Latent Grounds in Investor-State Arbitration: Do International Investment Agreements Provide New Means to Enforce Intellectual Property Rights?

This paper examines a time, perhaps not far off, when the general shift to “ideational content” in the larger economy will be matched in FDI, and may result in an increasing number of disputes brought by investors against host states in which intellectual property rights are the central focus. To date, there have been no publicly reported decisions concerning IP-centered investment disputes. However, I predict this may change. The investor’s claim, while founded on an alleged violation of a particular provision of the international investment agreement (IIA), can implicate not only the investor’s privately held intellectual property rights, but also certain public rights under the IIA and a host country’s TRIPS agreement obligations. Combining the international legal framework with fundamental changes in the world economy that bring more focus to intellectual property rights, IP-based investor disputes could become more common, particularly as awareness continues to spread concerning the availability of investor-state arbitration procedures. The extent to which rights guaranteed through IIAs may be used to substantiate claims in the area of intellectual property is as yet unclear. In the intellectual property context, if these disputes arise, we can ask the following questions: (i) What types of intellectual property-based claims can investors bring? (ii) Do IIAs generate new possibilities for forum shopping when seeking IP enforcement? (iii) Do issues of arbitrability of intellectual property rights, which can arise in private international commercial arbitration, have any bearing in the investor-state arbitration context? (iv) How will existing standards in IIAs be applied in the IP context? (v) Is there a unique tension between investor rights and governmental regulatory discretion in this area? And (vi) Are there potential complications arising from overlapping and possibly competing international legal frameworks, in particular, obligations arising from the IIA and their possible intersection with the multilateral commitments under the TRIPS agreement?At the intersection between IIAs and the TRIPS Agreement, the following three additional questions may arise in respect of investments: (i) Can a government measure bearing on intellectual property be TRIPS Agreement-compliant, yet violate a protective standard in the relevant IIA? (ii) Can a government's violation of the TRIPS Agreement provide basis for an independent claim under the IIA in investor-state arbitration? (iii) Alternatively, can TRIPS agreement norms provide “interpretive background” on “minimum standards of protection” under international law to inform IIA standards such as “fair and equitable,” “indirect expropriation,” “full protection and security” or “national treatment”?This article seeks to address these issues while exploring the protective standards of IIAs in relation to foreign investments where IP rights are critical. Despite the longstanding practice of listing intellectual property in the definition of “investment” in IIAs, there has been relatively little written to examine this specialized form of investment in relation to the standards of protection that could be relied upon to form claims in an investor-state dispute. The tension between investor’s rights and government action in the area of intellectual property is but a specialized example of a broader recurrent issue in international investment law. The broader question concerns the appropriate balance between the rights and responsibilities of investors and those of governments. The investor is entitled to have its legitimate expectations with regard to the operation and return on its investment respected by the host state, even when the core of its investment is integrally dependent on IP. However, the host state must be able to pursue legitimate regulatory goals without risk of what has been called “regulatory chill.” The investment dispute context for intellectual property brings these countervailing interests to a head, as these issues coalesce around questions of how much leeway governments should have to take actions that may interfere with IP rights and IP-based investments, and whether these actions (or omissions) contravene the standards of protection and expectations established for foreign investors under IIAs, national patent, trademark and other IP laws, or whether such measures are otherwise defensible as consistent with non-investment law treaty provisions, such as standards established in the TRIPS Agreement. I suggest that although these issues involving intellectual property and investment may be complex and, at times, contentious, they will become only more significant and cannot be ignored.