Licensing Of Modified Virgin Coconut Oil In Malaysia

Pre-Commercialisation and Licensing
of
Modified Virgin Coconut Oil

A Case Study
Under MARDI-CAS-IP NPI Collaboration Project

Guat Hong Teh
Intellectual Property Specialist

CGIAR Central Advisory Service on Intellectual Property
Email: g.h.teh@cgiar.org

And

Rafeah A. Rahman
Deputy Director

Malaysian Agricultural Research and Development Institute
Email: rar@mardi.gov.my

Malaysian Agricultural Research and Development Institute
P.O. Box 12301 General Post Office, 50774 Kuala Lumpur, Malaysia
Tel: +603 8943 7570 Fax: +603 8941 6642
Website: http://www.mardi.gov.my

CONTENTS

EXECUTIVE SUMMARY 3

ACRONYMS 4

1. INTRODUCTION 5

2. VIRGIN COCONUT OIL AND ITS ENHANCEMENT THROUGH RESEARCH AT
MARDI 6

3. UP-SCALING OF PRODUCTION TECHNOLOGY AND LICENSING OF MVCO FOR
PRODUCT DEVELOPMENT: THE CHALLENGES 7

4. FACTORS OF SUCCESS FOR PRE-COMMERCIALISATION OF MVCO 8

4.1 Funding Mechanism under TechnoFund 8

4.2 Searching for the Right Partner and Building Trust and Confidence in Partnerships 10

4.3 Dedicated Inventor is central to success 13

4.4 Internal MARDI support for IP management and business development 13

5. WHAT’S NEXT? 14

5.1 Management of production technology of MVCO 14

5.2 Further research and development for use of MVCO in animal feed and health 14

5.3 Possible consolidation and continuous capacity building for IP and business
development functions at MARDI 15

6. CONCLUSION 15

ACKNOWLEDGEMENT 16

of 2

Executive Summary
Commercialisation of publicly-funded research in Malaysia is low. Studies have shown that a complex
interaction of policy direction, funding mechanism, innovation structure, diffusion mechanisms and
manpower availability is necessary to increase the interaction between public research institutes,
universities and the private sector, in order to bring research to market. In this paper, the authors
showcase a recently patented product known as modified virgin coconut oil and how the Malaysian
Agricultural Research and Development Institute (MARDI) has been able to up-scale its production and
licence the technology to two private companies. Factors leading to its success include the newly-
launched TechnoFund scheme by the Ministry of Science, Technology and Innovation (MOSTI); the
selection of the right private sector partners and the building of trust and confidence between them; an
extremely dedicated and proactive inventor who is business savvy; and the internal MARDI support to
research staff for IP management and business development needs. The paper concludes by looking into
further steps that MARDI can take to exploit the potential of this technology, investments that it should
continue to make for augmenting its current internal skill sets, and a recommendation to consider the pros
and cons of future models of collaboration with the private sector.

of 3

Acronyms

BDU Business Development Unit
Biotropics Biotropic Malaysia Berhad
CAD Corporate Affairs Division
CAS-IP Central Advisory Service on Intellectual Property
CGIAR Consultative Group on International Agricultural Research
IP Intellectual Property
IRPA Intensification of Research in Priority Areas
MARDI Malaysian Agricultural Research an Development Institute
MARDITech MARDITech Corporation
MOA Ministry of Agriculture and Agro-Based Industries
MOSTI Ministry of Science, Technology and Innovation
MP Malaysian Plan
MVCO Modified Virgin coconut Oil
PCT Patent Corporation Treaty
TMC Technology Management Committee
VCO Virgin Coconut Oil
Wawasan Wawasan Tebrau Sdn Bhd

of 4

1. INTRODUCTION
The Malaysian Agricultural Research and Development Institute (MARDI)1 has been conducting coconut
research since its inception more than 30 years ago. The ‘tree of life’ is the fourth most important
industrial crop in Malaysia in terms of total cultivated area, after oil palm, rubber and paddy. The scope of
research has focussed on breeding and selection of new improved varieties, agronomy, and pest and
disease management. Alongside recent initiatives by the Ministry of Agriculture and Agro-Based Industry
to revive the coconut industry through replanting efforts2, emphasis is also given to development of
technologies and know-how for creating value-added products from coconut, so as to generate wealth
and ensure higher returns to coconut farmers and small and medium-size coconut enterprises3 in the
country.

Besides keen competition from neighbouring countries such as the Philippines, Indonesia, Thailand and
Sri Lanka, where raw coconut availability is high and labour costs are generally lower, coconut oil, as the
main commodity traded in the world market, faces keen competition from other vegetable oils4. The
development of niche products from coconut oil is therefore one way for Malaysian coconut farmers and
entrepreneurs to derive higher value without having to compete rigorously in the conventional oils
market5.

This paper is intended to showcase a recent technology developed at MARDI to produce high-quality
virgin coconut oil with antimicrobial properties and to share with the reader some ex-post observations of
the intellectual property (IP) and pre-commercialisation policies and strategies adopted, and lessons
learnt.

1
MARDI is a statutory body incorporated with the main objective of generating and promoting new, appropriate and
efficient technologies towards the advancement of food, agriculture and agro-based industries in Malaysia. See:
http://www.mardi.gov.my/home, last checked 30 July 2009.
2
At least two replanting programmes are on-going at the time of writing. See, for example, the National Coconut
Development Plan (2001-2010) and the Coconut Industry Revitalising Plan (2008-2015).
3
In Malaysia, coconut is said to affect the socio-economic position of approximately 80,000 households in rural
areas. (See: A. Sivapragasam, Coconut in Malaysia – current developments and potential for re-vitalisation, paper
presented at the 2nd International Plantation Industry Conference and Exhibition, Shah Alam, Malaysia; 18-21
November 2008, available at: http://www.ipicex.com/docs/oral/Session%202B%20Sivapragasam.pdf, last checked 29
October 2009). Worldwide, coconut is grown by more than 11 million farmers, mostly smallholders with low incomes,
in more than 90 countries (See: http://www.cogentnetwork.org/).
4
World trade in coconut oil has only increased marginally between 1960 and 2005, compared to soybean, palm oil
and rapeseed oil. (See: A. Sivapragragasam, Ibid., Table 1). For world vegetable oil consumption, see: The American
Soybean Association, Soy Stats, available at: http://www.soystats.com/2009/Default-frames.htm, last checked 29
October 2009. For price of coconut oil and other products, see: http://www.apccsec.org/daily.html, last checked 29
October 2009). Other coconut products traded in the world market include fresh nuts, copra, desiccated coconut,
activated carbon, coir and coir-based products.
5
See: Business Times, Good Demand for Virgin Coconut Oil, 25 May 2009, available at:
http://www.scribd.com/doc/17560020/Global-Market-for-Virgin-Coconut-Oil, last checked 30 October 2009.

of 5

2. VIRGIN COCONUT OIL AND ITS ENHANCEMENT THROUGH
RESEARCH AT MARDI
In recent years, the successful commercialisation of virgin coconut oil (VCO) in the market has drawn the
attention of scientists into researching for its future potential as a form of functional food oil6, as well as for
possible uses in the pharmaceutical, nutraceutical and cosmetics industries7. The term “VCO” refers to
virgin coconut oil that is obtained from fresh and mature kernel of coconut by mechanical or natural
means with or without the application of heat, which does not lead to the alteration of the oil8. It is
generally differentiated from refined coconut oil because it does not undergo the processes of refinement,
bleaching and deodorization.

In 2004, through the Intensification of Research in Priority Areas (IRPA) Programme9 (for further details,
see Figure 1 and Box 1) of the Ministry of Science, Technology and Innovation (MOSTI), the research at
MARDI on modified virgin coconut oil (MVCO) started with a humble grant of RM133,000.0010 to Dr.
Kamariah Long, a principal research officer with a background in enzymology. After 2 years11, a proof of
concept for a unique form of virgin coconut oil with broad antimicrobial properties was developed. A
MARDI-owned product known as DermacoTM M7, a liquid for external application, produced with this
unique oil, had also been made for unofficial distribution.

Box 1. Intensification of Research in Priority Areas (IRPA) Programme

Since 1988, the government of Malaysia had initiated the IRPA scheme to fund research and
development in public research institutions and universities. This scheme, administered by MOSTI, was
primarily aimed at socio-economic development and capacity building, starting from its implementation in
the 5th Malaysia Plan (MP)12. This later led to the aim of increasing collaboration between public
institutions and industry for research collaboration and commercialisation in the subsequent 6th, 7th and 8th
MP. Despite the investment in basic and applied research, public research institutions and universities
continued to struggle in transferring and/or commercialising potential technologies, as well as to develop
meaningful linkages with the private sector.

In the National Survey of Research and Development 2008 Report, gross expenditure on research and
development for 2006 was RM3,646.7 million, representing 0.64% of Malaysia’s gross domestic
production (GDP). From this amount, RM411.4 million (11.3%) was spent on basic research; RM1,645.3
million (45.1%) on applied research; and RM1,590 (43.6%) on experimental development. “Basic

6
See: A.M.Marina, Y.B.Che Man and I.Amin, Virgin Coconut Oil: Emerging Functional Food Oil, Trends in Food
Science & Technology 20 (2009) 481-487.
7
There are many websites dedicated to informing the public about the benefits of VCO and promoting products
derived from VCO. See, for example: http://www.thevirgincoconutoil.com/, http://www.cocoscience.com/ and
http://www.tropicai.com/index.php?id=304&L=2.
8
See: APCC Standards for Virgin Coconut Oil, available at: http://www.apccsec.org/document/VCNO.PDF, last
checked 29 October 2009.
9
This is the main source of research and development funds for public institutions and universities in Malaysia. In the
th
8 Malaysia Plan (2001-2005), the total amount approved under the IRPA was RM883.9 million. The scheme
emphasises funding of research activities that will lead to commercialisation. The IRPA is today renamed as the
Science Fund (see Figure 1).
10
USD 38,000. The exchange rate between United States Dollars and Malaysian Ringgit used in this paper is
USD1=MYR3.50.
11
It is deceptively simple to think that the research only took 2 years. Dr Kamariah Long has had a long history of
working on hydrolysis of fats and oils and holds 2 patents in her name to date.
12
The Malaysia Plans are 5-year development plans launched by the Government of Malaysia since 1966. For more
information, see: http://www.epu.gov.my/historyeconomic, last checked 5 August 2009.

of 6

research” has been defined as “experimental or theoretical work undertaken primarily to acquire new
knowledge without a specific application in view. It is carried out without looking for any long-term
economic or social benefits other than for the advancement of knowledge”. “Applied research” is said to
“involve original work to acquire new knowledge with a specific application in view. It also involves
research to determine possible uses from the findings of the basic research or to determine new methods
or ways of achieving some specific or pre-determined objectives”. “Experimental development” has been
defined as “research involving systematic work using existing knowledge gained from other research
and/or practical experience for the purpose of creating new or improved materials, equipment, products,
system and processes or services”.
See: http://www.mastic.gov.my/portals/mastic/publications/R_DSurvey/2008/R&DSurvey2008.pdf, last
checked 29 October 2009.

The result of this research led to the filing of a patent (Application no. PI 20055720) on the invention with
the Intellectual Property Corporation of Malaysia on 7 December 2005. Within 12 months, an international
application published under the Patent Cooperation Treaty was also filed13. The international preliminary
report on patentability of the invention suggests that it met the criteria of novelty, inventiveness, and
industrial applicability.

According to the patent documents filed, the uniqueness of the invention relates to the nature of MVCO
produced through the disclosed method. It was stated that the MVCO contains broad antimicrobial
spectrum towards bacteria and yeast. This finding is potentially useful for developing products for
treatment of skin diseases, personal hygiene, food preservation, and as a natural antibiotic agent for
prevention of diseases in animals. For the innovation, the inventor and her technology have received
several awards within and outside Malaysia14.

3. UP-SCALING OF PRODUCTION TECHNOLOGY AND LICENSING
OF MVCO FOR PRODUCT DEVELOPMENT: THE CHALLENGES
With its many potential uses, subsequent challenges for MARDI included the up-scaling of the production
of MVCO for commercial purposes, and the further work in product research, development and marketing.
For the up-scaling process, infrastructure and additional technical know-how and skills were lacking within
MARDI. Investment had to be found for construction of a physical plant, and partnerships need to be
developed to augment MARDI’s existing technical skill sets.

To eventually commercialise the MVCO in the market, further clinical testing of the MVCO for specific
uses in cosmetics, health supplements and pharmaceutical products for human and animal health
needed to be carried out, again, by entities that not only have the relevant expertise and experience, but
are also willing to put investment monies into a relatively new and untested novel technology.

An initial attempt was undertaken by MARDI to interest a large public-listed company in Malaysia to invest
in up-scaling the technology and to subsequently develop, solely or jointly with MARDI, new products
using the MVCO. This company was involved in the business of, inter alia, industrial and specialty
chemical production. It was thought that the company would be interested in investing in future MVCO
market, which was largely unexplored but showed commercial prospects, by developing know-how for the
up-scaling process.

13
International Application No. PCT/MY2006/000028, filed 16 November 2006.
14
Gold Medal, MARDI Science and Technology Exhibition 2005; Bronze Medal, Salon International Des Inventions
Des Techniques Et Produits Noveaux Geneve (2006); Woman Inventor of the Year (2006), International Federation
Inventors’ Association.

of 7

However, MARDI was unable to generate enough interest with its patent that would result in the company
investing monies into development of large-scale production technology. The company was merely
interested in future product development using the MVCO and expressed willingness to be a potential
licensee when MARDI could produce it at an industrial scale.

Despite these challenges and the initial failed attempt to solicit for investment through partnership with the
private sector, the following section will elaborate on how MARDI was able to attract two local companies
who were willing to partner in moving its technology forward. It will attempt to showcase factors of
success that contributed to the up-scaling and licensing processes.

4. FACTORS OF SUCCESS FOR PRE-COMMERCIALISATION OF
MVCO
From the authors’ observation, several factors (explained below) seem important in the success of the
pre-commercialisation process of MVCO. These factors represent interesting elements for the
consideration of policymakers, scientists and IP practitioners when studying ways in which to improve
linkages between research and market, public-private partnerships, and management of IP and
technology transfer in research institutions.

4.1 Funding Mechanism under TechnoFund

Whilst ongoing scoping for interested partners was being conducted by MARDI after its failed initial
attempt, a new research, development and commercialisation funding structure for the next Malaysia
Plan, the 9th (2006-2010), was being launched. Under that structure, a new competitive fund known as
TechnoFund was initiated to provide funding to bridge the gap between research and market-ready
inventions (see Figure 1 and Box 2). The aims of the TechnoFund were:

1. to stimulate the growth and successful innovation of Malaysian technology-based enterprises by
increasing their level of research and development, and commercialisation;
2. increase capability and capacity of Malaysian Government Research Institutes and Institutions of
Higher Learning to undertake market driven research and development, and to commercialise the
outputs through spinoffs or licensing;
3. enhance global competitiveness and research and development culture among Malaysian
technology-based enterprises;
4. increase contribution to Malaysia’s gross domestic production through economic wealth creation
and exports;
5. foster greater collaboration between Malaysian enterprises and Government Research Institutes
or Institutions of Higher Learning; and
6. to encourage institutions, local companies and inventors to capitalise their intellectual work
through patent registration15.

The fund would provide financing for 2 major types of activities: (a) pre-commercialisation activities such
as the development of pilot plants or the conduct of clinical/field trials; and (b) intellectual property
acquisition. The TechnoFund scheme also required cooperation between public bodies and the private
sector. Where application is submitted by government research institutions, institutions of higher learning
or the private sector, a business plan has to be submitted to MOSTI as well.

15
See: TechnoFund Guidelines at http://www.psas.edu.my/portal/berita/pengarah/technofund.pdf, last checked 7 July
2009.

of 8

A joint application was made by MARDI and Wawasan Tebrau Sdn Bhd (Wawasan), a company
established by a group of young creative entrepreneurs who specialises in specialty feed and fat
manufacturing, oil and fat process technology, and renewable energy.

Figure 1: Types of funding administered by MOSTI under the 9th Malaysia Plan (2006-2010) (Source:
TechnoFund Guidelines).

Box 2: The National Survey of Public Research Commercialisation in 2003,

Low percentage of technologies from public institutions and universities actually made it to market. From
a total of 5232 projects funded under the 7th and 8th Malaysia Plans, only 5.1% were successfully
commercialised. Commercialisation has also not resulted in any significant revenues.

The “root causes” for this failure were identified by MOSTI as follows16:
a) Funding mechanism for research is not conducive for commercialisation.
b) Researchers are often unaware or not concerned about the commercial potential of their findings.
c) There is a lack of good research management practices and skill sets in universities and public
research institutes that will lead to commercialisation.
d) Manpower constraints in universities and public research institutions such as lack of scientific
personnel and technology transfer officers.
e) Research focuses mainly on publications rather than a culture of commercialising research
products.
f) Lack of clear incentives and rewards to stimulate commercialisation activities.
g) Paucity of networking mechanism to link key parties necessary in commercialising research
findings.
h) The innovation infrastructure suffers from systemic weakness.
i) Limited diffusion mechanism for accelerating adoption of technologies because of an absence or
lack of technology transfer agencies and professionals.
j) Feasibility studies on marketable outputs are rarely conducted and commercial partners are often
not involved in research and development planning.

16
See: Hii Hnn-Hui, Diagnosis and Prescriptions of National Innovation System: Case of Malaysia, 10th September
2003, available at: www.it-lodge.com/doc/hhh.ppt, last checked 29 October 2009.

of 9

On 13 November 2007, a grant of RM4.5 million17 was made to MARDI and Wawasan for up-scaling of
the MVCO production18 with the following main milestones:

a) The setting up of pilot plant and equipment for the primary production and processing of VCO and
secondary processing of MVCO;
b) Establishment of safety data and standard compliance for VCO and MVCO;
c) Development of commercial-ready prototype; and
d) Animal feeding trials for VCO and MVCO.

The availability of the TechnoFund scheme was seen to be a crucial component for the further
development of the MVCO technology19 through this public-private partnership, according to MARDI and
Wawasan. It could be argued that, with governmental funding, the risks presented to the private sector
were substantially reduced because of the financial support provided by the government in building the
pilot plant and for related studies. This scheme was thus timely and served as a bridge between MARDI
and Wawasan.

In the words of the Director General of MARDI, upon hindsight:

“Without the TechnoFund grant of RM4.5million given to us by The Science, Technology and Innovation
Ministry (MOSTI) this collaboration might not have worked out.”20

It is unclear if MARDI would have been successful in partnering with Wawasan or another private
company if not for the TechnoFund grant. Arguably, based on the novelty of the technology and
increasing popularity of VCO, private investments to up-scale the production technology could have been
found. However, one will not be able to state this for certain. Future impact assessment studies of the
TechnoFund scheme by the government of Malaysia may well look, in greater depth, into studying the
various situations where gap funding under TechnoFund was essential to the success of the
commercialisation process.

4.2 Searching for the Right Partner and Building Trust and Confidence in
Partnerships

4.2.1 Partnership for up-scaling of production technology: Wawasan Tebrau Sdn Bhd (Wawasan)

The selection of an appropriate partner for the up-scaling production of the MVCO was arguably the most
difficult for MARDI, despite the availability of governmental funding under the TechnoFund scheme.

As stated above, prior to the availability of the TechnoFund scheme, MARDI had approached a potential
company for partnership in this venture. However, due to the lack of interest in further investment in
research and development of the up-scaling technology, the partnership never materialised. When the
scheme became available, MARDI again approached the same company for partnership, this time with
some potential support from the government. Nevertheless the collaboration did not materialise because
the said company did not have the necessary expertise to up-scale the production technology, was

17
USD1.29 million.
18
To date, MARDI has been successful in obtaining a total of RM41.32 million for up-scaling of 14 of its technologies,
including the MVCO project. (Source: MARDI).
19
Personal communication, Dr Kamariah Long (MARDI) and Mojo Yap (Wawasan Tebrau Sdn Bhd).
20
The Star, Virgin Coconut Oil to Hit the Shelves, 9 June 2009, available at:
http://thestar.com.my/metro/story.asp?file=/2009/6/9/southneast/3972462&sec=southneast, last checked 30 October
2009.

of 10

unwilling to invest in clinical trials of MVCO-based products, and was merely interested in final product
development using the MVCO.

A decision was then made by the inventor to approach Wawasan, a smaller-size company which she has
had previous technical co-operations with. The individuals behind Wawasan have been process experts
for many years and are consultants to various public bodies and private companies, both locally and
internationally, for the design and building of manufacturing plants as well as the development of
technology in niche segments of the oil and fats industry. Simply put, Wawasan has a proven track record
in the field of oils and fats.

In the authors’ view, the partnership with MARDI for the up-scaling of MVCO production was seen as a
unique complementary component to Wawasan’s business. It had traded in VCO prior to the partnership
and was therefore interested to explore the possibility of an expansion into the production of MVCO. As
the by-products of the MVCO production may also potentially have uses that would add value to their
feed manufacturing business, among others, this was a win-win partnership21.

Although the funding from the TechnoFund scheme assisted in alleviating some of the risks presented to
Wawasan, the company had also invested time and approximately RM1 million22 into the venture so far,
an amount that is not insubstantial for a company of its size. This demonstrated that Wawasan was
serious in the venture and saw potential commercial value in the MVCO.

4.2.2 Partnership for product development for human health: Biotropics Malaysia Berhad (Biotropics)

How did Biotropics come to learn of the MVCO?
Biotropics is a government-linked company that was incorporated in 2007 with a mandate of developing
and promoting Malaysia’s bio-resources into superior herbal-based products23.
The company first approached MOSTI to seek for recommendations regarding potential inventions
funded by MOSTI that could be developed into nutraceutical, cosmetics or pharmaceutical products. As
custodian of the national R&D grants, MOSTI is aware of MARDI’s MVCO invention and its commercial
potential, therefore suggested Biotropics to approach MARDI for further negotiations.

Initial talks centred upon whether Biotropics should be included in the TechnoFund scheme, i.e. whether
there should be a tripartite relationship between MARDI, Wawasan and Biotropics. After some
discussions, it was concluded by Biotropics that it did not see its contribution in the up-scaling process. It
was only keen on the MVCO as a potential product in itself or as an ingredient for further product
development.

What were the licensing terms?
A Product Licensing Agreement was concluded on 17 February 2009 between MARDI and Biotropics. It
has been granted an exclusive licence by MARDI to:
a) undertake preliminary studies based on the available data or information and to further use,
develop and undertake researches necessary for producing marketable products for human use
based on the MVCO; and
b) subsequently manufacture, use and sell the products worldwide.

21
Wawasan is the main producer of CalCFA (calcium soap of long chain fatty acids), a type of rumen bypass fat
made for high milk-yielding dairy ruminants. In 2004, it built and commissioned the first plant in Malaysia for the
production of CalCFA. (Source: CalCFA Brochure, obtained from Wawasan, 15 July 2009).
22
USD285,714.29. (Personal communication, Mojo Yap of Wawasan, 15 July 2009).
23
See: http://www.biotropicsmalaysia.com/index.php, last checked 29 October 2009.

of 11

As consideration for the licence from MARDI, Biotropics undertook to pay licensing fee, management and
application fees for patents in several countries, and a sliding scale of royalties over net sales of future
products.

Under this arrangement, Biotropics was granted a 3-year term to conduct a preliminary study on the
MVCO properties and its potential uses for human health and application. If the preliminary study shows
that the MVCO is unsuitable for purposes envisioned by Biotropics, it can terminate the Agreement.
Similarly, if Biotropics is unable to commence sale of a product within 3 years, MARDI has the right to
withdraw the licence. The Product Licensing Agreement would otherwise last for as long as the patent on
the MVCO remains valid. The terms negotiated demonstrate that parties were able to be flexible but
committed in bringing any viable products to market in a pre-determined timeline.

What were some of the critical points in the success of this negotiation?
The Product Licensing Agreement was negotiated for approximately 30 months before it was signed.
During this time, a few observations on important negotiation points deserve mention, as follows:

a) MARDI’s role in creating trust and confidence between Wawasan and Biotropics
It is interesting to note that the Product Licensing Agreement between MARDI and Biotropics does not
include the right for Biotropics to produce MVCO in its own right, unless MARDI is not able to meet the
demand requested by Biotropics. In this situation, it was foreseen that Wawasan would be the supplier, or
one of the suppliers (depending on subsequent negotiations between MARDI and Wawasan), 24 of the
MVCO to Biotropics in the future.

According to those involved in the project, this was one of the “sticking points” in the negotiations.
Biotropics had no prior or previous engagements with Wawasan and does not know of their ability,
technically or otherwise, in ensuring continuous supply of the MVCO. To alleviate the concerns of
Biotropics, MARDI conducted several meetings, at an early stage when this concern was raised, that
facilitated the building of trust and confidence between Wawasan and Biotropics. All parties were able to
put their concerns upfront and deal with them in a transparent manner. Upon hindsight, it was thought
that this was a significant element in the successful negotiation process with Biotropics25.

b) Creative delineation of rights and interests by the parties
Prior to signing the Product Licensing Agreement with Biotropics, MARDI had earlier concluded a
collaborative agreement with Wawasan, dated 1 February 2008, that had granted to the latter a first right
of refusal to own a licence on the MVCO and the technology or know-how in its production. This meant
that MARDI would need to obtain the approval of Wawasan before licensing the MVCO or know-how
relating to its production to a third party.

MARDI was able to convince Wawasan to carve out its interest for potential uses of the MVCO for human
application to Biotropics. It was also apparent, from the authors’ interview with Wawasan, that the
company adopted a pragmatic approach to negotiations in this case as the development of
pharmaceutical, nutraceutical and cosmetic products is not in Wawasan’s area of expertise and may well
require extensive investments to build in the short term. It remains, however, interested in researching for
promising uses of MVCO in animal feed and health products, an existing area of its current business.

c) Existence of intellectual property rights adds credibility to innovation
The existence of intellectual property rights on the MVCO invention was seen as adding credibility to its
commercial potential by Biotropics. In fact, Biotropics undertook to pay for management and application
fees for the patents in several countries under the Product Licensing Agreement.

24
Or at least, one of the suppliers, depending on subsequent negotiations.
25
Personal communication (Kamariah Long, 8 July 2009).

of 12

MARDI had initiated filing under PCT invention in several countries and this was later added by Biotropics
to now include the United States of America, the United Kingdom, Ireland, France, Germany, Japan,
India, Philippines, Singapore and Indonesia, as countries of interest.

4.3 Dedicated Inventor is central to success

The success in the project so far seems to be influenced greatly by the inventor of the technology taking a
proactive attitude in commercialising her invention. When interviewed, it was clear to the authors that
despite the lack of training and experience in this process, Dr Kamariah Long had a positive and
dedicated attitude in learning how to build partnerships, was savvy on intellectual property issues, and
was instrumental in building trust on the technology throughout the negotiation process.

The inventor is also currently in the driving seat to further improve the up-scaling technology of MVCO
production with Wawasan. There is mutual respect between the partners, and reliance is placed on the
inventor for matters relating to the improvement of the technology.

4.4 Internal MARDI support for IP management and business development

One of the important factors that contributed to the success of the pre-commercialisation and licensing
activities of the MVCO patent is the close co-operation between the inventor, the MARDI IP office and its
Business Development Unit (BDU). Although the success thus far is largely attributed to the passion and
commitment of the inventor, the roles played by both the IP office and BDU were important in supporting
her. Together, they planned, executed and continue to monitor the project. In the process, the inventor
had also acquired many different skills sets, including negotiation and business experience26. This fact
demonstrates that it is vital that both scientists and IP or business managers work hand-in-hand in
bringing technology to market because of their complementary skill sets.

The development of IP and business capabilities in MARDI is a fairly recent affair and is arguably
evolutionary in nature. The IP office is a part of Corporate Affairs Division (CAD) that has various
portfolios besides IP management, and is separate from BDU. CAD reports to the Senior Director for
Operations whilst BDU reports to the Deputy Director General for Technology Transfer and
Commercialisation27.

Disclosures of new inventions are submitted to the IP office where it would undergo first-level screening
for novelty and potential commercialisation. Any invention worthy of a patent application would then be
submitted to the MARDI Technology Management Committee (TMC) for a further evaluation and
endorsement. This Committee is made up of senior managers from MARDI’s 18 units/divisions, and
includes members from the IP office and BDU. If the technology is approved for protection by TMC, the IP
office takes the necessary steps for application and protection of the invention. For licensing and up-
scaling of technologies, however, BDU is the unit tasked to assist inventors to undertake further steps
such as to partner with either a public or private entity or both. There is a further body called MARDITech
Corporation28, a subsidiary of MARDI, which is responsible for commercialisation of MARDI technologies
which do not require up-scaling.

26
Personal communication (Kamariah Long, 8 July 2009).
27
See: http://www.mardi.gov.my/organisational, last checked 30 July 2009.
28
See: http://www.marditech.com/, last checked 30 October 2009.

of 13

Box 3. Some tips for a successful partnership and commercialisation process
.
1. Strong and patentable innovation
2. Dedicated, passionate and committed inventor
3. Choose the right partner Develop a checklist that spells out the essential skill sets of a desirable
partner that you are looking for. If necessary, do a background check or mini due diligence of
your partner.
4. Build trust, respect and confidence among all players. If necessary, bring all your collaborators to
the same table.
5. Be transparent and firm about your interests, but at the same time adopt a flexible and listening
attitude to the party you are negotiating with.
6. Don’t be greedy in negotiations. Make a list of your interests and your “non-negotiables” to guide
you.
7. Put yourself in the shoes of your partners and try to see what their concerns are. Develop a list of
options together and rate them. Select the option that best meets both parties’ interests.
8. Various skill sets are needed in the commercialisation process of an invention. Scientists,
intellectual property professionals and business managers should work hand-in-hand throughout
the process. Be prepared to learn new skills that are out of your usual scope of work, especially if
you are a scientist. Adopt a positive and dedicated attitude, and have a mindset that shows you
truly care about the success of your invention.
9. Seek professional advice where and when necessary. No one is an expert in everything.

5. WHAT’S NEXT?
Although it can be said that the up-scaling and licensing of the MVCO technology have been largely
successful, several observations can be made for future consideration.

5.1 Management of production technology of MVCO

The agreement between MARDI and Wawasan will end on 31 January 2010. It is imperative that parties
discuss a plan or strategy for future exploitation of the production technology, as this is jointly owned
under the agreement. At the very least, parties would need to ensure that production of MVCO for
Biotropics would be feasible should it require bulk supply in the future.

At the date of writing, the authors are informed that discussions are under-way between MARDI and
Wawasan on the appropriate collaborative model. Parties are considering a range of options from setting
up a joint venture company to simple licensing. Future studies could, inter alia, look into the pros and
cons of the various options for collaboration.

5.2 Further research and development for use of MVCO in animal feed and
health

The exclusive licence with Biotropics involves only the use of MVCO in products for human health. It
would serve MARDI’s interests well if further research is carried out to determine the suitability of the
MVCO for animal feed and health. Also, MARDI’s existing partner, Wawasan, may be convinced to invest
in this venture further.

of 14

5.3 Possible consolidation and continuous capacity building for IP and
business development functions at MARDI

Although the functions of IP management and business development may be separated between two
distinct units within an organisation, MARDI already has plans to consolidate both its IP office and BDU in
the upcoming 10th Malaysia Plan commencing in 2011. An IP management audit of the institution is
recommended to examine the role of the IP office, BDU and MardiTech Corporation for effective
management, transfer and commercialisation of intellectual assets in MARDI.

Capacity building for IP and business development functions at MARDI will remain as important areas for
MARDI to invest in, from the perspective of both human and financial resources. Additional skill sets that
can be included within these functions are legal, marketing and business development. The importance of
IP management in commercialisation of technology is fully recognised by the ministry and the Malaysian
government. One of the Key Result Area identified by the government in the 10th Malaysia Plan is to
achieve greater contribution from valued-added new sources of growth29. To achieve that, MOA has
proposed a programme for effective IP management as a strategy to strengthen the IP environment.
Hence, it has fully supported MARDI in its request for a substantial budget for the setting up of an IP
Office. The budget includes cost for IP protection, capacity building, incentives to researchers, as well as
the necessary infrastructure required.

6. CONCLUSION
The MVCO patent, and its up-scaling and licensing process, show that local public-private partnerships in
commercialising publicly developed inventions can be a reality with enabling policies, strategies and
personnel skill sets. The timely introduction of the TechnoFund scheme was an important enabling policy
that contributed to the formation of public-private partnership between MARDI and Wawasan, as
substantial investments were made by the government for the building of the pilot plant. Despite its initial
failed attempt to partner with a big company, it turned out that MARDI is better off collaborating with a
smaller-size company that had the necessary skill sets to further develop the technology and was willing
to invest a significant amount of money and time in the up-scaling process. MARDI’s subsequent role in
linking Wawasan and Biotropics early on in the project was important in creating trust and confidence in
two private companies that did not have any formal legal relationship. The background to all of this was
the actors – the inventor, the business development manager and the intellectual property practitioner.
Together, they worked to ensure that all of these goals were achieved.

Challenges still exist and future planning remains necessary. Possible models for future collaboration with
Wawasan need to be considered and the pros and cons of each discussed. The further potential of the
MVCO for animal feed and health could also bring promising commercial value to MARDI and it needs to
plan carefully for further research in this direction.

Changes are foreseeable to strengthen the support functions of business development and intellectual
property management within MARDI. In the long run, capacity building of these functions internally would
benefit MARDI’s goals and would be consistent with the country’s aim in becoming a knowledge-based,
innovation-driven economy. More success stories such as this one need to be documented and shared
more widely to build confidence in scientists and developing country intellectual property practitioners.

29
Garispanduan Pertama Penyediaan Rancangan Malaysia Kesepuloh, 2011-2015: Prospek Ekonomi dan Hala Tuju
Strategik

of 15

Acknowledgement
The authors would like to acknowledge the financial support provided by the Dutch Foreign Ministry
(DGIS) through CAS-IP of the CGIAR, for this case study.

We would like to express our gratitude to Dr Kamariah Long, the inventor of MVCO; Dr Azizan Ab.
Rashid, Head of BDU; and the entrepreneurs from Wawasan Tebrau Sdn Bhd – Mojo Yap, Low Moh Sing
and Gareth Cheong - for sharing their experiences with us during interviews. Without their contributions
and cooperation, this case study would not be a reality. Thanks also to Dr Lam Peng Fatt for making the
arrangement for the interviews and sourcing some of the reference documents for us.

Special mention is also due to Karine Malgrand for her patience, comments, editing and gentle reminders
throughout the writing of this case study. We appreciate the critical feedback that we have received from
her, as well as from Peter Munyi, on earlier drafts. The paper also benefited from comments of IP
practitioners in the CAS-IP led National Partners Initiative (NPI) in January 2010.

Lastly, it is hoped that the experience, lessons learnt and observations gathered from this case study will
help MARDI and other NPI members in their efforts to improve IP management and technology transfer in
their respective institutions.

Any omissions and errors remain the authors’ own.

The individual case studies and the compilation are licensed under the Creative Commons Attribution-
Noncommercial-Share Alike 3.0 Unported License. To view a copy of this license, visit
http://creativecommons.org/licenses/by-nc-sa/3.0 or send a letter to Creative Commons, 171 Second
Street, Suite 300, San Francisco, California, 94105, USA.

Recommended citation:
Guat Hong Teh, Rafeah A. Rahman. 2010. Pre-Commercialisation and Licensing of Modified Virgin
Coconut Oil. In: CAS-IP NPI. 2010. Institutionalization of Intellectual Property Management: Case Studies
from five Agricultural Research Institutions in Developing Countries. CAS-IP, Rome, Italy.

of 16

Licensing Of Modified Virgin Coconut Oil In Malaysia

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (11)

Destaque

Destaque (20)

Semelhante a Licensing Of Modified Virgin Coconut Oil In Malaysia

Semelhante a Licensing Of Modified Virgin Coconut Oil In Malaysia (20)

Mais de CGIAR Central Advisory Service on Intellectual Property

Mais de CGIAR Central Advisory Service on Intellectual Property (10)

Licensing Of Modified Virgin Coconut Oil In Malaysia