The WTO TRIPS agreement adopts substantive protections from existing multinational agreements on intellectual property rights. It bundles existing intellectual property rights into a package governed by generally applicable trade-related principles (most-favored-nation treatment, national treatment and transparency) and by a Council for Trade-Related Aspects of Intellectual Property Rights (“Council for TRIPS”).
Copyrights. The TRIPS agreement extends and clarifies rights under the Berne Convention on copyrights. It supports global services, particularly data processing, through clarifying that copyright protection shall apply in member states to:
- Computer programs, whether in source or object code, which are protected as literary works under the Berne Convention (1971), and,
- “Compilations of data or other material, whether in machine readable or other form, which by reason of the selection or arrangement of their contents constitute intellectual creations.” As a limitation, “[s]uch protection, which shall not extend to the data or material itself, shall be without prejudice to any copyright subsisting in the data or material itself.” TRIPS, Art. 10.
Copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such.
Copyright Exceptions. The national member states may not Members adopt limitations or exceptions to exclusive rights for certain special cases unless such limitations or exceptions “do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder.” TRIPS, Art. 13. In effect, national limitations on the rights of foreign copyright owners must not exceed regulation of “normal” exploitation and the “legitimate interests of the right holder.”
Trademarks. Trademark rights in global services do not have significant value. Enterprise customers want to preserve their own trademarks and not promote foreign service providers’ use of confusing or similar marks. The trademark provisions of the TRIPS agreement is thus of limited value for promoting the adoption of services marks by global service providers. It does protect the interests of enterprise customers, who should be vigilant to register their marks in TRIPS member states in order to acquire “the exclusive right to prevent all third parties not having the owner’s consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion.” TRIPS, Art. 16.
Industrial Designs. The TRIPS agreement ensures protection of “independently created industrial designs that are new or original,” but member states can decree “that designs are not new or original if they do not significantly differ from known designs or combinations of known design features.” Also, such protection may be denied for “designs dictated essentially by technical or functional considerations.” TRIPS, Art. 25. Except for contract manufacturing services the consumer goods, such provisions are of limited benefit for global services.
Patents. The TRIPS agreement encourages foreign investors to establish local factories to manufacture goods under patents. Subject to certain exceptions, it requires that “patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.” [Footnote: “For the purposes of this Article, the terms “inventive step” and “capable of industrial application” may be deemed by a Member to be synonymous with the terms “non-obvious” and “useful” respectively.” This definition was designed to accommodate U.S. patent law.] TRIPS, Art. 27(1).
Exceptions in Patent Rights. TRIPS allows exceptions where member states deem it necessary to “protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.” TRIPS, Art. 27(2). Such exceptions expose foreign companies to loss of legal protections if they rely upon local patents to ensure that local competitors do not use their processes competitively. Such considerations are important in contract manufacturing but not necessarily in outsourcing of business services.
Omissions from Patent Protection. The TRIPS agreement does not require a member state to adopt a “business method patent,” such as patents issued in the United States. Enterprise customers must therefore ensure that any proprietary business methods are protected contractually and otherwise by local law on trade secrets. Service providers likewise need to pay attention to this omission as they develop their own trade secrets or improved business processes from general skill and knowledge not at the customer’s expense. Intellectual property provisions thus require a contractual allocation, and parties cannot simply rely on patent law for their protections. The protection of business method patents in one country and the lack of protection in another country creates an incentive not to seek such patents of they provide significant competitive advantage in an enterprise’s core business. As a result, TRIPS may merely encourage more use of trade secrets and contractual allocations of rights and remedies in “business process” design and management.
Confidential Information (“Undisclosed” Information”). In the provisions governing “confidential information,” the TRIPS agreement is most valuable in fostering global services, particularly business process outsourcing (“BPO”), information technology outsourcing (“ITO”) and the outsourcing of specialized business operations ranging from mortgage and credit card processing to market research, product research and development, product design services, pharmaceutical design, testing and manufacturing services and other specialized services. Article 39 states:
- In the course of ensuring effective protection against unfair competition as provided in Article 10bis of the Paris Convention (1967), Members shall protect undisclosed information in accordance with paragraph 2 and data submitted to governments or governmental agencies in accordance with paragraph 3.
- Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices 1 so long as such information: (a) is is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
- Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.
When drafting international international BPO agreements, consideration must be given to appropriate protections of trade secrets of each party. The TRIPS agreement offers a framework for the design, negotiation and enforcement of such outsourcing agreements.
Unfair Licensing Practices. TRIPS targets the liberalization of licensing practices but reserves regulatory authority for member states to specify
“in their legislation licensing practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market. As provided above, a Member may adopt, consistently with the other provisions of this Agreement, appropriate measures to prevent or control such practices, which may include for example exclusive grantback conditions, conditions preventing challenges to validity and coercive package licensing, in the light of the relevant laws and regulations of that Member.” TRIPS, Art. 40(2)
Accordingly, grants of licensed rights to a service provider (or to an enterprise customer of BPO global services) may run afoul of local laws. Both customer and service provider have an interest in ensuring that local laws are not designed or interpreted to prevent reasonable licensing practices necessary to implement ITO or BPO global services.
Enforcement. The TRIPS agreement requires member states to adopt civil and criminal laws to protect intellectual property rights of foreigners of other member states. Enforcement remedies may be slow in some countries, so enterprise customers will want to investigate the legal system in every country where they have BPO services performed.
Exceptions to TRIPS.
Exceptions Generally. As with other WTO agreements, several exceptions apply to the general principles promoting liberalization of trade in services and goods.
Exceptions to National Treatment. The principle of “national treatment” is thus subject to the exceptions already provided in, respectively, the Paris Convention (1967), the Berne Convention (1971), the Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits. TRIPS, Art. III(1).
Exceptions to Most-Favored-Nation Treatment. MFN treatment does not apply in several cases involving “any advantage, favour, privilege or immunity accorded by a Member:
(a) deriving from international agreements on judicial assistance or law enforcement of a general nature and not particularly confined to the protection of intellectual property;
(b) granted in accordance with the provisions of the Berne Convention (1971) or the Rome Convention authorizing that the treatment accorded be a function not of national treatment but of the treatment accorded in another country;
(c) in respect of the rights of performers, producers of phonograms and broadcasting organizations not provided under this Agreement;
(d) deriving from international agreements related to the protection of intellectual property which entered into force prior to the entry into force of the WTO Agreement, provided that such agreements are notified to the Council for TRIPS and do not constitute an arbitrary or unjustifiable discrimination against nationals of other Members.” TRIPS, Art. 4.
Exceptions Exceptions under WIPO Agreements. In addition, TRIPS principles of national treatment and MFN rights do not apply under multilateral agreements separately concluded under the auspices of WIPO relating to the acquisition or maintenance of intellectual property rights. In short, TRIPS leaves to WIPO the right to develop additional IPR conventions.
Exceptions under Public Policies. Similar to the GATS exceptions, TRIPS allows many exceptions to its protections, including measures
- “necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement; or
- “… to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.” TRIPS, Art. 8.
References:
www.wto.org
www.wipo.org
- For the purpose of this provision, “a manner contrary to honest commercial practices” shall mean at least practices such as breach of contract, breach of confidence and inducement to breach, and includes the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition. ↩