A session on India-US Economic Relations was held in New Delhi yesterday wherein Adewale (Wally) Adeyemo, the Deputy Assistant to the US President and Deputy National Security Advisor for International Economics, was quoted as saying,
“To be frank, we are far apart on number of issues with regard to trade and investment with India. We feel our colleagues in India have not been as ambitious (on concluding BIT) as we want them to be but we remain open.”
Given that the bilateral trade between the two countries is expected to reach US$ 500 billion in the near future (a four-fold jump from US$ 35 billion in 2015), the US is eager to seize the opportunity to trade with India, one of the fastest growing economies among the G20 countries. Negotiations over a BIT between India and the US first commenced in 2008.
As always, ‘protection of intellectual property rights’ remains a thorny issue. As Adeyomo notes,
“I do think there are issues where we can find ways to work together. For example digital issues, with regard to IPR this is the place both have interest in trying to find solutions. Finding places to work together will help us in finding solution to more contentious issues like IPR,”
Earlier this year, India had faced public condemnation over allegations that the Indian government had given secret assurance to the US that India would not be granting compulsory licences on US patented drugs. Shortly thereafter, the US released its Special 301 report which placed India on the Priority Watch List (list of countries which have “serious intellectual property rights deficiencies”).
Adeyomo’s statement is indicative of yet another instance of the US trying to pressure the Indian government to tighten IP protection in the country, this time through the BIT route.
Intellectual property is covered as an ‘investment’ under BITs and any State measure which adversely affects the investor’s IP can trigger investment arbitration against the host-state under the investor-state dispute settlement (ISDS) mechanism in BITs. It is not uncommon for investors such as US companies to challenge a host-state’s IP laws on the ground that their intellectual property (or investment) is not adequately protected in the host-state. This was in fact the legal basis for Philip Morris’ claim against Australia in an ISDS proceeding, where Philip Morris, a US tobacco company, had challenged Australia’s plain packaging laws for cigarettes. While the investment arbitral tribunal in Philip Morris declined jurisdiction to hear the matter, such investor claims, if successful, can compel States to withdraw regulatory measures (including measures addressing public health concerns).
India, on its part, has been more proactive in its attempt to avert future ISDS claims; in December 2015, the Indian government unveiled a revised version of the model India BIT, which aims at preserving the host State’s right to regulate. However, the revised model BIT sways the pendulum too heavily in favour of the host State. As investment law expert, Dr. Prabhash Ranjan notes, the model India BIT excludes wholly the issuance of compulsory licences and revocation of IPR from being challenged under the ISDS.
Given that intellectual property is integral to any trade negotiation between India and the US, it is a no-brainer that the US would not agree to the IP protection clauses in the model India BIT in its current form. Both sides, would have to meet each other half-way to conclude the India-US BIT.
If India gives in to the US demand to strengthen the IPR regime in the country, it could make it even more difficult for India to grant compulsory licences and would adversely affect the Indian generic drugs industry.
Earlier this week, the European Commission (EC) in an ongoing antitrust investigation accepted binding commitments from Paramount Pictures Corporation (Paramount) to not enforce restrictive copyright licensing conditions against Sky TV. In this two-part series, I will analyze how similar agreements to not enforce IP are useful in preventing competition harm caused due to injunctions in SEP cases.
A short background on Paramount v. Sky (or Pay-TV case) is in order:
Paramount, a Hollywood film studio, entered into an agreement with Sky UK to license the right to broadcast Paramount’s content in UK & Ireland. Sky UK is a subsidiary of Sky Plc( a European satellite and internet TV broadcasting company) which offers subscription-based television content to consumers in Europe. One of the conditions in the agreements related to geo-blocking whereby Sky was prohibited from letting consumers in other EU countries access the content either through satellite TV or internet.
In 2015, the EC initiated an anti-trust investigation against Paramount and five other Hollywood film studios on the ground that the geo-blocking condition is restrictive because it limits Sky’s ability to broadcast the content outside the UK, and consequently affects cross-border competition among TV broadcasters in Europe. The investigation was in line with Europe’s Single Digital Market strategy which envisions doing away with the 28 different EU-member state laws currently prevalent in Europe. One of the benefits of the Single Digital Market strategy (which is still in its blueprint form) is that it will harmonize copyright laws across the EU; this means that if I, as a German resident, can legally download a French movie (under German copyright laws), I need not worry whether I am infringing the copyright laws of France. In other words, the same copyright law would apply across all EU-member states.
Under the geo-blocking condition in Paramount’s licensing agreement, a user would not be able to subscribe to the content which Sky broadcasts in the UK if they are a resident of any EU state other than the UK and Ireland. The reason why Hollywood film studios or other video content-providers would introduce such licensing conditions is to charge different rates from users in different countries (This is probably why Netflix has geo-blocked its content in India).
While the investigation was on-going, Paramount agreed not to bring IP infringement claims against Sky UK in the event that Sky UK accepts unsolicited subscription requests from users outside of UK & Ireland. While the Pay-TV case is settled as far as Paramount is concerned, the investigation is on-going with respect to the five other Hollywood movie studios.
It bears noting that Paramount committed to not enforce its IP right because otherwise it risked an ‘abuse of dominant position’ finding by the EC. In this case, Paramount has voluntary undertaken not to file injunctions/restrain Sky if Sky breaches the licensing conditions; if Paramount were to file a case against Sky for breaching the restrictive licensing conditions, Paramount’s commitment to the EC would act as an estoppel against Paramount. The Pay-TV case is important in the context of FRAND licensing of SEPs because (as Chilling Competition notes) enforcing intellectual property claims in SEP licensing cases can amount to competition harm. The relevant case law on this point is Huawei v. ZTE wherein the main issue referred to the European Court of Justice was:
‘When is seeking of injunctions by SEP-holders when they have agreed to license their SEPs to third parties on FRAND terms amount to abuse of dominant position?’
The Court was of the opinion that while enforcement of IPR by itself is not an abuse of dominant position, an abuse will occur only when the following exceptional circumstances are met:
The patent in question is indispensable
The patent achieved an SEP status only when the SEP-holder agreed to license the patent on FRAND terms
The Court held that the undertaking by the SEP-holder creates legitimate expectations on the part of licensees (standard -implementers) that the SEP-holder would license the SEP on FRAND terms, and if the SEP-holder subsequently refuses to license their IP, this would amount to abuse of dominance.
While the ECJ was clear that FRAND licensing commitments do not bar SEP-holders from enforcing their IP claims (including by filing for injunctions), the SEP-holder must meet a greater burden to justify injunctions against the standard-implementers in infringement cases. The specific requirements for grant of injunctions in SEP infringement cases identified by the ECJ were as follows:
Prior notice must be given by the SEP-holder to the licensee identifying the SEP and the manner in which it is being infringed
Where the alleged infringer agrees to obtain a license for the SEP, the SEP-holder must communicate to the willing licensee a “specific written offer” which states the amount of royalty payable by the licensee and the method of calculation of such royalty.
The alleged infringer is then free “to respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics”.
Where there is no agreement between the SEP-holder and the alleged infringer, “the parties may, by common agreement, request that the amount of the royalty be determined by an independent third party“.
Finally, “an alleged infringer cannot be criticised either for challenging, in parallel to the negotiations relating to the grant of licences, the validity of those patents and/or the essential nature of those patents to the standard in which they are included and/or their actual use, or for reserving the right to do so in the future”. In other words, in licensing the SEP to the alleged infringer, the licensing agreement shall not contain any clause to preclude the licensee from challenging the validity of the patent or its status as an SEP either at the time of licensing or in the future.
[For an analysis of the ECJ ruling in the Huawei case, please refer to Chilling Competition’s post]
In Part II, I analyse how injunctions in SEP cases amount to abuse of dominant position by the SEP-holder; the trend of Indian courts in granting injunctions in SEP cases; and alternate ways to fix the competition harm created by injunctions (for instance, by introducing final offer arbitration to determine FRAND royalties in SEP disputes).
This summer, I attended a four-week long summer school in international trade law because it seemed like a fun way to gain expertise in another area of law and a good getaway from the Chennai summer.
Every year, the Centre for WTO Studies (an independent think-tank on WTO law which is housed at the Indian Institute of Foreign Trade, Delhi) conducts a one month intensive academy on International Trade Law & Policy. The Academy is conducted by CWS jointly with the World Trade Institute in Berne, Switzerland.
This year the Academy was conducted from 23rd May to 17th June. What drew me to the course was the eclectic mix of modules on offer: Basic Principles of GATT/WTO; Agreement on Agriculture; SPS & TBT; Trade & IPR; Trade Remedies; Investment Law; and Trade in Services. The faculty that was reigned in for this module comprised international trade experts, policy-makers, lawyers, WTO staff and economists; many of the resource persons teach the Master of International Law & Economics (MILE) programme and the International Economic Law & Policy (IELPO) programme at WTI and the University of Barcelona respectively; both these programmes are highly coveted among persons looking to specialize in International Trade.
The course accommodates 30 students and law professionals every year and the process for short-listing candidates is through an essay on a topic related to International Trade. The course fee is 10,000 for students and 25,000 for legal professionals. There were two modules offered every week (except for Week 3 which was solely devoted to Trade Remedies) from Monday to Friday, with each module covered in 2-3 days. Legal professionals had the option to choose which weeks they want to attend the course (depending on which module was of interest to them) and alternately pay 7000 per week instead of attending the full course. Radhika & I decided to attend the entire duration of the course.
We arrived in Delhi a day before the course was to begin; participants who were not from Delhi were provided accommodation in the IIFT hostel on a twin/triplicate sharing basis on an additional payment of 5,000 per person. Radhika & I had a room to ourselves which was actually quite spacious with an en suite bathroom shared between two hostel rooms.
My first day was quite memorable…we arrived in Delhi on 22nd afternoon in the midst of infernal summer heat (it had actually been raining in Chennai a few days before we were to leave for Delhi) and I found myself wondering whether we had indeed made the right decision to take a month-long break from our work to attend the summer school.
When I look back, I think that my apprehension at that time stemmed from the change that those 30 days would prove to be in my life…this was another instance when I was moving out of my comfort zone to venture in the unknown…I didn’t know at the time that the summer school was the best thing that could have happened to me!
While in my hostel room, I already started feeling home-sick for Chennai and I missed the familiar warmth of my place in Chennai…it was then that I saw a poster which was stuck in my hostel room:
Sometimes the right words at the right time can be very powerful. It struck me in that moment that I could choose to either continue feeling down, or I could use my time at IIFT to do something purposeful…
A few days before the Academy was to start, participants were given access to a ‘Virtual Classroom’ where the readings for each module had been hosted. Participants were expected to read and come to class (this is the teaching pedagogy which is adopted in most universities abroad, where students do compulsory readings before a topic is discussed in class). I spent the remaining day doing my readings for the class on 23rd…at night, the weather grew stormy and it rained…this really lifted my mood and things really started to look up.
When I got up the next morning, I went for a short walk in the IIFT campus. While the campus itself is quite small, it is quite green and there is a beautiful garden in IIFT. I was much more positive about the course and I looked forward to my first class that morning.
When I entered the hall where the classes were to be conducted, I was really amazed to see that it was nothing of the sort of classrooms that we are so accustomed to in college…the hall was more like a conference room arranged to seat course participants in two concentric semi-circles, facing the lectern. It made us feel even more important to see our name plates at our seat.
The Academy opened with the first module on ‘Basic Principles of GATT/WTO’. The resource person for the module was Mr. Jan Bohannes, who has worked previously at the WTO, and is currently a lawyer at the Advisory Centre on WTO Law in Geneva. Half way into the first class, I knew that I was going to enjoy my time in the summer school. Unlike the lecture method of teaching that we are used to in Indian universities, classes in the summer school were quite interactive. The participants were a diverse mix of law students & professionals…there were students from various law schools in India (while most were pursuing their undergraduate studies, there were also students who were pursing their Masters or M.Phil). The class also had two participants from Afghanistan and one from Poland, making it “international” in the true sense. For some people, their previous exposure to International Trade Law was quite elementary while there were others who were specializing in the subject after studying it at the Masters level or having done fairly well at international trade law moots like ELSA and GIMC.
The classes would normally begin at 9:30 in the morning, with four classes scheduled in a given day. There were tea breaks and lunch during the day, where we were served gourmet-style Indian dishes. The lunch was a grand affair and the participants ate with the resource persons…it was a wonderful experience to be taught by persons who are considered experts in their field; some have even directly negotiated at the WTO and are part of the ongoing negotiations for some of the free trade agreements. Classes would be over by 4:30 every day and on some days, trade talks would be scheduled after classes where resource persons would speak on a contemporary topic in International Trade.
We also had a Career Talk during the summer school where we learned about the different career options in India & abroad for those who interested in pursuing a career in International Trade Law.
I enjoyed every day of the summer school. The classes were quite intensive given that each module had to be covered over a short span of 2-3 days, and I would read for the next day’s class every night. The IIFT library was open on weekdays and weekends. The Centre for WTO Studies has a section to itself in the library and has arguably the best books available in WTO Law and International Trade Law.
I also have fond memories of going to Sanjay Van (an urban forest located right opposite IIFT) where I would run on weekends.
Time really flew and before I knew it, the summer school had come to a close. In that one month, I had learnt far more in International Trade Law than I ever had in college, and I was convinced after doing the course that International Economic Law is a field that I definitely want to explore further and maybe even specialize in some day.
I would highly recommend the course to anyone with an interest in International Trade Law. It is every bit worth your time and money. While we were given participation certificates on the last day itself, we were also given a take-home exam at the end of the course which we had to complete within a month’s time. The idea behind the exam is that if you perform well, your course fee would be refunded (subject to a minimum class attendance requirement).
I got to meet wonderful people through the course and personally too, the summer school was an experience of moving out of my comfort zone. While most people choose to travel to take a break from the stress of their working life, the summer school invigorated me in a way that no holiday could. It introduced me to the wide and exciting field of International Economic Law & gave me better sense of where I want to go in my career.
For more information about the CWS-WTI Joint Academy, click here.