Despite assurances to contrary, intellectual property covered asset for TPP ISDS mechanism
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KEI | 5 November 2015

Despite assurances to contrary, intellectual property covered asset for TPP ISDS mechanism

The negotiators have finally released, for the first time, TPP text, which is on the web here.

Despite assurances from the contrary by Australia and USTR, intellectual property is a covered asset subject to Investor State Dispute Settlement (ISDS):

Article 9.1: Definitions

For the purposes of this Chapter:
. . .
investment means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk. Forms that an investment may take include:

(a) an enterprise;
(b) shares, stock and other forms of equity participation in an enterprise;
(c) bonds, debentures, other debt instruments and loans;2,3
(d) futures, options and other derivatives;
(e) turnkey, construction, management, production, concession, revenue-sharing and
other similar contracts;
(f) intellectual property rights;

(emphasis added)
(g) licences, authorisations, permits and similar rights conferred pursuant to the Party’s law;4 and but investment does not mean an order or judgment entered in a judicial or administrative action.

footnotes
2 Some forms of debt, such as bonds, debentures, and long-term notes, are more likely to have the characteristics of an investment, while other forms of debt, such as claims to payment that are immediately due and result from the sale of goods or services, are less likely to have such characteristics.
3 A loan issued by one Party to another Party is not an investment.
4 Whether a particular type of licence, authorisation, permit or similar instrument (including a concession to the extent that it has the nature of such an instrument) has the characteristics of an investment depends on such factors as the nature and extent of the rights that the holder has under the Party’s law. Among such instruments that do not have the characteristics of an investment are those that do not create any rights protected under the Party’s law. For greater certainty, the foregoing is without prejudice to whether any asset associated with such instruments has the characteristics of an investment.

There is, as in earlier drafts, a limited exception for compulsory licenses or the "issuance, revocation, limitation or creation" of intellectual property rights, but only " to the extent that the issuance, revocation, limitation or creation is consistent with Chapter 18 (Intellectual Property) and the TRIPS Agreement." This means private investors will have the right to use the ISDS mechanism to interpret the IP chapter of the TPP and also the TRIPS agreement itself.

5. This Article shall not apply to the issuance of compulsory licences granted in relation to intellectual property rights in accordance with the TRIPS Agreement, or to the revocation, limitation or creation of intellectual property rights, to the extent that the issuance, revocation,
limitation or creation is consistent with Chapter 18 (Intellectual Property) and the TRIPS Agreement.19

footnotes
19 For greater certainty, the Parties recognise that, for the purposes of this Article, the term “revocation” of intellectual property rights includes the cancellation or nullification of those rights, and the term “limitation” of intellectual property rights includes exceptions to those rights.

The investment chapter provisions on prohibited performance requirements includes a number of exemptions for intellectual property rights, compulsory licenses to patents under Article 31 of the TRIPS or for copyright, or remedies to anti-competitive practice, that protect U.S. state practice in those areas.

Article 9.9: Performance Requirements

3. (b) Paragraphs 1(f), 1(h) and 1(i) shall not apply:
(i) if a Party authorises use of an intellectual property right in accordance with Article 31 /26/ of the TRIPS Agreement, or to measures requiring the
disclosure of proprietary information that fall within the scope of, and are consistent with, Article 39 of the TRIPS Agreement; or

(ii) if the requirement is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority to
remedy a practice determined after judicial or administrative process to be anticompetitive under the Party’s competition laws.27, 28

(c) Paragraph 1(i) shall not apply if the requirement is imposed or the commitment or undertaking is enforced by a tribunal as equitable remuneration under the Party’s copyright laws.

footnotes
26 The reference to “Article 31” includes any waiver or amendment to the TRIPS Agreement implementing paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health (WT/MIN (01)/DEC/2).
27 The Parties recognise that a patent does not necessarily confer market power.
28 In the case of Brunei Darussalam, for a period of 10 years after the entry into force of this Agreement for it or until it establishes a competition authority or authorities, whichever occurs earlier, the reference to the Party’s competition laws includes competition regulations.

There is also a limited exception for national treatment, which may be there to protect the provisions in the Bayh-Dole act on local working on patents.

Article 9.11: Non-Conforming Measures

5. (a) Article 9.4 (National Treatment) shall not apply to any measure that falls within an exception to, or derogation from, the obligations which are imposed by:
(i) Article 18.A.9 (General Provisions National Treatment); or
(ii) Article 3 of the TRIPS Agreement, if the exception or derogation relates to matters not addressed by Chapter 18 (Intellectual Property).

source: KEI