In Conversation with Mr. Tariq Ahmed Khan – Arbitration amidst COVID-19, Challenges to virtual Arbitration and Future of Institutional ArbitrationMay 29, 2020
A GLOBAL PACT FOR THE ENVIRONMENTMay 30, 2020
This article provides an outline of investment treaty practice with regard to the protection of Intellectual Property Rights (IP Rights). The aim of this article is to highlight the extent to which international investment agreements (IIAs) includes Regional Trade Agreements (RTAs) with an investment chapter, increase the scope of IP protection beyond TRIPS minimum standards. Expanded IP protection can also be derived from the unqualified treatment protection found in IIAs. This article further explores the reasons for the limited role played by the dispute settlement mechanism in the enforcement of IP Rights.
There are numerous multilateral treaties on Intellectual Property, amongst all the best known and far-reaching amongst them is ‘The Agreement on Trade-Related Aspects of Intellectual Property Rights’ (or The TRIPS Agreement). The TRIPS Agreement sets forth the international minimum standards which the WTO members need to adhere to in all circumstances. The Provisions dealing with IP can also be found in bilateral investment treaties (BITS) and the preferential trade & investments agreement (PTIA). This addition of Intellectual Property related provisions in BITS & PTIA reflects the importance of patents, trade secrets, trademarks, copyrights etc in the commercial relations between various countries. The insertion of IP in the definitions of ‘Investment’ in a BIT suggests the significance of protecting such an intangible asset, in numerous investments operation. IP is routinely regulated by International Investment Agreements (IIAs) as a protected class of ‘investment’.
The IIAs are designed in a manner which gives leverage to the foreign investors to protect their investment against numerous political risks surfacing in the host state. At one hand the numbers of IIAs and investment disputes thereunder have been on the rise, only a few claims have directly addressed the protection of intellectual property as an inter-state dispute. This lack of activity in this area is not surprising, the technological advancement and information sharing techniques were not this rampant. Firstly, out of thousands of IIAs negotiated and concluded in the last fifty years, the majority of these treaties do not expressly list IP as a form of protected investment. Secondly, most IIAs offer the lucrative option of allowing an aggrieved investor to have the claims resolved through arbitration by a neutral arbitral tribunal in which protection IP would be an auxiliary issue. The claims about the ineffective protection of IPRs give rise to intense debates at both international and municipal levels.
IIAs protect certain types of property possessed by a national of one state however put resources into a remote state against unnecessary impedance by open experts of the host state. In order to fascinate these protections, the subject property must typically qualify as an ‘investment’ for purposes of the relevant treaty. Most IIAs do not explicitly include IP in the definition of covered ‘investment’. The default presumption must be that ‘Intellectual Property’ would be included in any broad definition of ‘investment’. The ascent of a more ‘restrictive’ way to deal with what constitutes as ‘investment’ covered by Article 25 of the ICSID Convention. The indicia of an ‘investment’ as identified by leading ICSID panels and makes the case that – depending on the specific right at issue – these intangible assets also meet the test: ‘Intellectual Property is every bit as much an engine in today’s economy as commodities and production lines.’
IIAs might be best intending to shortcomings in a state’s authorization of IP, a territory in which TRIPS and other multifaceted understandings have bombed so far to pick up footing. Financial specialists may have more prominent trouble attempting to uphold rights in IIAs outside of those debates in which there is effectively settled direct state complicity in the culpable lead. Attempts in recent IIAs to clarify the interplay between investment protection and TRIPS have been unavailing. The newest IIAs, such as the DR-CAFTA, provide a specific exception that its protections do not apply to compulsory licenses granted in relation to IP in accordance with the TRIPS Agreement. But other IIAs are intended to encompass compulsory licenses and it is extremely difficult to ascertain what must be done to ensure one acts in accordance with TRIPS (particularly given the lack of specificity in that agreement on this issue).
ELI LILLY & CO. V. GOVERNMENT OF CANADA
The award given the case became sui generis in the domain of international investment disputes. The arbitral tribunal decided the first final award on patents as the basis for a dispute under international investment law, thereby opening a whole new can of worms and paved the way for future disputes where patents will form the basis of an inter-state dispute under a treaty. The tribunal had to decide whether courts of Canada complied with international standards of treatment under investment law when they revoked Eli Lilly’s patents relating to the compound olanzapine (Zyprexa Patent) and the use of the compound atomexetine for relieving attention-deficit/hyperactivity (Strattera Patent). All the claims of Eli Lilly were dismissed by the Canadian courts but the arbitral proceedings set the standards and paved the way forward for ‘patents’ in the future.
In view of the Courts in Canada, the patents of Eli Lilly did not meet the standards necessary for the grant of patent in the State since the patent specifications did not contain the factual basis of the inventor’s sound prediction of utility. This was confirmed by the highest court of Canada. In response to the invalidation, Eli Lilly (Claimant) commenced international investment arbitration against Canada under Chapter 11 of the North American Free Trade Agreement (NAFTA) of 1994 between Canada, the United States, and Mexico were amicus in the dispute. In the arbitral proceedings, Eli Lilly alleged that the revocation of its Zyprexa and Strattera patents (which were filed in 1991 and 1996, respectively) was an unfair and inequitable treatment contrary to NAFTA Article 1105 as well as an expropriation under NAFTA Article 1110.
The tribunal rejected Eli Lilly’s allegations, as it did not find a fundamental or dramatic change in Canadian patent law just the patents were revoked. The evidence before the tribunal only showed that Canada’s utility requirement underwent incremental and evolutionary change between the time that the Zyprexa and Strattera patents were granted and then invalidated. Therefore, the arbitral tribunal dismissed Eli Lilly’s claim. Even though a violation of the standards of treatment of international investment law requires more than a simple violation of national law and arbitral tribunals cannot act as mere appellate courts in respect of national courts.
There is a growing need to go beyond TRIPS standards. Accordingly, developed countries have chosen investment agreements that go beyond TRIPS. In cases such as Eli Lilly, investors have used bilateral investment agreements to enforce IP rights. The protection of IP rights through IIAs comes with its own set of densities and contentions. Many of those densities and contentions are a by-product of the imperfect system of international IP treaties that make up the legal basis at the international level for IP regulation. IIAs investment chapters do not set autonomous substantial standards for IP protection. It takes after that a claim in view of the infringement of the treatment of IP as speculations might be hard to substantiate. Given the competing outlines and unresolved metaphysical disputes that have been part and parcel of attempts at creating consistent international standards for regulation of intellectual property, it is little wonder that these battles have spilled over into the investment treaty arena. The rationale for this Transnational Dispute Management, special Issue was to provide a forum to bring together commentators from both the intellectual property and the investment law worlds.
ABOUT THE AUTHOR(S)
Swagita Pandey is a final year law student at School of Law, UPES, Dehradun.
Mridul is currently working as an associate at PLA Advocates, New Delhi. He has completed his graduation from School of Law, UPES, Dehradun.
In content picture credit: Lecture in Progress