Free Trade and IP: A Virtuous Circle?

Over the past 20 years, IP has increasingly encroached into international and regional FTAs. The North American Free Trade Agreement (NAFTA) was the first FTA to cover IP, back in 1994, according to the U.S. Congressional Research Service.

Research by the Federal Reserve Bank of St. Louis, Missouri (US), found that 69 percent of regional trade agreements (RTAs) in effect prior to the formation of the World Trade Organization (WTO) in 1995 did not mention IP rights (IPRs) anywhere in the agreement. In contrast, since 2015, 33 of the 35 enforced RTAs or 94 percent have contained strong IPR provisions.

Indeed, it is a very rare trade agreement today that doesn’t include IP. According to WTO records, members have notified the World Intellectual Property Organization (WIPO) of 64 trade agreements (bilateral and regional) since the start of 2020. Of those, 39 involve the UK post-Brexit, and many of those are rollovers of existing EU agreements, while others are supplements to previously-existing agreements in other parts of the world.

The reason why there seems to be so many FTAs at the moment is “in no small measure because of Brexit,” noted Paul Kilmer, partner at Holland & Knight LLP (US), chair of INTA’s Free Trade Agreement Subcommittee, Harmonization of Trademark Law and Practice Committee.

“The United Kingdom of course needs to form agreements on trade with numerous countries and has set out very aggressively and vigorously to do that,” he added.

The UK has signed three new trade agreements since leaving the EU—with Australia in December 2021, and with New Zealand and Singapore in February 2022. It is currently negotiating a trade agreement with India.

Also in recent times, since 2018, the three big multilateral agreements all contain detailed IP provisions: the latest agreement, the Regional Comprehensive Economic Partnership (RCEP); the U.S.-Mexico-Canada Agreement (USMCA); and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

All three agreements require members to modernize and update their IP systems, with many provisions that require levels of protection far greater than in international IP treaties.

“IP owners are pressing for more harmonization and rationalization of laws and practices around the world,” Mr. Kilmer said.

Many current IP-related laws and practices cost owners a great deal of time and money. And consequently, they are interested in having input into these agreements as a way of increasing efficiency, he added.

But how do the IP provisions in the most influential FTAs translate into practice? And will those FTAs eventually supplant the work of international IP treaties, as regional and bilateral agreements beef up IP protections beyond what has been achieved by truly multilateral consensus? In general, Mr. Kilmer noted that there is often much “soft text” in FTAs: they make commitments to look into things, but nothing more concrete is decided at the time of the agreement.

RCEP

The RCEP is a much-anticipated FTA in the Asia-Pacific region between the 10 member states of ASEAN, namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, and five of their FTA partners—Australia, China, Japan, New Zealand, and South Korea, covering about 30 percent of the world’s gross domestic product (GDP) and population.

It took effect January 1, 2022, among 10 members who had completed ratification earlier: Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Singapore, Thailand and Vietnam, Singapore, Laos, Brunei, and Cambodia. South Korea followed in February 2022.

Wency Yu, partner at Anjie & Broad (China), noted that China seems to have been influential in setting the IP standards in the RCEP. On the big issue of bad faith trademark filings, the RCEP provides that each contracting state’s competent authority can refuse or cancel an application if it was made in bad faith in accordance with its laws and regulations.

“This RCEP provision is quite general, and only provides basic level of protection against bad faith filings,” she said. Therefore, in China, the general influence of the RCEP on domestic trademark legislation and enforcement is likely to be limited, she added, since “Chinese law already provides more extensive protection than is required by the IP provisions of RCEP.”

Rather than the RCEP resulting in changes to Chinese law, it is more likely that the converse is true. For example, the RCEP Article 11.22 includes an obligation to use a trademark e-filing system.

“The extensive use of e-filing system in China has benefited many brand owners,” Ms. Yu noted. “We are happy to see that China shares its experience with other countries in the RCEP agreement.”

USMCA

The USMCA, which replaced NAFTA, came into force on July 1, 2020. After 18 months of negotiations, the three representative countries committed to adapting their existing IP laws under the new Agreement.

Abraham Díaz, partner at Olivares Y Compañia S.C. (Mexico), pointed out that the biggest change ushered in by the USMCA is the recognition of nontraditional trademarks, which can no longer be denied because the sign might not be visible.

As a result, the USMCA has expanded trademark protection in Canada and Mexico so that sound and scent marks conform with U.S. law.

Mexico is still working on the rules regarding nontraditional trademarks, and the Mexican Institute of Industrial Property (IMPI) is working on a draft. According to Mr. Díaz, there is a provision that says that it is possible to file those applications, but there are no clear rules yet as to how these applications will be examined.

Turning to another issue, the USMCA revamps laws and regulations related to licensees and franchisees.

Some of these laws and regulations “set a bit of a trap for the unwary” Mr. Kilmer said, in that owners can lose rights if they do not realize they need to record licenses and fail to do to so. “So, trademark owners are keen to get rid of those licensed user and licensee registration provisions,” he said.

This provision was removed as part of Mexico’s obligation under the USMCA. The move was welcomed, Mr. Díaz said, noting, “It is very good, since in the past it gave way to very heavy litigation.”

According to Mr. Kilmer, the USMCA also has a transparency provision to ensure that countries publish their laws and regulations, and they must also issue a decision in a trademark case that is a reasoned decision.

It is not just the USMCA that has pushed Mexico into domestic changes, Mr. Díaz said.

In Mexico, there is now also recognition of geographical indications (GIs). In the past, there was not an express protection for GI; it was only for denominations of origin, he pointed out.

He added that Mexico had been under increasing pressure in relation to the EU-Mexico Trade Agreement (initially signed in 1997 and then modernized in 2020 pending ratification) to make this change, particularly for EU cheese producers

CPTPP

The CPTPP was entered into in December 2018 by 11 countries across the Pacific Rim: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. It originated from the Trans-Pacific Partnership, which also included the United States, but which was abandoned when the U.S. withdrew from the Agreement in 2017.

CPTPP requires that parties make “best efforts” to register olfactory marks. It is a soft obligation, so it would not prove too much of a barrier for signatory nations to enter into the agreement.

Paolo Beconcini, head of the IP and Anti-Counterfeiting team at Squire Patton Boggs (US), said that the CPTPP is broader in scope than the RCEP, but the RCEP provides more specific requirements.

On February 1, 2021, the UK applied to join the CPTPP, and, in June 2021, it was invited to begin the accession process. Mr. Díaz said that the provisions under the CPTPP and EU-Mexico Trade Agreement are very similar to those in the USMCA.