Originally from Investment Treaty Arbitration and International Law - Volume 11

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I. INTRODUCTION

The protection of intellectual property rights (IPR) in investment law has a distinguished pedigree: The first ever modern international investment agreement (IIA), between the Federal Republic of Germany and Pakistan of 25 November 1959, included by way of Art. 8(1)(a) the protection of “patents and technical knowledge” within the definition of investment. Today, most IIAs cover the protection of intellectual property. For example, Art.1 of the US Model BIT provides that “forms that an investment may take include…intellectual property rights.” This widespread protection is a recognition of the central importance of intellectual property rights in today’s knowledge economy, as well as the purpose of IIAs to protect and promote foreign investment.

The nature of IP rights in investment arbitration throws up many novel problems. Three examples: first whether the scope of specific IIAs extends to protecting intellectual property rights as qualifying investments under the instrument in question.   Second, the enforceability of a state’s international obligations such as the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), within the framework of an investor- state dispute and the role of national law.   Third, the scope of doctrines of public interest and proportionality, and the State’s reasonable right to regulate.

Three recent investor-state awards have considered these issues: Apotex v. United States,  Phillip Morris v. Uruguay,  and Eli Lilly v. Canada.  In all three of these claims the investor lost. Each of these cases was correctly decided.  But they were decided on questions of jurisdiction and liability and there has never been an investor-state case involving claims arising out of IP rights that has reached the damages phase where the Award is in the public domain. The appropriate remedial response to an established breach, the topic of this paper, therefore has to be addressed as a matter of principle rather than an application of precedent.