Legal Briefing

The Middle East: IP issues resulting from 
government-led
initiatives to boost technology development

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TMT | 01 December 2011

In this article we identify some of the intellectual property issues that will be of importance for anyone involved in technology development in the Middle East, particularly in the context of the many initiatives, largely government financed, that have been undertaken in the region to create a fertile ground for that development.

UNITED ARAB EMIRATES AND KINGDOM OF SAUDI ARABIA: GOVERNMENT INITIATIVES

Having taken a number of initiatives, revolutionary for the region, the United Arab Emirates (UAE) has attracted significant foreign investment and established itself as a major player in the fields of digital media, science and technology. It is now a leader in the region in digital media and mobile telephone usage, with around 36% of the population using social networking tools, 200 mobile telephone subscribers per 100 inhabitants, and a growth rate in internet usage that is four times greater than that of the rest of the world.1

One of the most important initiatives undertaken by the UAE has been the establishment of a number of free zones, each with customised regulatory and physical environments that provide incentives for organisations operating in specific sectors. These free zones bring with them particular challenges as there are often additional layers of laws and/or regulations that need to be considered, along with both the Federal and Emirate-specific laws and regulations. So, for example, a business considering setting up in Dubai Internet City will need to consider all of the UAE federal laws and regulations, Dubai laws and regulations and the Dubai Internet City laws and regulations to have a clear picture of a particular issue.

The first free zone was the well-known, 
and still very successful, product- and shipping-based Jebel Ali Port Free Zone. Then, in early 2000, Dubai Media City (DMC), a free zone dedicated to the media industry, was established. DMC has grown to be a regional hub for the media industry, with more than 1,300 organisations including news agencies, television and radio stations, newspapers, advertising agencies, and website operators. In the same year Dubai Internet City (DIC), now considered to be the largest technology park in the Middle East, was launched. DIC comprises over 850 companies including IBM, Microsoft, Oracle Corporation, Dell, Canon, Sun Microsystems, Sony Ericsson, Cisco, HP, Nokia and Siemens.

In 2003, Dubai Knowledge Village 
was established to encourage the development of small- and medium-sized, knowledge-led businesses. It now houses close to 450 organisations operating in the fields of education and human resource management, including universities, research and development centres, professional associations, training centres, and human resources management centres.

In 2004, Dubai Silicon Oasis (DSO) opened with the aim of attracting businesses operating in the high-tech sector including mobile technologies, data centres, Arabisation and localisation technologies, software development and semiconductors. DSO has attracted companies such as Philips, AMD, Western Digital, Fujitsu, Synopsys, Schneider Electric and Corning.

Similar initiatives have already been taken in other Emirates, including the establishment of Masdar City in Abu Dhabi, which has been the subject of much publicity because of its focus on the development of green technologies and the involvement of world class institutions such as the Massachusets Institute of Technology.

In the Kingdom of Saudi Arabia, on the other hand, the focus has been on the development of research and development centres at universities. These seek to provide attractive and enriching faculties for both Saudi nationals and overseas students. The cash available for research and development in Saudi Arabia ensures that the facilities are the best available, capable of attracting some of the best minds in the world.

In 2009, Saudi Arabia invested close to $10bn in founding the King Abdullah University of Science and Technology (KAUST). KAUST, believed to be one of the richest universities in the world after a subsequent endowment of $20bn, has established a number of partnerships with industry. It has nine research centres focusing on catalysts, computational bioscience, geometric modeling and scientific visualisation, advanced membranes and porous materials, plant stress genomics, solar and alternative energy engineering research, the Red Sea, clean combustion, and water desalination and reuse.

The university-focused model adopted in Saudi Arabia is different from the free zone model adopted in the UAE in that it does not add a further layer of law and regulation.

The initiatives undertaken by both countries create fertile ground for the development and commercialisation of technologies, and are bound to lead to further increases in the amount of innovation in the region. The UAE and Saudi Arabia have the highest gross domestic product in the Arab world2, but 
the regional Arab population, at more
than 280 million people and growing, is increasingly hungry for locally developed, Arab-specific technologies.

IS THE LEGAL FRAMEWORK READY TO SUPPORT THESE INITIATIVES?

Notwithstanding the government-financed initiatives that have taken place, many potential investors have questioned whether the intellectual property system, particularly the patent system and the general commercial legal framework, is adequate to support private sector investment in the region.

Patents: access to rights and prosecution

Patent practice in the region has developed quickly in the past 10 years, but it is not without its challenges.

Most member states in the Gulf Co-operation Council (GCC) now adhere to the World Trade Organisation Agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPS) and the Paris Convention (Kuwait is a notable exception). The UAE, Bahrain and Oman are members of the Patent Cooperation Treaty (PCT) and Saudi Arabia is in the process of ratifying the PCT. The GCC member states also have a common GCC Patent Law, which enables inventors to obtain one patent covering all GCC countries and establishes a GCC Patent Office. We understand the GCC Patent Office may also accede to PCT shortly.

Despite these well-established systems, however, there can still be notable delays in patent examination (although the GCC Patent Office does tend to be faster in examining patents than national offices), and documentary and translation requirements can be onerous. The experience of examiners is also an issue, and some countries still outsource examination to more experienced jurisdictions, which further compounds delays and translation issues.

A further issue is the lack of publicly accessible patent-related information/resources in the region. Very little information is made publicly available by either the GCC or the national patent offices, which makes it virtually impossible to obtain an overview of the patent landscape in a particular area of interest. This differs markedly from the practice of patent offices in the US, Europe and much of Asia, where information is freely available, very often online.

Patents: enforcement

Patent enforcement capabilities are in their infancy in the region, and because of the lack of published/reported decisions it is difficult to find information on the cases that have been brought. Saudi Arabia tends to see more patent litigation than other countries in the region, possibly because it is the largest GCC market as well as the seat of the GCC Patent Office. Other countries have issued relatively few patents as yet and, therefore, enforcement opportunities there have been more limited.

Although the number of granted patents and patent cases being litigated would probably not yet warrant the establishment of specialist patent courts in most jurisdictions, governments would be prudent to consider providing specialist training to their judiciary at this stage. Such a move would be likely 
to increase technology-investor confidence in the region. Ultimately, sufficiency of patent protection relies not only on 
effective Patent Office procedures and 
the adherence to international treaties, but also on the availability of well-reasoned and clear judicial decisions.

Employee-created intellectual property

Generally speaking, intellectual property created by an employee in the course of their employment resides with the employer. There are, however, a number of exceptions to this general principle. Investors in technology development should establish the exact provisions that apply in the jurisdiction in which they operate.

For instance, in the UAE, the Copyright Law specifically prohibits general provisions in employment contracts that have the effect of assigning more than five future copyright works from employee to employer; and under the Patent Law, an employee may be entitled to additional compensation if an invention brings significant benefit to the employer. Neither of these provisions has yet been judicially tested.

It is important to remember that the principles relating to employee-created intellectual property apply equally to 
sub-contractors or third-party contractors: agreements in which contractors are required to assign all relevant intellectual property rights should include an undertaking from the contractor that it will, in turn, secure all relevant rights from its employees.

Commercial legal issues

Although parties are generally free to contract, and agreements are therefore likely to look and feel very familiar, there are some key points to consider before entering into contracts in the region.

First, particularly in Saudi Arabia, there is a need to comply with general sharia law principles. Even if the contract is governed by the law of another jurisdiction, in the event of a dispute it will be re-examined for compliance with sharia law principles.

Although there has, in recent years, been improvement in the implementation of foreign arbitral awards, it can still be difficult and time-consuming to have 
foreign court decisions implemented. In Saudi Arabia, at least, the dispute will need to be reconsidered by the local courts.

Finally, in relation to technology-related agreements – joint development agreements, technology licences and the like – it pays to be very clear in relation to intellectual property issues. Generally, the understanding of these issues in the business community is not high, and the importance of issues such as licensed use, sub-licensing limitations and the ownership of developments/improvements (including the rights to secure intellectual property protection) is not well understood.

CONCLUSIONS

As technology companies become increasingly conscious of the importance of IP rights in today’s business environment, and of the Middle East and Africa region in the context of global intellectual property strategies, there is an increasing need to secure registered IP rights in the region. Licensing and other opportunities to commercialise technology are also on the up. While the IP protection systems in the region are generally strong, with most countries being members of the Paris Convention, TRIPS and, increasingly, the PCT, there is a need for IP enforcement systems to be further developed. This is something that is bound to happen as innovation and investment in the region, and consequently the number of IP disputes, continue to rise.

Meanwhile, businesses investing, or intending to invest, in the region need to be prepared to make the most of existing systems in order to obtain the strongest rights possible and to enforce those rights as effectively as possible. They should also ensure that any agreements relating to the commercialisation of IP in the region are carefully drafted, taking account of both local legal requirements and the general commercial environment that exists in the relevant jurisdiction.