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Assessing the consequences of TRIPS+ FTAs for India: TPP, TISA and RCEP (Part II)


In the previous post, I’d summarised my findings from a study of the TPP, the TISA and the RCEP and their impact on Indian/TRIPS IP and e-commerce norms. Here, I flag specific issues that merit urgent consideration.

E-commerce

While an important element of the TPP’s Digital Two Dozen (D2D) core principles is the removal of customs duties on all digital products (Article 14.3), this does not create any new international obligation for India. This is because India is a party to the 1996 WTO Information Technology Agreement, which appears to already mandate this. The TISA contains a provision (Draft Art. 10 of the E-commerce Annex) that mirrors the TPP standard.

The TPP also requires, in Article 14.4, that parties practice non-discriminatory treatment of digital products originating from any other party. Draft Article 1.6 of the TISA’s E-commerce Annex contains a non-discrimination provision, but the crucial difference between the two obligations is that the TISA appears to provide a flexibility for government procurement, while the TPP limits exceptions to Article 14.4 to subsidies, grants and other government-sponsored benefits. To the best of my knowledge, India has no explicit non-discrimination legislation, but such a law would be redundant, since India would be compliant with Article 14.4 merely by virtue of refraining from treating foreign digital products discriminatorily. In addition, government policies such as preferential adoption of the Bharat Operating System Solutions (BOSS) Linux distro may fall foul of the TPP standard, given that mere adoption would not amount to a grant or subsidy.

Article 14.8 of the TPP and Art. 4 of the TISA draft both mandate the protection of personal information online. While it can be argued that these legal standards can be independently imposed on India through instruments such as the International Covenant on Civil and Political Rights, these will represent the first time India accepts a concrete international obligation to actualise the right to privacy over the internet.

Article 14.11 of the TPP mandates the free flow of information across national borders. This provision may have huge implications for businesses that base their revenue generation on big data and targeted advertising, and the thrust of Article 14.11.2 is that parties must allow businesses to transfer information (including personal information) across borders through electronic means. However, Article 14.11 is subject to two significant carve-outs. First, Art. 14.11.2 is only applicable to covered persons, a term that has been defined to exclude financial service providers. Second, Article 14.11.3 permits derogation from the free flow obligation to achieve “legitimate public policy objectives”, provided that measures derogating from the obligation are non-discriminatory and least-restrictive in nature. The TISA draft, in Article 2.1, contains a similar provision to Article 14.11 of the TPP. However, it is unclear whether the TISA definition of “service supplier” mirrors the TPP definition of “covered person.” If it is, then financial service providers will be similarly excluded from the TISA obligation. Otherwise, the TISA obligation would be wider than the one in Article 14.11 of the TPP. In the latest TISA draft, Hong Kong has proposed a lengthy prefix to Article 2.1 of the E-commerce Annex which exempts all measures taken by parties to protect the privacy of individuals from the cross-border data flow obligation. Indian compliance with the TPP obligation is doubtful, and would turn on an interpretation of the words “legitimate public policy objective” in Article 14.11.3. This is because under Rule 7 of the Information Technology (Reasonable security practices and sensitive personal data or information) Rules 2011, cross-border flow of personal information is permitted only in situations where the recipient of the information complies with Indian data protection standards as a bare minimum. Similarly, India would almost certainly be non-compliant with the TISA draft unless the Hong Kong proposal is incorporated into the final text of the agreement.

Article 14.13 of the TPP contains a prohibition on parties against conditioning the conduct of business in their territory on the localisation of computing facilities such as servers and storage devices. This requirement is conditioned by the same carve-outs as Article 14.11, with Article 14.13.3 being identical to Art. 14.11.3. In addition, Article 14.13 also applies only to “covered persons”, and excludes financial institutions from its protection. The corresponding TISA draft article, Article 8, contains a similar obligation. However, the TISA obligation may end up becoming significantly broader than the TPP provision, since only Colombia currently opposes a draft that expands the prohibition on server localisation to investment in the country’s territory by a covered business. Further, the difference between the TPP’s “covered person” and the TISA’s “service supplier” may mean that the TISA is nevertheless broader than the TPP. This researcher is unaware of Indian law that contravenes the prohibition on server localisation, although provisions of the Information Technology Act on surveillance may be interpreted as granting such powers to the government.

Intellectual property

One of the more troubling features of the RCEP is Draft Article 1.7.6, which contains a commitment to accede or ratify a number of TRIPS+ agreements, such as the WIPO Copyright Treaty (WCT), the WIPO Performances and Phonograms Treaty, the Beijing Treaty on Audiovisual Performances, and the International Convention for the Protection of New Varieties of Plants.

With respect to trademark protection, the TPP’s Article 18.18 specifically provides for non-visual marks such as sounds and scents to be given protection by parties. Draft Article 3.1 of the RCEP contains a similar provision, but the portion dealing with scent marks has been met with significant opposition. India’s position on scent marks is unclear, but a reading of Section 2(1)(zb) of the Trade Marks Act 1999, alongside Rule 30 of the Trade Marks Rules 2002, seems to suggest that scent marks would not be permitted in India. Sound marks have been granted in the past by the Indian registry.

Article 18.20 of the TPP suggests that the exclusive protection granted to the owner of a registered trademark shall extend even against the rights of prior users of the mark. This would fly in the face of the statutory limitation in Section 34 of the Trade Marks Act 1999, which provides that owners of registered trademarks shall have no remedies against prior users. Draft Article 3.6 of the RCEP unequivocally protects prior rights.

Article 18.37 of the TPP contains an expansive definition of patentable subject matter, which would have significant implications for Indian law. These include software patents, evergreening, patents on microorganisms, etc. Draft Article 5.1 of the RCEP contains a similarly broad definition of patentable subject matter, but recent statements by Nirmala Sitharaman seem to indicate that Draft Article 5.1 has been modified to address India’s concerns regarding evergreening.

Another worrying feature of the TPP is the provision of patent term adjustments for “unreasonable” processing delays at the patent office (Article 18.46) and more specifically, for the time taken to obtain marketing approval for a new drug (Article 18.48). Draft Article 5.13 contains a provision for patent term restoration to compensate patentees for the non-working of patents pending marketing approval, but the latest draft records significant opposition to this clause. Draft Article 5.13.3 also contains a more general patent term restoration obligation for unreasonable delays at the patent prosecution stage attributable to the patent office.

The TPP provides for an aggressive data exclusivity regime, with ten years for agrochemicals (Article 18.47), five for new drugs (Article 18.50) and eight for biologics (Article 18.51). The RCEP, in Draft Article 5.16, provides for five years of data exclusivity for new drugs. The TPP also contains a patent linkage regime, in Article 18.53.

Article 18.63 of the TPP mandates a ‘life plus 70’ copyright term, while the RCEP leaves this untouched.

Article 18.68 of the TPP and Draft Art. 2.3 of the RCEP require parties to legislate anti-circumvention measures such as DRM and RMI into place. While India has done this through the insertion of Ss. 65A and 65B through the 2012 amendment to the Copyright Act 1957, it had no international obligation to do so, since it is not a party to the WCT. This would, therefore, still amount to the acceptance of a new TRIPS+ international standard. In addition, the Section 65A contemplates mens rea on the part of the person attempting to circumvent TPMs, and for this reason, Indian law could still fall short of complying with the TPP and RCEP obligations.

Article 18.72 of the TPP requires parties, in judicial proceedings for infringement, to presume the validity of the patent, trademark or copyright. This could pose significant problems for India, especially in patent litigation, since Indian jurisprudence advocates a relatively cautious approach to patent validity at the prima facie stage of infringement proceedings. In Bilcare v. Supreme Industries, the Delhi High Court has interpreted Section 13(4) of the Patents Act 1970 to arrive at the conclusion that young patents could not be presumed to be valid, and that interim injunctions could be denied merely on the strength of a challenge to the patent’s validity in court.

Finally, Article 18.78 of the TPP also requires parties to enact criminal penalties for the misappropriation of trade secrets, a provision that has come under criticism for its lack of protection to whistle-blowers. In addition, given that Indian law does not provide for statutory protection of trade secrets, it would be unable to comply with this requirement as it stands today.

Conclusion

From this analysis, it is clear that the TPP, RCEP and TISA will entail some amount of IP norm-setting that shifts the balance established in the TRIPS towards rights-holders. It is safe to say that the provisions of the TPP and the TISA will entail the loss of what is perceived as “sovereign” control over the internet, a tradeoff balanced by the lowering of entry barriers for Indian digital players into the world market. However, it bears noting that most provisions in the TPP are subject to a ‘ratchet clause’, meaning that the lowering of barriers is necessarily a one-way process. Within the IP space, it is surprising to note that in some instances, the RCEP draft imposes stricter obligations than the TPP. Less surprising is the fact that the TISA, in several cases, imposes stricter controls than the TPP on e-commerce and the free flow of information. This is because the TPP can be seen as a sort of lowest common denominator among the FTAs surveyed, while the TISA, which has the EU and the US as parties, understandably caters to developed country interests at a larger scale.

(This piece was originally published on the ORF website.)

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Balaji Subramanian

Balaji Subramanian

Balaji is a third year student at NALSAR, Hyderabad. He is currently an editor of the Indian Journal of Intellectual Property Law. He is fascinated by technology law and IP law, and is an active member of NALSAR's Technology Law Forum. When he isn't doing law school things, he wanders the country looking for quizzes to participate in. He can be emailed at [email protected]

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