At WIPO, A Singular Explanation Of A ‘Non-Unitary’ Budget

At the World Intellectual Property Organization annual General Assembly this week, the financing of the Lisbon system protecting appellations of origin is the subject of intensive discussions cutting across several agendas. Attempts are being made by non-Lisbon members to separate the Lisbon system’s funding from other agreements, and in the course of the debate the broader WIPO budgetary system came under analysis.

During the week, the WIPO legal counsel and director general gave explanations to member states on WIPO’s budget and the concept of a unitary presentation, a term that has come up frequently. The explanations were given during the assembly of the Patent and Cooperation Treaty (PCT) Union on 6 October.

Secretariat Explanation of ‘Unitary’ Contribution System

According to the summary of the 1967 WIPO Convention, the main source of income of WIPO’s regular budget are the fees paid by users of the international registration and filing services, and the contributions paid by the governments of member states. Director General Francis Gurry said this week that such government contributions represent about 5 percent of the budget.

According to the summary, “Each State belongs to one of 14 classes, which determines the amount of its contribution. Class I, with the highest contribution, involves the payment of 25 contribution units, whereas Class Ster, with the lowest contribution, involves the payment of 1/32 of one contribution unit.”

Edward Kwakwa, WIPO’s legal counsel, told the Assembly this week that a unitary contribution system (not a unitary budget) has been in practice since 1994, following a decision by the 1993 General Assembly. The decision, he said, stated that any country that adheres to any of WIPO’s conventions as well as any of the six contributions-financed unions would only pay one contribution amount.

The six contributions-financed unions are: the Paris Convention for the Protection of Industrial Property; the Berne Convention for the Protection of Literary and Artistic Works; the Strasbourg Agreement Concerning the International Patent Classification; the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; the Locarno Agreement Establishing an International Classification for Industrial Designs; and the Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks.

The US asked on which authority the PCT was funding other unions, and whether a decision by the PCT to not fund the Lisbon system would change the unitary system currently in place.

Gurry said that when member states approve the programme and budget, “they approve the proposals that are made with respect to the authority to spend.”

“We are a little strange as an organisation,” he said, “because we do not have a request for revenue, except for the 5 percent that are contributed.” The rest comes as a consequence of the operation of the PCT, the Madrid, and the Hague system, he said.

“So the authority for allocations actually comes from the member states’ approval of the program and budget,” he said, adding that “that has been the case since this organisation came into its present incarnation in 1970.”

“As far as the unitary budget is concerned … that is an expression that we use, or the members use, rather, to describe one document, which is a unitary presentation, if you like, of the rather complex finances of this organisation,” Gurry said.

“The draft programme and budget gives two views. It gives a unitary presentation of the budget by reference to programmes and results, and it gives in its annexes a union view of the sources of funding,” he explained.

“The complicated part of it is, of course, what we refer to as common expenses,” he said. Those expenses that occur and are common to all of the unions, he said, such as human resources, the buildings, or any other expenses that are made for the benefit of all treaties, and unions and programmes of the organisation, he said.

According to Gurry, if the PCT Union decided not to subsidise any expenses of the Lisbon Union’s operations “that would not affect any other part of the budget,” and “it would not affect the so-called unitary budget, even though there is no such thing as a unitary budget”, rather a unitary presentation, he said.

“It would not affect the sharing of revenue from other unions to the Lisbon Union … and it would not affect furthermore the sharing of other PCT revenue … with other unions than Lisbon,” Gurry said.

PCT Union Assembly Stumbles on Lisbon Financing

The Lisbon financing issue arose in the context of the Patent Cooperation Treaty Union Assembly on 6 October. The United States proposed that the PCT stop funding the Lisbon system, which was opposed by a number of countries. The issue will be revisited later.

The 47th session of the Patent Cooperation Treaty (PCT) Union Assembly was held on 6 October, and chaired by Susan Sivborg of Sweden.

One item that kept delegates debating budgetary and legal issues was a US proposal [pdf] to keep the PCT Union income and reserves from being used to fund direct or indirect expenses of the Lisbon Union (the governing body of the Lisbon System for the International Registration of Appellations of Origin), unless the PCT Union consents to it.

The US delegate told the plenary that the Lisbon system has been operating at a financial deficit for many years as its expenses have not been covered by the Lisbon Union reserves.

The US also indicated that the surplus that the Madrid system enjoys could be given back to the Madrid members. Hamamoto said, “the Lisbon deficit that is projected for the biennium is quite small, and in fact we have identified funds already available at WIPO that could adequately cover this deficit, including the excess Madrid Union surplus that can be disbursed to all Madrid members, some of whom belong to the Lisbon Union.”

The US delegate said the PCT Union has a surplus that could be used to fund the Lisbon system instead of feeding the reserve fund, but the PCT Union needs to decide to do so and the US said it would not support this action.

The US decision is based on the fact that the newly adopted Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications was adopted in their view contrary to WIPO’s rule of the house to include all membership in final negotiation meetings to adopt a treaty.

The Geneva Act negotiations were open to the whole WIPO membership but only the 28 members of the agreement had a voting right, with the addition of the European Union and the African Intellectual Property Organisation (Organisation Africaine de la Propriété Intellectuelle – OAPI).

In her opening statement at the outset of the General Assembly, US Amb. Pamela Hamamoto said, “Both the Lisbon Agreement and the Geneva Act will negatively impact them as the protection for GIs [geographical indications] in these agreements is trade-distorting. And we are facing serious questions about why and how US fees and contributions are required to subsidize the Lisbon system when it is so harmful to US trade.”

Prior to the secretariat’s explanation, a number of countries, including Switzerland, Mexico, Cuba, France, Italy, Hungary, Uganda and Tunisia, said they were keen on keeping the WIPO “unitary budget” and did not endorse the US proposal. Australia said it shared some of the concerns voiced by the US, and encouraged Lisbon members to develop a plan for financial sustainability, on the basis of a document submitted by WIPO at the last Program and Budget Committee in September, and to take into account some of the US concerns.

The secretariat then was called upon to explain the notion of a “unitary” budget, in which it said in effect there is no unitary budget, just a unitary presentation of the budget.

The US requested that the item remain open pending the other budget items. The chair decided to allow more time on the issue and thus to come back to it at a later stage.

New International Searching Authority Approved

Separately, during the PCT Union Assembly, the Visegrad Patent Institute (VPI) [corrected] in Central Europe, which was seeking [pdf] to become an International Searching and Preliminary Examining Authority under the PCT, was accepted as such by the PCT Union members, and the draft agreement between WIPO and the VPI was approved.

The VPI joins 19 other International Searching and Preliminary Examining Authorities, such as the National Institute of Industrial Property of Brazil, the Canadian Intellectual Property Office, the European Patent Office, the Egyptian Patent Office, the Indian Patent Office, and the United States Patent and Trademark Office.

The Visegrad Patent Institute is a joint patent institute gathering four Central European countries: the Czech Republic, Hungary, Poland, and Slovakia (IPW, IP Policies, 18 March 2015).

According to the Hungarian delegate, presenting the candidacy of the VPI, “The VPI agreement is subject to ratification in accordance with the respective constitutional requirements of the contracting states. It will enter into force two months after the Czech Republic, Hungary, the Republic of Poland and the Slovak Republic have all deposited their instruments of ratification.”

Hungary and the Slovak Republic have ratified the VPI agreement and deposited their instruments of ratification in June and July. The Czech Republic deposited its instrument on 1 October and Poland is expected to do the same in a few days, the delegate said. The VPI is expected to become operational on 1 July 2016, as planned, he added.

Other PCT Items

Meanwhile, a number of other documents were considered by the PCT Union, such as a report [pdf] on the PCT Working Group, a document [pdf] on quality-related work by international authorities, a review [pdf] of the Supplementary International Search System. Also on the agenda was a proposal [pdf] for amendments to the PCT Regulations. All draft decisions on those documents were approved by the PCT Union.

Meanwhile, discussions on budgetary issues are continuing under various items of the General Assemblies agendas. Members must agree on a budget for the next biennium (2016/2017) by the end of the Assemblies next week.