly upon the authors. As copyright constitutes a single proprietary right held jointly, any assignment or licensing of the copyright must be undertaken collectively by all co-owners unless otherwise agreed.
• Singapore Copyright Law: Under Section 149 of the Singapore Copyright Act 2021, references to the owner of copyright in a work of joint authorship are references to all joint authors collectively. Accordingly, any licence granted in respect of the copyright must be granted by all co-owners acting together.
• Australia Copyright Law: Sections 35 and 78 of the Copyright Act 1968 (Cth) recognise joint ownership of copyright and the requirement that dealings with the copyright be undertaken by all co-owners collectively unless otherwise agreed.

5. Joint Trademark Ownership & Unilateral Licensing Restraints:

• United States: Under the Lanham Act (15 U.S.C. § 1051 et seq.) and common law, a trademark must identify a single source; licensing by a co-owner without shared quality-control metrics is deemed an invalid “naked license,” causing an involuntary abandonment of the trademark.
• United Kingdom: Governed by Section 23 of the UK Trade Marks Act 1994; under Section 23(4)(a), a co-proprietor is explicitly prohibited from granting a license to use the registered trademark without the express consent of all other co-proprietors.
• Malaysia: Governed by Section 63 of the Malaysian Trademarks Act 2019; under Section 63(4)(a), a co-proprietor is contractually barred from granting a trademark license to any third party without obtaining the prior consent of the other co-proprietors.
• Singapore: Under Section 37 of the Singapore Trade Marks Act 1998; specifically, Section 37(4)(a) dictates that a co-proprietor may not, without the consent of the other co-proprietors, grant a license to use the registered trade mark.
• Australia: Under Section 20 of the Australian Trade Marks Act 1995 (Cth); under Section 20(5), the registration rights of joint owners must be exercised as if they were the rights of a single person. Consequently, neither joint owner can unilaterally license the mark to a third party.

6. Trade Secret Protection and Breach of Confidence Principles:

• United States: Governed by the Defend Trade Secrets Act, 18 U.S.C. §1836 et seq. Trade secret protection exists only where reasonable measures are taken to preserve secrecy. Unauthorized disclosure by a co-owner may destroy the protectable status of the information and expose the disclosing party to legal liability depending on the governing contractual and ownership arrangements.
• United Kingdom: Governed by the Trade Secrets (Enforcement, etc.) Regulations 2018 together with the equitable doctrine of breach of confidence. Unauthorized disclosure of jointly controlled confidential information may constitute a breach of confidence.
• Malaysia: Governed primarily by the common law doctrine of breach of confidence. Unauthorized disclosure of jointly controlled confidential information may give rise to a claim for breach of confidence.
• Singapore: Governed principally by the common law doctrine of breach of confidence. Unauthorized disclosure of jointly controlled confidential information may constitute an actionable breach of confidence.
• Australia: Governed by equitable and common law principles relating to breach of confidence. Unauthorized disclosure of jointly controlled confidential information may give rise to an action for breach of confidence.

7. Patent Enforcement by Joint Owners and Licensees:

• United States: Patent enforcement rights are governed by federal patent law, including principles relating to standing and joinder in actions involving co-owners and exclusive licensees.
• United Kingdom: Sections 66 and 67 of the Patents Act 1977 contain provisions governing infringement proceedings involving co-proprietors and exclusive licensees.
• Malaysia: Sections 40 and 61 of the Patents Act 1983 govern enforcement rights of joint owners and licensees, including the right of a joint owner to institute infringement proceedings independently.
• Singapore: Sections 72 and 74 of the Patents Act govern infringement proceedings involving proprietors and exclusive licensees.
• Australia: Section 120 of the Patents Act 1990 (Cth) governs infringement proceedings by patentees and exclusive licensees.

 

Written by:
Airene Ho Eu Ghee
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
16 June 2026

Introduction

Malaysia’s animation film industry has experienced remarkable growth over the past two decades, evolving from a niche creative sector into a significant contributor to the country’s digital economy. According to the Ministry of Digital, as at 2026, Malaysia’s digital creative industry has generated RM92.5 billion in revenue and RM12.1 billion in exports, created over 11,000 high-value jobs and attracted RM85.7 billion in investments.¹

The success of locally produced animated films and television series has demonstrated Malaysia’s capability to create intellectual property (IP) that resonates with both domestic and international audiences. Productions such as Upin & Ipin, BoBoiBoy, Ejen Ali, and Didi & Friends (all brought to life by local producers) have become household names, showcasing the country’s creative talent and technological prowess.

From intellectual property protection and licensing arrangements to production agreements and international distribution, legal considerations play a critical role in supporting the sustainable growth of the animation film industry in Malaysia.

 

Intellectual Property: The Foundation of the Animation Film Industry

Intellectual property is arguably the most valuable asset in any animation film project. Unlike traditional industries where value may be tied to physical products, animation film derives much of its commercial worth from intangible assets such as characters, storylines, artwork, music, scripts, and brand identity. It is through the exploitation of these intellectual properties that owners are able to generate revenue in multiple ways, for example, through merchandising, licensing deals with broadcasters and streaming platforms, character ambassadorships, etc.

In the context of the animation film project, a multitude of intellectual properties can be protected and conferred to owners, including the following:

(a) Trademark – animation film titles, franchise titles, slogans, in-film products and character names;

(b) Copyright – animation film scripts, production timeline, character designs, storyboards, animation sequences, music, soundtracks, and completed animated films; and

(c) Industrial Design – merchandise, merchandise packaging, stationeries, and collectibles.

All the above intellectual properties are protected under the relevant laws in Malaysia, including the Trademarks Act 2019, the Copyright Act 1987, and the Industrial Designs Act 1996.

These laws give owners leeway to obtain legal ownership over their works and the exclusive right to control how those works are used, reproduced, distributed, and monetized. As a simple example, a trademark prevents another animation film studio/production company from producing an animation film with a confusingly similar character name. Copyright stops someone from pirating and selling your animated film without permission. Industrial design rights ensure that the unique look of your plush toy or action figure cannot be legally copied by another party.

In other words, these legal tools transform creative effort into protected business assets. They allow animation film studios/production companies to license their characters to toy manufacturers, sign distribution deals with streaming platforms, and take legal action against infringers with confidence. Without this legal backbone, even the most beloved Malaysian characters like Upin, Ipin, BoBoiBoy, or Ejen Ali could be freely exploited by others without their rightful owner seeing a single ringgit.

 

Trademark Protection and Brand Building

Successful animation film projects frequently evolve into powerful brands. Character names, logos, catchphrases, and franchise titles can become valuable commercial assets through merchandising, licensing, and cross-platform exploitation.

Trademark registration provides an important mechanism for protecting these brand elements. Under the Trademarks Act 2019, owners can register trademarks in Malaysia and obtain exclusive rights to use them in connection with specified goods and services registered with the Intellectual Property Corporation of Malaysia (“MyIPO”)².

Since trademark protection is territorial in nature, if an owner wish to exploit or monetize their trademark in a foreign jurisdiction, they should also register their trademark in that jurisdiction to be conferred adequate protection. This goes to show that owners should be cognizant of trademark considerations at an early stage to prevent loss of exclusive rights, registration by a third party, and costly intellectual property disputes in foreign markets.

 

Creation and Ownership of Copyrights

Every great work starts with an idea. However, an idea alone cannot be copyrighted. Under Malaysian law, copyright only exists once that idea is expressed in a tangible, physical form such as a script, a character sketch, a storyboard, or a recorded animation sequence. In other words, copyright law does not protect what is merely in your head. It protects what you have actually created and put down on paper or saved on a hard drive i.e. those expressed/fixed in tangible form.

In Malaysia, the Copyright Act 1987 grants ownership rights to the owners of the copyright³. Importantly, these rights are conferred automatically upon the creation of the work subject to the fulfilment of the requirements for copyright protection. No registration is required, no forms need to be filed, and no fees must be paid. The moment an original animation script is written, or a character design is drawn, copyright protection arises by operation of law. However, it is advisable for the owners to keep clear records of when and how a work was created as this can serve as useful evidence in the event of a dispute over ownership or infringement.

Notwithstanding the above, the copyright owners also may file for Copyright Voluntary Notification with the MyIPO⁴. Such filing provides owners with a formal, officially issued record of their work. Think of it as an official timestamp. It is not mandatory, but it can serve as powerful prima facie evidence in court should a dispute over ownership or infringement ever arise.

 

Production Agreement in the Animation Film Industry

Animation film production involves collaboration among production companies/studios, producers, directors, scriptwriter/story team, animation team, voiceover cast, design team, music composers, and technical and post-production team. Contract (normally called Production Agreement) with clear contractual arrangements is therefore necessary to define roles, responsibilities, compensation, confidentiality obligations, and most importantly ownership of intellectual property.

The primary purpose of Production Agreement is to convey the copyright ownership to the production entity (often structured as a Single Purpose Entity or SPE) to facilitate and have a structured exploitation. Without such agreements, copyright ownership may default to individual authors under the Copyright Act 1987, leading to fragmented rights and commercial deadlock. For example, a character designer could theoretically block the distribution of an entire animated series if no written assignment of rights exists. This is why well drafted Production Agreement expressly provide for “work for hire” or “assignment of rights” clauses, ensuring that all intellectual property created by the author during production vests solely in the production entity.⁵

Furthermore, this agreement should address territorial scope, duration of rights, revenue sharing from derivative works, and dispute resolution mechanisms. A failure to address these issues at the outset can result in costly litigation, delayed releases, and even the complete abandonment of commercially valuable animation film projects.

 

International Distribution and Co-Production

Many Malaysian animation film projects target international audiences through streaming platforms, broadcasters, and theatrical releases. International distribution agreements can provide significant revenue opportunities but also present legal complexities.

Distribution contracts should clearly define the rights granted, territories covered, revenue-sharing arrangements, marketing obligations, and termination rights. Animated film producers should also ensure that all underlying intellectual property rights have been properly secured before entering into international distribution arrangements.⁶

Further to the above, co-production arrangements have become increasingly common as animation film studios seek access to foreign markets, funding opportunities, and technical expertise. Such projects often involve multiple jurisdictions, making it necessary to address issues such as governing law, ownership of jointly developed intellectual property, profit allocation, and dispute resolution procedures.

It is trite that a production companies should engage in thorough and meaningful negotiations with the potential co-producer before entering into any agreement. Such negotiations provide an opportunity for the parties to clearly articulate their expectations, identify potential risks, and reach a mutual understanding of their respective rights and obligations. By carefully considering and negotiating key commercial and legal terms at the outset, they can minimise the likelihood of future disputes, misunderstandings, or unintended consequences. Adequate due diligence and negotiation are therefore essential to ensure that the agreed arrangement accurately reflects their intentions and commercial objectives, thereby reducing the risk of dissatisfaction or regret at a later stage.

 

Regulatory and Content Compliance

For animated film intended for theatrical release in Malaysia, the production company, distributor, or exhibitor must ensure compliance with Malaysia’s regulatory and content censorship framework. In particular, the animated film must be submitted to the Malaysian Film Censorship Board (Lembaga Penapis Filem or LPF) for review and approval pursuant to the Film Censorship Act 2002, Film Censorship (Classification of Film) Regulations 2023 and Garis Panduan Penapisan Filem 2024 issued by the Ministry of Home Affairs before it may be publicly exhibited in Malaysian cinemas.

LPF assesses films against the Film Censorship Guidelines and may approve the film without cuts, require edits or excisions, assign an age classification (currently U, P12, 13, 16 or 18), or prohibit public screening altogether. Content is generally scrutinised for its impact on public order and security, religious sensitivities, morality, and socio-cultural values. In addition, film publicity materials, including posters, trailers, and advertisements intended for public exhibition, are also subject to LPF approval prior to distribution. Accordingly, any party seeking a theatrical release in Malaysia (whether for a local film or an import film) should conduct a thorough content compliance review at an early stage to identify and address potentially objectionable material that may trigger censorship requirements, delays, mandatory cuts, or refusal of approval by LPF.⁷

 

Enforcement of Intellectual Property Rights

Obtaining intellectual property rights is only half the battle. The true value of trademarks, copyrights, and industrial designs lies in the ability of their owners to enforce those rights against unauthorized use. In the animation film industry, infringement can take many forms, including the sale of counterfeit merchandise, unauthorized reproduction of animated films, piracy through online platforms, imitation of character designs, and the misuse of brand names or logos. If left unchecked, such activities can erode the commercial value of a successful animation film franchise and divert revenue away from its rightful owners.

Fortunately, Malaysian intellectual property laws provide owners and rights holders with a range of enforcement mechanisms. Under the Trademarks Act 2019, the proprietor of a registered trademark enjoys the exclusive right to use the trademark in Malaysia in relation to the registered goods or services and may commence legal proceedings against parties who use identical or confusingly similar marks without authorization.⁸ Similarly, the Copyright Act 1987 provides copyright owners with civil remedies against infringers, including injunctions, damages, an account of profits, and the delivery up or destruction of infringing copies.⁹ Further, registered industrial design owners may take legal action against parties who, without consent, make, import, sell, or otherwise commercially deal in articles embodying a design that is identical to, or substantially similar to, the registered industrial design in Malaysia.¹⁰

In practical terms, enforcement often begins with monitoring the marketplace and identifying potential infringements at an early stage. Rights holders may issue cease-and-desist letters paired with letters of undertaking, negotiate settlements, initiate court proceedings, or work with enforcement agencies to curb the distribution of infringing goods (by way of raid). For animation film studios with international distribution channels and merchandising programmes, proactive enforcement is particularly important as counterfeit products and digital piracy can spread rapidly across multiple jurisdictions. Ultimately, intellectual property protection is only as effective as the owner’s willingness and ability to enforce it. By actively safeguarding their rights, owners can preserve the commercial value of their intellectual property, protect their reputation, and ensure that the economic benefits of their creative efforts remain with those who invested in bringing the work to life.

 

Looking Ahead and Conclusion

The Malaysian animation film industry is set to continue its strong growth, supported by increasing demand for digital content and the rising commercial value of intellectual property. As local animation film studios expand their reach to international audiences, the importance of a clear and robust legal framework becomes even more pronounced.

Ultimately, the success of an animation film project depends not only on creative excellence but also on sound legal foundations. Clear ownership of rights, properly structured agreements, and proactive protection and enforcement of intellectual property are essential to safeguarding value and enabling commercial exploitation.

In this regard, intellectual property law plays a central role in transforming creative ideas into enduring and commercially viable assets. A strong legal strategy ensures that owners are not only able to bring their characters and stories to life, but also to protect, monetise, and sustain them in an increasingly competitive global market.

 

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1. Ministry of Digital. (2026, January 30) ADVANCING MALAYSIA’S DIGITAL CREATIVE INDUSTRY TOWARDS AI NATION 2030 [Press release]. https://www.digital.gov.my/en-GB/siaran/Memacu-Industri-Kreatif-Digital-Malaysia-Ke-Arah-Negara-AI-2030.
2. https://www.myipo.gov.my/applying-for-a-trademark/.
3. as determined under Section 26 of the Copyright Act 1987.
4. https://www.myipo.gov.my/notifying-copyright/.
5. WIPO Committee on Development and Intellectual Property Drawing on Creativity Copyright for Animation Industry Professionals: A Training Tool. https://www.wipo.int/edocs/mdocs/mdocs/en/wipo_cr_jkt_23/wipo_cr_jkt_23_www_615978.pdf.
6. Aft, Rob. (2022) From Script To Screen Copyright for Audiovisual Industry Professionals A Training Tool. https://www.wipo.int/edocs/pubdocs/en/wipo-pub-cr-film-script-to-screen-en-from-script-to-screen.pdf#SubDistributors#40#39‌.
7. Ministry of Home Affairs & Lembaga Penapisan Filem. (2024) Garis Panduan Penapisan Filem. https://www.moha.gov.my/utama/images/Akta%20Perundangan/PEJABAT%20PENAPISAN%20FILEM/Garis%20Panduan%20Penapisan%20Filem%202024.pdf.
8. Section 48 and 54, Trademarks Act 2019.
9. Section 37 – 40, Copyrights Act 1987.
10. Sections 32 and 35, Industrial Designs Act 1996.

 

Written by:
Khairul Fazli Abdul Kadir & Muhammad Amirul Rafeeq Aznorashiq
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
11 June 2026

Introduction

For many years, in answering the question of whether group companies may be joined as parties in unfair dismissal proceedings, the Industrial Court was perceived as a forum prepared to look beyond corporate form in order to ensure that employment remedies were effective in practice. Where the named employer was insolvent, wound up, or commercially defunct, employees frequently sought to substitute or join related corporate entities, for instance, holding companies, subsidiaries, or group affiliates, on the basis that justice demanded a solvent party remain before the Court. That approach, while rooted in the protective philosophy of labour law, developed into an established practice following the Court of Appeal’s decision in Asnah Ahmad v Mahkamah Perusahaan Malaysia & Ors (“Asnah”).¹

The recent Court of Appeal decision in Hubline Berhad v Intan Wazlin Ab Wahab & Ors (“Hubline”)² calls for a re-examination of that long-standing practice and marks a decisive recalibration of that position. While affirming the Industrial Court’s procedural powers under the Industrial Relations Act 1967 (“IRA 1967”), the Court of Appeal made clear that substitution and joinder applications must remain anchored to orthodox principles of company law, rather than being driven by the practical enforceability of a potential award alone.

 

The Statutory Starting Point and the Court’s Early Flexibility

The Industrial Court’s power to add, strike out, or substitute parties is found in Section 29(a) of the IRA 1967.³ On its face, the provision is broadly framed and procedural in nature, and does not articulate substantive criteria governing when a non-party may properly be brought into proceedings. When read together with Section 30(5) of the IRA 1967,⁴ which requires the Court to act according to equity, good conscience, and the substantial merits of the case, Section 29(a) of the IRA 1967 was historically understood as permitting a pragmatic and flexible approach to the identification and inclusion of parties in proceedings.

Earlier authorities accepted that, in appropriate circumstances, the Industrial Court could look beyond strict contractual privity to ensure that its awards were not rendered ineffective by corporate restructuring or insolvency.

This inclination can be traced to decisions such as Hotel Jaya Puri Bhd v National Union of Hotel, Bar & Restaurant Workers⁵ where the Court recognised the economic realities underlying employment relationships. Comparative jurisprudence, particularly the Indian decision of Hochtief Gammon v Industrial Tribunal,⁶ also influenced Malaysian courts in accepting that joinder may be justified where the presence of an additional party was necessary for effective adjudication. That reasoning was later adopted locally in Harris Solid State (M) Sdn Bhd v Bruno Gentil Pereira⁷ reinforcing the view that joinder could be employed to prevent awards from becoming hollow.

 

The Earlier Approach: Asnah and the Expansion of Joinder

Against this backdrop, the Court of Appeal’s decision in Asnah became the cornerstone of the Industrial Court’s modern approach to substitution and joinder. In Asnah, the Court endorsed what came to be understood as a relatively low threshold for joinder, focusing on whether there existed a reasonable factual or legal nexus between the proposed party and the industrial dispute.

Significantly, the Court held that the party sought to be joined need not be the formal employer, and that it was sufficient at the joinder stage to show a prima facie nexus, with liability to be determined later. In practice, this led to related corporate entities being joined on the basis of common shareholding, overlapping directors, shared premises, or group branding.

Over time, however, this approach began to blur the distinction between procedural joinder and substantive liability, and increasingly strained fundamental principles of company law.

 

The Facts and Outcome in Hubline

Hubline arose from retrenchment claims brought by employees of operating companies within a corporate group. When the employing company was wound up, the claimants applied to substitute the holding company and to join another group entity, relying primarily on common shareholding, common directors, and shared addresses. The Industrial Court allowed the application, and the High Court upheld that decision on judicial review.

On appeal, the Court of Appeal took a markedly different view. It allowed the appeals and subjected the prevailing joinder jurisprudence to close scrutiny. Central to its reasoning was the reaffirmation of the doctrine of separate legal personality, as established in Salomon v A Salomon & Co Ltd,⁸ which recognises that a company is a legal person distinct from its shareholders, directors, and related entities. That principle, the Court emphasised, applies with equal force in industrial adjudication.

 

The Current Position After Hubline: Re-drawing the Limits of Section 29(a)

The Court of Appeal clarified that Section 29(a) of the IRA 1967 was never intended to operate as a mechanism to bypass corporate separateness merely because an employer is insolvent or unable to satisfy an award. Joinder, the Court held, is procedural in nature and cannot be used to retrospectively re-engineer the identity of the employer or to create a new debtor.

The Court of Appeal also rejected the proposition that a general “nexus” based on corporate group relationships is, without more, sufficient to justify joinder. The Court held that common directors, shareholders, or business addresses are ordinary features of corporate organisation and do not, by themselves, displace the principle of separate legal personality. The proper inquiry, the Court emphasised, must be directed at whether the proposed party was legally responsible for the termination giving rise to the industrial dispute. In the absence of such responsibility, joinder cannot be invoked as a means of extending liability beyond the true employer.

Where joinder is, in substance, an attempt to pierce the corporate veil, the applicant must satisfy the strict and exceptional criteria recognised in company law, such as fraud, sham arrangements, or misuse of corporate structures. In drawing this distinction, the Court made clear that joinder powers under Section 29(a) of the IRA 1967 cannot be used merely to secure the enforceability of an award, but must be grounded in legal responsibility for the termination itself, a position consistent with the approach in Co-operative Central Bank Ltd v Rashid Cruz Abdullah & Ors And Other Appeals⁹ and the caution expressed in Law Kam Loy v Boltex Sdn Bhd.¹⁰

 

Practical Implications for Employers and Corporate Groups

For employers and corporate groups, Hubline provides welcome clarity and predictability. It significantly reduces the risk that holding companies or affiliates will be drawn into Industrial Court proceedings solely because they sit higher up the corporate chain or possess greater financial resources.

The decision reinforces the importance of maintaining proper corporate separateness in employment arrangements. Clear employment contracts, accurate identification of the employing entity, and disciplined observance of corporate boundaries are no longer merely best practices; they are critical safeguards against unintended exposure.

At the same time, Hubline does not immunise corporate groups from scrutiny altogether. Where there is evidence that corporate structures have been abused to disguise the real employer or to evade statutory obligations, the Courts retain the power to pierce the corporate veil, consistent with the broader principles affirmed by the Federal Court in Ong Leong Chiou v Keller (M) Sdn Bhd.¹¹

 

A Recent Illustration in Practice

This stricter approach is already being reflected in subsequent Industrial Court proceedings.

In a recent matter in which we acted for Majlis Agama Islam Wilayah Persekutuan (“MAIWP”), former employees of a subsidiary sought to join MAIWP to the proceedings despite the absence of any employment relationship or involvement in the impugned termination. While the Court noted that MAIWP is a statutory authority and that its amenability to the Industrial Court’s jurisdiction is constrained by Section 52 of the IRA 1967,¹² the joinder application was in any event untenable on first principles. Applying the framework articulated in Hubline, the Court held that MAIWP is a separate legal entity and that there was no legal basis to extend liability beyond the actual employer. The joinder application was therefore rejected.

 

Conclusion

Hubline marks a clear recalibration of the Industrial Court’s approach to substitution and joinder. In the context of unfair dismissal proceedings involving corporate groups, the decision provides a more principled answer to the question of when, if at all, group companies may properly be joined as parties. While the Court remains guided by fairness, procedural powers under Section 29(a) of the IRA 1967 cannot be used to sidestep corporate separateness or to extend liability based solely on group connections or enforceability concerns.

Going forward, joinder applications will turn on legal responsibility for the impugned termination, not corporate proximity. Post-Hubline, the focus is no longer on whether a related entity can satisfy an award, but on whether it can properly be said to be legally answerable for the dismissal itself. For corporate groups, the decision underscores the importance of disciplined employment structures and clearly defined roles in managing exposure to industrial disputes.

 

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1. Asnah Ahmad v Mahkamah Perusahaan Malaysia & Ors [2015] 4 MLJ 613.
2. Hubline Berhad v Intan Wazlin Ab Wahab & Ors [2025] CLJU 2677.
3. s 29(a), Industrial Relations Act 1967.
4. s 30(5), Industrial Relations Act 1967.
5. Hotel Jaya Puri Bhd v National Union of Hotel, Bar & Restaurant Workers [1980] 1 MLJ 109.
6. Hochtief Gammon v Industrial Tribunal AIR 1964 SC 1746.
7. Harris Solid State (M) Sdn Bhd v Bruno Gentil Pereira [1996] 4 CLJ 747.
8. Salomon v A Salomon & Co Ltd [1897] AC 22.
9. Co-operative Central Bank Ltd v Rashid Cruz Abdullah & Ors and Other Appeals [2004] 1 MLJ 626.
10. Law Kam Loy And Anor v. Boltex Sdn Bhd and Others [2005] 3 CLJ 355.
11. Ong Leong Chiou & Anor v. Keller (M) Sdn Bhd & Ors [2021] 3 MLJ 622.
12. Industrial Relations Act 1967, s 52.

 

Written by:
Melinda Marie D’Angelus, Khairunnajihah Aqila Mohd Sofian & Siti Nursyafiqah Zainuddin
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
27 May 2026

Introduction

Expanding a brand internationally is a critical step for many businesses. One of the first strategic decisions is how to protect a trademark in multiple jurisdictions. There are two main routes to secure international trademark protection, i.e., filing applications directly in each country/regional Intellectual Property (“IP”) office, or utilizing the Madrid Protocol, an international system administered by the World Intellectual Property Organization (“WIPO”) that allows one application to cover multiple countries¹.

Both approaches aim to provide exclusive rights over a trademark, but they operate differently in practice. Each route has advantages, limitations, and strategic considerations. This article provides an overview of both routes, compares their benefits, and offers guidance on choosing the right strategy.       

 

Direct National and Regional Filing

Direct filing involves submitting separate trademark applications to each country/regional IP office where protection is sought. Each application must comply with the local requirements, including language, examination procedures, publication, opposition, and registration rules. Regional offices such as the European Union Intellectual Property Office allow protection across multiple member states with a single application, but the examination and registration process is handled by the regional authority².

Direct filing is independent, meaning that the outcome of one application does not affect others. Applicants can tailor their specifications to each market, which is particularly important in jurisdictions with stricter examination standards or unique classification practices. Direct registration also provides immediate local rights, which can facilitate enforcement and customs recordation.

Direct filing is mandatory in jurisdictions that are not members of the Madrid Protocol. While the Madrid System covers many countries, businesses targeting non-member states must use the direct filing route. However, filing in multiple jurisdictions separately increases administrative and financial burdens. Each application requires local representation, translations, and separate fees for filing, examination, and maintenance.

In addition to the above, certain trademark offices require a Power of Attorney (“POA”) when a foreign applicant appoints a local agent to act on its behalf. A POA is a formal document authorising the local representative to prepare, file, prosecute, and maintain the trademark application. Depending on the jurisdiction, the POA may need to be notarised, attested, or legalised before it is accepted. These processes typically attract additional costs, including notarisation fees, attestation fees, and legalisation fees, as well as international shipping charges to deliver the original executed documents to the foreign agent. As a result, POA requirements contribute further to the administrative and financial burdens of direct filing in non-participating members of the Madric Protocol.

 

The Madrid Protocol and International Registration

The Madrid Protocol (also referred to as Madrid System) is an international mechanism that allows trademark owners to seek protection in multiple countries through a single international application. Applicants must first have a national trademark application or registration in their home country, known as the basic mark. The international application is submitted through the home IP office to WIPO, which issues an international registration number and forwards it to the designated member countries.

The Madrid System provides administrative efficiency, centralization, and flexibility. Applicants can make changes to ownership, address, and renewals centrally through the WIPO platform. They can also expand coverage through subsequent designations without filing new national applications³.

However, the Madrid Protocol does not replace national examinations. Each designated office examines the application according to its own laws and can issue refusals or oppositions. The international registration is dependent on the basic mark for the first five years. If the basic mark is refused, cancelled, or withdrawn during this period, the international registration shall be deemed withdrawn, if not converted to a national application or better known as transformation. This is known as central attack rule.⁴

The following is the comparison table between Direct Filing and Madrid Protocol:

 

Strategic Considerations

The choice between direct filing and the Madrid Protocol depends on business goals, budget, enforcement needs, and risk tolerance.

 

When to use the Madrid Protocol

It is suitable when:

• The applicant has a strong basic mark in a Madrid member country.
• The goal is broad protection in multiple member countries.
• Centralized management of renewals and assignments is desirable.
• Immediate local enforcement is not critical.
• Flexibility for future expansion is valued.

 

When to prefer Direct Filing

Direct filing is preferred when:

• The target jurisdiction is not a Madrid member.
• Immediate local rights and enforcement are required.
• There is a need for tailored applications for classification, specification, or legal strategy.
• Avoiding dependency on a basic mark is important.

Many businesses adopt a hybrid strategy, using the Madrid Protocol for broad coverage and direct filing in high-priority markets where enforcement or market presence is critical.

 

Practical Recommendations

• Before filing, conduct trademark clearance searches in all relevant jurisdictions. Identify key markets for direct filing and other markets suitable for Madrid Protocol coverage. Ensure that the basic mark is solid and defensible to reduce the risk of central attack.
• Monitor registrations continuously, including oppositions, refusals, and renewal deadlines. Even with the Madrid Protocol, local counsel may be required to respond to national office actions.
• A structured filing plan that combines direct filing in strategic markets with Madrid Protocol registrations for broader coverage can optimize both cost and protection.

 

Conclusion

There is no single correct approach for all businesses. The Madrid Protocol simplifies administration and reduces initial costs for multi-country filings, but it carries dependency risk and does not eliminate national examination. Direct filing offers independence, control, and stronger local enforcement, but requires more administrative effort and cost. A hybrid strategy often provides the best balance, combining efficiency with strong local protection. Careful planning, clearance searches, and proper management are essential to secure enforceable trademarks in international markets.

 

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1. WIPO, ‘Madrid System – The International Trademark System’ <https://www.wipo.int/madrid/en/>.
2. EUIPO, ‘Trade marks’, <https://www.euipo.europa.eu/en/trade-marks/before-applying>.
3. WIPO, ‘Managing International Trademark Registrations – Expand Protection’, <https://www.wipo.int/en/web/madrid-system/how_to/manage/designation>.
4. WIPO, ‘GUIDE TO THE MADRID SYSTEM: International Registration of Marks under the Madrid Protocol’ (updated 2024), WIPO Publication No. 455E/24.

 

 

Written by:

Amera Mohd Yusof, Muhammad Amirul Rafeeq Aznorashiq & Fadlin Khabir Mohamad Khalid
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
20 May 2026

Introduction

In recent years, the issue of sanctions has become highly relevant in shipping and international trade due to geopolitical developments. This article will focus on sanctions implemented by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury, and the manner in which Malaysian courts engage with U.S. sanctions law.

 

Ship-to-Ship (“STS”) Transfers for Sanctioned Cargoes

Owing to its geographical position, sheltered offshore waters, and proximity to major international shipping lanes, Sungai Linggi — located along the west coast of Peninsular Malaysia north of Port Klang within the Strait of Malacca — has developed into a significant maritime operating zone for offshore marine activities.¹ In particular, Sungai Linggi has seen an increase in STS operations involving liquid bulk cargoes such as fuel oil and petroleum blends over the past few years.² One reason for the increased popularity of STS operations is that they can be conducted offshore without the need for berthing at a jetty, which in turn allows parties to obscure the provenance of cargoes during such operations.³ The problem, however, arises when some of these cargoes, reportedly of Iranian, Russian, or Venezuelan origin often loaded onto vessels bound primarily for China,⁴ are used to evade sanctions.⁵

In the Malaysian High Court case of Orin Energy v Futura,⁶ the learned YA Ong Chee Kwan (as he then was) considered whether cargo that was arguably subject to U.S. secondary sanctions could be treated as such under Malaysian law even though neither transacting parties was on the OFAC’s ‘Specially Designated Nationals’ (“SDN”) list. From the perspective of U.S. sanctions law, it was argued that if the ‘blocked property’ becomes ‘unblocked’ merely by virtue of being transacted to non-U.S. persons, this could create a perceived ‘loophole’ whereby the cargo is effectively ‘laundered’ of its U.S.-sanctioned status.

 

Background Facts of Orin Energy v Futura

To understand His Lordship’s judgment and to provide the necessary context, the brief facts of the case are as follows:

(i) Orin Energy Investments Ltd (“Orin Energy”), a Labuan incorporated company, entered into a sales contract with Futura Asia Ltd (“Futura”), a Hong Kong incorporated company, for the purchase of approximately 700,000 barrels of fuel oil (“Sales Contract”);

(ii) The fuel oil originated from Venezuela, and was supplied by PDVSA Petroleo SA (“PdVSA”), a Venezuelan state-owned oil company;

(iii) It was agreed that the delivery of the fuel oil was to be effected via a STS transfer from the tanker MT Eser K to a vessel chartered by Orin Energy, MT Nordic Sirius (a vessel owned by NAT Bermuda Holdings, a subsidiary of Nordic American Tankers Ltd, a U.S. entity) (“MT Nordic Sirius”), at Sungai Linggi, Malaysia;

(iv) The STS operation commenced in September 2020, but the Master of the receiving vessel, MT Nordic Sirius, refused to complete the transfer after learning of the fuel oil’s Venezuelan origin, raising claims related to U.S. sanctions risk; and

(v) As a result, Orin Energy alleged, among other allegations, that Futura had breached the Sales Contract by supplying fuel oil of Venezuelan origin, which Orin Energy claimed to be ‘blocked property’. Futura, however, countered that neither it nor Orin Energy were U.S. persons nor designated on the SDN list, and as such, the fuel oil is not ‘blocked property’.

 

Judicial Interpretation of Foreign Law

In reaching his conclusion, His Lordship made the following findings:

(1) First, for non-U.S. persons to be caught under the relevant Executive Orders issued by the White House,⁷ there must first be a determination by the U.S. Secretary of the Treasury, in consultation with the Secretary of State, that the non-U.S. person falls within the scope of the sanctions regime, i.e., designated under the SDN list. Once such a determination is made, all property and interests in property of that SDN are treated as ‘blocked’ when they come within the possession or control of a U.S. person. It was undisputed that PdVSA is listed as a SDN. However, its property would constitute ‘blocked property’ only when it comes within the possession or control of a U.S. person. Since neither Orin Energy nor Futura are U.S. persons, therefore, any transactions of the fuel oil are also not ‘blocked’;

(2) Second, both Orin Energy and Futura were not, at all material times, determined by the U.S. Secretary of the Treasure, in consultation with the Secretary of State, as SDNs. In addition, His Lordship also held that a single commercial purchase of fuel oil from PdVSA by Futura in itself does not contravene the Executive Orders as it does not amount to having ‘materially assisted, sponsored, or provided financial, material or technological support’ to the Government of Venezuela and it does not suffice to characterise the buyer as operating in the oil sector of Venezuela; and

(3) Third, His Lordship emphasised that to treat the fuel oil as ‘blocked property’ solely by reason of its Venezuelan origin would effectively amount to OFAC imposing a total embargo or blanket prohibition on all products originating from Venezuela, thereby preventing all persons worldwide from dealing in such products. Such an outcome, His Lordship observed, would constitute an ‘impermissible exercise by a country of extraterritorial coercive powers’, which would in any event be practically unenforceable.

These findings illustrate that His Lordship did not decline to engage with U.S. sanctions law, but rather exercised the Court’s judicial responsibility to determine the content and scope of foreign law as a matter of fact. In doing so, His Lordship preserved the distinction between recognising foreign sanctions as part of the factual matrix of a dispute and enforcing them as binding rules of law within the Malaysian legal system.

 

Conclusion: Not a ‘Loophole’ in the context of Malaysian Law

Malaysia is not a unilateral sanctions-imposing state. As such, U.S. sanctions do not have direct legal force in Malaysia.⁸ Importantly, the learned YA Ong Chee Kwan (as he then was) observed that a unilateral enforcement to U.S. sanctions would effectively transform them into a worldwide embargo, extending their reach beyond U.S. jurisdiction and into states that have not enacted corresponding sanctions regimes. His Lordship did not, however, decline to consider U.S. sanctions altogether. Rather, His Lordship undertook a substantive examination of the applicable OFAC regime as a matter of foreign law and determined that the fuel oil did not constitute ‘blocked property’. This judicial approach accords with Malaysia’s position as a sovereign jurisdiction that does not give automatic domestic effect to unilateral sanctions regimes. What may appear, from a U.S. sanctions perspective, to be a regulatory ‘loophole’ is more accurately understood under Malaysian law as an expression of sovereignty.

 

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1. Shipnext, ‘Port of Sungai Linggi’ (Shipnext) <https://shipnext.com/port/603747a660e63cd6c47ebb34> accessed 5 February 2026.
2. Marcus Hand, ‘Dark fleet ship-to-ship transfers off Malaysia more than double’ Seatrade Maritime News (27 January 2026).
3. Anish, ‘What Is Ship-to-Ship Transfer (STS) and Requirements to Carry Out the Same’ (Marine Insight, 6 May 2021) <https://www.marineinsight.com/maritime-law/what-is-ship-to-ship-transfer-sts-and-requirements-to-carry-out-the-same/> accessed 5 February 2026; and Reuters, ‘Malaysia seizes $1.299 million crude oil tankers suspected of illegally transferring’ Reuters (Singapore, 1 February 2026).
4. Marcus Hand, ‘Dark fleet ship-to-ship transfers off Malaysia more than double’ Seatrade Maritime News (27 January 2026).
5. Office of Foreign Assets Control, ‘Sanctions Advisory for the Maritime Petroleum Shipping Community’ (US Department of the Treasury, 2020) <https://ofac.treasury.gov/media/933556/download?inline> accessed 5 February 2026.
6. Orin Energy Investments Ltd v Futura Asia Ltd [2024] MLJU 2347 (unreported).
7. Executive Order 13850 of November 1, 2018, Blocking Property of Additional Persons Contributing to the Situation in Venezuela, Federal Register, Vol. 83, No. 213, 55243 (2 November 2018); and Executive Order No. 13884 of August 5, 2019, Blocking Property of the Government of Venezuela, Federal Register, Vol. 84, No. 152, 38843 (7 August 2019).
8. Bernama, “Malaysia does not recognise unilateral sanctions, remains non‑aligned to any sides” New Straits Times (Putrajaya, 8 May 2022).

 

Written by:
Philip Teoh & Evelyn Ng Can Fei
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
13 May 2026

Introduction

As Malaysia accelerates its pursuit of net-zero carbon emissions by 2050, a fundamental question surfaces: should nuclear power form part of the nation’s energy strategy? Industrialisation, rapid urbanisation, and the expansion of digital and manufacturing sectors are intensifying Malaysia’s electricity needs, even as the country commits to ambitious global climate goals under the Paris Agreement and the UN Sustainable Development Goals (“SDGs”).

At present, Malaysia’s dependence on fossil fuels, primarily coal and natural gas, remains the backbone of its energy infrastructure. Yet these sources are also the primary contributors to national greenhouse gas emissions. Balancing economic growth with climate commitments has therefore revived the debate over nuclear energy, prompting policymakers, experts, and the public to reconsider its role in Malaysia’s transition to cleaner power.

 

Policy Context and Strategic Significance

Malaysia’s energy mix is heavily tilted toward fossil fuels, which account for more than 80% of total electricity generation.¹ While this reliance has long underpinned industrial development, it now undermines Malaysia’s capacity to reduce carbon emissions. Renewable sources, such as hydropower, solar energy, and biomass, account for only a modest share of the national grid. Although solar power is expanding rapidly, its intermittent nature limits its ability to meet the continuous, large-scale energy demand.

Against this backdrop, nuclear power has re-emerged as a serious policy consideration. Malaysia’s participation in World Atomic Week 2025 in Moscow, with Malaysian representatives from the Ministry of Energy Transition and Water Transformation (“PETRA”) and the Atomic Energy Licensing Board (“AELB”) engaging with the International Atomic Energy Agency (“IAEA”) to explore cooperation, capacity building, and safety regulation.²

This renewed interest has since progressed beyond preliminary discussion and is now reflected in formal policy planning. Under Strategy A1.5 of the Thirteenth Malaysia Plan 2026–2030, nuclear energy has been identified as a potential source of clean electricity within the national energy mix, with implementation expected to begin operations by 2031.³ This strategy signals the government’s intention to explore nuclear power as a long-term option to support energy security, economic growth, and climate commitments.

To support this initiative, MyPOWER Corporation (“MyPOWER”), a special purpose agency under PETRA, has been designated as the Nuclear Energy Programme Implementing Organisation. In this capacity, MyPOWER will be responsible for the governance and coordination of Malaysia’s national nuclear programme in accordance with standards set by the International Atomic Energy Agency.⁴ This institutional framework reflects a structured and cautious approach, emphasising regulatory compliance, capacity building, and public engagement.

 

Regional and Global Context

1. Southeast Asia’s Growing Interest

Across Southeast Asia, nations are reassessing nuclear power as part of their clean energy transitions.

• The Philippines has revived the Bataan Nuclear Power Plant project and has partnered with the United States and the IAEA to update the feasibility and safety assessments.⁵
• Indonesia is exploring SMR deployment with international partners, aiming to operationalise its first reactor in the early 2030s.⁶

2. East Asia’s Established Leaders

In contrast, other countries such as Japan represent mature nuclear economies. Despite the Fukushima disaster, Japan has restarted several reactors after implementing rigorous safety reforms, reaffirming nuclear power as central to its decarbonisation and energy security strategy.⁷

Given this landscape, Malaysia’s entry into nuclear power would occur within a region rich in technological expertise and regulatory experience, offering valuable partnerships for training and system development.

 

The Case for Nuclear Integration

1. A Low-Carbon Energy Source

Proponents of nuclear power emphasise its unparalleled capacity to generate low-carbon electricity on a large scale. According to the World Nuclear Association (2024), the life-cycle carbon footprint of nuclear energy ranges between 12 and 15 grams of CO₂ per kilowatt-hour (“kWh”), accounting for emissions from planning, uranium mining, construction, operation, and decommissioning, rather than from the nuclear fission process itself.⁸

In comparison, gas-powered generation emits approximately 450 gCO₂/kWh, while coal-fired power produces around 1,050 gCO₂/kWh, making them roughly 30 and 70 times more carbon-intensive, respectively.

In Malaysia’s fossil-heavy energy landscape, incorporating nuclear power could substantially lower national carbon emissions while sustaining industrial growth. Experts note that countries with rising energy demands but limited renewable capacity, such as Malaysia, stand to gain significantly from the stable, continuous, and clean output that nuclear energy provides.⁹

2. Stable and Reliable Base-Load Power

Unlike solar and wind power, which fluctuate with weather conditions, nuclear reactors operate continuously, offering stable base-load power. This reliability is crucial for Malaysia’s energy-intensive industries, digital infrastructure, and expanding urban population. As the country’s electricity consumption surges, particularly with the rise of data centres and manufacturing, nuclear energy offers a consistent and round-the-clock power supply.¹⁰ This stability would enhance grid resilience and mitigate blackout risks during periods of low renewable output.

3. Long-Term Economic Competitiveness

Although the initial capital cost of nuclear infrastructure is substantial, its operational lifespan is typically 40 to 60 years, making it a cost-effective long-term investment. The IAEA estimates that once construction and safety measures are in place, nuclear-generated electricity is price-competitive with fossil fuels, particularly when factoring in long-term operational and maintenance costs. For Malaysia, this translates to stable energy prices, reduced exposure to volatile global fuel markets, and improved economic resilience. PETRA officials position that nuclear energy could act as a strategic hedge against global energy shocks, ensuring affordable and predictable electricity for future generations.¹¹

4. Technological Advancements and Safety Improvements

Public scepticism toward nuclear power often stems from a legacy of past disasters like Chernobyl and Fukushima Daiichi accidents. However, modern nuclear technology has evolved significantly in the decades since. Generation III and IV reactors feature passive safety systems that automatically shut down during emergencies. Furthermore, the Small Modular Reactors (“SMRs”) offer flexible, scalable, and safer options that require less land and infrastructure. The IAEA has commended these innovations, describing next-generation systems as designed to minimise the risk of accidents while maximising efficiency. For Malaysia, adopting smaller, safer reactors tailored to its scale could represent a pragmatic and forward-looking approach to nuclear integration.¹²

 

Challenges for Malaysia

A balanced view requires acknowledging that nuclear energy is not without challenges. For Malaysia to proceed responsibly, several critical issues must be addressed.

1. Establishing a Strong Legal and Regulatory Framework

A robust and comprehensive legal and regulatory system is the cornerstone of any nuclear energy programme. In Malaysia, this responsibility primarily lies with the AELB, which oversees the safe use of nuclear technology for medical, industrial, and research purposes. However, transitioning from these limited applications to full-scale power generation demands significant regulatory strengthening.

From a legal standpoint, adopting nuclear energy requires Malaysia to restructure and modernise its statutory environment. This includes clear and comprehensive legislation governing reactor licensing, radiation protection, nuclear safety and security, radioactive waste and spent fuel management, emergency preparedness, and long-term liability for nuclear damage. Such a framework must be capable of regulating the entire nuclear lifecycle, from construction and operation to decommissioning, while ensuring public safety and environmental protection at every stage.

Encouragingly, Malaysia has already taken concrete steps in this direction. The Atomic Energy Licensing (Amendment) Act 2025 introduced significant enhancements to the existing regulatory regime, most notably by introducing a mandatory permit system for the import, export, transhipment, and transit of radioactive and nuclear materials. Specifically, under the newly inserted Section 12A of the Atomic Energy Licensing Act 1984, it is stated that:

“Permit

12A. (1) Without prejudice to the requirements of any other law, no person shall –

(a)  import radioactive material, nuclear material, nuclear related item or nuclear related technology; or

(b)  export, tranship or bring in transit radioactive material or nuclear material,

unless he is the holder of a valid permit issued under subsection 16A(2) by the Director General for such purpose as specified in the permit.”

This amendment broadens regulatory oversight beyond domestic activities and strengthens state control over nuclear-related materials, reflecting Malaysia’s alignment with international nuclear safety and security norms.

While these amendments reflect growing regulatory readiness, further reforms will be necessary if Malaysia proceeds with nuclear power generation, including alignment with international instruments such as the Convention on Nuclear Safety and IAEA safety standards.

2. Enhancing Public Education and Transparency

Public understanding and acceptance are essential for the success of a nuclear energy initiative. Many Malaysians continue to associate nuclear power with radiation risks due to past accidents.

Addressing this concern is both a legal and technical imperative. Public transparency, accountability, and access to information are central principles of administrative law and good governance. The government must therefore conduct open consultations, publish the findings of feasibility studies, and ensure that nuclear decision-making follows fair and transparent procedures. A legally sound process enhances legitimacy, builds public trust, and reduces the risk of future litigation or political resistance.

3. Investing in Infrastructure and Skilled Workforce Development

The establishment of nuclear power plants requires substantial infrastructure and a highly skilled workforce. This extends beyond engineers and scientists. Malaysia will also require legal specialists trained in nuclear law, environmental law, international compliance, energy regulation, and contract negotiation. Lawyers will play a vital role in drafting legislation, reviewing regulatory requirements, structuring public-private partnerships, managing cross-border agreements, and advising on liability regimes. A strong domestic legal talent pool is therefore essential to a safe and sustainable nuclear energy programme.

 

Why Law Matters in Malaysia’s Nuclear Future

As Malaysia considers integrating nuclear energy into its national electricity mix, the legal profession will play a central role in shaping this transition. Lawyers will be involved in drafting comprehensive nuclear legislation, negotiating international cooperation, advising on environmental and safety compliance, and ensuring that regulatory processes meet global best practices. The future of nuclear energy in Malaysia ultimately depends on a transparent, robust, and well-enforced legal framework that reflects the fundamental connection between energy policy, governance, and the rule of law.

 

Conclusion

The debate over nuclear energy in Malaysia reflects a broader global challenge of meeting rising energy demand while reducing carbon emissions. While nuclear power offers stable, low-carbon and cost-competitive energy, it also demands strong governance, rigorous safety standards, and public trust. For Malaysia, any move towards nuclear energy must be gradual, transparent, and grounded in legal, environmental, and technical responsibility. With appropriate policies, stakeholder engagement, and legal safeguards, nuclear power could support Malaysia’s transition towards a sustainable, secure, and low-carbon energy future.

 

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1. Ministry of Natural Resources, Environment & Climate Change, Malaysia Energy Transition Outlook (IRENA, 2023) <https://www.law.ox.ac.uk/sites/default/files/migrated/oscola_4th_edn_hart_2012quickreferenceguide.pdf> accessed 22 November 2025.
2. The Sun, ‘Nuclear Power – the road to net zero?’ The Sun BIZ & FINANCE (Petaling Jaya, 25 October 2025), 13 <https://thesun-ipaper.cld.bz/publication/20251025/12/#zoom=true> accessed 22 November 2025.
3. Ministry of Economy, Thirteenth Malaysia Plan 2026–2030 (2025) <https://www.investmalaysia.gov.my/media/m3eamxey/thirteenth-malaysia-plan-2026-2030.pdf> accessed 1 January 2026.
4. Ibid.
5. Adoracion M. Navarro, ‘Nuclear Power in the Philippines: The Need to Address Institutional Gaps’ (Fulcrum, 14 May 2025) <https://fulcrum.sg/nuclear-power-in-the-philippines-the-need-to-address-institutional-gaps/> accessed 3 January 2026.
6. Nuclear Business Platform, ‘Indonesia Developing Indigenous SMR Technology’ (Nuclear Business Platform, June 2021) <https://www.nuclearbusiness-platform.com/media/insights/indonesia-developing-indigenous-smr-technology> accessed 30 December 2025.
7. Koh Ewe, ‘Japan restarts world’s largest nuclear plant as Fukushima memories loom large’ (BBC, 22 January 2026) <https://www.bbc.com/news/articles/cq6v0v32rg1o> accessed 27 January 2026.
8. World Nuclear Association, ‘Carbon Dioxide Emissions from Electricity’, (World Nuclear Association, 3 September 2024) <https://world-nuclear.org/information-library/energy-and-the-environment/carbon-dioxide-emissions-from-electricity> accessed 28 December 2025.
9. Dhana Raj Markandu, ‘Cover Story: Should Malaysia give nuclear power the green light’ (Institute of Strategic & International Studies (ISIS) Malaysia, 21 February 2025) <https://www.isis.org.my/2025/02/21/cover-story-should-malaysia-give-nuclear-power-the-green-light/> accessed 3 January 2025.
10. Ibid.
11. World Nuclear News, ‘Malaysia launches nuclear energy feasibility study’ (World Nuclear News, 19 August 2025) <https://www.world-nuclear-news.org/articles/malaysia-launches-nuclear-energy-feasibility-study> accessed 27 November 2025.
12. International Atomic Energy Agency, ‘IAEA Mission Observes Commitment to Safety at Research Reactor in Malaysia, Recommends Further Improvement’ (International Atomic Energy Agency, 20 June 2025) <https://www.iaea.org/newscenter/pressreleases/iaea-mission-observes-commitment-to-safety-at-research-reactor-in-malaysia-recommends-further-improvement> accessed 4 January 2026.

 

Written by:

Norhisham Abd Bahrin & Muhammad Amsyar Akif Amran
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
6 May 2026

Introduction

As Malaysia continues its trajectory towards the rapid growth of high-rise and mixed developments, the issue of variation of maintenance charges in strata properties has come to the fore. Strata properties, which involve residential parcels such as flats, apartments and townhouses, or commercial parcels such as shophouses, office units, and car parks, are generally equipped with common facilities that are managed and maintained out of the maintenance charges from parcel owners.

However, disputes over the calculation of these charges and whether these charges may be varied among different parcels remain one of the most contentious legal issues within the last decade. In recent years, the Malaysian courts have shed some light on how maintenance charges can be varied, balancing statutory provisions with commercial practicality.

This article will examine the recent judicial developments on the variation of maintenance charges in strata properties, focusing on key cases, statutory interpretations, and their implications for parcel owners, developers, and management corporations.

 

Recent Judicial Developments

1. Aikbee Timbers Sdn Bhd & Anor v Yii Sing Chiu & Anor¹ (“Pearl Suria”)

The strata properties involved in this 2024 case are known as Pearl Suria, which is a mixed development comprising residential units, a shopping mall, and a car park block. The first appellant is the developer of the development and the owner of the shopping mall. The second appellant is the owner of the car park block, while the third appellant is the management corporation (“MC”) of the development. The mall and the car park are the only commercial parcels (“Commercial Parcels”) in the development. The first respondent, on the other hand, is one of the owners of the residential units (“Residential Parcels”).

In January 2019, during the preliminary period, the respondent discovered that the developer had imposed higher rates for the maintenance charges and contributions to the sinking fund (“Contributions”) for Residential Parcels than the Commercial Parcels. In April 2019, after the preliminary period and after MC officially took over the management, the MC had increased the rates for Residential Parcels, but maintained the rates for Commercial Parcels. Dissatisfied with the different rates during both periods, the respondent brought an action by way of Originating Summons, and the High Court (“HC”) subsequently ruled that the different rates for the maintenance charges and contributions were illegal, as the rates for all parcels shall be the same.

However, the Court of Appeal (“CoA”) overturned this decision, allowing the different rates for both of the periods. In regards to the rates during the preliminary period, CoA firstly held that Section 52(2) of the Strata Management Act 2013 (“SMA 2013”) empowered the developer to vary the rates of maintenance charges and contributions, as the section expressly mentioned that “the charges shall be determined by the developer”. Secondly, Section 52(6) of the SMA 2013 stated that “any proprietor who is not satisfied with the sums determined by the developer may apply to the commissioner for a review”. The word “sums” here indicated that there could be more than one rate for the maintenance charges and contributions that can be imposed. Moreover, if the rate is meant to be fixed and cannot be varied, there would be no reason for the provision to allow the commissioner to review the charges or to appoint a property manager to recommend the sum payable for the charges.

Accordingly, in respect of the rates after the preliminary period, the CoA held that Section 60(3)(b) of the SMA 2013 empowered the MC with the power to impose different rates of maintenance charges and contributions for parcels which are “used for significantly different purposes”. The CoA further elucidated that the phrase “used for significantly different purposes” connotes the distinct use of the parcel, namely whether it is used as a residential parcel or a commercial parcel. Moreover, Section 65 of the SMA 2013 read together with Section 17A of the Strata Title Act 1985 recognised that there could be common property exclusively for the benefit of certain proprietors, and these proprietors are to share and contribute to those expenses to maintain the exclusive common property.

Similarly, in the present case, the exclusive common facilities or common property which were funded out of the maintenance charges and contributions are exclusively for the use of the Residential Parcels owners, and not Commercial Parcels owners. Therefore, it should be the responsibility of the Residential Parcels owners to share the expenses or estimated expenses for the maintenance and management of the exclusive common facilities.

Further, the test to determine the chargeable rates of the maintenance charges and contributions can be derived from Sections 12(8) and 52(7) of the SMA, which is by the principle of “just and reasonable”. This means that the sums charged must be just in the sense that one must pay for what one is entitled to enjoy and to share his responsibility with those who share the same rights and benefits.

Hence, since the Commercial Parcels owners were excluded from enjoying the exclusive common facilities, they were thus excluded from bearing the cost of expenses of these facilities, thereby justifying their different rates for maintenance charges and contributions to the sinking fund. The CoA’s decision to allow these varied rates was ultimately upheld in principle when the Federal Court dismissed the leave applications filed by the respondents, rendering the decision final and conclusive.

2. Perbadanan Pengurusan PD1 v SCP Assets Sdn Bhd²

The strata properties involved in this 2025 case are known as Pusat Dagangan Phileo Damansara 1, which is a mixed commercial development comprising seven blocks of shop and office parcels, one block of office towers, surface car park bays, and three levels of basement car park bays. The appellant is the MC of the development, whereas the respondent is the owner of the surface and basement car park bays.

In November 2017, following a vote by way of private motion, the MC had imposed new rates of maintenance charges that were different from the previous rates imposed by the developer. Dissatisfied with the different rates, the respondent brought an action in HC, and the HC ruled in favour of the respondent, holding that the different chargeable rates imposed by MC were unlawful.

The MC subsequently appealed to the CoA, and at this stage, the MC contended that the different rates are permissible based on direct cost allocation methodology, as the respondent’s car parks incurred higher maintenance expenditure and the original allocation of share units was inequitable. The MC relied on Section 60(3) of the SMA 2013 and its principle established in Pearl Suria’s case,³ which allows the imposition of different rates of maintenance charges in respect of parcels that are “used for significantly different purposes”. However, the CoA had distinguished Pearl Suria’s case from the present case, as Pearl Suria is a mixed development, comprising Residential Parcels and Commercial Parcels, whereas in the present case, all parcels in the development are commercial parcels. Hence, since the parcels are not “used for significantly different purposes” as all the parcels are commercial, the CoA upheld the HC’s decision, holding that the different chargeable rates imposed by MC were unlawful.

 

Conclusion

In conclusion, the recent judicial developments have shown that variation of maintenance charges in strata properties is not inherently unlawful, but is subject to the statutory framework, particularly the SMA 2013. It is evident that the MC may vary or impose different chargeable rates for the maintenance charges and contributions to the sinking fund, provided that the parcels are “used for significantly different purposes”. The phrase “used for significantly different purposes” under Section 60(3) of the SMA 2013 can be further understood as parcels that are used distinctly, namely whether they are used for residential parcels or commercial parcels. The test to determine the chargeable rates shall be based on the principle of just and reasonable, which means that the sums charged must be just in the sense that one must pay for what one is entitled to enjoy and to share his responsibility with those who share the same rights and benefits. All in all, in light of these judicial developments, developers, MCs, and any other relevant bodies must ensure that any variation in maintenance charges shall be just, reasonable, and aligned with the established legal principles.

 

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1. [2024] 1 MLJ 948.
2. [2025] 6 MLJ 283.
3. [2024] 1 MLJ 948.

 

Written by:

Tengku Assila Maisara Tengku Adnan Mahadzir & Raja Azfar Raja Zainal Abiddin Shah
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
29 April 2026

Introduction

In Malaysia, intellectual property (IP) is no longer confined to private enterprise, it has become an increasingly valuable asset within the public sector. Government agencies, statutory bodies, and public universities generate significant IP through publicly funded research, administrative innovation, and service delivery improvements. The National Intellectual Property Policy (NIPP) provides the overarching framework, while the Intellectual Property Corporation of Malaysia (MyIPO) administers the regulatory regime.

However, the practical management of IP in the public sector is largely decentralised, raising important legal and policy considerations. This article examines the importance and function of IP policy within the Malaysian public sector, with particular emphasis on the protection of publicly funded assets, the facilitation of commercialisation, and the establishment of legal certainty in ownership and entitlement.

 

Importance of IP Policy in the Malaysian Public Sector

An IP policy is a strategic tool presented as a single written document that provides frameworks for the administration and management of an organisation’s intellectual property. It covers critical areas such as IP creation, ownership, utilisation, and protection, while also defining the rights and obligations of employees and the nature of interactions with third parties. The primary purpose of such a policy is to establish clear guidelines for the registration, disclosure, and commercialisation of assets, ensuring that an organisation can effectively pursue its missions and visions through its IP activities.

 

A. Protection of Publicly Funded Intellectual Assets

Public sector entities are custodians of innovations generated using state resources. Institutions such as Universiti Malaya and Malaysian Agricultural Research and Development Institute routinely produce patentable inventions, proprietary data, and copyrighted works.

In the absence of a structured IP policy:

1. Ownership may be ambiguous
2. Rights may be inadvertently waived or lost
3. Public assets risk misappropriation

A well-defined IP policy ensures that such assets are properly vested, protected, and enforceable, consistent with statutory regimes such as the Patents Act 1983 and Copyright Act 1987.

 

B. Enabling Commercialisation and Revenue Generation

A key policy objective under the NIPP is the commercial exploitation of IP. Public sector IP policies provide the legal and procedural infrastructure necessary to:

1. License technology to industry players
2. Facilitate joint ventures and public-private partnerships
3. Establish spin-off entities

This is particularly relevant where agencies collaborate with investment-focused bodies such as Malaysian Investment Development Authority, which emphasise IP protection as a factor in attracting foreign direct investment. From a legal standpoint, IP policies function as risk allocation instruments, clarifying rights prior to commercial engagement.

For instance, Universiti Putra Malaysia (UPM), supported by annual grants of approximately RM50 million to RM60 million from government ministries and industry partners, has successfully commercialised 278 intellectual properties across various sectors, generating an estimated RM82.78 million in gross sales while maintaining a portfolio of 385 IP assets. Through royalty and licensing arrangements ranging from 1% to 5%, UPM demonstrates how a structured IP framework enables publicly funded research to be translated into tangible economic and commercial outcomes.

Further, innovation initiatives within the public sector, such as the Kumpulan Inovatif dan Kreatif (KIK), similarly underscore the necessity for a structured and coherent IP policy framework. Whilst KIK has been effective in fostering creativity, efficiency, and process-driven improvements across government agencies, the absence of clear and standardised IP guidelines may give rise to uncertainty as to ownership, insufficient legal protection, and the underutilisation of innovations produced thereunder. Accordingly, a comprehensive IP policy remains imperative to ensure that such outputs are properly identified, duly protected by law, and, where appropriate, systematically developed, managed, and commercially exploited.

 

C. Certainty in Ownership and Revenue Allocation

One of the most critical functions of an internal IP policy is to resolve proprietary entitlement.

Typical issues include:

1. Whether IP vests in the Government, the agency, or the individual creator
2. The extent of employer rights over employee-created works
3. Distribution of royalties or commercial proceeds

Clear policy provisions mitigate disputes and align with principles of employment law and fiduciary duty. More importantly, they serve as incentive mechanisms, ensuring that innovators within the public sector are adequately recognised and rewarded.

 

Conclusion

In conclusion, while innovation initiatives within the Malaysian public sector continue to generate valuable outputs, it is the existence of a coherent and structured IP policy framework that ultimately determines whether such outputs can be effectively protected, managed, and leveraged. The NIPP provides essential direction at the national level, but greater consistency in implementation across government agencies remains necessary.

As demonstrated through initiatives such as UPM’s successful IP commercialisation efforts and innovation-driven programmes like KIK, the existence of a clear and structured IP policy framework is crucial in bridging the gap between research output and market application. Ultimately, a robust IP policy not only safeguards public assets but also enhances economic value creation, encourages collaboration with industry, and ensures that innovation within the public sector is sustainably managed and equitably rewarded.

 

Written by:
Ahmad Hafiz Zubir & Nur Alya Azahan
editorial@azmilaw.com

 

Corporate Communications
Azmi & Associates
24 April 2026

The Malaysian Court of Appeal has recently delivered a decision that sits right at the intersection of academic research, copyright law, and patent law.

In Veronica Sainik @ Ronald v Meluha Life Sciences Sdn. Bhd. & Ors (Rayuan Sivil No.: W-02(IPCv)(W)-1713-09/2022), the Court dealt with a situation that many researchers quietly worry about: What happens if your academic work is used commercially without your name credited on it?

The answer is quite significant: It may not only infringe your moral rights as an author, but it can also invalidate a patent entirely.

 

The Backstory: From Master’s Dissertation to Patent

The plaintiff was a postgraduate researcher involved in a collaborative scientific project. As part of that process, she produced a Master’s dissertation containing original research data, methodology, and findings she worked on during the project. Like many academic works, the copyright of the Master’s dissertation was assigned to the university as part of formal requirements.

At that stage, everything appears routine.

The issue arose when a patent was later filed by the defendants who were the lead scientist in the collaborative scientific project research and the company under which the patent was ultimately registered.

The plaintiff was shocked to find that her research had been used, adapted, and incorporated into the patent yet her name was not found nor credited as among the inventors of the patent.

Subsequently, the plaintiff sued the defendants in the High Court. The High Court dismissed the plaintiff’s claim on the basis that there was insufficient evidence of modification or mutilation that adversely affected the plaintiff’s honour or reputation.

The plaintiff appealed, and the Court of Appeal took a very different view.

 

Takeaway From the Court of Appeal Decision

1) Moral Rights Remains with the Author Even If You Don’t Own Copyright

One of the most important legal clarifications in this case is the Court’s firm separation between copyright ownership and moral rights of an author.

Even though the plaintiff had assigned copyright in her dissertation to the university, the Court of Appeal reaffirmed that her moral rights as an author remained intact. These rights are not transferable and do not disappear simply because the copyright has been assigned.

The author retains a continuing legal interest in how the work is presented to the world particularly in being identified as its creator and in ensuring that the work is not altered in a way that damages their reputation.

2) No Credit = Infringement of Paternity

The infringement of the right of paternity in this case is pretty straightforward. The defendants used substantial portions of the plaintiff’s work without naming her or giving credit to her.

In an academic and scientific context, attribution is not just a matter of courtesy or convention. It is directly tied to a researcher’s credibility, career progression, and professional standing. The absence of attribution effectively disconnects the researcher from their own intellectual contribution.

The Court of Appeal recognised this reality. By failing to acknowledge the plaintiff’s authorship while simultaneously benefiting from her work, the defendants did more than overlook her name, they appropriated her intellectual identity.

3) When Modification Becomes Misrepresentation

The High Court had initially taken the view that although there were similarities and even modifications of plaintiff’s work in the defendant’s patent, they were not sufficiently serious to amount to infringement as such modification does not affect the plaintiff’s honour or reputation. However, The Court of Appeal disagreed.

The defendants had altered aspects of the plaintiff’s methodology while still producing results that were identical or substantially similar to those in her Master’s dissertation. From a scientific perspective, this is problematic. Different methodologies should not yield identical outcomes without explanation.

The Court of Appeal accepted expert evidence that such inconsistencies could not be easily justified. This raised a critical concern as the modified presentation of the work could mislead others and reflect poorly on the original researcher.

Further, the Court also took into account evidence that the defendants had relied on the plaintiff’s research materials, including her logbook, while at the same time failing to properly acknowledge her contribution.

The plaintiff’s expert testified that the defendants’ actions, i.e., their reliance on the plaintiff’s data without citation or permission was unethical and amounts to research misconduct and plagiarism. The Court of Appeal agreed with the expert opinion and decided that defendants’ conducts form of derogatory treatment of the plaintiff’s work.

In other words, the issue was not just that the work had been changed, but that the changes and modification distorted how the research would be understood by others. That distortion, in turn, had a direct impact on the plaintiff’s reputation as a researcher.

4) The Invalidation of the Patent

Once the Court accepted that the patent had drawn heavily from the plaintiff’s dissertation, the next question became inevitable: was the invention actually new?

The answer was no.

The Master’s dissertation had already been published prior to application of the patent, this meant that the so-called invention had already been disclosed before the patent application. Under the Patents Act 1983, this destroys the requirement of novelty.

The Court of Appeal therefore declared the defendant’s patent invalid.

5) Cut, Paste and Plagiarise: You Pay the Price

The Court of Appeal ordered the defendants to pay plaintiff RM100,000 in damages for infringement of moral rights and RM100,000 in aggravated damages, with interest of 5% per annum until full payment.

The takeaway is: If you use someone else’s work without proper attribution, you might expose yourself to financial liability. In this case, it cost the defendants RM200,000 in damages, and they also lost the patent.

In short: don’t plagiarise.

 

Conclusion

Stepping back, this case is as much about academic ethics as it is about legal doctrine.

It highlights the risks when research moves from academia into commercial use. In that process, people often focus only on ownership. But this case shows that ownership is just one part of the picture. Issues of authorship, attribution, and integrity are still legally protected.

For researchers, the decision offers reassurance that their contributions are not erased simply because rights have been assigned. For institutions and commercial partners, it serves as a caution that the use of someone’s research must be handled with care, transparency, and proper recognition.

 

Written by:
Ahmad Hafiz Zubir & Iman Danial Hakim Md Azam
editorial@azmilaw.com

  

Corporate Communications
Azmi & Associates
22 April 2026