Protecting IP Rights in International Transactions

Regardless of the chosen mechanism of “going global,” before an innovation-based company initiates any international operations, it is imperative that it ensures its intellectual property, IP rights, are adequately protected.  Due to the mercurial nature of IP assets and the differing rules and varying degrees of international IP rights protection, American IP owners are particularly vulnerable when they transact business internationally.  However, many risks can be successfully mitigated through a well-planned and executed global IP strategy.

International IP Rights Protection

Contrary to popular belief, there is no comprehensive international IP rights enforcement system. IP rights that exist in the United States essentially end at American borders.  To enforce IP rights internationally, in a foreign country’s jurisdiction, intellectual property owners must avail themselves of the procedures and laws of each foreign nation.  Since each nation has its own laws, protocols, and systems of enforcement, this can be a complicated and unfamiliar process.

There is no single “magic bullet” when it comes to protecting IP rights abroad. A prudent global IP strategy will involve a range of tactics and the application of cost-benefit principles. The following are some suggestions for how to implement a successful international IP rights strategy.

Identify IP Assets and Secure Direct and Indirect IP Protection

The first step is to properly identify all IP assets. Many believe that only large, “high tech” companies have IP, but all businesses have IP assets. IP assets can include names, brands and logos (trademarks and service marks), designs, websites and software (copyright), inventions, ideas and processes (patent & trade secrets).

Once a company has identified and inventoried all of its IP assets, it needs to take action to protect them. There are two basic means of protecting IP: direct and indirect. Whenever possible, it is advisable to employ both direct and indirect means to protect IP rights, both in the United States and internationally.

Direct IP protection refers to using contracts and individual relationships to protect IP rights, such as using non-disclosure agreements with anyone exposed to the secrets (including employees). This allows IP owners to define the scope of their IP rights and identify when an infringement occurs. However, a key limitation is that IP owners can typically enforce their IP rights against only those with whom they have contractual relationships.

Indirect IP protection involves taking advantage of government registration protections to secure IP rights against a much broader group of would-be infringers. Due to the broad scope of protection, a key limitation of indirect IP protection is that it is difficult to spot infringement, particularly when the infringing activity is isolated or remote. In addition, because IP rights owners must register internationally, in each country where they seek IP protection, this can become an expensive process and an administrative burden.

The International Impact of American IP Rights

For the most part, all rights granted to IP owners under American law stop at the American border.   However, a number of international treaties and conventions provide for some degree of protection as American IP owners and their IP rights move internationally, across borders.

For example, the TRIPS Agreement (“Trade Related Aspects of Intellectual Property”) requires all member nations of the World Trade Organization (WTO) to provide some basic levels of IP protection such as requiring minimum time periods of protection, and mandating that foreigners have the same rights provided to domestic companies to register and enforce their IP rights.

In addition to TRIPS, several other treaties and conventions make international IP protection more practicable, such as those allowing American IP owners to claim the earlier priority filing dates based on their American registration applications and those providing for consolidated multi-national IP registration application filings.

Absent those special privileges afforded by treaty, if American IP owners want IP protection in other countries, they must avail themselves of the IP laws and registrations provided by each of those countries.

Policy and Enforcement of IP Rights

Consistent with American IP laws, the burden of policing and enforcing IP rights internationally rests with the owners of the IP.  IP owners must be vigilant in discovering IP infringement and take swift action to stop it.

As previously discussed, an American IP owner’s rights in another country will be defined by the laws of that country.  For example, if an American company wishes to stop infringement of its trademark in Japan, it must ensure that its IP is afforded IP protection under Japanese law, and then must consult Japanese law to discern what types of enforcement Japan provides.  Moreover, any legal action against the infringer will likely take place in Japan.

However, if IP infringement is caused by a manufacturer, distributor, vendor or some other party with whom the American IP owner has a contract, then the terms of the contract (including choice of law and forum) would impact the rights and remedies the American IP owner might have. Practically speaking, the ability of an American IP owner to enforce the contract will depend on the terms of the contract itself as well as the location of the infringer and its assets.

Stopping Foreign-Made “Knock-Offs” from Entering the United States 

A significant concern for American IP owners is the rampant IP counterfeiting and piracy that occurs outside the United States. According to the American government, American companies lose between $200 billion and $250 billion in sales annually due to international IP rights counterfeiting.

Although there is little that American law and legal authorities can do to directly disrupt international counterfeiting and piracy, Customs and Border Protection (CBP) officers and import specialists are aggressively working together to intercept shipments containing counterfeit and pirated items once they arrive at the American border.

In the 2010 fiscal year alone, CBP seized counterfeit and pirated goods with a total domestic value of $188.1 million and a manufacturer’s suggested retail price of $1.4 billion. The total domestic value of seized counterfeit products that presented potential safety or security risks was $42 million.

To obtain the assistance of CBP in stopping goods from entering the United States which would infringe on their trademarks, trade names or copyrights, American IP owners can record their IP with CBP through a relatively simple and inexpensive recordation process available online.

Stopping patent–infringing imports is more complex. Through a process involving the United States International Trade Commission (ITC) known as “Section 337,” holders of American patents can request the ITC issue an order excluding patent-infringing products from importation into the United States. The ITC process can be lengthy and expensive, but it can be effective in stopping patent-infringing goods from entering the United States.

(This post is an excerpt from a more comprehensive article published in CURRENTS International Trade Law Journal which I co-wrote with Sophilia Hsu.)

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