THE INTERPLAY BETWEEN INTELLECTUAL PROPERTY RIGHTS AND CROSS-BORDER TRADE
Introduction
With the advent of globalization towards the end of the 20th century, the world has become seemingly compact, with geographical borders getting more and more blurred by the day. In the current era of widespread international trade, innovation is key in sustaining your business venture. This is exactly where Intellectual Property Rights come into play. A robust protection mechanism ensures free and fair competition, fosters creativity, and encourages smoother movement of knowledge-intensive, high-technology products in a cross-border scenario. Moreover, it also influences international trade flow, which is dependent on other factors like a territory’s trade and IP laws, economic landscape, and the overall investment climate. This article is an attempt to navigate the rather convoluted relationship between intellectual property rights (IPR) and international trade.
Cross-Border Trade: The Good, Bad & Ugly
Cross border trade is a practice which is as old as time itself; but has constantly been subjected to rapid evolution. However, one of the most significant actors in shaping the current landscape of this phenomenon was the establishment of the World Trade Organization (WTO). Nearly 3 decades and a slew of reforms later, the international trade landscape has witnessed major developments, including but not limited to lowered trade barriers, provision of support to developing economies to ensure steady growth, increase in preferential trade agreements, and promoting fair competitive practices; with the primary aim of creating a more inclusive trading environment. However, this is far from the only catalyst. With the rapid advancement of technology in the last 25 years, e-commerce sites have taken over the world, and altered consumer behaviour at a completely unheard of level. Global cross-border e-commerce, which was valued at over $560bn in 2018 is set to increase to a staggering $4bn by 2027, at a CAGR of 27.4%. Add to that, the phenomenon of globalisation, and you have the perfect recipe for enhanced international trade.
But how is intellectual property at all related to Cross-Border Trade, of all things? Let’s have a look!
Intellectual Property, hereinafter referred to as ‘IP’, plays a significant role in cross-border trade as it promotes not just innovation, but also economic growth. IP-reliant industries like technology and pharmaceuticals, more often than not, contribute significantly to the GDP of a country. With the exponential growth of innovative start-ups across the world, it becomes crucial to safeguard your IP for a variety of reasons, including the protection of inventions, brand name, and subsequently, the retention of a competitive edge in the market. Furthermore, well-protected IP also promotes cross-border transfer of technology and knowledge, which in turn facilitates the enhancement of capabilities of developing nations. However, on the flip side, cross-border trade comes with its own set of challenges. While the list of obstacles is endless, we shall stick to the ones concerned with the domain of Intellectual Property: namely inconsistent IP protection across varying jurisdictions, risks associated with infringement and IP theft, and the prevalence of malpractices like counterfeiting and piracy. This brings us to the next section of this article, where we dive into the importance of a robust IP protection mechanism, and the perils associated with the lack thereof.
Intellectual Property: Understanding the Importance of a Robust Protection Mechanism
The role of a strong protection mechanism in the realm of Intellectual Property Rights is multifaceted. You must have noticed how trade and commerce agreements have in place, clauses which emphasize on the protection and enforcement of intellectual property rights. These clauses serveseveral purposes, which have been summarized as under:
- Promoting Innovation & Investment
IP protection mechanisms such as registration of patents, trademarks, and copyrights go a long way in promoting innovation. Inventors are often incentivised on their creations, which helps them accrue economic benefits from their creation. This in turn encourages creativity and innovation. As for the investment angle, a business having well-protected IP has far better prospects of attracting investments, which eventually facilitates higher valuations, and makes the business significantly more profitable.
- Ensuring Competitiveness
For an economy to grow, it is important to have a dynamic marketplace with free and fair competition. Since intellectual property, by its very nature is pro-competitive, it becomes all the more important to have in place a solid IP protection mechanism to minimise any and all instances of trade malpractices like copying, counterfeiting, and piracy. These instances harm the goodwill and legitimacy of the businesses which are the brains behind a product, while also reducing fair competition. By enforcing well-thought out IP protection mechanisms in a way that does not encourage monopoly, policymakers and traders alike can ensure the existence of competitiveness.
- Enhancing Opportunities in the Domain of Trade
Entering and efficiently penetrating into foreign markets is one of the key indicators of success for most, if not all businesses. If they have their intellectual property protected, they can safeguard their creations and brand names in a much more effective manner while operating in new jurisdictions. Further, countries with favourable IP regimes are more likely to attract foreign direct investments (FDI), and present better prospects of technology transfer, franchising opportunities, etc. Furthermore, these practices also, in the long run, lead to the minimization of infringement risks, promote healthy business relationships, and enhance the credibility of businesses.
- Compliance with International Norms
Perhaps the most crucial aspect, protection of intellectual property like patents and trademarks should be given due consideration so as to ensure compliance with international standards and agreements. One of the most prominent examples herein would be the TRIPS (Trade Related Aspects of Intellectual Property Rights) Agreement, which was enacted under the umbrella of the WTO. While it plays a vital role in ensuring harmonization of IP regulations among member countries; adherence with its standards will also ensure reduction in complexities associated with cross border trade, and further enhance streamlined business operations.
At this juncture, it also becomes important to highlight the impact of intellectual property on trade flows, which in fact is a culmination of the aforementioned factors. However, it is also important to keep in mind that while a robust IPR mechanism can enhance international trade while also limiting the malpractices which have been elaborated upon earlier; extremely stringent regulations can also stifle innovation by restricting market access and limiting competition; particularly in IP intensive industries like technology and pharmaceuticals. In light of the same, it becomes more important than ever to strike a balance in a way which promotes knowledge transfer and upholds the sanctity of a creation, and at the same time, maintains competitiveness in the market.
Strategies to Safeguard Intellectual Property in the Global Trade Landscape
Strategy is key, especially when it comes to international business. More often than not, people fail to realise the difference between inspiration and infringement; and the thin line often becomes blurred. It is thus crucial for creators to ensure that their inventions/ creations do not infringe upon the copyrights, trademarks, or patents of other entities. This aspect particularly gains more importance if we think about the current era of globalisation. While managing intellectual property on an international scale may seem complex, it is essential to safeguard it so as to prevent unauthorised use, while simultaneously maintaining a competitive edge. Lack of international protection could make your innovations vulnerable to IP theft and significant financial losses, among many others. To simplify things, let’s have a look at an instance which underlines the importance of intellectual property in the realm of international trade.
In a notable case, Blackberry found itself in the middle of a dispute when Typo Products, an American company allegedly infringed on the former’s iconic QWERTY keyboard by providing a physical keyboard add-on for iPhones. Blackberry accused Typo of design infringement and initiated legal proceedings in 2014. While the court granted preliminary injunction while acknowledging Blackberry’s patented design, Typo continued selling the keyboards and even went on to release a second version of the same. This prompted Blackberry to file another lawsuit for continued infringement. Ultimately, the parties reached a settlement whereby it was decided that Typo would have to indefinitely discontinue global sales of their products for smartphones measuring less than 7.9 inches.
Moving on to strategies to safeguard intellectual property in the realm of cross border transactions, creators and businesses can take quite a few steps to ensure that their IP is well protected in a global trade setting. For starters, it is highly recommended that businesses conduct necessary IP due diligence before entering foreign markets to ascertain if their portfolio is well protected in the target jurisdiction. Not only will this ensure ease in doing business, but also saves the time and money spent on multiple potential lawsuits. Further, another practice which is highly encouraged is the registration of IP across multiple jurisdictions. This is especially important for entities which are focused on growing their business at a global level. This measure would entail filing for trademarks and patents in regional/ local offices like EUIPO. Last but definitely not the least, it is strongly recommended that trade and commerce agreements should be drafted in a way that clearly highlights the protection of intellectual property, and the subsequent enforcement of the rights arising out of it in the event of any dispute. Well drafted IP, Non-Compete, and Licensing clauses ensure the minimization of the possibilities of disputes.
Conclusion
In the current era of globalization where everyone is trying to make a mark at an international level, it is extremely important to be aware not only of your rights and responsibilities pertaining to your intellectual property, but also taking the required steps to safeguard it. Since intellectual property and international trade go hand in hand, staying updated on the latest developments in these fields will provide you with a slew of benefits, which will go a long way in minimizing financial and economic losses, save time and resources, and encourage further innovation. To conclude, businesses should be proactively engaged in protecting their intellectual property by collaborating with legal experts, and adopt the most viable courses of action to foster growth and sustainable development. Until then, it will be interesting to see how the national and international laws surrounding intellectual property evolve in the ever shifting landscape of international trade.
Authored by
Advocate Priyamvada Lonial, Legal Associate, SUO Law Offices
