The Principle of Territoriality in Intellectual Property Protection and National Development

The Paris Convention for the Protection of Industrial Property (Paris Convention), signed in 1883, represents the first international milestone in the protection of Industrial Property. It enshrines the principle of territoriality, which establishes that the protection granted to industrial property is limited to the territory granting such protection, as set forth in Article 4. (Article 4 bis of the Paris Convention for the Protection of Industrial Property). Under the same provision, all countries that are signatories to the Paris Convention are sovereign in their examinations and may grant or refuse the rights applied for, regardless of decisions made by other countries regarding the same application. In this regard, Denis Borges Barbosa, in his work Treatise on Intellectual Property, discusses the principle of patent independence, stating that each patent corresponds to a national title that is completely independent of other patents.¹

According to Peter Drahos, as cited by Cláudio Lins de Vasconcelos, the advent of the TRIPS Agreement marked the beginning of the Global Period of intellectual property protection and a process of “deterritorialization,” that is, a reduction in countries’ autonomy regarding intellectual property law, through the harmonization of intellectual property protection standards and enforcement mechanisms, all integrated into the international trade system.²

In this context, according to Cláudio Lins de Vasconcelos, the right of each State to regulate a given matter within its territory represents both a power and a limitation. Although a State retains sovereignty over the level of protection granted within its territory to innovations originating in another country, it has no control over the level of protection its own innovations will receive abroad.³

Thus, except for cooperation mechanisms established under international agreements, such as the Madrid Protocol for trademark registration, it is the responsibility of the rights holder to identify the countries of interest and then, through the appointment of a local representative, file the relevant applications and comply with the other legal protection requirements in the selected jurisdictions, thereby extending protection of its rights to other territories.

A strong Intellectual Property system is directly related to the level of innovation within an economy, not only because it provides direct incentives to creators, but also, in the case of patents, because it facilitates access to the technical information contained in patent documents and enables local exploitation through licensing or assignment of rights.

Once published, patent documents become available in international public databases, representing an enormous source of technological knowledge and fulfilling their social function, as already highlighted in Article 2 of the Brazilian Industrial Property Law – LPI (Law No. 92.79/96), which provides for the protection of industrial property rights while taking into consideration the country’s social interest and technological and economic development.

According to WIPO data,⁴ in 2019 the national IP offices receiving the highest number of patent applications were those of China, the United States, and Japan. Furthermore, these same three countries were the largest users of the PCT system that year.

Considering that the countries with the highest numbers of patent filings and the greatest use of the PCT system are also among the world’s leading commercial and technological powers, a direct relationship can be established between the creation of intellectual property and a country’s technological and economic development.

The capacity to innovate is a determining factor in the competitiveness of companies and nations,⁵ and Intellectual Property is a key mechanism for safeguarding innovation. As Denis Borges Barbosa explains, in a market economy, free competition should govern all economic relations. However, intellectual property arises from a failure or inability of this system to operate properly, thereby creating the need for restrictions on access.⁶

Generating innovation generally requires significant investment in research and development, in addition to the assumption of risks due to the uncertainty of results. Once developed, however, technology can often be easily copied. In this context, the free market becomes insufficient to sustain investment flows, since a competitor that appropriates technology developed by a third party, in order to reduce the risks of its own business, may charge lower prices and force the developer to reduce its profit margin, which represents the return on its investment.

The main function of Intellectual Property, when connected to industrial development policy, is to make acquired knowledge available to the public while, at the same time, providing the developer or investor, albeit temporarily, with an appropriate return on the investment made in research activities.

The principle of territoriality has numerous practical implications for the possibilities of exploiting innovations and, consequently, for industrial development policy. A particular technology protected in territory “A” but not in territory “B” may be freely exploited in “B,” without any exclusive right. It would therefore be considered to be in the public domain, a concept encompassing everything that has not been protected by intellectual property rights within a territory or whose granted protection is no longer in force.⁷

Based on these concepts, various possibilities arise for the use of innovations that fall within the limits of territorial autonomy but are not necessarily dependent on the acquisition of IP rights. The use of technologies in the public domain is, of course, unrestricted, as is the use of concepts derived from protected technologies in the development of new applications, thereby reducing research investment.

Likewise, technological mapping or monitoring of specific fields or companies may be freely conducted, allowing the identification of new research and development opportunities, market trends, or even potential partnerships and negotiations. Without a reliable patent protection system, however, much of this information might not even be available.

In this respect, one of the most emblematic examples is the so-called “Japanese economic miracle,” referring to Japan’s remarkable economic growth after World War II. As described by Glaucia Maria Vasconcelos Vale, the political and economic reforms of that period included, among other measures, the creation of industries in strategic sectors and the dispatch of observers to Western countries in search of new knowledge and technologies that could be implemented by emerging Japanese companies.

The Ministry of International Trade and Industry (MITI) established specific objectives and strategies for certain industrial sectors. Every technology transfer process originating from the West passed through MITI, which ensured that the best technologies were acquired under the most favorable conditions and disseminated throughout the country’s business environment.⁸

These protectionist measures enabled the technological knowledge acquired by local industries to move beyond merely reproducing what had previously been developed in the West and instead serve as a foundation for the creation, improvement, and development of new locally generated technologies, transforming Japan into a major technological power.

Industrial and technological development is one of the most important pillars of a country’s economic development, since excessive dependence on the importation of certain goods or technologies may place a country in a position of vulnerability.

¹ BARBOSA, Denis B. Tratado da Propriedade Intelectual. Rio de Janeiro: Lumen Juris, 2010, p. 637.

² VASCONCELOS, Cláudio Lins de. Mídia e Propriedade Intelectual – A crônica de um modelo em transformação. Rio de Janeiro: Lumen Juris, 2013, p. 46.

³ Ibid., p. 48.

⁴ WIPO. IP Facts and Figures. September 2020. Accessed December 17, 2020. Available at: https://www.wipo.int/edocs/infogdocs/en/ipfactsandfigures2019

⁵ CALMANOVICI, Carlos Eduardo. A inovação, a competitividade e a projeção das empresas brasileiras. Rev. USP No. 89, São Paulo, Mar./May 2011.

⁶ BARBOSA, Denis B. Tratado da Propriedade Intelectual. Rio de Janeiro: Lumen Juris, 2010, p. 191.

⁷ POLIDO, Fabrício Bertini Pasquot. Direito internacional da propriedade intelectual – fundamentos, princípios e desafios. Rio de Janeiro: Renovar, 2013, p. 422.

⁸ VALE, Glaucia Maria Vasconcelos. Japão: milagre econômico e sacrifício social. RAE – Revista de Administração de Empresas, Vol. 32, No. 2, 1992. Accessed December 17, 2020. Available at: https://www.fgv.br/rae/artigos/revista-rae-vol-32-num-2-ano-1992-nid-44265/