By Khaled Habib Al-Ali makes a case for intellectual property rights. By Khaled Habib The world's most recognized brands are the most vulnerable.

By Sherine Bakir

lyThe Egyptian legal system has long turned a blind eye to the violation of companies’ intellectual property rights. Now, well into the second year of the Nazif government, which has prioritized attracting foreign direct investment, it can no longer afford to do so

When a multinational decides to launch a brand in a country, it must be confident that it will be able to distinguish itself from a host of competitors that will spring up to take advantage of the new demand. A bureaucracy that currently takes years to register trademarks — and an eon to process infringement lawsuits — is not encouraging to some of the world’s most recognized (and paradoxically vulnerable) brands.

However, intellectual property isn’t just valuable for companies like Oracle, Sony or Pepsi. Nermien Al-Ali, legal counsel for intellectual property rights with the law firm of Ibrachy & Dermarkar, says even local companies must prioritize protecting their intellectual property rights, which are sources of revenue that add value to products and distinguish them in the market.

“There are two products on the shelf, why would I pick up one and leave the other?” Al-Ali asks. “Because I trust the company. Why would I pay more than LE 100 to buy, for example, a Mobaco shirt when I can get a generic cotton one for LE 40 only? Because I am buying value that is associated with the brand name.”

Al-Ali also stresses that enforcing intellectual property rights protects consumers.

“Intellectual property rights build trust between companies and consumers,” she says. “Protected products show consumers they contain active ingredients, and if they have a problem with one of the products, they can return it.”

In June 2002, the People’s Assembly passed a consolidated bill (the new Intellectual Property Rights Act, Law 82/2002) that enshrined in a unified code pieces of legislation previously spread over multiple acts of Parliament.

But the new law, Al-Ali says, still divides enforcement authority between different branches of government. Today, the Trademark Office falls under the Ministry of Trade and Industry, the Patent Office is affiliated with the Ministry of Higher Education and Scientific Research, the Ministry of Culture protects copyrights, and the Unit for Cyber Crime and Piracy tackles internet-based infringements under the Ministry of Communication and Information Technology.

Al-Ali calls for more coordination between the ministries involved. “Sometimes, when you have an infringement case, you keep thinking of which ministry to go to. Then you go to one and it refers you to the other,” she says. “There needs to be one governmental body that coordinates with each entitled ministry.”

She adds that in 2005, lawmakers amended the act to protect pharmaceutical formulae, which had not been covered. She believes this provision will encourage companies to invest more in R&D to develop new compositions and thus improve treatment.

Nevertheless, in April 2005, the US Trade Representative (USTR) downgraded Egypt from its ‘Watch List’ to its ‘Priority Watch List’ in its annual review of how US trade partners treat intellectual property rights.

The USTR statement reads: “Placement of a trading partner on the Priority Watch List or Watch List indicates that particular problems exist in that country with respect to intellectual property rights protection, enforcement, or market access for persons relying on intellectual property.”

A spot on the Priority Watch List can, in fact, impact Egypt’s bid to negotiate an FTA with the US, which frequently uses negotiations to push for better intellectual property rights protection for its companies.

A top problem is corruption in the implementation process. Mustafa Abou El-Enien, deputy chief at the Intellectual Property Rights Assistance (IPRA) Project, funded by USAID, believes that proper implementation of the law is key.

“Law No. 82/2002 will not bear fruit and protect intellectual property rights unless the government and its executive bodies better monitor the Egyptian market,” he says.

IPRA is designed to assist in the establishment of a reliable intellectual property rights protection system that complies with Egypt’s international obligations. Besides training personnel responsible for implementation of the law, the IPRA Project is supplying local IPR-protection offices with information-technology assistance.

Abou El-Enien points out that on Egypt’s streets, clear-cut violations of the law are ubiquitous, which gives the impression that the law is still not taken seriously.

“In, for instance, Ataba or Imbaba, you can find counterfeited spare parts, cassette players, phones” says Abou El-Enien. “They once sold shampoos that caused severe hair loss to consumers, which again shows a crevice in protection of intellectual property rights, and it is a shame to ignore that.”

Herewith, an FAQ on the state of play:

“The law complies 100% with the TRIPS agreement which harmonizes our legislation with the rest of the world,” says Al-Ali.

TRIPS requires Egypt to have broader measures to protect intellectual property rights and stop violating products before entering the country. Of great concern, she says, are knock-offs pouring into the nation from China.

The law defines a trademark as any signs distinguishing goods and services of a particular company that are represented in a distinctive manner using design, drawings, engravings and a combination of colors that are recognizable by sight.

A trademark is registered under the class or category of goods produced by its applicant, and its use is limited to this class.

Trademarks devoid of any distinctive characters

Trademarks offensive to public order and morality

Public armorial bearings, flags and other emblems pertaining to any country or organization

Trademarks identical or similar to a religious character

Symbols of the Red Cross or Red Crescent

Trademarks that mislead the public and contain false descriptions of the origins of a product

After registering a trademark, a person is given a period of five years to make use of it. After that period, the person becomes the trademark owner unless a third party proves precedence of use prior to these five years.

“For example, no one can register the Nokia brand name for cars,” explains Al-Ali, who explains that sometimes employees at the Trademark Office do not recognize famous brands. She mentions a case in which a Chinese company produced computer speakers and affixed a famous trademark to their products.

“The company then applied for trademark protection and their imports of fake speakers multiplied in the country as a result.”

What it comes down to, she says, is that trademark protection is very new to the country, and Trademark Office employees — often in fear of making mistakes — end up waiting for ministerial decrees explaining to them how to do the job properly.

“We have a good law, but there is a loophole in its implementation,” Al-Ali says.

Yes. Owners of trademarks both worldwide and in Egypt are protected under the law, even if their trademarks are not registered in Egypt.

The Trademark Office rejects any applications for trademarks identical to internationally recognized ones or intended associated unrelated products with a more recognizable international brand.

Registration fees ring in at LE 500 per application.

“There used to be a backlog in the registration process, and it took up to four years. In mid-2005, they started moving quickly, and it now takes between two and three years,” Al-Ali says.

Registering a trademark through the Madrid Protocol, explains Al-Ali, expedites the registration process. The Madrid Protocol protects trademarks in member countries including Egypt and is the foremost international system for registering trademarks across different jurisdictions.

The Madrid registration process usually takes one year, but fees are paid in foreign currency.

The protection period is 10 years, renewable upon the owner’s request if filed within the last year of that period for another LE 500. Trademark owners can also request renewal of that period within six months after its expiry date, and failing to do so will result in the cancellation of the trademark.

If the trademark has not been used for a period of five consecutive years, a third party has the right to file a lawsuit asking the court to cancel the trademark registration. A cancelled trademark may be re-registered in favor of its owner exclusively within three years of the cancellation date in return for the payment of the initial registration fees as well as an additional fee of LE 1,000.

If the owner does not re-register during the three-year period, a third party is allowed to register the trademark.

If two or more people apply simultaneously for registration of the same trademark, registration is suspended until one of them withdraws the application or until a binding judgment is issued in one party’s favor.

When a trademark is accepted, the Trademark Office publishes the acceptance in the Gazette of Trademarks and Industrial Designs. Other parties then have 60 days from the date the Gazette is issued in which to lodge an objection. Should that happen, an ad hoc committee is convened to either accept or reject the registration.

The committee’s decision may be appealed to the Administrative Judicial Court.

Al-Ali cites a case where a paint company applying to register its trademark found out that another paint company wanted to protect the industrial design of the paint container.

“They wanted to protect the cylinder-shaped container used by every single paint company and put our client out of business. This was a clear misdemeanor,” Al-Ali says.

Another case involved an international pen manufacturer that started exporting to Egypt. After the brand became broadly known here, a local company registered for protection of the trademark. “We then proved that our clients have been using and selling products carrying the trademark for more than twenty years,” Al-Ali says.

Al-Ali explains that it is very easy to counterfeit a trademark and deceive consumers with lower quality products. “The biggest problems are when it comes to food and medicine,” says Al-Ali

Trademark infringements include counterfeiting a registered trademark, fraudulently affixing a trademark to a product and selling or distributing products bearing a counterfeit trademark.

Infringement is punished by imprisonment for a period of not less than two months and/or by paying a fine of between LE 5,000 and LE 20,000.

The court confiscates the infringing products, as well as any revenues and/or profits from their sale. The court may also order the closure if the enterprise where the infringement was committed for a period not exceeding six months.

In case of repetition, the offense is punishable by imprisonment for not less than two months and fines of between LE 10,000 and LE 50,000.

Affixing a false trademark to products or inside stores or kiosks is also punishable by imprisonment for not less than one month and/or by paying a fine of between LE 2,000 and LE 10,000. In case of repetition, imprisonment is for a period of not less than one month and the fine is between LE 4,000 and LE 20,000.

The law stipulates that patents are granted for an industrially and practically applicable invention that is new, not known or applied worldwide, and involves an inventive step.

Patents are also granted for any modification or improvement of a previously patented invention provided that it is new, inventive and applicable. The patent protection period is 20 years as of the application date.

The law allows any person or legal entity, Egyptian or foreign, domiciled or present in a country that is a member of the World Trade Organization (or that has reciprocal patent protection laws with Egypt) to apply for a patent at the Egyptian Patent Office.

Patent applications cost LE 2,000, paid upon filing the application. A progressive annual fee of LE 1,000 is paid as of the second year until the patent-protection period expires. Applicants also have to pay for experts’ and examination fees.

Along with a patent application, a person has to submit a detailed description of the invention and of each product or method for which protection is sought. The patent office will then examine the invention to ascertain if it is new, applicable and in conformity with the provisions of the law. Afterward, the office publishes the application acceptance in the Patent Gazette.

A period of 60 days is given to any party that wants to oppose the granting of a patent. The Patent Office will also send copies of applications to the ministries of defense, military production, interior and health within 10 days of examining the application. These ministries have the right to oppose publication of the patent’s acceptance within 90 days.

If there is no objection, the patent is then published in the Patent Gazette. After publication, people may copy documents or entries in the patent in return for a fee of LE 1,000.

Patents are granted within one year from the application date; the application remains confidential during that period.

Patent registration in Egypt takes between two and three years, which is also the standard timeframe worldwide. According to the law, patents are not to be granted before one year from the application date.

The patent owner has the right to prevent a third party from exploiting the invention in production by any means. However, the right to prevent a third party from importing, using, selling, or distributing a product will lapse when the patent owner begins marketing the product in any country or authorizes a third party to do so.

The following cases are not considered violations of that right when carried out by third parties:

Activities carried out for scientific research purposes;

When a third party makes the product in good faith — or uses a process used in preparing it — prior to the patent application date;

Indirect uses of the invention’s production process to make other products;

When a third party obtains during the protection period a marketing license, provided that marketing starts after the protection period expires.

According to Article 6 of the law, if two or more people have jointly made an invention, the right to a patent is jointly and equally granted to them. However, if more than one person make the same invention independently, the patent is granted to the person who applies first.

Article 26 lists the following conditions: Upon expiration of the protection period; upon the patent holder relinquishing rights to a third party; upon failure to pay annual fees or an overdue penalty of 7% of the annual fees within one year of the set due date.

These may include: imitation of the invention for commercial purposes; the sale, circulation or trade of products known to be counterfeits of the invention; and unlawful use of advertisements, trademarks or packaging that publicizes the identity of the patent holder against its will.

In any of these cases, offenders have to pay a fine of between LE 20,000 and LE 100,000. Repeat offenders face prison terms of up to two years and fines ranging between LE 40,000 and LE 200,000.

Moreover, the law stipulates that infringing products will be confiscated and that the verdict of conviction will be published in one or more daily newspapers.

Al-Ali refers to trade secrets as the technical know-how of an industry.

“Trade secrets are very valuable,” she says. “For example, a technology developed by General Electric enabling it to cut glass with diamonds was valued at $40 million, and it led them to reduce their costs significantly.”

She adds that with patent protection, it is usually difficult to prove there is an infringement. “If you can prove that someone has induced one of your employees to reveal the secret of your invention, then you can win the case,” Al-Ali says, explaining that it is harder to protect a patent than a trade secret.

Unlike patents, to protect a trade secret, a company does not have to divulge its exclusive technology. She also illustrates that it can be very difficult for a company to discover in the first place that another company or factory is violating its patent rights.

“Moreover, a patent is a public record that can disclose means of making the invention upon its expiry,” she stays. “Therefore, most companies keep the process a secret. For example, recipe of Coca-Cola has been protected for more than 100 years, not as a patent but as a trade secret. [KFC’s] secret recipe is also a trade secret.”

Undisclosed or confidential information is also protected under the provisions of the new IPR law if it meets the following criteria: It must be information that is not generally known to those involved in the industry, and it must be information that has commercial value because it is secret.

A person can prevent others from using undisclosed information without authorization by means of unfair commercial practices and unfair competition. The law stipulates the following acts as unfair commercial practices and competition: bribery of employees to disclose information acquired by virtue of their employment; disclosure by a party to “confidential information contracts” of such information; and acquisition of information through illegal means such as theft, espionage, or fraud.

Legitimate practices include: acquisition of information from public sources such as patent office libraries and public or governmental records; acquisition of information by exerting independent efforts through examination or analysis of products that incorporate the undisclosed information; and scientific research, innovation, development or modification done by people independent of the owner of the trade secrets

Violators face fines of between LE 10,000 and LE 50,000. In case of repetition, punishment includes imprisonment for a period of not more than two years and a fine ranging between LE 50,000 and LE 100,000.

The Administrative Court handles cases that deal with the cancellation of registration. The most common cases are when someone registers for protection without being entitled to it, or when someone opposes the rejection of an application.

If there is an intellectual property infringement, one can file a complaint to the entitled ministry. Once the ministry investigates, the c ase goes to the Misdemeanor Court and can take six months to two years to reach a verdict.

“The punishment is either imprisonment or a fine, which the usual deterrent,” says Al-Ali.

Plaintiffs seeking compensation take their cases to civil courts. In these cases, infringement must have caused the plaintiff financial damages.

“These cases take two to four years in court, which is a long time, usually because these cases get referred to an expert and damages are not commensurate with the loss caused by the infringement,” explains Al-Ali. Part of the problem, she adds, is that judges not conversant with the technologies in play often refer cases to experts for a report, a step that drags the procedures out considerably.

She suggests establishing a specialized court to adjudicate intellectual property rights cases and training judges as well as assistant state attorneys. There have already been some efforts exerted to train judges to better understand the scope of intellectual property rights protection. She also recommends imposing stricter customs controls.

“If [counterfeited products] are stopped at the borders, then there is no need to chase them inside the country,” says Al-Ali, who also notes that, “compensation awarded for infringement is insignificant. In one case, [our client] asked for a LE 200,000 compensation, and in the end, we got LE 20,000, which was considered a big victory in principle. However, it did not compensate them for the losses. There should be more stringent penalties.” bt

Business Today Egypt has written this guide based on the opinion of a few legal professionals and takes no responsibility for errors, omissions or inaccuracies regarding issues of translation, differences of opinion or lack of clarity in the law. Specific questions regarding issues of law should be referred to a competent lawyer using the Arabic text. bt