Enforcing IPRs Through Investor‐State Dispute Settlement: A Paradigm Shift in Global IP Practice

AuthorPratyush Nath Upreti
Published date01 March 2016
DOIhttp://doi.org/10.1111/jwip.12054
Date01 March 2016
Enforcing IPRs Through Investor-State Dispute
Settlement: A Paradigm Shift in Global IP Practice
Pratyush Nath Upreti
Upreti and Associates, Kathmandu, Nepal
Globally, we are moving towards stronger Intellectual Property Rights. Intellectual Property Rights (IPRs) have
become an integral part of the regulatory system and they are included in investment, regulations and trade policies. It
is now important to understand the linkage between them. Recent practices of International Investment Agreements
(IIAs) include intellectual property as a denition of investment, giving the investor an alternate forum to enforce their
IP under International arbitration tribunal. International investment laws focus mostly on the rights of the investor and
diverse opinions of generally accepted international principles such as fair and equitable treatment that encourage
investors to litigate intellectual property through Investor State Dispute Settlement (ISDS). This article will focus on
the relationship between intellectual property and investment agreement in three aspects. The rst part of the article
will focus on how intellectual property is treated as an investment. The second part emphasizes how an investor uses an
investment agreement as a tool to enforce intellectual property. The last part of the article highlights the possible
impacts of litigating intellectual property under ISDS, particularly focusing on TRIPS exibility.
Keywords investment; ISDS; TRIPS; intellectual property
In recent years, the relationship between intellectual property and investment related issues have been
widely discussed. In an open market economy, developed countries have opted for investment agreements
such as Free Trade Agreements (FTA), Bilateral Investment Treaties (BITs) to attract investors by
strengthening the intellectual property regime. Recent cases have revealed the complexity and potential
overlap between intellectual property and international investment law.
The overlap received greater attention through Tobacco plain packaging policy and the subsequent
dispute, which were brought before the arbitration tribunal. The plain packaging was result of the World
Health Assemblys adoption of the World Health Organization Framework Convention on Tobacco
Control (WHO FCTC). Article 13(4)(a) of the FCTC states that each member shall: prohibit all forms of
tobacco advertising, promotion and sponsorship that promote a tobacco product by any means that are
false, misleading or deceptive or likely to create an erroneous impression about its characteristics, health
effects, hazards or emissions.
The WHO member countries have adopted such provisions, which prima facie seem to undermine two
important functions of trademark: (i) the origins indicator and (ii) the communicative function as a
conveyor of expectation, feeling and any other psychological message. Additionally, The tobacco
companies generate substantial goodwill from the use of tobacco product and packaging, which also
require immense investment. Moreover, companies use investment agreement to claim that the plain
packaging legislation results in the expropriation of investment due to substantial deprivation of the
intellectual property and goodwill, which consequently undermines the economic rationale of its
investments and substantial destruction of the value of the tobacco company.
1
Therefore, tobacco
companies have a strong reservation on the above clause as it will have an adverse impact on their business.
The national court in some jurisdictions have rejected such claims of trademark owners on the ground that
the imposition of control on the packaging and presentation of tobacco products does not involve the
accrual of a benet of a proprietary character, which would constitute an acquisition of property.
2
©2016 John Wiley & Sons Ltd 53
The Journal of World Intellectual Property (2016) Vol. 19, no. 1–2, pp. 53–82
doi: 10.1111/jwip.12054
Furthermore, scholars have justied plain packaging under public heath consideration (Voon et al., 2012).
After the exhaustion of remedy at the national level, an investor has relied on alternative forums, such as
international arbitration tribunal under International Investment Agreements (IIAs). The larger question
associated is whether an investor could use investor-state dispute settlement to enforce IP rights? If so,
under such circumstances, the investor may use the alternative forum, but to what extent are such
intellectual property claims justied?
At the international level, the World Trade Organization (WTO) dispute settlement body decides on
matters related to intellectual property. On the other hand, investor state dispute settlement (ISDS) has
jurisdiction over any dispute arising from an investment. In most of the recent IIAs cover intellectual
property as the form of investment, advancing an alternative way for an investor to protect their intellectual
property rights. Under such circumstances, investors have challenged traditional intellectual property
through claims of Most Favor Nation (MFN), fair and legitimate expectation, expropriation, full protection
and security. Such practices have a severe impact on international intellectual property standards and also
bring concerns of TRIPS exibility, which is discussed, in this paper. In addition, ISDS has been the
concern for countries in negotiating investment agreements like Transatlantic Trade and Investment
Partnership (TTIP) between the European Union and the United States and Trans-Pacic Partnership
(TPP), where twelve countries throughout the Asia pacic region are members. There has been a serious
concern raised in the European community on ISDS for they believe it creates a risk of regulatory chill.
The issue is not yet settled. There are four ongoing cases: one at WTO Dispute settlement body,
3
and
the remaining three at international arbitration tribunal.
4
This article aims to focus on the relationship
between investment laws, intellectual property in light of recent cases and analyzes possible impacts of
litigating IPRs through investor state dispute settlement.
Intellectual Property as an ‘‘Investment’’
The term investmentis generally used in two senses. The rst sense is the process or transaction by
which a person or legal entity makes an investment (Salacuse, 2013). The second meaning refers to the
asset acquired as a result of investing (Salacuse, 2013). In both denitions of investment, does intellectual
property t? The legal denition of investment, as it appears in the investment agreement is not necessarily
in line with the economic denition. Most of the investment agreements dene investmentto include
every kind of assetand accompany this denition with an illustrative list of assets that fall within the
denition (Muchinski et al., 2008).
In order to bring a claim under investment agreements, the burden lies on the investor to prove that he/
she has made an investment within the scope of the agreement. Recent IIAs explicitly include intellectual
property as one of the items under the denition of investment. For example, under the Australian-India
Bilateral Investment Treaty (BIT), investment is dened as every kind of asset, including intellectual
property rights invested by an investor ...
5
In addition, few IIAs expressly mentioned the kinds of
intellectual property protected under the agreement. For example, under article 6(d) of the Energy Charter
Treaty, it denes investment as every kind of asset, owned or controlled directly or indirectly by an
investor and includes intellectual property.Furthermore, intellectual property is explained as copyrights
and related rights, trademarks, geographical indication, industrial designs, patents, layout-designs of
integrated circuits and the protection of undisclosed information.
6
A similar denition is incorporated with
additional kinds of intellectual property in the AustraliaHungary BIT, which includes copyright,
trademarks, patents, trade name, industrial design, trade secrets, know-how and goodwill.
7
In addition, the
Canadian Model BITs even includes plant breedersrights under the denition.
8
Some scholars have argued that even if intellectual property is not explicitly mentioned under the
investment agreement, there can be claims of intellectual property under other aspects of the denition of
Pratyush Nath Upreti Enforcing IPRs Through ISDS
©2016 John Wiley & Sons Ltd
54 The Journal of World Intellectual Property (2016) Vol. 19, no. 1–2

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