Can Nepal’s domestic laws prevail over an IPR Compact with US corporation MCC?

The MCC, which has approved 37 compacts for 29 countries since its inception in 2004, could extend a claim on products originating or produced from Nepal, which would unfortunately lose its sovereign rights over certain products which have their origin in Nepal, write Jivesh Jha and Nil Prasad Paneru for South Asia Monitor

Jivesh Jha and Nil Prasad Paneru Feb 04, 2020
MCC

Imagine if a law prevents you from availing or seeking benefits from agricultural or natural products, like Lapsi or Yarshagumba, that are produced or found exclusively in Nepal. It is assumed that you have an inherent right to use, produce, reproduce, repurpose or modify the properties which belong to you (as a nation), but that is not so if the property rights are unsecured. The same is true of intellectual properties. 
 
Intellectual properties have various forms, including patents, trademarks, design, geographical indications (GI) and copyright. The government of Nepal, under the Patent, Design and Trademark Act, 1965 is responsible for making the policies to ensure the implementation of intellectual property laws.
 
Recently, the United States’ Millennium Challenge Corporation’s (MCC) Nepal compact has courted controversy, for the MCC incorporates provisions that say they will prevail over Nepal’s domestic laws. Such provisions could have serious implications on the intellectual properties generated or produced in the country. The stakeholders believe that MCC is part of Washington’s Indo-Pacific Strategy, which aims to counter China, and the compact entails diplomatic, economic and geographical implications.
 
The preamble states that this Millennium Challenge Compact is between the United States of America, acting through the MCC, a US government corporation, and the Federal Republic of Nepal, acting through its Ministry of Finance. Also, the preamble, which is the window through which aims and objectives of the legislation can be seen, clarifies that the compact obligates both Nepal and the US to stand “committed to the shared goals of promoting economic growth and the elimination of poverty in Nepal and that MCC assistance under this Compact supports Nepal’s demonstrated commitment to strengthening good governance, economic freedom and investments in people.”
 
The MCC Nepal compact has provisions which confer power on Washington DC to produce, reproduce, purpose, repurpose or modify the intellectual properties and claim rights on them. Section 3.2(f) of the MCC states, “The Government grants to MCC a perpetual, irrevocable, royalty-free, worldwide, fully paid, assignable right and license to practice or have practiced on its behalf (including the right to produce, reproduce, publish, repurpose, use, store, modify, or make available) any portion or portions of Intellectual Property as MCC sees fit in any medium, now known or hereafter developed, for any purpose whatsoever.”
 
This clause clearly shows that the MCC, which has approved 37 compacts for 29 countries since its inception in 2004, would extend a claim on products originating or produced from Nepal, which would, unfortunately, lose its sovereign rights over certain products which have their origin in Nepal. It would ultimately dearly cost the Himalayan Republic because of the intentional or unintentional theft of some intellectual properties belonging to her.
 
Section 6.8 of the MCC clarifies that it is a US government corporation acting on behalf of the US government.  But, “MCC and the United States government assumes no liability for any claims or loss arising out of activities or omissions under this Compact” (Section 6.8). The provision further clarifies that the US government will be immune from the jurisdiction of all courts and tribunals in Nepal for any claim or loss arising out of activities or omissions under the Compact. Thus, Nepal’s judicial department has been precluded from entertaining any issues arising out of this MCC Compact. Ultimately, MCC would be immune from the tortious liability, vicarious liability or any civil or criminal liability whatsoever, as if the act or omission of the MCC is within the ambit of sovereign functioning.
 
Ironically, Section 7.1 has a provision that can potentially question the sovereignty and integrity of Nepal, stating, “The Parties understand that this Compact, upon entry into force, will prevail over the domestic laws of Nepal.”  Nepal’s legislation would not apply within its jurisdiction!
 
Therefore, if MCC starts claiming rights on the intellectual properties that have their origin in Nepal, then in such cases, Nepal’s domestic laws would be impotent to counter such types of infringement, interventions or imperialism.
 
Nepal does not have special legislation now to govern the Geographical Indications (GI) of goods in the country to sufficiently protect the interests of the producers of such goods. For instance, if MCC seeks GI on Nepali products, including Lapsi, Yarashagumba, Jhapa Tea, or Pidukiya, Mithila Paintings or other agricultural products, then Nepal would lose exclusive claims to its products. In doing so, the US could extend GI claims not only for agricultural products but also for Nepal’s manufactured goods.
 
Similarly, Trade-Related Aspects of Intellectual Property Rights (TRIPS) aims to foster intellectual property on traditional knowledge, integrated circuits’ layout design or business secrets. Nepal’s domestic laws, including the Patent, Design and Trademark Act and the Copyright Act, are silent on securing rights on these contemporary issues.    
Unless Nepal provides intellectual property protection, it cannot obtain the identical protection for its products abroad, in countries that have intellectual property laws in place. Interestingly, Articles 22-24 of TRIPS made it obligatory on signatory states of the World Trade Organization (WTO) to provide GI protection to products that may include agricultural, natural, or manufactured goods or handicrafts or foodstuffs.
 
Nepal became a WTO member on April 23, 2004, the first least developed country (LDC) to join the WTO. If MCC succeeds in availing claims on Nepali products, Nepal would fail to honour its international commitments under TRIPS. Nepal must build its capacity for innovation, realise its research potential and take its rightful place in the global arena.  
 
In the presence of the stringent MCC provisions and absence of a strong IPR regulatory regime, it would be an uphill task for Nepal to stake an exclusive claim on products nationally and internationally. MCC defines Intellectual Property as “all registered and unregistered trademarks, service marks, logos, names, trade names and all other trademark rights; all registered and unregistered copyrights; all patents, inventions, shop rights, know-how, trade secrets, designs, drawings, artwork, plans, prints, manuals, computer files, computer software, hard copy files, catalogues, specifications, and other proprietary technology and similar information; and all registrations for, and applications for registration of, any of the foregoing, that is financed, in whole or in part, using MCC Funding.”
In today’s competitive world, where economics decides politics, the developed, developing and underdeveloped countries ought to stand on the same page in protection and promotion of IPR. If these rights are protected, then companies, farmers, researchers, or writers could play a creative and constructive role in development, as innovation enhances productivity.  
 
It is evident that the MCC is a US development project. Claims or rights availed by the Corporation would directly or indirectly benefit the global superpower. Nepal would be unable to claim rights to its own products. The burden of proving the relevance of the intellectual property provisions under the MCC lies with the MCC. It is interesting to note that the MCC was not implemented in Tanzania, Madagascar and Mali because of disputes between the MCC and state parties.
 
The Corporation must prove that arrangements envisaged within the Compact do not frustrate or overrule the federal laws of any country.    
 
(The authors are Judicial Officers with Janakpur High Court, Birgunj, Nepal)