Intellectual rigour

When it comes to innovation in the field of IP, Guernsey is leagues ahead of its competitors, both on and offshore. By Elaine Gray

One offshore powerhouse is leading the way on ­innovative IP initiatives. As an offshore giant, Guernsey is already recognised ­internationally as a responsible, mature and well-regulated jurisdiction – its inclusion on the ­Organisation for Economic ­Cooperation and Development’s (OECD) 2009 ’White List’ of jurisdictions makes that clear.

However, in the past few years Guernsey has shown the prescience to step away from the rest of the offshore pack and strike out as the offshore jurisdiction of choice for IP rights. Starting in 2002 Guernsey identified the need to diversify its economy. A review of the options identified an obvious target: IP rights.

Beginning in 2002 Guernsey set about creating a cutting-edge IP environment.

In 2006 Guernsey’s IP Office opened, and foundation IP laws on copyright, ­trademarks, design rights and database rights (among others) came into force. But do not be misled by the term ’foundation laws’: these were no basic building block laws. Guernsey could have gone for that option, but chose to introduce laws on key IP rights, which in many ways were more advanced than ­equivalent rights elsewhere.

Getting the ball rolling

For example, Guernsey’s copyright ­legislation did not just replicate the ­protection available in Europe: it offered enhanced protection for digital rights ­management and encryption technologies.

In the field of database rights, Guernsey’s legislation was drafted to address the perceived dilution of the ­European database right as a result of judicial interpretation. In the recent UK ­litigation involving the English and ­Scottish Premier League football fixture lists, ­Football Dataco ­Limited and Ors v Brittens Pools ­Limited and Ors (2010), it is likely that the fixture lists would have been given protection as ­databases under Guernsey’s legislation (in contrast to the European ­position) because Guernsey gives broader recognition to the type and level of investment that qualifies for ­database protection.

In January 2009 Guernsey introduced new patents legislation. The new ­legislation allows reregistration in Guernsey for a wide range of inventions, including many ­inventions based on software. As a result some US software patents, which are ­otherwise unable to obtain protection in Europe, may qualify for protection in Guernsey.

iven the uncertainty that ­follows the US Supreme Court’s decision on 28 June 2010 in Bilski, this is likely to prove of ­considerable interest to US ­software holders, not least because Guernsey took a deliberate decision to ditch the ’domino effect’ (where reregistrations fall upon the patent falling in the primary jurisdiction).

Guernsey is not stopping there. When it decided to create a new IP regime, it also decided that it wanted to develop new and innovative IP rights. Consequently, Guernsey’s enabling IP law from 2004 ­provided for subordinate legislation to be introduced across a range of new IP areas, including rights arising out of the ­information society, innovation patents, domain names and image rights.

Positive image

Internationally, interest is increasingly focusing on the scope for image rights ­legislation. Under Guernsey’s enabling law, ’image rights’ includes rights that relate to a person’s name, voice, signature, photograph, characteristics or likeness. Image rights are also sometimes referred to as personality rights or publicity rights.

Despite a broad understanding of what the term encompasses, as yet no jurisdiction has developed a legislative framework that defines these rights clearly, offers them statutory protection, facilitates commerce in the rights and provides enforcement ­remedies. Guernsey’s IP Office has ­confirmed in various publications that it hopes to introduce image rights legislation in the future.

This legislation is awaited eagerly and, combined with the outstanding range of products and services already in existence in Guernsey to manage income streaming from licensing arrangements and the like, positions Guernsey as the destination of choice for these products.

For example, a young footballer’s career takes off and all of a sudden his image becomes a valuable ­commodity. He assigns his image rights to a Guernsey company so that any income from the use of those rights is paid to the ­company. Through ­appropriate structuring, as the player becomes ­recognised internationally, he can ensure tax-effective ­treatment of his international rights. In addition, a club might decide that it will set up a cell company. For example, if the club sets up an incorporated cell ­company, this allows the club to manage its IP rights ­within one structure, but also allows the players maximum flexibility as regards their image rights. Each player will hold his image rights in his own cell, which has its own corporate identity and which is ringfenced from the other cells in terms of the liabilities of the cells and overall ­corporate structure. In addition, if the ­player should leave the club he can convert the cell into an ordinary company and, if need be, migrate it ­elsewhere.

Tax drivers

Guernsey’s corporate tax regime underwent a substantial change in 2008; as a result the standard rate of tax for most Guernsey companies is 0 per cent, with exceptions being taxed at 10 per cent. In 2009, in response to approaches from the EU Code of Conduct Group for Business Taxation, Guernsey announced that it would review its 0-10 per cent system with a presumed corporate tax rate of 10 per cent. Consequently, in contrast to the other Crown Dependencies (Jersey and the Isle of Man), Guernsey will not be ­subject to a review by the Conduct Group. As well as leading the way with its benign but ­transparent tax strategy, Guernsey is also pursuing double taxation agreements. These will enhance further the scope for efficient tax planning.

Guernsey, then, is leading the pack on innovative IP rights by ­providing an ­environment that offers ­maximum opportunity for their protection, management and enforcement.

Elaine Gray is a partner and an IP legal specialist at AO Hall