1 Introduction

Running through the various detailed justifications for intellectual property is a grand promise. By enacting laws that confer some degree of exclusivity over intangibles such as knowledge, data, and information, a country is promised a better future. In the case of geographical indications (GIs) the promise is of rural development. The recitals to a 1992 Council Regulation of the European Community, which set up a framework for registering GIs relating to agricultural products and foodstuffs, imply this promise, suggesting that GIs could improve farmer income and help keep people in ‘less-favoured or remote areas’.Footnote ¹

A regulatory tool that promises to improve the lot of the poor, especially the rural poor, deserves serious attention. With more and more of the world’s population moving into cities, governments everywhere are interested in policy ideas that will help keep some people in agricultural production. In the case of the European Union’s (EU) twenty-eight members, some 23 per cent of the population live in rural regions.Footnote ² More and more people, and not just Europeans, are looking to participate in the economic life of cities. More of us are drawn to shopping malls than barns.

The EU’s advocacy for more international protection for GIs is well known. It was the EU that put forward draft text for the protection of GIs at the beginning of the negotiations of what became the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 1994.Footnote ³ Since then, the EU has continued to pursue protection for its GIs through preferential trade negotiations.Footnote ⁴

One of the first countries to negotiate with the EU over protection of its wine GIs was Australia. After long negotiations that began in the 1980s, Australia and the EU signed an agreement in 1994 to regulate the wine trade between them (1994 Agreement).Footnote ⁵ A replacement agreement was signed in 2008, coming into force in 2010.Footnote ⁶ These agreements were entered into because Australia needed better access to the EU’s wine market and in particular wanted to provide consumers with more information on wine labels relating to matters of vintage, variety, and production.Footnote ⁷ Australia enacted legislation in 1993 that would protect the wine GIs of EU countries, as well as allow Australian wine producers to apply for GIs.Footnote ⁸

At the time of the negotiations, many on the Australian side, especially those in government, saw national GI systems in Europe as part of the protectionist agricultural policies of the EU. During this time, Australia was one of the leaders of the Cairns Group, the group that was leading the charge to liberalize trade in agriculture in the Uruguay Round of multilateral trade negotiations.Footnote ⁹ The belief that GIs were examples of a larger picture of the over-regulation of the EU wine sector is understandable keeping in mind that since 1962 more than 2,000 directives, regulations, and decisions concerning wine in the EU have been published.Footnote ¹⁰ At the same time, the trade incentives for Australia to continue negotiating with the EU over GIs were and remain strong. For example, in 2007–2008 the European Community accounted for about 50 per cent of Australia’s wine exports, worth about $1.3 billion.Footnote ¹¹

In any case, Australia’s enactment of a wine GI system did set up a natural experiment in which Australia’s wine regions would become test sites for whether or not GIs contribute to regional development. By definition, natural experiments are not run under laboratory conditions. Australia did not copy a European GI model but rather, taking into account the circumstances of the Australian wine industry, it developed its own model of protection. Perhaps the most important aspect of those circumstances was that an export boom had begun in the late 1980s, well and truly before Australia’s GI legislation came into operation in 1994.Footnote ¹² As we will see, Australia’s wine GI system represents an experiment with a minimalist model of GI regulation: one that can be contrasted with a French command-and-control model.

Little attention has been paid thus far as to whether or not Australia’s wine GI system has contributed to Australia’s regional economies. One might argue that it was not designed to, but this does not necessarily mean that it has not had such effects in practice. In this chapter, I present the results of interview data with actors from the wine industry, including winemakers, wine associations, tourist associations, government officials (federal and state), and regulators. The interviews with winemakers took place in some of Australia’s premium wine growing regions (Tasmania and the Yarra Valley in Victoria) as well as regions that were generally not regarded as such (e.g. Southern Queensland). The data are part of a bigger project carried out with William van Caenegem and Jen Cleary that examined the issue of whether Australia should enact a GI system for food.Footnote ¹³ However, in this chapter I am concerned with the narrower question of whether there is evidence of regional developmental benefits that might be attributed to Australia’s wine GI system.

This is very much a micro-study, one grounded in the idea that there is merit in getting actors steeped in industry experience to exercise the wisdom of hindsight on critical issues such as the regional benefits of GIs. As with all micro-studies, there are limitations about its generalizability, but then I would argue that this is precisely the broader conclusion that one should come to about intellectual property. Its universal prescription as development medicine for countries sits at odds with the fact that it is an intervention into organic and local systems that respond very differently to the same medicine. The present case study does not point to regional development benefits, but rather it reveals the existence of mechanisms that explain how GIs might function to deliver regional benefits. Whether or not these mechanisms will operate is, as we will see, a matter of complex causal context. For example, lack of trust in a rural region can spoil the best-designed GI system. Wine has economic characteristics that many other products do not have, setting another potential limitation on what might be inferred from the present study.

The remainder of this chapter sets out the Australian GI scheme, including its costs and enforcement. If one were to summarize the Australian system in tweetable form, it is that ‘flexibility rules’. After the sections on the GI scheme, there follows a section on how various actors in the wine industry view GIs. The remaining sections discuss the link between GIs and regional development, identifying two mechanisms – reciprocal spillovers and group identity – that suggest how a GI might help regional development.

2 Australia’s System of Geographical Indications for Wine

The wine industry in Australia is the only industry that has the option of registering a GI under legislation specially dedicated to that purpose, namely Part VIB of the Australian Grape and Wine Authority Act 2013 (AGWA Act). Under the AGWA Act, the Geographical Indications Committee (GIC) has powers of determination to decide applications for GIs.Footnote ¹⁴ The Act lists organizations that may apply for a GI and it specifies that a winemaker or grower of grapes may make an application. The detailed criteria for determination are prescribed in the relevant regulations.Footnote ¹⁵ These criteria include geological, climatological, cultural, and historical factors.Footnote ¹⁶

Lying at the heart of a GI system is the delineation of the boundaries of an area and the decision on the indication to be used in relation to that area. Boundaries have to be described as accurately as possible because these descriptions would be included in the Register of Protected GIs and would become the legal basis for deciding whether, for example, someone has made a false claim on a wine label.Footnote ¹⁷ By way of example, the description on the GI Register for ‘South Eastern Australia’ is as follows:

There is something else to note about this GI: its extraordinary size. It includes, for example, the State of New South Wales, a state bigger than France in terms of square kilometres (800,642 square kilometres compared to 549,087).Footnote ¹⁹ The State of New South Wales is itself a registered GI and within New South Wales there are a number of registered GIs, the most well-known being the Hunter Valley.Footnote ²⁰ With GIs that enclose areas the size of large European countries, there is little plausibility to the claim that there is a distinctive set of qualities imparted by the locality to a particular wine. The system was not designed to bring terroir into a close regulatory association with the production of wine, but rather had a market-access goal. This is clear from the Explanatory Memorandum to the Australian Wine and Brandy Corporation Amendment Act 1993 when it states that in order ‘to enable wine labelled by region to be marketed in the EC, the boundaries of Australian geographical indications concerned must be defined’.Footnote ²¹ The fact that large country-like GIs of the size of ‘South Eastern Australia’ were created meant that no Australian wine producers would be left out of a GI region and therefore access to the EC market.

The rules that govern the use of a wine GI registered in Australia are straightforward compared to those found in many European systems, especially the French appellation system appellation d’origine contrôlée (AOC). The French system allows obligatory rules to be prescribed for many things, including allowable grape varieties within a region, minimum levels of alcohol, production methods, maximum yield levels, and methods of harvesting.Footnote ²² The purpose behind this detailed prescription is to ensure the production of a wine of good quality from grapes that best fit the terroir of the area. The regulation of yield in the French system is one important element of a scheme aimed at maintaining a standard of quality. Regulating yield was probably one of the last things on the minds of the Australian designers of the GI system in the boom years of the 1990s. The Australian wine GI system is a simple system concerned with the regional designation of grapes and is silent on processes about which the French system is vocal. The principal regulatory tool in Australia is a Label Integrity ProgramFootnote ²³ (LIP) that includes GI labelling but with the GI system not specifying standards aimed at quality.

In Australia there is no obligation to use a GI, but where a single GI such as ‘McClaren Vale’ is used, at least 85 per cent of the wine must have come from grapes grown in the region defined by the registered GI.Footnote ²⁴ Multiple GIs can also be claimed, though only up to a maximum of three in total.Footnote ²⁵ In the case of multiple claims, the basic rule is that 95 per cent of the wine must have come from grapes grown in those regions, with at least 5 per cent of the wine coming from each region.Footnote ²⁶

The Australian GI system takes a strict bright-line approach to GIs, its aim being to contribute to the greater goal of ensuring ‘the truth, and the reputation for truthfulness, of statements made on wine labels’.Footnote ²⁷ For example, the Australian Grape and Wine Authority’s guide to labelling with GIs makes clear that

The 85 per cent rule means that there is some flexibility in terms of sourcing grapes since, if required, up to 15 per cent can come from outside the region. If so, there is no requirement for this to be mentioned on the label. Similarly, there is no obligation under GI rules to process the grapes in the region in which they are grown.Footnote ²⁹

The Australian wine GI system, because it relies only on rules of origin and imposes no other standards, does set up a potential free-rider problem. A small group of winemakers within a region may work hard to create a reputation for quality through the adoption of best-practice methods and drawing on the strong innovation base of the industry. In the absence of detailed prescribed standards, there is nothing to stop someone from buying into the region, making a lower-quality wine, but being able to use the GI to market the wine because they have sourced 85 per cent of the grapes from the region. It is clear from the interviews that at least some winemakers see the reputation of a region as depending on a small pool of excellent producers: ‘Six out of 50 wineries are excellent [in the region], there are about 10 other wineries that are good’ (Respondent #16).

At the time the rules of the Australian GI system were being talked about, the industry produced wines of varying quality and price. A number of interviewees pointed out that in order to accommodate this diversity a ‘keep it simple’ approach was adopted. The GI system was not intended to be a barrier to entry into the industry. Rather than using formal rules and sanctions to set a standard of wine production in a region, the industry has pursued quality in other ways. For example, the interviews showed that important to the drive for quality at the regional level have been informal social mechanisms such as tasting groups organized by winemakers – places where they can have an ‘honest conversation about the quality issue’ (Respondent #15). Such groups provide new entrants into a region with information, constructive feedback, support, and the opportunity to win recognition through competing for prizes. The aim has been to socialize those who are interested into a culture of quality production rather than prescribe it through law. According to our interviewees, the Australian approach to GIs has helped the industry to grow. A highly prescriptive system might have functioned as a deterrent. In the words of one interviewee:

3 Enforcement

As we have seen, the regulatory footprint of Australia’s GI system, in terms of rules, is light. Nevertheless, if a GI system is to win the trust of consumers, producers have to follow its rules. This is something well understood by the Australian wine industry. In the words of the industry regulator, the Australian Grape and Wine Authority (AGWA):

This in turn raises questions about how compliance with the rules is best achieved, how breaches of the rules are to be detected, and what the strategies for enforcement should be. AGWA provides information and educational services to the wine industry about its labelling obligations. It also has responsibility for monitoring compliance with the LIP, GI claims forming part of that program.Footnote ³¹ The LIP imposes record-keeping obligations on those in the wine supply chain.Footnote ³² In addition, AGWA has a range of sanctions available under the law, including the suspension or cancellation of an export licence, as well as terms of imprisonment and/or fines.Footnote ³³

Compliance with the LIP is monitored by a small group of auditors (a total of four at the time of the interviews).Footnote ³⁴ This audit team aims to cover all Australian wine producers once every three to four years. Audits may be done via cold-calls or by appointment. Wine producers are obliged to keep detailed records that help to ensure full traceability because traceability is one of the things that compliance inspectors comment on in their audit reports. Auditors appear to follow what is known in the regulatory literature as an enforcement pyramid. The key idea behind the pyramid is that punishment and persuasion should be linked in a certain sequence that always begins with dialogue and persuasion at the base of the pyramid and ends with the most punitive sanction at the apex of the pyramid.Footnote ³⁵ At the time of the interviews, approximately 400 audits were being carried out annually. Resorting to coercive levels of the enforcement pyramid by the regulator appeared to be rare, with few licence suspensions and only two prosecutions in the last fifteen years (Respondent #104). Only one of those prosecutions related to alleged breaches of provisions relating to GIs (Respondent #104). A lot of the effort invested in obtaining compliance takes the form of presentations, advice, and the provision of manuals and templates to wine producers and exporters.

4 Costs

There is a range of costs that accompanies the wine GI system: the costs of application, the costs of running the system, and the ongoing costs of compliance. The costs begin with a group’s time in putting together an application for the determination of a GI. These costs include a fee and those arising from assembling the evidence/information required as part of the application process. The application fee is currently set at $27,500, a fee that approximates the average cost of the GIC hearing an application (Respondents #103 and #104). The fees for wine GIs have changed over time. Initially they were met out of industry levies and then were kept at a low rate (Respondent #104). The potentially deterrent effect of the present fee was seen as a desirable consequence by many interviewees.

The real costs of application, however, lie in the evidence that is required to convince the GIC that it should determine the boundaries of a GI. The applicant has to provide evidence on matters such as the history of an area, its discreteness, and homogeneity by reference to attributes such as climate and geology, all of which require expert evidence (Respondent #94). Estimates from the interviews suggest that such costs amount to tens of thousands of dollars. Costs might rise to a six-figure sum if, for example, there is opposition to the GI from a trademark owner. This sum might be larger still if, as in the case of the dispute over the determination of the boundary for the Coonawarra GI in South Australia, the matter ends up before the Federal Court with many years of legal expenses having to be met.

The Coonawarra saga is a spectacular example of a bitter and prolonged dispute over a GI boundary, but it is also something of an outlier.Footnote ³⁶ Settling GI boundaries has been a story of consensus rather than conflict. Most other Australian GI boundaries were determined without recourse to battalions of lawyers and appeals to the Federal Court (Respondent #94). One reason may be that before the introduction of the formal GI system, some winemakers in Australia were organizing themselves on a regional basis and so perhaps there was, at least in some regions, a customary sense of boundaries. For example, there were about six regional wine associations in Victoria in the 1980s (Respondent #151). Also in the 1980s some winemakers had organized an appellation program in Tasmania (Respondent #128).

5 Perceptions of Geographical Indications

As the quote from AGWA in Section 3 suggests, many people in the wine industry believe that GI regions are important. How important turns out to be difficult to say, and the reasons vary among regions and participants. Two perspectives on wine GIs emerged from the interviews. One was a winemaker’s perspective that, not surprisingly, looked to the role of GIs in helping to define and communicate the connection between the region and the wine. The other was a marketing perspective in which assessing the value of GIs comes down to answering one simple question about them: ‘does the consumer care?’ (Respondent #128).

If we look to consumer preferences as a guide to the importance of GIs, separating the influence of region from a range of other purchasing influences such as age, awards, brand, expert or other recommendation, price, previous experience, and so on, it is not clear where region sits in a ranking exercise. Studies suggest that region is probably recurrently important, but how important is difficult to isolate.Footnote ³⁷ The answer is likely to vary depending on which segment of the consumer market is being studied.

Those interviewed tended to think that GIs were needed above a certain price point: ‘From $15.00 onwards you need a region’ (Respondent #158). Others nominated higher price levels. GIs had a ‘halo effect’ that ‘helped 5%–10% of the export market’ for Australian producers (Respondent #151). The importance of GIs in export markets was linked to the increase in value of the Australian dollar: ‘[We] got priced out of the low-end market because of the rise in the dollar. [We] make more on a £10 bottle and there the “Yarra Valley” region makes the difference’ (Respondent #163).

The interviews with those in the wine industry who took a marketing perspective on GIs tended to confirm the difficulty of isolating the effects of regions on consumer purchasing decisions. Some interviewees made the point that industry surveys showed that the recall by Australian consumers of even high-profile GIs, such as the Barossa, the Hunter Valley, and Coonawarra, is weak and essentially non-existent for many lesser Australian GIs. Amongst consumers in international markets there is also very little recall of Australian GIs. The survey results reported by interviewees (internal and not published) would have many winemakers reaching for antidepressants. There is ‘massive ignorance and confusion out there’ when it comes to GIs with consumers, according to one survey, thinking that Chardonnay and Jacobs were GIs (Respondents #103, #104, and #171). In Europe, consumer awareness of the European GI scheme was also reported as being very low, with only 8 per cent of consumers recognizing the relevant symbols.Footnote ³⁸ This is a telling example, as it shows how difficult it is to familiarize consumers with new GI label categories (in this case, the protected designation of origin (PDO) and protected geographical indication (PGI) symbols). Extolling the virtues of GIs is much easier if one is growing one’s grapes in Burgundy.

The interviews also suggested that the export success of Australia’s wine industry in the 1990s was built around the application of modern brand-building techniques that allowed the winemakers of the New World to communicate with European consumers in ways that caused the Old World to sniff with disdain. At the core of this marketing success was the image of Australia itself: a place that could pour sunshine into wine bottles from where it could be released like a genie to brighten the gloomiest European day.Footnote ³⁹ The marketing of Yellow Tail wines is a good example of the kind of creative strategy that was employed. Yellow Tail is reported to sell more in the US market than all French producers combined.Footnote ⁴⁰

Australian GIs were not central to this marketing strategy. The Australian wine export figures for the period 1989–1998 show remarkable growth, with an average increase of 26 per cent per year.Footnote ⁴¹ They also show that Australia’s export success was occurring well before the introduction of the GI system. GIs functioned as a Trojan horse allowing the Australian industry to gain greater access to European consumers. Once in the market, the combination of quality, price, and marketing of Australian wine did the rest.

It is probably also fair to say that GIs became progressively more important in the wine industry’s thinking as it considered its future. One interviewee, a winemaker and leader within the wine industry, referred to the 1996 publication Strategy 2025, describing it as a long-term vision for the Australian industry that included an important role for GIs. In his words, ‘We didn’t want to be the wool industry. If we’d taken the path of the wool industry we’d be shipping tankards of fermented grape juice’ (Respondent #151).

Some eleven years later, the growing emphasis on GIs and regions can be seen in the AGWA’s 2007 publication Directions to 2025:

And even more recently, AGWA, outlining its strategic plan for 2015–2020 in a discussion paper, indicated that ‘increasing the demand and premium paid for Australian wine’ was a key strategic priority to be underpinned by research into ‘Australia’s unique terroirs’ and compliance with its labelling laws.Footnote ⁴³

There was a strongly held view amongst interviewees that having too many new GIs could create marketing problems. Australia’s well-known GIs were reputable wine regions before they became GIs. The Barossa Valley, McLaren Vale, the Hunter Valley, the Yarra Valley, and Rutherglen grew in prominence as wine regions throughout the twentieth century. These regions progressively changed from an exclusive reliance on producing cheap fortified wine and bulk wine to making improved quality table wine, particularly as better grape varieties were developed and the industry placed more emphasis on technological innovation of all kinds.Footnote ⁴⁴ When Australia adopted the GI system, these regions had the benefit of sunk reputational costs. Taking a largely unknown region and turning it into a consumer brand is a much more difficult and expensive exercise irrespective of whether or not the region is defined by a GI. Some GIs were described as ‘unwieldy and impossible’ (Respondent #171). Thinking about how to lift some of Australia’s GIs out of anonymity remains a marketing challenge for the wine industry.

Interviewees, whether speaking from a winemaker’s perspective or a marketing perspective, were generally not in favour of a further sub-delineation of Australia’s existing wine GIs. For example, Tasmania has been a registered GI since 1994 with no sub-regions appearing on the register. The Tasmanian winemakers interviewed saw no gains in the creation of GI sub-regions. They saw Tasmania as a strong and recognizable brand. They characterized their industry as a small industry that had to work together in order to grow and keep the focus on producing quality wines. Their worry was that sub-regional GIs might have a splintering effect on an industry that could not at this point in its evolution lose the cooperation it had achieved: ‘At this stage of our maturity we’ve got more to lose than to gain by going our own separate ways’ (Respondent #128).

The wariness about sub-regional GIs was not confined to Tasmania. The view that Australia had enough wine GIs was reported by our interviewees to be a general view within the industry. That said, some interviewees in Tasmania and elsewhere did hint at the desire of some smaller winemakers to have their own identity, suggesting that there is at least some debate within the industry about sub-regional GIs. An overall view from the interviewees was that while sub-regions could certainly be identified, something not surprising given the size of Australia’s wine GIs and the diversity of soils within those GIs, at this stage of the industry’s growth it was better not to formalize those boundaries. Many winemakers saw themselves as still being in a learning and experimental phase: ‘There’s a lot of learning to identify the perfect single vineyard for growing grapes – it can take 100 years to work it all out.’

The more general lesson here is that if an industry is to work successfully with a GI system, it will have to arrive at a general consensus about its use, avoid its potentially destabilizing effects, and make it an ongoing part of its planning conversations. The Australian wine industry has many levels and institutional actors from the public, private, and research sectors that produce internal circles of deliberation and debate about its future.Footnote ⁴⁵ From those internal circles it has been able to forge common strategic objectives that at first did not heavily prioritize GIs in the export boom years of the 1990s, but now with the boom well and truly over, do include a greater emphasis on GIs.

6 Geographical Indications and Regional Benefits

Even if, as seems likely, GIs will come to play a more important role in the Australian wine industry in terms of marketing, more sales will not necessarily translate into significantly more income or benefits for a wine GI region in Australia. The test of the development benefits of a GI system, as the Council regulation referred to in the introduction makes clear, is encouraging people in rural areas to stay and improving their income. In the case of the Australian wine GI system there is no obligation to process the wine within the region. Continued mechanization and automation in the Australian wine industry will also affect local employment opportunities. Industry structure matters to the likelihood of regional benefits. Australia’s wine companies are export-oriented, as well as part of global ownership structures.Footnote ⁴⁶ Investment decisions by large wine companies are likely to be determined by a global-market perspective rather than a regional perspective. For example, Accolade Wines, Australia’s largest wine company, has a presence in 115 countries and a business model based on brand investment and contracting with grape growers.Footnote ⁴⁷

The extent to which a GI improves the income of a wine region will also be deeply affected by market structures concerning distribution. For example, two supermarkets in Australia, Coles and Woolworths, dominate the retail grocery market and together account for some 70 per cent of domestic wine sales.Footnote ⁴⁸ This structure makes for hard bargaining when it comes to winemakers selling their wine to these supermarkets. In the words of one of Australia’s largest winemakers, ‘they just taste and check with their calculators’. These retailers are also creating their own private label wines, placing even more pressure on the capacity of winemakers to improve their margins.Footnote ⁴⁹ Even if some wine GIs result in a willingness by consumers to pay more for the wine, players other than individual winemakers may end up capturing those greater margins.

The Australian GI system was designed so as not to disturb the flexibility and diversity of the industry. Australia’s GIs are, as pointed out earlier, like a set of very large Russian nesting dolls giving large wine companies a lot of flexibility when it comes to sourcing grapes and using GIs to indicate the source of the grapes. Large wine companies in Australia own about 20 per cent of the national vineyard estate, with the remainder in the hands of specialist grape growers and some small wineries.Footnote ⁵⁰ In a recent submission to the Australian Senate, the Wine Grape Growers Association of Australia argued that the returns to their industry, which is most directly involved in regional employment, were affected by their members’ relative lack of bargaining power with large wine companies.Footnote ⁵¹ GIs, one suspects, have made little impact on who gains how much out of the wine supply chain.

On the question of GIs and regional benefits, the interviews suggested two possible mechanisms that might help to answer the question of how a region might benefit from a GI. For convenience we can label these the reciprocal spillover mechanism and the group identity mechanism. The next two sections discuss each in turn.

7 Reciprocal Spillovers

One wine region in which a number of interviews took place was in the Granite Belt (a registered GI), Queensland. Wine GIs do not commonly occur in Australia’s north, but the Granite Belt, because of its elevation (600–1,000 metres) and soils, is quite suitable for viticulture. Centred on the town of Stanthorpe in Southern Queensland, the Granite Belt case study suggests that a registered GI may create regional development benefits beyond that of other more generic, region-specific, provenance branding options.

Queensland does not have a great or even good reputation for wine because its tropical and sub-tropical climate and soils are largely unsuitable for growing wine grapes, with the granite soils around the Stanthorpe area being an exception. The problem for the winemakers in the region was the reputation of Queensland wine; as long as they were under the banner of ‘Queensland wine’, success was limited. Queensland was simply not known as a traditional grape-growing area. Winemakers had to be skilled in creating interest in their product first and not mentioning Queensland in their marketing. One winemaker described how they explained the location of their winery in the Granite Belt to customers, commenting, ‘notice how I don’t use the word Queensland’ (Respondent #18). The registration of the Granite Belt GI in 2002 was seen as an important breakthrough: ‘it’s given us our own identity’ (Respondent #18).

In the interviews, the winemakers were very clear that it was the registration of a GI that had been crucial to their success. It created the opportunity for them to escape the poor reputation of Queensland wines. The Granite Belt GI became the basis for a marketing strategy for wine that allowed winemakers to distinguish their wine from the rest of Queensland. It also became the basis for creating a broader identity for the region as a tourist destination. Importantly, there was an organizational vehicle that helped to back the promotion of the Granite Belt in the form of Granite Belt Wine and Tourism (GBWT), a peak local body representing wineries and other tourist operations.

According to interviewees, the GBWT works with the GI boundary as a guide for its promotional activities. These activities are funded from member levies and fees, with businesses being able to buy different promotional packages. Critical to the stability of the GBWT has been finding a fee structure acceptable to the different types of businesses involved. Establishing a regional identity was described as a ‘slog’ (Respondent #20). The challenges include settling on an identity, since there are always options, alternatives, and a diversity of views.

The Granite Belt wine GI seems to have played an important role in the region’s growth by helping winemakers gain an independent identity and allowing them the opportunity to forge a reputation for the quality of their wines that was not distorted by an association with Queensland. As the region’s wines began to achieve recognition for their quality, tourists became more interested in visiting the region. This in turn generated demand for food and accommodation services, services that both drew on the success of the wine industry and contributed to its drawing power. In this particular case, the GI was integral to a process of reciprocal spillovers in which the benefits of the wine GI spilled over into various other food and tourist ventures, which in turn created benefits for the local wine industry. This process of reciprocal spillovers has continued to intensify with the establishment of the Queensland College of Wine Tourism in the region, a specialist education and training provider relating to the wine tourism industry.

The Granite Belt case suggests that a GI may, under a set of conditions, help a region gain the benefits of reciprocal spillovers that might not otherwise occur. In the case of the Granite Belt two conditions emerged as crucial: distance to a large urban centre (Brisbane is three hours away by road) and the creation of an owner-operated regional marketing organization (the GBWT). In terms of the proximity to Brisbane, what emerged from the interviews was that the marketing focused upon the Granite Belt as a weekend destination rather than a day-trip destination. This had important implications for the accommodation businesses in the region. Without a regional marketing body the Granite Belt region would have enjoyed much less success. As one non-wine producer who was paying $1600 to GBWT pointed out, ‘where would $1600 go if we had to market ourselves?’ (Respondent #12).

Proximity to tourism was mentioned as a factor in other interviews in other regions. In the Yarra Valley one winemaker pointed out that Yarra Valley Shiraz grapes commanded a higher price than Grampian Shiraz grapes (the difference being in the range of $400–$600 per tonne), despite the excellence of the Grampian grapes (Respondent #164). He attributed this to the fact that the Grampians did not get the tourist exposure of the Yarra Valley. Conversely, if we consider the situation where no Granite Belt GI was registered and the winemakers in the region continued to operate under a Queensland identity, then on their own account they would have continued to struggle and the region would have attracted fewer tourists. The GI was important rather than some other marketing strategy based on a certification mark because of the precise in/out group effect of the GI, which is discussed in the next section.

The Granite Belt case study points to the possibility of a GI triggering or accelerating a process of reciprocal spillovers. It is not the only case study where the spillover process was observed. In the Yarra Valley an interviewee from a dairy observed that the success of Yarra Valley wine in China had also triggered an interest in other Yarra Valley products such as cheese.

One important issue is whether a product other than wine can trigger this spillover process. Wine is a complex cultural product. It can be a bulk commodity (beverage wine), as well as a Veblen good (a wine of excellent or superexcellent reputation), a term used by economists to describe the purchase of goods that are linked to social status. In the case of goods with Veblen attributes, consumers are prepared to pay more because these goods have status and cultural effects. More is being satisfied in the consumption of such goods than simply thirst or hunger. People are prepared to pay for wine-tour holidays and tell their friends about them, whereas apple-eating tours would perhaps not generate the same pattern of social reporting. The number of food products like wine that can generate strong reciprocal spillover effects may be quite restricted. The interviews revealed that the Granite Belt region does have a reputation for producing good apples, but it would be unlikely that a GI for Granite Belt apples would generate a process of reciprocal spillovers of the same intensity as one for wine. The mechanism of reciprocal spillovers, which explains how other businesses in a region both benefit from and contribute benefits to a GI area, depends critically on the possession of a signature or iconic GI.

8 From Groups to Communities of Shared Commercial Fate: Investing in Quality

The certainty that GIs bring to the placement of boundaries appears to be playing an important contributory role in attracting investment into a GI region. Wine GIs in Australia, as they are subject only to rules of origin and not additional quality standards, do not of themselves trigger an interest in the production of quality wines. As indicated earlier, investment in quality in Australia’s traditional wine-growing areas was occurring well before the advent of the GI system. A GI by virtue of its precise delineation creates a simple group identity based on geographic lines. For example, the Barossa Valley GI enables one to claim the identity of being a Barossa Valley winemaker. The GI can be thought of as creating a minimal group identity: a formal right to be counted as part of a group. But, of course, groups once constituted may evolve in all sorts of ways; this evolution itself is affected by variables such as trust and leadership. In those GI regions where a sufficient number of winemakers have committed to investing in quality and in improvement, the GI does not simply define a geographical group but also defines who is potentially a part of a community of shared commercial fate. A winemaker who produces a poor-quality wine and who is in a region known for its quality wine generates a negative externality for the region. A winemaker who wins prizes generates a positive externality for their region. The interviews with winemakers from regions with a reputation for premium wines indicated that all were sensitive to the negative and positive effects that individuals could have on a region’s reputation.

Informal mechanisms and practices have evolved amongst winemakers to try to ensure that the production of wine in a GI region that is associated with wines of a particular quality continues to meet or improve on those standards of quality. A common practice is the use of tasting groups or clusters in which winemakers bring along samples for evaluation by their peers. The goal is constructive criticism aimed at improving the wine prior to bottling (Respondents #18 and #123). Wine competitions also seem to play a role in creating a culture of quality. Winemakers care about winning prizes. The esteem in which they are held by their peers and the broader industry matters to them. There are also the more obvious benefits that accrue from winning prizes – the capacity to price accordingly. Wine competitions are important networking sites where they can find out from judges in informal conversation why they did not win a place and how they might improve. The leadership of more established wineries in a region, such as a Josef Chromy in Tasmania, is also important. These wineries keep a weather eye out for newcomers, finding ways to give them advice about what works best in the region. The response is generally positive: ‘nobody wants to make bad wine – they jump on board immediately’ (Respondent #123).

Where a region has committed to quality, the GI boundary creates certainty for future investors. They know precisely where they must buy in order to gain the benefit of the GI. Winemakers who want to expand their business into premium wines benefit from having precisely defined regions that are associated with quality winemaking. A wine company such as De Bortoli, which has its headquarters in Griffith (an area not associated with premium wines), has expanded into the Yarra Valley as part of a strategy to increase its production of premium wines. The Yarra Valley GI is seen as generating an important halo effect.

The group identity that a GI system creates through its precise boundary delineation function helps winemakers who are interested in investing in quality to identify those who they must work with if they are to create a community with a sense of shared commercial fate within a region. If a group of winemakers makes the transition to quality wine production, then other effects such as greater investment in the region are likely to follow. The group-identity mechanism that operates as a result of the Australian wine GI system makes a modest but important contribution by defining who is in an area and who is not. This is simply a start. What happens after that depends heavily on leadership and the inclinations of people to work together.

9 Conclusion

There are two points that come from the negotiating phase of Australia’s experience with GIs that are worth emphasizing. Australia’s 1994 Agreement with the EU was an agreement that was specific to trade in wine. In other words, unlike in the case of a preferential trade deal that covers many industries and therefore sets up many possible trade-offs and complexities, the negotiations focused solely on the wine industry. This does raise the issue of whether it is better to negotiate GIs outside of a preferential trade agreement. The answer to this question will depend on whether one is negotiating with the EU or some other major trading partner such as the United States or China, but the point here is that the option of attempting to negotiate a specific agreement on GIs outside of a preferential trade agreement should at least be evaluated.

At the time of Australia’s introduction of a wine GI system, the relationship between trademarks and GIs in Australia did not prove a problem, one reason being that Australia was not party to preferential trade agreements that contained provisions on the issue. Like other countries, Australia has gone down the preferential trade agreement path concluding in 2004 the Australia-United States Free Trade Agreement. Amongst other things, this agreement led to provisions in Australian law that allow for objections to the determination of a GI based on pre-existing trademark rights.Footnote ⁵² For example, Rothbury Wines were able to use these provisions to object successfully to the determination of a ‘Rothbury’ GI, citing the existence of a suite of registered, pending, and common-law trademarks.Footnote ⁵³ As countries become parties to more and more preferential trade agreements, they will have to introduce much more procedural complexity into the design of any domestic GI scheme. At a more fundamental level, if a trademark office has allowed many trademark registrations over the country’s valuable agricultural place names to creep onto the register, it may have created a huge practical obstacle to introducing a GI system.

Turning now to the issue of regional development, Australia’s GI system was introduced at a time when the Australian wine industry was in the greatest export boom period of its history. The dominant regulatory principle of this system was truth in labelling, but it was also a principle that was bent to serve the interests of the wine industry in flexibility. Truth had to accommodate the demand for flexibility in production and processing. A consumer buying a bottle of wine with the GI ‘South Eastern Australia’ on it is being told that the grapes come from an area the size of several large European countries. The Australian industry is now in one of its bust cycles, and there is much more talk about concentrating on quality, suggesting that the GIs linked to Australia’s premium wine regions will perhaps gain more attention from marketers. It is also important to keep in mind that Australia’s experience with GIs is a little more than two decades old, whereas the Australian wine industry itself has a history of boom–bust cycles going back to the 1850s. It would be fair to say that the industry is still in something of a learning period with GIs. The future of wine GIs in Australia and globally is more likely to be influenced by decisions in the designer boardrooms of multinationals than in the cramped offices of the many hundreds of small wine producers in Australia, 75 per cent of whom crush less than 100 tonnes per year.Footnote ⁵⁴ Of Australia’s 2,573 wine companies, the top four account for 48 per cent of the national crush.

The Granite Belt GI does point to the mechanisms of reciprocal spillovers and group identity that help to explain how a GI could contribute to regional growth. However, for reciprocal spillovers, the case of the Granite Belt shows that proximity to a large city (Brisbane) matters. The same is true for the Yarra Valley with its close proximity to Melbourne. A wine GI may help a region in terms of jobs and growth by being able to entice city dwellers to visit. Regions with iconic GIs need cities to tango. Wine has that allure. Apples do not. For those interested in a GI system that truly serves poor and remote regions, the Australian wine GI model is almost certainly not the answer. But then perhaps no GI model could serve in that way.

1 Introduction

The concept of a geographical indication (GI) as a badge of origin that performs the function of identifying the geographical source of a product and its unique characteristics or quality that results from its geographical origin is a fairly recent development in the landscape of Malaysian intellectual property law. GIs were only formally recognised in Malaysia as a distinct type of intellectual property right when the Geographical Indications Act 2000 (GIA 2000)Footnote ¹ was enacted. The Act, which came into force on 15 August 2001, was Malaysia’s response to its international obligations to protect GIs under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).Footnote ² At that time, there was relatively little understanding of the benefits and potential impact of a system of protection of GIs on the socio-economic development of the country, particularly with regard to sustainable rural development. Even though there is currently no specific study that has been conducted in Malaysia on the impact of GI protection on the country’s socio-economic development, it is safe to say that at the present moment there is a general perception among stakeholders of intellectual property rights that GIs have a potentially positive impact on the generation of income, creation of local employment and, implicitly, the country’s social and economic development.Footnote ³ This is because consumers often place value on products that they associate with a certain geographical origin and GIs are potentially effective marketing tools of great economic value.Footnote ⁴ GIs are able to link products to their geographical regions, which oftentimes are in rural areas, and connect consumers to the producers.

As GIs were not perceived as a distinct form of intellectual property prior to the GIA 2000, it is not surprising that no applications were made to the Intellectual Property Corporation of Malaysia for the registration of geographical indications until the year 2003. Even then, there was only one application for registration made in that year.Footnote ⁵ The number soon escalated, and in the year 2015 alone there were thirty-one new applications filed to register GIs in Malaysia.Footnote ⁶ Of these, twenty-nine applications were by Malaysian applicants while two were by foreigners. Needless to say, not all applications were successful because they lacked the necessary requirements, but it suffices to note that by the end of 2015 there were in total fifty-nine registered GIs on the Register of Geographical Indications set up under the Act.Footnote ⁷ These registered GIs belong primarily to products related to agriculture-intensive industries as well as to producers in the handicraft and food sectors, which possess historical and cultural links between the geographical area of the GI-denominated products and the respective groups of producers.Footnote ⁸ For example, in the agriculture industry, producers of pepper, tea, coffee, rice, ginger, mangoes, groundnuts and durians have obtained registration of their GIs under the Act.Footnote ⁹ Producers of handicrafts such as songket (a handwoven fabric), batik and wood-carving have also registered their GIs for protection.Footnote ¹⁰ Similarly, GIs have been registered by producers of food items such as belacan (shrimp paste), cheese and biscuits.Footnote ¹¹ The increase in the number of applications for registration of GIs over the relatively short span of time suggests that producers are aware of the importance of adequate legal protection of GIs in contributing to the commercial success of their products.

Starting from the premise that GIs play an important role as a tool in marketing strategies to advance the commercial and economic interests of GI producers,Footnote ¹² this chapter discusses whether the current legal protection of GIs in Malaysia is adequate to prevent third parties from free-riding on the reputation of a GI. Adequate legal protection is necessary to prevent the unauthorised use of a GI by a third party for the purpose of misleading or confusing the public as to the geographical origin of a product, particularly when the product does not comply with the specific conditions of manufacture or does not originate from the geographical area. Apart from that, widespread unauthorised use of a GI could eventually result in the GI becoming a generic term. The unauthorised use of a GI in trade is detrimental to the legitimate interests of consumers and producers and, ultimately, will negatively impact the economic success of the industry that markets its products using the GI. In particular, the first part of the chapter provides an overview of the importance of GIs in the marketplace and describes two scenarios, both at a supranational level involving Malaysia, where GIs were at issue. The second part of the chapter discusses the scope of protection conferred on GIs pursuant to the GIA 2000 and the extent to which the Act promotes the use of GIs in trade. This is then followed by a discussion of the role played by the law of passing off in protecting GIs, particularly prior to the enactment of the GIA 2000. Subsequently, the provisions of the Trade Marks Act 1976 (TMA 1976),Footnote ¹³ the Consumer Protection Act 1999 (CPA 1999)Footnote ¹⁴ and the Trade Descriptions Act 2011 (TDA 2011)Footnote ¹⁵ that are relevant to the protection of GIs are briefly mentioned. Finally, the chapter analyses whether the current regime for protection of GIs in Malaysia creates a suitable legal environment that enables holders of GIs to prevent their unauthorised use by third parties in the marketplace.

2 Geographical Indications as an Important Tool in Trade

The notion of a GI hinges on the link that exists between the product, its geographical origin and its quality or other unique characteristics that are attributed to the geographical source. The particular quality, trait or unique characteristics result from natural geographic advantages such as climate, soil, raw materials, manufacturing skills or food processing techniques local to a region. Essentially, the reputation that is associated with a GI is the intrinsic element that sells the product and contributes to the success of the industry that uses the GI. The geographical area of origin is therefore at the heart of all GIs and represents the normative basis for GI protection.Footnote ¹⁶

As mentioned earlier, the increase in the number of applications for GI registration in Malaysia suggests the growing importance of GIs for trade in the country. A number of reasons may be proffered for the increase in the number of GIs registered each year with the Intellectual Property Office of Malaysia (IP Office). First, with the public awareness campaigns conducted by the IP Office, the relevant industries and stakeholders, there is now a significant conscious awareness among the public in Malaysia of the functions of GIs and their utility in the course of trade, as well as the legal benefits of seeking GI registration. Second, with a clearer understanding that GIs enable producers to differentiate their offerings from those of other producers because of the unique quality and characteristics that are attributed to production in a particular location of the country, producers are better equipped to use their GIs as a basis for branding and promotion of their products. Accordingly, GI producers are able to gain competitive advantages in the marketplace, thanks to the value added by identifying their products with GIs. Third, with the perceived or actual quality differences imbued in the public mind between GI-denominated products and generic products, GI producers are able to command premium pricing for their products.

The importance of GIs as assets of great value in trade may be demonstrated through the following two illustrations: The first illustration concerns disputes that arose between Malaysia and Indonesia a few years ago over allegations that Malaysia had asserted ownership of some GIs and cultural icons that Indonesia claimed it owned.Footnote ¹⁷ For instance, Indonesia had claimed ownership over the textile art of batik, which involved the practice of dyeing cloth through wax-resistant methods. At the same time, the batik industry is also an important part of Malaysian cultural heritage, which has garnered widespread popularity. In Malaysia, the batik industry is a bustling commercial activity and an important source of commercial income for those involved in the industry.Footnote ¹⁸ Another example is the registration of Bario rice under the GIA 2000 by an agency of the Sarawak state government. Indonesia claimed that the rice was originally known as Beras Adan and had originated from the local rice area of Malinau in East Kalimantan.Footnote ¹⁹ During the same period of time, tension had also arisen over Indonesia’s claim that Malaysia had asserted ownership of some of their cultural icons, such as the sacred Balinese temple dance known as the pendet dance, the shadow puppet theatre known as the wayang kulit, the folksong Rasa Sayang, the ceremonial dagger known as the kris and the meat dish known as rendang.Footnote ²⁰ While these cultural icons are not registered as GIs, the disputes show that the controversies over the geographical origin of a product, which also embodies an important part of national or local cultural heritage, can potentially create barriers to trade and raise issues regarding the importance of elements of national culture, as disputes over these elements can result in creating tension in international relations.

The second illustration concerns the inclusion of issues related to GI protection in free trade agreements, namely those signed by Malaysia with other countries. In particular, in the Malaysia-Chile Free Trade Agreement, which was concluded in 2010, Malaysia was required to recognise the Chilean Pisco GI, but without prejudice to Malaysia’s right to also recognise the Pisco GI from Peru. Similarly, the ASEAN-Australia-New Zealand Free Trade Agreement requires signatory parties to recognise that GIs may be protected through a trademark system. In addition, parties are also to recognise that where a trademark predates a GI within the jurisdiction, parties are required to continue to protect that trademark over the GI.Footnote ²¹ Currently, Malaysia is engaged in negotiations with the European Union (EU) on the Malaysia-European Union Free Trade Agreement (MEUFTA), whose negotiations started in 2010. One of the issues at the negotiating table amongst other intellectual property rights is precisely the legal protection of GIs.Footnote ²² Although the final content of the agreement has yet to take some form, it is likely that insofar as GI issues are concerned, Malaysia’s obligations on the protection of GIs will closely resemble that found in the European Union-Singapore Free Trade Agreement (EUSFTA).Footnote ²³ To a large extent, the EUSFTA shares many similar obligations with the South Korea-European Union Free Trade Agreement.Footnote ²⁴ Assuming that the MEUFTA’s provisions on GIs will parallel that of the Singapore and South Korea counterparts, it would appear that the enhanced level of protection currently granted to wines and spirits under the GIA 2000 will be extended to a broader category of goods in Malaysia, such as agricultural products and foodstuffs. In addition, it is likely that the MEUFTA will include specific provisions in the event of conflicts between trademarks and GIs, namely it may require that a GI is not to be protected if such protection would result in conflict arising with an existing well-known trademark, and consumers would be misled as to the true identity of the product. Apart from that, rightholders may be obliged to maintain minimal commercial activity of their GIs for continued protection and also to put in place control provisions for production of the goods.

3 Current Legal Protection of Geographical Indications in Malaysia

Since the TRIPS Agreement does not mandate any specific system for the protection of GIs, Malaysia had opted to adopt a sui generis regime for the protection of GIs rather than make changes to its existing intellectual property laws. Although the notion of GIs as a distinct type of intellectual property right with its own content and characteristics was statutorily embodied in Malaysia only fifteen years ago with the adoption of the GIA 2000, prior to that date a patchwork of different laws existed that could be invoked to protect GIs. The more significant laws in this respect are the law of passing off, the TMA 1976,Footnote ²⁵ the CPA 1999Footnote ²⁶ and the law on trade descriptions.Footnote ²⁷ Nevertheless, the only reported court decision prior to the enactment of the GIA 2000 where a GI was contested was The Scotch Whisky Association & Anor v. Ewein Winery (M) Sdn Bhd,Footnote ²⁸ and it was argued solely on the basis of the law of passing off without reference to any of the other areas of law. The case demonstrates that GIs, though not a defined category of intellectual property right at that time, were already perceived by industries as meriting some form of legal protection.

4 Is the Scope Protection for Geographical Indications in Malaysia Adequate?

As discussed above, the principal area of law that protects GIs is the GIA 2000, which provides for a registration system but does not make registration mandatory for protection in Malaysia. Nevertheless, GI registration is beneficial because only producers carrying on activities in the geographical area specified in the Register are entitled to exclusively use the GI in the course of trade. By the same token, producers of the same type of product from another geographical region are not permitted to use the same GI. Moreover, registration raises a presumption that the indication is a GI, thereby giving producers more confidence when using their distinguishing indicia as a marketing tool. Likewise, consumers can confidently place their trust in a product bearing a GI mark since they are assured of the geographical origin of the product. Further, registration is prima facie evidence that the registered GI is indeed a GI, which also means that in legal proceedings the burden lies with the party challenging the legitimacy of the GI to prove his case.

Overall, the framework of the GIA 2000 provides a satisfactory scope of protection for GIs in Malaysia, particularly with respect to the provisions regarding the types of GIs that may be registered, the persons who qualify to apply for registration, the rights acquired by the registered holder upon registration, the procedure for registration, the institution of legal proceedings for the unlawful use of a GI, the defences in an action for the infringement of a registered GI and the rectification of the Register. In fact, the framework closely mirrors the general layout of the other, more established intellectual property statutes, such as the TMA 1976,Footnote ¹³⁹ the Patents Act 1983Footnote ¹⁴⁰ and the Industrial Designs Act 1996.Footnote ¹⁴¹

Be that as it may, it is suggested that there is scope for further improvements to the GIA 2000 in order to have in place a more robust regime for the protection of GIs in Malaysia.

First, as consumers have come to expect that GIs connote a certain level of product quality, it is proposed that provisions be inserted in the Act to preserve the producer-quality-geographical region link by requiring rightholders to maintain a minimum level of quality in their products. Second, rightholders should be required to ensure that at least a minimal level of commercial activity is carried out in relation to the registered GI. Third, pursuant to section 13 of the GIA 2000, in an application for registration, the Registrar is currently only required to conduct an examination of the formal requirements of the Act. The formal requirements are spelt out in section 12(1), and these include stating the particulars of the applicant,Footnote ¹⁴² the GI and geographical area for which registration is sought,Footnote ¹⁴³ the goods for which the GI applies,Footnote ¹⁴⁴ the quality or other characteristic of the goods for which the GI is usedFootnote ¹⁴⁵ and any other particulars which may be prescribed by the Minister under section 32 of the Act.Footnote ¹⁴⁶ If these requirements are complied with and the GI is not contrary to public order or morality, the Registrar shall advertise the application. In addition to this formal examination, it is recommended that the Registrar additionally conduct a substantive examination of the application, particularly to ensure that the indication applied for meets the definition of a GI and genuinely embodies the characteristics claimed for a product originating from the geographical region. This may require the assistance of expert assessors, which may be costly. However, a substantive examination is increasingly important to guarantee the actual quality and quality control of the GI-denominated products. Also, through a substantive examination, the examiner should check for possible conflict with existing trademarks, whether registered or not.

Fourth, under the TMA 1976, there are provisions for border enforcement measures to combat trademark-counterfeiting activities at the borders of the country through the seizure of counterfeit goods.Footnote ¹⁴⁷ A parallel system could be put in place for GI protection for the same purpose. The final suggestion relates to an ambiguity that arises from a reading of section 3 of the GIA 2000. As mentioned earlier, section 3 states that protection under the GIA 2000 shall be given to a GI regardless of whether or not it is registered under the Act.Footnote ¹⁴⁸ Yet, section 21(1), which spells out the exclusive right of a rightholder, states that ‘[i]n the case of registered geographical indications, only producers carrying on their activity in the geographical area specified in the Register shall have the right to use a registered geographical indication in the course of trade’.Footnote ¹⁴⁹ This section is amenable to two possible interpretations: On the one hand, by section 3 extending the protection granted under the Act to all unregistered GIs, it may be argued that the exclusive right under section 21(1) applies equally to unregistered GIs. On the other hand, the opening words of section 21(1) appear to qualify the applicability of the section only to registered GIs, which would mean that only registered GIs enjoy the exclusive right under the section. This apparent ambiguity should be addressed by Parliament, which should clarify that only registered GIs enjoy the exclusive rights provided under the Act.

5 Conclusion

It is not an exaggeration to explicitly state that a GI is a singular marketing tool that encapsulates important information about the triple association that exists between a product, its quality or other unique characteristic, and its geographical origin. As GI products often command premium prices, they play an important role in the development of rural areas, which are usually the regions that produce such products and, by extension, are able to contribute to the social and economic development of a country. The valuable information embodied in a GI renders it a valuable commercial asset, which merits legal protection against the unauthorised use by third parties. The discussion above has examined the scope of protection of GIs in Malaysia, emphasising the sui generis protection under the GIA 2000 and outlining the protection under the common law of passing off as well as the statutory protection under the TMA 1976, the TDA 2011, and the CPA 1999. Based on the earlier discussion, it may be surmised that as a whole, the overall scope of protection for GIs in Malaysia creates a suitable environment for the protection of GIs. Nevertheless, as recommended above, there is room for improvement of the GIA 2000 in order to provide a more comprehensive scope of GI protection under the law in Malaysia.

1 Introduction

This chapter seeks to investigate the way in which the system of protection of geographical indications (GI) has developed in the legal, policy, and socio-economic context of an emerging country such as Vietnam. Vietnam has over fifteen years of experience in GI protection, and GIs are considered an important tool for socio-economic development in the country. Vietnam also recently completed the negotiations of two international free trade agreements, which include specific provisions on GIs: one with the European Union, the European Union-Vietnam Free Trade Agreement,Footnote ¹ and the other one with twelve countries of the Pacific (including the United States), the Trans-Pacific Partnership Agreement (TPP).Footnote ² Our analysis in this chapter aims at providing useful insights on the law and practice of GIs in Vietnam, which could also be relevant with respect to other countries in the region, as several countries in South East Asia are currently considering reforms to their existing laws or are implementing new provisions in the areas of GIs.

First established in 1995 through the system of appellations of origin brought by the French, the Vietnamese legal framework for the protection of GIs provides for a State-driven, top-down management of GIs that is supported by strong public policies. Indeed, beyond the strict legal scope, GIs have recently attracted an increasingly growing interest within the country as a promising tool for ‘socio-economic development … to eliminate hunger and reduce poverty’Footnote ³ and for the preservation of the ‘cultural values and traditional knowledge of the nation’.Footnote ⁴ Yet despite the political will to promote GIs, the impact of GIs for socio-economic development in Vietnam in practice is facing two challenges. First, the number of registered GIs is still very low compared to that of geographical names registered as trademarks (TMs). Second, the use of the registered GIs on products for sale in Vietnam is still very limited. As this chapter will uncover, the reasons for the limited registration and use of GIs in Vietnam are due to a range of institutional, socio-economic, and organizational factors.

The existing literature, referring to origin labelling as ‘branding from below’Footnote ⁵ or ‘development from within’,Footnote ⁶ has embraced GIs as an instrument of socio-economic development owing to the link with the origin. Indeed, while the primary functions of GIs relate to competition rules and market regulation,Footnote ⁷ a large body of scholarship has built upon the market utility of GIs to claim that they may also contribute to local development by advancing the economic and commercial interests of local farmers, producers, and other stakeholders along the supply chain. In line with the economics of product differentiation,Footnote ⁸ it is contended that GIs – by exhibiting the very characteristics of a specific terroirFootnote ⁹ – help producers get out of the ‘commodity trap of numerous similar and undifferentiated products trading primarily on price’.Footnote ¹⁰ Pursuant to this, a number of food sociologists have described the emergence of a ‘wider Renaissance of “alternative agro-food networks” and “quality discourse” ’Footnote ¹¹ in which GIs fit in reaction to the hyper-industrialization, mass production, and standardization of ‘placeless’ food, as well as the failure to impose safety criteria, as illustrated by the spread of mad cow disease.Footnote ¹²

In this context, it has been argued that the successful marketing of a product based on the link between its specific origin and its unique quality, characteristic, or reputationFootnote ¹³ may allow GI producers to increase their access to new or existing markets, gain a competitive advantage, and make a profit from the product differentiation.Footnote ¹⁴ The capturing of price premiums by producers is ‘often one of the first aims of supporting a strategy for an origin-linked product’.Footnote ¹⁵ It is further suggested that the economic benefits derived from the successful marketing of GIs may also foster trust, social cohesion, and solidarity since operators need to cooperate and exchange information.Footnote ¹⁶ This is particularly true in Europe, where there is a long history of producer-led GI collectives. There, the sui generis system of protected designations of origin and protected geographical indications requires the formation of a producers’ association and a code of practice at the application stage. This arguably fosters collective action and collaboration among local stakeholders.Footnote ¹⁷

In contrast, a number of authors have pointed out that in developing and emerging countries, GI initiatives are often driven by outside actors such as the State or development agencies. Hence, not enough GI-related activity, leading to the organization of producers and registration of GIs, is developed at the local level and within local producers.Footnote ¹⁸ Yet, as recalled by Biénabe and Marie-Vivien, what makes GIs peculiar and valuable instruments from a social development standpoint is the capacity of GIs to embody the link with the geographical origin where the product’s reputation is built, which accounts for public considerations by the State and national governments, while still retaining private considerations insomuch as GIs are used by private stakeholders to identify products destined to consumers.Footnote ¹⁹

However, while the literature holds promises of GIs as tools for socio-economic development, it has been noted that empirical data in this respect are lacking, especially from emerging and developing countries.Footnote ²⁰ In particular, it has been noted that some context-specific factors may facilitate or hinder the ability of GIs to effectively promote such development.Footnote ²¹ This conclusion seems to be reflected also in the existing empirical research conducted so far. This research has in fact yielded inconclusive results of the effect of GIs on economic development and demonstrated that the impacts of GIs essentially vary on a case-by-case basis.Footnote ²² Even with respect to successful GIs, particularly in Europe, economists such as Belletti and Marescotti have drawn attention to the risk that only the largest processing and distribution firms that sell in international markets or use modern and long marketing channels might capture the additional earnings that can be obtained due to GIs.Footnote ²³ Overall, it remains difficult to measure the extent to which the price premium that is commanded often by GI products is directly attributable to the legal protection granted to GIs only or whether other factors can also contribute to such premium, for example, the long-established reputation of certain products or the existence of subsidies and private investments in certain sectors of the economy.Footnote ²⁴ Ultimately, what has emerged as a consensus among researchers is that GI legal protection alone is a necessary but insufficient condition to bring the desired effects.Footnote ²⁵ In this regard, Hughes contends that ‘[t]he argument that substantially stronger GI protection will benefit developing countries simply mistakes the piling up of laws for the piling up of capital investment’.Footnote ²⁶

Yet there is a need for research as to what an enabling legal and institutional GI framework is, or should be, in the context of an emerging country. In addition, it seems that a combination of other enabling factors is required for a GI framework to positively impact socio-economic development.Footnote ²⁷ For example, commentators have pointed to the need for substantial investments in advertising and marketing to develop a product’s image and reputationFootnote ²⁸ as well as to establish quality control, monitoring, and enforcement mechanisms aimed at building consumer trust in the product’s quality.Footnote ²⁹ However, while Albisu cautions that ‘marketing of many OLPs [Origin Labelled Products] is often one of the weakest links in the chain’,Footnote ³⁰ Zografos notes that the costs involved might be considerable for small farmers in developing countries, especially given the low reputation of many GI products.Footnote ³¹ Notably, the collective action dynamics involved in the GI initiatives, which tie local actors ‘in a lattice of interdependence’,Footnote ³² have also emerged as critical factors for directing their effects.Footnote ³³ According to Barjolle and Sylvander, the effectiveness of the collective action depends on the ability of each local actor to ‘appropriate the collective process’Footnote ³⁴ – an act that may be undermined by dominant market positions, local power relations, and supply chain inequalities.Footnote ³⁵ In this regard, Larson stresses the need for an enabling institutional environment and collective organization with strong institutional mechanisms and governance systems.Footnote ³⁶

This chapter offers additional insights on GIs and socio-economic development from the perspective of an emerging country, namely Vietnam. In particular, our study seeks to identify some of the factors that are limiting the use of both the GI registration system and the registered GI labels on the products themselves. In this respect, our chapter seeks to provide useful empirical data that could assist in better understanding the use of GIs in practice in an emerging country in Asia. The chapter proceeds as follows. After a description of the methodology in Section 2, we provide a thorough analysis of the legal and policy framework for the protection of GIs in Vietnam in Section 3. Subsequently, we present two GI case studies – the fried calamari from Hạ Long and the star anise from Lạng Sơn – with a particular focus on the commercial and marketing strategies of these GI initiatives in Section 4, which will lead to our discussion in Section 5.

To conclude, we highlight the following three points: first, despite the increasing number of registered GIs in Vietnam, which is explained by a strong top-down involvement by the State in the identification and registration of GIs, the success of the registration process remains mixed due to the extremely strict criteria for demonstrating the link with the origin. Second, the commercial and marketing aspects have an impact on whether the use of GI labels is promoted or hindered. These factors determine the success of GIs from a socio-economic development perspective; it depends especially on whether it is a domestic or an export-marketing channel, and a processed or raw product. Third, the commercial and marketing channels also influence the negotiation skills of local farmers and producers, which in turn affect the way the GI labels are used in trade, as well as the extent to which they may contribute to building the product’s reputation and fostering local economic development.

2 Methodology

Our methodology in this chapter is primarily qualitative. We used a variety of methods to generate data. First, in order to provide a thorough understanding of the Vietnamese legal and policy framework for GIs, secondary data were generated through the analysis of legal and policy documents, including the Vietnamese Intellectual Property LawFootnote ³⁷ (Vietnam IP Law), its circulars and decrees, and other sources of law such as GI codes of practice. Second, we conducted a number of interviews with officials of the National Office of Intellectual Property (NOIP) and experts on intellectual property law to strengthen our analysis of legal documents. Third, we adopted a comparative case study approach to assess the impact of the commercial and marketing channels, and compared two GI initiatives with contrasting commercial and marketing strategies. This approach led us to study the fried calamari from Hạ Long, which has a very strong local market, and the star anise from Lạng Sơn, which is an export-oriented product. The contrast between these two GI initiatives allows us to analyse whether, and why, different marketing strategies may affect the success of GIs from a socio-economic development perspective.

For the purposes of the two case studies, we collected primary data through a combination of semi-structured interviews with public authorities and stakeholders in the supply chain, including farmers and processors; distributors and traders; and leaders of farmers’ associations and cooperatives. The interviews were conducted in Vietnam between March and May 2014. Overall, we conducted 6–8 semi-structured interviews for each GI product under investigation. Furthermore, official documents relating to the establishment and organization of the GI initiatives, including charters, bylaws, and board regulations, and internal documents, such as meeting reports, project reports, and annual statements collected from the interviewees, have provided valuable information on the operation and management of the GI initiatives under study. Finally, data were also sourced from development projects funded by international agencies in which we had previously been involved.

3 Limited Number of Registrations Despite a Complete Legal and Policy Framework for Geographical Indications in Vietnam

4 Case Studies on the Use of Geographical Indications and Their Contribution to Socio-economic Development in Vietnam

Bearing in mind the stated development policy goals attached to GIs,Footnote ⁷⁷ this section reviews two cases studies. First, it presents the case study of the GI-denominated fried calamari from Hạ Long, a product that is characterized by a strong local market and local consumption in Vietnam. Second, it presents the case study of the GI-denominated star anise from Lạng Sơn, a product that is instead primarily export-oriented. By presenting these two case studies, we seek to show the extent to which the actual use of GI labels on local products in Vietnam may be impacted by the commercial and marketing strategies of local actors and how such strategies may generate different socio-economic development outcomes.

5 Discussion

So far, our study has examined the use of the GI registration scheme and two particular GI labels in the context of an emerging country, Vietnam, which actively promotes GIs as a socio-economic development tool. The analysis in this section hopes to provide valuable insights into an important issue, namely identifying the legal and other contextual factors that may hinder the positive impact of a GI system in an emerging country. In particular, from the case studies above, our research suggests several impediments at three separate but interdependent levels: (a) the legal and institutional framework, (b) the commercial and marketing channels, and (c) the collective action of producers within the GI initiatives.

6 Conclusion

In conclusion, in light of the above, the highest priority in Vietnam should be to empower local farmers and producers to use the GI system and the GI labels beyond the current status quo. Undoubtedly, this is a challenge in the context of a State-driven economy in which GI policies are developed through top-down governance. Still, the law in Vietnam permits that the right to register and manage GIs can be delegated to collectives of producers. Such a management model could be applied more often in order for producers and producer associations to play a more prominent role in the GI landscape than they do today. Naturally, Vietnam continues to go through a learning process regarding the use of the GIs, after a first successful step of registration of GIs, as many other countries of the region. Still, GI protection can have a beneficial impact on economic development in many areas of the economy in Vietnam, and thus producers should learn to use the GI system to a fuller extent to capture more of its promises.

1 Introduction

A walk through the narrow winding lanes of Bari Bazaar in India’s holy city of Varanasi (popularly known as Benaras or Kashi) is captivating for several reasons. Located in one of the oldest continually inhabited cities in the world, Bari Bazaar is a popular hub for producers and sellers of Banarasi silk sarees and brocades. The region represents an epitome of syncretism in India’s diverse cultural setting. As the river Ganges silently flows through the city, Varanasi today has emerged as a confluence of products protected by geographical indications (GIs) with five GI registrations assigned to this region alone.Footnote ¹

But there is also a crisis of survival. Today, one of the most important challenges facing Banarasi saree producers is that cheaper synthetic imitations are produced in the textile city of Surat, which is located in the Western Indian state of Gujarat. It has also been reported that traders frequently import Chinese silk cloth and sell them in the Indian markets as Banarasi sarees.Footnote ² This illegal trade negatively impacts Banarasi producers, since Surat-made synthetic sarees and Chinese-made sarees are regularly passed off as Banarasi products in different markets across India.Footnote ³ Not only are the motifs and patterns of Banarasi sarees ripped-off, and their best weavers poached by producers in Surat; much more problematically, these ‘Surat-made Banarasi-style sarees’ are produced at a fraction of the cost (due to the use of synthetic materials and polyester) in comparison to an ‘authentic’ silk Banarasi saree.Footnote ⁴ It is quite intriguing that Banarasi saree producers have, so far, not contemplated legal action against producers, or traders, of Surat-made or Chinese-made Banarasi-style sarees for infringing on their registered GI. Instead, several Banarasi weavers are also seeking access to cheaper raw materials for their sarees on the basis of and assumption that, by reducing their production costs, they could better fend off the competition by producing cheaper replicas of their sarees. Moreover, these producers seek to reduce costs to compete against the other legitimate producers of GI-denominated Banarasi sarees.

However, this situation begs several questions: Why are (several) Banarasi saree producers choosing to compete in a race to the bottom rather than turning to the legal enforcement of their GI and encashing the premium value of their products protected by the GI? Moreover, what implications will this strategy of lowering the quality of the authentic Banarasi sarees have on those producers who may continue to use silk fibres and not choose to compete by diluting the brand? In other words, what are the obligations of GI producers in India and does the Indian GIs system protect GI producers against those members of the GI producers’ community who decide to turn to a lesser quality relying on the historical reputation of the GI products, that is, those who become ‘free-riders from within?’

Overall, the existence of a GI registration on a product is meant to enable producers within a collective group to capture a premium for their products by (also) preventing members of the group from arbitrarily changing the product quality. In this respect, a GI registration also aims at preventing members of the collective group from deciding to lower the quality of the products to compete with other GI producers, or producers of similar products outside the GI-denominated market, especially when consumers are agnostic or unaware about those distinctions. Hence, the case of Banarasi sarees reveals that (at least a considerable number of) GI holders are often not concerned about the loss of combined reputation of their GIs resulting from compromise on the distinctive quality. Unfortunately, such instances are not unique to Banarasi sarees in India.Footnote ⁵ This sense of lack of agency among GI holders highlights the collective action problem that goes deep into the ambiguity surrounding what makes a particular GI unique and the lack of adequate quality control on the ground amongst many GI producers in India. Interestingly, some may argue that changing the composition of raw materials by a few entrepreneurial members of a GI club could be seen as innovation. Yet, when that innovation includes turning to cheaper materials and to synthetic fabrics for sarees historically woven with silk, it should more likely be regarded as a compromise of GI-product quality and a (self)dilution of the GI’s distinctiveness.Footnote ⁶

Essentially, this debate comes down to the quality and characteristics that GI-denominated products are supposed to possess and that GIs are supposed to purport to consumers. Presently, however, almost all of the GI awareness campaigns in India seem to be focused only on the registration component of GIs.Footnote ⁷ Even though the branding and promotion of GI products has started receiving some attention both on the domestic and international fronts,Footnote ⁸ the Indian government and the surrounding legal and policy discourse on Indian GIs have, at least until now, completely ignored the introduction of quality-control and maintenance measures for goods produced under the GI tag. In many ways, it could be said that the Indian GIs regime promotes a system of ‘Vanity GIs’ where the registration of GIs is seen as an end in itself and a measure for brand promotion, with little attention being paid to the deep linkages between the registration of GIs and the quality control that should follow the registration. Instead, quality control – and in turn the function of GIs as guarantors of and symbols assuring product quality – is central to the success of the Indian GIs regime, and this chapter seeks to fortify this claim by identifying how the consumer perception of quality has a sharp influence on the economics of GIs.

Accordingly, this chapter focuses on the post-registration quality-control regulatory measures for GIs in India. First, this chapter identifies the problem involving the interface between GIs as collective intellectual property (IP) rights and their linkages with quality and product/process standards. Second, it briefly discusses the experiences of two comparative jurisdictions – the United States (US) and the European Union (EU) – regarding the linkages between the GIs framework and the corresponding regulatory framework for quality control. Third, the chapter explores the missing regulatory framework in India and discusses the limitations of Indian GI law in this regard. A few short case studies are presented to highlight the various combinations of statutory and self-voluntary mechanisms associated with different GI products in India. The objective is to show how different mechanisms for quality control have led to either preservation or dilution of the collective reputation of GI. This chapter concludes by elaborating on the reasons for failure of the Indian GIs regime on issues of quality control and suggests that decentralized mechanisms for different GIs, which are nevertheless governed by a uniform statutory framework, are the way forward to restore the credibility of many GIs and promote a successful system of GI protection in India.

2 The Relevance of Quality for Geographical Indications

GIs do not serve merely as indications of their origin. In their simplest form, GIs also signify a connection between ‘a product’s reputation, quality or characteristic and its geographical origin’.Footnote ⁹ In the marketplace, consumers often find it difficult to assess product quality without searches or experience and normally possess limited information about the valuable attributes of the product.Footnote ¹⁰ The producers, however, possess full information about the product’s attributes and quality relative to other goods in the market.Footnote ¹¹ This results in the ‘natural chaos’ of asymmetrical information. Such information asymmetry can negatively impact the market, or the purchasing choice of consumers, when it is exploited by certain producers who may be inclined to lower the quality of the goods supplied precisely because consumers lack complete information, as is often the case.Footnote ¹² In such a scenario, GIs can help restore the symmetry in information by offering consumers additional information on the products’ quality and reputation so that they are not adversely placed against producers. In his model on reputation, Shapiro suggested that reputation operates as a signalling device, which transmits information about a certain quality to the consumers, thereby reducing the consumer’s search costs.Footnote ¹³ The operation of GIs is quite similar and therefore GIs could have a direct impact on consumer welfare by leading consumers towards goods of a higher quality.Footnote ¹⁴

One of the prime motives behind obtaining a GI registration is in fact to create a distinct reputation for the product bearing the GI label so that consumers will eventually move from the point of brand awareness, in this case GI-awareness, about the product to brand preference, in this case GI preference, where they are willing to pay a higher price (‘premium’) for the GI-denominated product and, at the same time, refuse to accept other alternatives.Footnote ¹⁵ In this regard, surveys conducted by the United Nations Conference on Trade and Development (UNCTAD) among EU consumers provide good insights. These surveys show that for GI-registered agricultural products consumers are willing to pay a premium of up to 10 to 15 per cent, whereas for non-agricultural products the premium could range anywhere between 5 and 10 per cent.Footnote ¹⁶ In particular, most consumers expect GI products to be of a higher quality than non-GI products.Footnote ¹⁷ The findings of certain empirical studies show that in case of foodstuffs. Even though labelling of GIs does not operate as the most important quality attribute,Footnote ¹⁸ GIs are frequently associated with higher quality control and consumers highly value food safety inspection. Thus, GIs remain an important indicator of quality in the marketplace.Footnote ¹⁹ Consumer perception regarding GI labels thus has important economic implications as it directly influences consumer preferences for the product.Footnote ²⁰ For example, Louriero and McCluskey have concluded that Spanish consumers are more inclined to pay a premium for fresh meat products labelled with a protected geographical indication (PGI) label – Galician Veal, which is regulated by the European Union – because the consumer perception associates the certification directly with food safety in addition to quality.Footnote ²¹

But it would be incorrect to claim that the association of reputation with quality is unique to GIs. Trademarks also operate as useful information tools for consumers by allowing them to equate the quality of a good with a distinct brand and business, thereby reducing consumer confusion and their search costs.Footnote ²² Consequently, trademark protection offers a natural incentive for every business to produce and maintain a ‘consistent quality over time and across consumers’.Footnote ²³ This encourages the firm to invest in quality (as expected by the customers) and brand value, lest it lose customer loyalty and of course sales.Footnote ²⁴

Despite these similar tendencies, unfortunately, the incentive to maintain quality does not arise in the case of GIs in the same way it does in the case of trademarks. GIs are collective public or ‘club’ goods and, as such, are more prone to the classic ‘free-rider’ problem compared to other distinctive signs like trademarks.Footnote ²⁵ In particular, the link between the GI as a collective mark and its owners (i.e. association of producers) is not as direct as in the case of trademark owners protecting their marks. Moreover, not only do GIs identify the quality and the characteristics of the GI-denominated products, but they also embody the collective reputation that consumers place on the association or group of producers in a certain region (who participate in the production of the GI product) and which is carried forward through tradition over time.Footnote ²⁶ Therefore, while conducting a realistic assessment of GIs one must take into account and tackle the possibility of free-riding from within, i.e. by insiders.Footnote ²⁷ These insiders are individual producers that operate within the collective group of GI producers, are legally entitled to produce GI-denominated products (as a registered proprietor or authorized user), but have succumbed to producing goods of inferior quality in a bid for higher profit margins. In order to prevent this unwelcome phenomenon, the regulation structure that is at the basis of GI protection needs to provide for specific procedures, which must account not only for the verification of the geographical origin and manufacturing source of the products but also for specific quality certification to ensure that the GI-denominated products ascribe to the registered GI specifications.

3 How Can Geographical Indications Be Regulated? The European and American Experience

Presently, there are two dominant models of formal regulatory mechanisms for quality control and maintenance for GI-denominated products operating in different socio-economic and political contexts across the world: (a) the European-style sui generis quality scheme; and (b) the American-style quality scheme based on certification marks, which is not specifically a sui generis system for GIs but nonetheless includes relevant provisions with respect to quality control.

4 Case Studies Reflecting Different Experiences with Geographical Indications in India

In India, GI protection is available through a sui generis system operationalized through the Geographical Indications of Goods (Registration & Protection) Act of 1999 (‘GI Act’).Footnote ⁵⁴ The GI Act was followed by the Geographical Indications of Goods (Registration and Protection) Rules of 2002 (‘GI Rules’).Footnote ⁵⁵ The Intellectual Property Office in Chennai is in charge of the GI Registry for India. As of today, the Registry has been able to successfully register around 237 Indian GIs involving agricultural products, handicrafts and manufactured products.Footnote ⁵⁶

Under the GI Act, the definition of ‘geographical indication’ adopted states that a GI is

But under the Act, names that do not denote the name of a country or region or locality can still be considered for registration as long as they relate to a specific geographical area and are used in relation to goods originating from that region.Footnote ⁵⁸ This provides the leeway for extending protection to other famous symbols such as ‘Alphonso mangoes’Footnote ⁵⁹ and ‘Basmati Rice’.Footnote ⁶⁰ It is emphasized that this is not unique to India and the same practice is used in several other countries, including the European Union – Feta is not a region of Greece, for example.

Several scholars have suggested that the collective-action problems that can derive from the misuse of GIs with regard to quality maintenance can be alleviated to a certain extent by the adoption of ‘some regulatory process that polices quality and technique among producers within the GI’.Footnote ⁶¹ However, despite the stakes involved for consumers in this respect, not much attention has been paid to post-registration quality-control measures exclusively for Indian GIs under the current system of GI protection under Indian law. A recent empirical study by an Indian scholar notes the absence of an inspection mechanism on the ground in the GI-denominated regions and calls for ‘a stringent quality control mechanism in place to assure the consumer of the authenticity and quality for which she pays a premium price’.Footnote ⁶² The study notes that among the selected sample of GI producers, only 40 per cent indicated that quality checks were carried out for their GI products before these products were distributed to consumer and after.Footnote ⁶³

Still, despite the lack of quality control for GI-denominated products in practice, Indian law does provide for some measures guaranteeing quality control in language similar to that of European law. Notably, at the time of the application to register a GI under the GI Act, a combined reading of Section 11(2) of the Act and Form GI-1 suggests that the applicant group should identify an ‘Inspection Body’, which is responsible for quality control of the products within the GI.Footnote ⁶⁴ In fact, Rule 32(1)(g) of the Geographical Indications of Goods (Registration and Protection) Rules, 2002 specifically requires ‘particulars of the inspection structure, if any, to regulate the use of the geographical indication in respect of the goods for which application is made in the definite territory region or locality mentioned in the application’.Footnote ⁶⁵ Still, it is important to note that the non-existence of an inspection structure will ultimately not be considered as a sufficient ground for demonstrating the inadequacy of an application to register a GI for the final granting of the GI under Indian law.Footnote ⁶⁶

Moreover, in addition to referring to the Inspection Body suggested by the collective group, the law in India could be strengthened by also requiring that an independent neutral agency is also appointed to maintain the quality standards of the GI-denominated products post-registration of the GI.Footnote ⁶⁷ It should also be noted that the current legislative framework has no teeth as there is no statutory liability imposed on Inspection Bodies under the current GI Act in the event that they fail to conduct periodic verification of compliance with the product specifications of the associated GI.Footnote ⁶⁸ At present, if members of the collective group entitled to use the GI, or consumers, want to hold a member of the group accountable for not complying with the quality standards of the products, the only course of action available is under Section 27 of the GI Act, which provides the cancellation of registration of the non-complying member from the list of authorized GI producers.Footnote ⁶⁹ This mechanism is not sufficient, however, and the fact that additional preventive regulatory mechanisms may be needed to ensure the quality control of the GI-denominated products in India is accentuated by reports that popular GI-denominated products are losing their markets to adulterated products that are sold by ‘insiders’. Further, the availability of cheaper raw material imports is promoting the sale of inferior-quality products. These products are handed to the unaware consumers who still rely on the name of the GI-registered products and thus are lured into paying premium prices for products that no longer carry the same characteristics of the genuine GI-denominated products.

In the following sub-sections, this chapter reviews four case studies of Indian GI-denominated products for which it seems that ‘free-riding’ by insiders has become the norm. As we elaborate in the reminder of this chapter, this has negatively impacted the market for other producers within the respective collective groups.

5 Conclusion

GIs must be able to create value for their products in order to be valuable to registered producers. The GI regime in India borrows heavily from the regulatory framework of trademarks. Consequently, it is highly trader-centric, focusing primarily on protecting GIs against the misuse of the names by unauthorized users. The GI Act does not account, however, or accounts considerably less for the producer-centric need to maintain the quality and reputation of the GI-denominated products. Perhaps, due to the lack of awareness and lack of enough incentives, producers have not been able to assure themselves of a premium market. Legitimate interests of consumers cannot, and should not, be ignored; providing quality assurance and promoting consumer welfare have been found to be central to the success of any GI regime across the world, especially the European model.

This chapter presented four different case studies highlighting both the successes and pitfalls of post-registration quality control of GIs in India. The case study of Banarasi sarees highlights the need for collective action among the traditional producers who are choosing to compete with the synthetic fabric producers – those who sell sarees made from synthetic fabrics under the GI names – and by producers belonging to the collective group who are entitled to use the Banarasi GI. However, by choosing to compete with subpar products, producers will only dilute the premium value of the GI-denominated products. The case study of Pashmina highlights how voluntary regulatory mechanism with the support of the government has the potential to strengthen quality control and provide assurance to consumers about the origin and characteristics of the products. The use of technology to track the products and certify quality throughout the manufacturing chain may assist producers in monitoring the production of the GI-denominated products. The world-famous Darjeeling tea GI is an interesting case study, where due to the establishment of inspection structures governed by the Tea Board, the supply chains have been foolproof. But this is only on account of historical factors responsible for the establishment of the Tea Board and subsequent strict compliance with quality norms by authorized users. And yet, it is only since 2016 that Darjeeling tea producers can take legal action against blended tea sellers in the European Union. Finally, the Alphonso mango case study, after the EU ban, highlights the need to incorporate the SPS standards of importing destinations into inspection structures by authorities in India. Due to the weak link in the GI Act, where inspection structures are not linked with compliance by GI authorized users, it remains to be seen how market dynamics will play out in this sector.

The Indian experience thus highlighted how the different mechanisms of regulation currently associated with some of the most prominent Indian GIs showcase a fragmented framework of quality-control structures across the country. This could perhaps be an advantage as GIs across the country face different issues. Yet, even though a decentralized mechanism with different approaches to the implementation of a system of quality control could be the way forward, it is also crucial that the legislature consider either the inclusion of a chapter on the responsibilities of Inspection Bodies within the GI Act or enact a separate statute altogether for the same purpose. Certainly, Indian policymakers can no longer afford to ignore quality-control debate in the policy discourse surrounding GIs as quality control is a key element to preserve the premium value of GIs as it ensures compliance with quality. To the contrary, the Indian GIs system, with its several registered GIs, will be called out for its vanity!

1 Introduction

Intellectual property (IP) protection is nothing new to Taiwan. Prior to the 1980s, Taiwanese IP laws were criticized for their limited recognition and protection of intellectual property rights (IPRs), inadequate deterrence for infringements, and protectionist provisions. Foreign entities were denied the same treatment as nationals, and unrecognized foreign entities were often denied protection for their IPRs as well as the standing to seek redress for infringement.Footnote ¹ Under the threat of trade retaliation by the United States (US), Taiwan began a major IP law reform in the 1980s.Footnote ² The “crucial turning point” in the development of Taiwanese IP law occurred when Taiwan realized the political and economic importance of its accession to the World Trade Organization (WTO) and its accompanying obligation to protect IP.Footnote ³ This particular goal drove Taiwan to implement more IP reforms. By 1998, one commentator was able to proudly claim that “Taiwan’s statutory regime for intellectual property protection now by and large complies with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement).Footnote ⁴ In some areas, the regime reaches beyond the TRIPS Agreement’s threshold.”Footnote ⁵ Others also found no difference between Taiwan’s IP law and the standards under the TRIPS Agreement.Footnote ⁶

However, it is a completely different picture when it comes to geographical indications (GIs). GI protection officially originated in 2002 when Taiwan became the 144th member of the WTOFootnote ⁷ and it has been viewed as a new IP issue. One commentator even described GIs as a “purely transplanted norm for Taiwan.”Footnote ⁸ The Taiwan Intellectual Property Office (TIPO), the government agency in charge of policymaking and administration of IP,Footnote ⁹ claims that GIs are a brand-new legal norm introduced into Taiwan as a result of the implementation of TRIPS obligations:

However, unfamiliarity did not prevent Taiwanese policymakers from promptly developing a legal regime for the protection of GIs. In its 2004 Communication to the TRIPS Council,Footnote ¹¹ the Taiwanese government enumerated the three elements of the Taiwanese GI regime as the Trade Mark Act,Footnote ¹² the Fair Trade Act,Footnote ¹³ and the Tobacco and Alcohol Administration Act.Footnote ¹⁴ While the Fair Trade Act and the Tobacco and Alcohol Administration Act provide administrative regulation prohibiting the false or misleading representation of GIs, the heart of the Taiwanese GI regime is the Trademark Act. Apart from “negative protection,” which prevents geographical terms from being registered as trademarks, the Trademark Act also provides for the “positive protection” of GIs, namely, the registration of geographical terms as certification marks.Footnote ¹⁵ Later in 2007, collective trademarks were added as a means of positive protection.Footnote ¹⁶

Taiwan has also been an active participant in international GI negotiations. The inclusion of GIs in the Uruguay Round Negotiations was initiated by the EU and resisted by the United States, Canada, Australia,Footnote ¹⁷ and some Latin American countries.Footnote ¹⁸ This disagreement was described as the “North-North division,”Footnote ¹⁹ “New World v. Old World,”Footnote ²⁰ or “immigrant v. emigrant countries.”Footnote ²¹ This struggle continues even after the conclusion of the TRIPS Agreement.

In 2002, Taiwan joined Argentina, Australia, Canada, Chile, the Dominican Republic, El Salvador, Guatemala, New Zealand, Paraguay, the Philippines, and the United States in opposing the extension of the higher level of GI protection for wines and spirits to all goods.Footnote ²² According to TIPO, the reason for this was that “after thoughtful review, we have concluded that extension will not provide meaningful benefits but will instead create new difficulties.”Footnote ²³ Furthermore, on March 11, 2005, Taiwan joined the New World countries, including Argentina, Australia, Canada, Chile, Ecuador, Mexico, New Zealand, and the United States, in supporting the establishment of a nonbinding and voluntary multilateral register for wine GIs.Footnote ²⁴ This group of countries proposed that the TRIPS Council set up a voluntary system where GI holders could register their GIs in a database. The governments who choose to participate in the system would then have to consult the database when making decisions regarding GI protection in their own countries. Nonparticipating members would be “encouraged” but “not obliged” to consult the database.Footnote ²⁵

Judging from the façade, Taiwanese GI law seems to represent just another successful example of legal transplantation. However, as it will be revealed in this chapter, this tranquility is misleading, if not deceiving. The truth is that GI-protection issues have been a legal conundrum for Taiwanese policymakers and the history of Taiwanese GI law has been characterized by dereistic policy premises, perennial overhauls, doctrinal dilemmas, and atavistic evolution. This chapter aims to reveal and decipher Taiwan’s GI conundrum and provide strategies to turn this conundrum into a tool for policy development.

2 Dereistic Policy Premises

Dereism is a psychological term that refers to mental activities that do not accord with reality or logic.Footnote ²⁶ This term is used here, in the abstract, to describe the nature of the policy premises on which Taiwanese GI law has been based. This section identifies and explores three such policy premises, including the misidentification of policy context in which GIs are protected, misinterpretation of the GI–trademark relation, and opportunistic distortion of the meaning of protection.

3 Positive Protection: Perennial Overhauls, Doctrinal Dilemmas, and Atavistic Evolution

Positive protection, which is the registration of GIs as certification marks and collective trademarks, has been characterized by perennial overhauls, doctrinal dilemma, and atavistic evolution. Although the Trademark Act 2003 was the first official response to the GI-protecting obligations, it simply added the words “place of origin” to the categories of qualities certifiable by certification marks. Later in 2004, TIPO introduced a whole new administrative mechanism for “the registration of geographical indications as certification marks.”Footnote ⁶⁰ It incorporated the TRIPS Agreement’s definition of GIs and established procedures to ensure the existence of a required link between the product and the place of origin.Footnote ⁶¹ It also introduced a decision-making process through which the decision to grant GI protection was a joint decision by TIPO and the relevant government authorities in charge of the products identified by the GI, such as Ministry of Agriculture and Ministry of Treasury.Footnote ⁶² However, this mechanism was abolished in 2007 when TIPO introduced the registration of “geographical certification marks” and “geographical collective trademarks.” At the heart of this new mechanism was the requirement of distinctiveness of the geographical term – a link between the product and place was no longer required. The TIPO was now the sole authority for granting GI protection. Further change came in mid-2011 with the enactment of the Trademark Act 2012 (TMA 2012),Footnote ⁶³ which codified the terms “geographical certification mark” and “geographical collective mark.” In doing so, the TRIPS definition of GIs was formally incorporated into the definition of “geographical certification marks” and “geographical collective marks.” Surprisingly, the requirement of distinctiveness was abolished and a joint decision-making process was reintroduced – not to qualify the product but to qualify the applicant.

4 Making Geographical Indications Work for Development

Given what we have seen in the past, it is time to end the chaos and emancipate Taiwanese policymakers from their Sisyphean mission of designing an ideal positive protection mechanism for GIs under the existing trademark law. Surprisingly, the manumissioFootnote ¹²⁶ required is actually rather obvious and straightforward. While Taiwan’s GI conundrum is a result of perennial overhauls, doctrinal dilemmas, and atavistic evolution, the heart of the problem lies in its dereistic policy premises. Taiwanese policymakers’ immediate task should be to escape the GI–TM confusion. To accomplish this task, policymakers must stop seeing GIs through the lens of the trademark doctrine, and acquire a genuine understanding of the long-ignored EU sui generis paradigm. Once the GI–TM muddle is cleared, there will no longer be a need to employ the sophistry of “negative protection” to belie the incompatibility between GIs and trademarks. Only then can the Sisyphean effort of designing an ideal “positive protection” mechanism for GIs within the Trademark Act be stopped.

Another matter left to be considered is whether it is advisable for Taiwan to shift from the trademark approach to a GI regime modeled on the EU sui generis paradigm. In order to answer this question, policymakers must first ask themselves what they want GIs to do for Taiwan. An example would be the name “阿里山” (Ali Shan, meaning Ali Mountain), one of the most prestigious tea production regions in Taiwan as well as in the Chinese-speaking world. The Chia-Yi County Council registered “嘉義縣阿里山高山茶” (Chia Yi County Alishan High Mountains Tea) as a geographical certification mark on December 16, 2006.Footnote ¹²⁷ This certification mark is used to certify tea produced in six towns located around the Ali mountain area and that complies with government safety regulations in relation to the use of chemicals. Furthermore, the name “Ali Shan” is not disclaimed.Footnote ¹²⁸ But despite the registration, a search of TIPO’s database on April 10, 2011, displayed 104 entries containing the name “阿里山.” Among the 104, 12 were pending applications and 92 were registered. Among the 92 registered, 37 were for tea products, and of the 37, 24 were registered after December 16, 2006, after the “阿里山” mark was registered. A search not too long ago revealed that registration of the name “阿里山” still continues despite the vicissitudes of law. A search of TIPO’s trademark registry database on September 5, 2015, displayed 171 entries containing the name“阿里山.” Among these results, 15 were pending applications and 156 were registered. Of the 156 registered, 43 were registered for tea products and among the 15 pending applications, 4 were for tea products.Footnote ¹²⁹

For those who are skeptical of the value of GIs as a form of IP in its own right and who seek to subsume GIs under trademark law, the coexistence of multiple applications and registrations is in line with the economic rationale behind trademark law and its doctrinal principle. On the contrary, for those who view GI as a valuable policy tool for rural development because of its potential to provide “measurable economic benefits to a wide portion of its stakeholders while enhancing, or at least not compromising, the social and environmental conditions there,”Footnote ¹³⁰ this state constitutes a lamentable case of what Gangjee describes as the “hidden consequences” of protecting GIs as collective or certification marks:

Thus, the proposition of constructing a meaningful GI regime is the predetermination of an unambiguous policy goal. Therefore, it is necessary for the policymaker to recontextualize Taiwanese GI law. By doing so, GIs will no more be merely an exogenous IP obligation imposed by the TRIPS Agreement. Instead, GIs will become a policy issue that has a real connection to Taiwan. It is in this new policy context that the policymaker will be able to adopt, after in-depth cost–benefit analyses, as components of Taiwanese GI law, legal measures not because they are IP but because they are necessary to achieve the policy goal.

5 Conclusion

Taiwan has been facing a GI conundrum, which is symptomized by the perennial overhauls, doctrinal dilemmas, and atavistic evolution. Roots of the conundrum lay in its dereistic premises, that is, the misidentification of policy contexts, misinterpretation of the GI–trademark relation, and the opportunistic distortion of the meaning of protection. To terminate the chaotic state the policymaker must stop seeing GIs through the lens of the trademark doctrine and acquire a genuine understanding of the long-ignored EU sui generis paradigm. To turn GIs into a policy tool for development, the policymaker must determine a clear policy goal in the first place.

1 Introduction

China is a nation with a large population and vast territory with numerous products originating in specific parts of the country. The introduction of a geographical indication (GI) regime in China can assist in preserving the authenticity of these products, both in terms of their geographical origin and the characteristics.

The history of GI protection in China can be traced back to the mid-1980s when China joined the Paris Convention for the Protection of Industrial Property (Paris Convention).Footnote ¹ Under the obligations of the Paris Convention, China started to protect indications of source and appellations of origin by way of administrative decrees. In 1989, the State Administration for Industry and Commerce (SAIC)Footnote ² issued an administrative decree to protect the French GI ‘Champagne’ from being misused as a generic term for a type of sparkling wine in Chinese markets.Footnote ³ This was probably the first significant event in China regarding GI-related administrative protection. Since then, several legislative efforts have been made in this respect, and different government agencies have been involved in protecting GIs in China.

Still, China does not adopt a uniform approach in protecting GIs. In particular, both trademark protection and a sui generis regime are available for GI protection today. In addition, these types of protection are complemented by laws on unfair competition, consumer protection, and product quality. However, as this chapter elaborates, the parallel and sometimes conflicting different legal systems under which GIs can be protected in China today may also hamper the creation of a healthy and efficient system of GI protection.

Notably, this chapter offers an overview of how the GI legal system has evolved in China. It also compares the advantages and disadvantages of the different regimes currently available for GI protection, and concludes with specific suggestions for improvements to the existing arrangement.

2 Protecting Geographical Indications under the Chinese Trademark System

The philosophy of using trademarks to protect GIs is that GIs function quite similarly to trademarks. In particular, the primary purpose of a trademark regime is to protect the interests of consumers by way of the trademark’s source-identifying function and the quality guarantee function. Moreover, trademark protection extends to protect the business interest of trademark owners, namely the trademark goodwill and the investments that trademark owners have in the marks, and the products. Generally speaking, a trademark is an identifier of one single producer or service provider.

Similar to trademarks, GIs also designate source, even though a geographical source guarantees specific qualities of the products that derive from the natural and human factors within the given geographical area, and protect the investment made by generations of local producers on the reputation that is associated with the GIs. In this sense, GIs can be understood as a subset of trademarks.Footnote ⁴ More specifically, a GI usually serves to identify a group of producers who share something in common, that is, the producers’ products possess a certain quality, reputation, or other characteristics which are essentially attributable to their geographical origin.Footnote ⁵

Generally, GIs are protected as certification or collective marks in China, the two types of marks that best accommodate GI protection within the trademark system.Footnote ⁶ Notably, both certification marks and collective marks identify groups of users, instead of one single business entity, which best reflect the nature of GIs as collective rights and signs that guarantee specific (and certified) product quality and characteristics. Moreover, the ownership of certification marks or collective marks is for applicants which have a collective legal nature, usually in the form of an association of producers.Footnote ⁷ Again, this best corresponds to the collective nature of a GI registrant. Therefore, both certification marks and collective marks can be used to protect GIs under the trademark system in China.

3 Protection of Geographical Indications under the Sui Generis Regime

Meanwhile, there are two independent sui generis systems available in China for GI protection. These systems implement the ministerial rules on GIs by the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ)Footnote ³⁹ and the Ministry of Agriculture (MOA) respectively.

Under a sui generis system, the legal recognition and protection of GIs is based on a ‘unique’ approach, which is specifically dedicated to this type of intellectual property. With its close links to the specific geographical area, GIs belong to the region itself and not to individual producers located therein. Because GIs grant collective rights, GI protection also sees a deep involvement of the public authorities. In particular, under a sui generis system, the definition of the GI area, the eligible users of the GIs, and the ability to enforce regulations often are driven, at least in part, by the public authorities. Moreover, governments intervene in terms of control and supervision on the quality and specific characteristics of the products marketed under GIs.Footnote ⁴⁰ In this respect, sui generis protection puts more emphasis on the quality of GI products, which requires strict controls over their production processes.

4 Protecting Geographical Indications under Other Laws in China

In addition to be protected under the trademark system and a sui generis system, GIs can be protected in China (at least to a certain extent) under other laws. In particular, the Anti-Unfair Competition Law,Footnote ⁷⁷ Product Quality Law,Footnote ⁷⁸ and Law on Protection of Consumer Rights and InterestsFootnote ⁷⁹ were enacted to protect producers and consumers. They only stipulate general rules, but can serve the purposes of GI protection.Footnote ⁸⁰

5 Major Challenges for the Protection of Geographical Indications in China

In conclusion, there are three parallel ways in which one may seek protection for GIs in China’s legal system – within trademark law, under the PPGIP regimes administered by AQSIQ, and the MOA regime. Each of them is administered by different governmental agencies, with a distinct legal basis. There are also more general legal regimes which target misleading conduct in the marketplace and can thus protect GIs, namely, unfair competition regime (Anti-Unfair Competition Law), consumer protection regime (Law on Protection of Consumer Rights and Interests), and product quality regulation regime (Product Quality Law).

Still, GI protection in China faces many challenges. The most controversial issue is the concurrent operation of trademark and sui generis models, and this is made more complicated by the fact that there are two parallel sui generis models operated by AQSIQ and the Ministry of Agriculture. As previously noted, trademark protection falls within the jurisdiction of the SAIC, while protection of GI products in general and protection of agricultural products in particular come under the administration of AQSIQ and the Ministry of Agriculture respectively. Since there are three independent and parallel systems of GI protection in China, the same GIs may be simultaneously protected, potentially obtaining three independent kinds of protection.

Simultaneously, the possibility of registering place names qualified to be GIs as ordinary trademarks causes conflicts between individual trademarks and GIs-as-trademarks within the trademark regime. Therefore, there are two principal challenges: one is the conflict between ordinary trademarks containing geographical terms and geographical indications by means of certification or collective marks; and the other is the overlap and ensuing conflict arising from the co-existence of trademark and sui generis mechanisms.Footnote ⁸⁸

6 Comparison between the Trademark Regime and Sui Generis Protection

As mentioned before, the most prominent problem is the co-existence of the trademark and sui generis systems for GI protection. By weighing the advantages and disadvantages of the two systems respectively, and taking into consideration the conflicts precipitated by the co-existence of the two systems, it is suggested that in China it would be better to maintain only one system. This should preferably be the trademark mechanism because it accommodates the rationale of GI protection better than sui generis mechanisms, bearing legal and economic considerations in mind.

7 Legal Considerations

1 Introduction

In a country like Sri Lanka, the importance of obtaining protection for unique products can hardly be overstated. Sri Lanka is a small nation, both in size and in production capacity. Still, Sri Lanka is known globally for its tea, in particular, Ceylon Tea. Although China and Kenya produce more tea than Sri Lanka,Footnote ¹ Sri Lanka remains one of the largest global exporters of tea.Footnote ² This has been achieved partly due to the fact that the name of its famous tea, Ceylon Tea, is protected as a registered certification markFootnote ³ and under the regime for the protection of geographical indications (GIs),Footnote ⁴ as is the logo identifying the “Ceylon Tea.”Footnote ⁵ Sri Lanka is also famous for its “true cinnamon,” the Ceylon Cinnamon,Footnote ⁶ which is also widely exported, and which also enjoys protection as a certification mark and under the current GI regime.

But what if Sri Lanka could make better use of its existing protection for geographical names and protect additional products coming from specific geographical areas in the country? For example, Sri Lanka is famous for Ceylon Sapphires, Dumbara Mats, and Beeralu Lace – just to name a few products. Yet, the producers of these products have not been successful at marketing them internationally, or at least, to the extent of renown enjoyed by Ceylon Tea and Ceylon Cinnamon. The reason for this lies in both gaps in the legal protection for these products and the unawareness among many producers of the potential returns that might be yielded from the further sales that could be promoted by a higher degree of legal protection and marketing of the products.

In particular, there is one major hurdle in the protection of GIs in Sri Lanka to date, namely, there is no registration-based system for GIs under the Sri Lankan GI regime. Instead, producers have to turn to the trademark system to obtain a trademark registration through which they can protect their geographical names. Generally, this involves applying for a certification or collective trademark under Sri Lankan trademark law. The lack of a registration-based system under the Sri Lankan GI regime has attracted criticism and raised concerns about the functionality, enforcement procedures, and level of protection and has prompted a call for an update to ensure that Sri Lankan products enjoy fuller protection.

This chapter first examines the legal protection that is currently afforded to GIs and will proceed to analyze the deficiencies of the current system. It will then evaluate the international system of GI protection and assess Sri Lanka’s position within this system. Based on the findings gathered, this chapter will then offer some suggestions that could be undertaken in order to ensure that an effective regime for GI protection is put in place so that Sri Lankan producers may benefit meaningfully from GI protection. In particular, the primary suggestion offered in this chapter is that Sri Lanka could, and perhaps should, consider improving its current GI regime by implementing a national GI registry. In particular, creating a registration-based scheme for GI protection in Sri Lanka could offer additional certainty to GI producers, and in turn competitors and other interested parties who could be made aware of existing GI registrations. In turn, this greater certainty could lead to a greater willingness to invest in marketing and promoting the registered GIs. Still, this chapter concludes that, even with a GI registry, the actual success of any GI product in Sri Lanka would ultimately depend on wise management, product quality, and marketing.

2 Geographical Indications Defined

The earliest mention of protecting signs indicating “source,” including geographical source, can be found in the 1883 Paris Convention for the Protection of Industrial Property (Paris Convention), even though the Paris Convention does not protect geographical names per se.Footnote ⁷ The first international agreement that mentioned and protected GIs was the 1981 Madrid Agreement for the Repression of False and Deceptive Indications of Source (Madrid Agreement).Footnote ⁸ The next international agreement to focus specifically on the protection of “appellations of origin” was the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration (Lisbon Agreement), which was adopted in 1958, subsequently revised in Stockholm in 1967, and most recently revised in 2015.Footnote ⁹ Neither the Madrid Agreement nor the Lisbon Agreement had a large membership, however, which made their impact limited at the international level.

It was only in 1994 that GI protection became a more global, and globally contested, issue with the adoption of the Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS),Footnote ¹⁰ which was adopted as part of the creation of the World Trade Organization (WTO). In particular, TRIPS defines the term “geographical indications” as

TRIPS also provides for a minimum standard of protection for GIs that all WTO Members have to implement into their national laws,Footnote ¹² even though TRIPS leaves WTO Members to implement this protection as they prefer – generally through existing unfair competition rules, trademark laws, or via the adoption of ad hoc sui generis protection.Footnote ¹³

As has been observed by several scholars, GI protection is generally justified by the fact that GIs perform the function of identifying goods, and they are used to distinguish goods as having certain properties or a reputation attributable to a particular geographic area.Footnote ¹⁴ In this respect, GI protection aims at protecting the information function of GIs with respect to these properties and reputation. In particular, the distinguishing qualities of the product may be due to local geological factors (such as climate and soil) and/or to human factors present at the location (such as a traditional manufacturing method or any particular manufacturing technique).Footnote ¹⁵ The GI may also consist of a combination of both these factors, that is, the geological and the human factors that contribute to the uniqueness of the GI products. The inclusion of the human factor as part of the definition of GIs is useful when considering the viability of GI protection for certain types of products such as artisanal products in addition to purely agricultural products. Because GIs identify local products, GI protection is commonly justified based on the assertion that GIs can promote and protect local and rural developments in the GI-denominated areas.Footnote ¹⁶

3 Different Types of Protection and Their Implications

A survey conducted by the World Trade Organization (WTO) in 2003 established that WTO Members use any of the following three possible methods to protect GIs (intended as geographical names or names indicating products coming from a specific geographical region).Footnote ¹⁷ The first method is to protect GIs through laws focusing on business practices and consumer protection based on the template provided by the Paris Convention. The second is to achieve protection through the law which protects trademarks – a position supported by the United States (US) and several common-law countries. The third, and most significant, is to create a special sui generis system of protection for GIs.

It is important to note that TRIPS does not impose any system of protection for GIs for WTO Members. As mentioned in Section 2, TRIPS merely provides a minimum standard of protection that all WTO Members should implement with the legal means that they see most appropriate for their individual legal systems.Footnote ¹⁸

With respect to the first type of protection, the laws focusing on business practices are laws that have not been enacted with the specific purpose of protecting GIs but which nevertheless do so through the broader objective of regulating business practices or consumer protection. Some examples of such legislation are those which deal with unfair competition, consumer protection, trade descriptions, food standards, and the common-law action for passing off. These could be used to protect GIs when the misuse of a GI in a particular situation falls within the conduct regulated by such laws. For example, the false use of a GI that misleads consumers as to the origin or qualities of the goods would be actionable. Quite often these laws are a good alternative to a sui generis law because firstly these laws are available in most legal systems, and secondly they are usually familiar to business lawyers. On the downside, these laws are not specifically geared for GI protection, and hence may not be useful in more complex situations involving GIs.

Under the second type of protection, trademark protection, GIs are generally protected and registered under a special category of trademarks – collective marks and certification marks. In particular, collective marks identify a mark as belonging to a group of enterprises, such as a union of producers in a particular area. Certification marks identify the goods of an enterprise as having met certain standards or having certain qualities, such as a particular geographical origin. Prominent scholars have observed that, of these categories, certification marks are the most suitable to protect GIs because they can underpin the requisite product origin and quality and/or characteristics that are embodied in the GI product.Footnote ¹⁹

A collective mark is usually owned by the association of enterprises, while a certification or guarantee mark is owned either by an association of enterprises or by a separate entity. In order to avoid a conflict of interest, it is usually provided that the owner of a certification or guarantee mark may not itself use the mark or carry on a business in the kind of goods or services certified. Registration of this type of mark has to be accompanied by registration of the conditions governing the eligibility of interested parties to use the mark. If the interested party meets the requirements listed in the certification, then that party may then use the mark. The mark owner is also obliged to monitor compliance with the conditions of use by mark users.Footnote ²⁰ Compared to the first system (laws focusing on general business practices), trademark protection appears to be better suited to protect GIs as it contains more precise rules related to the geographical and quality standards of the products.

The third system of GI protection is that of a sui generis GI regime, that is, the adoption of a specialized regime for GI protection listing the specific requirements for and the rights granted as part of this protection. Frequently, a sui generis system for GI protection is also based on a national registration system under which GIs are registered in a national registry administered by the national authorities. In addition to the general rules set by TRIPS, individual countries may set administrative procedures for the national protection and registration of GIs.Footnote ²¹ In the EU, sui generis GI protection applies at the EU level, as GIs are protected and registered as a matter of EU law. Interestingly, countries that have traditionally opposed or been resistant to GI protection also protect some types of GIs with their own unique GI regime. This includes Australia and the US, which protects GIs for wines with sui generis protection, while other geographical names are currently protected under the trademarks regime, the unfair competition regime, or passing off.Footnote ²²

Where a sui generis system includes the registration of GIs, the necessary criteria to be satisfied for such registration generally include the definition of the geographical area; the link between the geographical area and the product (e.g., that all stages of production, or a particular stage, take place in the particular geographical area); the indication of the particular quality, reputation, or other characteristic of the product; and the inspection requirements to be put in place, including the control bodies in charge of certifying and controlling the quality of the products. In addition, the applicant should be able to demonstrate that it has a legal interest in the GI or is in a position to control the use of the GI.Footnote ²³ Overall, a sui generis GI regime certainly offers the most comprehensive protection for GIs, but also requires considerable investments – financially and administratively – from the applicants (the collective of GI producers).

As elaborated in the various chapters in this volume, the majority of WTO Members have adopted a combination of the three types of systems that have been described. Still, as noted by scholars, important differences continue to exist with respect to national eligibility requirements, and the scope of protection.Footnote ²⁴ These differences undoubtedly make the international protection of GIs cumbersome and increase costs when an enterprise seeks to develop and manage international marketing strategies for their GI products, which may have a bigger impact on developing countries as compared to developed countries.

4 Protection for Geographical Indications Currently Available in Sri Lanka

The Sri Lankan legal framework for protecting GIs includes the three types of protection identified above. Each of these types of protection will be discussed briefly below.

5 Products Currently Protected in Sri Lanka: Ceylon Tea and Ceylon Cinnamon

Even though Sri Lanka has been famous for its spices from time immemorial,Footnote ⁷¹ the protection of these products’ geographical names is a recent phenomenon. As highlighted above, the most relevant examples of protection in Sri Lanka today are for the names “Ceylon Tea” and “Ceylon Cinnamon.” These names are registered as certification marks and are also protected under the current GI system.Footnote ⁷² The specific details of the protection granted to each of these products will be discussed in the following sections.

6 Products that Could Benefit from Additional Protection for Geographical Indications in Sri Lanka

Boasting a long and proud history and a rich and diverse heritage, Sri Lanka is home to many products that could also benefit from stronger GI protection. A few of these products are outlined in the following paragraphs. To date, these products are not registered as certification or collective trademarks in Sri Lanka and, in the absence of a registration system for sui generis GI protection, cannot be registered as sui generis GIs. Thus, they can only be protected under the current language for GI protection in the IP Act of 2003 and with a possible action for passing off in the event of misuse of these names. Moreover, some of these products have also suffered from a lack of patronage, or have not been able to withstand the march of global development. Still other products have been noticed by the global markets and have been subsequently revived by producers that have managed to survive into the twenty-first century as small cottage industries.

7 Comparative Analysis: Should Sri Lanka Adopt an Indian-Style Protection for Geographical Indications?

As I mentioned in Section 4, the current standard of protection for GIs in Sri Lanka, particularly with respect to the sui generis GI regime, is unsatisfactory and could be improved. In this respect, it could be useful to look at the approach adopted in India. India is Sri Lanka’s closest neighbor and shares many similarities with Sri Lanka in terms of culture and traditions. However, India has been more proactive than Sri Lanka in protecting its cultural and traditional items.Footnote ¹¹² In particular, India enacted a sui generis system for GI protection in 1999, which includes a registration-based system – the Geographical Indications of Goods (Registration & Protection) Act (India GI Act) – after its accession to the World Trade Organization (WTO).Footnote ¹¹³ This law came into force with effect from September 15, 2003.

Notably, section 8 of the India GI Act provides that a GI can be registered for any of the goods listed in the GI registry.Footnote ¹¹⁴ The India GI Act extends GI protection to all types of goods and thus covers a spectrum of goods from handicrafts to agricultural products. The India GI Act further lists out the procedure to be followed. Interestingly, and unlike the case in Sri Lanka, section 25 of the India GI Act prohibits the registration of a GI as a trademark (other than a certification mark under the Indian Trade Mark Act, 1999).Footnote ¹¹⁵

The first GI registered in India was Darjeeling tea in 2004, and to date 236 GIs have been registered in India. Initially, GIs were registered primarily for handicrafts, but recent GI registrations have been made in favor of agricultural products, which include types of litchi, mandarins, and lemons.Footnote ¹¹⁶

At this time, it remains unclear if the system of GI protection in India and the GI registrations have, in fact, improved the financial viability of any of the industries for which GI protection was obtained. Still, it remains a fact that the large number of registrations have been granted, and that these registrations represent a vehicle that can help producers in advertising the GI products. Moreover, producers have to agree on common standards and product quality control as part of the application for GI registration. This process alone can assist in motivating producers in a particular area to invest in the quality of their products and in promoting their products in the national and international markets.

Thus, even though Sri Lanka may need some more time before it can implement a system of GI registration similar to India, it should be noted that the system in India does allow for GI registration and, in turn, GI producers can enjoy the full protection of a sui generis GI protection system. In contrast, the only avenue for producers in Sri Lanka to register their geographical names is through the trademark system.

8 Conclusion

As described above, the current status of GI protection in Sri Lanka is still a work in progress. To date, the strongest form of protection is found in the trademark system, as geographical names can be registered as certification and collective marks, as in the case of Ceylon Tea, Ceylon Cinnamon, and (likely) Ceylon Sapphires. In contrast, the sui generis Sri Lankan GI regime does not include a registration system; thus, it offers a less comprehensive level of protection. In particular, even though a system without registration still grants protection to the GIs, a registration-based scheme can provide additional certainty for producers (and competitors who can be made aware of GI registrations). In turn, this greater certainty may lead to a greater willingness to invest in marketing and promoting the registered GIs on the part of GI producers and other interested parties.

As indicated in this chapter, several products from Sri Lanka could benefit from a more comprehensive system of protection and the creation of a GI registry similar to the one operating in India and in several other countries today. As it has been the case with Ceylon Tea and Ceylon Cinnamon, the primary consideration in seeking protection for geographical names is to prevent the misuse of these names by third parties that are not authorized to use them and, in turn, ward off competition from cheap product imitations. Still, while Ceylon Tea and Ceylon Cinnamon are protected today through the trademark system, and also enjoy (the so far limited in Sri Lanka) GI protection, several other products do not enjoy any form of meaningful protection, as these products are not registered marks and so far enjoy only limited protection under the current sui generis GI regimes. Hence, the producers of these products also have concerns about cheap alternatives, as could become the case with respect to Beeralu lace.

Naturally, the creation of a GI registry would not become a panacea for protecting traditional products in Sri Lanka. In fact, the mere fact of having a system of GI registration may not help an industry that is already unprofitable or for which there is no consumer demand. However, if the industry at issue already has a good target market, and consumers are interested in the products, then GI registration has the potential to position the products more meaningfully within that market. In particular, granting exclusive rights through GI protection (and more meaningfully GI registration) would likely serve to incentivize producers to invest and capitalize in the GI name, which could potentially lead to greater returns. Moreover, many of the industries that rely on culture and traditions in Sri Lanka (such as Dumbara mats and Ruhunu Curd) could also benefit from some intervention and assistance, either by the State or by other public or private entities.

In this respect, it should be noted that the intervention of the State is an important component of the process of registering GIs under the current sui generis GI regime. Furthermore, the registration process requires identifying ad hoc entities in charge of controlling the quality of products. Again, this series of controls could benefit several traditional products in Sri Lanka. Finally, the State and these entities could further assist producers in marketing and managing the GI products in the national and international markets.

Finally, while repeating that a registration system could be beneficial from Sri Lanka, we must note that moving into a registration system and then maintaining it can be a relatively costly endeavor. Thus, in order for this to be a successful change in the current system, it would be important that a considerable number of products be registered as GI. It would also be important that, in addition to seeking GI registration, producers work toward maintaining the quality of GI products and managing the GIs wisely. For example, should a GI gain popularity, GI producers should be mindful and not try to increase production unsustainably. Product quality should not be sacrificed for quantity. Overall, it is important to remember that GI protection is a useful tool for local and rural development, but the proper managing of GIs remains the primary strategy for potential long-term success of these products in Sri Lanka, as it is with the rest of the world.