How the US-Chile Free Trade Agreement impacts on IP


Marcos Morales


Article published in Managing Intellectual Property - Americas IP Focus: Protection and Enforcement (2003)


On June 6 2003 Chile and the US signed a Free Trade Agreement (FTA), ending a two-year process and 14 rounds of talks that came to a conclusion in December 2002, when both countries reached a consensus on all of the commercial issues covered in the agreement. Recently, on July 31 this year, the US Congress approved the FTA, which will enter into force on January 1 2004.

Over the past 12 years Chile has negotiated trade agreements with most of its partners, among which are Latin American countries and Canada. In addition, an Association Agreement with the EU was subscribed and negotiations with South Korea were completed, all of which makes Chile a solid investment platform thanks to this network of trade agreements comprising a market of more than one billion consumers.


GENERAL ASPECTS OF THE FTA

This agreement is the first ever signed by the US with a South American nation. In addition to being the world's most powerful economy - with 22% of gross world product - the US is also the first commercial partner and major foreign investor in Chile.

The FTA includes different issues, among which is the elimination of tariffs, customs procedures, sanitary measures, investments, competition policies, temporary entry of personnel, modern treatment of labour and environmental issues, as well as intellectual property regulations. Worth mentioning is also an expeditious and impartial mechanism for settling controversies and treatment of e-commerce, which will allow a more dynamic interaction in the new world economy.

As for tariff reduction for the trading of goods, the FTA provides that 90% of the goods imported by Chile from the US, and 95% of Chilean products imported by the US, will immediately become duty-free, whereas taxes on all other products will be phased out over a maximum period of 12 years. These conditions favouring access to the world's largest economy will constitute an attraction for leading international companies, American as well as European and Asian, without excluding opportunities that will also be available to Argentinean and Brazilian investors.


REGULATIONS OF INTELLECTUAL PROPERTY WITHIN THE FTA

FTA Chapter 17 is intended to regulate intellectual property rights, including special provisions to regulate the protection of encrypted programme-carrying satellite signals and the limitations on liability for internet service providers. On these matters, the FTA adjusts to modern standards, accounting for the latest technological advances. In general, it may be held that a substantial number of the regulations contained in this chapter have already been incorporated into Chilean legislation.

A relevant aspect of general application in Chapter 17 is the guarantee that each country will give to nationals of the other party non-discriminatory treatment as it would give to its own nationals regarding the protection and usufruct of intellectual property rights.


Acknowledgment of treaties on intellectual property

Both countries acknowledge the convenience of relating to each other upon the basis established in existing international agreements in force in the field of intellectual property.

In this sense, the FTA provides that both countries should ratify or adhere to the Patent Cooperation Treaty (1984) before January 1 2007, and that before January 1 2009 they shall ratify or adhere to the International Convention for the Protection of New Varieties of Plants (1991), the Trademark Law Treaty (1994), and the Convention Relating to the Distribution of Programme-Carrying Signals Transmitted by Satellite (1974).

In addition, it provides that both countries will make reasonable efforts to ratify or adhere to the Patent Law Treaty (2000), the Hague Agreement Concerning the International Deposit of Industrial Designs (1999), and the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (1989).

It also states that no FTA provision relating to intellectual property rights may be in detriment to the obligations and rights of a nation with respect to the other in virtue of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) or multilateral agreements on intellectual property subscribed or operated under the auspices of the World Intellectual Property Organization (WIPO).


Trade marks

The FTA provides that trade marks shall include collective, certification and sound marks, and may include scent marks.

As for the protection of rights, the FTA provides that each party shall allow interested parties to oppose trade mark registration applications, and recognizes the exclusive right of a holder of a registered mark to prevent third parties, without his/her consent, from using signs being identical or similar to his/hers on related goods or services when its use is likely to mislead consumers.

It is also acknowledged that Article 6 bis of the Paris Convention for the Protection of Industrial Property (1967) (Paris Convention) shall apply, the necessary changes having been made, to goods or services which are not similar to those identified by a well-known trade mark, whether registered or not, provided the use of such a trade mark indicates a connection among such products or services and the holder of the well-known trade mark. Likewise, each country shall establish measures to prohibit or annul a trade mark registration that is identical or similar to a well known trade mark, if the use of said trade mark by a registration applicant could be confusing, misleading or deceitful, or if there is the risk to associate that trade mark with the holder of the well known trade mark, or if it constitutes an unfair use of such trade mark's reputation. In order to establish the reputation of a trade mark, it will not be demanded that its reputation extend beyond the public sector that normally deals with the respective products or services.

The FTA also contains various regulations regarding the registration procedures of commercial trade marks, providing that each country should establish a system including information about the reasons to reject the registration, the time to reply to the authority, to disagree with an initial rejection and judicially disagree with any final rejection. Likewise, both countries undertake, to the greatest extent possible, to establish an electronic system for applying, processing, registering and maintaining trade marks.


Domain names

Each party shall require that the management of its country-code top level domain (ccTLD) provide an appropriate procedure for the settlement of disputes, based on the principles established in the Uniform Domain Name Dispute Resolution Policy (UDRP), in order to address the trade mark internet piracy issue. Also, the management of their respective ccTLDs shall permit online public access to an accurate and reliable database, containing contact information for domain name registrants.


Geographical indications

The US and Chile undertake to reciprocally protect their geographical indications, further demanding of each other the publication of applications, the existence of an application objection procedure and registration annulment of geographic indications.

As of the date the FTA comes into force, only the protection or registration of a geographical indication will be rejected when it is confusingly similar to a pre-existing trade mark application and carried out in good faith, or to a pre-existing registered trade mark, or even to a pre-existing trade mark whose rights have been acquired through use in good faith.


Patents

In this regard, the FTA provides that each party may reject or annul a patent only when reasons may justify the rejection of a patent.

Also, both countries undertake to adjust the term of a patent to compensate the unjustified delays that may occur when awarding it. To that effect, unjustified delay will be regarded as that occurred when awarding the patent and which is higher than five years computed from the date the application is filed, or higher than three years from date the application analysis has been requested, whichever occurs later.

An interesting aspect in this matter is that neither party will be able to a use public disclosure to bar patentability based upon a lack of novelty or inventive step if the public disclosure was made or authorized by the patent applicant and occurs within 12 months prior to the date of filing of the application.

As regards pharmaceutical products protected by a patent, each country shall grant a patent extension period to compensate the holder of the patent for the unjustified reduction of the patent period as a result of the marketing approval process, also having to provide the patent holder with the identity of any third party that requests the marketing approval in effect during the patent period, and deny the marketing approval to any third party before the expiration of the patent period, unless by consent or acquiescence of the patent owner.


Copyright and related rights

Among many other matters, the agreement establishes that both countries shall provide that authors of literary and artistic works are entitled to authorize and prohibit all reproduction of their works, in any manner or form, permanent or temporary, including temporary storage in electronic form. Also, notwithstanding what has been provided in the Berne Convention for the Protection of Literary and Artistic Works (1971) (Berne Convention), both parties will grant literary and artistic authors, the right to authorize or prohibit the communication to the public of their work by wire or wireless means, provided that the disposal of their work to the public is done in such a way that they may be accessed from any place and at any time.

The FTA also assigns provisions regarding related rights, regulating the reproduction right, the authorization to dispose of the original and copy to the public, as well as the authorization or prohibition to broadcast.

It is also indicated that any person owning any economic right - not a moral right - may freely and separately transfer such right by contract. Each country may establish which contracts of employment underlying the creation of works or phonograms shall, in the absence of a written agreement, result in a transfer of economic rights by operation of law.


Enforcement of intellectual property rights

To effectively penalize piracy and forgery, the FTA provides that both countries will provide civil and criminal procedures incorporating effective measures and remedies.

As regards civil procedures, it is provided that judicial authorities will have the authority to order the infringer to pay damages, the seizure of suspected infringing goods, and the destruction of the goods determined to be infringing goods. Any provisional measure filed without having heard the other party shall be acted upon expeditiously, being able to order the applicant to provide a security or assurance to prevent abuse, but without constituting an unjustified dissuasion of access to such procedures.

In the criminal field, the FTA states that both countries undertake to establish criminal procedures and penalties at least in cases of willful trade mark counterfeiting or piracy, on a commercial scale, of works, performances or phonograms protected by copyright or related rights, including sentences of imprisonment and/or monetary fines that are sufficient to provide a deterrent to future infringements. Judicial authorities have the authority to order the seizure of suspected counterfeit or pirated goods, as well as to order the forfeiture and destruction of all counterfeit and pirated goods.

Border measures are also expressly regulated, establishing that any right holder will be entitled to initiate procedures for suspension by the customs authorities of the release of suspected counterfeit trade mark or pirated copyright goods into free circulation.

Lastly, both regarding border measures and criminal procedures, the FTA provides that, in cases of copyright and related rights piracy and trade mark counterfeiting, the competent authorities will be permitted to initiate measures or legal action ex officio - without the need for a formal complaint by a person or right holder.

 

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2003, Marcos Morales