As the government fails to honour its commitments to improve and strengthen Nepal’s intellectual property rights (IPR) regime, investors, innovators as well as consumers continue to suffer due to rampant IPR infringements and violations. The delay in IPR reform is not only frustrating innovators, investors and entrepreneurs, but also inhibiting the country from realising its investment and growth potential.
--BY SAGAR GHIMIRE
From Nike sneakers to Louis Vuitton handbags, Nepali consumers can easily purchase any item in the domestic market at a price that is nowhere close to their real or actual price. These knockoff products that closely resemble the global brands have long been flooding the market.
From electronics to apparels to spare parts, the shift to ecommerce is further fueling the sale of counterfeit and pirated goods.
Many are still confused by KKFC (Krispy Krunchy Fried Chicken) for its misleading abbreviation as well as the trademark including the logo that is identical to the global brand Kentucky Fried Chicken (KFC).
Trademark infringement is not only affecting foreign brands. Many local brands are also battling with counterfeit products in the country.
While trademark infringement has become a headache for global brands across the world, the explosion of counterfeit products in Nepal's market has largely remained unchecked.
After nearly eight years of legal battles in courtrooms, smartphone manufacturers Apple and Samsung in 2018 reached a settlement on a patent infringement dispute that was centered on whether Samsung copied Apple’s iPhone.
The issue of intellectual property rights (IPR) is not new or unusual in the world. However, the IPR protection in Nepal is considered weak with little enforcement. As a result, the marketplaces in Nepal get flooded with counterfeit products. The consequences are borne by investors as well as consumers.
Investors, individuals and institutional alike, are frustrated with the poor intellectual property rights regime in Nepal that fails to ensure adequate protection from stealing or copying the names of products, brands, patents, inventions, designs or trademarks. Not only has this caused them a loss of revenue, but has also damaged their reputation.
Similarly, consumers are getting duped by counterfeit or substandard products. There are concerns that the counterfeit products endanger people’s health and safety while also negatively impacting the investment and the overall economy.
The rampant availability of counterfeit products in the domestic market illustrates the extent of the intellectual property theft in the country. On the one hand, the intellectual property rights regime in the country is outdated and ineffective, say experts. The enforcement of intellectual property violations is so weak that it simply frustrates innovators and investors.
Laggard in Innovation
Higher trademark, patent and design filing numbers reflect a stronger knowledge, economy and intangible assets as well as growing innovation.
For example, IP assets account for a significant portion of the net value of corporations in the United States and Europe. This is a reason why intellectual protection became critical for many would-be investing companies.
Nepal's performance for registering ideas, inventions or brands for intellectual property protection and commercialisation is very poor. The higher number of intellectual property filings is an indicator of vibrant entrepreneurship and human innovation, say experts.
Nepal remained at 111th among the 132 economies featured in the Global Innovation Index 2021, indicating a weak performance in the world's innovation ranking.
According to the Department of Industry, 2,403 trademarks were registered in the last fiscal year 2020/21, taking the total number of registered trademarks to 53,052. Similarly, 56 designs were registered in the last fiscal year, up from 17 in the previous fiscal year 2019/20. There are a total of 255 designs registered in the country so far. The department registered three patents in the last fiscal year taking the total to 79.
Nepal's poor IP protection has remained a major concern for foreign investors. "There is currently no single exclusive legislation in Nepal for the protection of intellectual property rights (IPR), and protections remain weak with little enforcement," says the US Department of State's 2021 Investment Climate Statements for Nepal. "Improving Nepal’s IPR policies has been a top priority for the U.S. Embassy, and the United States Patent and Trademark Office (USPTO)," the report adds.
As pointed out by the report, the lack of a single exclusive legislation in Nepal for the protection of intellectual property rights has been hampering the investment climate in the country.
"We have been unable to protect intellectual property. When investors are not assured that their property is not protected, they do not want to make investments in that country. Nepal has not yet been able to build a strong credibility of protecting intellectual property rights. The weak intellectual property protection is one of the major reasons why foreign investors are reluctant to come to Nepal," says Vijay Singh Baidya, an executive committee member of Nepalese Chambers of Commerce & Industries (FNCCI).
Baidya, who is also the chairperson at the Trade Committee of the FNCCI, says that creating stronger intellectual property rights regime is also in the interests of local businesses and the national economy.
"We have so many traditional businesses or local brands that have the potential to go international. For example, pashmina, Yarshagumba and other herbs can be protected or patented. For that to happen, our intellectual property rights regime should be strong first," says Baidya.
The issue of IPR features as a top agenda in almost every meeting of the US-Nepal Council on Trade and Investment under the United States-Nepal Trade and Investment Framework Agreement (TIFA), highlighting the concerns of the US about Nepal's poor intellectual property rights regime.
"The issue of intellectual property rights has long been a key concern for the US side during the TIFA council meetings. They tell us that if there is a comprehensive IPR legislation, it would be easier and convenient for American investors to come to Nepal with their investments," says Chandra Ghimire, a former secretary at the Ministry of Industry, Commerce and Supplies who had led the Nepal side for the 4th TIFA Meeting held in 2018 in the US.
Not only American investors, but Indian, Japanese and investors from all other countries accord high value to their intellectual property and seek a guarantee that their property will be protected, say experts.
“Until and unless foreign investors are ensured that their intellectual property rights are protected, they will shy away from making any investment. It is also the same in the case of Nepal,” says former Industry and Commerce Secretary Ghimire.
Investors are concerned with the current requirements for the registration of foreign trademarks and designs. As Nepal does not automatically recognise patents and trademarks awarded by other nations, foreign brands must file an application in Nepal to get the recognition. Once registered, trademarks are protected for a period of seven years. Business leaders call for the revision of such provisions to ensure that the country extends protection to the international brands and their trademarks and patents.
"Right now, international brands of multinational companies are not secure in Nepal. Several fakes and look-alike brands resembling the international or foreign brands are already registered in Nepal, blocking multinational companies from launching the brands they rightfully own," says Sunil KC, Vice President at Nepal-India Chamber of Commerce and Industry (NICCI).
The case of Kansai Nerolac Paints, an Indian subsidiary of Kansai Paints of Japan, perfectly showcases the predicament faced by foreign brands in Nepal. The multinational company had to fight a legal battle for seven years in Nepal to claim its 'Kansai Nerolac" brand after the Department of Industries sided with a domestic firm Rukmini Chemical which had already registered the trademark.
"To attract foreign investment in Nepal, multinational companies or foreign corporations need to be allowed to register their international brands in the country without the precondition of permanent brand registration certificate of its home country," says NICCI's Vice President KC. "Laws regarding IPR in Nepal are not sufficient, strong and at par with international standards set by the WIPO. This has impacted the flow of FDI in Nepal, basically from India and other countries, who have their own brands renowned globally," adds KC, while calling for an autonomous authority to look after the IPR issues rather than putting the domain under the MoICS.
Much Awaited IPR Legislation
Nepal's existing laws governing intellectual property rights are very old. Though the provisions related to trademark, copyright and patents, among others, were remarkable at the time when they were introduced, they have now become obsolete.
There are two laws that currently govern Nepal’s intellectual property sector. Both the Patent, Design and Trade Mark Act, 2022 (1965) and the Copyright Act, 2059 (2002) have largely become outdated and fail to cover new areas like geographical indications, trade secrets, integrated circuit designs and new plant varieties recognised by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) that Nepal has already signed.
According to Ghimire, Nepal has not been able to update or refresh the IPR related laws and regulations in line with the fast-changing trade and investment scenario in the world.
Many issues related to intellectual property rights that should be under the scope of such legislations have not been addressed.
“Our problem on IPR is that we are now lacking strong intellectual property laws and regulations while our institutions to protect and enforce intellectual property rights are weak and ineffective. The system that we have adopted for the protection and enforcement of IPR is not modern or technology-friendly,” says Ghimire.
Nepal has been repeatedly missing the deadline to reform its laws to bring them in line with the Paris Convention for the Protection of Industrial Property that Nepal became a signatory party to in 2001.
According to government officials, the process to draft the new law on intellectual property rights is underway. The draft bill is currently under government review. While the Ministry of Industry, Commerce and Supplies started the process to draft the bill three years ago, it is yet to be tabled in the parliament. A senior official said that the MoICS has already finalised the draft bill and sent it to the Ministry of Law, Justice and Parliamentary Affairs for approval.
“The bill has already been finalised from the ministry’s side. It will be sent to the cabinet after the law ministry approves the draft. Following the decision of the cabinet, the draft bill will move into the legislative process in the parliament,” says Ekdev Adhikari, an undersecretary at MoICS.
"The new bill, if approved by the parliament, will be an umbrella legislation that governs all aspects of intellectual property rights. In line with international practice, it will be the single legislation and the single administrative mechanism or regulatory body to deal with the intellectual property rights issues," says Adhikari, who is also the chief at the Foreign Investment and Intellectual Property Section at MoICS.
According to Undersecretary Adhikari, the new legislation also aims to address various obligations created by Nepal's decision to become a member of the World Intellectual Property Organization, a UN agency for intellectual property, in 1997 and various other IP related conventions, notably bringing geographical indication under the domain of the legislation. A geographical indication (GI) is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
"Investors and industrialists have not been able to protect their industrial property in Nepal's market in the absence of a comprehensive legislation that regulates the intellectual property issue," says Undersecretary Adhikari.
"We believe the new legislation will provide a sense of security for domestic as well as foreign investors, stimulate innovation and protect the interest of consumers," he adds.
Stakeholders also agree that there is a substantial improvement in the draft legislation over existing IP laws and regulations, helping to bring Nepal’s national law close to international IP standards.
The concept of national treatment to foreign IPs, electronic system for registration and administration of IP rights, the concept of well-known trademarks, regulation of anti-competitive practices with regard to licencing, the patent law concepts of patentability, novelty, inventive step and industrial applicability and a single government entity to enforce the full range of IPR issues are some of the proposed provisions in the new draft legislation that experts of intellectual property rights praise.
While the new umbrella legislation is expected to create a robust legal foundation for the protection of intellectual property, experts say that the government will still have a lot to do to foster innovation, creativity and entrepreneurship through protection and promotion of intellectual property.
Enhancing the capacity of law enforcement agencies as well as the judiciary is a crucial step towards swiftly addressing the disputes related to the IPR infringements and violations.