The global packaging giant admitted it was taken back when Hugo Chavez declared that his country would no longer recognize patented products. The mercurial 54-year-old leader said his country might copy packing technology developed by Tetra Pak as part of a strategy to reduce costs and reliance on foreign companies.
Tetra Pak, which employs 225 people in Venezuela, said it was hoping to start talks with ministerial officials this week to understand better the basis for the warning, given that patents are internationally recognized and accepted.
The company was reacting to the announcement made on national television in which the left-wing Chavez dismissed patents as “universal knowledge” before declaring: “We don’t have to be subject to capitalist laws.” The government also said it would also seize cardboard manufacturers that refused to supply packaging to state-owned food companies.
Urgent talks
Jörgen Haglind, senior vice president of Tetra Pak, said: “The statement by President Chavez obviously surprised us given the international recognition of the importance of patents. We will initiate talks with the ministry to better understand the rationale of his statement.
“Tetra Pak has been present in the country for over 25 years and has for 15 years local production in Venezuela, and we trust we can continue to support our customers and ultimately the consumers of the country.”
Jesse Chacon, Science and Technology Minister, said Venezuela had spent $63 million dollars on importing packaging material manufactured by Tetra Pak in May. However, the company confirmed it had posted a turnover of $97m in 2008, selling a total of one billion packages. It has been operating a plant for gable top packages there since 1993.
Legal obligations and possible remedies
Adrian Toutoungi, associate and intellectual property expert at international law firm Eversheds, told FoodProductionDaily.com that if Venezuela carries out its threat it could face sanctions from the World Trade Organisation (WTO) for breaching the Agreement on Trade Related Intellectual Property Rights (TRIPS). The South American country signed up to the convention in 1995.
All TRIP signatories are obliged to recognise and grant patents from other WTO members as long as they meet “relevant criteria of patentability”. Patents cannot be revoked arbitrarily and if they are, the patent holder must have the opportunity to appeal, said the lawyer. He added the Chavez government had two legitimate options.
“It can apply to revoke the Tetra Pak patent on the grounds that it doesn't comply with the criteria of patentability: e.g. if the invention covered by the patent is not new, or is obvious.”
The alternative would be for the Venezuelan government to grant a compulsory licence to its domestic manufacturers, but only on condition that Tetra Pak has first refused to grant voluntary licences and is paid reasonable compensation, he said.
“Any other action such as arbitrarily revoking the patent, instructing national courts simply to refuse to enforce it or granting a compulsory licence without compensation to Tetra Pak would amount to a breach of Venezuela's obligations under the TRIPS agreement”, explained the Eversheds expert.
In this event, the main remedy open to Tetra Pak would be for a WTO member to refer the matter to the body’s dispute resolution panel. If the panel ruled against Venezuela, it could face various retaliatory trade sanctions from other WTO countries.
Toutoungi concluded: “Aside from TRIPS and other international intellectual property conventions, a country is entirely free to decide whether to operate a patent system or not. This is a matter of economic policy. For example, the member states of the former Soviet Union and many less developed and least developed countries did not have a patent system at all until relatively recently.”