Intellectual property rights (IPRs) play a major role in global trading. For rights holders, the more effective the international framework of IPRs, the more comfort they have that they will be able to exploit what they own across borders without risk of interference. Currently though, the challenges of a fragmented framework of protection, and areas of 'IPR blackouts', can be a serious disincentive. Importers, exporters, distributers and resellers also have to consider compliance with a complex web of rights in order to make their business models work.
Where goods are moved across borders, there are added risks of infringing IPRs, not just in the country of destination, but also in the country of origin, and, in some cases, countries through which the goods are merely in transit. The position is not necessarily any easier for goods (or services) provided online since trading via the internet poses its own challenges. As with many areas of law, there is a tension between the drive to further globalise markets and the need to maintain national or regional control, not to mention growing protectionism in certain jurisdictions.
For traders who get it wrong, the risks are potentially serious. Depending on the nature of the right and the form of infringement, the right holder may have a claim for damages, production and preservation of evidence, information, provisional and precautionary measures, legal costs and an injunction to prevent the infringing acts. In addition, the right holder may have the right to request the return or destruction of the infringing goods.
A patchwork of protection
IPRs can be protected at numerous levels: nationally, across multiple jurisdictions and under various international agreements and conventions. Some are protected by registration; others arise automatically on creation or use. Some laws are harmonised (for example, at EU level); others are not at all. This patchwork of protection (and, therefore, enforcement) can be difficult to navigate, both for rights holders and for those further down the supply chain.
Largely, IPRs are protected at national level on a country-by-country basis. However, there are some mechanisms for protection of rights across multiple jurisdictions. For example, in the EU, it is possible to obtain an EU-wide trade mark (EUTM), as well as EU-wide registered designs (RCDs) and unregistered designs (UCDs), all of which are unitary rights with effect across the whole of the EU. With the unitary patent (and unified patent court) now in process, it should also soon be possible to obtain a single patent right with effect across the EU. Conversely, copyright is still dealt with at national level in the EU and arises automatically without the need for registration. It is also possible to obtain certain rights through international agreements and conventions. For example, an international trade mark (IR) can be applied for through the World Intellectual Property Office (WIPO). While a single application is filed at WIPO, the applicant effectively obtains a bundle of national trade marks in the countries designated (as opposed to a single mark with effect in numerous countries worldwide). However, the application process is somewhat simpler and dealing with the resulting registrations can be administratively easier than applying in each country separately through their national systems.
What this means is that there can be numerous rights, all sitting alongside one another. For rights holders, this potentially means applying to register, administering and, perhaps more importantly, policing and enforcing their rights in multiple jurisdictions at the expense of significant cost and time.
For those looking to make sure that they do not infringe IPRs, this means potentially having to determine what rights exist on a country-by-country basis. This, of itself, is not an easy task. While some IPRs are easily identified because they are registered (e.g. trademarks and patents), in other cases, no registration takes place (e.g. copyright). And even where there is registration, searching can be time-consuming and expensive and, in some jurisdictions, the facility is limited or non-existent.
In some countries, relatively weak protection is afforded to IPRs. This can be a particular problem for international traders especially if there is significant scope for local imitations in the country concerned. China is the often-cited example. There are numerous examples of well-known trade marks and patents having been registered by Chinese residents and companies in bad faith. Recovering these rights can be difficult since Chinese law specifically protects rights that have been registered and used in China for a reasonable amount of time even if the original registration of those rights was made in bad faith. Likewise, even if a right is validly registered, enforcing it may not be easy particularly against a local infringer. It is therefore imperative that international traders seek advice and apply to register (and use) their rights in these IPR hotspots at as early a stage as possible.
The territorial nature of IPRs means that they must also be enforced on a country-by-country basis for the most part. The principle of territoriality forms the basis of international intellectual property law. According to this principle, whether or not an infringement has occurred will be determined by the law of the place where the right is registered. Where goods are traded or services are provided internationally, there is, therefore, a very real risk of having to bring multiple actions in multiple jurisdictions to protect and enforce rights.
While some laws have been harmonised (for example, trade mark law in the EU is harmonised to a large extent), most have not. Likewise, whilst there are a number of international agreements and conventions on IPRs, not all countries are signatories and they only set down very broad minimum standards, leaving everything else to be determined at a national level. This gives rise to the risk of divergent decisions on the same or similar facts.
One area where the law can be divergent is in terms of what constitutes an infringing act. For example, in the EU importing and exporting goods bearing a trade mark is a potentially infringing act (even if those goods are not intended to be sold in the country of import or the country from which they are due to be exported). However, the same is not true of all countries around the world.
Likewise, some countries allow rights holders to enforce their IPRs against goods in transit through their borders; whereas others do not. In the EU, for example, new rules mean that trade mark owners can enforce their IPRs against counterfeit goods in transit through the EU (even if the goods are held in customs detention or warehousing and are never freely available in the EU) unless the owner of the goods can show that the sale of the goods would not infringe any of the rights holder's IPRs in the country of final destination.
The issues are no less complex when it comes to sales online where there is a risk of infringing IPRs not just by supplying consumers internationally but also (potentially) if a particular website is accessible in a country. Fortunately, the EU has taken a pragmatic stance on this, holding that there is only infringement (of trade marks, at least) where consumers in the EU are targeted.
Even in the relatively harmonised environment of the EU (where pan-EU injunctions are sometimes available), enforcing IPRs is highly complex. First, the enforcement regime will differ significantly depending on whether an EU right or a national right is enforced. Second, when assessing the available jurisdictions for enforcing the right, rights holders can generally choose to bring an action in the place of domicile of the defendant, or the place where the infringing act has taken place. This choice has important consequences for the scope of the jurisdiction of the respective court. For example, as far as EUTMs are concerned, if the jurisdiction is based on the place of infringement, the court’s authority remains limited to infringements committed in the local Member State; if it is based on domicile, the court's authority potentially extends to infringements throughout the EU. Either way, there are risks of being sued (or having to bring proceedings) in a jurisdiction where you are not physically located, with all the difficulties that entails. Issues like this are magnified when it comes to countries outside the EU.
Exhaustion of Rights
Those involved in the supply of goods and services internationally must also consider the possibility of exhaustion of rights. The principle of exhaustion states that a right holder may not prohibit (using its IPR rights) any further dealing in goods which have been put on the market by or with its consent. In other words, once goods have been put on the market, IPRs are "exhausted". However, not all countries have adopted the principle. In the EU, there is exhaustion of rights where goods have been put on the market in the EEA by or with the consent of the rights holder. Thus, where a product is legitimately sold in France (for example), the right holder cannot prevent that product from being sold in Germany on the basis of its IPRs. However, rights holders can prevent the sale of goods in the EEA where they have been first put on the market outside the EEA. Other countries adopt different rules on this issue. Practically, this can mean that it is difficult for rights holders to keep track of their products once they have been put on the market. Where there is differential pricing across different countries, this raises particular issues.
If global trade is the end-goal, it is clear that much needs to be done to harmonise IPR regimes around the world to facilitate this. At the moment, IPRs are patchwork in nature and there is a lack of harmonisation on an international scale, entailing considerable time and cost for rights holders in protecting, policing and enforcing their rights (often with limited success) as well as for those further down the supply chain who must navigate around numerous potential rights.