Originally from Investment Treaty Arbitration and International Law - Volume 11

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I. INTRODUCTION

The dependence on enterprise on data and intellectual property (IP) has never been greater.  “Big data”-based decision-making is now regularly implemented in an even broader range of business models, from online social media platforms to airline passenger seating.  The availability and accuracy of such data helps these firms generate profits and optimize costs both for themselves and as a service to other businesses.  In each case, IP forms a core asset of the business.  Businesses are using their IP rights as both a sword and a shield, excluding competitors from their benefit while using it to enhance the value of the enterprise’s own activity.  And, just as with financial assets and products, the legal system plays a particularly vital constitutive role for IP:  it recognizes, formalizes, and protects the inherent value of certain ideas and concepts as legal property rights and, in the case of registered IP such as patents and trademarks, it also facilitates its marketability and transferability to the benefit of the rights-holder.   However, foreign direct investment (FDI) involving IP-intensive enterprise in particular, by necessarily introducing the IP driving the enterprise into a new legal system, brings the host state’s intellectual property rights system into sharp relief.

The development of intellectual property has long been recognized at the national policy level as a driver of economic growth.  Various legal contractual solutions have arisen to balance the tension between a host state’s desire to attract technology-driven foreign investment and the technologist-foreign investor’s interest in protecting its intellectual property from undue access by co-venturers and business counterparties.  Technology transfer agreements such as turnkey agreements and technology licensing contracts have played an important role in facilitating FDI flows from IP-exporting states to IP-importing states in the latter half of the twentieth century by setting out concrete terms by which the IP owner would benefit from the sharing of its intellectual property with enterprises in the host state.