Seminar - IP and International Dispute Settlement

The USA and the EU, two of the most IP sensitive traders, have concluded many agreements with various trade partners. In terms of IPRs, both entities place emphasis on enforcement, but the USA’s focus has been on copyright (DMCA) and high-tech, whereas the EU’s focus has been on pharma and geographical indications of origin.

 

Bilateral investment treaties (BITs) increasingly serve to address changes in public policy. This leads to the question to what extent sovereign states have leeway to change public policy in relation to issues covered in trade deals.

 

Intellectual property is recognized as an investment under BITs. Investors can take national governments to task over issues of expropriation of property in breach of Fair and Equitable Treatment (FET) obligations, but also over diminishment of the value of an investment contrary to legitimate expectations of the investor. Contrary to the multilateral trading system’s dispute settlement system, Investor-State Dispute Settlement (ISDS) cases are adjudicated by arbitration, often under ICSID or UNCITRAL arbitration rules. The arbitrators are not appointed judges, but professional lawyers who act as representative of parties one day, and as arbitrator the next.

 

Issues of ‘expropriation of property’ or ‘diminishment of investments’ can also be adjudicated by national (constitutional) courts. ISDS then often leads to a ‘second bite of the cherry’ for undertakings. The cost of litigation is burdensome for states with limited capacity. The case of Philip Morris v. Uruguay lasted from 2010 to 2016. In it Philip Morris sought US$25 million in compensation from Uruguay over introduction of plain packaging tobacco legislation. Also in developed nations, public policy decisions may become subject to ISDS and raise serious public concern. In the case of Ely Lily v. Canada, the Canadian patent office adopted a strict(er) application of the “promise doctrine” – which holds that if a patent describes a particular utility but fails to deliver on it, the patent is invalid. Two of Eli Lily’s patents were affected and it brought action against the Government of Canada under NAFTA arguing that this dramatic change in the law upset its legitimate expectations and that the doctrine was arbitrary and discriminatory. Although Eli Lilly lost the case, it did raise some serious questions on the freedom of states to change IP policy.

 

The issue of exhaustion of intellectual property rights is one of domestic public policy, and according to art. 6 TRIPS, questions on exhaustion cannot be brought to dispute settlement. National or regional exhaustion is often used as an instrument of market segmentation, allowing for price and quality differences for products on global markets. For copyright, it is important to note that in the internet age the right of communication to the public does not exhaust.

 

The USA has included the principle of national exhaustion in its BITs. The US Supreme Court has, however, overturned its national system of national exhaustion in two recent cases, raising the question whether bilateral trade partners, like Singapore, can now return to their previous policy of international exhaustion.

 

 

 

 

Anselm Kamperman SANDERS (1968) is Professor of Intellectual Property Law, Director of the Advanced Masters Intellectual Property Law and Knowledge Management (IPKM LL.M/MSc), and Academic Director of the Institute for Globalization and International Regulation (IGIR) at Maastricht University, the Netherlands. He acts as Academic Co-director of the Annual Intellectual Property Law School and IP Seminar of the Institute for European Studies of Macau (IEEM), Macau SAR, China and is Adjunct Professor at Jinan University Law School, Guangzhou, China. Anselm holds a Ph.D. from the Centre for Commercial Law Studies, Queen Mary, University of London, where he worked as a Marie Curie Fellow before joining Maastricht University in 1995. He is a member of the European Commission expert group on development and implications of patent law in the field of biotechnology and genetic engineering. For the UN he is member of the expert group for the World Economic and Social Survey 2018. He is the coordinator of the European IP Institutes Network-Innovation Society, a Horizon 2020 Marie Skłodowska Curie ITN-EJD Action (www.eipin-innovationsociety.org).