Law Firm of Dr. Khalid Alnowaiser

Issue No. 06 October/November/December 2001

LEGAL UPDATE

Contents

1. Saudi Arabia’s Intellectual Property Law

2. Negative List Revision Expected Early Next Year

3. Saudi WTO Update

4. Warning on Post-Dated Checks

5. Saudi Arabia’s New Vehicle Insurance Law

1. Saudi Arabia’s Intellectual Property Law

In an effort to compete in the global business community, Saudi Arabia has developed and refined its law on intellectual property, which essentially encompasses the areas of copyrights, trademarks, and patents.

Copyrights

The Kingdom’s current copyright law was enacted in 1989 and protects all original literary, dramatic, musical and artistic works. Generally, the creator of the work owns the copyright if it complies with the law and is registered in the Copyright Office of the Ministry of Information. Licensees and those who commission the work for valuable consideration are also entitled to claim ownership and register the copyright.

A copyright gives the owner the sole right to produce, deliver and license a work for the life of the author and for 50 years thereafter. If more than one author is involved, the period is extended from the death of the last surviving author. For audio works, photographs, and classified works which are published without citing the name of the author, the period of copyright protection is 25 years from the date of publication.

By Saudi Arabia joining the Universal Copyright Convention (UCC) in 1994, foreign-owned copyrights of other UCC signatory nations receive the same protection afforded to Saudi-owned works. Article 23 of the law specifically applies to the classified works of Saudi and foreign authors which are published, performed or displayed for the first time in the Kingdom and to the classified works of Saudi authors which are so published for the first time in a foreign country.

Other than facts and news which are considered to be within the public domain and not susceptible to copyright protection, anyone who infringes upon a copyright is subject to fines and confiscation of all copies of the classified work. Article 30 of the law establishes an Infringement Oversight Committee to review any copyright violations. A 60-day right of appeal to the Board of Grievances is provided for.

The most common defense in an infringement case is that of personal use. If the user can demonstrate that his copying, translating or quoting the classified work was done solely for his personal use and not for republishing the work for financial gain, an infringement claim in violation of the statute will likely fail. Article 8 contains various examples too numerous to cite of situations when the use is considered lawful even when the author’s permission has not been obtained.

Anyone who plans to quote or otherwise use another’s classified work is well-advised to determine if the work has copyright protection and, if so, obtain the written consent of the owner to avoid legal penalties for copyright infringement.

Trademarks

Since 1984, Saudi Arabia’s trademark law has protected certain products and services in the marketplace. As global business extends its reach among Middle Eastern countries, trademark protection has taken on greater importance.

Registration of a trademark constitutes legal title to certain intellectual property just as a deed evidences legal title to real estate. When a trademark is entered on the Trademark Register in the Ministry of Commerce, the owner obtains exclusive use of the words, letters, numbers, symbols or other signs distinguishing the pertinent product or service. This exclusive right to use the trademark in the Kingdom continues for 10 years unless renewed for a similar period within the final year of registration. Failure to renew the trademark prior to its expiration requires the owner to file an entirely new application, since no grace period is allowed.

An examiner within the Trademark Bureau must study the proposed mark and determine if it is eligible for registration after considering whether it is in conflict with any other previously registered trademark. If a conflict exists, the examiner will communicate his objections to the applicant who must respond by distinguishing the proposed mark from others deemed to be similar. If the examiner issues a decision denying the application, the applicant may appeal to the Objections Committee within 30 days.

If the trademark is approved, it is published in the Official Gazette giving any interested parties 90 days to object to the registration. If an objection is received prior to the deadline, the case is referred to the Oppositions and Complaints Committee for a decision. Any party may file an appeal within 30 days to the Board of Grievances.

Certain products such as alcoholic beverages are not registrable, and others simply are not trademarks. Article 2 of the law contains a long list of those marks which are not considered trademarks. Among them are words which are merely descriptive, those which are of a purely religious nature, those which offend public morality, and official governmental signs and stamps identifying the Kingdom of Saudi Arabia. Naturally, any marks which are intended to mislead the public or misidentify the product or service are not registrable.

If a trademark is cancelled pursuant to Part III of the law, no one may register the same or similar products or services until three years have passed from the date of cancellation.

If a trademark is registered and all objections are overruled, the owner will have an incontestable mark if he uses it for at least two consecutive years from the registration date. He may enforce his right against anyone who uses the trademark without his permission or license. Penalties include imprisonment and fines and provable damages resulting from the misuse of the trademark.

Patents

Saudi Arabia adopted its current patent law in 1989. Patents offer inventors exclusive use and development of their creations for a period of 15 years from the date of the grant. Renewals are permitted. Preparing, prosecuting, and submitting a patent application to the King Abdul Aziz City for Science and Technology is an extremely complex process and requires the assistance of a qualified agent who is generally a patent attorney.

If the invention violates Islamic law, it will not be approved. Certain theories and methods are not patentable. The invention must be exhaustively described and accompanied with very specific drawings. One can obtain a patent for an improvement to an existing patented invention, but this usually does not abrogate the original patent.

In return for exclusive use, an inventor must allow publication by the Patents Directorate so that all Saudis can benefit from the information. Publication usually occurs about 18 months from the application’s filing date. The inventor generally must exploit the patent industrially within two years of the grant. In many cases, an inventor chooses to sell or assign the patent to another who can then move the invention into commercial production.

2. Negative List Revisions Expected Early Next Year

Since the Foreign Investment Act was enacted in April 2000, Saudi Arabia has attracted about $10 billion in foreign investment commitments. However, many lucrative sectors such as telecommunications and insurance have remained on the government’s “negative list”. Now, the Supreme Economic Council (SEC) is revising the list and expects to issue a new one next February.

Although no official word has been issued about which sectors might be opened up to foreign investments, some Saudi economists expect the government to allow foreign companies to invest in the telecom and insurance sectors. In fact, the SEC is currently studying a bill proposed by the Shoura Council allowing private investment in the area of telecommunications, which is now run solely by the Saudi Telecom Company. If the negative list is revised to allow foreign investment in these important sectors, it is anticipated that foreigners will make substantial commitments of money and technology to grow the Saudi economy.

This would be a welcome development in a nation which remains dependent upon oil revenue and is intent on reducing the nation’s relatively high unemployment rate. The Kingdom hopes to achieve an annual growth rate of almost seven percent annually over the next four years until the end of the country’s seventh development plan in 2005.

3. Saudi WTO Update

Saudi Arabia has been seeking to join the World Trade Organization (WTO) since 1993. Until recently, it was hoped that accession would be accomplished by the end of this year. Now, it appears as if WTO membership remains a goal that will not be realized anytime soon.

The Kingdom is one of the world’s important economies still outside the WTO and the only nation in the Gulf Cooperation Council yet to join. Among Arab nations, Sudan, Algeria, Lebanon, Yemen and Syria are seeking WTO membership. Other countries such as Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar, Tunisia and the UAE are already members.

Although many positive steps have been taken to liberalize the Saudi economy, many remain. For example, many sectors of the economy such as telecommunications, insurance, oil, health, pharmaceuticals, and banking have not been opened up to foreigners, and the WTO seems to be requiring that these reforms be implemented before, rather than after, the country is admitted to the WTO.

4. Warning on Post-Dated Checks

The Commerce Ministry recently warned Saudi companies and traders not to accept post-dated checks from customers, saying that the practice violates clause 118 of the commercial documents’ regulations. Violators can receive up to a three-year jail sentence and fines up to SR50,000 or both.

In one recent case in the Kingdom, the director of a high-purchase establishment was jailed for three months and fined SR10,000 for accepting a post-dated check when the customer did not have any cash in his bank account at the time the check was issued as a guarantee for a sale.

5. Saudi Arabia’s New Vehicle Insurance Law

The Saudi government recently approved a mandatory third-party vehicle insurance law to address the growing problem of car accidents in the Kingdom. The law is to be effective late next year and will cover all of the approximately 6,000,000 cars in the country.

Although there are over 60 insurance companies operating in the Kingdom, only a few write car insurance, resulting in coverage for only about 25 percent of all vehicles. The delay in implementing the new law is intended to give more insurance companies the opportunity to provide coverage. The new law will require drivers to have liability insurance in the event of accidents. Covering damage to one’s own vehicle – called collision insurance – is not required under the new law.

All foreign vehicles must have third-party insurance before entering the Kingdom. The ministries of the interior, finance and communications are to coordinate with one another in order to implement the new law. The Interior Ministry will review implementation of the law and present a report to the Cabinet within three years.

The Law Firm Of Dr. Khalid Alnowaiser
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Saudi Arabia
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