The IP Benefits and Risks in a Global Marketplace – Reflections on GFIP 2015

The IP Benefits and Risks in a Global Marketplace – Reflections on GFIP 2015
The IP Benefits and Risks in a Global Marketplace – Reflections on GFIP 2015

The moderator and speakers of GFIP 2015’s Plenary Session 1, from L to R: Mr Teymoor Nabili, Dr Francis Gurry, Mr Hitoshi Ito, Mr He Zhimin, and Dr Stanley Lai.

Introduction

The 5th Global Forum on Intellectual Property (GFIP) organised by the IP Academy was held from 25 – 26 August 2015 at the Marina Bay Sands. As the anchor event for the Intellectual Property Office of Singapore (IPOS)’s IP Week @ SG 2015, GFIP 2015 was the scene for a diverse and thought-provoking array of cutting-edge discourse on IP. Topics were varied and comprehensive, ranging from “IP Value Creation in the 21st Century”, to “Views from the Bench on the Evolving Role of the Courts”, to “IP Strategies and Risk Management in ASEAN”.

True to its “global” nature however, one common thread that ran through the various panel discussions and plenary sessions was the “internationalisation” of IP. Numerous speakers touched on the tearing down of geo-economic boundaries, and the rise of a single global marketplace. In essence – with globalisation, the Internet, and an increasing number of global trade agreements – we now live in an era where demand and supply are no longer hindered by geography.

To illustrate: a product sold by an American company might be designed in California, but built with a number of components from Japan, Taiwan, and South Korea. These components may then be shipped by a Danish company to be assembled in China. The finished product is then transported by rail to various warehouses in South-East Asia. A customer from Singapore is able to order the product online from the comfort of his own home, and have the product delivered to him within 3 working days.

In the course of GFIP 2015, numerous global IP luminaries spoke at length about the IP benefits and pitfalls in respect of a unified global economy. This set the two authors thinking: what would this all mean for international IP laws, most of which were built on 18th century principles and concepts of territoriality? It is clear that this new economic reality is challenging and straining the boundaries of traditional IP laws, and that to stay relevant, IP laws and systems must adapt. This article is a condensation of some of our thoughts on this issue.

Benefits

Greater Flexibility in IP Tax Planning

Businesses dealing with intangible assets often require a holding vehicle through which they can licence and commercialize their IP. Businesses must therefore carefully consider where such holding vehicles are located in order to maximise their IP protection, tax optimisation, and legal flexibility. Thankfully, in the new global marketplace, economic assets are becoming increasingly mobile, and business owners have greater flexibility in choosing the IP holding jurisdiction that works best for them.

Mr. Chiu Wu Hong from KPMG Singapore, in his presentation on “Managing Risks in IP Investing”, touched on how companies now have more options when considering IP tax issues and incentive opportunities. For example, Singapore allows companies to claim foreign tax credit for tax paid in a foreign jurisdiction against the Singapore tax payable on the same income. Such Foreign Tax Credit can be claimed either through a Double Tax Relief, or a Unilateral Tax Credit. The company may also have to consider other factors such as exit taxes, in the event that their IP assets will be moved between jurisdictions, as well as withholding tax on cross-border payments.

Internet Domain Names as Branding

The rise of the global marketplace has also been fuelled in large part by the growth of the Internet and e-commerce. Today, it is commonplace for consumers to be able to purchase goods or services online, regardless of where that good or service originates from. In fact, it is not uncommon for consumers to be unaware of the provenance of their purchase.

A concordant but significant benefit of this, is that domain name URLs have become an additional badge of origin – akin to a trade mark – for consumers. In the new economy, a well-chosen domain name can therefore serve as a measurable commercial and marketing asset for companies. Ms. Mary Wong, Senior Policy Director at ICANN, in her presentation on “Branding Strategies and Domain Names”, touched on how ICANN had rolled out an expanded list of generic top-level domains (gTLD) in 2012, and highlighted how 50% of Interbrand’s Top 100 Brands of 2011 had applied for a new gTLD. In an interesting point of differentiation from traditional trade marks, Mary Wong also highlighted that in the online world, generic words in domain names can have significant value (eg. sex.com is estimated to be valued at US$14m).

Increased Adoption for New Technologies

With the rate of increase in technology and globalisation, businesses also now have almost unfettered ability to reach consumers. Not only is the rate of technology breakthroughs increasing exponentially, more importantly for businesses, the rate at which these technologies are being adopted is also accelerating. Mr. Etienne Sanz de Acedo, CEO of INTA, for example highlighted how it took the radio 38 years to reach 50 million users, whereas Twitter took only 9 months to achieve the same result. In light of this, businesses have at their disposal increasingly powerful and pervasive means to reach the end-user.

Risks and Challenges

Imitation Risks

Globalisation has brought about increased mobility and reduced geographical barriers, thereby allowing international trade to occur more freely. However, with great benefits, come great risks and challenges. One such risk is the increased imitation risks to IP owners. Mr. Nick Redfearn, Deputy CEO of Rouse highlighted in his presentation that the problem of trans-shipment of counterfeit goods for assembly and distribution is growing especially in South East Asia (SEA). Besides trans-shipments, counterfeit goods are also traded with impunity across land borders (eg. Vietnam and Myanmar) as well as via sea ports. Counterfeiting is not only damaging to businesses and IP owners in SEA, it hurts the level of consumer and investor confidence which in turn, has an adverse impact on SEA economies. He concluded his presentation by asserting how SEA governments should strengthen their customs IP border protection systems and leverage on technology at ports in order to stamp out counterfeiting and smuggling in the region.

Influence of the Internet on trade mark use and infringement
As the Internet’s functionality continues to improve, and becomes ever more pervasive, more businesses are turning to the Internet as an alternative marketplace for the sale of their goods and services.

This growing trend brings the spotlight to issues on online trade mark use and infringement in the digital and virtual world. Trade mark owners are now faced with novel challenges when protecting and enforcing their exclusive rights. Ms. Susanna Leong, Associate Professor from NUS, underlined one such issues faced – whether goods available over the internet must be purchased in that country to constitute use of trade mark. The Singapore High Court when determining this issue, opined that the purchase of goods is not mandatory for genuine use of the trade mark to be established. The UK courts in a later case (Euromarket Designs Inc v Peter & Another [2000] ETMR 1025), however took a slightly different view and held that it is unnecessary for the goods to be purchased in the UK but the goods must be available for purchase by UK customers. In light of these decisions, it is evident that the online market place is challenging established principles of trade mark law. Trade mark owners must thereby change the ways in which they enforce their rights and conduct their businesses.

Cross-border IP disputes

Another distinctive facet of an increasingly globalised world, is the increased prevalence of multinational corporations (MNCs). As MNCs grow more receptive towards an ‘open innovation’ paradigm, they begin engaging in more cross-border collaborative Research & Development (R&D) activities. This is particularly so in the pharmaceutical industry where the cost of R&D is often sky-high.

The growth of cross-border R&D activities coupled with the “internationalisation” of IP has seen the potential for cross-border IP disputes rise significantly. Consequently, it is essential for MNCs to adopt a more coordinated approach towards managing and resolving cross-border IP disputes. To illustrate, Mr Kenneth K. Cho, Senior U.S. Attorney at Kim & Chang, highlighted the various factors that an MNC had to consider in a multi-jurisdiction dispute, including the type of legal system (i.e. common law or civil law), the cost and pace of litigation in the jurisdiction, and the effectiveness of enforcing a judgment. Mr Cho also emphasized how lead counsels in MNCs now have to play the role of ‘coordinator’ in multi-jurisdiction disputes, having to manage the entire global litigation and coordinate with in-house counsels, local counsels, external counsels, and other stakeholders within the MNC, so as to ensure efficient and cost-effective dispute resolution.

Conclusion

What Lies Ahead?

It is undeniable that the internationalisation of IP has brought about significant benefits to the global economy, and is unlikely to go away anytime soon. However, this new economy reality has severely exposed the failings of traditional IP laws – built on concepts of territoriality – to meet the needs of a global international market. This has forced courts and legislatures around the world to address the problem in a number of ways. The traditional approach has been to apply private international law, in order to determine issues of jurisdiction, liability and enforcement – this approach however, is complex and can lead to unpredictable outcomes.1 In some jurisdictions, courts have developed doctrines for the limited extraterritorial application of domestic law.2 In the worst case scenario, a single IP dispute can spawn multiple proceedings in multiple jurisdictions on the same basic issues, as witnessed by the series of ongoing disputes between Apple Inc and Samsung Electronics.

As cross-border IP disputes become ever more prevalent, there exists a greater need today for harmonisation of IP laws to remove or reduce the legal boundaries faced by both the courts and parties involved. Removing legal boundaries can potentially reduce the high costs associated with multijurisdictional proceedings and bypass complex issues of private international law.

To that end, many speakers at GFIP 2015 spoke at great lengths about the various harmonisation efforts being undertaken globally. Dr Stanley Lai SC of Allen & Gledhill LLP for example, in his presentation on “Singapore’s Role in the Global IP Regime” highlighted the various ASEAN initiatives such as the ASEAN Patent Examination Co-operation (ASPEC), and the ASEAN Economic Community; Mr Hitoshi Ito of the Japanese Patent Office (JPO) highlighted the various work-sharing plans (such as the Patent Prosecution Highway) undertaken by the JPO; Dr Eleonora Rosati, IP Law Lecturer at the University of Southampton, in her presentation highlighted the EU initiative for a “Digital Single Market” strategy.

Harmonisation is then a question of when and how, and not if. In this respect, two schools of thought have emerged. Some have argued that a move towards a harmonisation of substantive laws is the way forward. The World Intellectual Property Organisation (WIPO) for example, had previously tried to form a Standing Committee on the Law of Patents, while in 2013, the European Patent Office had successfully entered into office a Unitary Patent scheme, and are in the midst of working towards a Unified Patent Court.

Others however, have fallen on the other side of the debate, arguing that a move towards procedural harmonisation is more realistic and achievable. One proponent of the latter camp is Dr Francis Gurry, Director General of WIPO, who expressed the view at GFIP 2015 that IP harmonization was more likely to be limited to procedural subjects, at least in the short run.

The exact form of such harmonisation is unfortunately, beyond the scope of this article. However, regardless of the eventual form in which harmonisation will take, it remains clear to these authors that some form of harmonisation is necessary in the near and immediate future if IP laws are to remain relevant to the global economy.

This article was originally published in the October 2015 issue of the Singapore Law Gazette.

[1] For example, the outcome of any such litigation would depend on the arbitrary differences between the requirements for liability, defences, etc in each jurisdiction. For a further illustration and discussion, see K Weatherall “Can Substantive Law Harmonisation and Technology Provide Genuine Alternatives to Conflicts Rules in Intellectual Property” [2006] UMelbLRS 4 at pg 2.
[2] See for example, G W Austin, “Importing Kazaa – Exporting Grokster” (2006) 22 Santa Clara Computer and High Technology Law Journal 577. Available here: http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1412&context=chtlj


Contributed by

Mark Cheng
Deputy Editor, The IPA Beacon
Legal Counsel, IP Academy

Mark Cheng is a legal counsel at the IPA.

Before joining IPA, Mark was in private practice in an international firm where he specialised in dispute resolution, criminal and civil litigation, mediation, and arbitration proceedings. Through his practice, Mark has experience working with a wide range of disputes ranging from workman compensation and personal injury claims, to multi-national companies in cross-jurisdictional disputes. Mark has also had experience with the corporate drafting and reviewing of contracts, including high-profile employment agreements and multi-million dollar escrow agreements.

Outside of practice, Mark has a keen interest in the intersections between intellectual property law and the areas of music, art, and technology, and has furthered that interest in his time with IPA.

Edna Ong
Associate Editor, The IPA Beacon
Legal Counsel, IP Academy


Prior to joining IPA as Legal Counsel, Edna practised at a Singapore law firm specialising in TMT. During her stint there, Edna negotiated, drafted and reviewed various types of commercial and IP contracts which include shareholders’ agreements, employment contracts, media contracts, licensing and franchise agreements. Amongst all the different types of IP, Edna is particularly interested in Trade Marks and Copyrights. Outside of work, Edna enjoys baking and cooking and aspires to be a domestic goddess one day.