By Paramjeet Singh
Can a country can own Intellectual Property Rights and claim financial gains from their commercial exploitation? If legally viable, this concept allows a nation to claim its share of revenue that is generated from the commercial exploitation of its IPRs in the jurisdiction of another country.
Economies around the world are becoming knowledge-based. A knowledge-based economy is dependent on intellectual property rights and their effective protection and enforcement. According to the World Intellectual Property Organization (WIPO), “Intellectual property (IP) refers to creation of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce”. Therefore, there are two aspects that qualify property as ‘intellectual property’. Firstly, the property has to be a creation of the mind. Secondly, the property should be used in economic activity.
Mr. A sees a restaurant in Sydney, Australia. The name of the restaurant and its appearance (design and architecture of the building, pictures of Chinese cuisine on the board placed outside the restaurant, etc.) convey to him that it’s a “Chinese” restaurant. He goes inside and enjoys the food.
The motive behind this transaction is the theme ‘belongs to China’ aspect depicted by elements like name of the restaurant etc. that finally concludes to the payment made by Mr. A in lieu of the food he has eaten at the restaurant and ‘something more’. In such a circumstance the motive is of great economic value. According to the concept, the presumption is that Mr. A ate food at the restaurant because of its association with ‘China’. The association of this restaurant with China has been brought about by its nomenclature, decoration and design. The aforementioned association “belonging to a country” is in some way driving the ‘revenue generation’ in some country other than India. If this association with a country is a reason for an entity to earn revenue in the jurisdiction of some other country, the former could argue in favour of demanding share in the fruits of its IPRs.
In the example, it is possible that the elements like design of the building, the board outside the restaurant, name of the restaurant could be subject matter of various other IPRs owned by other legal entities. When these parameters manifest the “belonging to a nation”, they have a separate existence. This existence is derived from the result of the use of different elements constituting IPRs of a country.
It would be very difficult to identify the separate elements depicting the association with the country that owns the IPRs and club them together under the portfolio of that country. Therefore, stress has to be laid on the outcome of the manifestation of the association in order to determine the commercial exploitation of such IPRs. The outcome, in the example, is that the restaurant is associated with China. Thus, the determination of the existence of the IPRs belonging to a country is comparatively easier than their clear identification and bifurcation into the constituent elements. But attributing a particular share of the revenue generated by commercial exploitation of the IPRs belonging to a particular country would again be difficult because other factors also contribute to the overall revenue.
Certain conditions need to be complied with before this concept can be evaluated on its merits.
a. Firstly, the nation has to have a legal capacity to own IPRs.
b. Secondly, the IPRs belonging to a country should be the creation of the human mind.
c. Thirdly, the property falling under the subject matter of IPR-portfolio of a country should be capable of being used in commerce. More specifically, it should be capable of commercial exploitation and of being translated into economic benefit.
Individuals can be allowed to own IPRs. Legal persons like corporations, registered associations and institutions can also own IPRs. ‘Legal person’ is generally used to refer to those entities that can act in law. A country could be considered to be a legal person as it has right in almost all the jurisdictions of the world to sue and be sued in the court of law; especially in the context of newly negotiated and ’trade-agreements’ like TPP and TTIP. The best example in this regard could be the criminal cases where the crime committed is the crime against the state and the state has power to sue the alleged criminal in the court of law.
Trade Related Aspects of Intellectual Property Rights (TRIPS) recognize IPRs as private rights. Their association with the state or the country could be viewed with doubt and criticism. But as far as the world economy is concerned, a country exercises certain rights and is bound to discharge some obligations in the international environment. Before various international forums like World Trade Organization (WTO), a country has an existence and a stance in relation to various issues that affect it. Therefore, strictly putting the IPRs in the category of ‘private rights’ in an isolated environment would ignore the situation where a country is allowed to voice and defend its economic or other interests as an independent entity. Public interests could also be served if the State is allowed to claim the economic benefits from the commercial exploitation of its IPRs. This scenario would, remotely, look like benefit sharing; as is the case with traditional knowledge and bio-diversity where the indigenous people seek benefit sharing from the exploitation of their properties by other entities.
- Creation of The Mind
The existence of a nation itself is the creation of the mind of human beings. It is a collective effort of all the individuals in relation to that state that lead to its distinct identity. A very faint parallel could be drawn to the case of corporate houses where IPRs are owned by a corporate house despite the fact that the real creator is the employee or other persons working in that corporate house. In the same way, a country owns the IPRs that have been created in a unique manner by its people who act not for themselves but for the nation. It is not necessary that the IPRs should have been created by the citizens of these nations. The status of the person whose intellect created or contributed in creating the IPRs is immaterial. What matters is the fact that the IP, thus created, is solely attributed to a country. This indeed creates a strong and concrete link between the human intellect and the country wherein the latter is represented by the former. In this context it is not only the process of creation of mind that is important but what is also significant is the result of the activities that lead to this process.
Another argument for validating the stance that the proposed IP is the creation of intellect of people of a country is that such property has been employed by other entities to their commerce. Though this also points to the fact that the property in question is being used in commerce, it specifically indicates that the said property is the creation of the mind or the human intellect. The property in question already exists as ‘created’ in the wake of the fact that certain countries have been in existence for quite some time. It cannot be doubted that the countries as such are a part of the public domain in relation to the existence of the world as a whole. But the moment any particular aspect, in this case elements of association, related to a country is commercially employed by the human intellect in a commercial transaction, it achieves the status of being “created” and “used”, simultaneously, in the context of intellectual property. The “creation” as an aspect of intellectual property already exists as per the notion under discussion but it is given effect to when it is commercially exploited. It simply implies that the “creation” of intellectual property under discussion is apparently borne out of its “use” by any entity. This is not the case in the regular instances pertaining to IPRs where the IP is created and then used in commerce. In the present case, the intellectual property is ‘created’ but its existence is dormant until it is ‘used’ in the commercial context. But the ‘creation’ of the intellectual property, as it already exists in the context of its association with a country, cannot be attributed to the human entity that is ‘using’ it in some different revenue jurisdiction. The credit of ‘creation’ is, rather, given to the country to which the property thus considered to be ‘created’, within the meaning of IP, owes its existence.
Looking from a different perspective it could also be said that intellectual property is not the creation of a single act or transaction, but it is the result of the cumulative efforts of the people of a country that lead to the creation of the IPRs belonging to that country. The role of human intellect in ‘using’ such property cannot be ignored; but the very fact that it is associated with some country and is being economically utilized in some other country leads to the postulation of a proposition that if what is derived from one country could be used for generation of financial benefits in some other country then some share or portion from thus reaped benefits have to be afforded to the country to which the intellectual property actually belongs.
The property of a country could be used in commerce when it is applied to commercial transaction in the foreign countries with a different revenue jurisdiction. It would not be wrong to submit that the criterion of being used in commerce also holds true for the elements that depict association with a country. Therefore, keeping the WIPO definition of IP as a benchmark, it could be contended that the elements depicting ‘association’ with a country might be called intellectual property when they are used in commerce and therefore, the country to which they belong could be allowed to exercise IPRs over them.
In the context of the aforementioned illustration, whether the translation of IPRs into economic benefits by the process of commercial exploitation of the said IPRs should be direct or indirect could be one of the questions that need to be considered. But prior to that the focus should be on the determination of the fact whether the economic benefits so generated could be said to be the result of the role played by the IPRs belonging to a country.
In the illustration mentioned above, it is obvious that investment has been made in giving the restaurant a Chinese ‘look’, so that people in the foreign place like Sydney could associate the restaurant with China, in whatsoever manner. In business the ultimate purpose of investment is financial gain. Thus, commercial affiliation is indicated between the country’s IPRs and their use by some other entity in another country.
The arguments such as “common use words in public domain” or “subject matter of such IPRs being in public domain” seem to lose their relevance here because of various reasons. In this regard, exclusively, the concept could be remotely compared to the case of event organizing where generic, descriptive, and non-distinctive words are being protected on various grounds, under various IP regimes because of their commercial affiliation to the event. In the same manner, in case of country owned IPRs, as per the notion under discussion, there exists a commercial “affiliation” of the various elements comprising the intellectual property to the country. It is not necessary that a country should exclusively own all the means through which this commercial affiliation is manifested; rather, the significance is of the requirement that the result or the outcome of the means used should bear a substantial relation or connection with the country as such. The result or the outcome is the existence of “association with a country” attribute that can be linked with the commercial activity in question. If the existence of this attribute is unable to transform into economic returns, then the concept would not be applicable in that case.
It could be argued that the countries are in public domains and therefore, it is open to the world at large to use the elements signifying a connection to any country. But this could be negated by arguing that the traditional knowledge that has been in existence since ages is also being protected. In the case of traditional knowledge, the commercial exploitation of the subject matter that belongs to communities since ages should afford some share of the benefit to those communities. In the same but restricted manner, it could also be contended that the commercial exploitation of the IPRs belonging to one country in other countries should afford some benefits to the former.
Business Perspective and Law
Generally, a business carried out in a territorial jurisdiction is subject to tax liabilities or other revenue related liabilities in accordance with certain laws and rules. When revenue is generated within a particular revenue system, that particular jurisdiction, subject to various conditions, becomes entitled to claim tax on the revenue so generated. In any commercial transaction, there are numerous factors that lead to the revenue generation. The situation where the factor that is owned by a country having a different revenue jurisdiction is being commercially exploited in some other country entails a whole spectrum of economic and legal issues. The factor is intellectual property. The business houses operating in one revenue jurisdiction and commercially utilizing the intellectual property belonging to or owned by some other country having a different revenue jurisdiction yield the taxes and other economic liabilities in the former system. This seems to be inappropriate. The application of the proposed concept at the level of the business firm is not to be discussed here. It is not within the scope of this article to discuss the implications, at the level of a commercial entity, of use of intellectual property belonging to one country in the other country. The scope is confined to discussion of the implications of such use of intellectual property by the business structures on the economic and financial systems at the national and the international level.
Different Revenue Jurisdictions
The proposed concept could have application only where, in an economic transaction, the owner of the IPRs is one country and the revenue generated from it is subject to the jurisdiction of another country. The concept is based on the premise that the revenue generated in one country because of the commercial exploitation of IPRs owned by another country should be dealt with in a manner so as to allocate a portion or share of those revenue derived from the IPRs in question to the country that owns those IPRs. The main point here is that when taxes are levied on revenue generated in one country due to the commercial exploitation of the IPRs owned by another country, there should be a system to account for the commercial contribution of those IPRs in the foreign revenue jurisdiction. There seems to be no law in existence that could deal with such situation.
The proposed concept is more about ‘belonging to a nation’ (i.e. belonging to the economy of a nation), rather than the ‘inception of the right’, which is the case in traditional knowledge. According to WIPO, traditional knowledge, genetic resources and traditional cultural expressions are economic and cultural assets of indigenous and local communities and their countries. Whereas under the proposed concept it could be put forth that if there exists any representation through any means, able to show a ‘substantial connection’ with a country and be commercially exploited, the country has a right to have ownership of such means as its intellectual property and should be able to exercise IPRs in relation to the same. The term ‘substantial connection’ in the context of the topic under discussion is a concrete relationship of the ‘means’ with the country that points out to the ownership of the former by the latter. It could be contended that a country can own certain IPRs in its own capacity and not through its citizens, corporation, communities or other entities having legal capacity to own IPRs. This is different from the concept of geographical indication where the place of origin of the goods is the prime consideration. As per the proposed concept, a country’s connection, manifested through means which could be any depending upon the internationally, multilaterally, or bilaterally accepted practices and norms, when finally yields economic returns to an entity in some other country, it gives the former country a strong ground to claim its share of the said returns.
The application of the idea is not simple. Various issues like assertion of parallel systems at community level or the local level, difficult or impossible ascertainment of rights in cases of ambiguous use of a country’s IPRs, recognizing and identifying the means or representations that could be classified to be within the nation’s IPR portfolio and tedious task of establishing its link with revenue that is alleged to have been generated by the commercial use of those IPRs in complicated situations, recognition of such IPRs pre-and-post-commercialization, unconventional taxation aspects, deliberations, nature and prospects of licensing such IPRs etc. are likely to crop up while dealing with practical implications of this concept.
The primary matter of concern would be to determine whether the countries have any legal status to claim ownership of the property that has been commercially exploited by human intellect but cannot be particularly said to be created by it. It is presumed in this article that the citizens of a country through their country and its economy have a vested right in the intellectual property that has its roots embedded in their country but is being commercially exploited to generate revenue in the domain of some other country for the benefit of the citizens of the latter country. The test of this presumption is based on various variable factors. Furthermore, the contemporary law doesn’t provide anything to regulate such proposition. Law of taxation does not include in its periphery any such factor that takes into consideration the commercial exploitation of IPRs falling within the domain of a foreign revenue system. Neither does the intellectual property law provide for any recognition of such IPRs as are discussed in this article.
The citizens of a country through their country and its economy have a vested right in the intellectual property that has its roots embedded in their country but is being commercially exploited to generate revenue in the domain of some other country
In the wake of commercialization of every aspect of human life and increasing periphery of strict enforcement and implementation of the IPR regimes sought by the economic entities and developed nations, the notion in this article could find some scope for discussions in the contemporary IP-related unconventional deliberations.
However, it could be argued that despite all the unforeseen issues, the notion of allowing a country to directly have the ownership of certain IPRs and the use of the commercial exploitation of the same for the benefit of its own economy could have a substantially debatable footing in the domain of practicality. Even if the discussion in this article does not reach its logical conclusion, one question pertaining to the fate of the revenue generated in a revenue/tax system due to commercial exploitation of an intangible aspects associated with another territorial entity having different revenue/tax system still remains awaiting due consideration.
The author is a lawyer practicing before the Supreme Court of India. He may be contacted at email@example.com