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Guest Post: Economic sanctions and IPRs: Condition of anonymity or a smooth ride?


The_Interview_2014_posterv2We’re happy to bring to our readers a very interesting guest post by Punam Kadam, where, taking off from the example of the recent cybervandalism caused sanctions on North Korea, she examines what happens to IPRs when US places economic sanctions on a country. Punam is a research professional who has worked in Pharma and Agrochemicals Industry and currently working as a Patent Associate at Inttl Advocare. The views expressed are her personal views and not that of her employers.”

Economic sanctions and IPRs: Condition of anonymity or a smooth ride?

By: Punam Kadam

Escalation of protests against certain movies and mindless vandalism is nothing new in India. In a one of its kind “cyber-vandalism” merely a month back, Pyongyang [allegedly] kowtowed to the plot of the otherwise mediocre movie — “The Interview” — hacking the computer network of Sony Pictures Entertainment. And the infamous executive ultimatum by United States, in the form of economic sanctions came back in vogue. Signing an executive order, US President Barack Obama tightened its 64 year long sanctions against the government of North Korea in response to their “numerous provocations”.

Imposing sanctions under Special 301 of The Trade Act of 1988 on the countries failing to protect intellectual property rights is well known. A lot has been reported recently about the differences between India and US over the intellectual property rights, India finding itself on ‘Priority Watch List’ and the Office of the United States Trade Representative (USTR) possibly triggering unilateral trade sanctions against India. In view of such highly combustible international relationships between nations, it would be interesting to see how the intellectual property rights pan out in respect of the economic sanctions.

The “U.S. Sanctions Program” forms an important part of United States foreign policy and their national security goals, the objectives of which are laid down in 31 C.F.R. § 501. The implementation and the administration of these sanctions are mostly delegated to the US Treasury’s Office of Foreign Assets Control (OFAC). These sanctions usually focus on blocking of assets and dictating trade, travel and financial restrictions which are targeted against not only the foreign countries but also the individuals such as terrorists, narcotics traffickers and transnational criminal organizations.

Most of the sanctioned countries with the likes of Balkans, North Korea, Cuba, Libya, Syria, Bulgaria, Greece, Italy, Iraq, Iran, Zimbabwe and many others are contracting states of WIPO administered treaties viz; Patent Cooperation Treaty (PCT) and Paris Convention. Now the fact that U.S nationals/companies are formally forbidden to “do-business” with sanctioned countries got me intrigued as to what happens with the ownership and registration of the intellectual property rights in these countries. On background reading, I found that U.S. government also has an anti-boycott legislation in place (enacted since 1977 and administered by Department of Commerce) to thwart the Arab League’s Israel-boycott which also in a way affects the protection of intellectual property rights in sanctioned countries. The penalties for violation of U.S. anti-boycott laws have been well documented.

A quick look at the electronic compilation of Codes of Federal Regulations (e-CFR) will give a glimpse into mindbogglingly intricate details of sanction programs under TITLE 31—Money and Finance: Treasury. Certain transactions related to patents, trademarks, copyrights and other intellectual property rights are well defined only for Syria, Sudan, Burma, Cuba and Iran. Let’s take Iran, for instance. 31 C.F.R. §535.528 spells out the authorized transactions for intellectual property rights.

economic sanctions

*Source: electronic compilation of Codes of Federal Regulations (e-CFR)

The above screenshot is largely self-explanatory. Activities such as filing and prosecution of patents, trademarks and copyrights applications, renewals, oppositions or infringement proceedings, payment of fees etc. that are authorized in sanctioned countries.

Although the transactions related to intellectual property rights are not explicitly mentioned in the Federal codes under TITLE 31 for countries sparing above five, OFAC does grant “General License” for intellectual-property related activities that are spelled under Subpart B (Prohibited Transactions), Subpart C (Property; property interest), Subpart E (Licenses, Authorizations, and Statements of Licensing Policy). As a result the provisions mentioned in above screenshot should apply to other sanctioned countries as well.

OFAC generally offers two types of license: General License and Specific License for ownership/application of intellectual property rights in sanctioned countries. These licenses are also granted for many other transactions that would be usually prohibited under the economic sanctions.

The General License authorizes the performance of certain categories of transactions. OFAC also issues Specific Licenses on a case-by-case basis under certain limited situations and conditions. If a General License has not been granted, Specific License must be obtained. However, OFAC may or may not grant the Specific License. Earlier OFAC had denied the renewal of the registration of the “Havana Club” trademark in the United States although the reasons for such a denial are not known that lead to a complicated dispute. The subject matter of this dispute calls for a detailed post, but you can find the communication of the OFAC officials relating to the denial of the Specific License here. The notifications related to the issuance of licenses get published on the OFAC’s website. You can find the year wise archives of all such notifications here. In one such notification OFAC’s website reflects the issuance of “General License 15 related to Syria” to authorize transactions in connection with patent, trademark, copyright, or other intellectual property protection that would otherwise be prohibited by Executive Order 13582. (The PDF link to this license is broken. I tried to look for it but haven’t really found anything yet.)

Once the license application is denied, there is not much of scope for appeal at OFAC, which is evident from OFAC’s website that states:

“A denial by OFAC of a license application constitutes final agency action. The regulations do not provide for a formal process of appeal. However, OFAC will reconsider its determinations for good cause, for example, where the applicant can demonstrate changed circumstances or submit additional relevant information not previously made available to OFAC”

The detailed procedures followed by OFAC can be easily found on its website.

Further, in a redacted communication, OFAC officials have given a written clarification on matters pertaining the protection and transfer of intellectual property rights under the Iraqi Sanctions. Accordingly, pursuant to the license, U.S. persons may engage in all transactions with the Trademark and Patent Office in Iraq (the “TPO”) that were previously prohibited by the Regulations, including making payment to the TPO for the prosecution and maintenance of new intellectual property rights, subject to the exception of section 575.533(b)(2) of the Regulations.

Also, OFAC requires the concerned parties to get a specific authorization (read license) for the matters involving patents and trademarks issued before May 23, 2003 (which is the effective date of amended regulations).

In the view of aforementioned discussion one can evidently conclude, that the U.S. Sanctions Program allows U.S. nationals/companies to protect their intellectual property rights owing to the issuance of license which are otherwise not prohibited by the sanctions.

(On an unrelated note, found this interesting piece on how WIPO defied UN Sanctions to provide computers and servers to North Korea, the country that bans internet!)

Swaraj Paul Barooah

Swaraj Paul Barooah

Follow @swarajpb Swaraj has a deep interest in IP, Innovation and Information policy, especially when they involve issues relating to Access to Knowledge, Innovation incentive mechanisms, Digital Freedoms, Open Access, Education, Health and Development. After his BA, LLB (hons) from Nalsar Univ of Law, Hyderabad, he went on to do his LLM from UC Berkeley in 2010. He is now pursuing his J.S.D. degree from UC Berkeley where he is focusing on Drug Innovation Policy and Access to Medicines. Aside from SpicyIP, he is also engaged as a consultant on various IP matters, and is a visiting faculty member at Nalsar Univ of Law. He is also in the process of starting up a New Delhi based "IP, Innovation & Information Policy" focused think-tank.

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