Bridgestone Licensing Services, Inc. (“Bridgestone Licensing”) and Bridgestone Americas, Inc. (“Bridgestone Americas”), which held rights in certain FIRESTONE and BRIDGESTONE trademarks through a series of assignments and licenses, initiated an arbitration before a Tribunal of the International Centre for the Settlement of Investment Disputes (“Tribunal”) against the Republic of Panama (“Panama”) in October 2016 under the United States-Panama Trade Promotion Agreement (“TPA”) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”), following a decision by the Panamanian Supreme Court holding Bridgestone Licensing jointly and severally liable with its parent for US$5 million, plus attorney’s fees, in connection with Bridgestone Licensing’s opposition to the registration of a rival mark, the RIVERSTONE mark. Bridgestone Licensing and Bridgestone Americas asserted that, among other things, the decision violated their rights to fair and equitable treatment, treatment no less favorable than treatment accorded to domestic investors and investments, and protection from expropriation without prompt, adequate and just compensation.
Panama raised various preliminary objections, including that Bridgestone Americas, as a mere licensee of the FIRESTONE and BRIDGESTONE trademarks, did not have an “investment” entitled to protection under either the TPA or the ICSID Convention.
However, the Tribunal determined that trademarks and trademark licenses may constitute protected investments under the TPA and ICSID Convention, provided that the owner or licensee of the trademarks can show that it is actively exploiting them by, for example, (i) designing, manufacturing and selling products that bear the marks and offer desirable features and/or (ii) promoting the marks through advertising, sponsorships, etc. The Tribunal thus concluded that these sorts of acts may result in the creation of a qualifying investment because they involve:
- the “devotion of resources, both to the production of the articles sold bearing the trademark, and to the promotion and support of those sales”;
- benefits to the host state’s development, including contributions to its economy and tax revenues; and
- “the expectation of profit and the assumption of the risk that the particular features of the product may not prove sufficiently attractive to enable it to win or maintain market share in the face of competition.”
The Tribunal concluded that Bridgestone Americas held protected investments because Bridgestone Costa Rica – a subsidiary of Bridgestone Americas – had exploited the FIRESTONE and BRIDGESTONE trademarks under Bridgestone Americas’ oversight, including through “advertisements in publications, on radio and television and on the web, seasonal promotions, marketing campaigns, and merchandising co-sponsorship,” and sold tires with “the FIRESTONE and BRIDGESTONE marks in Panama.”
The Tribunal’s ruling has potential implications for owners and licensees of intellectual property rights, particularly with respect to the protections they can expect for their trademarks under investment treaties and the steps they can take to maximize the likelihood that those protections will be available.
This post comes to us from Cleary Gottlieb Steen & Hamilton, and is based on a memorandum first published here.