Vietnam Trade Agreement And Its Impacts On Intellectual Property System In Vietnam

By Pham Nghiem Xuan Bac and Dang The Duc

On 13 July 2000 in Washington, a long-awaited trade agreement between the Socialist Republic of Vietnam and the United States of America on trade relations was signed, marking a new development in the bilateral trade – economic relations. The Agreement finally completes the process and economic normalization between Vietnam and United States. It is really a triumph of market reformers in Vietnam, showing an encouraging progress by Vietnam during its active global and regional integration. It is also a significant step toward the Vietnam’s accession into the World Trade

The trade pact with the US is very comprehensive, covering four major areas: trade in goods, trade in services, intellectual property, investment relations of which intellectual property rights have been placed a special focus. The Agreement reserves Chapter II comprising 16 articles including a variety of issues in the intellectual property field in respect of the trade and economic relations between the two countries. This paper will take us through the major provisions of the Agreement concerning intellectual property rights as well as the impacts that the Agreement has on the improvement of the intellectual property system in Vietnam to bring it in line with the international standards. For better understanding of how the Agreement will affect the intellectual property system of Vietnam, it is necessary to have a brief look at what Vietnam has achieved in this field.

Though starting a decade ago, with the introduction of the Ordinance on Protection of Industrial Property Rights in 1989, the intellectual property law is one of the fastest developing areas of laws in the country. After the 1989 Ordinance, the Government issued a series of regulations for protection of patents, trademarks, designs and copyrights. However, the most noted development of the IPR regime in Vietnam is the Civil Code passed by the National Assembly in 1995, which took effect on July 1, 1996 and is followed by a host of implementing regulations . Under the Civil Code and its guiding regulations, significant changes have been made toward compliance with the international standards, especially the Agreement on Trade Related Aspects of Intellectual Property under WTO (TRIPs). For example, the term of protection of an invention has been increased to 20 years from 15 years; a trademark registration shall be cancelled on the basis of any five year consecutive non-use; procedures for copyright registration have been regulated, etc.

On the one hand, it is agreed by many that the laws on IPR of Vietnam are comparatively progressive and in line with the minimum international standards in the field. However, on the other hand, it is the case when we touch upon the ‘paper" laws and the current system is somewhat fundamental, still under development and remains much to be improved particularly for IPR enforcement. The current laws lack regulations on protection of certain important IP objects as required by TRIPs, for example layout deigns of integrated circuits, geographical indications, undisclosed information including trade secrets and repression of unfair competition, plant varieties, computer programs. The scope of protection for patents, trademarks, designs and copyrights and related rights is still limited. For the IPR enforcement, the prevailing laws lack specific regulations on effective and sufficient civil, administrative and criminal procedures and remedies for IPR enforcement as required by TRIPs. Though there are currently quite a few State authorities involved in and vested with the authority to solve IPR infringements , unfortunately, there is not any State authority with the central authority and strong enough powers to handle IPR infringements. The system is now cumbersome and bureaucratic, with the overlapped functions and powers between those agencies, thus making IPR holders unable to know which agency to ask for assistance.

TRIPs compliance has been cited by the two Parties for providing such adequate and effective protection and enforcement of IPR. Vietnam agrees under the Agreement to full TRIPs compliance in all areas of IPR in a comparatively short time, from 12 to 30 months, relevant to each area, from entry into force of the Agreement when it is ratified by the Congress of the United States and the National Assembly of Vietnam.

As a principle, the Agreement requires that each Party shall accord to nationals of the other treatment no less favorable than it accords to its own nationals with regard the acquisition, protection, enjoyment and enforcement of all IPR and any benefits derived therefrom (i.e. national treatment). Particularly for copyrights and related rights, the Agreement makes it clear that that either of the Parties shall not require right holders to comply with any formalities or conditions (including fixation, publication or exploitation in each Party’s territory) in order to acquire, enjoy, enforce and exercise rights or benefits.

The two Parties agree to comply with the Berne Convention for copyright protection of all works that embody original expression of each country’s nationals. In particular, protection must be also given to:

1. all types of computer programs which are literary works within the meaning of the Berne Convention, and
2. compilations of data or other material (excluding the data or material itself), whether in machine readable or other form which by reason of the selection or arrangement of their contents constitute intellectual creations.

Those rights as provided by the Berne Convention must be provided to authors and their successors in interest, and each Party shall make available to the author or their successor the right to authorize or prohibit:

1. the importation into the other Party’s territory of copies of the work,
2. the first public distribution of the original and each copy of the work by sale, rental or otherwise,
3. the communication of the work to the public, and
4. the rental of the original or a copy of a computer program for the purposes of commercial advantage.

In respect of economic rights derived from copyright and related rights, each country shall provide that any person acquiring or holding any economic rights may freely and separately transfer such rights by contracts. Regarding the term of protection of a work, it is stipulated that where the term is calculated on a basis other than the life of a natural person, then it shall be in no cases less than 75 years from the end of the calendar year of the first authorized publication of the work. In case of failing such authorized publication within 25 years from the creation of the work, the term shall not be less than 100 years from the end of the calendar year of the creation of the work.

The time period in which Vietnam shall have to implement fully its obligations with respect to copyrights and related rights shall be 18 months from the date of entry into force of the Agreement (except for the provisions on term of copyright protection above, for which the time period shall be 30 months). In case of conflict between the Agreement and the US-Vietnam Agreement on Establishment on Copyrights , the provisions of the Agreement shall prevail.

Each Party commits to make available appropriate remedies including civil and criminal remedies for serious violations concerning the protection of encrypted program-carrying satellite signals. Serious violations include: the manufacture, assembly, modification, or distribution of a device or system, by any person knowing or having reason to know that the device or system is primarily of assistance in the unauthorized decoding of an encrypted program-carrying signal; and the willful receipt or further distribution of an encrypted program-carrying satellite signal that has been decoded without the authorization of the lawful distributor of the signal or of any other person designated by the original transmitter as authorized distributors of such signal.

Vietnam shall fully comply with its obligations on protection of encrypted program-carrying satellite signals, in a period of 30 months from the date of entry into force of the Agreement.

Substantially the relevant provisions of the Paris Convention have formed a basis for the obligations of the two countries for trademark protection. Accordingly, each Party shall provide to the owner of a registered trademark the right to prevent all persons, without the owner’s consent, from using in commerce identical or similar signs for identical or similar goods or services, where such use would result in a likelihood of confusion. Likelihood of confusion shall be established in case of use of an identical sign for identical goods or services.

The Agreement requires that each Party must provide a transparent system for registration of trademarks, which gives the applicant to respond to the notice from the trademark office or an interested person to cancel a trademark registration. Actual use of a trademark shall not be a condition for filing an application for registration, and an application may not be refused solely on the ground that intended use has not taken before expiry of a three year period from the date of the application.

The Agreement also deals with protection of well-known trademarks, cancellation of registration on non-use basis, compulsory licensing, fair use of descriptive terms. Article 6bis of the Paris Convention shall be applied for protection of well-known trademarks; specifically, to determine a well-known trademark, account shall be taken of the knowledge of the trademark in relevant sector of the public, including knowledge in the Party’s territory obtained as a result of the promotion of the trademark. The registration of a trademark may be cancelled for non-use after an uninterrupted period of at least 3 years, except for valid reasons preventing the use as proved by the trademark owner, for example import restrictions or other government requirements. It is expressly stated that the compulsory licensing of trademarks shall be in no cases permitted.

Vietnam shall fully perform its above obligations for trademark protection within 12 months from the date of entry into force of the Agreement.

As a generally accepted principle, each Party shall make patents available for any invention, whether a product or process, in all fields of technology, provided that such invention is new, resulted from an inventive step and is capable of industrial application. However, the following objects may be excluded from patentability:

1. Inventions of which the prevention is necessary to protect public order or morality, including to protect human, animal or plant life or to avoid serious prejudice to the environment, provided that such exclusion made merely because the exploitation is prohibited by their law;
2. Diagnostic, therapeutic and surgical methods for the treatment of humans or animals; and
3. Essentially biological processes for the production of plants or animals other than non-biological and microbiological processes; animal varieties; plant varieties.

The Agreement requires that each Party must provide in its legislation that where subject matter of a patent is a product, the patent shall confer on the patent owner the right to prevent other persons from making, using, selling, offering for sale or importing for these purposes the subject matter of the patent without the patent owner’s consent. If the subject matter is a process, the patent owner must be accorded the right to prevent other persons from using that process and from making, using, selling, offering for sale or importing for these purposes at least the product obtained directly by that process, without the patent owner’s consent. Certain exceptions to exclusive rights are allowed, provided however that such exceptions do not conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner.

It is noteworthy that, as provided under Article 7.9 of Chapter II, where the subject matter of a patent is a process for obtaining a product, each Party shall, in any infringement proceeding, place on the defendant the burden of establishing that the allegedly infringing product was made by a process other than the patented process in either of the following situations:

1. the product obtained by the patented process is new;
2. a substantial likelihood exists that the allegedly infringing product was made by the process and the patent owner has been unable through reasonable efforts to determine the process actually used.

The time period in which Vietnam shall fully implement its obligations in respect of patents is also 12 months from the date of entry into force of the Agreement.

Each Party commits to protect layout designs (topographies) of integrated circuits in accordance with Articles 2 through 7, 12 and 16(3), other than Article 6(3), of the Treaty on Intellectual Property in Respect of Integrated Circuits. In addition, each Party shall make unlawful for any person without the right holder’s authorization to reproduce, import or distribute a protected layout design, an integrated circuit in which a protected layout design is incorporated, or an article incorporating such an integrated circuit only so far as it continues to contain an unlawfully reproduced layout design, except for the case where the person performing such acts or ordering such acts to be done did not know and had no reasonable ground to know the integrated circuit or article incorporated an unlawfully reproduced layout design.

The Agreement prohibits the Parties from permitting the compulsory licensing of layout designs. Each country may requires registration as a condition for protection of a layout design and, in such a case, the term of protection shall not end before the expiration of a 10 year period from the date of filing or from the date on which the layout design is commercially exploited in the world, whichever occurs first.

Vietnam commits to implement its obligations for protection of layout designs within 24 months from the date of entry into force of the Agreement.

Article 10bis of the Paris Convention is referred to for the Parties’ obligation to ensure effective protection against unfair competition. Specifically, legal means must be provided by each Party to prevent confidential information from disclosure, acquisition or use by other persons, without the consent of the person lawfully in control of the information, in a manner contrary to honest commercial practices. Confidential information shall be established if and when:

1. the information is not generally known or readily ascertainable;
2. the information has commercial value because it is secret; and
3. the person lawfully in control of the information has taken reasonable steps under the circumstances to keep it secret. Neither Party may discourage or impede voluntary licensing of confidential information by imposing excessive or discriminatory conditions on such licenses or conditions that dilute the value of the confidential information.

Vietnam agrees to fully implement its obligations for confidential information protection within 18 months from the date of entry into force of the Agreement.

Protection must be given to independently created industrial designs that are new or original, however either Party may provide that designs are not new or original if they do not significantly differ from known designs or combinations of known design features and that such protection shall not extend to designs dictated essentially by technical or functional considerations. The Agreement also states that each Party must provide the owner of a protected industrial design the right to prevent other persons without the owner’s consent from making, selling, importing or otherwise distributing articles bearing or embodying a design that is a copy, or substantially a copy, of the protected design, when such acts are undertaken for commercial purposes. Vietnam agrees to perform its obligations concerning protection of industrial designs within a 24-month period.

The Agreement requires that each party must provide effective enforcement procedures against infringement of IPR. The enforcement procedures shall include expeditious remedies to prevent infringement and remedies substantial enough to deter future infringement. They must be fair and equitable, are not unnecessarily complicated or costly, and do not entail unreasonable time limits or unwarranted delays. To this end, the Agreement set in details specific procedural and remedial aspects of civil and administrative procedures, criminal procedures and remedies and enforcement procedures at the border.

For example, for the civil judicial procedures for enforcement of any IPR, the Agreement requires that such procedures must secure that:

1. defendants have the right to written notice that is timely and contains sufficient detail, including the basis of the claims;
2. parties in a proceeding are allowed to be represented by independent legal counsel;
3. enforcement procedures do not include imposition of overly burdensome requirements concerning mandatory personal appearances;
4. all parties in a proceeding are duly entitled to substantiate their claims and to present relevant evidence; and
5. the procedures include a means to identify and protect confidential information.

Furthermore, each Party shall authorize its judicial authorities to order that (i) goods that are found to be infringing be, without compensation of any sort, disposed of outside the channels of commerce or destroyed, and (ii) materials and implements the predominant use of which has been in the creation of the infringing goods be, without compensation of any sort, disposed of outside the channels of commerce to minimize the risks of further infringements.

Each Party shall also authorize its judicial authorities to order prompt and effective provisional measures (i) to prevent an infringement of any IPR, and in particularly to prevent the entry into the channels of commerce in their jurisdiction of allegedly infringing goods, including imported goods immediately after customs clearance; and (ii) to preserve relevant evidence in regard to the alleged infringement. For avoidance of abuse of provisional measures, the Agreement makes it clear that the applicant asking for provisional measures must provide a security sufficient to protect the interests of the defendant. In addition, the defendant may request such measures to be reviewed by the judicial authorities for the purpose of deciding whether the measures will be modified, revoked or confirmed. The applicant must compensate for injury caused the provisional measures which are revoked or lapse because of any act or omission of the applicant, or in case the judicial authorities subsequently find there has been no infringement or threat of infringement of any IPR.

In certain and appropriate cases, criminal procedures and penalties shall be made available for those IPR infringements which are committed willfully and on a commercial basis. The judicial authorities of each country may order seizure, forfeiture and destruction of infringing goods and of any materials and implements the predominant use of which has been in the commission of the offense.

For border control, the Agreement demands that each Party shall adopt procedures to enable a right holder, who has valid grounds for suspecting that the importation of counterfeit products may take place, to request for suspension by the customs authority of the release of such goods into free circulation. Similar procedures may be also applied concerning the suspension by the customs authority of the release of infringing goods destined for exportation from either Party’s territory. To protect the defendant and prevent abuse, the applicant who seeks suspension or detention of infringing goods by customs authority shall be required to provide an appropriate security or equivalent assurance. Moreover, the applicant shall have to pay the importer, the consignee and the owner of the goods appropriate compensation for any injury caused to them through wrongful detention of goods.

Vietnam agrees to perform its obligations in this area within a period of 24 months from the date of entry into force of the Agreement.

Vietnam undertakes under the Agreement to perform its obligations in a relatively short time from 12 to 30 months with respect to each area of IPR protection to fill the gaps in its IPR system. To this end and in a broader view to improve the country’s IPR system along with its globalization and regionalization , the Government of Vietnam has made a comprehensive plan to overhaul the IPR system of country, including the amendments and additions to the current legislation on IPR (Most will take place this year and some in 2001) and improvements of the systems of IPR management and enforcement (scheduled to be finalized in two years ahead). The following will reveal the major improvements of the IPR system in Vietnam as proposed by the Government.

To fully comply with the national treatment, amendments will be made to the existing regulations on official fees in the field of industrial property in order to provide a single rate applicable to both foreigners and Vietnamese .

The copyright rules will be modified to provide the regulations for the protection of computer programs and compilations of data, the term of protection of performers, the rights of fixation and communication to the public of broadcasts, the provisions on the right of rental of phonograms, the right of communication to the public in respect of performance of dramatic, dramatic-musical and musical works.

The scope of protection of registered trademarks would be extended to the effect that the owner of a registered trademark shall have the exclusive right to prevent third parties, without his consent, from using identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion . In addition, the protection of well-known trademarks will be added .

New regulations will be issued to provide protection of geographical indications. Particularly, the Government has drafted a decree on the protection of trade secrets, geographical indications, trade names and the protection against unfair competition relating to industrial property, which is expected to be issued within this year. The current protection of geographical indications is inadequate as only one type of geographical indications is protected, namely appellations of origin of goods .

The current rules on industrial designs will be supplemented to extend the scope of protection of industrial designs. Accordingly, the owner of a protected industrial design shall have the exclusive right to prevent third parties, without his consent, from making, selling or importing articles bearing or embodying a design which is a copy, or substantially a copy, of the protected design, when such acts are undertaken for commercial purposes .

Specific regulations on the application form, the examination guidelines and deposit of microorganisms for the purpose of examination of the patent applications in respect of microorganisms will be issued. It is ironic that microorganisms are patentable under the patent rules , however because of lack of detailed provisions on the form of patent application, the examination procedures as well as deposit procedures for microorganisms, patents for microorganisms are not yet granted in practice.

Another important change concerns the proceedings in respect of infringements regarding process patents. A circular will be issued by the Supreme People’s Court, the Supreme People’s Prosecution Institute and the Ministry of Science, Technology and Environment guiding the judgement of cases, which would place on the defendant the burden to prove himself to be innocent in the cases of infringement in respect of the process patents .

A separate decree will be issued to provide protection of new plant varieties in accordance with the standards of the UPOV Convention. Such a decree is being drafted by the Ministry of Agriculture and Rural Development which will set up within its auspices an office for new plant varieties. Under the patent rules, plant varieties are excluded from patentability, while the current regulations on plant varieties are just of administrative nature where the exclusive rights are not accepted .

The Government will issue a separate decree providing protection of layout designs of integrated circuits. So far, Vietnam has not yet have any regulations on the protection of layout designs of integrated circuits as required under TRIPs.

Trade names, trade secrets and unfair competition will be regulated under a Government decree on the protection of trade secrets, geographical indications, trade names and the protection against unfair competition related to industrial property. At the present, the Commercial Law, passed on 10 May 1997 and effective from 01 January 1998, just provides very general provisions on trade names and anti-unfair competition, which needs greater details, while there is not yet any regulations on protection of confidential information.

Since the enforcement sphere remains the most weakness of the IPR system in Vietnam, various improvements will be made both to fill the gaps in the existing legislation concerning IPR enforcement and to raise the capacity of the State agencies and public awareness.

Specific regulations on civil, criminal and administrative procedures and remedies against the infringements of IPR will be introduced to provide right holders with an effective and fair legal framework for enforcement of their rights. Those pieces of legislation to be issued include circulars on hearing of cases related to industrial property rights; on hearing of cases related to copyrights and related rights; on border measures and procedures against infringement of industrial property rights in exportation and importation; on border measures and procedures against infringement of copyrights and related rights in exportation and importation; on market control measures and procedures against infringement of industrial property rights in manufacture, trade and service activities; and on market control measures and procedures against infringement of copyrights and related rights in manufacture, trade and service activities.

Regarding the criminal procedures and remedies, a new Criminal Code was passed on December 21, 1999 and took effect since 01 July 2000, adding more crimes related to IPR. For administrative procedures and remedies, the Government issued on March 6, 1999 Decree No. 12/1999-CP providing Penalties for Administrative Violations in the Field of Industrial Property, effective March 31, 1999, which governs administrative measures and remedies for industrial property.

Measures will be taken by the Government in the next two years to improve the capacity of the State agencies for IPR enforcement. One re-structure model as proposed by the Government is that (i) specialized courts for IPR matters will be established in big cities to raise the capacity of the judicial system, and (ii) the administrative agencies involved in IPR enforcement will be simplified to two agencies, namely Customs Offices for border control and the Agency for IPR Management to be newly set up and in charge inland with central power to handle IPR infringements. No less important, the capacity of the staff of the enforcement agencies would be strengthen concurrently with raising of public awareness of IPR which is still poor.

The Agreement is a significant step forward in the developing commercial relationship between the US and Vietnam, of which the protection of IPR plays a key role. The commitments of Vietnam under the Agreement show its will and determination to bring its IPR system up with the international standards. Great efforts and active actions are being made by the Government of Vietnam to perform its obligations concerning IPR protection as per the terms of the Agreement. Of course, much remain to be done and we will have to wait to see whether those obligations are enforced as contemplated under the Agreement. It is however certain that the Agreement would bring about profound changes to IPR system in Vietnam especially IPR enforcement. The Agreement would have a wide-ranging impact, of which the beneficiaries are not only limited to US nationals or domiciliaries but also those from other countries who hold IPR in Vietnam. IPR holders may hope for a sufficient legal framework and strong enforcement system that permit and help them to effectively and fairly protect and enforce their IPR.

© Pham Nghiem Xuan Bac and Dang The Duc.