IP in Trade Agreements: Make or Break?
As IP remains an active topic in governmental trade policy and international trade negotiations alike, Muireann Bolger considers the role that IP has played in recent trade agreements.
“The major win for IP owners in this Agreement was the revision of some strategic points regarding IP rules and the creation of a standard of IP legislation in Mercosur countries.”
Cybelle Fernandes, MercadoLibre
The mutual protection and enforcement of intellectual property (IP) rights between nations is central to stimulating innovation and encouraging cross-border trade. However, negotiating trade agreements and obtaining a consensus on all terms of the deal is complicated, and how best to reflect IP is no easy feat as well. The road to an agreement can be a lengthy one—and to implementation, even lengthier. Several recent trade agreements highlighted here reflect the paths in various jurisdictions.
EU-Mercosur: Worth the Wait?
After 20 years of negotiations, the principles of the European Union- Mercosur Trade Agreement (the Agreement) were concluded on June 28, 2019, as the EU and Argentina, Brazil, Paraguay, and Uruguay approved a draft text of the Agreement. More than a year later, the Agreement itself is still awaiting signatures.
For Edward Taelman, Senior Associate at Allen & Overy LLP (Belgium), the Agreement is worth the wait.
“It’s a major step forward for the harmonization of IP protection between the EU and Mercosur,” he said. “It represents an enormous opportunity to evolve and improve IP protection in the Mercosur countries.”
Cybelle Fernandes, Senior Legal Manager at MercadoLibre (Brazil), agreed, explaining that “the major win for IP owners in this Agreement was the revision of some strategic points regarding IP rules and the creation of a standard of IP legislation in Mercosur countries.”
For example, she said, it will enable brands to expand their businesses globally knowing that they can rely on the “safer legal scenario” created by the Agreement, as well as providing IP owners with more legal certainty in the global market.
“It is expected that the registration of GIs and denominations of origin, both national and foreign, will grow in Uruguay.”
Natalia Paladino, Cervieri Monsuárez
The most significant changes introduced by the Agreement center on geographical indications (GIs), according to Natalia Paladino, Senior Partner at Cervieri Monsuárez (Uruguay). Parties to the Agreement will reciprocally recognize a list of GIs and help prevent the circulation of products that use the name of a GI without having the characteristics of the protected product.
“In this regard, it is expected that the registration of GIs and denominations of origin, both national ￼and foreign, will grow in Uruguay,” Ms. Paladino predicted. Uruguay has more than 50 wines protected by GIs, which the EU will recognize under the Agreement.
Mr. Taelman agreed that the “biggest win” for IP owners is the mutual recognition of many GIs: a total of 355 EU GIs, such as “Gorgonzola” and “Champagne,” will be protected in Mercosur countries.
In return, the EU will protect 220 Mercosur GIs, including “Cachaça” liquor and “Mendoza” wine. In comparison, in the EU-Japan Agreement, which entered into force in February 2019, Japan agreed to protect 211 EU GIs and the EU, to protect 56 Japanese GIs.
“The EU-Mercosur Agreement protects twice as many GIs as the EU-Japan Agreement does,” he said. “This will have a major impact on the food and wine industry.”
However, the Agreement is by no means perfect, according to some IP professionals.
Mercedes Durlach and Mingo Palacio, Partners at Palacio & Asociados (Argentina), would have preferred the Agreement to impose a duty for the signatories to enter into the Patent Cooperation Treaty (PCT).
Instead, the Agreement states that Mercosur members "shall make best efforts to comply with the protocol related to the Madrid Agreement concerning the international registration of marks,” and encourages members “that are not yet party to the Patent Cooperation Treaty to do so to speed up international patent applications and to provide more legal certainty to the process.”
While Brazil is a member of the PCT as well as a signatory to the Madrid Protocol, Argentina, Paraguay, and Uruguay are not, and none of the Mercosur countries is party to the Hague Agreement.
A Missed Opportunity?
Similarly, Mr. Taelman cited this aspect of the Agreement as a “missed opportunity.” If all four Mercosur countries were members of the PCT, the Madrid Protocol, and the Hague Agreement, it would become significantly easier to register trademarks, patents, and design rights in them, he said.
While the negotiations were concluded last year, the Agreement itself is still awaiting signatures and the subsequent incorporation of its provisions into the regulatory framework of the parties.
“Only the general lines of the Agreement have been confirmed, and there is still a long internal process of verification, translation, and approval by the local parliaments to be undergone,” Ms. Palacio explained.
Although only time will tell whether the Agreement in its current form is realized, IP owners are already positive about its impact. As Mr. Taelman surmised, it represents “a fantastic opportunity to create strong, harmonized, and effective IP protection.”
“The first obstacle has been the different processes in each jurisdiction when it comes to amending and/or adapting their local legislations.”
Victor Vila, Vila
The CPTPP: A Challenge Overcome?
IP has been one of the most controversial issues during negotiations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the free trade agreement (FTA) between Canada and 10 countries in Asia-Pacific and Latin America, said Victor Vila, Managing Partner at Vila (Mexico).
The CPTPP replaced the Trans-Pacific Partnership (TPP) after the United States withdrew from the agreement in early 2017. On December 30, 2018, the CPTPP entered into force among the first six countries to ratify the FTA, namely Canada, Australia, Japan, Mexico, New Zealand, and Singapore. On January 14, 2019, the CPTPP entered into force for Vietnam.
However, Brunei, Malaysia, and Peru have yet to ratify the Agreement. While Chile started the ratification process, the country’s Senate suspended it on November 11, 2019 so it could address civil unrest and protests within the country.
“The first obstacle has been the different processes in each jurisdiction when it comes to amending and/or adapting their local legislations,” Mr. Vila said. He pointed out that the signatories agreed to suspend 11 IP provisions from the original agreement to address concerns expressed by the remaining four countries which have yet to ratify it.
He believes that these countries were concerned that the Agreement was “conferring overly-broad protections to rights holders against the interests of developing countries.” The IP articles relating to patentable subject matter, patent term adjustments, and the protection of clinical test data would, if passed, have significantly raised healthcare costs in those countries, he said.
According to Benjamin Mitra-Kahn, General Manager, Policy and Governance Group at IP Australia, given the diversity of countries involved, it was always going to be a “challenging exercise” to finalize what turned out to be an “extensive” IP chapter.
“One of the biggest challenges was agreeing to rules that give greater certainty and consistency for businesses, while maintaining enough flexibility to ensure the IP system remains adaptable,” he explained.
Catherine Escobedo, Of-Counsel at Barrera & Asociados (Peru), believes that the CPTPP’s IP chapter will “definitely set a regional standard for the protection and enforcement of IP rights in the Asia-Pacific region, providing nationals of the member countries with a predictable and harmonized IP regimen which they can trust.”
According to Ms. Escobedo, despite not yet ratifying the CPTPP, Peru has continued to participate in all CPTPP-related meetings, in addition to reviewing its internal regulations in preparation for its implementation.
“The CPTPP’s IP regulations are key to this Agreement because they will consolidate Peru's efforts to meet international protection standards,” Ms. Escobedo said, adding that she believes this standardized level of IP protection also provides a boost to commerce as they will help to create a new level of trust in foreign investors.
However, while the Agreement was supposed to be ratified by Peru’s Congress in 2019, the country’s political climate has proved a stumbling block. And, currently, there is still no date set to discuss this matter.
Yen Vu, Principal and Country Manager at Rouse (Vietnam), believes that the CPTPP’s IP regulations will make a significant and positive difference in Vietnam: “Many of the parties are highly innovative and IP-intensive economies and therefore could greatly benefit from IP protection with their extensive IP exports,” she said.
For Ms. Vu, one particular benefit is that it will push Vietnam to upgrade its IP legislation and enforcement to a level equal to that of Malaysia or Singapore, providing greater security to IP owners.
Alexandra Howard, Partner at Saenz de Santa Maria Abogados (Chile), added that the CPTPP provides a common set of rules regarding IP protection and enforcement that aims to encourage investment in new ideas, promote innovation, and enhance creativity, while also preventing counterfeiting and piracy.
But she said: “There is an ongoing negotiation for some modifications on the trade agreement that Chile has with the EU that will affect IP, mainly regarding GIs and the need to harmonize the standard of protection.”
“The CPTPP’s IP regulations are key to this Agreement because they will consolidate Peru’s efforts to meet international protection standards.”
Catherine Escobedo, Barrera & Asociados
However, one area that the CPTPP does not adequately address is patents, according to some practitioners.
The now-defunct TPP provided for patent terms to be extended in cases of unreasonable delays by the relevant patent office, but this provision was not included in the CPTPP.
Ms. Howard, for one, does not agree with the removal of this provision. “It is discouraging to inventors when there are unreasonable delays from the authorities in issuing patents, particularly as there is no compensation for the delay,” she said.
Ms. Vu agreed that a provision for patent term extension due to delays to the patent grant is “￼necessary.”
“In Vietnam, the substantive examination process is usually subject to long delays due to the heavy backlog at the IP Office,” she said.
Mr. Vila noted that patent terms have been a “sensitive topic” in the CPTPP negotiations. Regardless of the standard to be agreed, it is essential that a definitive direction is given on this matter, he observed.
However, some see the merits of the change. Vivian Zhang, Attorney-at-Law at Advance, China IP Law Office (China), noted that while the original provisions gave inventors a sufficient patent protection period, and enabled some countries to maintain a leading position in technology, it also created problems.
“The high level of protection in certain areas is not conducive to the spread of technology or an increase in human welfare,” she said. “Putting aside those provisions reflected the demands of the CPTPP contracting states for an increased balance of IP protection, technology dissemination, and human welfare, and a balance between technology-producing countries and technology users.”
She further suggested that as “the IP protection levels of the contracting states are very different,” shelving these provisions “undoubtedly reduced the difficulty” of the negotiations preceding the conclusion of the CPTPP.
“In Vietnam, the substantive examination process is usually subject to long delays due to the heavy backlog at the IP Office.”
Yen Vu, Rouse
USMCA: An Evolution Rather Than A Revolution
The IP community has also keenly watched the emergence of the United States–Mexico–Canada Agreement (USMCA), which came into force on July 1, 2020. After a year and a half of negotiations, the three countries have committed to adapting their existing IP laws under the new Agreement, which replaced the North American FTA (NAFTA). The negotiations have been carried out relatively quickly, compared to other recent worldwide agreements, partly because the revisions to the older agreement have been minor.
The most notable change is that the USMCA has expanded trademark protection in Canada and Mexico so that sound and scent marks conform with U.S. law. Furthermore, the protection of well-known marks has also been expanded in Canada and Mexico, removing any requirements that well-known marks be registered or put onto a list.
In a concession to the U.S. agricultural sector, the USMCA now requires that the signatory countries include provisions to challenge GIs. “This will happen if the GI serves as a common name for the goods in that country, or if it interferes with an entity’s trademark rights,” said Jess M. Collen, Partner at Collen (US).
Anticounterfeiting enforcement measures have also been positively affected by the Agreement. The USMCA encourages the sharing of information regarding counterfeit goods among these three countries and, importantly, mandates that customs officials be authorized to seize goods where there is prima facie evidence that they are counterfeit.
For trademark practitioners, this will notably increase the importance of coordinating with customs not only in the U.S., but in Canada and Mexico as well. While there had been some level of speculation of more radical changes, including the institution of a joint trademark filing system among Canada, Mexico, and the U.S., these did not materialize.
However, Mr. Collen noted that Canada’s adoption of the Madrid Protocol last year, following the U.S.’s adoption two decades ago, and Mexico’s in 2012, has reduced the need for a joint system.
“There does not currently appear to be any type of groundswell of support for this concept either,” he suggested.
RCEP: A New Chapter for Asia
The Regional Comprehensive Economic Partnership (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. The prospective signatories are negotiating the deal in Vietnam this month.
India was originally meant to be a signatory but decided to opt out of the agreement at the East Asia Summit meeting in Bangkok last November on the grounds that its concerns were not being addressed.
India feared that the trade deal would lead to an inundation of imports into the country, endangering its domestic industry and agriculture, while also derailing Prime Minister’s Narendra Damodardas Modi’s “Make in India” initiative that aims to protect the country’s economic interests.
The proposed RCEP has a combined gross domestic product (GDP) of more than US $24.2 trillion, almost one-third of global GDP, according to research by Grant Thornton. The RCEP nations are also home to over 2.3 billion people, roughly 30 percent of the global population. By signing, member countries will join an open market for goods and services, investment opportunities, facilitated trade, and simplified customs procedures.
However, the breadth of the trade in counterfeit goods in Asia is a major problem facing the prospective signatories. According to the Organisation for Economic Co-operation and Development, more than 80 percent of the world’s trade in counterfeit goods originates in Asia.
In its recommendations to proposed RCEP signatories, INTA has suggested that countries adopt trademark infringement and anticounterfeiting laws that go beyond the minimum requirements of TRIPS Part III to strengthen the protection of trademarks and enhance the legitimate trade between nations.
FTAs are by their nature, complex, and negotiations are rarely completed in a speedy fashion. Invariably, their progress is dictated by national economic interests, market fluctuations, and the vagaries of domestic policy and politics.
Meanwhile, the past couple of years have posed immense challenges as countries worldwide grapple with the issues posed by political unrest and a breakdown in multilateralism, as well as the unprecedented problems posed by the COVID-19 pandemic. It is not surprising then, that the emergence of many long-anticipated trade deals have been delayed or, in some countries, trapped in limbo.
While the USMCA has been successfully implemented, it arguably represents an evolution in trade relations between the Mexico, Canada, and the U.S. rather than a revolutionary departure from previous provisions under NAFTA.
Elsewhere, the EU-Mercosur Trade Agreement, the CPTPP, and the RCEP, once passed by all the proposed signatories, are likely to have a more dramatic effect on trade relations among a host of diverse countries and, consequently, their IP.
As deadlines loom or become extended, the skills that trademark attorneys possess will become invaluable as they are called upon to resolve the complicated questions that hinder the vast potential promised by these deals.
Video courtesy of Envato Elements / petrunine
Monday, November 16, 2020