Master Thesis
LLM International and European Law Trade and Investment Law Track
IS INVESTOR-STATE DISPUTE SETTLEMENT AN ACCESSIBLE, APPROPRIATE AND EFFECTIE FORUM TO LITIGATE INTELLECTUAL PROPERTY DISPUTES?
A comparative analysis of the additional value of ISDS in the field of Intellectual Property
handed in by
Vanessa Huber
vanessa.huber@student.uva.nl Student-No. 12655724 supervised by Dr. Vid Prislan
II
ABSTRACT
From the outset, Intellectual Property Rights seem to be covered as investments by most International Investment Agreements. Those agreements provide for ISDS: a dispute settlement mechanism that offers the possibility that a private party, i.e. the investor, can challenge a measure adopted by a state before an arbitral tribunal. In practice there are, however, very little cases that make use of this type of dispute settlement. In searching for answers to this phenomenon, this thesis tries to map the legal and regulatory challenges that pertain to bringing Intellectual Property Rights disputes into the realm of ISDS. It examines - based on the available case law - if this forum is actually accessible, adequate and effective for these types of claims or if they are systematically excluded in practice. This thesis also follows a comparative approach and will contrast ISDS to other potentially competent fora for Intellectual Property Rights claims, thereby trying to dissect the additional value of ISDS as a dispute settlement mechanism and forum.
III
TABLE OF CONTENTS
TABLE OF ABBREVIATIONS ... V TABLE OF INTERNATIONAL CONVENTIONS AND DOCUMENTS ... VII TABLE OF CASE LAW ... XIII BIBLIOGRAPHY ... XVII
RESEARCH QUESTION AND INTRODUCTORY REMARKS ...1
A. ACCESS TO DISPUTE SETTLEMENT ...4
I. Access to Investor-State Dispute Settlement ...4
1. The definition of “investment” under IIAs ...5
2. Limitations to the notion of “investment” ...8
3. IPRs as investments under the ICSID Convention ... 10
II. Access to other forms of IP dispute settlement ... 12
1. Domestic Courts and IP offices ... 12
2. WIPO ... 13
3. WTO ... 13
Conclusion: Access to Dispute Settlement ... 15
B. STANDARDS OF PROTECTION ... 16
I. Standards of Protection in ISDS ... 16
1. Expropriation ... 16
1.1 Protection under IIAs ... 16
1.2 Case Law and Practice regarding IPRs ... 20
2. Fair and Equitable Treatment ... 23
2.1 Protection under IIAs ... 23
2.2 Case Law and Practice regardingt IPRs ... 24
3. Most-Favoured Nation and National Treatment ... 25
4. Full Protection and Security ... 26
5. Umbrella Clauses ... 27
II. Exceptions and Exclusions ... 28
III.Standards of Protection outside of ISDS ... 29
1. Domestic Law ... 29
2. WTO ... 30
IV
C. AVAILABLE REMEDIES ... 31
I. Available Remedies in ISDS ... 31
II. Remedies in other fora ... 32
1. Domestic Courts ... 32
2. WTO ... 32
Conclusion: Remedies ... 33
CONCLUSION ... 34
V
TABLE OF ABBREVIATIONS
Abbreviation: Full meaning:
Art(t). Article(s)
BIT(s) Bilateral Investment Agreement(s)
CETA Comprehensive Economic and Trade Agreement
DSU Dispute Settlement Understanding
e.g. example given
ECT Energy Charter Treaty
et seq(q). and what follows
etc. et cetera
FCN Friendship Commerce and Navigation
FET Fair and Equitable Treatment
FPS Full Protection and Security
i.e. id est (that is)
ICSID International Centre for the Settlement of Investment Disputes
VI
IPR(s) Intellectual Property Right(s)
ISDS Investor-State Dispute Settlement
Ltd. Limited
MFN Most-Favoured Nation
NT National Treatment
p(p). page(s)
PCA Permanent Court of Arbitration
SA Societé Anyonyme
TTIP Transatlantic Trade and Investment Partnership
UN United Nations
v versus
VCLT Vienna Convention on the Law of Treaties
Vol. Volume
WIPO World Intellectual Property Organization
VII
TABLE OF INTERNATIONAL CONVENTIONS AND DOCUMENTS
cited as: full description:
International Conventions
Berne Convention Berne Convention for the Protection of Literary and Artistic Works, 5 December 1887
Energy Charter Treaty (ECT) Energy Charter Treaty, 17 December 1991
ICSID Convention Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 14 October 1966
Marrakesh Agreement Marrakesh Agreement Establishing the World Trade Organization, 1 January 1995
Paris Convention Paris Convention for the Protection of Industrial Property, 20 March 1883
TRIPS Agreement Agreement on Trade Related Aspects of
VIII
VCLT Vienna Convention on the Law of Treaties, 23
May 1969
Bilateral Investment Treaties
Argentina – Germany BIT Vertrag vom 25. November 1959 zwischen der Bundesrepublik Deutschland und der Argentinischen Republik zur Forderung und zum Schutz von Kapitalanlagen, 8 November 1991 available at:
https://investmentpolicy.unctad.org/international-
investment- agreements/treaties/bit/128/argentina---germany-bit-1991-
Australia – India BIT Agreement between the Government of Australia and the Government of the Republic of India on the Promotion and Protection of Investments, New Delhi, 26 February 1999
available at:
https://investmentpolicy.unctad.org/international- investment-agreements/treaties/bit/209/australia---india-bit-1999-
Australia – Poland BIT Agreement between Australia and the Republic of Poland on the Reciprocal Promotion and Protection of Investments, 27 March 1992
IX available at: https://investmentpolicy.unctad.org/international- investment-agreements/treaties/bilateral- investment-treaties/219/australia---poland-bit-1991-
Belgium - Luxembourg Economic Union – India BIT
Accord entre l'Union économique belgo-luxembourgeoise et le Gouvernement de la République de l'Inde concernant l'encouragement et la protection des investissements, 8 January 2001 available at: https://investmentpolicy.unctad.org/international- investment-agreements/treaties/bilateral- investment-treaties/494/bleu-belgium-luxembourg-economic-union---india-bit-1997-
Benin – Ghana BIT Agreement between the Government of the Republic of Ghana and the Government of the Republic of Benin for the Promotion and Protection of Investments, 18 May 2001
available at:
https://investmentpolicy.unctad.org/international- investment-agreements/treaties/bit/567/benin---ghana-bit-2001-
X Germany – Pakistan BIT Vertrag vom 25. November 1959 zwischen der
Bundesrepublik Deutschland und Pakistan zur Forderung und zum Schutz von Kapitalanlagen, 25 November 1959 available at: https://investmentpolicy.unctad.org/international- investment-agreements/treaties/bilateral- investment-treaties/1732/germany---pakistan-bit-1959-
Switzerland – Mexico BIT Agreement between the Swiss Confederation and the United Mexican States on the Promotion and Reciprocal Protection of Investments, 14 March 1996 available at: https://investmentpolicy.unctad.org/international- investment-agreements/treaties/bilateral- investment-treaties/2543/mexico---switzerland-bit-1995-
US – Argentina BIT Treaty between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment, 20 October 1994
available at:
https://investmentpolicy.unctad.org/international-
investment-XI agreements/treaties/bit/162/argentina---united-states-of-america-bit-1991-
US – Jamaica BIT Treaty between the United States of America and Jamaica concerning the Reciprocal Encouragement and Protection of Investment, 7 March 1997 available at: https://investmentpolicy.unctad.org/international- investment-agreements/treaties/bilateral- investment-treaties/2148/jamaica---united-states-of-america-bit-1994-
US – Mongolia BIT Treaty between the United States of America and Mongolia concerning the Encouragement and Reciprocal Protection of Investment, 6 October 1994 available at: https://investmentpolicy.unctad.org/international- investment-agreements/treaties/bilateral- investment-treaties/2577/mongolia---united-states-of-america-bit-1994-
XII
Model Bilateral Investment Treaties
1997 Chinese Model BIT
2006 French Model BIT
2008 German Model BIT
2012 US Model BIT
Free Trade Agreements
CETA Comprehensive Economic and Trade Agreement,
21 September 2017
NAFTA North Atlantic Free Trade Agreement, 1 January
1994
UN Documents
Resolution 1803/XXVI Resolution 1803/XXVI, dated 14 December 1962, adopted by the UN General Assembly, UN Doc A/52/7
XIII
TABLE OF CASE LAW
cited as: full description:
ICSID Cases
Apotex v United States
(Award on Jurisdiction and Admissibility)
Apotex Holdings Inc. and Apotex Inc. v United States of America, ICSID Case No. ARB(AF)/12/1, Award on Jurisdiction and Admissibility, 25 August 2014
Biwater Gauff v Tanzania (Award)
Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008
Eli Lilly v Canada
(Respondent’s Counter Memorial)
Eli Lilly and Company v The Government of Canada, UNCITRAL, ICSID Case No. UNCT/14/2, Respondent’s Counter Memorial, 29 September 2014
Eli Lilly v Canada (Final Award)
Eli Lilly and Company v. The Government of Canada, UNCITRAL, ICSID Case No. UNCT/14/2, Final Award, 16 March 2017
Enron v Argentina (Award)
Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007
XIV Marvin Feldman v Mexico
(Award)
Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award, 16 December 2002
MHS v Malaysia
(Award on Jurisdiction)
Malaysian Historical Salvors, SDN, BHD v. The Government of Malaysia, ICSID Case No. ARB/05/10, Award on Jurisdiction, 17 May 2007
Philip Morris v Uruguay (Award)
Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 8 July 2016
Saipem v Bangladesh (Decision on Jurisdiction)
Saipem SpA v The People’s Republic of Bangladesh (Decision on Jurisdiction), ICSID Arbitral Tribunal, Case No ARB/05/07, 21 March 2007
Salini v Morocco
(Decision on Jurisdiction)
Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 31 July 2001
Sempra Energy v Argentina (Award)
Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 18 September 2007
XV SGS v Pakistan
(Decision on Objections to Jurisdiction)
Société Générale du Surveillance SA v Pakistan ICSID Arbitral Tribunal, Case No ARB/01/13, Decision on Objections to Jurisdiction, 6 August 2003
Shell v Nicaragua Shell Brands International AG and Shell Nicaragua S.A. v. Republic of Nicaragua, ICSID Case No. ARB/06/14
Tecmed v Mexico (Award)
Técnicas Medioambientales Tecmed v Mexico, ICSID Arbitral Tribunal, Case No ARB(AF)/00/2, Award, 29 May 2003
Iran – United States Claims Tribunal
Amoco v Iran (Award)
Amoco International Finance Corporation v The Government of the Islamic Republic of Iran et al, Award, 14 July 1987, Case No. 56, Award No. 310-56-3
London Court of International Arbitation
EnCana v Ecuador (Award)
EnCana Corporation v Republic of Ecuador, Case No UN3481, Award, 3 February 2006
XVI
Permanent Court of Arbitration (PCA)
Allard v Barbados Peter A. Allard v. The Government of Barbados, PCA Case No. 2012-06, 27 June 2016
Philip Morris v Australia (Final Award)
Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-12, Final Award, 17 December 2015
Philip Morris v Australia (Notice of Arbitration)
Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-12, Notice of Arbitration, 21 November 2011
Romak SA v Uzbekistan (Award)
Romak SA v Uzbekistan (Award), Permanent Court of Arbitration, Case No AA280, 26 November 2009
Saluka Investments v Czech Republic (Partial Award)
Saluka Investments B.V. v. The Czech Republic, UNCITRAL, 17 March 2006
XVII
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cited as: full description:
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1
IS INVESTOR-STATE DISPUTE SETTLEMENT AN
ACCESSIBLE, APPROPRIATE AND EFFECTIVE FORUM TO
LITIGATE INTELLECTUAL PROPERTY DISPUTES?
A comparative analysis of the additional value of ISDS in the field of Intellectual
Property
RESEARCH QUESTION AND INTRODUCTORY REMARKS
1 Intellectual Property Rights (hereinafter also referred as “IPR or IPRs”) are exclusive rights
which are granted to the creator or inventor and are valid for a limited amount of time. The most prominent forms of IPR are copyrights, patents, trademarks and designs. IPRs may best be characterized as negative rights: Instead of granting a positive right and thereby the use of a protected work or invention, they (merely) grant the right to exclude others from making use of that specific creation or invention without the IPR holders’ consent.1
2 Initially, IPRs were national and strictly territorial rights.2 With increasing trade relations all
over the world and fuelled by globalization itself, Intellectual Property Law became more and more international. This mainly by virtue of international treaties and international cooperation.3 More recently, the focus has shifted from independent international conventions
to international organisations, namely to the World Intellectual Property Organization WIPO (hereinafter “WIPO”) and the World Trade Organization (hereinafter “WTO”) and its Agreement on Trade Related Aspects of Intellectual Property Rights Agreement (hereinafter “TRIPS Agreement”). The latter is a very comprehensive treaty and stipulates (minimum) standards of protection, rules on administration as well enforcement and dispute settlement mechanisms which are binding on all members of the WTO.4
1 WATAL /WAGER /TAUBMANN, at p. 1 et seqq. 2 Ibid.
3 As for treaties, one might refer to e.g. the Berne Convention or Paris Convention. 4 WATAL /WAGER /TAUBMANN, at p. 10.
2
3 Against this background, one would be inclined to think that besides (administrative) state
courts, possible international disputes arising out of or in connection with IPRs were to be settled within these organizations. Indeed, domestic courts and IP offices as well as the WIPO Mediation and Arbitration Centre are fora certainly competent to deal with IP disputes involving at private parties. The WTO Dispute Settlement Body, on the other hand, is competent in cases involving two or more state parties. Quid if a private party wants to initiate a proceeding against a state party? What are the available fora?
4 International Investment Agreements (hereinafter “IIA or IIAs” and thereby referring to Bilateral Investment Treaties or “BITs”, regional investment treaties as well as trade agreements with investment provisions5) usually foresee exactly this possibility of dispute
settlement: A private party, i.e. the investor can challenge the measure adopted by a state before an arbitral tribunal. This dispute settlement mechanism is known as Investor-State Dispute Settlement (hereinafter “ISDS”).
5 Despite a great amount of International IP disputes, this forum and dispute resolution method
has only recently gained momentum. In this regard, MERCURIO has coined the term “Awakening
of the Sleeping Giant”.6 But even in the past years, ISDS cases surrounding IPRs have not really
become widespread. Thus, this Giant might as well still be asleep.
6 In searching for answers why there is still only a little amount of (publicly available) cases, one
may ask the question if ISDS is an accessible, adequate and effective forum to litigate IP
disputes in the first place.
7 In trying to answer this question, my thesis tries to map the different legal and regulatory
challenges that pertain to bringing IPR disputes before ISDS tribunals. I aim to dissect the additional value of ISDS compared to other methods of dispute resolution for IPR claims. Emphasis is also on the available ISDS case law and practice evolving around IPRs, which will be analysed and contextualized. As ISDS is in its general nature designed to offer the investor a venue of dispute settlement, it naturally follows that the investors’ perception will be at the
5 These are the three types most generally referred to as IIAs, see further SALACUSE, at p. 3. 6 MERCURIO, at pp. 871 et seqq.
3 forefront of this thesis. Nonetheless, I will eventually also examine some legal and regulatory implications on the broader international plane.
8 For the purposes of this thesis, I propose to analyse accessibility, adequacy and effectiveness in light of three main categories [A.] Access to Dispute Settlement, [B.] Standards of
Protection, [C.] Available Remedies.
9 These three categories are commonplace in examining and studying any given forum and dispute resolution mechanism and have been used by other authors to conduct assessment with regards to other fora as well.7
10 In this thesis, my use of the notion of accessible mainly pertains to the question whether or not ISDS as a dispute settlement forum is accessible for IPR claims. The notion of adequacy mainly – but not exclusively – refers to whether or not the standards of protection in ISDS, and thus also possible grounds for claims, are suitable in the context of IPR disputes. Lastly, the notion of effectiveness mainly refers to the outcome of a dispute and respective remedies and enforcement in ISDS and whether or not this is apt for IPR disputes.
4
A. ACCESS TO DISPUTE SETTLEMENT
11 The question of access to dispute settlement centres around the prerequisites to establish
jurisdiction in a given forum as well as further conditions thereto. This first part will accordingly examine the (jurisdictional) preconditions that are (more) specific to IPR claims. The first section will analyse access to ISDS [I.]. The second section will outline the preconditions to access the other potentially available methods of dispute settlement for IPRs [II.].
I. Access to Investor-State Dispute Settlement
12 Investor-State Arbitration is like all forms of arbitration consent-based. Thus, access to this form of dispute settlement arises from the document which comprises this consent, generally an IIA. IIAs set forth various jurisdictional or pre-merit prerequisites which need to be met to confirm jurisdiction and grant access to this dispute settlement mechanism. These prerequisites span from falling within the notion of “investment”, to nationality issues, timing consideration or the exercise of an investment authorization. Yet, the latter are rather unspecific to IPRs8 and
thus fall outside the scope of this paper. At the core of access to ISDS for IPR claims, however, is the notion of “investment”: IIAs do in general only allow for bringing a dispute that arises out of or in connection with an investment. In order to benefit from protection standards of an IIA and the possibility of bringing an ISDS claim under its realm, the dispute must thus concern an investment. Therefore, this first part solely focuses on this question.
13 The qualification of IPRs as investments foremost depends on the applicable IIA and the notion of investment contained therein.9 Therefore, an analysis of the definition of investment in IIAs
and the coverage of IPRs therein will be examined first [1.]. Certain limitations to that general definition might apply, which will be explored secondly [2.]. Third and lastly, if the dispute shall be brought before an ICSID Tribunal, certain criteria might apply in addition [3.].
8 LAVERY, at p. 33
5
1. The definition of “investment” under IIAs
14 Whether or not IPRs qualify as investments under International Investment Law foremost
depends on the applicable IIA and the notion of investment contained therein.10 Most IIAs
define investment in one way or another.11 Unfortunately, there is little to no harmonization
with regards to that definition and even less so regarding the way IPRs are referenced. Ultimately, the criteria are specific to each IIA.12. Nonetheless, most IIAs cover IPRs.13
According to CORREA and VIÑUALES,there are generally four variants of how IIAs may cover
IPRs:14
15 One way to include IPRs within the scope of investment is to make a general reference to IPRs or intangible property as a protected type of investment.15 This is an approach that many IIAs
follow, i.e. they consist of a non-exhaustive list of possible assets or items that fall within its term of investment.16 An example of this type of inclusion may be found in the Australia-India BIT which defines an investment as “every kind of asset, including intellectual property rights invested by an investor [emphasis added]”.17 Also the CETA follows this approach and sets
forth in its Art. 8(1) that “forms that an investment may take include: [...] (g) intellectual property rights [emphasis added]”.18
16 A second way is more specific and (additionally) enumerates the types of IPRs or intangible
assets which are covered. For instance, the Energy Charter Treaty takes this approach and lists “intellectual property” as including “copyrights and related rights, trademarks, geographical indications, industrial designs, patents, layout designs of integrated circuits and the protection of undisclosed information”.19 Similarly, the 2006 French Model BIT speaks of “every kind of
asset […] and in particular […] intellectual, commercial and industrial property rights such as copyrights, patents, licences, trademarks[…][emphasis added]”.20 This detailed
10 VANHONNAEKER, at p. 7. 11 Ibid., at p. 9.
12 VOON /MITCHELL /MUNRO, at p. 6.
13 LAVERY, at p. 13; LIBERTI, at N 39; VANHONNAEKER, at p. 9; VOON/MITCHELL/MUNRO, at p. 5.
14 Besides differences in language as such, see CORREA /VIÑUALES at p. 92 et seqq.; VANNHONAEKER also divided his analysis
of the different ways that IPRs may be covered in IIAs into these categories, see at p. 9 et seq.
15 CORREA /VINUALES, at p. 93. 16 VOON /MITCHELL /MUNRO, at p. 6. 17 Australia - India BIT, at Art. 1.
18 Art. 8(1) CETA, for futher examples see LAVERY, at p. 4 or VOON /MITCHELL /MUNRO at p. 6. 19 Art. 1(12) ECT.
6 enumerating approach is gaining more popularity in modern treaty provisions than the latter approach and today accounts for the vast majority of BITs.21 As for clarity and legal certainty
with regards to what (specific) IPRs are covered, this approach seems like the most preferential as it leaves little to no doubt in qualifying IPRs as investments.22
17 Another, third possibility would be through a reference to international or domestic law.23 In
this case, the provision might refer to rights as “recognized by the national law of both Contracting Parties”, as is the case e.g. in the Benin - Ghana BIT.24 Such a formulation
presupposes the recognition of the IPR under domestic law as a right in order for it to be qualified as an investment. Thus, domestic law is of great importance in such a variant to interpret and qualify investments under the IIA with such a wording.25
18 Lastly, an IIA may also contain no reference whatsoever to IPRs as such. Nor may it refer to
rights recognized under domestic law. Nonetheless will IPRs usually also fall within the notion of investment in these cases.26 This conclusion follows from an interpretation of the terms found
in the IIA – inter alia terms like “investment”, “property” or “assets” – in accordance with the interpretative rules of Art. 31 of the VCLT.27 Accordingly, an interpretation of these terms shall
take into account “the object and purpose of the treaty and its context” and consider “any relevant rules of international law applicable in relation to the parties”. In this respect, recourse may be made to international treaties that have recognized that IPRs are a form of property and have extended protective rights to them.28 It the words of MORTENSON it follows from there that
IPRs are “so clearly recognized by international instruments as a form of property […] that the default presumption must be that it would be included in […] any broad definition of investment”.29 Therefore, by means of referring to international law, also the simple notion of
“investment”, “asset” or “property” must be read as to encompass intangible property, i.e. IPRs.
21 SCHREUER /MALINTOPPI /REINISCH /SINCLAIR, at p. 123, N 140; further examples include e.g. the 2008 German Model BIT;
the 1997 Chinese Model BIT.
22 VANHONNAEKER, at p. 9.
23 For further examples see CORREA /VIÑUALES, at p. 93; LAVERY, at pp. 12 et seqq. 24 Benin – Ghana BIT, Art. 3; CORREA /VIÑUALES, at p. 96.
25 VOON /MITCHELL /MUNRO, at p. 7. 26 Ibid., at pp. 6 et seqq.
27 VANHONNAEKER, at p. 11.
28 See e.g. the Berne Convention or the Paris Convention, which both entered into force before the ICSID Convention. Later
on, the TRIPS Agreement becomes one of the most important international treaties for IPRs.
7
19 At the same time, CORREA andVIÑUALES argue that in this last variant the relation and recourse
to domestic law is even more important.30 This recourse will normally further corroborate to
the finding that IPRs are considered protected investments.31 As a result, the interpretation of a
very broad and undefined term as “investment” should accordingly give “reason to assume that a general recognition of BITs covering intangible property exists”.32
20 From the latter two approaches, but also more generally, it becomes evident that besides international law also the domestic law of the host state may play a key role with regards to the question of qualification of IPRs as investments.33 Protection under an IIA may ultimately not
be available when the domestic law of the host state requires registration for a certain IPR or does not recognize a certain from of IPR in the first place.34 Given the amount of International
Intellectual Property Law Treaties, their respective number of signatories and their efforts to harmonize domestic law, classic IPRs will nonetheless regularly be covered as an asset and thus as an investment. As treaties like the TRIPS Agreement often leave some leeway for members’ system, in that case so-called TRIPS flexibilities, and TRIPS+ Agreements become more frequent it will at the end of the day be up to the domestic law of that jurisdiction.35
21 Altogether, it follows from these approaches that in theory, (classic) IPRs will today indeed be
generally fall within the definition of “investment”. This conclusion is also shared by MERCURIO
who asserts that “it is almost assumed that IPRs are one way or another included within the scope of IIAs”.36 A view, which is shared by many other authors indeed.37
22 Whilst some approaches of covering IPRs in IIAs are more modern than others, coverage of IPRs as such in IIAs is no new trend. According to the assessment of LIBERTI, even very early
FCN Agreements allowed for copyright protection.38 In fact, even the very first BIT, the one
concluded between Pakistan and Germany, explicitly encompassed IPRs under its notion of
30 DOLZER/SCHREUER, at pp. 96 et seq.
31 See e.g. Belgo-Luxembourg Economic Union – India BIT, at Art. 1(b); see for the broad interpretation of this term Romak
SA v Uzbekistan (Award) at para. 177; see further VOON /MITCHELL /MUNRO, at p. 7.
32 BOIE, at p. 8
33 VOON /MITCHELL /MUNRO, at p. 7
34 EnCana v Ecuador (Award), at para. 184;see further VOON /MITCHELL /MUNRO, at p. 7.
35 VOON /MITCHELL /MUNRO, at p. 7; VOON /MITCHELL /MUNRO also mention the award in Saipem v Bangladesh (Decision
on Jurisdiction) where the Tribunal did not follow Bangladesh’ argumentation that since the right was not recognized under Bangladeshi law, it were not to constitute an investment. They criticize this outcome since it potentially threatens regulatory sovereignty of the state.
36 MERCURIO, at p. 876. 37 LIBERTI, at N 11. 38 Ibid.
8 investment.39 This further supports the finding of including IPRs in a broadly defined IIA notion
of investment. What is a rather new indeed, is that cases are brought forward concerning (solely) IPRs.
23 In these new and rather few publicly known cases concerning IPRs as investment, the general definition of investment in the applicable IIAs in these cases was not a central issue. To the contrary, in neither of the high-profile cases of Eli Lily v Canada40 or the two Philip Morris Cases has the respondent challenged this categorization. Rather, one could say, the home states had each (tacitly) recognized the possibility of the qualification the IPRs as investments.
2. Limitations to the notion of “investment”
24 Even if IPRs generally fall within the definition of “investment”, the coverage of an asset as investment may at times be limited to or dependant on further criteria.41 If those further
requirements are not met, the investor is proscribed from benefiting from both the protective standards and the possibility of dispute settlement under the IIA.
25 Firstly, it is not uncommon that an asset must in addition to fall within the (general) definition
of investment fulfil certain economical characteristics to be considered a protected investment under that particular BIT. Such economical characteristics may be (i) a (substantial) commitment of capital or other resources, (ii) the expectation of gain or profit or (iii) the assumption of risk.42 If an IIA presupposes such characteristics, it will thus not be enough that
IPRs are expressly mentioned as possible investments to ensure their qualification as investment under that treaty. Rather, they have to withstand an additional economic analysis in accordance with the respective economic characteristics.43
26 As with regards to IPRs, a problematic issue in this respect arises when the IPR is simply owned
and kept as a form of asset, but is neither used actively or commercially, and does not in itself represent an assumption of risk or generate any returns.44 In such a case, it will be hard to meet
these additional objective criteria and the IPR will likely not be qualified as an investment,
39 Germany – Pakistan BIT, at Art. 8(1); see also: VANHONNAEKER at p. 13. 40 Eli Lilly v Canada (Respondent’s Counter-memorial), at para 209. 41 VANHONNAEKER, at p. 14.
42 E.g. the 2012 US Model BIT. 43 VANHONNAEKER, at p. 15.
9 notwithstanding any enumeration in the IIA. In fact, a tribunal was faced with this question in the Apotex v United States case.45 The tribunal in that case indeed found Apotex to be a mere
exporter and to simply own certain IPRs, which in turn would not meet the economic characteristics of an investment (and an investor) under NAFTA.46
27 It shall be noted that according to some scholars, however, the failure of Apotex as to establish jurisdiction in that particular case was also due some unfortunate strategic decision as to how to frame their claims.47 Particularly KOTUBY and EGERTON-VERNON argue that Apotex could
have argued to apply a wider categorization of investment through application of the MFN clause.48
28 Another, second, limitation often occurs in the formulation of “[and investment] made in accordance with the laws of the host state”. Similarly as alluded to before,49 this implies a
strong recourse to the domestic law of the host state and the realm on IPRs, susceptible issues may arise in this context. Most concerned by such a clause are particularly patents:50 Patents
are territory-bound, namely a patent issued in one country will not necessarily lead to recognition in another and vice-versa.51 Thus, the patent in this example, or IPR more generally,
will need to fulfil the prerequisites of the patent application of the jurisdiction of the host country, i.e. be a registered patent.52 Only then may it be considered an investment “in
accordance with the laws of the host state”. The simple inclusion of the notion “patent” or “intellectual property” within the definition of investment will in itself not be sufficient to constitute an investment in this case.
29 This limitation is met by commentators with some substantial critique: If it is applied strictly,
the investor will find himself “at the mercy” of the host state and enable the host state a certain discretion in shaping the relationship with its investors.53 This were to be square to the very
rationales on International Investment Law.54 A solution or at least compromise for this critique
45 Whilst this case is not an ICSID case, NAFTA employs almost identical criteria to the Salini test applied by certain ICSID
Tribunals; see Apotex v United States (Award on Jurisdiction and Admissibility), paras 143 et seq., 235 and 244.
46 Ibid.
47 KOTUBY/EGERTON-VERNON, at p. 27.
48 For the clause, see Art. 1103 NAFTA; see futher KOTUBY/EGERTON-VERNON, at p. 27. 49 See supra para. 19 et seq.
50 VANHONNAEKER, pp. 15 et seqq. 51 Ibid.
52 Ibid. 53 Ibid.
10 may be found in acknowledging as the crucial point in time the application date instead over the official registration date.55 Indeed, certain BITs have already incorporated this approach,
and list not only patent but also “patentable invention” as a form of investment.56 Such a
formulation is particularly desirable from the viewpoint of investors, as it allows also for recourse to ISDS in case a patent application or registration was denied.57 According to
CORREA, unless a treaty specifically asks for registration of a certain IPR, the notion of
investment shall rather be seen as to “encompass not only granted rights but also applications”.58 Such an understanding would certainly favour the investment, thus ultimately
the investor, and arguably solve most issues with a “made in accordance with the laws of the host state” clause.
30 A third possible limitation that is found very frequent in IIAs is that the investment has been
“made in the territory of the host state” in order to be considered a protected investment.59
From the outset, assessing where an investment has been made seems like a rather simple yes or no question. However, bearing in mind that IPRs are intangible assets and the creative process behind them might not necessarily have taken place in the host states territory, it is questionable if they still fulfil this requirement.60 Scholarly writing suggests drawing an
analogous conclusion from cases that involve the transfer of funds.61 When faced with this question pertaining to the transfer of funds, ICSID tribunals often apply an approach described as holistic, i.e. considering the fact that IPRs one part of a larger economic activity of an investor.62 Thus, an IPR may not individually regarded not necessarily benefit from protection as an investment, but the entire undertaking – including the IPRs – might as well will.63
3. IPRs as investments under the ICSID Convention
31 If the IIA in question provides for arbitration under the auspices of ICSID, the jurisdictional requirements of this fora as laid down in Art. 25 of the ICSID Convention need to be fulfilled
55 See VANHONNAEKER, at p. 17.
56 E.g. US – Jamaica BIT, at Art. 1(a)(iv); similarly, the US - Mongolia BIT uses the broad language of «inventions in all fields
of human endeavour»; see further the analysis of VANHONNAEKER at p. 17.
57 SEELIG, at p. 3.
58 CORREA, Compulsory Licencing, at p. 340.
59 E.g. US – Argentina BIT; at Art. Art. I(1)(a); Artt. 1(10) and 10 ECT. 60 VANHONNAEKER, at p. 28.
61 Ibid.
62 Instead of many, see the analysis of KNAHR, at p. 50. 63 VANHONNAEKER, at p. 30.
11 in addition to criteria laid down in that IIA. Particularly, the provision refers to a “legal dispute arising directly out of or in relation to an investment”. Whilst the Convention explicitly uses the wording “investment”, it fails to provide a respective definition of investment under the ICSID Convention.64 In practice, two main diverging approaches have emerged in addressing
this issue:
32 The first approach mainly orientates itself on the underlying treaty, i.e. for as long as that treaty qualifies a certain asset or activity as an investment, there is not further requirement under the ICSID Convention. It will be deemed to follow the definition in the IIA.65 The only outer limit
under the ICSID Convention might be the distinction to a simple commercial transaction.66
Here these characteristics are mere indicators and not requirements and moreover have not all to be fulfilled cumulatively.
33 This last aspect is, however, regarded differently according to the second approach. This second
approach requires a certain threshold to the notion of investment in order to ascertain jurisdiction.67 In contrast to the first approach, these threshold requirements have to be present
cumulatively in order to be considered as an investment.68 This threshold is usually coined
“jurisdictional approach” and includes (a varying yet cumulative combination of) criteria like (i) duration, (ii) regularity of profit and return, (iii) assumption n of risk, (iv) substantial commitment and (v) significance for the host state’s development. These criteria gained particular prominence in the Salini case.69
34 As VANHONNAEKER puts it, IPRs will nonetheless likely be considered as investments even
through the lens of the Salini criteria.70 According to his analysis of IPRs under the Salini
criteria, he comes to the conclusion that “(i) IPRs are susceptible to be invested for a certain duration; (ii) it is likely to generate profit and return on a regular basis; (iii) IP and IPRs more precisely share the unique and constant risk of infringement by third parties not privileged to
64 MORTENSON, at pp. 268 et seqq. 65 Ibid.; VANHONNAEKER at p. 23
66 MHS v Malaysia (Award on Jurisdiction), at para 70.
67 VOON /MITCHELL /MUNRO, at p. 8; See further MITCHELL/WURZBERGER, at p. 623. 68 MHS v Malaysia (Award on Jurisdiction), at para 70.
69 See e.g. the cases of Salini v Morocco (Decision on Jurisdiction), at paras 52 et seqq.; Biwater Gauff v Tanzania (Award), at
paras 312 et seqq.
12 their use; (iv) IP investments often represent a substantial commitment; and (v) such assets have significant potential to contribute to the host states development”.71
35 As a result, if an ICSID tribunal follows the first approach, the issues of qualifying IPRs as investments – if any – are the same as arise out of an IIA and are outlined above.72 As per the
second approach, this indeed requires that the IPR fulfils further requirements in addition to those set out in the IIA. These additional criteria can but must not affect the qualification of IPRs as an investment. Yet again, IPRs are generally able to fulfil these requirements and thus be deemed investments also under the ICSID Convention.
II. Access to other forms of IP dispute settlement 1. Domestic Courts and IP offices
36 Outside of the field of investments, domestic courts and IP offices will mainly deal with
disputes involving two private parties. Also, proceedings against an official act on behalf of the state is generally possible through domestic administrative proceedings. If there is no agreement to the contrary, such as e.g. an IIA, even a dispute regarding IPRs as investment would normally be adjudicated by the competent courts of the host state of the investment.73
37 A reoccurring cluster that gives rise to claims of an investor is a legislation which allegedly
violates the latter’s rights. In these circumstances, courts are often bound to apply that particular national law over any international principles or agreements. The problematic tightens even a fortiori in cases where courts are by constitution not allow to adjudicate the existence of a certain legislation in the first place.74 It follows that access to domestic courts may be restricted
given the nature of the measure in question.
38 Moreover, it is argued that domestic courts are not an ideal solution for an investor. Indeed, the
investor may be faced with biased courts – after all it might even be a decision by that very
71 VANHONNAEKER, at p. 26; see further MORTENSON, at pp. 268 et seqq. 72 See supra paras 13 et seqq.
73 DOLZER/SCHREUER, at p. 235. 74 Ibid.
13 court which gave rise to the claim in the first place.75 Thus, even if domestic courts are a viable
forum, it might not be an investors’ first choice.
39 A proceeding before a domestic court can in principle precede or take place simultaneously to an ISDS proceedings for as long as there is no decision with res iudicata effect. At times, IIAs prescribe a so-called fork-in-the-road provision. It is in these cases that the investor must choose between either bringing its claim before domestic courts or before an ISDS tribunal.76 On the
other hand, IIAs at times prescribe that adjudication before domestic courts has to be exhausted or at least pursued for a certain amount of time in order for the right to initiate ISDS proceedings to arise.77 In this vein, domestic courts might be an additional prerequisite or indeed an
exclusionary issue for an investor to have access to ISDS.
2. WIPO
40 Despite being the International Organization for Intellectual Property Rights, the WIPO’s
Arbitration and Mediation Centre only offers (alternative) dispute resolution to private parties.78 At the core of the present thesis, however, are disputes involving an investor and a
state party on one end. It follows that this forum is not suitable for an investor - or any private party more generally - to bring a claim against a state. Accordingly, the particularities of the WIPO Arbitration and Mediation Centre will not be further examined in this context.
3. WTO
41 The TRIPS Agreement is one of the core treaties that pertain to International Intellectual Property Rights and is one of the main agreements within the framework of the WTO. It sets out the minimum standards of protection to be provided by each member of the WTO. In its essence, it incorporates significant parts of the Berne Convention by means of referencing these agreements.79 As such, the TRIPS Agreement encompasses basic principles, but also standards
concerning the availability, the scope and use of intellectual property rights inter alia in the fields of copyright, trademarks, designs and patents.80 It further features a section which
75 Ibid.; It should be noted however, that this problematic has become much less stringent in more western countries, see in this
regard BRONCKERS, at pp. 11 et seq.
76 DOLZER/SCHREUER, at p. 267; an example for such a provision can be found e.g. in Art. 26(3)(b)(i) of the ECT.
77 DOLZER/SCHREUER, at p. 266, an example for such a provision can be found e.g. in Art. 10(2) of the Argentina – Germany
BIT.
78 See Website of the WIPO Mediation and Arbitration Center, https://www.wipo.int/amc/en/ 79 See Artt. 7 TRIPS et seqq.; see further ABOTT /COTTIER /GURRY, at p. 1 et seqq.
14 addresses domestic procedures, remedies and enforcement of IPRs. If specific rights are to be adopted by member states, they are merely minimum standards and stronger protection is within the discretion of the respective states.81
42 The WTO has established its own dispute settlement mechanism to address violations of any of its agreements, including the TRIPS Agreement. Thus, when the governmental action in question allegedly (also) results in a TRIPS violation, dispute settlement within the realm of the WTO comes to mind. However, a dispute before the WTO Dispute Settlement Body can only be brought by a member to the WTO, and membership is only open to states and customs territories.82
43 From the investor’s perspective, this is certainly not preferable: The investor has no standing for himself in the proceedings. He could, nonetheless, resort to diplomatic protection and ask its home state to take up the dispute in the WTO on its behalf. Yet, whether or not a dispute resolution proceeding would ultimately be initiated would lie entirely in the discretion of his home state. The likelihood for the state to actually pick up and proceed the dispute is rather small and the decision highly political. After all, the diplomatic relations amongst states can only withhold a very restricted number of actual intergovernmental disputes.83 Not being party
to the dispute then also has further implications on what can actually be alleged and respective available remedies. Accordingly, access to this forum for dispute settlement for an investor is tied to many hurdles and thus less favourable than initiating ISDS proceedings.
44 It has to be noted, however, that if a dispute relating to an IPR (which may qualify as an investment at the same time) be brought before the WTO DSU, the aforementioned specific investment prerequisites – and most importantly the question whether or not the IPR at stake qualifies as an investment – not need to be addressed in the first place. In this vein, the prerequisites for access might be regarded to be “easier” than in case of an ISDS tribunal.
81 See Art. 1(1) TRIPS Agreement, see further WATAL/WAGER/TAUBMAN, at p. 13. 82 See Art. XII of the Marrakesh Agreement.
15
Conclusion: Access to Dispute Settlement
45 In comparison to other potentially competent fora to settle an IPR dispute, ISDS clearly stands out: On one hand, the investor has its own standing in the proceedings and thus the option to also initiate them according to his own liking. On the other hand, ISDS allows also to challenge fact patterns, e.g. regulations, which might fall outside of the competency of domestic courts. Altogether, ISDS provides for an allegedly more neutral forum to settle the dispute.
46 Unless an IIA clearly stipulates so, ISDS does not per se exclude the possibility of bringing a dispute arising out of the same fact pattern before other potentially competent fora. In this sense, litigating IPR disputes before an ISDS tribunal is an additional venue and as such broadens the scope of possible recourse mechanisms for the investor and should accordingly be in the investors’ interest. At the same time, this not entirely to a state’s disadvantage: In providing the option to recourse to ISDS – also for IPRs – the state may also attract more investments into its territory.
47 As with regards to access to ISDS, one can clearly infer the general possibility that an ISDS
tribunal be competent to settle an IP claim. Yet, one has to closely regard the interplay with domestic law as it pertains to this question. Nonetheless, as a result, IPRs almost always fall within the definition of an ‘investment’ in IIAs; hence, investors may in principle utilise IIAs to protect and enforce their intellectual property rights. Consequently, a dispute arising out of or in connection to that investment may be addresses through an Investor-State Arbitration tribunal under that specific IIA.
16
B. STANDARDS OF PROTECTION
49 As laid down in Part A, the question of qualification of IPRs as investments is largely
intertwined with the respective domestic and international substantive provisions on IPRs.84 In
ISDS, an investor can, however, generally only claim violation of rights laid down in the applicable IIA. It follows that notwithstanding this eminent connection to other sources of law, the substantive rights and thereby the protection thereof vary. This part will lay out the Standards of Protection in ISDS applicable to IPRs in more detail [I.] as well as explore possible Exceptions and Exclusions [II.]. It will then make a brief comparison to the Standards of Protection in other forms of IP Dispute Settlement [III.].
I. Standards of Protection in ISDS
50 This first section will cover the standards of protection that are possibly applicable to IPRs as
investments in International Investment Law. The analysis comprises the standards of Expropriation [1.], Fair and Equitable Treatment [2.], Most Favoured Nation and National Treatment [3.], Full Protection and Security [4.] and Umbrella Clauses [5.]. In the respective assessment, the available case law pertaining to IPRs will be contextualized.
1. Expropriation
1.1 Protection under IIAs
51 Property rights are in most countries guaranteed and protected on the constitutional level.85 At
the same time, expropriation of said property is possible too. In fact, the right to expropriate is a sovereign right of every state and is as such internationally recognized.86 For an expropriation
to be legal in the context of International Law, however, certain cumulative criteria have to be fulfilled: the expropriation (i) serves a public purpose, (ii) cannot be arbitrary or discriminatory in nature, (iii) has to be adopted respecting due process and (iv) the investor has to receive prompt, adequate and effective compensation.87 Against this background, IIAs generally
84 See supra paras 13 et seqq.
85 Instead of many, see the analysis of VANHONNAEKER, p. 37. 86 Resolution 1803/XXVI, United Nations, at para 4.
