INTRODUCTION
This article analyzes the protection of industrial property rights under national laws and international agreements to which Turkey is a party, identifying actions that may violate these protections. It examines whether such rights qualify as investments under international investment treaties and the protection standards applied. International investment arbitration decisions are reviewed to determine the conditions under which industrial property rights are protected.
PROTECTION OF INDUSTRIAL PROPERTY RIGHTS AT THE NATIONAL LEVEL
Intellectual and industrial property law consists of two categories: intellectual and artistic works, in other words, copyrights and industrial property rights.
Copyrights are regulated under Law No. 5846 on Intellectual and Artistic Works, while industrial property rights are governed by the Industrial Property Law No. 6769 (IPL). The purpose of this law is to contribute to the country’s technological, economic, and social development by protecting rights related to trademarks, geographical indications, designs, utility models, and traditional product names.
In addition to the Industrial Property Code (IPC), protection of industrial rights is regulated under the Customs Law No. 4458, Turkish Commercial Code No. 6102, Consumer Protection Law No. 6502, and related regulations. This article focuses on the protection of industrial property rights at both national and international levels.
Pursuant to Article 3 of the Industrial Property Law, the rights provided by this law apply not only to natural persons of Turkish nationality but also to legal entities having residence or conducting industrial or commercial activities within the territory of the Republic of Türkiye, persons entitled to file applications under the provisions of the Paris Convention or the Agreement Establishing the World Trade Organization dated 15/4/1994, and, on the basis of reciprocity, nationals of states that grant industrial property protection to persons of Turkish nationality.National protection is obtained through registration with the Turkish Patent and Trademark Office (TURKPATENT), granting exclusive rights. Trademark owners may use and protect their marks against unauthorized use, while patent owners can prevent others from producing, selling, or importing patented products or processes. Infringement allows legal actions such as injunctions, restitution of unjust gains, product recall, destruction, determination and compensation claims, and interim measures. IPC also prescribes criminal sanctions. Under Customs Law Article 57/A and the Regulation on Border Enforcement of Industrial Property Rights, right holders may request protection from the Ministry of Customs and Trade. Even without an application, customs officials can act ex officio to stop counterfeit goods. In cases of unfair competition, the Advertising Board and Ministry of Trade can impose administrative sanctions, including product recalls and fines. These mechanisms enable both domestic and foreign right holders to protect their industrial property nationally. Unregistered rights may also be enforced through civil and criminal courts. Additionally, TURKPATENT can reject bad-faith applications that infringe existing rights.
Another form of protection, which is also the subject of this article, is the protection obligations established by international agreements. Through these agreements to which Türkiye is a party, industrial rights acquired under national law can also be protected internationally. Examples of such agreements include the Paris Convention for the Protection of Industrial Property (1883), the Patent Cooperation Treaty (PCT, 1970), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS, 1994), and international investment agreements. These agreements show that foreign right holders can assert their industrial rights in Türkiye and seek protection under the relevant provisions.
International investment treaties play a role in protecting industrial rights by establishing specific treatment standards and commitments between the contracting states.
WHAT ARE INTERNATIONAL INVESTMENT TREATIES?
International investment treaties (IITs) can be bilateral (BITs) or multilateral. They are agreements that commit to provide certain standards of treatment to foreign investments from state parties. These agreements provide foreign investors with certain protections and benefits to resolve disputes with host states receiving investment. The aim of the protections and treatment standards committed in the treaty is to increase the flow of investment in the country, ensure sustainable economic development and liberalize investment.
An important aspect of international agreements is the judicial remedy used in dispute resolution. When a dispute arises between an investor and the host state, investors may seek remedies not only through local courts but also through arbitration against states. Arbitral tribunals often award compensation to the investor or order the suspension of the host state’s actions that constitute a violation.
The International Centre for Settlement of Investment Disputes (ICSID) is the most frequently used institution for arbitration. In addition, the United Nations Commission on International Trade Law (UNCITRAL) and the International Chamber of Commerce (ICC) may also serve as arbitration forums.
For arbitral tribunals to have jurisdiction and for investors to benefit from these protections, the relevant commercial activity must qualify as an investment. According to Article 25 of the ICSID Convention, the following conditions must be met: both the host state and the investor’s home state must be ICSID members; both parties must consent to ICSID arbitration; and the dispute must arise out of an investment. Therefore, a key issue examined by ICSID tribunals is whether the activity constitutes an investment. Otherwise, investors cannot benefit from the treaty protections and cannot resort to arbitration in case of disputes.
In multilateral investment agreements, there is generally a tendency to interpret the concept of investment broadly. Definitions often state that “any kind of asset in accordance with the host country’s laws” may qualify as an investment.
a. How is the definition of investment defined in international investment treaties?
The ICSID Convention does not define the scope of investment in detail. The Salini award plays an important role in determining this scope (Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4). The criteria established by this award are as follows: The investor must have brought a certain amount of capital to the host State. The investment project must be ongoing for a certain period of time and bear a certain risk. This risk may be economic, commercial or political. Finally, the investment project must contribute to the economic development of the host state. The search for these criteria in the Salini award in concrete disputes is called the “Salini Test”.
b. Can industrial property rights be considered as investments?
Under international law, case law, and legal doctrine, industrial property rights are also covered by international investment agreements. Many such agreements define “investment” broadly, explicitly including intellectual and industrial property rights. Examples include the 1989 U.S.–Turkey BIT, the 2005 German Model BIT, and the 2003 Japan–South Korea BIT. The Salini decision also recognized that an investor’s capital may consist of intellectual creations or products.
For instance, using a trademark in a host country may qualify as an investment if it involves production, sales, marketing, promotion, and warranties. Arbitral tribunals have held that to meet the investment definition, a trademark owner must contribute during the trademark’s validity, assume commercial risk, and support the host country’s economic development through commerce generated by the trademark, thus fulfilling the Salini Test.
In the ICSID arbitration case Phoenix v. Czech Republic, it was stated that disputes involving investments made in violation of national law cannot be brought before ICSID. Thus, if an investment is made unlawfully under national law, it will not be considered an investment even if explicitly mentioned in an international treaty.
From a Turkish law perspective, it is also necessary to examine whether industrial rights are included within the scope of investment. The 2009 Turkish Model Bilateral Investment Treaty (BIT) defines investments as any agreements related to commercial activities acquired to establish lasting economic relations in the territory of a party state, explicitly listing industrial and intellectual property rights. Similarly, under the Foreign Direct Investment Law No. 4875, intellectual and industrial property rights are included in the definition of investments. Therefore, in Türkiye, industrial rights can also be considered investments and fall under protection principles.
PROTECTION OF INDUSTRIAL RIGHTS THROUGH INTERNATIONAL INVESTMENT AGREEMENTS
Developed countries have embraced the idea that adequate protection and enforcement of intellectual property rights is a prerequisite for attracting foreign direct investment. Investors who feel that their intellectual and industrial property assets are securely protected will be more likely to invest in emerging markets. It is important that the protection activities demanded and reasonably expected by investors are not only committed to, but also successfully realized. In order to provide investors with this confidence, many regulations have been envisaged in addition to national legislation.
The standard implementation obligations of the TRIPS Agreement and the basic principles established by the Paris Convention play a role in shaping the main arrangements for the protection of industrial property rights in international investment agreements. The minimum protections envisaged in TRIPS are determined by various principles. According to one of these principles, the principle of national treatment, the protection rights provided by the state to domestic investors cannot be denied to foreign investors. In other words, the industrial property rights granted by the host state to its own citizens should not be more comprehensive and superior to those granted to foreign investors. For example, if Turkish citizens are granted tax deductions in the field of industrial property, they should also be granted to foreign investors.
According to the Most Favoured Nation principle (MFN), the advantage granted to an investor of a state party to the treaty should be applied in the same way to investors of all other states party to the treaty. The purpose of this principle is to prevent discrimination, to ensure equal opportunities among investors and to create equal competitive conditions.
Investors are also protected against expropriation. Expropriation is when the host state removes or reduces the value of a registered industrial right by confiscating it or rendering it effectively unusable. For expropriation to be possible, there must be public interest, it must be provided for under national and international legislation, and it must not be based on discrimination. Expropriation is made possible in return for an appropriate compensation.
Investors must be treated fairly and equitably (FET – Fair and Equitable Treatment). According to this principle, existing arrangements on which investors rely when investing in the host state cannot be changed in an arbitrary, sudden and unpredictable manner. Legislative provisions that encourage the investor to invest in the host state should not be changed unexpectedly and the legitimate expectation of the investor should be protected. For example, a patent application cannot be arbitrarily rejected. Legislation cannot be changed suddenly and licenses giving rise to industrial property rights cannot be revoked, contrary to the investor’s legitimate expectation.
According to the principle of umbrella clause, if the host state and the investor have concluded a special agreement in addition to international investment treaties or if the host state has given a written commitment, the obligations arising from these will fall within the scope of the direct investment treaty. As a result, the investor will have the right to resort directly to international arbitration instead of resorting to the remedies provided by national legislation. For example, if the state promises the investor that the trademark right will be protected for twenty years and then revokes it in the tenth year, this constitutes a violation of rights that can be brought to arbitration in accordance with the umbrella provision.
The free transfer of investors’ industrial property income outside the country (Free Transfer of Funds) is another protection. The investor cannot be prevented from transferring the income items generated as a result of the investment activity to its own country or to any other country. License income, patent usage fees and royalty payments are examples of industrial property income.
Investors with industrial property rights may arbitrate in their capacity as investors when these protection obligations are breached. ICSID arbitration is the most commonly used method to resolve disputes arising from breach of protection obligations. ICSID, UNCITRAL and ICC arbitration may award sanctions such as compensation in favor of the investor or the suspension of the host state’s activity.
EXAMPLE ARBITRAL AWARDS RELATED TO INDUSTRIAL PROPERTY PROTECTION CLAIMS
Investors have frequently resorted to arbitration in disputes alleging that their industrial property rights were violated by host state actions. Arbitration rulings show that the protection principles invoked by investors do not guarantee unlimited protection, and state measures can be justified.
Arbitral tribunals seek to balance interests, sometimes favoring the investor and other times prioritizing public welfare. The following cases illustrate how these assessments are made in line with arbitration decisions.
In the Philip Morris v. Uruguay (ARB/10/7. Philip Morris Brand Sàrl (Switzerland), Philip Morris Products SA (Switzerland) v. Oriental Republic of Uruguay) dispute, the host state adopted plain packaging by removing brand logos from cigarette packs. The anti-smoking law aimed to protect public health. Philip Morris International (PMI) claimed this law devalued its cigarette brands and investments. PMI sought $25 million in damages, alleging Uruguay violated the bilateral investment treaty between Switzerland and Uruguay and engaged in anti-competitive practices. PMI argued the law harmed legitimate expectations, amounted to indirect expropriation, and breached national treatment and most-favored-nation clauses.
In its decision, the International Centre for Settlement of Investment Disputes (ICSID) emphasized that regulatory measures adopted by a state in pursuit of legitimate public interests—such as public health—take precedence over investor rights. It was also noted that Uruguay’s regulation was among the measures recommended globally by the World Health Organization (WHO), and therefore could not be considered unforeseeable. The arbitral tribunal upheld that the state’s right to regulate takes priority over the investor’s commercial expectations. Although the investor’s capacity to generate profits was diminished, the tribunal found that the property rights were not entirely extinguished, thereby rejecting the claim of indirect expropriation. Furthermore, since the regulations were applied equally to all tobacco companies, no discriminatory treatment could be established.
In Eli Lilly and Company (U.S.) v. Canada (UNCITRAL arbitration under ICSID administration, NAFTA Chapter 11, UNCT/14/2), the issue of patent infringement was examined. Eli Lilly, a U.S.-based pharmaceutical company, claimed that Canada violated NAFTA by invalidating its patents for Zyprexa (schizophrenia drug) and Strattera (ADHD treatment). The patents were revoked based on the “promise doctrine,” which requires proof that the invention fulfills its promised benefits—something Eli Lilly allegedly failed to demonstrate.
Eli Lilly argued that the patent cancellations were arbitrary and discriminatory, that the “promise doctrine” did not exist when the patents were filed, and that its legitimate expectations were violated, breaching TRIPS and NAFTA intellectual property protections. Canada defended by stating that the invalidations were judicial decisions, the doctrine had long been part of Canadian law, national court rulings cannot be subject to international investment arbitration, and neither TRIPS nor NAFTA guarantees patent grant or maintenance.
The tribunal ruled that Canada’s judicial system did not violate investment protection standards; patent invalidations were not arbitrary state action and there was no legal unpredictability.
These arbitral decisions illustrate that provisions in international agreements concerning the protection of industrial property rights do not always offer absolute protection. Nevertheless, they do provide foreign investors with extensive safeguards against potential rights violations by host states.
CONCLUSION
Industrial property rights are protected not only by national laws but also through international agreements. Foreign investors’ protection claims over industrial rights are evaluated under international investment agreements, with international arbitration available for disputes. Arbitration decisions balance protection principles with competing interests. Applying protection standards from international investment treaties, alongside national laws, aims to increase foreign investment and promote economic development.
Intern Elif Rana DELİKTAŞ
