The transnational protection of private rights: issues, challenges, and possible solutions.

Author:Menon, Sundaresh
Position:Charles N. Brower Lecture on International Dispute Resolution
 
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The Charles N. Brower Lecture on International Dispute Resolution was given at 4:15 pm, Thursday, April 10. The speaker was Sundaresh Menon, Chief Justice of Singapore.

THE TRANSNATIONAL PROTECTION OF PRIVATE RIGHTS: ISSUES, CHALLENGES, AND POSSIBLE SOLUTIONS *

In the wake of the two world wars that rocked the international order in the twentieth century, the right of nations to self-determination was enshrined in Article 1 of the Charter of the United Nations. (1) Among the most important developments of the post-war era was the disintegration of colonial empires and a consequent massive increase in the number of states and polities. (2) With this came a proliferation of borders, inside of which were different sovereign legal systems and laws.

At the same time, the rebuilding and reconstruction of the post-war world created both the impetus and the opportunity to focus on development and economic growth. (3) So even as the number of discrete states and polities increased, the world witnessed a rapid increase in the connectedness of its economies and its cultures. Thomas Friedman observed in his international bestseller, The World Is Flat, (4) what might now be accepted as conventional wisdom: that increased connectivity has resulted in the accelerated flattening of the world, facilitating the phenomenon of globalization. But globalization occasions the need for a more homogenous and harmonized legal framework that can accommodate the vast increase in economic relationships which cross borders that might not previously have existed or have been quite so firm.

With the fragmentation of colonial empires and the "birth of scores of new states in the so-called Third World," (5) developed and developing countries found themselves separated by massive gulfs in terms of their relative states of social, economic, and political development. Under these circumstances, there were always going to be difficulties in attaining transnational harmonization in law, policy, and practice pertaining to commercial transactions.

At the dawn of a new millennium, we face the challenge of dealing, on a global scale, with movements in opposite directions. On the one hand, the emphasis on decolonization and self-determination in the post-war era has seen a movement toward building barriers and fixing legal and political boundaries between jurisdictions. On the other hand, globalization sees a movement to break economic barriers and transcend boundaries. While the first movement sees growth in the number of individual systems of law, the second calls for laws and legal systems that are not so tightly constrained by jurisdictional boundaries so that they can more effectively support the immense growth in transnational trade and commerce.

My focus today is on the legal protection of private economic rights in the transnational arena. The term "international economic law" has been adopted as a shorthand reference for regulation in this immense field. (6) For conceptual and analytical clarity, I propose to approach my subject by considering the regulation of transnational economic relationships at three different levels:

First, where a party's rights are not regulated or governed by any contract, but where there is nonetheless a need to protect one's interest or rights in commercial property;

Second, where there is a contract between the parties, by which they look to protect their rights as between themselves; and

Third, where a foreign investor looks to protect its investment against unlawful interference by a host state.

These are not exhaustive of the range of regulatory mechanisms that affect transnational economic relationships. For instance, even though "international trade law" (or "world trade law") (7) relates to international rules and conventions that seek to manage trade relations between states, these still have a direct impact on individual actors. While this is certainly important in international commerce, I do not discuss it as a discrete category given the constraints of time, and instead focus on the three levels, which relate to private actors being directly involved in protecting their private economic rights.

I begin with a brief overview of the existing legal order at each of the three levels, focusing my observations and analyses on selected fields of law. I look to identify some of the key issues and thereafter close with a section in which I share some thoughts on what might lie ahead.

ISSUES AND CHALLENGES

Level One: The Protection of Commercial Interests in the Absence of a Contractual Relationship

Contracts are the lifeblood of commerce. Yet there are many instances in which there is a need to protect commercial property in the absence of any contractual arrangements. This can arise in many discrete areas of law, including, for instance, the wide range of economic torts, such as conspiracy, trade libel, conversion, and so on.

I focus today on the transnational protection of intellectual property (IP) rights. IP is essentially a jurisdiction-bound area of law, and the drawbacks that exist in this area are clearly exposed in an increasingly transnational marketplace. (8)

Snapshot of the International IP Regime

IP rights are traditionally "territorial" in nature. (9) They are conferred by individual jurisdictions for rights owners to reap, within that jurisdiction, the economic benefits of their protected subject matter. They had their genesis in a world that was vastly different from ours today, and may be traced at the very least to legislation in the 17th and 18th centuries, (10) when there was hardly any need for the protection of IP rights to be robust across national borders. IP was mainly exploited within a limited geography, and there was little scope for the extraterritorial infringement of IP rights. Under these circumstances, the territorial nature of the regime did not pose much difficulty.

The incidence of cross-border IP interests has grown significantly in recent years. (11) There are numerous actors, (12) including the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO), as well as state governments, national judiciaries, and national regulatory boards. There are also many new sources of law, including free trade agreements (FTAs), bilateral investment treaties (BITs), (13) and the jurisprudence of national courts. With so many different actors and sources of law, the need for harmonization of the international IP framework has been the subject of discussion for some time.

Developments in the technology patents industry are a sign of our times. In the massive Apple-Samsung patent dispute, the late Steve Jobs memorably declared that he was willing to "go to thermonuclear war," "spending] [his] last dying breath" and "every penny" in Apple's vast reserves to "right [Android's] wrong." (14) Apple commenced patent litigation against Samsung in April 2011, and by July 2012, the "thermonuclear war" had reached the shores of the United States, South Korea, Japan, Germany, the United Kingdom, France, Italy, the Netherlands, and Australia. (15) At last count, the two technology giants were involved in more than 50 lawsuits globally over claims for damages that ran into the billions of dollars.

We should not be surprised if more such disputes follow. In fact, a whole new patent licensing industry has already emerged, with certain technology companies reverse-engineering new devices for the purpose of helping patent owners to prove that the devices of others infringe their patents. (16)

Some Difficulties with the International IP Framework

Not only do these massive international IP disputes involve huge amounts of money, they also must be fought in a multitude of jurisdictions, with potentially different standards being applied and different outcomes being reached.

Lack of common standards. While broad frameworks for the protection of IP rights are being harmonized to a growing extent, arising from efforts to comply with TRIPS obligations, there remains a basic lack of common standards. In part, this is because the application of the law by national courts has varied tremendously within those frameworks. How a particular state chooses to protect IP rights--which in essence are artificial monopolies--can depend heavily on its relative stage of economic development and indeed even on its moral or other values. As has been observed, while IP is largely a legal construct, it is not just about law and economics; it is often also about politics. (17)

In designing the international IP system, the balance sought is that "between universal norms and the national autonomy necessary to legislate a substantive balance appropriate to each nation-state." (18) However, it is extremely difficult to attain meaningful international consensus on how that precise balance should be struck. This is unsurprising, given that the national strategic interests of the various states will often not be aligned. For instance, while the United States and the European Union have tried to encourage other countries to adopt higher IP enforcement standards through the Anti-Counterfeiting Trade Agreement (ACTA), increasingly powerful developing countries such as Brazil, China, and India have "shown no urgent desire" to join such a system. (19) A particular example draws from the experience in the pharmaceutical industry. States economically dependent on pharmaceutical companies lean toward applying IP laws to protect those interests, while states facing increasing healthcare costs lean toward laws which keep healthcare affordable. The recent decision by the Indian Supreme Court, rejecting Novartis' attempt to seek the evergreening of a pharmaceutical patent, illustrates the point. (20)

In conducting research for this lecture, I did come across an example of the successful harmonization of IP standards in the Andean region. (21) It seems implausible that this can extend across a wide geography...

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