The World Trade Organization (WTO) created by the Uruguay Round of negotiations for revision of the General Agreement on Tariffs and Trade (GATT) is expected to come into operation on January 1, 1995. With certain exceptions, the TRIPS agreement relating to Intellectual Property matters will come into effect one year later on January 1, 1996.

The major features of the United States GATT implementing legislation signed by President Clinton on December 8, 1994 relating to intellectual property include:

The major immediate impact abroad is that, from the date on which the World Trade Organization comes into effect, all countries that have ratified the GATT TRIPS Agreement and whose patent laws have limitations on the subject matter that can be protected that are incompatible with the Agreement must start to permit filing of patent applications relating to inventions previously in the prohibited classes. However, depending on the country's degree of economic development, there may be no obligation to grant patents on such applications for another five or ten years. The implementation of other provisions such as the extension of patent terms may be delayed up to January 1, 1996.

We have outlined in various Information Letters to our clients the major developments relating to the North American Free Trade Agreement (NAFTA) and the revision of the General Agreement on Tariffs and Trade (GATT) as they have occurred[2]. However, now that the United States Congress has ratified the revised GATT and the necessary implementing legislation has been signed into law, we believe that a summary of the situation might be useful.

Trade agreements come in many different forms and may range from simple bilateral agreements on a single topic to, for example, the Articles of the Confederation of the United States in the immediate post-colonial period, the form of which was to a significant extent determined by issues of trade between the states. In increasing order of complexity possible trade arrangements may fall into the following categories:

NAFTA, as its name implies, is a free trade agreement that clearly falls into the second category above. No common external tariff is to be established. Thus Mexico was free, as recently agreed, to participate in an additional free trade agreement with Colombia and Venezuela without any conflict with its obligations under NAFTA. This may lead to problems as to what goods are entitled to pass from one NAFTA country to another free of duty (NAFTA provides that only goods originating in one of the member countries are entitled to entry into the others at zero or low customs duty rates. About one quarter of the entire text of the NAFTA agreement is devoted to defining rules of origin for goods that are entitled to NAFTA treatment.)

The new version of GATT after completion of the Uruguay Round of negotiations is still really an arrangement of the first category listed above but has started to take on additional features. The Bretton Woods Conference after World War II, which established the World Bank and the International Monetary Fund, also proposed the creation of an International Trade Organization. As a result of resistance from the United States Senate, this never came into existence and the GATT was adopted on a provisional basis until such time as the issue could be readdressed. This occurred during the Uruguay Round of negotiations that started in 1986 and finally ended in December 1993. In this round of negotiations the task of the negotiators was extended from dealing simply with trade in goods to covering other matters such as trade in services, trade-related aspects of intellectual property rights and a new disputes settlement mechanism. This has led to the decision to establish a World Trade Organization to oversee the implementation of the new.

Since the negotiations for adoption of NAFTA and GATT were carried out largely in parallel and the same negotiators for the most part represented the United States in both sets of negotiations, particularly in the aspects of the agreements that relate to intellectual property, it is not surprising that many of the features of the two agreements are very similar.

NAFTA came into effect on January 1, 1994 as an agreement between the United States, Canada and Mexico. On December 10, 1994 it was announced that agreement had been reached in principle for Chile to be admitted to the Agreement.

The main NAFTA agreement covers trade in goods; technical barriers to trade (related to national standards); aspects of Government Procurement; Investment, Services and Related Matters; Intellectual Property; and Dispute Resolution. In addition to the main agreement negotiated by the Bush administration, there are side agreements negotiated by the Clinton administration relating to Environmental Cooperation and Labor and Import Surges. The former will result in the establishment of an Environmental Secretariat in Montreal, the latter a Labor Secretariat to be located in Dallas. To give something to Mexico, a NAFTA Secretariat (which was not contemplated in the original NAFTA text) is to be established in Mexico City although its functions are still to be defined.

Outside the provisions of the specific chapter on Intellectual Property, which are essentially similar to those adopted in GATT and will be discussed below in the section on GATT, other chapters of the NAFTA Agreement contain a few items of interest to IP practitioners. Among these are the following:

It is unlikely that this wording will establish an exhaustion of rights principle in NAFTA similar to that which exists in the European Union in respect of intellectual property rights. However, it could, particularly when read in conjunction with the provisions on harmonizing technical standards, lead to changes in labelling and advertising."

So far as the IP chapter is concerned, the most dramatic changes from the United States' point of view were: 1) the change required in 35 USC 104, to permit reliance on dates of invention in other NAFTA countries, 2) the change in the trademark law to preclude the registration of a trademark that is geographically misdescriptive even if it has acquired a secondary meaning and 3) a change in copyright law that restored to protection certain works on which copyright had previously terminated.

In Canada the main changes were a restriction on prior user rights that exist in respect of patents to those who had used the invention before the filing or, where relevant, the priority date of the patent in question; a restriction on the federal and provincial governments' rights to make use of an invention without consent of the patentee to situations where the government in question had tried but failed to secure a voluntary license from the patentee; and repeal of the prior special compulsory license provisions in respect of inventions for the production of food or medicines. (One should not be too cheerful over this, however, since the activities of the Patented Medicines Prices Review Board still cause major problems for the owners of Canadian patents relating to pharmaceutical inventions).The major change in the trademark area is to provide for improved procedures for preventing the importation of counterfeit goods by the customs authorities. In addition, the term for filing a Declaration of Use to support a trademark application based on proposed use has been modified and the evidence of use requirement to defend against an action for cancellation of a registration based on nonuse has been liberalized. In the copyright field the major changes are the introduction of a rental right for computer programs and sound recordings and an improvement in the ability of the copyright holder to prevent the importation of counterfeit works into Canada. With respect to designs, the law was changed to make importation, rental and exposure for sale of an infringing design actionable.

Mexico carried out a major revision of its Industrial Property laws in 1991, ahead of the final agreement on NAFTA, and so had comparatively little to do when NAFTA came into effect. One issue that still needs to be addressed, however, concerns the protection of plant varieties; a new law is expected shortly, at which time plant varieties will cease to be patentable. Mexico has recently carried out a further revision of its Industrial Property Law, which does not seem to have been provoked by NAFTA as such. This law gives applicants the right to choose whether they wish the 1991 or 1994 law to apply to a particular case and requires that a request for examination be filed by March 1, 1995 on all pending patent applications on which examination has not yet been requested.

Many of the 100+ countries that signed the revised agreement in Marrakesh in April 1994 have still not ratified it. Most seem to have been waiting to see what happened in the United States where the necessary implementing legislation was signed by President Clinton on December 8, 1994. It now seems probable, however, that a sufficient number of countries will have ratified the agreement by the end of 1994 for it to come into effect on January 1, 1995.

In addition to bringing new topics within the purview of the international trade bureaucracy, the new agreement provides a new frame work within which to operate, namely, the World Trade Organization (WTO), which will have its headquarters in Geneva, Switzerland. As yet no director general has been appointed. The front runners are ex-President Carlos Salinas of Mexico (supported by the United States), Renato Rugiero (a former Italian trade minister - supported by the EU) and Kim Chui-su (the South Korean trade minister - supported by Japan).

Organizationally, the most important change from the old GATT organization is the establishment of a binding dispute settlement procedure. It may be recalled that under the old version of GATT disputes were referred to a panel and the GATT Council could accept or reject the decision of the panel and on occasion even delay or prevent the panel's findings from being presented to the Council. Under the new procedures a Dispute Settlement Body is to be established comprising both panels to make initial determinations on a case and an Appellate Body. Panels will normally be three person panels and appeals will normally also be heard by a three person panel. Panels investigating a complaint will have the right to seek information or technical advice from anyone they deem appropriate. Findings and recommendations reached by the Dispute Settlement Body can include authorizing a country that has been aggrieved by failure of another to comply with its obligations under the agreement to take reprisals against the erring party.

The general provisions of GATT's Agreement on Trade Related Intellectual Property Issues (TRIPS) follow those of the Paris, Berne, Rome and Semiconductor Chip Conventions providing for national treatment and most favored nation treatment, subject, however, to the exceptions to these principles that already exist in these Conventions.

So far as Patents are concerned, the major provisions include the following:

Major provisions relating to Trademarks are:

The major provisions in the field of Copyright protection include the following:

In other areas it is required that parties to the Agreement:

Perhaps more striking than the substantive law provisions are those that deal with procedural issues. For example, the Agreement requires member states to provide means whereby under appropriate circumstances a judicial tribunal can order production of evidence (something that is virtually impossible in Germany or Japan at present). The Agreement further provides for the availability of provisional remedies. These specifically provide that judicial authorities must have the authority to act promptly to prevent infringement from occurring and/or for preservation of evidence and in appropriate circumstances to act even without giving the alleged infringer the right to be heard. In such cases it is, however, necessary that the unheard party be given an early opportunity to challenge any remedy that has been ordered. Such remedies may be subject to the right holder having to indemnify any party who has been wrongfully enjoined or restrained. The Agreement specifically provides that damages awarded for infringement of an intellectual property right must be "adequate to compensate for the injury" suffered and that the judicial authorities must have the right to award attorney fees to an intellectual property rights holder who proves that his or her rights have been infringed.

In addition to the civil remedies set out above, countries are also required to provide for criminal procedures and penalties for "at least" wilful trademark infringement and copyright piracy on a commercial scale.

Additionally, member states are required to establish procedures to facilitate interception of "counterfeit" trademark or "pirated copyright goods" by customs authorities at national boundaries. To be entitled to take advantage of these provisions, the right holder will have to satisfy the competent authorities that prima facie rights exist and give a sufficiently detailed description of the goods as to make them "readily recognizable" by the customs authorities. Implementation of such procedures may be made subject to the right holder having to provide a security or equivalent assurance sufficient to protect the importer and the authorities in case of import of legitimate goods being impeded and "to prevent abuse". In cases where an interception has occurred, the goods will normally only have to be held for a ten day period unless proceedings are commenced within that period for an action on the merits to determine whether the goods are in fact infringements of intellectual property rights. If no such action is commenced, the goods will be released.

Industrialized countries are required to implement most provisions of the TRIPS within one year of the WTO Agreement taking effect. Less developed countries are given a five or ten year period to comply with most provisions depending on their state of economic development.

The most significant features of the United States GATT implementing legislation relating to intellectual property are summarized below.

Two major changes are to be effected in U.S. patent law: first, the term of a utility or plant patent is to be 20 years from filing of the "full" application and second, the requirement of 35 USC 104 that in considering acts of invention one can only consider acts that occur in the United States, Canada or Mexico is amended so as to cover acts carried out in all other World Trade Organization (WTO) member countries.

So far as the duration of the patent is concerned, after June 7, 1995, the 20-year term will run from the earliest of any series of continuations or divisional applications that was filed as a "full" application (which for present purposes also includes a PCT application designating the United States). Thus any divisional, continuation or continuation in part application filed on or after June 8, 1995 will, subject to certain exceptions noted below, have a term of 20 years from the filing date of its earliest filed U.S parent application or PCT application designating the United States. The legislation also provides for a modification of the maximum term of patents in force on June 8, 1995 and patents granted on applications filed before that date. Such patents will have a term which is the greater of 20 years from the first U.S. filing date or 17 years from grant. Safeguard provisions are, however, introduced to protect those who have "commenced" or made "substantial investment" before the change of the law on the assumption that the patent would expire 17 years from its grant date. Acts of this type that lead to infringement of "extended" patents will be subject to provisions limiting the remedies available during the period that extends beyond 17 years from grant. For such infringing acts no injunctions will be granted and no attorney fees awarded. The infringer will, however, be required to pay equitable remuneration for the use made of the invention.

In order to avoid prejudicing the rights of U.S. inventors, who unlike foreign inventors cannot take advantage of the Paris Convention to delay filing in the United States until one year after first filing of an application for an invention, a new Provisional Patent Right is to be created[4]. Such a provisional application will have to meet the general requirements of description, enablement and best mode set out in Section 112 of the U.S. patent statute but will not be required to contain claims. Provisional applications will not be allowed to claim priority from any foreign applications or any earlier U.S. application. Provisional applications will not be examined and will only be looked at if it becomes necessary to determine the date to which a claim of the "full" application is entitled because of intervening art having a date between that of filing the provisional and full applications. Provisional applications will be subject to a fairly low filing fee. The filing of a provisional application will give the applicant the right within one year to file a "full" application including claims. At the end of that year the provisional application will be abandoned by operation of law. More than one provisional application may be combined into a single "full" application as long as all the provisional applications are filed within one year of the first provisional application and the "full" application is filed within one year of the first provisional application. However, in order to avoid problems later on the question of whether a claim that derives from two different provisional applications is entitled to the date of either of them or only the date of filing the "full" application, it will be prudent wherever possible to write the second and any subsequent provisional application that is likely to be combined with a previous provisional application in such a way as to incorporate the text of any such prior provisional applications. The one-year period provided by the Paris Convention within which to file foreign applications claiming convention priority will normally run from the date of filing the first provisional application.

In order to avoid hardship, the 20-year term from filing will be subject to a possible extension of up to five years in certain situations. Any such extension will be independent of any extension granted under 35 USC 156 to compensate for delays in receiving approval to market a product because of the need to obtain FDA approval. Under the new law, extensions of up to 5 years may be possible in situations where the grant of a patent was delayed because of an interference, a secrecy order or as a result of the fact that the patent was only granted after an appeal to the Board of Patent Appeals and Interferences or to a Federal Court. Extensions because of the need to appeal are, however, subject to the limitation that the first three years of prosecution are to be discounted in determining the duration of the extension and that any period in which the applicant does not act diligently will also be discounted. Furthermore no extension will be available if grant of the patent is conditioned on a terminal disclaimer because the claimed subject matter is not patentably distinct from a previously granted patent of the same applicant. The latter provision is intended to discourage applicants from filing narrow and broad applications for the same invention, prosecuting the narrow one to obtain grant quickly and then obtaining broad claims only after prolonged appeals that effectively extend the duration of their patents.

Transitional provisions seek to alleviate the problems that will arise for applicants whose applications are already on file before the new law comes into effect and whose ability to use the filing of continuation or divisional applications to prosecute cases will be impacted by the fact that, after the law changes, the filing of such an application will carry with it the penalty that the term of any patent granted will run from the earliest of the U.S. applications from which it derives priority. In order to assist certain applicants who would be most affected by the change of law, PTO Rules will permit applicants whose effective filing date is prior to June 8, 1993, two opportunities to have the "finality" of any final rejection removed by payment of a fee, thus in effect assuring two additional office actions before an action really becomes final.

Transitional provisions also deal with the problem of late restriction requirements. For applications having an effective filing date earlier than June 8, 1992, no new restriction requirement may be made or maintained after April 8, 1995, if the applicant pays a fee to have all claims that would otherwise be withdrawn under the requirement maintained in the parent application. This provision will not, however apply if the application in question has never previously been subject to an office action.

The second major change is the extension of the right to establish inventive activity based on acts outside the United States, Canada and Mexico. This provision will, however, be limited to proving dates of invention on or after January 1, 1996[5]. This change is of significance not only in interference practice but also in ex parte proceedings since it will now permit those who made an invention outside North America to "swear behind" publications that occur less than one year before the actual filing of the U.S. application if they can show appropriate activity in a WTO member country. It should, however, be noted that the standard of proof required for demonstrating such inventive activity is the same as that required if the inventive activity is carried out in the United States and that, if the laws of a country or the steps taken by a party prevent U.S. discovery procedures from being applied properly, any court or tribunal considering the issue may "draw appropriate inferences" and presumably exclude the evidence in question. Proposed Rules to implement the equivalent provisions of NAFTA have been published and the PTO has indicated that those to implement GATT will follow the same form.

In order to ensure that evidence in respect of inventions made abroad is reliable, the proposed new interference rules provide that for testimony taken outside the United States, the following rule shall apply:

A major practical consequence of this change is that persons in any WTO country who may wish to take advantage of this provision should ensure that their record-keeping, having regard to the making and documentation of inventions, complies with U.S. standards. One particular point to note is that the making of the invention must be able to be corroborated by someone who is not part of the inventive entity. Hence, it might be desirable to ensure that, for example, laboratory notebooks are inspected by someone outside any likely "inventive entity" on a regular basis so that such corroboration can be established.

Another significant change is the requirement that a party's case-in-chief testimony in an interference proceeding is limited to and must be presented in an affidavit unless the taking of a deposition for a case-in-chief is approved by the administrative patent judge. Under the previous rule, a party had the option of submitting an affidavit or conducting a deposition for the purpose of taking testimony for its case-in-chief. The opponent has the opportunity to cross-examine the affiant by deposition and the proposed rules require that this deposition must be conducted in the United States (proposed 37 CFR 1.672(d)). Proposed rule 37 CFR 1.673(a) provides that a deposition may not be noticed in any other place than the United States without first obtaining permission of the administrative patent judge.

The proposed rule 37 CFR 1.671(h) provides that, in order for a party to compel testimony or production of documents or things in a foreign country, the party must file a motion seeking permission to do so. The motion must include a showing that the witness: has been asked to testify in the United States and has refused to do so or that the individual or entity having possession, custody, and control of the document or thing has refused to produce the document or thing in the United States. The motion must include a statement that the moving party has offered to pay the expenses involved in bringing the witness or the document or thing to the United States.

Under the present rules only if a party was seeking to rely on a document that was not in the English language was the party required to provide an English translation of the document. Pursuant to the proposed new rules, a party must also file an English translation of any document that it is required to produce that is not in the English language.

The other major change in the patent area is a change in the definition of infringement to make it clear that an offer for sale of an infringing product in the United States or an importation of an infringing product into the United States constitutes an act of infringement whether or not any actual sale occurs.

The major change in the copyright field is the extension of copyright protection to certain works that are currently in the public domain either as a result of never having had copyright protection in the United States or as a result of protection having lapsed for certain reasons. Other changes relate to rental rights in computer programs and to various aspects of the protection of sound recordings.

Situations in which works will become subject to copyright protection, which either had previously not existed or had lapsed, are the following:

All of such works are referred to in the statute as being "restored copyrights" even if copyright never in fact previously existed for the work in question.

Rights under such "restored copyrights" are limited in respect of those who have acted in reliance of the fact that no copyright previously existed for the work in question. In respect of such parties it will be necessary to have notified them that copyright has been restored, either by publishing a notice in the Federal Register or by direct notification before action for enforcement of the copyright can be taken. Furthermore, for a period of 12 months after notification, any such party may sell off previously manufactured stock or may continue to perform or display the work publicly and indeed authorize others to conduct such activities. Additionally, any derivative work created prior to copyright being restored in the main work may continue to be used subject to payment of compensation to the party whose copyright has been restored.

The change in respect of protection of computer programs is to abolish the sunset provision that previously existed in respect of rental rights for such programs.

So far as sound recordings are concerned, federal civil and criminal remedies are now provided against those who fix sounds or sounds and images of live musical performances, transmit or otherwise communicate to the public the sounds or sounds and images of a live musical performance or distribute or offer to distribute or offer to sell, rent or offer to rent or traffic in any copy or phonorecord fixed as described previously. The term "traffic in" is defined as transporting, transferring or otherwise disposing of, to another, as consideration for anything of value or to make or obtain control with intent to transport, transfer or dispose of the products in question. It is specifically provided that state law remedies are not preempted by the new federal statutes.

There are two major changes contemplated in the Lanham Act, for which implementing regulations are still being considered, namely:

In addition to amendments to the various IP laws as such, the implementing legislation also affects IP matters in other ways, the most notable being the following:

Many of the changes in intellectual property laws that have taken place over the last few years have been made with a view to meeting the obligations that were expected to be imposed by the GATT TRIPS Agreement (the form of which was effectively finalized over two years before agreement was reached on the main GATT Agreement itself). Thus, for example, Poland, Hungary, the Andean Pact countries and Thailand have all amended their laws over the past few years in light of the GATT requirements. Even countries that are not yet part of GATT, such as China, Russia and Taiwan have amended their laws, at least partially, as required. The final adoption of GATT even seems to have brought an end to the parliamentary squabbling in Argentina and it seems likely that a new patent law that will include protection for pharmaceutical products will be enacted shortly. Parliaments in Australia and New Zealand are considering legislation to extend the present 16-year patent terms in these countries to 20 years. Even in Brazil, the legislature approved ratification in December 1994, not even taking advantage of the possibility of arguing that Brazil is a developing country and entitled to delay implementation of some provisions. Only in countries such as India, where the local pharmaceutical industries persuaded the government to try to exclude intellectual property from the Uruguay round of negotiations, does progress towards implementation seem slow, and in India that slowness seems fairly well confined to the issue of patent protection for pharmaceutical products. Even in these countries, however, the prospects of action seem brighter than at any time in recent memory and even if amending legislation is slow to come on to the statute books, the black box provisions requiring at least the ability to file patent applications relating to excluded subject matter should be in effect shortly.