Fair and Equitable Treatment and Judicial Patent Decisions

Kathleen Liddell and Michael Waibel ()

Journal of International Economic Law, 2016, vol. 19, issue 1, 145-174

Abstract: This article focuses on the increased scope for tension between obligations under investment treaties, particularly fair and equitable treatment (FET), and the interpretation of national patent law by domestic courts. Precisely because investment treaties were created to protect investors from State-led mistreatment and bias, and investment treaties include intellectual property (IP) rights in their definition of investment, the question is how much flexibility national courts retain in applying, interpreting, and developing IP laws. The implication of international investment treaties limiting long-standing flexibilities in IP law could be serious and profound. What more precisely are the implications of the international investment law FET standard for patent law and domestic court interpretations? Our main conclusions are: first, that investment tribunals should defer substantially to interpretations of patent law by domestic courts, limiting themselves to reviewing decisions for lack of a rational basis or lack of elementary procedural fairness (denial of justice). They should not engage in closer scrutiny. Second, if investment tribunals engage in closer scrutiny (for instance, in relation to patent decisions by other State organs, or if they reject our first conclusion), FET provides limited stability for existing patents and for patent law. Investors have no legitimate expectation that national patents will be irrevocable, that national courts will interpret domestic rules of patentability—such as utility—in a particular way, or that patent law will be static over time. However, domestic courts (and other State organs) breach FET if they contradict settled patent law and apply this to the existing patents in such a way that the patent rights are diminished, or adopt an interpretation with no rational basis.

Date: 2016
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