Patent Licence Agreement (Malaysia)

A Patent Licence Agreement in Malaysia grants defined rights to use the licensed subject matter on the terms it specifies.

Patent registration in Malaysia is administered by the Intellectual Property Corporation of Malaysia (MyIPO) under the Ministry of Domestic Trade and Cost of Living (KPDN). MyIPO maintains the Malaysian Patents Register and administers the Patents Act 1983 through its Patent Examination Section. Patent licences may be recorded at MyIPO under Section 53 of the Patents Act 1983 — recording a licence provides notice to third parties of the licensee's rights under the patent, which is important in the event of a dispute over the patent's validity or ownership.

For foreign technology transfers into Malaysia, the Income Tax Act 1967 (Act 53) imposes a withholding tax obligation under Section 109B on royalty payments made to non-resident patent owners. The standard withholding tax rate is 10% on gross royalties paid to non-residents, unless a lower rate is available under a double taxation agreement (DTA) between Malaysia and the licensor's country of residence. Malaysia has DTAs with over 75 countries — key trading partners include the United Kingdom (0% royalty WHT under the Malaysia-UK DTA for qualifying cases), Singapore (8%), the United States (10%), Japan (10%), and Germany (7%). The withholding tax must be remitted to the Inland Revenue Board Malaysia (LHDN) within one month of the royalty payment date under Section 109B of the Income Tax Act 1967.

Compulsory licences may be granted by the High Court of Malaya under Section 49 of the Patents Act 1983 if the patented invention is not being worked in Malaysia, is being worked on a commercial scale insufficient to meet demand, or if the patent is being used in a manner unreasonably restrictive of trade or prejudicial to the public interest. The provisions for compulsory licensing are designed to prevent abuse of patent monopoly rights in the Malaysian market and are consistent with Malaysia's obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organisation (WTO).

The legal framework governing the Patent Licence Agreement (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Patent Licence Agreement (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies Act 2016 (Act 777) sets the foundational requirements.

A Patent Licence Agreement in Malaysia is needed whenever a patent holder wishes to grant commercial rights to a third party to exploit the patented invention.

A Patent Licence Agreement is needed when a Malaysian research institution or university licenses a patented technology to a Malaysian manufacturer for commercial production. Malaysian public universities including Universiti Malaya (UM), Universiti Teknologi Malaysia (UTM), and Universiti Putra Malaysia (UPM) actively commercialise their research through technology licensing to Malaysian industry partners.

A Patent Licence Agreement is required when a foreign technology owner grants a Malaysian company the right to manufacture products using the patented technology in Malaysia. The agreement is commonly used in the pharmaceutical, medical device, electronics, automotive components, and semiconductor industries. The Malaysian Investment Development Authority (MIDA) supports technology transfer into Malaysia for strategic industries.

A Patent Licence Agreement is needed when a Malaysian patent owner grants a licensee the right to sublicence the patented technology to sub-licensees in Malaysia or the ASEAN region. The right to sublicence must be expressly granted in the patent licence agreement — it does not arise by implication under Malaysian law.

A Patent Licence Agreement is required when an invention jointly owned by multiple parties (joint inventors or joint assignees under Section 38 of the Patents Act 1983) needs to be commercialised. Each joint owner may grant licences, but revenue sharing between joint owners must be agreed upfront.

A Patent Licence Agreement is needed when settling patent infringement disputes. A cross-licence or settlement licence may be granted as part of a settlement agreement in High Court proceedings or at the mediation stage under the Malaysian Mediation Act 2012 (Act 749).

Parties in Malaysia should prepare a Patent Licence Agreement (Malaysia) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid Patent Licence Agreement in Malaysia must contain the following key elements.

Identification of Patent: The full particulars of the licensed patent including the Malaysian patent number assigned by MyIPO, the title of the invention, the filing date, the grant date, and the expiry date. If the licence covers patent applications (not yet granted), the application number and the mechanism for confirmation on grant must be addressed.

Scope of Licence: Whether the licence is exclusive, sole, or non-exclusive. An exclusive licence grants the licensee the sole right to exploit the patent to the exclusion of all others including the patent owner. A sole licence means only the licensee and the patent owner may exploit the patent. A non-exclusive licence allows the patent owner to grant the same rights to multiple licensees. The territory (Malaysia, ASEAN, worldwide) and the permitted field of use (specific product categories or applications) must be precisely defined.

Royalties and Payment Terms: The royalty rate, royalty base (net sales, gross sales, per unit), minimum annual royalties, royalty reporting periods, and audit rights. All amounts in Malaysian Ringgit (MYR) or the specified currency. The withholding tax obligation on royalties paid to non-residents under Section 109B of the Income Tax Act 1967 (Act 53) must be addressed — either grossed up by the licensee or deducted at source.

Patent Maintenance: Which party is responsible for maintaining and paying renewal fees for the patent at MyIPO. Patents in Malaysia must be renewed annually from the 5th anniversary of the filing date. If the patent lapses due to non-payment of renewal fees, the licensee's rights are extinguished.

Improvement Inventions: Provisions for inventions that improve upon the licensed patent made by either party during the licence term. Grant-back clauses (requiring the licensee to license improvements back to the licensor) are common but must not be drafted in a way that amounts to an anti-competitive agreement under Section 4 of the Competition Act 2010 (Act 712).

Registration at MyIPO: The obligation to record the licence at MyIPO under Section 53 of the Patents Act 1983 within a specified period after execution.

Additional compliance elements for a Patent Licence Agreement (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.