BLAW511

INTERNATIONAL
BUSINESS LAW
AND ETHICS

Fall 2021
10
INTELLECTUAL
PROPERTY RIGHTS
REVIEW
INTERNATIONAL
SERVICES: ENGAGING
PERSONNEL ACROSS
BORDERS
 1. What are the 2 main legal forms for engaging personnel
in international business?

2. In terms of liability and risk, what is the difference

between the 2 legal forms?

3. Which legal form is usually used when engaging a

REVIEW

foreign:
 sales representative?
 commercial agent?
 distributor?
 tax adviser?
 business consultant?
 manager of a branch office?
4
 4. What are some of the terms in a hiring contract which
would show that the relationship between the parties is
an ‘independent contractor’ arrangement?

5. What is the relationship between the parties in a

distribution arrangement?

6. In a distribution agreement:
REVIEW

a) what does the ‘territory’ refer to?

b) what is ‘passive selling’?

c) what does a ‘retail price maintenance’ clause do?

d) why does a licensor include a ‘compliance’ clause?

e) why should the agreement have a fixed term?

f) what is a ‘best efforts’ clause? 5

1
INTRODUCTION
 WHAT IS INTELLECTUAL PROPERTY?

 Intellectual property (IP) is a form of intangible property

in ‘creations of the mind’.
INTRODUCTION

 Law grants intellectual property rights (IPR) over only

certain kinds of ‘intellectual creations’: e.g.

 technology (e.g. computer code)

 artistic works (graphic, musical, performance, etc)
 technical schemes and drawings e.g. circuit layouts
 scientific inventions
 business processes.

7
 WHAT IS INTELLECTUAL PROPERTY?

 Owners of IPR may:

 use
INTRODUCTION

 make income from

 sell

 license

all or part of their interest in the IP.

 Transfer of IPR is the most rapidly growing form of

international business.
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 INTERNATIONAL CONTEXT

Transfer of technology across national borders is intensely

debated:

1. advanced developing countries (e.g. China, India, Brazil)

want access to (expensive) technology usually owned by
INTRODUCTION

companies in developed/industrialised countries) to

produce products which are competitive on the global
market.

2. ‘stealing’ leading edge technology is common among

industrialised countries -
e.g. attempted theft of IBM computer technology by
Japanese companies (Mitsubichi, Hitachi): allowed
Soviets to use the technology to make quieter submarine
propellers.
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 IPR UNDER NATIONAL LAW

 IPR are created and regulated under national law

 Legal protections apply within a national territory

INTRODUCTION

How do you protect your IPR when you are doing

business internationally?

10
 IPR UNDER INTERNATIONAL LAW
 Some national IPR are recognised – and protected -
under international law: e.g.

 Berne Convention on Protection of Artistic and

INTRODUCTION

Literary Works (1886)

 Paris Convention for Protection of Industrial

Property (1967)

 Agreement on Trade-Related Aspects of Intellectual

Property 1995 (TRIPS)

 World Intellectual Property Organisation (WIPO):

facilitates international IPR protection e.g. maintains
international register of IPRs and single application
process. 11
 TRIPS
GATT 1994 extended GATT principles to trade-related
intellectual property rights under TRIPS:

 countries to make clear and stable rules for foreign

INTRODUCTION

parties to protect their IPRs

 most favoured nation principle: TRIPS countries must

ensure that holders of IPRs of any other country are
given no less favourable treatment than IPR holders of
any other country

 national treatment principle: TRIPS countries must treat

foreign holders of IPRs in the same way as domestic
ones.

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2
FORMS OF IP
PROTECTION
 TYPES OF INTELLECTUAL PROPERTY

What are the 4 main types of intellectual property?

FORMS OF IPR

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 TYPES OF INTELLECTUAL PROPERTY

1. Copyright protects creator’s rights in creative works

(artistic, literary, musical, technical)

Patent: protects ‘new’ inventions

FORMS OF IPR

2.

3. Trademark: protects words, images or symbols used in

commerce to identify and distinguish products in the
market.

4. Trade secrets / know how: limited protection for

‘secret’ commercially valuable information.

15
 WHAT IS COPYRIGHT?
 Protects:
 original works
 in a tangible (recorded) form
from unauthorised use (copying, distributing or
COPYRIGHT

modifying).
 Copyright is recognised on creation of the work – but
 can also be registered in many countries
 in some countries registration is mandatory.
 No international copyright protection – copyright
owners must apply for registration in each country
where they want protection.
16
 COPYRIGHT UNDER INTERNATIONAL LAW
 TRIPS requires all GATT-WTO member states to sign the
Berne Convention:

 Berne Convention grants copyright protection for

minimum 50 years
COPYRIGHT

 Covers literary, dramatic, musical, choreographic, pictorial,

motion picture and architectural works, including:
 literary works (including computer software,
programs, databases) protected until 50 years after
death of author
 Audi-visual works (photos, cinema, sound
recordings) protected until 50 years after
publication.
17
 COPYRIGHT UNDER INTERNATIONAL LAW cont’d

Universal Copyright Convention (1952):

 grants right of ‘national treatment’ to copyright
owners
 no need for foreign copyright owners to register
COPYRIGHT

copyright if they give adequate notice of their rights:

e.g.
© 2019 Big Bird Inc.

Note: some member states have opted-out of this

provision e.g. in the US, registration of copyright is
required.

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 WHAT IS A PATENT?

 An exclusive right granted for an invention which is:

 a product or a process

 a new way of doing something or a new

PATENTS

technical solution to a problem:

i.e. it is not ‘prior art’ (part of the body of

knowledge in the field )

 Patents are protected once registered.

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 REGISTERING A PATENT

 The first person to register a product or process is given

monopoly rights under patent law.

 To register a patent:
PATENTS

 submit application to national Patents Office

 include technical details about the invention
 details are put on public register so anyone can
see it and can challenge the application if they
consider the knowledge:
1. already exists and/or
2. has already been patented.
20
 NATIONAL PATENT PROTECTION
 Under Paris Convention, member state laws must protect:
 new, inventive products and processes capable of
industrial application in any field of technology,
including pharmaceuticals and agricultural products
PATENTS

 for at least 20 years (subject to payment of

maintenance fees – if not paid, patents will lapse).

 Patents grant exclusive rights within a national territory –

i.e. a monopoly which prevents others from commercially
exploiting the patented invention in that country.

 Note: EU has created a Unitary EU Patent - an alternative

to registering 27 member state patents.
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 INTERNATIONAL PATENT PROTECTION
 No international recognition of national patents:
separate patent applications required for each country.

 Paris Convention: rules for treatment of foreigners

under patent laws of member states:
PATENTS

 ‘right of national treatment’ prohibits discrimination

against foreign holders of local patents

 ‘right of priority’ are granted to foreign patent

holders who file a patent application in the foreign
country within 12 months of their home country
application.

22
 WHAT IS A TRADEMARK ?
 A word, expression, symbol, logo, image or design used to
identify and distinguish the products of one business
from others.
 Trademark law also protects other types of distinctive
TRADEMARKS

marks:
1. Service marks: same as a trademark but for services

2. Certification marks: identify goods or services that

meet a particular standard (quality, content,
manufacturing method, etc)
3. Geographical mark (country of origin): identifies
goods originating in a specific region (attributed with a
particular reputation, quality, etc)
23
 TRADEMARK PROTECTION
 Not limited to a specific period (cf. copyright, patents):
duration of protection depends on actual commercial use:
it can last forever!

 Trademarks can be registered – not usually mandatory.

TRADEMARKS

Animal Crackers ™ = unregistered

Apple ® = registered
 Advantages of registration:
 gives notice to the public of the mark
 get exclusive rights to use the mark for specific
categories of products or services
 get priority over other non-registered or later
registered marks 24
 TRADEMARK PROTECTION

 Advantages of registration:

1. gives notice to the public of the mark

TRADEMARKS

2. registered owner gets exclusive rights to use the

mark for specific categories of products or
services

3. registered owner gets priority over other non-

registered or later registered marks

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 INTERNATIONAL TRADEMARK PROTECTION

 TRIPS: trademark protection for minimum of 7 years-

renewable indefinitely

 WIPO facilitates registration in multiple countries through

TRADEMARKS

a single registration form under the Madrid Agreement.

26
 INTERNATIONAL TRADEMARK PROTECTION

 Paris Convention:

1. unused trademarks expire after 3 years (unless due

to events outside owner’s control e.g. import
TRADEMARKS

restrictions or government regulations)

2. gives holders a right of priority to register their

trademarks in foreign countries (if they apply in the
foreign country within 6 months after registration
in their home country)

3. owners of ‘well-known’ trademarks can block or

cancel unauthorised registration of a mark in
another country.
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 TRADE SECRETS and KNOW-HOW

 TRIPS: member states must give perpetual protection to:

1. trade secrets (scientific/technical information)
TRADE SECRETS

2. know-how (general commercial expertise)

only as long as they are kept secret.

 Know-how is also a form of commercially valuable

knowledge which can be protected under:

 national trade secret laws or

 private contract (confidentiality clauses).

28
 REMEDIES FOR BREACH OF IPRS

 REMEDIES for breach of copyright, trademarks and

patents vary from country to country.

 Include:
REMEDIES

 Injunctions (order to prevent someone doing

something e.g. using a protected product,
mark,work, process, etc)

 damages (compensation)

 seizure of counterfeit or pirated goods (e.g. by

customs officials)

BUT in some countries, little practical enforcement of

IPR.
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3
LICENSING OF IPR
 LICENSING OF IPR

Commercial use of IPR covers a range of transactions –

e.g.

 research and development in a foreign country

LICENSING

 giving rights to use technical information to a

foreign subsidiary or joint venture for a specific
project

 commercial licensing arrangements: owner gives

rights to a foreign licensee to manufacture, market
and/or sell owner’s products.

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 LICENSING OF IPR

 Most common legal mechanism involving the transfer

of IPR to another party:

 licence agreement (contract)

LICENSING

e.g. to use IPR in manufacture and/or sale of

goods or services

 for a licence fee – payable as:

 a lump sum, or

 royalties calculated on volume (% of the

number of products manufactured or sold).
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 LICENSING

 Advantages of licensing: fewer legal and financial

risks than direct foreign investment – e.g.

1. avoid tariffs and customs duties

LICENSING

2. avoid obligations under tax, employment and

environmental laws

 Disadvantages of licensing: IPR holders may lose

control over confidential information – risk of losing
their competitive advantage if a licensee/transferee
discloses the information.

33
 REGULATION OF LICENSING

 Regulation of licensing varies from country to country

 Especially in developing countries: national laws try to give

more rights to the licensee and therefore benefit the local
economy (e.g. promote local technological development).
LICENSING

 Regulations can include:

 government review and approval of licence terms
 registration of licence agreement
 prohibition of certain terms considered to be:
- anti-competitive (e.g. EU)
- disadvantageous to the licensee or local economy
(especially in developing countries) 34
4
SAMPLE LICENCE
TERMS
 COMMON LICENCE TERMS
 Grant clause (defines licensee IP rights; exclusivity; grey
market/parallel imports; reservation of rights)
Best efforts clause (minimum sales and/or marketing spend)
LICENSING AGREEMENTS


 Payment (calculation of royalties; guaranteed consideration)
 Grant-back (licensee improvements– title and right to use)
 Term (duration; option to renew)
 Termination (mutual - both parties; unilateral – licensor only)
 Post-termination (non-compete: duration and territory)
 Confidentiality (including licensee’s key personnel)
 Intellectual property rights (
 Compliance with laws (usually licensee’s obligation)
 Limitation of liability (e.g. product liability; breach of third
party IP)
 Boilerplate (standard) clauses (entire agreement, applicable
law, dispute resolution, etc) 36
 1. Grant of Licence
The Licensor hereby grants to the Licensee the
exclusive right to use the Patents, Trademarks and
SAMPLE LICENCE TERMS

Brand Name to manufacture, market and sell the

Licensed Products within the Territory during the
Term of this Agreement.

2. Term
The Term of this Agreement is for a fixed period of 3
years starting on the Commencement Date.

37
 3. Grant-back
[balanced clause: both parties have rights]:
The Licensee grants to the Licensor a non-exclusive,
SAMPLE LICENCE TERMS

perpetual, royalty-free licence to use all intellectual

property rights in any improvements to the Patents
made by the Licensee during the Term.

[alternatively: a ‘pro-Licensor’ clause]:

The Licensee agrees to transfer to the Licensor, at no
additional cost, all intellectual property rights in any
improvements made by the Licensee to the Patents
during the Term.

38
 4. Royalties
4.1 Guaranteed Consideration: The Licensee shall pay to
the Licensor the sum of 8,000 USD on the last day of
each quarter during the Term. This sum will be
SAMPLE LICENCE TERMS

applied against the Royalty Payments paid under

clause 4.2.
4.2 Royalty Payments: The Licensee shall pay a sum
equal to 5% of all Net Sales of the Licensed Product
each quarter.
4.3 Net Sales shall mean gross invoice price billed to
customers each quarter, less actual quantity discounts
and actual returns.

39
 5. Accounting and Record-keeping
5.1 Licensee’s records
Within 30 days of the end of every month, the Licensee
SAMPLE LICENCE TERMS

must give to the Licensor complete and accurate statements

of the number of Licensed Products sold, their gross sale
prices, and any deductions from the gross sale prices.
5.2 Inspection of records
The Licensee must keep all records relating to the Licence at
its place of business for at least 2 years after the end of the
Term. These records shall include purchase orders,
inventory records, invoices, correspondence, banking and
financial records, and any other records relating to the
Licensed Products. These records and accounts shall be
available for inspection and audit by the Licensor at any
time during or after the Term [during reasonable business
hours and on giving at least 3 business days’ written notice
to the Licensee]. 40
 6. Best efforts
6.1 Quality
The Licenses must use its best efforts to manufacture the
SAMPLE LICENCE TERMS

Licensed Products to the Licensor’s and to ensure that the

products are of the highest quality possible
6.2 Marketing and sales
The Licenses must use its best efforts to maximise the
sales of the Licensed Products within the Territory and for
that purpose to spend a minimum of 15,000 USD per
quarter on marketing.

41
 7. Indemnification
The Licensee shall indemnify the Licensor against any loss
or liability arising out of any claims brought against the
Licensor by reason of:
SAMPLE LICENCE TERMS

7.1 any unauthorised or improper use by the Licensee of

any of the Licensor’s trademarks, copyright, patent,
design, or process not specifically granted or approved
by the Licensor,
7.2 any non-compliance by the Licensee with laws or
regulations, and
7.3 any defects in the Licensed Products attributable to the
Licensee’s manufacture of the Licensed Products.

42
 8. Compliance
The Licensee shall manufacture, sell, and distribute the
Licensed Products in accordance with the terms of this Licence
Agreement, and in compliance with applicable government
SAMPLE LICENCE TERMS

regulations and industry standards.

43
 9. Confidentiality
The Licensee shall use its best efforts to maintain the
confidentiality of the Licensor’s confidential information
SAMPLE LICENCE TERMS

and to prevent unauthorised access, reproduction, use or

disclosure of that information. It will restrict access to key
employees on a need-to-know basis.

44
 10. Copyright and Trademark Protection (Infringement)
7.1 The Licensee shall put the proper copyright notices and
trademarks on each Licensed Product sold under this
Agreement, and on all advertising, promotional, and
SAMPLE LICENCE TERMS

packaging material.
7.2 The Licensee shall promptly notify the Licensor in writing of
any infringements by third parties of the Licensed Property.
7.3 The Licensee shall assist the Licensor at the Licensor’s
expense in protecting and maintaining the Licensor’s rights in
the Licensed Property.
7.4 The Licensee agrees to cooperate with the Licensor in
connection with any claims or suits relating to infringements
on the Licensor’s property rights.

45
 11. No sub-licences
This Licence Agreement is personal to the Licensee. The
Licensee shall not sublicense, franchise or transfer any of the
rights granted to the Licensee under this Agreement.
SAMPLE LICENCE TERMS

12. Independent Contractor

The Licensee is an independent company. Nothing in this
Agreement is intended to represent that the Licensee is to
act as an agent or partner of the Licensor.

46
 13. Termination
The Licensor has the right to terminate this Agreement if any of
the following occurs:
(a) The Licensee fails to deliver or maintain the required product
SAMPLE LICENCE TERMS

liability insurance policy;

(b) The Licensee is late in any payments due under this
Agreement;
(c) The Licensee fails to provide access to the premises or the
records required to be maintained under this Agreement;
(d) The Licensee fails to comply with applicable laws, regulations,
or industry standards;
(e) The Licensee does not commence in good faith to
manufacture, distribute, or sell the Licensed Products in the
Licensed Territory,
(f) The Licensee delivers or sells Licensed Products outside the
Territory or knowingly sells Licensed Products to a third party
who the Licensee knows intends to, or reasonably should
suspect intends to, sell or deliver such Licensed Products
outside the Licensed Territory.
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11. FOREIGN DIRECT INVESTMENT
INTERNATIONAL DISPUTE RESOLUTION
Required reading:
Textbook ch 4 pp 107-8, pp 114ff
ch 20 pp 581-5955

HOMEWORK BEFORE NEXT CLASS