Foreign investment and foreign patent filing in Vietnam

Vietnam is considered a strategic destination for many foreign investors. Investor-friendly policies, an extensive network of investment agreements, a stable and cost-effective economic and social condition have led to an increase in the Foreign Direct Investment (FDI) inflows into Vietnam despite impact of the pandemic. As of December 2021, the total investment capital of foreign investors in Vietnam reached 31.15 billion USD, up 9.2% over the same period in 2020. Among 106 countries and territories investing in Vietnam in 2021, Singapore leads with a total investment capital of over 10.7 billion USD, accounting for 34.4% of total investment capital in Vietnam, followed by Korea, Japan, etc.  

Source: Vietnam’s Ministry of Planning and Investment, Vietnam’s Foreign Investment Agency (link)

Source: Vietnam’s Ministry of Planning and Investment, Vietnam’s Foreign Investment Agency (link)

Source: Vietnam’s Ministry of Planning and Investment, Vietnam’s Foreign Investment Agency (link)

Foreign Direct Investment (FDI) has been one of the key factors in transforming the R&D environment in Vietnam through the introduction of global innovative technology into the national market[1]. The Ministry of Politics issued Resolution 50, in which it proposed to further encourage the development of R&D investment in Vietnam by implementing incentives in future legislation. Foreign investors have been gaining more and more confidence in setting up R&D centers in Vietnam, speeding up the process of technology transfer[2].

Together with the increase of foreign investment in general and R&D development in particular, the number of patent applications at the Vietnam National Intellectual Property Office (“IP Vietnam”) has also seen steady growth over the years. Analysing annual data over the past 10 years, it is clear that the gap between the number of patent applications by foreign applicants and Vietnamese applicants has been substantial, with the former significantly exceeding the later.

Source: Statistics for Intellectual Property Activities Annual Report 2021

As a consequence, Vietnamese intellectual property legislation should provide favourable conditions to attract foreign investors. However, there remains issues in the current regulations and some of them are interpreted strictly in practice, leading to difficulties for foreign applicants. Among them is the issue concerning patents’ first filing requirements.

First filing requirements under the current Vietnamese regulations

Under the current Vietnamese regulations[1], in cases of (1) inventions/utility solutions of Vietnamese organizations or individuals, or (2) inventions/utility solutions created in Vietnam, if the applicant(s) plan to seek patent protection in Vietnam, the patent application must be filed first in Vietnam before being filed abroad to meet the requirements on security control for patent applications.

If a patent application for an invention/utility solution created in Vietnam or an invention/utility solution of Vietnamese organisations and individuals is not first filed in Vietnam, it would be impossible to obtain patent protection for the inventions/utility solutions in Vietnam. Furthermore, should the invention/utility solution be considered a secret invention, confirmed by a notice by the competent authority on its secret characteristic, it is impossible to apply for protection of the invention/utility solution abroad without permission from the appropriate authority. The violation may be subject to be handled in accordance with administrative or criminal sanctions[2].

There are several unclear issues under the current Vietnamese regulations, among which the most notable issues are:

What are “inventions/utility solutions of Vietnamese organisations or individuals”?

• The current regulations do not provide a clear definition of what is an invention/utility solution of Vietnamese organisations or individuals. According to plain interpretation, if the applicant is a Vietnamese entity, a patent application is obliged to comply with the first filing requirements. However, this interpretation raises one question: in the case of an applicant being a foreigner and one of the inventors is Vietnamese, do the first filing requirements apply?? In practice, IP Vietnam interprets that if there is a Vietnamese inventor, the patent application will be subject to the first filing requirements.

How to determine whether an invention/utility solution is created in Vietnam?

• There have been no detailed regulations nor guidance to determine whether an invention/utility solution is created in Vietnam. It’s unclear whether “created in Vietnam” means the whole invention/utility solution has to be created in Vietnam to satisfy the regulations, or just a portion(s) would suffice to pass the requirements.
• Given that there have also been no cases and/or precedent regarding the matter, the applicant is recommended to file the application in Vietnam first even if a portion of the invention/utility solution is created in Vietnam to avoid any possible risks.

Whether filing a PCT international application satisfies the first filing requirements if the Receiving Office (RO) is IP Vietnam itself?

• There is no specific guidance, and under the current practice at IP Vietnam, applicants are required to file a Vietnamese patent application not a PCT application with RO/VN. After 6 months from the filing date, if the invention/utility solution is not classified as a secret invention, IP Vietnam will not issue any notification specifying the applicant can file a PCT application or any applications abroad. Accordingly, it is implied that filing a PCT international application does not satisfy the first filing requirements even if the RO is IP Vietnam itself.

Do the first filing requirements apply to all technical fields, or do they only apply to a limited technical field?

• The aim of the regulations is to control the security of the inventions to prevent filing inventions that are classified by state agencies as secret inventions (state secrets) in the fields of national defence and security. However, there are no further detailed regulations on secret inventions[3] or which areas are considered to be affecting national defence and Therefore, the first filing obligation is not limited to any field.

The unclear issues remaining in the current regulations as exemplified above have led to the practice of strict application and caused additional procedures to the applicants. For example, foreign applicants must file the application in Vietnam first for legal compliance and protection, although they might not want to file an invention/utility solution application in Vietnam. In addition, the unclear provisions may also generate conflicts with the first filing requirements (foreign filing license) in other countries imposed on the applicants for the same invention.

Changes on first filing requirements in the Law amendment of Intellectual Property Law (IP Law)

The Law amendment of IP Law that has been approved and will take effect from 1 January 2023 (Amended IP Law) provides substantive changes on patent first filing requirements. In particular, the Amended IP Law has taken the direction of relaxing the current regulations on first filing requirements.

The following is an extract of the Article 89a of the Amended IP Law: “Inventions/utility solutions in the technical fields that impact the national defence and security, created in Vietnam and belong to Vietnamese individuals having residence in Vietnam or organisations established under Vietnam Legislation are qualified for filing patent applications abroad if the patent applications for such inventions/utility solutions are first filed in Vietnam for procedure of security control.”

Firstly, the Amended IP Law limits the obligation to the technical fields that impact the national defence and security. Under the draft Decree (which is guiding implementation of the Amended IP Law currently being circulated for review and approval and expected to be effective in early 2023 (the draft Decree)) weapons, equipment, explosive material used in the military, and devices and technologies for use in intelligence, counterespionage, and criminal investigation activities are listed as technical fields that impact the national defense and security.

Secondly, the Amended IP Law clarifies the obligation of Vietnamese individuals having residence in Vietnam or organisations established under Vietnam Legislation having the rights to file the invention/utility solution.

Thirdly, although the Amended IP Law is not explicit, the draft Decree clarifies that filing a PCT international application satisfies the first filing requirements if the Receiving Office (RO) is IP Vietnam. This is a considerable improvement to the first filing requirements.

However, there are still unclear issues in the Amended IP Law and the draft Decree. For example, it is still unclear if an “invention created in Vietnam” to mean whole invention/utility solution has to be created in Vietnam to satisfy the regulations, or just a portion(s) would suffice to pass the requirements.

In addition, a concern by many applicants regarding the Amended IP Law is that the Amended IP Law requires filing the first application in Vietnam. However, since many applicants only want to file patent applications abroad by direct filing in foreign countries or via the PCT route with RO other than IP Vietnam, we recommend to  that a specific procedure is established to allow applicants to file their first patent application in Vietnam with a request for identification of a secret invention (in order to file applications abroad later) with very brief patent specifications to minimize the costs to prepare their specifications in Vietnamese.

Nevertheless, the changes in the Amended IP Law and further elaboration in the draft Decree remove many concerns for applicants, especially foreign applicants who do not want to seek protection for their inventions/utility solutions in Vietnam compared to the current regulations. The changes also encourage foreign companies, easing their concerns when employing Vietnamese employees or establishing R&D centres in Vietnam without being subject to overly strict first filing requirements under the current regulations. As a consequence, it could be said that the changes can help  to promote foreign investment.

Written by: Yen Vu and Vinh Dang

Sources:

[1] Decree No. 122/2010/ND-CP amending, supplementing Decree No. 103/2006/NĐ-CP:

Article 23b. Security control of inventions before filing for protection overseas:

2. Inventions of Vietnamese organizations and individuals and inventions created in Vietnam shall not be protected by Viet Nam if the applications of those inventions thereof have been filed for industrial property protection overseas in contravention of the following provisions on security control:
3. Applications for industrial property protection shall only be filed overseas when patent applications have been filed in Vietnam and the time limit of 6 months from the filing date has expired, except cases specified at Point b of this Clause;
4. The filing of applications for industrial property protection overseas is not allowed if inventions are classified confidential under laws and regulations on protection of state secrets and is communicated by competent agencies about that.

[2] According to Articles 19.3.d and 19.4.a of Decree No. 144/2021/ND-CP on administrative sanction in various fields including security:

• Monetary fine of VND 5,000,000 to 10,000,000 (approximately USD 220.60 to 441.21) for the individuals or VND 10,000,000 to 20,000,000 (approximately USD 441.21 to 882.42) for organizations for the acts of illegally providing or assigning state secrets.
• Monetary fine of VND 20,000,000 to 30,000,000 (approximately USD 882.42 to 1,323.63) for the individuals or VND 40,000,000 to 60,000,000 (approximately USD 1,764.84 to 2,647.26) for organizations for the acts of disclosing state secrets but are not eligible for being brought criminal prosecution.

[3] Under Article 23a.1 of Decree No. 122/2010/ND-CP amending, supplementing Decree No. 103/2006/NĐ-CP, Inventions that are classified by competent state agencies as state secrets in the field of national defense and security under laws and regulations on protection of state secrets are referred to as confidential inventions.

[1] Giam Tang, ‘Foreign Direct Investment and the issue of economy – social development in Vietnam’ (2021), National Institute for Finance Digital Portal < https://mof.gov.vn/webcenter/portal/vclvcstc/pages_r/l/chi-tiet-tin?dDocName=MOFUCM205169 >  (Accessed 27 May 2022)

[2] Vice Prof., Dr. Nguyen Mai, ‘Identifying R&D FDI Projects’ (2021), Investors’ Digital Newspaper < https://nhadautu.vn/nhan-dien-cac-du-an-fdi-ve-rd-d53318.html>

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• Vietnam
• Patent
• Foreign Investment