Wednesday, January 14, 2015

Patently pending: IP protection in the Middle East and North Africa (MENA)

Fraud Intelligence

The Middle East and North Africa (MENA) region ranks poorly in intellectual property rights protection and enforcement. While some countries, notably in the Gulf, are gradually improving, political and economic uncertainty in the wake of the Arab Spring uprisings is hampering progress in much of the rest of the region. Indeed the unrest has thrown a proverbial spanner in the works when it comes to IP enforcement, with the authorities' effectiveness often undermined, while political transition in countries like Libya and Egypt has meant IPR is far from being a top priority. Furthermore, firms are often reluctant to send investigators into dangerous markets such as Iraq and Syria to assess IP infringements.

Force majeur

Things have gotten harder (since the uprisings). In Egypt, since 2011, some cases take much longer, and with one client, it took a lot of time to close the case as the infringement was taking place in an unstable part of Cairo,” said Ms Roba Hamam, legal consultant at the Saba & Co. IP head office in Beirut, an intellectual property firm which has offices throughout the MENA. “There is a need to investigate possible infringements, but with people being killed on the streets we can't put our staff in danger in some areas of Iraq, Libya and Syria, so in such circumstances IP enforcement is no longer a priority for local authorities. On the other hand, clients have been surprised by the results we got even in conflict areas, such as Iraq.”
She cited a recent case in Libya where a client wanted to investigate a shipment of counterfeit goods that had been offloaded at Tubruq (Tobruk) port in the east of the country, but there was nothing that could be done as the port was in the hands of militias.“Many clients don't follow the news of these local jurisdictions, and when we have a shipment to Libya, we have to explain to them that, say in Tubruq, it is controlled by tribes and militias and the government can't help. To other ports like Tripoli or Benghazi we could do something, so it was of course intended by the counterfeiters to ship to Tubruq,” added Hamam.

Golden opportunities

Conflict areas aside, while IP infringement concerns have warded off some foreign investors and multinational brands from entering the MENA market, the overall economic benefits of being in a USD2.2 trillion market with 355 million people, according to World Bank figures, often outweighs the downsides. This is even more apparent in the USD1.56 trillion Gulf Cooperation Council (GCC) economies, which are considered less risky than the Levant and North Africa, with high purchasing power within the Gulf's burgeoning consumer markets helping negate brands' concerns. Furthermore, there is more law and order in the GCC region (United Arab Emirates – UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman) in general, despite shortcomings in IP enforcement on a global comparative basis.
“Where you look at the overall MENA market, the economic situation is better in some places than others, but everything is interrelated to governance as multinational corporations (MNCs) wouldn't want to invest in a country where the political situation is not stable. In stable places there is obviously more prosperity and chances for profit, so you would think of Dubai immediately and the GCC,” said Hamam. “Some MNCs are sceptical about the market, but the MENA was not heavily invested in until a decade or so ago. Of course illicit products are coming in, there's a lot of infringements as the MENA is a huge market for brand owners and counterfeiters.”

Culture and law

Adding to infringements is MENA countries generally being consumer economies rather than manufacturing ones. And there is a degree of cultural ambivalence towards counterfeits and IP theft, compounded by minimal fines and enforcement.
In most of the GCC countries, the Levant and North Africa, I don't see any local regulations that considers IP, and more specifically trademark, infringement as a serious felony but rather a misdemeanour level of crime,” said Mr Munir Suboh, partner, IP at law firm Al Tamimi & Co, in Dubai. “In the UAE, the regulator in trademark law [the UAE economy ministry’s intellectual property protection department] stipulates a penalty cap of [UAE dirham] AED10,000 (USD2,722) and/or imprisonment for up to 12 months, so if you see a business doing millions of dollars in revenue from selling counterfeit or infringing products, they will not be exposed to serious criminal sanctions. Unlike the USA and some other industrial jurisdictions, there is no punitive damages remedy in the region.”
While aspects of IP rights are better enforced in the region, the UAE especially, with copyrights, trademarks and trade dress infringement cases brought before the courts, in patents the MENA is particularly weak in enforcement, in part because of the low number of patents but more so the time it takes to register.
On a global comparative basis, the MENA ranks low in patent filing volumes, and regionally just ahead of Africa, according to the World Intellectual Property Organisation's (WIPO) ‘World Intellectual Property Indicators 2013’, with countries registering 1 to 99 applications in most of the MENA region in 2012, although Algeria, Morocco, Egypt, Kuwait, Qatar, Lebanon and the UAE were in the 100 to 199 applications bracket, and Saudi Arabia and Turkey in the 1,000 to 9,999 bracket, but behind global leaders Japan, China, the USA, Europe and Russia at over 10,000.
“There are a lot of practical obstacles in pursuing patent protection resulted from the delay of granting patent. Generally speaking, there must be patent rights that were recorded and registered properly prior to seeking enforcement procedures,” said Suboh. As the patent application is a lengthy process in most of the MENA, regulators may need to consider providing patent applicants preliminary injunctive relief to legally protect them in the case of patent infringements prior to ratification, he added. 

Local variation

In the GCC, the UAE, Bahrain, Qatar and Oman are members of the WIPO Patent Cooperation Treaty (PCT), which helps patent applicants file multiple patent protection applications. Saudi Arabia joined the PCT in September 2013, although Kuwait is a notable exception in not being part of the PCT or the World Trade Organisation’s (WTO) agreement on trade-related aspects of intellectual property rights (TRIPS). Yet while a GCC Patent Law was established in 1992, and became operational in 1998, committing the six GCC states to enforcing patents, in practice there is no clear regime in place to enforce such patents. As law firm Clyde and Co noted in regard to the GCC Patent Law and Saudi Arabia's PCT membership: “With a more favourable priority period being available through the PCT, and with a question mark over the enforcement of GCC patents, it is expected that rights owners will look increasingly towards filing patent applications direct in Saudi Arabia and other GCC states, rather than using the GCC patent system.”
There is a move to address patent concerns as countries invest more in R&D, especially in the GCC - the UAE and Qatar in particular. Both countries are working to diversify their economies away from hydrocarbons and setting up research facilities, with Doha earmarking 2.8% of government revenue for R&D and establishing facilities such as the Qatar Science and Technology Park. Such developments are expected to push IP enforcement forwards for GCC institutions to better protect themselves in the region and worldwide.
“Countries like the UAE are starting to invest in R&D and building industrial assets, but if this is not backed up with supportive regulations to acquire ownership on such assets and give practical options to enforce such rights, it will get challenging to attract investors to build and develop their IP rights in such markets,” said Suboh.

First signs of change

Progress in tackling IP infringements is being made in certain countries, the Gulf in particular, while Egypt, Israel, Kuwait, Lebanon, and Turkey were placed on the IP ‘watch list’ of the Office of the US Trade Representative (USTR) in its 2013 annual review, and Algeria on its ‘priority watch list’.
Qatar for instance is the only Gulf country that uses Interpol to counter trafficking in illicit goods and to investigate IP infringements, according to a speech by Jean-Michel Louboutin, Interpol's executive director of police services, at a workshop organised by the Interpol regional programme to counter trafficking in illicit goods and intellectual property crimes, staged in Doha during March.
In the UAE, the Federal National Council passed an anti-fraud law in March, 2014 – to go into effect in the next six months – to replace an outdated law from 1979. Notably the law will increase punishment to two years in prison and/or a fine of AED50,000 (USD13,612) to AED250,000 (USD68,063), while those convicted of commercial fraud in food or medical products could face imprisonment and fines of up to AED1 million (USD272,253), a much needed increase from the current AED10,000 (USD2,722). “We hope the new anti-fraud law will set a platform for serious sanctions against infringers of IP rights,” said Suboh.
Public awareness is also growing about the problem, partly because of information campaigns by MNC groups, such as the Brand Owners’ Protection Group (BPG). There have also been discussions about using Islamic jurisprudence to promote the fact that commercial fraud and counterfeiting is un-Islamic and amoral.

A role for religion

“In the recent First IPR Forum held in Dubai [organised in December (2013) by the BPG with the Dubai Economic Council (DEC)], there was a specially dedicated session to discuss what religion says about IP rights and infringement in light of Sharia law,” said Suboh. “There were some discussions to verify the religious grounds of IPR and I believe it’s the time to explore the possibility to issue a fatwa [a religious edict] by scholars of well recognised Islamic centres, such as Azhar [in Egypt], which needs to be widely covered and conveyed by regional media, to discuss violating IP rights and imply that infringement is somewhat equivalent to stealing tangible property.”
As in many other related issues, such as commercial crime, fraud and corruption, the MENA has a long road ahead to improve IP enforcement, and it all hinges on stability and the rule of law. “I think there is a really long way to go, for everything, and it is all related to good governance,” said Hamam.

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