ISDS and Intellectual Property: Protecting Investors Without Undermining Sovereignty
Introduction Intellectual Property rights are considered as a significant asset in the arena of international trade and investment. Disputes between the states and investors over IP laws has increased as globalization promotes investments among states over various sectors such as pharmaceuticals and technology. More directly, foreign investors are using the Investor-State Dispute Settlement (ISDS) mechanisms to challenge state actions that they claim contravene international IP law or impair the value of their IP rights. This raises two essential questions: Can investors resort to ISDS mechanisms to raise the query of whether states are actually adhering to international IP law? Should investment arbitration courts be allowed to cite reasons for domestic or foreign intellectual property laws when resolving issues? The present answer investigates the mentioned issues, observing the mode through which ISDS functions regarding IP-related disputes, and its implications on public policy and sovereignty, as well as the problems that rise from investment tribunals interpreting IP laws. Therefore, this essay argues that even though ISDS forms a valid place for protecting the IP rights of investors, their use must be carefully controlled to maintain a balance between protecting investors and state sovereignty. History: IP Disputes and ISDS Role of ISDS in safeguarding Foreign investments ISDS mechanisms, which appear frequently in BITs and MITs, permit host countries to be sued directly by foreign investors for alleged treaty breaches. That is, this mechanism seeks: To afford investors a neutral and predictable forum within which they may seek redress. Protect investments from discriminatory, arbitrary or expropriatory state actions. The rights under patents, trademarks, copyrights, and trade secrets are being treated as more “investments” under these treaties. For instance, the US Model BIT and the Energy Charter Treaty specifically list IP rights as among protected investments[1]. IP related ISDS disputes IP disputes under ISDS frequently arise when a state takes actions perceived to undermine foreign investors’ IP rights, including the following: Compulsory licensing of patents during public health crises (e.g., for life-saving drugs). Invalidation of patents or trademarks by judicial or administrative action. Expropriation or indirect expropriation of IP rights, such as nullifying exclusive rights. Failure to enforce IP rights in a manner consistent with international treaties like the TRIPS Agreement. In the case of Philip Morris v. Uruguay[2], Philip Morris challenged the tobacco packaging regulations of Uruguay on the account that such measure expropriated its trademarks and breached the FET standard. Howbeit. The tribunal upheld the actions of Uruguay on account that the state has the right to implement measures for public health. In Eli Lilly v. Canada[3], Eli Lilly challenged Canadian judicial decisions of disapproving two of its patents. It was argued that such decision amount to indirect expropriation and violated its legitimate expectations under NAFTA. However, the tribunal dismissed the claims of Eli and approved the state’s judicial independence. In Bridgestone Licensing Services v. Panama[4], Bridgestone argued that a judgment of the Supreme Court of Panama holding it liable for trademark infringement breached FET under the US-Panama Trade Promotion Agreement. These cases demonstrate how ISDS is a platform for intellectual property related disputes[5]. Should Investors Challenge State Compliance with International IP Laws Through ISDS? Protection against unfair treatment. ISDS allows foreign investors to appeal the government’s action that might have adversely or illegally infringed on their rights in intellectual property. For instance, if a government introduces unfair regulations against the owners of foreign IP, ISDS allows investors to claim relief to ensure that such rights are not prejudiced by such unfair policies. A Fair and Binding Place to Resolve Disputes. In many places, local courts may not be independent or skilled enough in complicated IP and investment disputes. ISDS provides a neutral space for solving these disputes, lowering the chance of unfair treatment against foreign investors. Encouraging compliance with international obligations. ISDS can also become a means of holding the states accountable to breach international IP treaties, for example, the WTO TRIPS Agreement, in respect of compliance with international standards of IP. Dangers of Undermining Public Policy. IP is not only a private right but also a means to support public goals such as health, education, and innovation. The public interest may be undermined in the sense that ISDS may yield to private profits rather than societal needs. For instance: Compulsory Licensing: Investors may challenge the use of TRIPS flexibilities, such as compulsory licensing for medicines, thereby discouraging states from taking measures to address public health crises. Regulatory Chill: States might not engage in IP-related policies such as price control and access to medicine owing to the risk of an ISDS claim[6]. International Law. ISDS tribunals function independently of other international legal systems, such as the WTO dispute settlement system. Allowing investors to inquire about how states implement international IP law may lead to different understandings of treaties like TRIPS, creating confusion in the law. Effect on State Control. Most often, intellectual property disputes involve choices that are critical for regulation. When investors can challenge such choices under ISDS, countries may lose power to make rules regarding public health, education, and innovation[7]. Lack of expertise. The tribunals on investment are composed of arbitrators holding a background in investment law, not in IP law. Therefore, an opportunity for an error or inconsistent decision based on such issues may arise. Should Investment Tribunals Interpret Domestic or International IP Laws? Investment Tribunals and Domestic IP Law. Cases concerning the implementation of local laws on IP are generally brought before investment tribunals. Their possible application in interpreting local law poses several problems, however: Venture into Supra-National Court. Investment tribunals are neither appellate courts for the different national legal systems. Giving them the powers to interpret such local IP laws contravenes the principles of national judicial independence. For instance, in Eli Lilly v. Canada, the investor sought to appeal judgments issued by Canadian courts that anulled its patents. The arbitration tribunal ruled in favor of the principle that national laws are best interpreted by local courts. Limited Domestic Legal Knowledge. Arbitrators often lack the expertise or
Investment Arbitration and its competent to adjudicate IP
Investment Arbitration and its competent to adjudicate IP-Related Disputes without undermining the balance achieved Through International IP Law: An Overview. Introduction The globalization of trade and the rise of cross-border investments have given rise to disputes at the intersection of intellectual property (IP) and investment law. Multinational corporations often invest in countries where their IP portfolios, including patents, trademarks, and copyrights, represent significant assets. When disputes arise—for example, due to alleged expropriation or discriminatory treatment by the host state—investors may seek recourse through investment arbitration. However, this raises a fundamental question: Can investment arbitration adequately resolve IP-related disputes without undermining the objectives and principles of international IP law? The inherent tension lies in the differing objectives of the two regimes. International IP law aims to foster innovation and creativity while balancing rights-holder interests with societal needs. On the other hand, investment arbitration primarily seeks to protect foreign investors against state actions, potentially sidelining public interest considerations embedded in IP law. This duality underscores a deeper challenge: while investment arbitration is designed to shield foreign investments from unjust state actions, it must operate within the nuanced framework of international IP law that also accounts for broader public policy considerations. For instance, IP law often embodies policy flexibilities that allow states to address pressing societal concerns, such as public health or cultural preservation. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), for example, includes provisions permitting the issuance of compulsory licenses in the interest of public welfare. Investment arbitration, with its focus on investor protection, might inadvertently disrupt such balances, prioritizing investor claims over these broader societal imperatives. Moreover, the growing inclusion of IP rights in the definition of “investments” under bilateral investment treaties (BITs) and free trade agreements (FTAs) has further amplified the intersection between the two fields. While this inclusion enhances the protection available to IP holders, it also raises concerns about the appropriateness of investment tribunals to adjudicate disputes involving complex IP principles. These tribunals, often staffed by commercial arbitration experts, may lack the specialized knowledge required to interpret and apply IP laws in ways that align with international standards and public interest objectives. The globalization of trade and the rise of cross-border investments have given rise to disputes at the intersection of intellectual property (IP) and investment law. Multinational corporations often invest in countries where their IP portfolios, including patents, trademarks, and copyrights, represent significant assets. When disputes arise—for example, due to alleged expropriation or discriminatory treatment by the host state—investors may seek recourse through investment arbitration. However, this raises a fundamental question: Can investment arbitration adequately resolve IP-related disputes without undermining the objectives and principles of international IP law? The inherent tension lies in the differing objectives of the two regimes. International IP law aims to foster innovation and creativity while balancing rights-holder interests with societal needs. On the other hand, investment arbitration primarily seeks to protect foreign investors against state actions, potentially sidelining public interest considerations embedded in IP law. This duality underscores a deeper challenge: while investment arbitration is designed to shield foreign investments from unjust state actions, it must operate within the nuanced framework of international IP law that also accounts for broader public policy considerations. For instance, IP law often embodies policy flexibilities that allow states to address pressing societal concerns, such as public health or cultural preservation. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), for example, includes provisions permitting the issuance of compulsory licenses in the interest of public welfare. Investment arbitration, with its focus on investor protection, might inadvertently disrupt such balances, prioritizing investor claims over these broader societal imperatives. Moreover, the growing inclusion of IP rights in the definition of “investments” under bilateral investment treaties (BITs) and free trade agreements (FTAs) has further amplified the intersection between the two fields. While this inclusion enhances the protection available to IP holders, it also raises concerns about the appropriateness of investment tribunals to adjudicate disputes involving complex IP principles. These tribunals, often staffed by commercial arbitration experts, may lack the specialized knowledge required to interpret and apply IP laws in ways that align with international standards and public interest objectives. The Intersection of IP Law and Investment Arbitration The Evolving Landscape of IP as an Investment Asset Intellectual property rights (IPRs) have increasingly been recognized as critical assets in cross-border investments. This recognition is reflected in various bilateral investment treaties (BITs) and free trade agreements (FTAs), which often include IP rights within the definition of “investment.” For instance, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Singapore FTA explicitly incorporate IP rights as protected investments. However, this inclusion creates potential friction between the commercial interests of investors and the regulatory autonomy of states to implement public policy objectives, such as access to affordable medicines or cultural preservation. Cases like Philip Morris v Uruguay illustrate this conflict, where a tobacco company challenged Uruguay’s public health measures on trademark-related grounds. The Role of Investment Arbitration Investment arbitration provides investors with a mechanism to seek remedies for alleged breaches of treaty obligations by host states. Tribunals adjudicate claims based on principles like fair and equitable treatment (FET), non-discrimination, and protection against expropriation. However, the competence of arbitral tribunals to resolve IP disputes is often questioned due to the specialized nature of IP law and the public interest considerations it entails. Challenges in Adjudicating IP-Related Disputes in Investment Arbitration Fragmentation of International Law One major concern is the potential fragmentation of international law. International IP law is governed by multilateral agreements like the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Paris Convention. These frameworks establish globally accepted standards and promote a balance between IP protection and societal benefits. Investment arbitration, however, operates within the confines of BITs or FTAs, which may lack the nuanced provisions of international IP law. For example, in Eli Lilly v Canada, the pharmaceutical giant challenged Canada’s judicial invalidation of its patents under the North American Free Trade Agreement
Intellectual Property & Privacy Risks of AI in India
An Analysis of Intellectual property, intermediary liability, and privacy risks for Indian companies utilizing AI-driven platforms, and how these risks align with the requirements under the Indian Copyright Act, Information Technology Act, and the Digital Personal Data Protection Act (DPDP) 2023? Introduction Artificial intelligence (AI) is completely reshaping the manner in which industries across the world automate tasks, improving decision-making, collecting information However, as it goes without saying the adaption of AI across various industries brings specific challenges, the companies in India that utilizes AI that deals with Intellectual properties do have the liability of an intermidiary. The use of AI-powered platforms introduces several legal risks related to intellectual property (IP), intermediary liability, and privacy. These risks are regulated by important legislative frameworks in India, such as the Indian Copyright Act, the Information Technology Act, 2000 (IT Act), and the Digital Personal Data Protection Act, 2023 (DPDP Act). A . Threats/Breach of Intellectual Property Rights The AI driven – Industries, which process large data, pose a significant threat to IP rights especially privacy and commercial exploitation being primarily targeted. 1. Copyright Infringement in AI Training: Generally, model-based training processes are rather data-intensive, depending on the nature of the generative AI. Thus, if there is copyrighted material in some of the training datasets without proper licenses or permissions, copyright infringement would most probably ensue, since it follows from Section 51 of the Copyright Act in respect of the conditions for determining whether copyright has been infringed. For example, AI models undoubtedly violate authors’ rights when such models collect online content or use copyrighted images, texts, or music unless their application would qualify as fair use. 2. Ownership of AI-Generated Works: One major issue pertains to who owns works created by AI. Specifically, Copyright Act does not point out precisely who owns AI-generated contents; hence, uncertainty is attached legally. As emphasized by Section 2(c), it is the authorship that is central to copyright ownership, but with AI-generated works, this is already complicated since no human author can identify the work. Therefore, the question arises whether the copyright of an AI developer, or that of the user of the platform, or that of the owner of the data needs to be considered, as Indian copyright law calls for human authorship, which creates problems for companies relying on AI to create content. 3. Derivative Works and Fair Use: AI systems can create derivative works from existing copyrighted materials. According to Section 14 of the Copyright Act, a derivative work consists of or from a prior established copyrighted work, which therefore establishes that organizations making use of AI must obtain the necessary permits from the original authors. However, Chapter 52 does outline some limits under the guise of fair use under which copyrighted works might be used in pursuit of purposes such as criticism, comment, or research. It is highly contentious whether use of copyrighted material for training AI models falls within fair use and probably needs judicial clarification. B. Intermediary Liabilities AI platforms are commonly intermediaries because they typically display user-generated content or otherwise take active roles in algorithm-driven decision-making. All intermediaries fall within the scope of the Information Technology Act, 2000, specifically Section 79 thereof, which affords interim protective immunity to them as “safe harbors”. 1. Safe Harbor Provisions: Section 79 of the Information Technology Act introduces a freedom from legal liability for intermediaries’ content generated by third parties provided they abide by a few due diligence standards. The intermediaries, as per 2021 Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, are required to remove or disable access to-content when they are notified thereof. Then such user generated content hosting AI driven services which are quite similar to the social media sites too come under the purview of such regulations. If they do not examine the content that is deemed offensive or infringes, these operators are liable to be charged under the IT Act as well as any other law, be it defamation, obscenity or copyright infringement. 2. Content Moderation and Algorithmic Accountability: Artificial intelligence platforms that combine artificial intelligence algorithms with content moderation obligations are bound by the intermediary guidelines under the IT Act. Safe harbor protections enjoyed by these platforms if algorithms incidentally promote unacceptable or illegal content are a concern. They will also provide information about following the content moderation policies under Rule 4 of the Intermediary Guidelines. Should such activities also involve a violation of privacy rights, Section 66E specifically forbids the recording, or distribution, of any photograph of a person’s private areas without consent. 3.AI-generated content moderation: The case of intermediary liability would be increased if it relies on artificial intelligence, which generates its content independently. Since the minute an AI-based platform creates or modifies the content, then it cannot be considered a neutral intermediary, thereby evoking liability related to content creation or/and distribution. C. Privacy and Data Protection Risks. The DPDP Act, 2023 has contain some severe measures about the collection, processing as well as the protection of data. The use of large amount of PII for analytical purposes through digital, AI based platforms will be compliance under the DPDP Act which inherently poses as a challenge to data privacy. 1. Data Management and Informed Consent: Section 4 of the DPDP Act laid down that where an organization proposes to process personal data, it shall, in particular, obtain clear and specific consent from that person. Indeed, it has in black and white in Section 7 that such consent shall be informed. Regarding processing of personal data, AI data processing systems shall as a result guarantee collection of actual consent at the time of data collection and subsequent consent for subsequent activities by the AI. According to section 9, the reasons for processing shall be specified, and data shall not be processed in ways incompatible with the purposes for which it was collected:. 2. Cross-Border Data Transfers: An AI platform of a multinational firm entail moving data across borders on a daily basis. Depending on