Intellectual Property and Private International Law: Comparative Perspectives 9781472566102, 9781849462310

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SERIES EDITORS’ PREFACE The relationship between intellectual property and private international law has attracted attention amongst academics, legislators and practitioners around the world in recent years. The problems which can arise in this field can be very challenging, given the complex interaction between principles of property law, contract and tort law and the traditionally territorial nature of disputes relating to intellectual property rights. They can be especially acute where it is necessary to reconcile national traditions and the approaches to be taken in interpreting and applying international conventions and regulations; and, of course, the advent of new forms of technology tends to de-localise the focus on the location of property rights and the occurrence of events. Against this background, this book offers a valuable and timely resource. It contains the General and National Reports arising from the 18th International Congress of Comparative Law. As such, rather than focusing on one, or a small number of legal systems, it offers a comparative law perspective on a range of core issues spanning more than 20 countries across North America, Europe (include both EU and non-EU states) and Asia. These states have divergent legal traditions and, often, widely divergent legal rules for regulating the private international law aspects of intellectual property. The reports, authored by experts in the various legal systems, explain the legal regimes in force in those jurisdictions and relevant case law based on a questionnaire which sought information on the national legal rules and international instruments to which the State in question was party. Respondents were also asked to consider a number of hypothetical case studies. The authors were asked to explain the position in respect of copyrights, patents, trademarks and other intellectual property rights. In this way, and under the skilled editorship of Professor Toshiyuki Kono, a renowned expert in this field, the reader is able to see clearly the differences between the various regimes, both in theory and in practice. The topics covered in this book range from issues of personal and subject-matter jurisdiction to provisional and protective measures; from contractual rights (including those created in the course of employment) to the law applicable to the creation and transfer of intellectual property rights and their infringement; and from the problems raised by parallel and concurrent proceedings to the recognition and enforcement of foreign judgments. Along the way, provisions considered include the CLIP proposals, the ALI Principles, the reform of the Brussels I Regulation and the potential impact of the Hague Choice of Court Convention, as well as recent national reforms in various jurisdictions, including Japan. The book begins with a fascinating, detailed and rigorous general report which skilfully reviews the law in these various jurisdictions, analyses the results of the questionnaires and provides an invaluable resource for understanding the application of the law in this field at both national and international levels and for reflecting upon its possible reform. We believe that Intellectual Property and Private International Law makes a very important contribution to comparative law learning in the field and are delighted to welcome it to the Studies in Private International Law series. Paul Beaumont (University of Aberdeen) Jonathan Harris (King’s College, London)

General Report TOSHIYUKI KONO* and PAULIUS JURCˇ YS**

Contents Introduction............................................................................................................................................... 6 Part I  General Overview..........................................................................................................................8 1

Intellectual Property and Private International Law: Legal and Institutional Background........... 8 1.1 IP and Private International Law: Legal Framework in Different States............................... 8 1.2 The Hague Judgments Convention and Legislative Proposals............................................. 11 1.2.1 The ALI Principles.................................................................................................... 11 1.2.2 The CLIP Principles................................................................................................. 12 1.2.3 The Transparency Principles and Joint Japanese–Korean Proposal (Waseda Principles)................................................................................................................. 12 1.3 Institutional Framework of Cross-Border Enforcement of IP Rights................................. 13 1.3.1 Canada and the United States.................................................................................. 13 1.3.2 European States........................................................................................................ 13 1.3.3 Asian States............................................................................................................... 14

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The Principle of Territoriality of IP Rights and the Lex Protectionis............................................. 15 2.1 Main Principles of the Paris Convention.............................................................................. 15 2.2 The Principle of the Protecting Country in the Berne Convention.................................... 16 2.3 Current Discussion concerning the Appropriateness of the Territoriality Principle.......... 18

Part II  Jurisdiction over Disputes Concerning Intellectual Property Rights 3

Personal Jurisdiction in IP Cases..................................................................................................... 19 3.1 Personal Jurisdiction in the Hague Judgments Convention................................................ 19 3.2 Personal Jurisdiction in North America................................................................................ 20 3.2.1 Canadian and US Law.............................................................................................. 20 3.2.2 Personal Jurisdiction in the ALI Principles............................................................. 22 3.3 Personal Jurisdiction in European Countries....................................................................... 23 3.3.1 Defendant’s Domicile as the General Ground of Jurisdiction according to the Brussels/Lugano Regime.......................................................................................... 24 3.3.2 Jurisdiction based upon the Defendant’s Domicile in IP-Related Disputes.......... 24 3.3.3 Third-Country Situations........................................................................................ 26 3.3.4 Brussels I Reform Proposals..................................................................................... 27

*  Professor of Law at Kyushu University. **  Lecturer at Kyushu University.

2  Toshiyuki Kono and Paulius Jurcˇys 3.4

3.5

Asian Countries...................................................................................................................... 27 3.4.1 General Grounds of Jurisdiction in India and Taiwan........................................... 27 3.4.2 The Main Principles of the Exercise of International Jurisdiction in Japan.......... 28 3.4.3 Personal Jurisdiction in Korea................................................................................. 32 Comparative Observations.................................................................................................... 33

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Exclusive/Subject-Matter Jurisdiction............................................................................................. 33 4.1 Exclusive Jurisdiction Rules in the 2001 Draft of the Hague Judgments Convention........ 33 4.2 North American States........................................................................................................... 35 4.2.1 Subject-Matter Jurisdiction of Canadian and US Courts...................................... 35 4.2.2 Subject-Matter Jurisdiction in the ALI Principles.................................................. 36 4.3 European States...................................................................................................................... 37 4.3.1 Brussels/Lugano Regime: General Considerations................................................. 37 4.3.2 The ECJ Decision in the Case of GAT v LuK........................................................... 39 4.3.3 Third-Country Situations........................................................................................ 42 4.3.4 Exclusive Jurisdiction Rules in Commission Proposal (2010) and the CLIP Principles.................................................................................................................. 43 4.4 Exclusive Jurisdiction in IP Disputes in Asian States............................................................ 43 4.4.1 Exclusive Jurisdiction Rules in India and Taiwan................................................... 43 4.4.2 Exclusive Jurisdiction over IP Disputes in Japan.................................................... 44 4.4.3 Exclusive Jurisdiction in IP Disputes according to Korean Law............................ 47 4.5 Comparative Observations.................................................................................................... 48

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Jurisdiction in IP Infringement Disputes........................................................................................ 48 5.1 Infringement Jurisdiction in the 2001 Draft of the Hague Judgments Convention........... 49 5.2 Jurisdiction over IP Infringements in North American Countries...................................... 50 5.2.1 Jurisdiction over IP Infringement Disputes of Canadian Courts.......................... 50 5.2.2 Jurisdiction of US Courts over Claims concerning IP Infringements................... 51 5.2.3 Jurisdiction over IP Infringements according to the ALI Principles..................... 52 5.3 Jurisdiction over IP Infringement Disputes in Europe......................................................... 53 5.3.1 Brussels/Lugano Regime: Infringement Jurisdiction.............................................. 53 5.3.2 Application of Article 5(3) to Infringements of IP Rights..................................... 55 5.3.3 Jurisdiction over Internet-Related Infringements.................................................. 56 5.3.4 Third-Country Situations........................................................................................ 57 5.3.5 Infringement Jurisdiction in the CLIP Principles................................................... 58 5.4 Asian Countries...................................................................................................................... 59 5.4.1 India and Taiwan...................................................................................................... 59 5.4.2 Jurisdiction over IP Infringements according to Japanese Law and Latest Legislative Proposals................................................................................................. 59 5.4.3 Infringement Jurisdiction in Korea......................................................................... 61 5.5 Comparative Observations.................................................................................................... 62

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Jurisdiction in Contract-Related Disputes...................................................................................... 62 6.1 The 2001 Draft of Hague Judgments Convention................................................................ 62 6.2 Jurisdiction in Contract Disputes in the ALI Principles...................................................... 63 6.3 European Countries............................................................................................................... 63 6.3.1 The Brussels/Lugano Regime................................................................................... 63 6.3.2 The CLIP Principles................................................................................................. 68 6.4 Asian Countries...................................................................................................................... 68 6.4.1 Jurisdiction over Contractual Disputes according to Japanese Law...................... 68 6.4.2 Legislative Proposals................................................................................................. 69 6.5 Comparative Observations.................................................................................................... 70

General Report  3 7

Consolidation of Proceedings.......................................................................................................... 71 7.1 Consolidation of Claims in the 1999 Draft of the Hague Convention................................ 71 7.2 North American Countries.................................................................................................... 72 7.2.1 Canadian Approach to the Consolidation of Claims............................................. 72 7.2.2 Consolidation of Claims in the United States......................................................... 73 7.2.3 Claims against Multiple Parties and Other Possibilities of Consolidation in the ALI Principles........................................................................................................... 74 7.3 Consolidation of Claims in European States........................................................................ 74 7.3.1 Brussels/Lugano Regime: General Considerations................................................. 74 7.3.2 The Early Practice of Domestic Courts in IP Infringement Cases......................... 76 7.3.3 ‘Roche Nederland’ and its Aftermath...................................................................... 78 7.3.4 Third-Country Situations........................................................................................ 81 7.3.5 Consolidation Possibilities according to the CLIP Principles................................ 83 7.3.6 European Patent Litigation Scheme........................................................................ 83 7.4 Asian Countries...................................................................................................................... 85 7.4.1 Consolidation of Claims in India and Taiwan........................................................ 85 7.4.2 Consolidation of Claims according to Japanese Law.............................................. 85 7.4.3 Consolidation of Proceedings in Korea................................................................... 90 7.5 Comparative Observations.................................................................................................... 91

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Parallel Proceedings in IP Disputes................................................................................................. 92 8.1 Parallel Proceedings in the 2001 Draft of the Hague Judgments Convention.................... 93 8.2 North American Countries.................................................................................................... 95 8.2.1 Parallel Proceedings According to Canadian Law................................................... 95 8.2.2 Parallel Proceedings in US law and the ALI Principles........................................... 96 8.3 European Countries............................................................................................................... 98 8.3.1 Parallel and Related Proceedings............................................................................. 98 8.3.2 IP Litigation Strategies........................................................................................... 100 8.3.3 Third-Country Situations...................................................................................... 103 8.3.4 Review of the Brussels I Regulation: Parallel Proceedings in the Commission Proposal and the CLIP Principles.......................................................................... 106 8.4 Asian Countries.................................................................................................................... 108 8.4.1 Parallel Proceedings according to the Laws of India and Taiwan........................ 108 8.4.2 Parallel Proceedings according to Japanese Law and Recent Asian Legislative Proposals................................................................................................................. 108 8.5 Comparative Observations.................................................................................................. 111

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Jurisdiction to Order Provisional or Protective Measures in IP Disputes................................... 112 9.1 Provisional and Protective Measures in the 2001 Draft of the Hague Judgments Convention................................................................................................................................. 112 9.2 Jurisdiction to Grant Provisional Measures and Interim Injunctions under the Laws of North American Countries.................................................................................................. 113 9.2.1 Legal Situation in Canada...................................................................................... 113 9.2.2 Provisional and Protective Measures in the ALI Principles.................................. 114 9.3 Provisional and Protective Measures in the European Countries...................................... 114 9.3.1 Brussels/Lugano Regime........................................................................................ 114 9.3.2 Provisional Measures and IP-Related Issues......................................................... 116 9.3.3 Third State Situations............................................................................................. 119 9.3.4 Provisional and Protective Measures in European Reform Proposals................. 119 9.4 Jurisdiction to Order Provisional and Protective Measures in Asian States...................... 120 9.4.1 India and Taiwan.................................................................................................... 120 9.4.2 Japan........................................................................................................................ 121 9.4.3 Korea....................................................................................................................... 122 9.5 Comparative Observations.................................................................................................. 123

4  Toshiyuki Kono and Paulius Jurcˇys 10 Choice of Court Agreements in Cross-Border IP Disputes.......................................................... 123 10.1 The 2005 Hague Choice of Court Convention................................................................... 124 10.1.1 General Principles of the Hague Convention....................................................... 124 10.1.2 Choice of Court Agreements in IP Disputes......................................................... 125 10.2 Choice of Court Agreements in North American Countries............................................. 126 10.2.1 Canada.................................................................................................................... 126 10.2.2 Choice of Court Agreements according to the ALI Principles............................. 127 10.3 European Countries............................................................................................................. 128 10.3.1 Choice of Court Agreements according to the Brussels/Lugano Regime............ 128 10.3.2 Choice of Court Agreements in IP Disputes......................................................... 129 10.3.3 Choice of Court Agreements according to the CLIP Principles.......................... 131 10.4 Choice of Court Agreements in Asian Countries............................................................... 132 10.4.1 Choice of Court Agreements in India and Taiwan............................................... 132 10.4.2 Choice of Court Agreements in IP Disputes according to Japanese Law and other Asian Legislative Proposals........................................................................................ 132 10.5 Comparative Observations.................................................................................................. 135 Part III  Choice-of-Law Issues in Intellectual Property Disputes......................................................135 11 Applicable Law to Proprietary Matters of IP Rights..................................................................... 135 11.1 Applicable Law to Proprietary Aspects of IP Rights in North American Countries......... 136 11.1.1 The United States.................................................................................................... 136 11.1.2 The ALI Principles.................................................................................................. 136 11.2 European Countries............................................................................................................. 137 11.2.1 Early European Proposals...................................................................................... 137 11.2.2 European States...................................................................................................... 138 11.2.3 The CLIP Principles............................................................................................... 141 11.3 Applicable Law to Proprietary Aspects of IP Rights in Asian Countries........................... 142 11.3.1 India and Taiwan.................................................................................................... 142 11.3.2 Japan........................................................................................................................ 142 11.3.3 Korea....................................................................................................................... 143 11.4 Comparative Observations.................................................................................................. 144 12 Applicable Law to Infringement of IP rights................................................................................ 145 12.1 North American Countries.................................................................................................. 145 12.1.1 Applicable Law to Infringements of IP Rights in Canada.................................... 145 12.1.2 Applicable Law to Infringements of IP Rights in the United States.................... 146 12.1.3 Applicable Law to Infringements of IP Rights in the ALI Principles................... 148 12.2 European Countries............................................................................................................. 149 12.2.1 Rome II Regulation on the Law Applicable to Non-Contractual Obligations: General Rules.......................................................................................................... 149 12.2.2 Special Choice-of-law Rules for Infringements of IP Rights (Art 8)................... 150 12.2.3 Prohibition of the Choice of Law.......................................................................... 152 12.2.4 Ubiquitous Infringements...................................................................................... 153 12.2.5 Law Governing the Liability of ISP........................................................................ 154 12.2.6 Infringements of IP Rights according to Swiss and Croatian Laws..................... 155 12.2.7 The CLIP Principles............................................................................................... 156 12.3 Asian Countries.................................................................................................................... 157 12.3.1 India and Taiwan.................................................................................................... 157 12.3.2 Japan........................................................................................................................ 158 12.3.3 Korea....................................................................................................................... 162 12.4 Comparative Observations.................................................................................................. 163

General Report  5 13 Applicable Law to the Contracts for the Transfer of IP Rights.................................................... 164 13.1 North American Countries.................................................................................................. 164 13.1.1 Canadian Law......................................................................................................... 164 13.1.2 The United States.................................................................................................... 165 13.1.3 Law Governing Transfers of Title and Grants of Licenses under the ALI Principles................................................................................................................ 167 13.2 European Countries............................................................................................................. 168 13.2.1 Rome I Regulation: General Principles................................................................. 168 13.2.2 Problems Related to IP-Contracts......................................................................... 170 13.2.3 Law Governing Contractual Obligations according to Swiss and Croatian Law.......................................................................................................................... 174 13.2.4 Applicable Law to Contracts according to the CLIP Principles........................... 175 13.3 Asian Countries.................................................................................................................... 177 13.3.1 Applicable Law to IP Transfer Agreements in India and Taiwan......................... 177 13.3.2 Japan........................................................................................................................ 177 13.3.3 Korea....................................................................................................................... 179 13.4 Comparative Observations.................................................................................................. 179 14 Applicable Law to IP Rights Created in the Course of Employment Relationship..................... 180 14.1 North American Countries.................................................................................................. 180 14.1.1 Canada.................................................................................................................... 180 14.1.2 The ALI Principles.................................................................................................. 181 14.2 European Countries............................................................................................................. 182 14.2.1 Overview of the Law in Different Countries......................................................... 182 14.2.2 The CLIP Principles............................................................................................... 183 14.3 Asian Countries.................................................................................................................... 184 14.3.1 Japan........................................................................................................................ 184 14.3.2 Korea....................................................................................................................... 185 14.4 Comparative Observations.................................................................................................. 186 15 Applicable law to Securities in IP.................................................................................................. 186 16 Recognition and Enforcement of Foreign Judgments.................................................................. 188 16.1 Recognition and Enforcement in the 2001 Draft of the Hague Judgments Convention........................................................................................................................... 189 16.2 North American Countries.................................................................................................. 191 16.2.1 Recognition and Enforcement of Foreign Judgments in IP Disputes according to Canadian and US Law........................................................................................ 191 16.2.2 Recognition and Enforcement of Foreign Judgments in the ALI Principles....... 194 16.3 European Countries............................................................................................................. 196 16.3.1 Recognition and Enforcement of Foreign Judgments according to the Brussels/ Lugano Regime....................................................................................................... 196 16.3.2 The Recognition and Enforcement of Third-country Judgments....................... 199 16.3.3 Brussels I Reform Proposals................................................................................... 201 16.4 Asian Countries.................................................................................................................... 203 16.4.1 Recognition and Enforcement of Foreign Judgments in Taiwan......................... 203 16.4.2 Recognition and Enforcement of Foreign Judgments in Japan........................... 204 16.4.3 Recognition and Enforcement of Foreign Judgments in Korea........................... 210 16.5 Comparative Observations.................................................................................................. 210 CONCLUDING OBSERVATIONS....................................................................................................... 211

6  Toshiyuki Kono and Paulius Jurcˇys

Introduction The emergence and development of global business activities, and the inception of the Internet have resulted in the creation of a new field of legal studies concerning cross-border enforcement of intellectual property (IP) rights. This novel area of law is known as private international law and intellectual property. It has attracted much attention from lawyers within the fields of both private international law and intellectual property law. Several landmark decisions have caught the interest of legal practitioners as well as scholars engaged in deeper research activities. So far, several edited books1 have been published, and a greater amount of legal articles have been written on the subject. The object of private international law and intellectual property is mainly related to the private enforcement of intellectual property rights. In this context, ‘private’ enforcement is understood to mean legal measures taken by private parties (eg, proprietors of IP rights, persons exploiting IP rights with or without authorisation). Such legal measures taken by private parties would usually be determined by the law of the country where the protection is sought. In this report the private enforcement of IP rights refers to legal actions brought before national judicial or administrative authorities. Hence, public administrative acts upon which certain preventive acts are taken (eg, customs control, seizure of counterfeited goods etc) are not analysed here. Private international law and intellectual property could also be considered a special area of private international law dealing particularly with the enforcement of IP rights. Accordingly, legal problems which arise in the course of the enforcement of IP rights are mainly related to the exercise of international jurisdiction of the court seised, the applicable laws, and the recognition and enforcement of foreign court judgments rendered in disputes over IP rights. This General Report draws upon 21 national reports received from countries with very divergent legal traditions. National reports were collated from three continents: North America (Canada and the United States), Europe (14 EU Member States, Switzerland and Croatia) and Asia (India, Taiwan, Korea and Japan). The national reports were drafted on the basis of a questionnaire2 containing two main sections. The first section required national reporters to provide a general legal and institutional framework concerning the enforcement of IP rights in their respective countries. National reporters were then asked to indicate: a) international and regional legal instruments which have been ratified or are applicable in their countries, and b) national statutory instruments pertaining to the enforcement of IP rights. The second section of the questionnaire was based on hypothetical cases. Instead of providing a list of questions asking for a description of certain legal matters, it was decided to incorporate those questions into hypothetical cases in order to provide a better illustration of their legal situation. Such methodology, whereby the questionnaire is partly based on 1   JJ Fawcett and P Torremans, Intellectual Property and Private International Law, 2nd edn (Oxford, Oxford University Press, 2011); J Drexl and A Kur (eds), Intellectual Property and Private International Law: Heading for Future (Oxford, Hart Publishing, 2005); J Basedow, J Drexl, A Kur, and A Metzger (eds), Intellectual Property in the Conflict of Laws (Tübingen, Mohr Siebeck, 2005); A Nuyts (ed), International Intellectual Property and Information Technology (Alphen aan den Rijn, Kluwer Law International, 2008); S Leible and A Ohly (eds), Intellectual Property and Private International Law (Tübingen, Mohr Siebeck, 2009); J Basedow, T Kono, and A Metzger (eds), Intellectual Property in the Global Arena: Jurisdiction, Applicable Law, and the Recognition of Judgments in Europe, Japan and the US (Tübingen, Mohr Siebeck, 2010). 2   See Appendix I.

General Report  7 hypothetical cases, was inspired by the recent initiatives to draft the European Civil Code (eg security rights in immovable property or condominiums in European private law). However, given that the scope of the project is related to international aspects of IP, national reporters were asked to consider these hypothetical cases as mere examples, so as to not restrict possible answers to questions posed. Hence, reporters were encouraged to provide further analysis of any issues not covered in the hypothetical case. In the same vein, national reporters were also asked to provide analysis of IP rights other than those addressed in a particular hypothetical case (eg, if the hypothetical case concerned copyright, the national reporters were asked to indicate whether, and if so, how the answers would differ in disputes related to other IP rights such as patents, trade marks, etc). Furthermore, national reporters were asked to structure their answers into two sections: operative rules and descriptive formants. In October 2009, due to certain logistic considerations and with the objective to receive national reports from as many legal jurisdictions as possible, a shorter version of the questionnaire3 was created (national reports of Switzerland and the United States were prepared on the basis of the shorter version of the questionnaire). Therefore, although the form of the national reports might differ, from a substantive point of view they cover identical legal issues as they were in the summer of 2010. The General Report consists of four main parts. Parts I and II provide a brief overview of private enforcement of IP rights as well as the related institutional framework. Part III deals with various jurisdictional issues which arise in cross-border IP litigation and provides an analysis of the jurisdictional approaches which exist in the countries covered. More specifically, Part II deals with jurisdiction over parties, jurisdiction in contractual and noncontractual disputes, subject-matter (exclusive) jurisdiction, available possibilities for consolidating multiple claims/proceedings, treatment of international parallel proceedings, and choice of court agreements in IP disputes. Part IV is mainly devoted to analysing various choice-of-law problems that arise in cross-border IP disputes. Namely, it provides an overview and analysis of the approaches concerning the applicable law to the proprietary aspects of IP rights, choice-of-law problems arising in IP infringement cases and contracts for the transfer of IP rights. A further aim of Part III is to depict choice-of-law problems which arise in the context of IP finance. Lastly, Part V focuses on the recognition and enforcement of foreign judgments rendered in IP-related disputes. An Epilogue concludes. Parts III, IV and V were drafted on the basis of the national reports and are structured geographically: each chapter begins with an introduction outlining the main problems subject to discussion. The analysis commences with an overview of the law in two North American countries – Canada and the United States – and deals with the approach established in the ALI Principles on Intellectual Property. Then the current legal situation in the European Union and several other countries (namely, Switzerland and Croatia) is introduced in conjunction with an analysis of the legislative proposals made by the CLIP working group and other legislative initiatives concerning the modification of the Brussels I Regulation. Finally, an overview of the law in four Asian countries (India, Taiwan, Korea and Japan) is provided. Further attention is given to recent legislation in Asian countries (for example, Japan’s Act amending its Code of Civil Procedure (2011), as well as several legislative proposals such as Transparency and Waseda Principles. In addition, the Korean proposal which was drafted together with the Waseda working group is briefly introduced.   See Appendix II.

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8  Toshiyuki Kono and Paulius Jurcˇys The authors would like to express their gratitude to a number of persons without whose assistance the preparation of this report would not have been possible: especially Ruben Pauwels, Steven Van Uytsel, Stefan Wrbka and Claire Wan-Chiung Cheng. The authors of the General Report are also grateful to the national reporters for their close collaboration and devotedness in drafting and updating their reports: Howard Abrams, Marie-Elodie Ancel, Joost Blom, Nerina Boschiero, Amelie Charbon, Dick van Engelen, Anastasia Grammaticaki, Marie-Christine Janssens, Ivana Kunda, Gyooho Lee, Tattay Levente, Ulf Maunsbach, Axel Metzger, Pedro de Miguel Asensio, Damjan Možina, Alexis Pereira, Thomas Petz, Ming-Yan Shieh, Iris Sidler, Vandana Singh, Tatiana Synodinou, Benedetta Ubertazzi, Dai Yokomizo and Christopher Wadlow.

Part I  General Overview 1.  Intellectual Property and Private International Law: Legal and Institutional Background 1.1  IP and Private International Law: Legal Framework in Different States All 21 states from which the national reports were assembled belong to the World Trade Organization. This means that these countries are bound by the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement4 which entered into force in 1995. The states had ratified many international conventions concerning the protection of IP rights before the establishment of the WTO (namely, Paris Convention for the Protection of Industrial Property (1883)5 and Berne Convention for the Protection of Literary and Artistic Works (1886)6). All represented states are also members of the World Intellectual Property Organization and are bound by the WIPO Performances and Phonograms Treaty (WPPT)7 and WIPO Copyright Treaty (WCT).8 Most of the states participate in international IP protection systems: the Patent Cooperation Treaty,9 the Madrid system concerning international trade mark registration, the Hague system concerning international industrial design registration and the Lisbon system concerning international registration of the appellations of origin.10 These international conventions have significantly influenced the development of national legal regimes for the protection of IP rights.11 Regional economic integration has also facilitated the harmonisation of different aspects of IP rights. This is particularly noticeable in the EU, where the domestic legislation of 4   Agreement on Trade-Related Aspects of Intellectual Property Rights, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C (1994) 33 International Law Materials 1197. 5  Paris Convention for the Protection of Industrial Property, as last revised at the Stockholm Revision Conference, 14 July 1967, 828 UNTS 303. 6   Berne Convention for the Protection of Literary and Artistic Works, 9 September 1886, as last revised at Paris on 24 July 1971, 1161 UNTS 30. 7   (1997) 36 International Law Materials 76. 8   (1997) 36 International Law Materials 65. 9   (1970) 9 International Law Materials 978. 10  www.wipo.int/services/en/. 11   For a more detailed overview, the reader is recommended to refer to the national reports of particular countries.

General Report  9 Member States has been to a large extent affected by harmonisation activities at the EU level. Numerous regulations and directives were adopted with the objective of aligning domestic statutes and ascertaining that minimum standards of protection are established. In the area of copyright, these include directives related to the legal protection of computer programs,12 rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission,13 legal protection of databases,14 harmonisation of certain aspects of copyright and related rights in the information society,15 resale rights16 as well as the term of protection of copyrights and related rights.17 Further, many legislative instruments were adopted with regard to industrial property rights in the EU: for example, directives to approximate the laws of the Member States relating to trade marks;18 legal protection of designs;19 or the protection of biotechnological inventions.20 On the basis of two legal instruments, Community trade marks21 and Community design rights became available.22 As regards patents, the European Patent Convention which entered into force in 1977 laid a solid foundation for the regional protection of patent rights.23 It is worth noting that negotiations concerning the creation of an ‘EU Patent litigation system’ are taking place.24 In addition, the following instruments regarding patents have to be mentioned: the Regulation concerning the creation of a supplementary protection certificate for medicinal products,25 and the Regulation concerning the creation of a supplementary protection certificate for plant protection products.26 In 2004 an additional directive was adopted requiring Member States to establish procedures concerning the protection of IP rights.27 Further regional cooperation occurs among a specific number of European states. For instance, the Swedish Report notes that major legislative developments in the area of IP in 12   Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs, replaced by Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs (Codified version) [2009] OJ L111/16. 13   Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission [1993] OJ L248/15. 14   Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases [1996] OJ L77/20. 15   Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society [2001] OJ L167/10. 16   Directive 2001/84/EC of the European Parliament and of the Council of 27 September 2001 on the resale right for the benefit of the author of an original work of art [2001] OJ L 272/32. 17   Directive 2006/116/EC of the European Parliament and of the Council of 12 December 2006 on the term of protection of copyright and certain related rights (codified version) [2006] OJ L 372/12. 18   Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks [1989] OJ L40/1. 19   Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs [1998] OJ L289/28. 20   Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions [1998] OJ L213/13. 21   Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark [1994] OJ L11/1. 22   Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs [2002] OJ L3/1. 23   Convention on the Grant of European Patents (European Patent Convention) of 5 October 1973 as revised by the Act revising Article 63 EPC of 17 December 1991 and the Act revising the EPC of 29 November 2000. 24   Belgian Report, nn 62 and 63. 25   Council Regulation (EEC) No 1768/92 of 18 June 1992 concerning the creation of a supplementary protection certificate for medicinal products [1992] OJ L182/1. 26   Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products [1996] OJ L198/30. 27   Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights [2004] OJ 195/16.

10  Toshiyuki Kono and Paulius Jurcˇys the Nordic states (Denmark, Sweden, Norway, Finland and Iceland) have been coordinated within the framework of the Nordic Cooperation. As a result, the legislative basis concerning the protection of IP rights rest on common principles. The Belgian Report refers to another regional mechanism – the Benelux Convention on Intellectual Property (BCIP) – which not only establishes substantive rules for the protection of trade marks and designs in Benelux counties (Belgium, Netherlands and Luxemburg) but also establishes rules for the jurisdiction as well as the recognition and enforcement of judgments.28 In the EU, one of the cornerstone legislative instruments concerning the international jurisdiction and the recognition and enforcement of judgments is the so-called Brussels I Regulation. The Regulation was adopted in 2001 and entered into force from 1 March 2001; it replaced its predecessor, the Brussels Convention. The Brussels I Regulation establishes common rules of jurisdiction which are to be applied by the courts of EU Member States. In addition, the Regulation sets up a framework whose purpose is to facilitate the recognition and enforcement of judgments, court settlements and authentic instruments within the EU. A parallel convention, the ‘Lugano Convention’,29 was adopted in 1988 and applies in circumstances between the EC/EU Member States and EFTA states (Switzerland, Norway and Iceland). The Lugano Convention of 1988 was replaced by the Lugano Convention of 2007.30 The Lugano Convention basically contains the same rules as the Brussels I Regulation and thus contributes to legal certainty and foreseeability in the European region. It should be also noted that the Brussels I Regulation is in the process of revision.31 Two important Regulations concerning the applicable law to contractual and noncontractual obligations were adopted in 2007 and 2008. The so-called Rome I Regulation32 established choice-of-law rules for contractual obligations and replaced its predecessor the Rome Convention (1980)33. The rules provided in the Rome I Regulation apply to contracts concluded after 17 December 2009 (Art 28) which means that, in practice, the Rome Convention will remain an important legal source in coming years. The Rome II Regulation establishes choice-of-law rules for non-contractual obligations.34 These provisions apply with regard to events, which give rise to damage, occurring after its entry into force on 22 January 2009 (Art 31). In countries that are not members of the EU, private international law questions are also often governed by special statutes. In the United States, some of the relevant provisions concerning the federal organisation of court structure as well as the distribution of compe  Belgian Report, section 2.2.2.2.   Convention on jurisdiction and the enforcement of judgments in civil and commercial matters [1988] OJ L319/9. 30   Council Decision of 15 October 2007 on the signing, on behalf of the Community, of the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2007] OJ L339/1. 31   Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee on the application of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (21 April 2009), COM(2009) 174; Green Paper on the review of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (21 April 2009), COM(2009) 175; Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast) (14 December 2010), COM(2010) 748; B Hess, T Pfeiffer and P Schlosser, The Brussels I-Regulation (EC) no 44/2001, the Heidelberg report on the application of regulation Brussels I in 25 member states (Munich, Beck, 2008). 32   Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L177/6. 33   Convention 80/934/EEC on the law applicable to contractual obligations [1980] OJ L266/1. 34   Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) [2007] OJ L199/40. 28 29

General Report  11 tence between the federal government and the states are addressed in the United States Constitution. Several special rules concerning the adjudication of IP-related disputes can be found in the Copyright Act, the Patent Act and other special legislation. In addition, a number of important sources of law in deciding multi-state IP disputes are established in the Restatements of Law (Restatement (First) and Restatement (Second) of Conflicts which have been adopted in US states). Similarly in Canada, provisions relevant to the adjudication of IP disputes can be found in the Constitution, special IP statutes as well as provincial legislation. Some Canadian provinces have enacted the uniform Court Jurisdiction and Proceedings Transfer Act (CJPTA).35 In other countries, jurisdiction and choice-of-law matters concerning multi-state IP disputes are generally decided according to special private international law statutes.36 These statutes have been subject to modifications or substantial revisions during the previous decades.37

1.2  The Hague Judgments Convention and Legislative Proposals One of the main events that accelerated the development of this new field of law was the Hague Judgments project initiated in early 1990 by the United States at the Hague Conference on Private International Law. The purpose of this initiative was to prepare an International Convention establishing harmonised rules on international jurisdiction and the recognition of foreign judgments. Following more than a decade of intense negotiations, the project basically failed, because major negotiating parties – principally the United States and the EU – were unable to agree on underlying concepts. One of the main reasons for such disagreements was also related to the problems concerning international jurisdiction in IP disputes. 1.2.1  The ALI Principles In an attempt to save the negotiations, three legal scholars (Rochelle C Dreyfuss, Jane Ginsburg and François Dessemontet) created a working group to draft more specific provisions regarding court jurisdiction in intellectual property matters. At the outset, such a draft proposal was intended to be put forward to the Hague Conference. However, as it became obvious that the project to conclude the Hague Judgments Convention would fail, the Dreyfuss-Ginsburg initiative was successfully transformed into another, more sophisticated initiative under the auspices of the American Law Institute. Subsequently, the ALI Principles on Intellectual Property38 were adopted in 2007 at the meeting of the ALI General Assembly. The ALI Principles provide for a comprehensive set of rules concerning various issues on international jurisdiction, applicable law and the recognition of judgments in IP disputes. One of the focal objectives of the ALI Principles was to restrict possible jurisdictional grounds in cross-border IP disputes and to facilitate coordination and consolidation of the proceedings.39   Canadian Report, section 1.1.2.2.   eg, Switzerland, Croatia, Korea, Japan.   Korean Report, section 1.3.1; Japanese Report, section 1.1.3. 38  The American Law Institute, Intellectual Property: Principles Governing Jurisdiction, Choice of Law and Judgments in Transnational Disputes (Chestnut, ALI Publishers, 2008). 39   R Dreyfuss, ‘The American Law Institute Project on Intellectual Property: Principles Governing Jurisdiction, Choice of Law and Judgments in Transnational Disputes’, in Leible and Ohly (eds), above n 1, 15–30. 35 36 37

12  Toshiyuki Kono and Paulius Jurcˇys 1.2.2  The CLIP Principles Parallel to the ALI initiative, the Max Planck Institute in Munich initiated a project which published draft principles on jurisdiction in intellectual property in 2004.40 This academic initiative further developed into a follow-up project, the so-called ‘CLIP’ (European Max Planck Group for Conflict of Laws in Intellectual Property). The CLIP working group was founded by the Max Planck Institute for Competition, Intellectual Property and Tax Law (Munich) and the Max Planck Institute for International and Foreign Law (Hamburg). Members of the CLIP working group consisted of six different countries on both sides of the Atlantic. Within five years the CLIP working group had drafted the so-called ‘CLIP Principles’ which, similarly to ALI, deal with international jurisdiction, applicable law as well as the recognition and enforcement of foreign judgments in IP matters. The CLIP Principles were finalised in 2011.41 1.2.3  The Transparency Principles and Joint Japanese-Korean Proposal (Waseda Principles) Two more specialised working groups to tackle private international law problems relating to the cross-border aspects of IP rights were formed by legal academics. Their creation was inspired by legal developments across the Pacific and in Europe. The first group was initiated under the auspices of the ‘Transparency of Japanese Law Project’, with the intention of drafting a proposal of special rules dealing with private international law aspects of IP.42 Similarly to the ALI and CLIP Principles, the Transparency Proposal deals, inter alia, with grounds for general, special and exclusive jurisdiction in IP disputes, consolidation of claims and coordination of parallel proceedings; applicable law to IP infringement, licensing and other related issues as well as recognition and enforcement; and recognition of foreign judgments rendered in IP disputes. The second so-called ‘Waseda group’ was established by scholars in Waseda University with the objective of drafting a proposal on the jurisdiction and applicable law for the whole East Asian region. The Waseda working group closely cooperated with another group of scholars in South Korea.43 It should be noted that in Korea, legal scholars have prepared a separate proposal for the revision of domestic private international law in order to make the cross-border adjudication of IP disputes more effective.44 The Principles prepared by the Waseda working groups were intended to be unified with the simultaneously drafted Korean Principles.

  See J Drexl and A Kur (eds), above n 1, 309–34.   Available at www.cl-ip.eu.  www.tomeika.jur.kyushu-u.ac.jp. 43   A new private international law statute was adopted in South Korea in 2001. For a German translation see ‘Gesetz über das internationale Privatrecht der Republik Korea Vollständige Revision am 7. April 2001 durch Gesetz Nr.6465’ (2006) 70 Rabels Zeitschrift für ausländisches und internationales Privatrecht 342–57, and KB Pissler, ‘Einführung in das neue Internationale Privatrecht der Republik Korea’ (2006) 70 Rabels Zeitschrift für ausländisches und internationales Privatrecht 306. Art 24 of the Act contained a special provision relating to infringements of IP rights, which mandated the application of the law of the place where those IP rights are infringed. 44   Korean Report, section 2.4. 40 41 42

General Report  13

1.3  Institutional Framework of Cross-Border Enforcement of IP Rights 1.3.1  Canada and the United States The institutional framework to adjudicate IP disputes in Canada and the United States is largely affected by the federal organisation of the courts. In Canada, the jurisdiction is divided between state courts and federal courts. The Federal Court of Canada would be competent to hear actions related to acts of registration which had to be undertaken by state officials.45 Patent infringement claims which are not brought in the Federal Court can be brought in a court of a state in which the infringement is deemed to have occurred (s 54(1) of the Canadian Patent Act). More generally, in IP infringement cases, a court seised must have jurisdiction in personam as well as subject-matter jurisdiction.46 In the United States, a case which can be adjudicated by state courts can also be brought before a federal court if there is diversity of citizenship or if one of the parties to the proceedings is a foreign citizen. As for IP disputes, federal courts have exclusive jurisdiction over matters which arise under the Patent Act or Copyright Act. Federal and state courts have concurrent jurisdiction in disputes which arise under the Trademark Act. State courts are competent to hear cases concerning trade secrets and rights of publicity. Matters concerning the qualification and registrability of patents and trade marks fall under the competence of the Patent and Trademark Office, whose decisions can be appealed to the federal courts.47 1.3.2  European States In Europe, the granting of IP rights is subject to different regimes. Depending on the nature of IP rights, the granting of IP rights may be national, regional or international. For instance, the protection of trade marks could be sought by registering the mark (a) in one particular state according to the law of that particular state; (b) according to the Community Trade Mark Regulation;48 or (c) by filing an application for international protection according to the Madrid Agreement. Similarly, patent protection could be sought pursuant to the Patent Cooperation Treaty (PCT), European Patent Convention (EPC) or national patent laws. Accordingly, different administrative authorities (specialised patent or trade mark offices) are involved in the examination of the applications for the protection of industrial property rights. The institutional structure of the adjudication of IP disputes has been to a large extent affected by European legislative instruments. An important document in this regard is the Enforcement Directive,49 which mandated Member States to facilitate the specialisation of their national courts and reduce the number of courts competent to hear IP cases. As a result, Member States undertook certain legislative measures which changed the organisation of their national courts, as well as their competence to hear IP cases. On the basis of the national reports, three groups of court systems could be generally distinguished. First,

  Canadian Report, section 1.1.2.1.  ibid. 47   US Report, answers to question III.1. 48   Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark [1994] OJ L11/1. 49   Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights [2004] OJ L195/16. 45 46

14  Toshiyuki Kono and Paulius Jurcˇys in some EU states, special courts are established to hear IP disputes (eg, Italy,50 Spain51 as well Switzerland, which is a member of EFTA52). Second, in other EU Member States, special court chambers have been established in order to specialise in the adjudication of IP disputes.53 In Portugal, specialised sections to hear IP disputes were established in courts of first instance and district courts of appeal. In addition, the Lisbon Court of First Instance had been conferred jurisdiction to hear appeals concerning certain decisions of the Industrial Property Office.54 Similarly, in Croatia, IP disputes fall under the competence of specialised Commercial Courts or courts of general competence, depending on the nature of the matter.55 Third, in several states, IP disputes are adjudicated by specially designated courts of general competence.56 It should be also mentioned that the distribution of functional competences varies from state to state. For instance, all the national reporters noted that different aspects related to IP rights are adjudicated by either civil or criminal courts. Further, a disparity exists over the possibility of challenging the decisions of institutions charged with examining applications for the granting of industrial property rights. In some states, appeals may be brought to the courts of general competence, while in other states – such as Switzerland – decisions by the Swiss Federal Institute of Intellectual Property shall be brought to the Federal Administrative Court. 1.3.3  Asian States In Japan, three special institutions share the competence to adjudicate IP disputes. First, the Tokyo District Court and Osaka District Court are competent to hear cases concerning IP disputes in general (Art 6(1) CCP). Second, the Japanese Patent Office (JPO) is in charge of the issuance of patents and other registered IP rights. The examination results of applications for patent and other registered IP rights could be appealed to the Appeals Department of the JPO. Third, appeals concerning decisions of the JPO are subject to the exclusive jurisdiction of the IP High Court which was established in 2005 and operates as a special division of the Tokyo High Court. The IP High Court also hears appeals concerning decisions of the Tokyo and Osaka District Courts that are rendered in cases concerning patents, utility models, layout designs, integrated circuits as well as copyrights (Art 6(3) CCP). Meanwhile, in Taiwan, jurisdiction over IP disputes is vested within the Intellectual Property Office (TIPO), courts of general competence as well as the special Intellectual Property Court (IPC). In India, a three-tier court system was inherited from the British legal system. According to their national report, IP disputes are generally adjudicated pursuant to the rules of the Code of Civil Procedure as well as any relevant rules for the specialised IP legislation.57

  Italian Report, section 1.1.4.   Spanish Report, para 19. 52   Where a specialised Federal Patent Court commenced its work at the beginning of 2011; Swiss Report, section III. 53   Portuguese Report, section 1.2; Greek Report, section 1. 54   Portuguese Report, section 1.1.3. 55   Croatian Report, section 1.3. 56   Slovenian Report, section 1.2.3. 57   Indian Report, section 1.2. 50 51

General Report  15

2  The Principle of Territoriality of IP Rights and the Lex Protectionis The roots of the territoriality principle, as it is known in IP law, can be found in the medieval printing and manufacturing privileges. Such privileges were granted on a case-by-case basis by sovereign seigneurs, princes and kings who thereby expected to increase their own wealth.58 The nineteenth and twentieth centuries were marked by the adoption of national IP statutes across the European continent. However, the adoption of IP statutes posed further complications. Namely, national statutes in different countries provided for different scopes of protection. More importantly, the protection of IP rights in foreign countries was often not available on the same terms as protection afforded to nationals of those countries where the protection was sought. In order to overcome these differences, governments of different countries started to conclude bilateral treaties, some of which are still currently valid.59 Nonetheless, the protection of IP rights based on bilateral agreements proved to be insufficient and therefore two landmark international treaties for the protection of IP rights were concluded (1883 Paris Convention for the protection of industrial property and 1886 Berne Convention for the protection of literary and artistic works). Bilateral and international treaties concluded at the end of the nineteenth century generally aimed, first, to establish minimum standards of protection and, secondly, to assure that foreign proprietors of intellectual property rights were treated in the same manner as domestic right-holders (so-called ‘national treatment’ principle). Besides that, both the Paris and Berne Conventions established Unions and administrative mechanisms responsible for the maintenance and development of these international instruments.

2.1  Main Principles of the Paris Convention The Paris Convention entrenched several significant principles relating to the enforcement of industrial property rights. Article 2 of the Paris Convention established the principle of national treatment, according to which nationals of any country of the Union shall enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon nationals are complied with. In addition, the Paris Convention abandoned the requirement of domicile or establishment in the country where protection is claimed for the enjoyment of any of the industrial property rights (Art 2(1)). Further, the Paris Convention established a principle known as the independence of national IP rights. This principle dictates that patents granted in one country of the Union are considered to be independent of patents obtained for the same invention in other countries, regardless of whether those other countries are members of the Union or 58   J Basedow, ‘Foundations of Private International Law in Intellectual Property’, in J Basedow, T Kono and A Metzger (eds), above n 1, 3–29. 59   F Dessemontet, ‘The ALI Principles: Intellectual Property in Transborder Litigation’, in J Basedow, T Kono and A Metzger (eds), above n 1, 31–48.

16  Toshiyuki Kono and Paulius Jurcˇys not (Art 4bis).60 The principle of independency of patent rights can be traced back to the idea of sovereignty and exclusive competence of states to regulate internal matters independently. It also reflects a general understanding that the requirements for the creation of industrial property rights are to be interpreted in the light of national industrial policy objectives. The Paris Convention also established a number of minimum requirements for the protection of industrial property rights. These are to be considered the minimum standards which must be implemented in all Member States of the Paris Union. The aim is to harmonise national IP systems and thereby afford equal minimum protection in any Member State of the Union. Countries remain free to establish higher levels of protection of industrial property rights. However, such broader protection enacted by a legislator of a particular state cannot extend beyond the territorial borders of the granting state. This means that the right-holder can enforce his/her intellectual property rights only in the granting state. These principles, ie national treatment, independence of patent rights granted by different countries to the same invention and minimum standards can be considered as reflections of territoriality of domestic industrial property rights. Hence, subject to the provisions of the Paris Convention, Member States are free to determine the scope of enforcement of industrial property rights. However, the legal effects of these statutes are limited to the territorial borders of the legislating state.

2.2  The Principle of the Protecting Country in the Berne Convention The principle of territoriality of intellectual property rights has been also associated with another specific rule known as the lex loci protectionis61, which literally means ‘the law of the protecting country’. This principle aims to solve the dilemma of applicable law in cases where the right-holder has intellectual property rights in several countries. Historically, the principle of the protecting country was first established in the Berne Convention for the Protection of Literary and Artistic Works. Among several provisions which the Berne Convention contains and which have relevance to the determination of applicable law in cross-border IP disputes, one of the most important is Article 5(2), which provides that: The enjoyment and exercise of these rights shall not be subject to any formality; such enjoyment and such exercise shall be independent of the existence of protection in the country of origin of the work. Consequently, apart from the provisions of this Convention, the extent of protection as well as the means of redress afforded to the author to protect his rights shall be governed exclusively by the laws of the country where protection is claimed.

For decades, the interpretation of this provision was a source of contention. First, insofar as ‘means of redress’ referred to in Article 5(2) is concerned, a court of a given country can grant only such remedies as are available according to the procedural rules of the forum law.62 In Europe, the application of Article 5(2) before EU Member States’ courts is subject to the relevant jurisprudence of the ECJ. Secondly, the phrase ‘where protection is claimed’ has been often referred to as the entrenching country of protection (lex loci protectionis). Notably, the law of the protecting country does not necessarily need to coincide with the lex 60   GHC Bodenhausen, Guide to the Application of the Paris Convention for the Protection of Industrial Property (Geneva, United International Bureau for the Protection of Intellectual Property, 2007), 61–63. 61   See R Fentiman, ‘Choice of Law and Intellectual Property’, in J Drexl and A Kur (eds), above n 1, 129–50. 62   See Belgian Report, para 15.

General Report  17 fori, especially in cases where the court exercises its international jurisdiction over foreign IP rights’ infringement.63 Consequently, in some recently adopted legal instruments, the principle of the protecting country is referred to as ‘the law of the country for which protection is sought’ (Art 8(1) of the Rome II Regulation, Art 3:601(1) of the CLIP Principles and Art 301(1)(b) of the ALI Principles). Thirdly, one of the most debated issues was related to the scope of the wording that ‘the extent of protection’ shall be governed by the law of the protecting country. Some national reporters indicated that the prevailing approach, both in theory as well as in court practice, is that Article 5(2) shall be applied to all matters related to copyright.64 Such broad interpretation of the scope of Article 5(2) of the Berne Convention was also adopted in recent domestic private international law codifications (eg, Art 93-94 of the Belgian CPIL). Alternatively, some legal opinions support a more moderate approach arguing for the application of the lex originis to such issues as validity of copyright or initial ownership and other related issues.65 Besides Article 5(2), the Berne Convention contains several additional provisions relevant to the cross-border enforcement of IP rights. Namely, Article 6bis(3) of the Convention provides that the means of redress for safeguarding moral rights shall be governed by the legislation of the country where protection is claimed. Moreover, Article 7(8) states that the term of protection shall be governed by the legislation of the country where protection is claimed. However, the Convention also allows Member States to provide for a different term, which shall not exceed the term fixed in the country of origin of the work. The need for the lex protectionis rule could be best explained by the fact that national IP laws differ, which also means that the protection afforded to the right-holder and the procedural mechanisms are country-specific. The traditional understanding of the lex protectionis principle is closely intertwined with the territorial nature of intellectual property rights.66 Namely, the territoriality principle in its strictest sense has been interpreted as meaning that the infringing acts can occur only within the borders of the country where the right-holder has his/her rights. Hence, patent-infringing acts could occur only within the borders of the protecting country (country of registration); and the law of this country would be applicable to the infringement. This notion, however, does not adhere well with distant intellectual property infringements when the infringing acts committed in one country cause damage in a third country (especially in the case of infringement of IP rights in the digital environment). Albeit lex protectionis seems to render quite straightforward results (ie the application of the law for which the plaintiff seeks protection), cross-border enforcement of IP rights have unravelled numerous practicalities pertaining to the application of this rule, as illustrated in the following examples. The content of the lex protectionis is deemed unclear and there has been much contention as to whether lex protectionis should be applicable to any aspects related to IP rights (initial title, conditions of existence, effects, infringement, consequences of the infringement etc).

63   See Decision of the Commercial Court in Zagreb, where the provision ‘in which protection is sought’ was interpreted as meaning lex fori. For a more detailed analysis of the judgment, see Croatian Report, part 1.3. 64   See Belgian Report, para 16. 65   See Chs 11 and 14 below. 66   Sometimes ‘territoriality principle’ is also used to refer to the choice-of-law rule determining the applicable law for in an intellectual property infringement case.

18  Toshiyuki Kono and Paulius Jurcˇys

2.3  Current Discussion concerning the Appropriateness of the Territoriality Principle In an age where IP products are objects of international trade, it is argued that the territoriality principle is no longer feasible.67 This is so because the exploitation of IP rights has become more globalised. The overarching idea which underlies all those criticisms of the territoriality principle is that it hinders efficient adjudication of multi-state disputes.68 Such inefficiency is closely related with the sovereignty argument which puts forwards the interests of sovereign states but does not take into account the interests of private actors. Besides supreme legislative competence to regulate IP matters at the domestic level, sovereignty concerns are apparent in the existence of registration requirements and rules positing exclusive jurisdiction for issues related with certain aspects of IP rights (existence, registration, validity69). Another subset of arguments against territoriality are related to the uncertainty of what legal issues should be governed by the law of the country which grants IP rights. By and large, it seems there is consensus that the law of the protecting country should be applied to issues of validity, registration and infringement of IP rights. However, opinions differ as to whether the law of the protecting country should also apply to such issues of initial ownership (especially with regard to copyright works and employee inventions), remedies of the infringement and transferability of IP rights. Several legislative initiatives in the United States70, Europe71 and Japan72 have been conducted in order to clarify those issues; although a closer glimpse into those legislative proposals elicits divergent academic opinions. The inability to cover cross-border exploitation of IP rights facilitated the development of an argument that territoriality should be replaced by extraterritoriality. In particular, proponents of this approach argue that we should not be so opposed to extraterritoriality, for it is part of the everyday practice of the courts.73 To be more precise, legal scholars have questioned whether there are any possible routes of departure from the territoriality principle.74 Other academics ponder the possibility of creating an IP regime which is not based on the territorial notion of IP rights, if one could design it from scratch.75 Such considera67  See eg GB Dinwoodie, ‘Developing a Private International Intellectual Property Law: The Demise of Territoriality?’ (2009) 51 William and Mary Law Review 713–800; RC Dreyfuss, ‘Resolving Patent Disputes in a Global Economy’ in R Moufang and T Takenaka (eds), Patent Law: A Handbook of Contemporary Research (Cheltenham, Edward Elgar Publishing, 2009) 610; A Kur, ‘Are there any Common European Principles of Private International Law with regard to Intellectual Property?’ in S Leible and A Ohly (eds), above n 1, 1–14. 68   A Kur, ‘Are there any Common European Principles of Private International Law with regard to Intellectual Property?’ in S Leible and A Ohly (eds), above n 1, 1–14; PA de Miguel Asensio, ‘Recognition and Enforcement of Judgments in Intellectual Property Litigation: The CLIP Principles’, in J Basedow, T Kono and A Metzger (eds), above n 1, 243–44. 69   Art 22(4) of the Brussels I Regulation. 70   American Law Institute, Intellectual Property, above n 38; F Dessemontet, ‘A European Point of View on the ALI Principles-Intellectual Property: Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes’ (2005) 30 Brooklyn Journal of International Law 850. 71   The second draft of the CLIP Principles is available at www.cl-ip.eu. 72  ‘Transparency Proposal’ is available at www.tomeika.jur.kyushu-u.ac.jp/ip/proposal.htm and J Basedow, T Kono and A Metzger (eds), above n 1, 394–402. 73   GB Dinwoodie, ‘Extra-Territorial Application of IP Law: A View from America’, in S Leible and A Ohly, above n 1, 123–37. 74   GB Dinwoodie, ‘Developing a Private International Intellectual Property Law: The Demise of Territoriality?’ (2009) 51 William and Mary Law Review, 732. 75   J Basedow, T Kono and A Metzger (eds), above n 1, 49.

General Report  19 tions were raised by academics and practitioners involved in the adoption of recent proposals dealing with cross-border aspects of IP rights (ALI Principles, CLIP Principles and Japanese Transparency Proposal).

Part II  Jurisdiction over Disputes Concerning Intellectual Property Rights 3  Personal Jurisdiction in IP Cases Before hearing the merits of a case with a foreign element, a court must verify whether it has international jurisdiction. Yet, as will be shown throughout this report, due to different economic and cultural traditions, private international law rules vary from state to state. As a result, different principles concerning the exercise of international jurisdiction have developed over time. Differences in the national laws and practices of domestic courts have fostered discussion for the need to prepare an international treaty which would harmonise rules on international jurisdiction. In the early 1990s the proposal to adopt such an international treaty was launched under the auspices of the Hague Conference on Private International Law.76 Although the goal to adopt a comprehensive instrument to harmonise the grounds of international jurisdiction as well as the recognition of foreign judgments failed, the early drafts of the Convention presented in 1999 and 2001 epitomise the possible avenues for harmonisation which were agreed upon at an international level.

3.1  Personal Jurisdiction in the Hague Judgments Convention Article 3(1) of the 2001 Draft of the Hague Judgments Convention established a general ground of jurisdiction according to which a defendant may be sued in the courts of a state where that defendant is habitually resident. The notion of ‘residence’ was further clarified in paragraphs 2 and 3. The drafters of the Hague Judgments Convention had considered other possible grounds of general jurisdiction (eg, domicile and nationality). However, the preference was given to habitual residence because, first, it was considered to be ‘more reliable in a factual sense’ and, secondly, habitual residence was also used in previous Hague Conventions.77 The residence of the defendant is understood as one of the alternative grounds of jurisdiction.78 Article 9 established a special ground of jurisdiction over actions brought against branches of the defendant. Namely, this provision provided that a plaintiff may bring an action in the courts of the state in which a branch, agency or any other establishment of the 76   Permanent Bureau of the Hague Conference on private international law, Annotated List of Issues to be Discussed at the Meeting of the Special Commission on Jurisdiction and Enforcement of Judgments, www.hcch. net/upload/wop/jdgm_pd01(1994).pdf. 77   P Nygh and F Pocar, Report on the preliminary draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters, available at www.hcch.net/upload/wop/jdgmpd11.pdf (hereinafter referred to as ‘Nygh-Pocar Report’) 40–42. 78   ibid 39–40.

20  Toshiyuki Kono and Paulius Jurcˇys defendant is situated, or where the defendant carried on his regular commercial activity. However, actions against branches could be brought only if the dispute directly relates to the activity of that branch, agency or other establishment. Such actions could be based on contract, tort as well as any other legal basis regardless of whether the particular activity occurred in the forum state.79 The Draft Convention did not provide for a definition of a ‘branch, agency or other establishment’; hence these concepts would have had to be interpreted according to the law of the forum. The explanatory report noted that such branch, agency or other establishment should be ‘an integral part of the parent organisation’.80 In addition, Article 17 introduces the possibility for a court of a Contracting State to assert jurisdiction on the basis of their national laws. Nonetheless, this would be possible only if there is a close connection between the dispute and the forum state. In order to prevent the adjudication of disputes by courts of states that obviously lack jurisdiction, the 2001 Draft of the Hague Convention established a list of connecting factors which would be considered as insufficient for the exercise of general jurisdiction (Art 18(1)). Namely, general jurisdiction should not be exercised by the courts of a Contracting State solely on the following: the ground that the presence of the property to be seised is located in the forum state; the domicile, habitual or temporary residence, or the nationality of the plaintiff or the defendant; the carrying on of commercial activities of the defendant in the forum state; the service of a writ upon the defendant in the forum state; unilateral designation of the forum by the plaintiff; opening of the proceedings for a declaration of enforceability, registration or enforcement of a judgment; or the signing of the contract or the existence of a related criminal action in the forum state. If one of the abovementioned criteria is satisfied, the court should find that it lacks jurisdiction.81 As regards the applicability of the 2001 Draft of the Hague Judgments Convention to IP-related disputes, several remarks should be stated. First, during the drafting process, consideration was given to whether IP disputes should fall within the purview of the Hague Judgments Convention at all. If IP cases are included within the material scope of the Convention, it was argued that a distinction must be made between registered and nonregistered IP rights. More particularly, as regards cases over non-registered IP rights (such as copyrights), general jurisdiction provisions established in the Hague Judgments Convention should be applied. The second issue was related to the treatment of registered IP rights and exclusive jurisdiction rules. Besides, different opinions were expressed with regard to infringement of registered IP rights: some submitted that disputes over infringement of registered IP rights should not be subject to exclusive jurisdiction provisions.82

3.2  Personal Jurisdiction in North America 3.2.1  Canadian and US Law In Canada, international disputes concerning IP rights are usually adjudicated either by the Federal Court of Canada or the courts of Canadian provinces. According to the Canadian Report, the jurisdiction of the Federal Court is rather limited and the majority of international disputes are adjudicated by provincial courts. In order to determine whether a   ibid 56.  ibid. 81   ibid at 78–79. 82   For further analysis see Ch 4 below. 79 80

General Report  21 Canadian court has international jurisdiction, two sets of factors are taken into consideration: (a) rules which determine a court’s jurisdiction (so-called ‘jurisdiction simpliciter’) and (b) matters of discretion (forum non conveniens). Legal sources governing jurisdiction simpliciter differ according to the province; however, the laws of all provinces require the existence of in personam jurisdiction. This requirement is largely satisfied if the party resides in one of the Canadian provinces.83 In addition, the laws of Canadian provinces also establish that Canadian courts have in personam jurisdiction if a party submits itself to the jurisdiction of a court. The forum non conveniens doctrine was established following the jurisprudence of English courts, and allowed the courts to stay the proceedings if the defendant could prove that the plaintiff ’s choice of forum was oppressive or otherwise amounted to an abuse of rights. In some Canadian provinces the court practices established specific criteria to be taken into consideration when deciding whether proceedings should be stayed.84 Hence this doctrine plays an important role in Canadian private international law because of the broadly framed rules on jurisdiction simpliciter. The principles of asserting international jurisdiction in the United States were developed by the courts. In one of the landmark judgments, International Shoe Co v Washington, the United States Supreme Court decided that in personam jurisdiction may be asserted if the defendant had sufficient minimum contacts with the forum and such exercise of jurisdiction did not offend traditional notions of fair play and substantial justice.85 The ‘minimum contacts’ requirement is met if the defendant purposefully availed himself of the privilege of conducting activities within the forum state thus invoking the benefits of protection of its laws. Accordingly, a US court can assert personal jurisdiction over a corporation that delivers its products into a stream of commerce with the expectation that they will be purchased by consumers in the forum state.86 As in Canada, the forum non conveniens doctrine has been often invoked before US courts. In US law this theory requires the court to consider two elements: first, the existence of an alternative forum that has jurisdiction to hear the case; and, second, which forum would be most convenient and where the adjudication of the dispute would best serve the ends of justice.87 In deciding whether it is convenient to decide the case, the court must weigh public and private interests, which include access to proof, availability of witness, and all other practical problems which would make the trial of the case easy, expeditious and inexpensive.88 Yet, the fact that foreign law would have to be applied is not sufficient to dismiss a case.89 In the context of copyright infringement, the United States courts tend to hold that if allegedly an infringing act occurred abroad and the dispute arose between foreign nationals, there are strong policy concerns to allow dismissal of an action on the grounds of the forum non conveniens doctrine.90 83   For a more comprehensive analysis of the law of each Canadian province see Canadian Report, section 1.1.2.2. 84  ibid. 85   International Shoe Co v Washington 326 US 310 (1945) 316. 86   World-Wide Volkswagen Corp v Woodson 444 US 286 (1980) 297–98. 87   Gulf Oil Corp v Gilbert 330 US 501 (1947) 508–9. 88  ibid. 89   Piper Aircraft Co v Reyno 454 US 235 (1968) 260. 90   See eg Dominic Murray v BBC 81 F3d 287 (2d Cir 1996) 290; Skelton Fibres Limited et al v Antonio Linares Canas et al 1997 US Dist LEXIS 2365; Boosey & Hawkes Music Publishers Ltd v The Walt Disney Company and Buena Vista Home Video 145 F3d 481 (1998) 491.

22  Toshiyuki Kono and Paulius Jurcˇys In order to hear a dispute pertaining to foreign IP rights, Canadian and US courts could exercise their adjudicative authority if they have both in personam and subject-matter jurisdiction. In personam jurisdiction requires the court to determine whether a particular defendant has sufficient contacts with the forum state to justify the court’s exercise of its authority over that defendant. Subject-matter jurisdiction means that a court has to determine whether an actionable claim has been stated.91 As a matter of procedural law, in the United States the plaintiff bears the burden of proving the existence of both personal and subject-matter jurisdiction.92 The subject-matter jurisdiction requirement would usually mean that Canadian and US courts are not competent to hear disputes concerning the validity and infringement of foreign IP rights. 3.2.2  Personal Jurisdiction in the ALI Principles Chapter I of Part II of the ALI Principles deals with the jurisdiction over litigants. According to the ALI Principles, in order to be competent to hear an IP-related case, the court must have jurisdiction over the parties as well as subject-matter jurisdiction.93 Section 201 of the ALI Principles establishes a general jurisdiction rule based on the defendant’s residence. Pursuant to section 201(1), a natural person may be sued in any state in which he is resident, regardless of whether or not the claims arise in that state. The residence of a natural person is considered to be in the state in which he is habitually found or maintains significant professional or personal connections. Further, the residence of a legal person is in any state in which (a) it has a statutory seat; (b) it is incorporated or formed; (c) its central administration is located; or (d) it maintains its principal place of business (section 201(3)). It is worth noting that although the ALI Principles aim to propose jurisdiction rules that could be applied in common law countries as well as civil law countries, the competence of the court in the state where the defendant is resident is presumptive but not preferred. This approach was taken in order to take into consideration the specificities of the IP litigation which are related to the territorial nature of IP rights and to reflect the virtual omnipresence of the corporations which are engaged in activities over the Internet.94 In addition, section 207 establishes prohibited bases of jurisdiction in order to assure that courts fairly exercise their jurisdiction over multi-territorial disputes. Pursuant to section 207, a court cannot exercise jurisdiction solely on the ground that the tangible or intellectual property belonging to the defendant is present in the forum state, unless the dispute is directly related to that property. Further, the court cannot assert jurisdiction solely on the basis of the nationality of the parties or the presence of the plaintiff in the forum state; the conduct of the commercial activities of the defendant in the forum state (except where the dispute arises out of these activities); service of a writ upon the defendant in that state; or of completion of the formalities necessary to execute an agreement to which that dispute relates.

91   Ralphe A Armstrong and Anna Music v Virgin Records Ltd 91 F Sup 2d 628 (2000) 636. For the application of these jurisdiction requirements in patent infringement disputes see eg Viam Corp v Iowa Export-import Trading Co 84 F3d 424 (Fed Cir 1996) 427. 92   Sram Corporation v Sunrace Roots Enterprise Co Ltd 390 F Sup 2d 781 (2005). 93   American Law Institute, Intellectual Property, above n 38, 28. 94   ibid 36 (Reporters’ notes).

General Report  23

3.3  Personal Jurisdiction in European Countries 3.3.1  Defendant’s Domicile as the General Ground of Jurisdiction according to the Brussels/ Lugano Regime Article 2 of the Brussels I Regulation95 provides for a general jurisdiction rule according to which persons domiciled in a Member State shall be sued in the courts of that Member State (the so-called actor sequitur forum rei principle). The rationale behind this general ground of jurisdiction based on the defendant’s domicile is to make it easier for a defendant to defend himself.96 The general rule conferring jurisdiction on the Member State court of the defendant’s domicile would be applicable even if the plaintiff does not have his residence in the EU.97 The Brussels I Regulation contains no autonomous rules for the determination of the place of domicile of natural persons. Instead, Article 59 stipulates that the domicile of a natural person has to be determined according to the internal law of the forum. If a party is domiciled in another Member State, the court shall apply the law of that state in order to determine whether a party is domiciled there.98 It should be also noted that the court’s jurisdiction, based on defendant’s domicile, is applied regardless of the nationality of the defendant, and even if the plaintiff is domiciled outside of the EU or EFTA. As far as legal entities are concerned, Article 60(1) of the Brussels I Regulation and the revised Lugano Convention establish an autonomous notion of domicile. In particular, they stipulate that a company or other legal person or association of natural persons is domiciled at the place where it has its (a) statutory seat; (b) central administration; or (c) principal place of business.99 In addition, Article 5(5) of the Brussels I Regulation100 establishes a special ground of jurisdiction and provides that in disputes arising out of the operations of a branch, agency or other establishment, a person domiciled in a Member State may be sued in another Member State in which the branch, agency or other establishment is situated. In one of its early judgments, the ECJ decided that efficacy of the administration of justice requires that Article 5(5) be interpreted in an autonomous and restrictive manner.101 The ECJ further decided that for the purposes of establishing international jurisdiction over the parent body at the place of its branch, agency or establishment, such branch, agency or establishment should be subject to the direction and control of the parent body.102 In other words, the branch, agency or other establishment must appear to third parties as an easily discernible extension of the parent body.103 In its early practice the ECJ also provided for a clarification of the notion of ‘operations’ of the branch, agency or other establishment which   Art 2 of the Lugano Convention and the revised Lugano Convention (2007).   Case C-26/91 Handte v Traitements Mécano-chimiques des Surfaces [1992] ECR I-3967, para 14. 97   Case C-412/98 Group Josi Reinsurance Comp v UGIC [2000] ECR I-5925, para 61. 98   For a more detailed discussion as to the application of Arts 2 and 59 of the Brussels I Regulation by domestic courts see Austrian Report, section 4.1.1; French Report, answers to HC 1; Italian Report, section 1.2.2. 99   It should be noted that the Lugano Convention of 1988 in its Art 53 only refers to the ‘seat of a company or association of natural or legal persons’ which are to be considered as domicile and mandated by the court to apply its own rules of private international law to determine that seat. 100   Art 5(5) of the Lugano Convention and the revised Lugano Convention (2007). 101   Case 33/78 Somafer SA v Saar-Ferngas AG [1978] ECR 2183, paras 7 and 8. 102   Case 14/76 A De Bloos SPRL v Société en commandite par actions Bouyer [1976] ECR 1497, paras 20–21; Case 139/80 Blanckaert & Willems PVBA v Luise Trost [1981] ECR 819, para 9. 103   Case 139/80 Blanckaert & Willems PVBA v Luise Trost [1981] ECR 819, paras 12–13. 95 96

24  Toshiyuki Kono and Paulius Jurcˇys should, inter alia, mean (1) actions relating to undertakings which have been entered into at the place of business of the branch in the name of the parent body and which are be performed in the Member State where the place of business is established, and (2) actions concerning non-contractual obligations arising from the activities in which the branch has entered at the place in which it is established on behalf of the parent body.104 The rule conferring jurisdiction upon the courts of the state of the defendant’s domicile can be derogated from only in situations prescribed in the Brussels I Regulation itself (Art 3). Accordingly, a court of a Member State may exercise its jurisdiction over a foreign defendant, if there is one of the special or exclusive grounds of jurisdiction or if the jurisdiction is based on parties’ choice of court agreement (Arts 5–31 of the Brussels I Regulation). Such ‘cardinal’105 importance of a defendant’s domicile as a general ground of jurisdiction was confirmed by the ECJ which decided that other jurisdiction rules (Arts 5–31) are merely exceptions to Article 2 and thus have to be interpreted restrictively.106 In addition, the general jurisdiction rule of the domicile of the defendant in a Member State cannot be overcome on the basis of national law.107 The purpose of such a framework of international jurisdiction is based on legal certainty and predictability considerations. Foreseeability of the results also explains why such doctrines as forum non conveniens were not endorsed by the European legislator.108 3.3.2  Jurisdiction based upon the Defendant’s Domicile in IP-Related Disputes In cross-border IP litigation, the question then arises with regard to the relationship of different grounds of jurisdiction. In particular, it might be questioned whether the territorial nature of IP rights would not prevent the courts from hearing disputes involving foreign IP rights. According to most national reports from European countries, the principle of a defendant’s domicile (actor sequitur forum rei) applies equally with regard to actions concerning IP rights.109 Therefore, the court of the country where the defendant is domiciled can assert jurisdiction over actions involving claims related not only to infringements of domestic IP rights, but also claims concerning foreign IP rights (eg, when IP infringing acts have occurred in another Member State or in a non-EU state). This approach appears to be a well-established practice by domestic courts of many EU Member States and is supported among the majority of academics.110 Hence, in cases where foreign IP rights are infringed by acts committed abroad, the Brussels/Lugano regime allows the suing of the defendant (alleged infringer of IP rights) before the courts of an EU Member State if the defendant has his domicile there. This is also the prevailing approach in cases involving Internetrelated infringements of IP rights.111 104   Case 33/78 Somafer SA v Saar-Ferngas AG [1978] ECR 2183, para 13. The same practice is established by courts of some Member States. For a discussion see eg Austrian Report, section 4.1; German Report, answers to HC 1; Greek Report, answers to HC 1; Slovenian Report, answers to HC 1; UK Report, answers to HC 1. 105   See Belgian Report, para 41. 106   See inter alia Case C-412/98 Group Josi Reinsurance Comp v UGIC [2000] ECR I-5925, paras 35–37; Case C-51/97 Réunion européenne SA and Others v Spliethoff ’s Bevrachtingskantoor BV [1998] ECR I-6511, para 16. 107   Case C-281/02 Owusu v Jackson [2005] ECR I-1383, para 37. 108   ibid para 41. 109   Greek Report, answers to HC 1. 110   Austrian Report, section 3.2.3; Belgian Report, para 41; Dutch Report, section 3.2 and nn 18–19; German Report, section 2.2.1.2; Italian Report, answers to HC 1; Spanish Report, answers to HC 1. 111   Austrian Report, section 3.2.3; German Report, section 2.2.1.2; Spanish Report, answers to HC 1 where it is also noted that the issue of applicability of Art 2 of the Brussels I Regulation to IP infringements which occur on the Internet, is still controversial.

General Report  25 The same principle where a court of a Member State has jurisdiction pursuant to Article 2 of the Brussels I Regulation is also applicable with regard to actions concerning unitary Community IP rights. For instance, Article 97 of the Community Trade Mark Regulation provides that all infringement actions and actions for declaration of non-infringement (if such actions are permitted under national law) shall be brought in the courts of the Member State in which the defendant is domiciled or, if he is not domiciled in any of the Member States, in which he has an establishment.112 Only if the defendant is neither domiciled nor has an establishment in any of the Member States, shall such proceedings be brought in the courts of the Member State in which the plaintiff is domiciled or has an establishment. In addition, Article 98(1) stipulates that such a competent court shall have jurisdiction in respect of acts of infringement committed or threatened within the territory of any of the Member States. The same principle also applies with regard to Community design rights113 and Community plant variety rights.114 The jurisdiction of the court in IP-related cases based upon Article 2 of the Brussels I Regulation covers all manner of IP disputes, except those related to the registration or validity of foreign IP rights. Under the existing interpretation of the Brussels I Regulation, such issues as registration or validity fall under the exclusive jurisdiction of courts of the granting state and have to be adjudicated even if issues relating to the registration or validity of IP rights arise as a preliminary question.115 Some national reporters noted that the prevailing approach is that courts of the defendant’s domicile can also order cross-border injunctions in IP infringement cases.116 One other related question concerns the scope of jurisdiction of the court on the basis of the defendant’s domicile. The landmark judgment that sheds some light to this issue is the Shevill case of the ECJ.117 In Shevill the dispute related to the protection of personality rights which were allegedly infringed by the distribution of a journal in several Member States. Some national reports mentioned that the prevailing approach is to apply the Shevill jurisprudence also to multi-state IP infringements.118 Accordingly, the court which asserts jurisdiction on the ground that the defendant is resident in the forum country (Art 2 of the Regulation) is competent to decide upon the entire damage that arose from an infringement of parallel IP rights in the forum state and other states, given that the harmful event causing damage occurred in the forum country. However, it should be noted that in such a case, the court would have to apply the laws of different foreign countries for which the protection is sought. If the jurisdiction of the court is based upon the operations of the branch (Art 5(5) of the Regulation) and the damage or the harmful event occurred in another country, the court would have jurisdiction only with regard to the damage sustained in the forum country.119 112   Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (codified version) [2009] OJ L78/1. 113   Arts 82 and 83(1) Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs [2002] OJ L3/1. 114   Art 101 of the Council Regulation (EC) No 2100/94 of 27 July 1994 on Community plant variety rights [1994] OJ L 227/1. 115   The matters related to the exclusive jurisdiction are further discussed in Ch 4 below. 116   Belgian Report, para 159 and also nn 155 and 156. 117   Case C-68/93 Fiona Shevill and Others v Presse Alliance [1995] ECR I-415. 118   Dutch Report, section 3.2; German Report, answers to HC 1; Italian Report, answers to HC 1; Spanish Report, answers to HC 1. 119   UK Report, answers to HC 1.

26  Toshiyuki Kono and Paulius Jurcˇys On the other hand, some national reports drew attention to the fact that the domestic case law on this issue is scarce or does not exist at all; and that the territorial nature of IP rights might probably be interpreted as limiting the court’s jurisdiction to decide only claims related to the damage sustained in the forum country.120 However, the Swedish Report noted that as a matter of practice, Swedish courts would determine the overall damage if the infringing acts were committed in Sweden.121 The same principles are also established with regard to Community IP rights: namely, the court which has jurisdiction based upon the defendant’s domicile is competent to hear claims related to acts of infringement committed or threatened within the territory of any of the Member States (Art 98 of the Community Trade Mark Regulation, Art 83 of the Community Designs Regulation, and Art 101(2) of the Community Plant Variety Rights Regulation). 3.3.3  Third-Country Situations The Brussels/Lugano regime does not extend to situations where neither of the litigants is resident in any EU Member State. In such cases, the domestic courts of the EU and the EEA states would assert international jurisdiction following the rules of the forum state (Art 4(1) of the Regulation). The domicile of the defendant is acknowledged as the general ground of international jurisdiction in domestic statutes of many EU Member States.122 Some EU Member States (the Netherlands123 and Spain) have aligned their domestic jurisdiction provisions to the Brussels/Lugano regime. For instance, in Spain, Organic Law 6/1985 was adopted on the basis of the Brussels Convention of 1968; hence, Spanish courts would assert jurisdiction over parties who are domiciled in third states, following the same principles applied in internal EU situations.124 It should be also noted that some national reports of EU Member States highlighted the fact that although national courts would apply the provisions of their domestic statutes in order to assert international jurisdiction, the application of domestic law has been largely influenced by EU law and the jurisprudence of the ECJ.125 Yet, not all EU countries follow principles similar to those laid down in the Brussels/ Lugano instruments. The courts of the United Kingdom would assert jurisdiction if the claim could be validly served to the defendant. Insofar as jurisdiction over the ‘overseas companies’ with a branch in the UK is concerned, UK courts would have to follow specific provisions of the Companies Act of 2006 and the Overseas Companies Regulations of 2009.126 In France, Articles 14 and 15 of the Civil Code establish nationality of the plaintiff or defendant as a ground for asserting international jurisdiction. These grounds could be invoked only if, firstly, there are no alternative grounds of international jurisdiction and, secondly, upon the request of the plaintiff.127

  For a discussion, see French Report, answers to HC 1; Slovenian Report, answers to HC 1, question 4.   Swedish Report, answers to HC 1.   Eg Arts 42 and 43 of the French Code of Civil Procedure; Art 3 of the Italian PIL Statute; Art 48(1) [personal jurisdiction] and Art 59 [operation of a branch or agency] of the Slovenian PILP Act; Art 112 of the Swiss Federal Private International Law Act. 123   Dutch Report, section 3.2. 124   Spanish Report, answers to HC 1. 125   French Report, sections 1.2.1 and 1.2.3 for further analysis of the French system of international jurisdiction. 126   UK Report, answers to HC 1. 127   French Report, section 1.2.3.6. 120 121 122

General Report  27 Insofar as a court’s competence to decide over damage claims arising from multi-state IP infringement is concerned, the legal situation would be less clear in cases involving defendants domiciled in third countries. The UK Report, for instance, draws attention to the fact that, subject to the forum non conveniens doctrine, and given that the defendant can be served without leave, UK courts would have unlimited jurisdiction to determine the damage sustained in foreign countries.128 3.3.4  Brussels I Reform Proposals One of the main features of the Commission’s Proposal to reform the Brussels I Regulation is the extension of the scope of application to cases where the defendant is not domiciled in a Member State (so-called ‘subsidiary jurisdiction’). The Commission requested the preparation of a study concerning the possibility of applying special jurisdiction rules of the Regulation in cases involving defendants who are domiciled outside of the EU129 based on the consideration of further legislative options. If the proposal to extend the personal scope of the application of the Brussels I Regulation with regard to defendants resident in non-EU states was adopted, this would mean that the same principles which had been developed for intra-Community situations would be applicable also in cases brought against defendants domiciled in third states. This would harmonise matters which had so far been left to Member States’ domestic legislation, and thus would contribute to more legal certainty. Contrary to the Brussels I Regulation, the CLIP Principles confer general jurisdiction over the courts of the defendant’s habitual residence (Art 2:201(1)). The CLIP Principles also provide for an explanation of the notion of ‘habitual residence’, which in the case of a natural person acting in the course of a business activity implies also the principal place of business (Art 2:601(1)). Article 2:601(2) of the CLIP Principles stipulates that the habitual residence of a company or other legal person shall be in any state in which it has its statutory seat or registered office; or central administration or principal place of business. If a legal entity lacks a statutory seat or registered office, it may also be sued in the state where it was incorporated or, if no such place exists, under whose law it was formed. Finally, similarly to the Brussels I Regulation, the CLIP Principles provide that, in disputes arising out of operations of a branch, agency or other establishment, a person may be sued in the courts of the place in which the branch, agency or establishment is situated (Art 2:207).

3.4  Asian Countries 3.4.1  General Grounds of Jurisdiction in India and Taiwan The Indian Code of Civil Procedure of 1908 contains no specific rules establishing when Indian courts have jurisdiction in cases with a foreign element. Nevertheless, according to their National Report, Indian courts would assume international jurisdiction if the defendant resides in India or is engaged in commercial activities there. ‘Residence’ in India means that the defendant has to dwell permanently or for a considerable time, or have his home in   UK Report, answers to HC 1.  See ec.europa.eu/justice_home/doc_centre/civil/studies/doc_civil_studies_en/htm, Green Paper on the review of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (21 April 2009), COM(2009) 175, 3–4. 128 129

28  Toshiyuki Kono and Paulius Jurcˇys India; a person may have several dwellings concurrently. The nationality of the defendant is not relevant to establishing jurisdiction of the Indian courts. As regards legal entities, Indian courts have international jurisdiction over the defendant’s legal entities that are incorporated in India under the Companies Act and have their principal or subordinate office in India. An action may be filed against a foreigner who is engaged in commercial activities and has an agent in India.130 Indian courts may also assert international jurisdiction over actions against foreigners if there is a cause of action determined in accordance with Indian laws. Taiwanese courts also have international jurisdiction over actions brought against corporate defendants who have their branch in Taiwan (Art 2 of the Civil Procedure Law).131 3.4.2  The Main Principles of the Exercise of International Jurisdiction in Japan The Japanese Code of Civil Procedure, adopted in 1890, did not provide for any specific provisions determining international jurisdiction of Japanese courts. Hence, the main principles concerning the exercise of international jurisdiction were developed gradually by the Japanese courts. It was not until May 2011 that Japan’s Parliament amended the CCP and introduced specific rules on international jurisdiction. This newly adopted legislation can be better explained in light of several landmark decisions by the Japanese courts. One of the trailblazing judgments of the Supreme Court was handed down in 1981, in the so-called Malaysia Airlines case.132 This case established the main principles of determining whether and under what circumstances Japanese courts can exercise international jurisdiction in disputes with a foreign element. In this case an action was brought by the relatives of Japanese passengers killed in a plane crash on a Malaysian domestic flight between Penang and Kuala Lumpur; there were no survivors. The plaintiffs’ action for compensation of damages, brought before a Japanese court, was challenged mainly on jurisdictional grounds. The plaintiffs argued that Japanese courts have international jurisdiction based on the place of the occurrence of contractual obligations. In addition, it was submitted that the defendant had his place of business in Tokyo. The defendant challenged the international jurisdiction of Japanese courts. The Supreme Court found that Japanese courts should have international jurisdiction over an action. Namely, the Supreme Court noted that in the absence of clear provisions on international jurisdiction that would assist in rendering the decision, rules on domestic jurisdiction envisaged in the Code of Civil Procedure should be interpreted in light of the principle of j¯ori (reasonableness, justice) and applied appropriately to determine international jurisdiction in cross-border disputes. The Court remarked that the defendant was engaged in economic activities in Japan, had appointed a representative in Tokyo and had a place of business there. Since the 1981 decision of the Supreme Court in the Malaysia Airlines case, lower courts in Japan have made minor modifications to the doctrine. The so-called ‘special circumstances test’ was developed to allow Japanese courts some discretion in applying general rules in the event that certain specific facts would justify deviation. In their decisions, the lower courts followed the concept that in cases where it is possible to establish the existence of one of the grounds of the venue, according to the provisions of the CCP, the principle of   Indian Report, section 1.3.   Taiwanese Report, answers to HC 1.   Supreme Court of Japan, Judgment of 16 October 1981, 35 Minsh¯u 1224.

130 131 132

General Report  29 j¯ori also mandated acknowledgement of the court seised having international jurisdiction. However, such a general principle was subject to certain limitations: the exercise of international jurisdiction would not be possible if it were to conflict with the principle of fairness between the parties or prevent prompt and speedy adjudication of the dispute. The special circumstances test meant that the court should consider various issues related to the conduct of the proceedings before asserting international jurisdiction. Such issues may be related to the collection of evidence, the hearing of witnesses, issuance of interim orders and so on. The change of approach was welcomed by the bar and legal academics, who applauded the fact that the determination of the existence of international jurisdiction would mean a more case-specific investigation of matters pertaining to the assertion of international jurisdiction. The special circumstances test was later approved by the Supreme Court in the so-called Family case.133 In this case the plaintiff was a Japanese legal entity engaged in the business of importing cars and car parts into Japan. The plaintiff concluded a contract with the defendant (a Japanese national domiciled in Germany), according to which the defendant was entrusted to purchase cars from various European countries, ship them to Japan and undertake other market research activities. For this purpose, a special account was opened to which the plaintiff transferred more than 90 million yen. Over time, the plaintiff became concerned that the entrusted money was not being managed properly. Hence, the defendant was requested to continue the payments for cars purchased by means of letters of credits. In addition, the defendant was requested to return the money from the fund. Later, the plaintiff filed a suit before the Chiba District Court for the repayment of money, arguing that this court was competent to hear the dispute because the place of performance of obligation was the plaintiff ’s headquarters. The defendant challenged the existence of international jurisdiction of the Japanese courts by claiming that the requested amount had been transferred. In its decision on the existence of international jurisdiction, the Supreme Court proceeded from the statement that even in cases where the defendant is not resident in Japan, Japanese courts may nonetheless have international jurisdiction over disputes if there is a connection between the dispute and Japan. After reiterating the view that Japanese courts have jurisdiction over the dispute if one of the conditions of venue set out in the CCP is satisfied, the Supreme Court added that ‘international jurisdiction may be denied if there are some special circumstances where the conduct of court proceedings in Japan is against the idea of fairness between the parties, [or prevents] prompt and speedy adjudication of the dispute’. In the case at hand, the Supreme Court found that the contract was concluded in Germany and the defendant was entrusted to engage in various commercial activities in Germany; there was no explicit agreement between the parties regarding neither the place of performance of obligation nor the governing law. The Court decided that the place of performance of the contract was in Japan, and the governing law of the contract should be Japanese law; therefore international jurisdiction of the Japanese courts could be asserted. However, the Supreme Court took into account that the defendant could not be aware that the claim for the performance of contractual obligations could be brought before Japanese courts. Moreover, the court referred to the fact that the defendant had been living in Germany for the last 20 years prior to the dispute; and since the plaintiff was a legal corporation, the filing of an action should not be an excessively burdensome task. Based on these   Supreme Court, Judgment of 11 November 1997, 51 Minsh¯u 4055.

133

30  Toshiyuki Kono and Paulius Jurcˇys considerations, the Supreme Court came to the conclusion that a decision to exercise international jurisdiction over the dispute would be against the principle of fairness, and would prevent prompt and speedy adjudication of the dispute; therefore they decided to decline international jurisdiction over the dispute. 3.4.2.1  The New Rules on International Jurisdiction The new Japanese rules on international jurisdiction are to a large extent built upon the domestic jurisdiction rules established in the CCP and the practice of Japanese courts. The members of the working group in charge of the preparation of international jurisdiction rules agreed that the principle according to which the action shall in principle be brought before the courts of the defendant’s domicile (actor sequitur forum rei) properly balances the interests of the parties, and therefore should be followed. Accordingly, with regard to actions against natural persons, Article 3-2 of the CCP (2011) establishes that Japanese courts have international jurisdiction if the person against whom the action is brought has his/her domicile in Japan. In a case when the defendant has no domicile or his/her domicile is unknown, Japanese courts have international jurisdiction if the person against whom the action is brought has his/her residence in Japan. The notion of ‘domicile’ should be interpreted in light of Article 22 of the Japanese Civil Code as meaning long-standing contacts with Japan, whereas ‘residence’ implies temporary relationships with Japan.134 Article 4(4) of the CCP provides for domestic grounds of territorial jurisdiction for actions against legal persons. More precisely, Article 4(4) establishes that actions against legal entities shall be brought before courts where the legal entity has its principal office or principal place of business. Further, Article 4(4) establishes that in the case where the place of the office or business is not known, the action can be also brought before a court of the place where the representative or person in charge of the business has his/her domicile. Accordingly, Article 3-2(iii) of CCP (2011) establishes that Japanese courts shall have jurisdiction with regard to actions against a legal entity or any other association or foundation when the legal entity or any other association or foundation has its principal office or place of business in Japan; or, if the place of business is not known or does not exist, the representative or other persons in charge of the business have their domicile in Japan. Further, Article 3-3 provides, inter alia, that actions against persons who have their office or place of business can be brought before Japanese courts but only with regard to commercial activities in Japan. In addition, Article 3-9 of the CCP (2011) codified the special circumstances test developed by the Japanese courts. Hence, according to this provision Japanese courts would have the discretion to decline international jurisdiction over either part of or the whole action, if it appears that there are some special circumstances affecting the fairness between the parties or prompt and speedy adjudication of the dispute. These general jurisdiction rules apply also with regard to cross-border IP disputes. 3.4.2.2  The Transparency Principles The general grounds of international jurisdiction established in the Transparency Principles by and large follow the established practice of Japanese courts and the Proposal for the 134   Kokusai saiban kankatsu kenky¯u-kai [International Jurisdiction Study Group], ‘Kokusai saiban kankatsu kenky¯u-kai h¯okoku (1) [Report of the International Jurisdiction Study Group (1)]’ 883 New Business Law (2008.6.15) 6. Art 22 of the Japanese Civil Code provides: ‘The principal place wherein a person lives shall be his/ her domicile’.

General Report  31 Amendment of the CCP.135 Hence, Japanese courts are conferred international jurisdiction over actions concerning IP rights if the defendant is domiciled or has its principal office or establishment in Japan (Arts 101(1) and 102(1)). It should also be noted that according to the Transparency Principles the court of the state where the defendant is domiciled can also hear claims concerning multi-territorial infringements of IP rights, and decide over claims concerning the damage sustained in foreign states.136 Article 109 of the Transparency Principles establishes a general exception allowing Japanese courts to dismiss a claim, if the claim is so closely related to other countries’ public-interest policies and the proceedings in those countries would be more appropriate than in Japan. This provision to some extent resembles the special circumstances test developed in the Japanese court practice. Yet, at the same time it should be noted that even though Article 109 is intended to provide some flexibility to Japanese courts in determining which court is in the most advantageous position to adjudicate the dispute, the intention of the drafters of the Transparency Principles was to interpret the notion of the ‘public-interest policy’ narrowly.137 3.4.2.3  Joint Japanese-Korean Proposal (Waseda Principles) The defendant’s habitual residence is also established as a general jurisdiction ground in the Waseda Principles (Art 201). ‘Habitual residence’ means the place where the party concerned habitually resides, including his or her principal office or place of business. In the event that the defendant is a corporation, habitual residence means the place where the head office of the corporation or any other legal person is located, and the place under the law of which that corporation or legal person is established. This general ground of jurisdiction is subject to limitations posed by exclusive jurisdiction rules (Art 209), choice-ofcourt agreements (Art 205) or jurisdiction by appearance of the defendant (Art 206). It should be also noted that the Waseda Principles also provide for a special jurisdiction rule determining international jurisdiction based on the place of business. The provision is drafted in light of the existing Japanese domestic jurisdiction regime and stipulates that a person may be sued in a state in which it has a business office, but only with regard to the business conducted at such business office or other office. In addition, Article 212 of the Waseda Principles establishes four grounds which are considered insufficient for a court to base its international jurisdiction: (i) nationality or habitual residence of the plaintiff in the forum state; (ii) nationality of the defendant; (iii) the temporary presence of the defendant or service of writ upon the defendant; (iv) the performance of the formalities necessary to enter into a contract. These prohibited grounds of jurisdiction were drafted with respect to Article 18 of the 1999 Draft Hague Judgments Convention.138 The Waseda Principles, prepared by scholars from Korea and Japan, establish the special circumstances test in Article 211. The special circumstances test would have only ‘negative’ effects in establishing international jurisdiction: a court which has jurisdiction pursuant to Articles 201–8 is entitled to dismiss a part of the whole action if there are 135  The Transparency Principles were drafted with an intention to facilitate the development of Japanese domestic legal framework. 136   S Chaen, T Kono and D Yokomizo, ‘Jurisdiction in Intellectual Property Cases: The Transparency Proposal’ in J Basedow, T Kono and A Metzger (eds), above n 1, 99. 137   Ibid, 108–9. 138   Comments to Art 212 of the Waseda Principles.

32  Toshiyuki Kono and Paulius Jurcˇys special factors that would undermine the fairness between the parties, due process or a prompt trial. 3.4.3  Personal Jurisdiction in Korea The general system concerning the exercise of international jurisdiction in Korea is quite similar to the principles established in Japanese law. Article 2 of the Korean Private International Act was drafted on the basis of previously developed court practice and provides that Korean courts shall have international jurisdiction if a party or a case is substantially connected to the Republic of Korea. In its practice, the Supreme Court of Korea emphasised that in asserting international jurisdiction, Korean courts should take into consideration the international nature of the dispute and consider whether the exercise of jurisdiction would not undermine such underlying principles as fairness between the parties, appropriateness and expediency of adjudication, as well as judicial economy.139 According to their national report, Korean courts would most probably exercise international jurisdiction over a dispute if the defendant is resident in Korea.140 Article 5 of the Private International Act prescribes that where the defendant is a legal entity, Korean courts would assert jurisdiction if the defendant has its principal office or business establishment in Korea. If the place of the principal office or business establishment is not known, jurisdiction should be asserted according to the domicile of the person who is principally in charge of its activities. In addition, Article 12 of the Korean Private International Act posits a special jurisdiction rule according to which an action concerning the affairs of an office or business place can be brought to the court located in the place of such office or business.141 Insofar as multi-state IP disputes are concerned, the Korean court would exercise jurisdiction regardless of whether the plaintiff seeks the protection of Korean IP rights or foreign IP rights. For instance, in the Sonata of Temptation case,142 the Seoul Central District Court found that it had international jurisdiction because both defendants were resident in the Republic of Korea, the copyright infringement had taken place in Korea and there were no special grounds why Korean courts should dismiss the action. Similarly, the close connection and thus international jurisdiction of Korean courts was asserted in the 49 Things to Do in Your Life case, where the court found that the headquarters of the defendants were located in Korea and that the copyright-infringing activities also occurred in Korea.143 The Korean Principles follow the established court practices and entrench the substantial connection between the parties or the dispute and the forum state requirement as the basis for the exercise of international jurisdiction. Article 9 of the Korean Principles establishes a general principle rule that the court of the state where the defendant is habitually resident shall have jurisdiction. Similarly to section 207 of the ALI Principles, the Korean Principles also aim to limit the possibility of an exorbitant exercise of jurisdiction and establish certain grounds where there is no substantial connection between the forum and the dispute.

  Korean Report, sections 1.2 and 2.1, answers to HC 1 and n 283 for further references.   Korean Report, answers to HC No 1. 141  ibid. 142   See Korean Report, sections 1.2 and 2.1; and answers to HC 1. 143   Korean Report, section 2.1. 139 140

General Report  33

3.5  Comparative Observations The national reports have highlighted disputes involving foreign elements that could be adjudicated by domestic courts if the domicile or residence of the defendant is a forum state and the dispute has certain connection with the forum state. However, the standards for determining whether the dispute bears sufficient connection with the forum state vary. In addition, as was illustrated by the national reports, domestic laws also have different methodologies that the courts could apply to determine whether jurisdiction over a dispute could be exercised (eg, forum non conveniens or special circumstances test). The close analysis of the represented legal systems shows that the adjudication of multi-state IP disputes is often constrained by a subject-matter jurisdiction requirement or a narrow interpretation of exclusive jurisdiction rules.

4  Exclusive/Subject-Matter Jurisdiction One of the key problems related to the cross-border enforcement of IPs is the limitations posed by exclusive jurisdiction (subject-matter jurisdiction) rules. Exclusive jurisdiction conventionally means the state of affairs where only courts of a particular country are competent to hear certain disputes. Traditional examples of matters which usually fall under exclusive jurisdiction are immovable property or matters related to the registration of registries. In the case of immovables, courts of the country where the immovable is situated may often have exclusive jurisdiction. Further, matters related to registries or registration may be subject to exclusive jurisdiction by the courts of the place of registration. Hypothetical case no 2 of the Questionnaire aims to enquire into the legal approaches to exclusive/subject-matter jurisdiction in IP disputes. The hypothetical case proposes a situation where a court of country X hears a dispute between two parties concerning the infringement of a patent granted by a foreign state. National reporters were asked whether the courts of their countries would have jurisdiction over foreign IP rights (infringement, validity etc) and if so, what would be the legal effects of such decisions (erga omnes, or between the parties only). Further, the questions of the hypothetical case study aimed to verify whether courts could decide upon the validity of a foreign IP right if this issue arose as a preliminary matter, and whether those decisions differ with regard to registered and non-registered IP rights.

4.1  Exclusive Jurisdiction Rules in the 2001 Draft of the Hague Judgments Convention The negotiations to adopt the Hague Judgments Convention failed in part due to disagreements on various aspects of jurisdiction in IP matters. Nevertheless, the outcome of the discussions during the negotiations had a threefold effect. First, the importance of matters related to jurisdiction in IP cases was acknowledged as playing an important role in the area of international commercial litigation. Secondly, the main problems related to IP

34  Toshiyuki Kono and Paulius Jurcˇys litigation by different legal systems were crystallised. Thirdly, the Hague Judgments project facilitated further research initiatives on the subject around the globe. One of the key provisions related to jurisdiction in IP disputes was entrenched in Article 12 of the 2001 Hague Draft Convention. Article 12 dealt with exclusive jurisdiction over actions concerning rights in rem in immovable property (Art 12(1)), validity, nullity or dissolution of a legal person or decisions of its organs (Art 12(2)), as well as the validity of entries in public registries (Art 12(3)). In so far as IP rights are concerned, it should be first noted that the drafters did not agree upon the question of whether international jurisdiction over IP rights should be addressed in the Convention at all.144 If IP rights were to fall within the scope of the Hague Convention, two alternative provisions were propounded. The difference between the two propositions was related to the issue of whether proceedings concerning the infringement of registered IP rights should fall under the scope of exclusive jurisdiction rules. Hence, according to Alternative A, in proceedings in which the relief sought is a judgment on the grant, registration, validity, abandonment, revocation or infringement of a patent or a mark, the courts of the Contracting State of grant or registration shall have exclusive jurisdiction. Moreover, in proceedings in which the relief sought is a judgment on the validity, abandonment, or infringement of an unregistered mark or design, the courts of the Contracting State in which the mark or design is registered shall have exclusive jurisdiction. Pursuant to Alternative B, courts which have jurisdiction pursuant to Articles 3–16 of the 2001 Draft Convention can also hear claims concerning infringements of registered IP rights. Both A and B Alternatives are subject to several qualifications. First, exclusive jurisdiction rules do not apply to claims concerning validity or infringement of copyrights and other IP rights, the existence of which does not depend on the registration.145 Secondly, the 2001 Draft of the Hague Convention solves the problem which may arise if the validity of IP rights at stake is challenged in infringement proceedings. Hence, regardless of whether IP infringement claims fall within the scope of the exclusive jurisdiction provision or not, such exclusive jurisdiction rules would not be applicable if one of the matters (mentioned in Alternatives A or B) arises as an incidental question in the proceedings of a court which does not have exclusive jurisdiction under Article 12 of the Draft Convention. In addition, proposed Article 12(6) stipulated that the ruling on that matter shall not have binding effect in subsequent proceedings, even if they are between the same parties. The aim of this provision was to limit the extent of exclusive jurisdiction rules only to the cases where the validity or registration issues arise as the main issue of the proceedings.146 It should be noted that Article 12(6) would only be necessary if the infringement and other IP matters (eg contractual disputes related to the exploitation of IP rights) do not fall under the rules of exclusive jurisdiction.147 The text of proposed Article 12 is an outcome of discussions among the representatives of different states with regard to the question whether validity and infringement issues 144   See Summary of the Outcome of the Discussion in Commission II of the First Part of the Diplomatic Conference (6–22 June 2001), available at www.hcch.net/upload/wop/jdgm2001draft_e.pdf, n 80. 145   Nygh-Pocar Report, above n 77, 69; Report of the experts meeting on the intellectual property aspects of the future Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters (Prel Doc No 13), www.hcch.net/upload/wop/jdgmpd13.pdfhttp://www.hcch.net/upload/wop/jdgmpd13.pdf, 7. 146   Nygh-Pocar Report, above n 77, 70. 147   Preliminary Document No 13, Report of the experts meeting on the intellectual property aspects of the future Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters, available at www.hcch.net/ upload/wop/jdgmpd13.pdf, 6.

General Report  35 could be separated or not. Some delegations (UK, Australia, China) argued that IP infringement and validity issues are closely intertwined and cannot be dealt with in separate proceedings. In practice, the validity defence is usually raised in infringement proceedings, especially in patent-related disputes. If infringement disputes could be heard by courts in countries other than the place of registration, differences in interpreting the scope of the patents might arise. Therefore, in many cases the proper forum could be that of the protecting country. The same rationale would apply also in cases of the enforcement of European ‘bundle patent’ rights.148 Other delegations (Switzerland, Scandinavian countries) were in favour of a ‘more flexible approach’ whereby the court of the place of registration has exclusive jurisdiction over matters related to validity, while courts hearing infringement claims would have to stay the proceedings until the validity issue is decided.149

4.2  North American States Common law jurisdictions usually establish that a court can exercise international juris­ diction if both territorial jurisdiction over the defendant and subject-matter jurisdiction grounds are present. The following sections deal with the approaches taken by Canadian and US courts with regard to the establishment of subject-matter jurisdiction in IP disputes.

4.2.1  Subject-Matter Jurisdiction of Canadian and US Courts In Canada, besides rules which allocate jurisdiction between the Federal Courts and courts of particular provinces, one of the main issues in cross-border IP litigation is the establishment of subject-matter jurisdiction. According to their national report, Canadian courts have not yet determined whether their courts would have jurisdiction over the validity and infringement of foreign IP rights.150 However, since Canadian private international law has to a large extent developed on the basis of English law, it is very likely that Canadian courts would take into consideration the jurisprudence of the jurisdictions of the British Commonwealth. In this regard, the Canadian Report referred to the 2009 decision of the English Court of Appeal in the case of Lucasfilm Ltd v Ainsworth,151 where the question of subject-matter jurisdiction was decided. In particular, the Court of Appeal found that English courts are barred from hearing claims for the infringement of foreign IP rights. In Lucasfilm Ltd v Ainsworth, the claims were related to the infringement of US copyright; and even though the alleged infringer was domiciled in England, the subject-matter jurisdiction rules rendered claims for the infringement of foreign IP rights non-justiciable. On the other hand, the Canadian Report referred to earlier Canadian case law and scholarly writings which take a rather different approach from the one established in the recent judgment of the English Court of Appeal. Namely, leading Canadian private international law scholarship and court jurisprudence shows some tendency to take a more functional approach aimed ‘to facilitate the flow of wealth’. Hence, it nevertheless remains possible that Canadian courts would assert international jurisdiction if it appeared that the action   ibid, 4–5.  ibid. 150   Canadian Report, answers to HC 1 and 2. 151   Lucasfilm Ltd v Ainsworth (2009) EWCA Civ 1328; (2010) FSR 10, but see the decision of the Supreme Court (2011) UKSC 39. 148 149

36  Toshiyuki Kono and Paulius Jurcˇys has a real and substantial connection with the province and would decide a case over the infringement or validity of foreign statutory IP rights. In the United States, subject-matter jurisdiction poses similar limitations concerning the exercise of jurisdiction over claims concerning foreign IP rights. In one of the leading patent infringement cases the court decided that a ‘statute purporting to confer subject matter jurisdiction should be narrowly constructed; and ambiguities must be resolved against the assumption of jurisdiction’.152 Generally, unlike personal jurisdiction, the parties cannot waive lack of subject-matter jurisdiction by consent, by conduct, or by estoppel.153 Hence, the United States courts would exercise jurisdiction over infringements of IP rights only if the infringing acts occurred in the United States; this stance has been followed by the United States courts. For instance, in the case of Subafilms Ltd v MGM-Pathe Communications Co it was decided that US courts could grant the plaintiff monetary relief only for infringements which occurred within the United States.154 It is possible that US courts would grant relief in multi-state copyright infringement cases when the infringement takes place in both the United States and other states. However, the plaintiff would not succeed unless he indicates exactly under which foreign laws he wishes to seek international protection.155

4.2.2  Subject-Matter Jurisdiction in the ALI Principles Rules on subject-matter jurisdiction represent one of the major developments proposed by the ALI Principles. Section 211 provides that a court is competent to adjudicate claims and defences arising under foreign laws pertaining to copyrights, neighbouring rights, patents, trade marks, trade secrets, related IP rights and contracts that are related to any of these rights. This legislative approach was to a large extent influenced by efficiency considerations. In particular, the drafters of the ALI Principles considered that speedy adjudication of cross-border IP disputes would hardly be possible if the courts of each country, whose IP rights are concerned, retained exclusive jurisdiction over matters pertaining to the validity and infringement of foreign IP rights. Accordingly, the ALI Principles establish that adjudicatory authority of a court should not be negatively influenced merely by the fact that the object of a dispute is a foreign IP right. In addition, the ALI Principles stipulate that a court may determine all claims and defences among the parties which arise out of the transaction or occurrence upon which the original claim is based, regardless of the territorial nature of the IP rights at stake (section 212(1)). Following a common law approach, the ALI Principles request a court to have subject-matter jurisdiction under its local law and personal jurisdiction (according to relevant provisions of the ALI Principles). Further, the ALI Principles provide that the adjudication of the validity of registered IP rights granted under the laws of another country has legal effects only among the parties to the action (section 211(2)). The ALI Principles acknowledge that states should retain their exclusive authority in deciding such questions as the cancellation of registrations. Nevertheless, courts should be allowed to decide upon such matters as the validity of foreign IP rights. Such decisions of a court concerning the (in)validity of foreign IP rights should not have effects against parties other than those involved in the proceedings. This   Mars Inc v Nippon Conlux Kabushiki-Kaisha 24 F 3d 1368 (Fed Cir 1994) 1373.   Update Art Inc v Modiin Publishing Ltd 843 F 2d 67 (2d Cir 1988) 72. 154   Subafilms Ltd v MGM-Pathe Communications Co 24 F 3d 1088 (9th Cir 1994) and the introductory part of the US Report. 155   Ralphe A Armstrong and Anna Music v Virgin Records Ltd 91 F Sup 2d 628 (2000) 638. 152 153

General Report  37 would have significant facilitating consequences in disputes over IP rights granted in several countries. Furthermore, by limiting the legal effects of decisions over the validity of foreign IP rights to only the parties of the proceedings, the ALI Principles aim to maintain a balance between the interests of various stakeholders (right-holders, other parties to the proceedings and states); and to ensure that the sovereign interests of the state where IP rights had been granted are not undermined. Efficiency considerations also lead to the adoption of another special rule in which a court may permit an intervention by a person who has an interest that is substantially connected to the subject matter of the proceedings. Such interventions could be allowed only if they do not cause undue confusion, delay or in any way obstruct the proceedings (section 211(3)). In the context of subject-matter jurisdiction it is important to note that the ALI Principles also provide for a set of special provisions dealing with international jurisdiction over actions for a declaratory judgment. From a purely policy perspective, actions for (negative) declaratory judgments play a significant role because they provide for a useful mechanism to clarify the legal relationship between the proprietors of IP rights and investors. Section 213(1) establishes a general rule that an action for a declaratory judgment can be brought on the same terms as an action seeking substantial relief. Nonetheless, the ALI Principles provide for a special rule regarding actions for the declaration of the invalidity of a registered right: such actions can be brought only in the state of registration (section 213(2)). By adopting this legal framework, the ALI Principles uphold the sovereignty considerations of the granting state and at the same time restrict the potential for abuse of actions in negative declaratory judgments. In a more complex litigation, an action seeking a declaration of the invalidity of IP rights arising in multiple states may be brought in the state or states in which the defendant is resident. However, the effects of such a judgment concerning rights registered in states other than the forum state is limited between the parties to the action (section 213(3)).

4.3  European States 4.3.1  Brussels/Lugano Regime: General Considerations Article 22 of the Brussels I Regulation (Art 16(4) of the Brussels Convention and the Lugano Convention) provides for exclusive grounds of jurisdiction. Pursuant to Article 22(4) of the Regulation, proceedings concerning registration or validity of registered IP rights can be brought only before the courts of the country where the right in question is registered. Notably, Article 22 confers exclusive jurisdiction on the basis of the substance of the dispute (ie the (in)validity of the patent right) and does not depend on other factors such as the particular characteristics of the parties.156 Article 22(4) does not require that the parties be resident in the forum country; instead it confers jurisdiction upon the courts of the registering country even if neither of the parties are resident in the forum country. Further, exclusive jurisdiction rules apply regardless of how IP rights were registered or deposited. However, Article 22(4) does not apply if the dispute is concerned with the registration or validity of an IP right which is registered in a third country. 156   P Jenard, ‘Report on the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters signed at Brussels’ (27 September 1968) [1979] OJ C59/1 (hereinafter ‘Jenard Report’), 36.

38  Toshiyuki Kono and Paulius Jurcˇys Article 22(4) of the Regulation is of a mandatory nature. This can also be illustrated by Article 25, according to which any court of a Member State shall declare of its own motion that it has no jurisdiction if the claim is principally concerned with a matter over which the courts of another Member State have exclusive jurisdiction by virtue of Article 22. Exclusive jurisdiction rules applicable in cases concerned with the registration or validity of registered IP rights were often considered a reflection of the sovereignty of states.157 The sovereignty argument is traditionally supported by the idea that patent examination and granting procedures involve highly specialised national administrative proceedings which have to prove whether patent applications fulfil general patentability requirements (novelty, inventive step and obviousness). Specially erected patent offices usually have to apply national patent laws and follow precise examination proceedings; besides, in many countries, special procedures for the filing of patent applications are supplementary modifications, and the annulment of patents are provided for in their laws. Hence, procedural and substantive rules are closely intertwined in patent examination proceedings. Therefore, the rationale for exclusive jurisdiction is the assumption that courts of the country of registration are best placed to decide the question of registration and validity of intellectual property rights.158 These considerations are taken into account in order to justify the aim of Article 22(4) to concentrate proceedings in the court which is most related with the validity of the patent right; therefore, parties’ choice of court agreements cannot override the exclusive jurisdiction of the courts as established in Article 22. Article 22(4) is an exception to Article 2 of the Regulation and therefore should be interpreted autonomously.159 Autonomous interpretation means that definitions used in European legislative acts should be interpreted in light of their textual context, genesis and objectives of the legal instrument where they are used.160 This is inevitable in order to assure that the practice of the domestic courts does not differ from country to country. Based on the interpretation of Article 22(4), it applies to national patents as well as patents granted under the European Patent Convention and other IP rights which are subject to registration (registered trade marks, design or plant variety rights).161 Conversely, the validity of IP rights which are not subject to registration (such as copyrights as well as moral rights of authors, neighbouring rights, non-registered trade marks) falls under the guise of exclusive jurisdiction because they are created not on the ground of registration but come into existence ipso iure.162 The material scope of exclusive jurisdiction rules was clarified in the ECJ jurisprudence. In the case of Goderbauer, a dispute arose between the employee and the bankruptcy administrator of the employer over the entitlement to patent rights of inventions created under the employment contract. The ECJ followed the narrow interpretation of exclusive jurisdiction provisions and indicated that disputes having as their object the validity, exist  ibid.   Case 288/82 Ferdinand Duijnstee v Lodewijk Goderbauer [1983] ECR 3663, para 22; D Stauder, ‘Die ausschließliche internationale gerichtliche Zuständigkeit in Patentstreitsachen nach dem Brüsseler Übereinkommen – Art 16 Nr 4 EuGVÜ, Art 19 EuGVÜ’ (1985) Praxis des Internationalen Privat- und Verfahrensrechts 78. 159   Case 288/82 Ferdinand Duijnstee v Lodewijk Goderbauer [1983] ECR 3663, para 19; P Torremans, ‘The way forward for cross-border intellectual property litigation: why GAT cannot be the answer’ in S Leible and A Ohly (eds), above n 1, 194. 160   C Heinze and E Roffael, ‘Internationale Zuständigkeit für Entscheidungen über die Gültigkeit ausländischer Immaterialgüterrechte’ (2006) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 789. 161   ibid. For an overview of the Italian case law in the application of Art 16(4) of the Brussels Convention see Italian Report, section 1.2.2.6 and further references. 162   Although the Italian Report indicated that in one case Art 22(4) of the Brussels I Regulation was applied in a copyright infringement case; see Italian Report, nn 67 and 68. 157 158

General Report  39 ence or revocation of patents as well as enforcement of priority rights should be decided exclusively by the courts of the country of registration.163 Yet, the definition of ‘proceedings concerned with the registration and validity’ of patents and other registered IP rights does not cover claims related with initial ownership in general, or attribution of ownership in case of employee inventions.164 The question of the validity of IP rights arises in almost all cases: the alleged infringer or a party to an IP-related contract may always challenge the validity of IP rights which lie at the heart of a particular dispute. The significance of the validity of IP rights is most obvious in the cases where it is found that the IP rights in question are not valid and which consequently leads to the impossibility of the right-holder to enforce substantive claims. For a long time there was no consent on whether courts dealing with cross-border IP disputes should dismiss the case if one of the parties challenges the validity of foreign IP rights. For instance, the Dutch Report referred to the judgment of the Hague Court of Appeal of 1998 where it was decided that it is not possible to separate validity and infringement issues. Therefore, according to the Hague Court of Appeal the court hearing a case concerning infringement of foreign patents will have to stay the proceedings until the decision on the validity of patents is decided by a foreign court. The Court noted that despite its shortcomings, this was the only possible outcome according to the Brussels Convention. Nevertheless, the Hague Court of Appeal decided that the invalidity defence should not obstruct a court’s powers to grant provisional measures.165 In another case, Roche v Primus, the Dutch Supreme Court ruled that it can decide upon the infringement of foreign patents even if there are serious doubts as to the validity of those patent rights involved.166 Exclusive jurisdiction rules together with rules of parallel proceedings became important in the last decade of the twentieth century, where certain EU-specific litigation strategies were developed. Alleged infringers of registered IP rights often launched proceedings seeking a negative declaration of non-infringement, or that certain IP rights are not valid. Such claims for negative declaratory judgments were often brought to courts which were known for lengthy procedures (eg, Italian courts) or to courts of countries which were open to the enforcement of foreign IP rights (eg, Belgian courts). The advantage of plaintiffs seeking negative declarations was that the lis pendens rule established in Article 27 would require the courts later seised to stay the proceedings if the same case between the same parties is pending before courts of another country, and would eventually decline jurisdiction if the court first seised should assert jurisdiction over the dispute.167 In practice this would prevent the right-holder (‘actual plaintiff ’) from enforcing his rights until the proceedings before the court first seised finished.

4.3.2  The ECJ Decision in the Case of GAT v LuK Many of the controversies related to the legal effects of the invalidity defence and the relationship between exclusive jurisdiction rules with other jurisdictional provisions were 163   Case 288/82 Ferdinand Duijnstee v Lodewijk Goderbauer [1983] ECR 3663, para 24. Some domestic courts have applied Art 22(4) in cases where the revocation of registered rights was at stake, see eg OLG Stuttgart, Decision of 26 May 2000 – 2 U 256/99 Recht der Internationalen Wirtschaft 141–43. 164   Case 288/82 Ferdinand Duijnstee v Lodewijk Goderbauer [1983] ECR 3663, paras 26–28; D Stauder, above n 158 at 79. 165   Dutch Report, section 3.6. 166  ibid. 167   Case C-116/03 Erich Gasser GmbH v MISAT Srl [2003] ECR I-14, paras 71–73.

40  Toshiyuki Kono and Paulius Jurcˇys clarified by the ECJ. In the case of GAT v LuK168 a dispute arose between two German companies, ‘GAT’ and ‘LuK’, which were competitors in the car manufacturing industry. GAT was supplying certain vehicle parts to another car manufacturer (Ford) which allegedly infringed two patents owned by LuK in France. The alleged infringer (GAT) brought a suit for the declaration of non-infringement to the District Court of Düsseldorf and argued that the patents which LuK held in France were either void or invalid. The District Court of Düsseldorf found that it had jurisdiction with regard to the infringement issue, since both of the parties were resident in Germany (Art 2). Moreover, the Court held that it also had jurisdiction with regard to the validity of a disputed patent. In later proceedings, the District Court of Düsseldorf dismissed the claim brought by GAT, on the ground that the manufacturing process actually fell within the scope of the French patents.169 GAT brought an appeal. On its behalf, the Düsseldorf Court of Appeals (Oberlandes­ gericht) referred to the ECJ for a preliminary ruling under Article 234 EC. The primary question was whether Article 16(4) of the Brussels Convention confers exclusive jurisdiction only upon the courts in the proceedings where the main issue is the (in)validity of the patent or whether it also applies to those cases where the issue of (in)validity is raised as a counter-defence by the defendant in the course of the proceedings. One of the actual problems of interpreting the given provision was that the text reads differently in the other languages of the Convention. The English text referred to the proceedings ‘concerned with’, while in other translations of the Convention reference was made to the proceedings ‘that have as their object’ validity matters. In his opinion, Advocate General Geelhoed noted that the more restrictive version of the language used in the English text should not be followed. On the other hand, AG Geelhoed argued that Article 16(4) should not be construed as being limited to only cases where the principal claim in the proceedings targets the issue of validity of a patent. In the view of AG Geelhoed, Article 16(4) would also be undermined if foreign infringement courts were to decide the issue of validity as an incidental matter. In his opinion, AG Geelhoed did not place much emphasis on the different wording of Article 16(4) of the Convention; instead, he reviewed the objectives of the Brussels Convention and made a common argument that conferral of exclusive jurisdiction is based on the assumption that courts of a country of registration are ‘best suited to adjudicate upon the validity of a patent’. Furthermore, he indicated that exclusive jurisdiction is also justified by the fact that different national authorities are involved in the process of granting patent rights. The Advocate General indicated that the need to interpret Article 16(4) is also supported by the more general objective of avoiding inconsistent judgments. The ECJ followed the reasoning presented by the Advocate General and adopted a wider interpretation of Article 16(4). In particular, the ECJ noted that exclusive jurisdiction rules should be interpreted in consonance with other jurisdictional provisions of the Brussels Convention. The Court noted that the rationale behind exclusive jurisdiction rules is that questions of registration and validity have to be decided by the court that is best placed to rule upon these issues, ie courts of the country of registration. Moreover, the ECJ reiterated that patent disputes usually are related to highly technical questions that are consequently 168   Case C-4/03 Gesellschaft für Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I-6509. 169   See the decision of the Düsseldorf District Court (Landgericht Düsseldorf) of 31 May 2001 in case 4 O 128/00, Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 31.5.2003; 2001 Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 983–86 (‘Schwungrad’).

General Report  41 decided by specially designated institutions and courts.170 The ECJ decided that exclusive jurisdiction rules shall come into play in any situation where the issue of validity is at stake. Thus, according to the ECJ, it does not matter whether the validity question is part of the main claim or is raised as a plea in objection.171 Consequently, exclusive jurisdiction rules would be undermined if questions of (in)validity of a patent was decided by any other court than the court of the granting country.172 In addition, the ECJ clearly stated that such interpretation of the rules on exclusive jurisdiction would contribute to legal certainty, foreseeability of the parties as to which courts are competent to adjudicate the dispute and the avoidance of inconsistent judgments.173 The UK national report indicated that such interpretation of exclusive jurisdiction rules affirmed the established practice of English courts. Yet, the judgment of the ECJ in the case of GAT v LuK was met with fierce criticism by continental scholars.174 Three main arguments were put forward against the reasoning of the ECJ. First, it was indicated that the ECJ judgment in GAT v LuK not only contradicted domestic procedural statutes of certain Member States, but arguably was also contrary to the jurisprudence of the ECJ itself.175 This is because according to the GAT judgment, jurisdiction of the case depends on whether the question of validity of a particular IP right is raised or not.176 This would often be the issue in cases involving disputes over infringements of foreign IP rights: namely, actions concerning the infringement of foreign IP rights may be brought before courts of a defendant’s domicile. According to the reasoning of the ECJ in the GAT v LuK case, the court seised will have to decline jurisdiction if the question of validity of foreign IP rights is raised at later stages of the proceedings. Secondly, the practical outcome of the ECJ ruling in GAT v LuK is that disputes over registered IP rights will in most cases have to be resolved before the courts of the granting country. This would bar the possibility of bringing actions over parallel IP rights (eg, infringement of European bundle patents) before the court of a single country. Such a legal regime would create undue burden upon the holders of parallel IP rights which would have to resort to a country-by-country litigation despite the fact that rights infringed are substantially the same. Therefore, the ECJ was criticised for its unwillingness to take into consideration procedural costs associated with country-specific litigation.177 Further, it was argued that the GAT v LuK decision opened the gates for the alleged infringer to delay proceedings by raising an invalidity defence.178 Some national reporters indicated that the ECJ could have arrived at a different solution by allowing infringement courts to decide on the validity of foreign registered IP rights, and such decisions should have only inter partes effects.179

  Case C-4/03 GAT v LuK [2006] ECR I-6509, paras 22–23.   ibid, para 25. 172   ibid, para 26. 173   ibid, paras 28–29. 174   Italian Report, answers to HC 3; French Report, section 2 and n 74 for further references. 175   Case C-111/01 Gantner Electronic [2003] ECR I-4207, para 26; Case C-39/02, Maersk Olie & Gas A/S v Firma M de Haan en W de Boer [2004] ECR I-9657, para 36 176   C Heinze, ‘A framework for international enforcement of territorial rights: the CLIP principles on jurisdiction’ in J Basedow, T Kono and A Metzger (eds), above n 1, 60. 177   P Torremans, ‘The way forward for cross-border intellectual property litigation: why GAT cannot be the answer’, in S Leible and A Ohly (eds), above n 1, 194. 178   Swedish Report, section 1.2.3. 179  ibid. 170 171

42  Toshiyuki Kono and Paulius Jurcˇys Thirdly, academics did not support the ECJ’s attempt to justify exclusive jurisdiction rules by arguing that numerous administrative agencies are involved in patent granting proceedings.180 This argument is only partially true because in many cases international organisations such the European Patent Office are involved in patent-granting proceedings. Besides, patent applications filed according to the Patent Cooperation Treaty might be processed by patent offices of foreign countries. Hence, it is argued that exclusive jurisdiction rules matter only in cases which are concerned with the revocation of patent validity, but not where the question of patent validity arises as a preliminary matter.

4.3.3  Third-Country Situations The answers provided in the European national reports highlighted the fact that domestic statutory rules or case practice are not uniform in cases where the defendant is not resident in any of the EU Member States. For instance, the French Report notes that it is possible that French courts might nevertheless make an inter partes decision upon the validity of foreign patent rights.181 This would not be possible however in the UK, where courts can hear a case that has both in personam and subject-matter jurisdiction (the latter is sometimes also referred to as ‘justiciability’). The requirement of justiciability was established in the Moçambique case182 concerning actions of ownership over foreign land. According to the Croatian Report, Croatian law does not follow strict territoriality principles which would prevent Croatian courts from adjudicating disputes concerning infringement of foreign IP rights. Hence, Croatian courts would have jurisdiction if any one of the jurisdictional grounds existed (eg, if the defendant’s domicile or residence was in Croatia, the parties to the dispute were Croatian nationals and the defendant had residence in Croatia, if damage occurred in Croatia, or the defendant did not challenge the jurisdiction of the court).183 As regards the jurisdiction of Croatian courts to decide matters concerning the registration or validity of foreign IP rights, the situation is rather unclear. This is because there are neither statutory provisions dealing with the issue nor any court judgments on this question. However, the absence of any clear rule on whether Croatian courts have international jurisdiction over the matter does not mean that the jurisdiction would be declined. Instead, Article 187, when applied in conjunction with Article 27 of the Civil Procedure Act, may lead to the conclusion that Croatian courts will assert international jurisdiction over the dispute regardless of whether the foreign-registered IP right is valid or not. Insofar as nonregistered IP rights are concerned, the national report states that Croatian courts would also assert jurisdiction regardless of whether the validity of a foreign non-registered IP right is challenged or not.184 If the validity defence in IP infringement proceedings arises in the claim or counterclaim, the legal effects of the court’s decision over the validity would have erga omnes effects. Yet, if the validity issue arises merely as an objection in the proceedings, legal effects would be limited to the effects between the parties themselves.185

180   A Kur, ‘A Farewell to Cross-Border Injunctions? The ECJ Decisions GAT v LuK and Roche Nederland v Primus Goldenberg’ (2006) 7 International Review of Intellectual Property and Competition Law 850 et seq. 181   French Report, answers to HC 3. 182   British South Africa Co v Compania de Moçambique [1893] AC 602. 183   For a more elaborate presentation see Croatian Report, answers to HC 2. 184   Croatian Report, answers to HC 2. 185  ibid.

General Report  43

4.3.4  Exclusive Jurisdiction Rules in Commission Proposal (2010) and the CLIP Principles In the Commission Proposal for a Regulation (2010), the rules on exclusive jurisdiction in IP matters (Art 22(4)) remain identical but the rules concerning the coordination of parallel proceedings have changed. In particular, one of the first concerns was the operation of the lis pendens rule and the policy objective to restrict the possibility of filing torpedo claims.186 The CLIP Principles to a large extent reflect the criticism raised with regard to the ECJ judgment in the GAT v LuK case. The CLIP Principles maintain the widely acknowledged principle of territoriality of IP rights. Article 2:401(1) states that in disputes having as their object a judgment on the grant, registration, validity, abandonment or revocation of a patent, a mark, an industrial design or any other IP right protected on the basis of registration, the courts in the state where the right has been registered or is deemed to have been registered under the terms of an international convention shall have exclusive jurisdiction. Nevertheless, this rule shall not apply where the validity or registration arises in a context other than by principal claim or counterclaim. In such cases the decisions do not affect the validity or registration of those rights as against third parties (Art 2:401(2)). In establishing such a legal regime, Article 2:401 aims to reconcile the principle of territoriality of IP rights with the need to facilitate efficient cross-border litigation. The CLIP Principles provide two modifications to the exclusive jurisdiction rules that exist under the Brussels/Lugano framework. First, the CLIP Principles aim to clarify that exclusive jurisdiction rules apply only if the validity or registration matters are part of the claim or counterclaim and do not extend to situations where these matters have to be decided as a preliminary question.187 It follows that according to the CLIP Principles the questions of validity or registration could also be decided in infringement or any other proceedings which take place before courts other than those in the protecting country. Secondly, it is established that a court’s jurisdiction to adjudicate incidental questions of validity and registration does not have effects vis-à-vis third parties. This means that a decision upon the validity of registrations of foreign IP rights does not interfere with the functions or functioning of the administrative agencies of the protecting country. The CLIP Principles also stipulate that if a court is seised of an action which is subject to the exclusive jurisdiction of other courts by virtue of Article 2:401, it shall declare sua sponte that it has no jurisdiction (Art 2:402).

4.4  Exclusive Jurisdiction in IP Disputes in Asian States 4.4.1  Exclusive Jurisdiction Rules in India and Taiwan The Indian national report noted that Indian courts would have jurisdiction only with regard to actions concerning infringements of Indian IP rights.188 The Taiwanese national report indicated that Taiwanese courts would have jurisdiction in infringement disputes   For further discussion see sections 7.3.5 and 8.3.4 of this Report.   A Kur and B Ubertazzi, ‘The ALI Principles and the CLIP Project: A Comparison’ in S Bariati (ed), Litigating Intellectual Property Rights Disputes Cross-border: EU Regulations, ALI Principles, CLIP Project (Milan, CEDAM, 2010) 108–9. 188   Indian Report, answers to HC 2. 186 187

44  Toshiyuki Kono and Paulius Jurcˇys concerning foreign IP rights. However, the law in Taiwan does not provide for a clear-cut answer as to whether a Taiwanese court would be competent to decide over issues of validity of foreign-registered IP rights. However, Article 24 of the proposed Draft Amendment to Applicable Law for International Civil Disputes of Taiwan provides that the court can decide over the validity of foreign IP rights, notwithstanding whether they are registered or not. Such decisions would have legal effects only between the parties.189

4.4.2  Exclusive Jurisdiction over IP Disputes in Japan The Japanese Code of Civil Procedure did not provide for any specific rules concerning the jurisdiction of Japanese courts over foreign IP rights. The prevailing opinion is that Japanese courts could assert international jurisdiction in cases over infringement of foreign registered IP rights. However, in cases where the validity of a registered IP right, e.g. patent, is raised in the main claim or counterclaim, Japanese courts would not have jurisdiction over the dispute.190 Nevertheless, in cases where the validity issue is brought as a defence, such as a contest of validity of a patent or other registered IP right concerned, it would not affect international jurisdiction of a Japanese court. In this context, a path-breaking Japanese judgment was handed down by the Tokyo District Court in 2003 (the ‘Coral Sand’ case).191 The factual circumstances in this case were as follows: the plaintiff was a Japanese corporation which produced fine powder from fossil coral and sold it as an ingredient in health food. This fine powder was sold and distributed in Japan and the United States. The defendant, another Japanese corporation, was the owner of a patent in the United States for compounds which include coral sand that promoted health benefits. Having found that a similar material was being sold in the United States, the patent-holder issued warning letters to the Japanese manufacturer and the American distributor, urging them to halt manufacturing and sales activities. The Japanese producer of fossil coral filed a suit requesting the court to issue a negative declaratory judgment that the defendant had no right to seek an injunction in Japan on the basis of an alleged infringement of the American patent and thus stop the manufacturing and distribution of the products in the United States. The plaintiff also argued that sending letters making false allegations of infringement of a patent constitute false allegations under the Japanese Unfair Competition Prevention Act (Fusei ky¯os¯o b¯oshi h¯o, as further amended) and entitled the plaintiff to seek damages for injury to the plaintiff ’s reputation. In response, the defendant argued that the principle of territoriality of IP rights prevents the Japanese courts from exercising international jurisdiction to claims for negative declaratory judgments related with injunctions based on an American patent. Moreover, the defendant stated that the claims raised by the plaintiff had no legal basis and therefore should be dismissed. The Tokyo District Court found that where jurisdiction is based on the domicile of the defendant in Japan (Japanese corporation with a registered office in Japan), the jurisdiction of Japanese courts should be asserted (Art 4(4) of the CCP). Further, the Court did not find any special circumstances which would require denial of international jurisdiction. Having   Taiwanese Report, answers to HC 2.   Japanese Report, answers to HC 2. 191   Tokyo District Court, Judgment of 16 October 2003, 1847 Hanrei Jih¯o 23 (‘Coral Sand’ case), abbreviated English translation available at www.tomeika.jur.kyushu-u.ac.jp/result.php?s=49ad07dddf8070213df126c2e9c17 296&c=95bda1d6770bf04bb3028edb28cf5585. 189 190

General Report  45 established that it had general jurisdiction, the Tokyo District Court addressed the principle of the territoriality of IP rights. It stated that ‘the principle of territoriality of patents means that the grant, transfer, validity etc of patent rights of each country is governed by the laws of that particular country. The validity and effects of a patent are to be recognized only within the territory of that country.’ The Court also noted that the territoriality of patent rights is to be understood as a principle of substantive law, and does not affect the question of international jurisdiction of courts which are seised with a claim related to patent rights. In addition, the Tokyo District Court decided that the creation of patent rights should be considered with regard to the national economic policies of the granting country. Thus, if the court seised has to order an injunction on the basis of an infringement of a foreign patent, it might be necessary to decide the question of validity of such a patent right. However, in the opinion of the Court, the question of validity of a patent right should be seen as a matter of substantive law, and therefore should not affect the decision of whether the court seised has international jurisdiction over the dispute. With regard to the invalidity defence, the Court emphasised that at the time when the decision was made, there was no positive law governing such situations. However, if the counterparty is challenging the validity of the patent and thus the legitimacy of the patent-holder’s claims, or if in a case related to ordering an injunction finds that the patent right, which would have been the basis for an injunction, is not valid, such decision of invalidity has limited effects: affecting only the parties to the proceedings and not third parties. It follows then that there is no ground to decline jurisdiction if the court seised is not the court of the registering state. Further, the claim that the patent right at stake is invalid should not interrupt the continuation of the proceedings of the court seised if that court is not a court of the registering country. The prevailing opinion is that the Japanese can also exercise their international jurisdiction in cases concerning infringement of foreign non-registered IP rights. The fact that the validity of non-registered IP rights is challenged does not negatively affect the assertion of jurisdiction. However, no particular judgments of Japanese courts have been reported so far which illustrate the actual practice.192 4.4.2.1  Exclusive Jurisdiction in the CCP (2011) Article 3-5 of the CCP (2011) establishes exclusive jurisdiction rules. Article 3-5(ii) confers exclusive jurisdiction to Japanese courts over actions related to registration and entries in public registries. The rationale behind this provision is that all public registries require the involvement of public agencies whose acts can be reviewed only by judicial authorities of the same country. Therefore, Japanese courts shall have jurisdiction only with regard to registration and entries in Japanese public registries. Further, during the drafting process it was generally agreed that even if Japanese courts were allowed to invalidate entries in public registries of foreign countries, such Japanese court judgments are very likely to remain unrecognised by third countries concerned. Further, Article 3-5(iii) of Section III should be considered as lex specialis to the abovementioned rule. Article 3-5(iii) posits that actions related to the existence and effects of IP rights (as they are defined in Article 2(2) of the Intellectual Property Basic Act), which are subject to registration, shall be subject to the exclusive jurisdiction of Japanese courts if such IP rights are to be registered in Japan. The material scope of application of this   Japanese Report, answers to HC 2.

192

46  Toshiyuki Kono and Paulius Jurcˇys provision appears to be narrow and covers only matters related to the existence and effects of registered IP rights.193 Some earlier reports of the International Jurisdiction Working Group suggest that its members were aware of the possibility that Japanese courts may be issued with a claim for a negative declaratory judgment whereby the plaintiff seeks declaration of non-liability and invalidity of foreign registered IP rights. It was considered that in cases where the question of validity arises as the main issue, courts of the country of registration should be the best places to decide or hear the claim. Consequently, the decision was to adopt the rule that even if Japanese courts had jurisdiction based on the defendant’s domicile, they should decline jurisdiction over the case if the main object of the proceedings is related to the validity of foreign registered IP rights. On the other hand, the drafters of the CCP (2011) considered that there may be situations where the validity of a foreign registered IP right may be challenged by the defendant. In such cases, the determination of international jurisdiction should not be precluded by the invalidity defence, which is considered a matter of substance, but instead must be decided according to the applicable law. 4.4.2.2  Exclusive Jurisdiction Rules in the Transparency Principles The Transparency Principles follow the prevailing approach and provide that the jurisdiction over actions concerning validity and existence be vested only to courts of the registering country. However, this exclusive jurisdiction should exist only in cases where the registration or validity issues arise as the main issue of the dispute. Thus, in cases related to infringement of IP rights, questions concerning the registration and validity of foreign IP rights could be decided also by a court having international jurisdiction over the infringement case. The decision of a preliminary question does not have effects against third parties. According to the drafters of the Transparency Proposal, such limited approach to exclusive jurisdiction should facilitate prompt and efficient resolution of disputes regardless of whether the rights involved are granted by a foreign country or the forum country.194 Moreover, inter partes effects of decisions concerning the validity of foreign IP rights do not impose upon the sovereignty considerations of the granting country.195 The Transparency Proposal does not endorse the possibility of declaring foreign IP rights invalid for one practical reason, namely, the fear that foreign courts might err in applying foreign IP statutes according to which the registered IP right was granted and the validity of which is challenged. To put it differently, the drafters of the Transparency Proposal were of the opinion that courts of the country of registration are nevertheless best placed to render judgments on the validity of IP rights with erga omnes effects.196 So-called ‘torpedo’ claims, whereby the alleged infringer aims to bring proceedings for a negative declaratory judgment before a court of a country which is known for its slow proceedings, are not known in Japan. This is mainly because so far there is no strict lis pendens rule which would require Japanese courts to stay the proceedings if the action involving the same substance and the same parties has been brought before courts of another country. Nonetheless, the Transparency Principles take a future-oriented approach and provide that 193   According to Art 2(2) of the Intellectual Property Basic Act, ‘IP right shall mean a patent right, a utility model right, a plant breeder’s right, a design right, a copyright, a trade mark right, a right that is stipulated by laws and regulations on other intellectual property or right pertaining to an interest that is protected by acts’. 194   S Chaen, T Kono and D Yokomizo, ‘Jurisdiction in Intellectual Property Cases: The Transparency Proposal’ in J Basedow, T Kono and A Metzger (eds), above n 1, 78. 195  ibid. 196  ibid.

General Report  47 in cases where an action is brought before a Japanese court seeking a declaration of noninfringement and also challenges the validity of a foreign IP right, a Japanese court shall dismiss the action if other proceedings based on the same or a related cause of action have been instituted before a foreign court; the Japanese court shall dismiss the claim if the primary obligation or primary facts (e.g. patent infringing acts) occurred or should have occurred in that foreign country (Art 201). According to the rules on recognition of foreign judgments, court decisions rendering foreign IP rights invalid may be considered contrary to public policy and be refused recognition (Art 402(3)). In other words, if a court of Taiwan were to decide that a certain patent granted by the Japanese Patent Office is declared invalid, such a decision of the Taiwanese court will likely be refused recognition in Japan on the ground that it is contrary to the public policy of Japan. 4.4.4.3  The Joint Japanese-Korean Proposal (Waseda Principles) The Waseda Principles do not follow the strict territoriality approach which allows a court to exercise international jurisdiction if one of the prescribed grounds of jurisdiction is satisfied. However, as regards registered IP rights, Article 209(1) provides that disputes concerning acquisition, registration, validity or revocation of IP rights have to be resolved exclusively by the courts of the state of registration. Such an exclusive jurisdiction rule would not be applicable if the issues pertaining to the acquisition, registration, validity or revocation of registered IP rights arose as a preliminary or incidental question (Art 209(2)). In such situations, the decision would have legal effects in subsequent proceedings.

4.4.3  Exclusive Jurisdiction in IP Disputes according to Korean Law In Korea, there are no statutory jurisdiction rules dealing with international IP litigations. Yet, according to established case law, actions concerning the existence, grant, registration, validity and revocation of patent rights fall within the exclusive international jurisdiction of the registering state.197 Such an exclusive jurisdiction rule is mandatory and cannot be modified by the parties’ choice of court agreement. It should be also noted that in one case, the Seoul High Court decided that exclusive jurisdiction rules do not apply for claims where the plaintiff seeks a transfer of the registration of foreign patents for the invention created on the basis of employment or other contractual relations.198 In the case at hand the court found that Korean courts had international jurisdiction on the ground that both parties were resident in the Republic of Korea and the employment duties resulting in the creation of the invention were performed in Korea. By and large, the exclusive jurisdiction rules concerning registration and validity of registered IP rights look identical in the Waseda and Korean Proposals. In both of these legislative proposals exclusive jurisdiction is conferred upon the courts of the country where those registered IP rights are granted (registered). Besides, in cases where the question of validity or registration arises before a court dealing with foreign-registered IP rights, both proposals follow the approach adopted in the ALI Principles that such decisions over registration and validity shall have effect only between the parties concerned and cannot have legal effects in other court proceedings. Article 10 of the Korean Principles follows the   See the Korean Report, section 2.1 para [2]; nn 183, 184 and 296 for further references.   Korean Report, section 2.1 para [3] and n 185.

197 198

48  Toshiyuki Kono and Paulius Jurcˇys rationale of the 1999 Hague Draft, in that an exclusive jurisdiction rule would be applicable only in cases where disputes over the creation and validity arise as the main issue. This exclusive jurisdiction rule would not apply to disputes where the question concerning the creation or validity of registered IP rights arises as a preliminary matter. Further, it should be noted that Article 10 of the Korean Principles deals only with exclusive jurisdiction over the validity and registration of foreign registered IP rights.199 Accordingly, the Korean Principles do not prevent the courts from deciding questions related to the validity of foreign non-registered IP rights.

4.5  Comparative Observations Close analysis of the represented legal systems shows that the adjudication of multi-state IP disputes is often constrained by a subject-matter jurisdiction requirement or a narrow interpretation of exclusive jurisdiction rules. One notable difference between the common law jurisdictions and continental European countries deserves attention. According to the Canadian and American reports, a subject-matter jurisdiction requirement would practically pre-empt the courts from hearing any claims concerning infringement or validity of foreign IP rights. Jurisdiction could be asserted only with regard to some incidental issues such as ownership of foreign IP rights. Under the European Brussels/Lugano regime, disputes concerning non-registered IP rights (such as copyrights or neighbouring rights) do not fall under exclusive jurisdiction rules and thus could be adjudicated by any court which has jurisdiction pursuant to one of the provisions of the Brussels/Lugano instruments. Exclusive jurisdiction rules as they were interpreted by the ECJ in the GAT case, would apply only with regard to registered IP rights. In the midst of such a legal environment, a number of legislative proposals put forward various possibilities of how to facilitate a resolution of multi-state IP disputes and to overcome limitations related to subject-matter/ exclusive jurisdiction requirements.200 One possible solution to the problem was first established in the 2001 Proposal for the Hague Judgments Convention. Namely, it was proposed in Article 12 that decisions over such issues as grant, registration, validity, abandonment or revocation of patent or mark should have inter partes effects.201 If any initiatives concerning adjudication of multi-state IP disputes is to be pursued in the future, the starting point should be the 2001 Draft of the Hague Judgments Convention.

5  Jurisdiction in IP Infringement Disputes Although the defendant’s domicile or habitual residence is a widely acknowledged principle of international jurisdiction, it is not the only ground upon which actions can be brought. IP cases have for a long time been subject to the jurisdiction of courts of those states which grant IP rights. This basis of jurisdiction was sometimes explained as a reflection of proprietary rights (land, immovable property) over which only courts of the situs   Korean Report, n 233 and answers to HC 2.   ss 211–14 of the ALI Principles; Art 2:401 and 2:402 of the CLIP Principles; Art 103 of the Transparency Principles; Art 10 of the Korean Principles. 201   Available at www.hcch.net/index_en.php?act=publications.details&pid=3499&dtid=35. 199 200

General Report  49 rei are competent, or linked to the protection of sovereign interests of the countries which grant IP rights. However, the expansion of international commercial activities and development of new digital technologies facilitated the creation of innovative business models which also brought about global strategies for the exploitation of IP rights. Jurisdiction in IP infringement disputes is without any doubt one of the cornerstones in the system of international adjudication of IP disputes. The importance of infringement jurisdiction in IP matters is also associated with a number of controversial questions. It is the territorial nature of IP rights that makes IP infringements substantially different from other kinds of torts. This section of the General Report is based on the answers provided in the national reports to hypothetical cases no 1 and 2. Hypothetical case no 1 sketched the following situation: A, who was an international pop-music idol, released a new single. After a short while B (a publisher of a monthly music journal) inserts a headline pronouncing that A’s new single is a mere adaptation of another song released in the 1950s. Questions 2 and 3 of the hypothetical case enquired whether and under what circumstances a court of a particular country would exercise its jurisdiction in tort disputes, and whether the court would be competent to decide on the damage suffered by A in the forum country as well as in other foreign countries where the journal was distributed. Since the case was obviously concerning libel/defamation disputes, the national reporters were also asked to indicate whether the decision of the court would differ in IP infringement cases.

5.1  Infringement Jurisdiction in the 2001 Draft of the Hague Judgments Convention Article 10 of the 2001 Hague Draft established a special jurisdiction rule for torts or delicts. Pursuant to Article 10(1), an action in tort or delict can be brought in the courts of the state in which (a) the act or omission that caused injury occurred; or (b) the state in which the injury arose. The latter would not apply if the defendant proves that the person claimed to be responsible for the tort could not reasonably foresee that the act or omission could have resulted in that particular state. In addition, Article 10 contains several provisions which are relevant for Internet-related activities. Namely, actions in tort could also be brought before the courts of the state in which the defendant has engaged in frequent or significant activity, or has directed such activity into that state (Art 10(2)). However, in order to protect the business operators, the 2001 Draft of the Hague Convention also established that courts shall not have jurisdiction if the defendant has taken reasonable steps to avoid acting or directing activities to the forum state (Art 10(3)). According to the Explanatory Report, the plaintiff in distant tort cases could have had the option to file a suit either before the courts of the country where the act or omission occurred, or before the courts of the country of injury.202 The same also applies in cases when the act or omission, or the injury, may occur in the future (Art 10(4)). The 2001 Hague Draft did not provide for a definition of the place of act or omission, nor did it offer a criterion to identify such place. Instead, it was generally understood that the court seised had to decide on this issue according to its own national law. As regards the place of injury, priority was given to the place where direct effects of the act occurred (the indirect harm   Nygh-Pocar Report, above n 77, 59.

202

50  Toshiyuki Kono and Paulius Jurcˇys was considered to be an insufficient connecting factor).203 The courts having jurisdiction, according to the rules of Article 10, would have had competence to decide only with respect to injury that occurred or may occur in the forum state, unless the domicile of the defendant is in the country where the injury was sustained (Art 10(5)). As a general rule, courts of the place where the act or omission that caused injury occurred should have jurisdiction to decide over injury which occurred in other states. It is noteworthy that Article 10 of the 2001 Draft of the Hague Convention could be used as an alternative to other general and special grounds of jurisdiction such as the place of a defendant’s habitual residence, in which case the forum would be competent to decide with regard to overall damage sustained by the plaintiff (Art 3), to choice of court (Art 4), or to the forum of the branch or any other establishment of the defendant given that the action is related to the activities of that branch (Art 9). In addition, the 2001 Hague Draft left open the possibility for Contracting States to provide for any additional grounds of jurisdiction (Art 17). The 2001 Draft did not contain any special provisions related to infringements of IP rights which meant that jurisdiction in cross-border IP infringement cases were to be assessed according to the general rules referred to above. However, from the preliminary documents it could be concluded that if it had been decided to include IP rights under the material scope of the Convention, jurisdiction over disputes related to copyrights and other non-registered IP rights would have to be decided according to general jurisdiction rules; whereas the adjudication of disputes related to registered IP rights would depend on the approach adopted with regard to the reach of exclusive jurisdiction rules (Art 12).

5.2  Jurisdiction over IP Infringements in North American Countries 5.2.1  Jurisdiction over IP Infringement Disputes of Canadian Courts The jurisdiction of Canadian courts over IP infringement disputes could be exercised if two requirements are satisfied: 1) the existence of jurisdiction simpliciter and 2) the existence of subject-matter jurisdiction. Jurisdiction simpliciter would exist if the defendant was resident in a Canadian province or if the defendant submitted himself to the jurisdiction of a Canadian court. Jurisdiction simpliciter would also exist if the claim is based on a tort which was committed in the province. In the case of Quebec, Quebec courts have jurisdiction if a fault was committed, damage was suffered or an injurious act occurred in Quebec. Hence, in the case of defamation by means of distribution of materials via the Internet, Canadian courts would have jurisdiction simpliciter over an action brought against a foreign defendant if the publication was distributed ‘in a language that could be read by more than a minimal number of people’. The defendant might be able to challenge the jurisdiction of the court seised by claiming that a court of a foreign country is forum conveniens. If the defendant’s pleas are successful, the Canadian court could stay the proceedings.204 The court’s jurisdiction to award damages based on tort would depend on whether the defendant’s residence is in a Canadian province or not. If the defendant has his residence in Canada, the Canadian court could decide on worldwide damages. If, however, the jurisdiction of a Canadian court was based on the situs of the tort (ie tort in Canada), the court   ibid, 60–61.   Canadian Report, answers to HC 1.

203 204

General Report  51 could decide only on damages based on the tort in that particular jurisdiction. In addition, the plaintiff could argue that the court should decide over damage sustained in foreign jurisdictions, but in order to succeed, the plaintiff will have to convince the court that there is a real and substantial connection between the local forum and those claims. On the other hand, the defendant could well bring counter-defence related to the difficulties associated with the application of foreign laws.205 The legal landscape would change considerably in the case of infringement of IP rights. As in the case of other kinds of torts, Canadian courts have jurisdiction over claims concerning infringements of IP rights, but this would only be true with regard to infringements of Canadian IP rights. Subject-matter jurisdiction requirements would bar Canadian courts from hearing disputes over the validity as well as infringement claims of foreign IP rights.206 Hence, Canadian courts would have jurisdiction only with regard to damages arising from an infringement of Canadian IP rights.

5.2.2  Jurisdiction of US Courts over Claims concerning IP Infringements The requirement to establish both jurisdiction in personam and subject-matter jurisdiction means that claims concerning infringements of foreign IP rights are usually dismissed by US courts. In cases concerning copyright infringements, US courts would usually grant monetary and injunctive relief for the infringements of US copyrights.207 However, in cases over multi-state IP infringements, the infringements of foreign copyrights may be taken into account for the purposes of calculating damages.208 A more stringent approach is followed in adjudicating disputes involving foreign registered IP rights. US courts usually do not assert jurisdiction over claims concerning infringements of foreign patents.209 In Ortman v Stanray Corp,210 the plaintiff filed a suit alleging the infringement of the United States as well as Canadian, Brazilian and Mexican patents granted for the same invention. Since both parties were US citizens, the jurisdiction of the court with regard to the infringement of the United States patent was affirmed. Nonetheless, the plaintiff ’s move to enjoin the defendant from infringing his foreign patents was dismissed by the court. In the same vein, the plaintiff ’s recourse to Congress having ratified the International Convention for the Protection of Industrial Property was considered to be insufficient for conferring jurisdiction over foreign patent infringement claims. In Packard Instrument Company Inc v Beckman Instruments Inc 211 the plaintiff alleged an infringement of a patent in the United States and nine other countries. The defendant brought a counterclaim and sought a declaration that patents in all countries were invalid. In addition, the defendant argued that the court should decline jurisdiction over foreign patent claims. Hence, the question was whether a US district court has jurisdiction over claims for infringement of foreign patents when the issue of the validity of these patents is raised. The defendant in particular argued that the United States courts should not exercise  ibid.   ibid, answers to HC 1 and HC 6. 207   Subafilms Ltd v MGM-Pathe Communications Co 24 F3d 1088 (9th Cir 1994). See also Boosey & Hawkes Music Publishers Ltd v Walt Disney Co 934 F Supp 119 (SDNY 1996), 124–25, where the court relied on the forum non conveniens doctrine and dismissed the plaintiff ’s claim for damages for copyright infringement, inter alia on the ground that foreign law had to be applied. 208   Sheldon v Metro-Goldwyn Pictures Corp 106 F2d 45 (2d Cir 1939). 209   Voda v Cordis Corp 476 F 3d 887 (Fed Cir 2007). 210   Ortman v Stanray Corp 371 F 2d 154 (7th Cir 1967). 211   Packard Instrument Company Inc v Beckman Instruments Inc 346 F Supp 408 (1978). 205 206

52  Toshiyuki Kono and Paulius Jurcˇys jurisdiction because, first, the determination of the validity of foreign patents ‘would involve a form of foreign governmental interest’; and, secondly, a US forum ‘would not be suitable to enforce [a] foreign based claim’. The court decided that the decision over the validity of a foreign patent would raise serious comity concerns. Besides, the court noted that national patent laws are closely related to economic and social policy concerns. Some guiding principles of how American courts exercise jurisdiction over claims concerning infringements of IP rights in the digital environment can be found in Penguin Group (USA) v American Buddha.212 Penguin, a publisher with its principal place of business in New York City, filed a copyright infringement action against the defendant making four of its recently published books available online. The defendant, American Buddha, an Oregon non-profit organisation, argued that the New York court should dismiss the complaint for the lack of personal jurisdiction, since the ties between the defendant and the forum state were too insubstantial and the plaintiff did not suffer any in-state injury. The court found that in a copyright infringement case against out-of-state defendants and involving the uploading of a work on the Internet, the situs of injury is the location of the copyright-holder. In addition, in order to establish personal jurisdiction over a non-­ resident defendant under New York’s long arm statute, five requirements must be proven: (1) the defendant committed a tortious act outside New York; (2) the cause of action arose from that act; (3) the tortious act caused an injury to a person or property in New York; (4) the defendant expected or should reasonably have expected the act to have consequences in New York; and (5) the defendant derived substantial revenue from interstate or international commerce. In the case at hand, the court in particular addressed the issue of injury. Besides, if the above-mentioned five requirements for conferring personal jurisdiction over a non-resident defendant are satisfied, a court must then assess whether a federal due process clause is also met. It was held that the location of the infringing conduct is of little relevance in jurisdictional analysis concerning online copyright infringements. Accordingly, the court affirmed that the injury occurred in New York.

5.2.3  Jurisdiction over IP Infringements according to the ALI Principles International jurisdiction over IP infringement disputes and the extent of the competence of the courts in infringement matters is governed by section 204 of the ALI Principles. At the outset, it is noteworthy to emphasise that the ALI Principles take a rather innovative approach213 with the objective to adapt traditional jurisdictional criteria to the infringements of IP rights which occur in the digital environment. The distinctiveness of the ALI Principles could be best understood from the rule which stipulates that courts of the country where allegedly infringed IP rights do not exist may nevertheless also have jurisdiction over the case. Namely, pursuant to section 204(1), a person may be sued in any state in which that person has substantially acted or taken substantial preparatory acts to initiate or further an alleged infringement. The courts of the country where such substantial activities took place shall have jurisdiction concerning all injuries arising out of the infringing conduct, regardless of the place where the injuries occur. Further, as regards Internet-related acts, the plaintiff may also bring an action to the courts of the state to which those infringing activities were directed (section 204(2)).   Penguin Group (USA) v American Buddha 2011 WL 1044581 (NY)   American Law Institute, Intellectual Property, above n 38, Comments to s 204.

212 213

General Report  53 In order to prevent potential forum shopping practices, the ALI Principles establish another rule in which a person who cannot be sued in a WTO Member State, with respect to full territorial scope as outlined in sections 201–204(1), may nevertheless be sued in any state in which that person’s activities give rise to an infringement claim if the following two conditions are satisfied. Firstly, that person should direct those activities to that state, and, secondly, that person should solicit and maintain contacts, business, or an audience in that state on a regular basis, whether or not such activity initiates or furthers the infringing activity. The jurisdiction of the court of that state extends to claims concerning injuries arising out of conduct in any state. This provision was drafted in technology-neutral language and is based on established practices of courts in different jurisdictions.214

5.3  Jurisdiction over IP Infringement Disputes in Europe 5.3.1  Brussels/Lugano Regime: Infringement Jurisdiction The primary legal sources determining international jurisdiction of EU Member State courts in cross-border IP infringement cases are the Brussels I Regulation and Lugano Convention. According to Article 5(3) of the Brussels I Regulation,215 a defendant who is resident in a Member State may also be sued before the courts of the place where the harmful event occurred or may occur. The European Court of Justice had many opportunities to clarify the meaning of Article 5(3) and has interpreted the notion of the place of harmful event in an autonomous manner.216 Thus, the ECJ aims to assure that jurisdiction rules are interpreted uniformly and that private parties have the same rights and duties before courts of different Member States.217 From the beginning, Article 5(3) of the Brussels Convention was given a broader interpretation by the European Court of Justice. In an early case, Bier, which was related to cross-border environmental damage, the ECJ indicated that the expression ‘place where the harmful event occurred’ should be understood as covering both the place where the damage occurred, and the place of the event giving rise to it. Consequently, the defendant may be sued, at the option of the plaintiff, before either the courts of the country where the damage occurred, or the courts of the country where the harmful event occurred.218 The Court noted that rules of special jurisdiction are based on the existence of a particularly close connecting factor between the dispute and the courts other than those of the state of the defendant’s domicile which is inevitable to the sound administration of justice and efficacious conduct of proceedings.219 The scope of decision in the case of Bier was further limited by the ECJ in its subsequent case law. In the case of Marinari, the ECJ stated that the term ‘place where the harmful event occurred’ within the meaning of Article 5(3) cannot be construed so extensively as to  ibid 54–59.   Art 5(3) of the Lugano Convention and the Revised Lugano Convention (2007).   Case 189/87 Kalfelis v Bankhaus Schröder [1988] ECR 5565, paras 15–16. 217  ibid. 218   Case 21/76 Handelskwekerij GJ Bier BV v Mines de potasse d’Alsace SA [1976] ECR 1735, paras 24–25; such position was subsequently followed by the courts of EU Member States, see eg, Belgian Report, n 160 with further references to Belgian case law. 219   Case 21/76 Handelskwekerij GJ Bier BV v Mines de potasse d’Alsace SA [1976] ECR 1735, para 11; Case C-220/88 Dumez France and Tracoba [1990] ECR I-49, para 17; Case C-68/93 Shevill and Others v Presse Alliance [1995] ECR I-415, para 19; Case C-364/93 Marinari v Lloyds Bank and Another [1995] ECR I-2719, para 10; Case C-539/03 Roche Nederland BV and Others v Frederick Primus and Milton Goldenberg [2006] ECR I-6535, para 27. 214 215 216

54  Toshiyuki Kono and Paulius Jurcˇys encompass any place where the adverse consequences can be felt if an event has already caused damage elsewhere. In other words, Article 5(3) cannot be interpreted as covering damage that results after the initial damage occurred and suffered by the victim in another Contracting State.220 Similarly, in the case of Dumez the ECJ held that Article 5(3) of the Brussels Convention cannot be interpreted as permitting a plaintiff, pleading damage, which he claims to be the consequence of harm sustained by direct victims of the harmful act, to bring proceedings against the perpetrator of that act in the courts of the place in which he himself suffered damage to his assets.221 In the case of Kalfelis, the ECJ was asked to clarify the meaning of the notion of ‘matters related to tort, delict or quasi-delict’ as it is employed in Article 5(3). In this case the plaintiff sued several banks with whom a number of spot and futures stock-exchange transactions were concluded. The plaintiff sought the establishment of the banks’ liability for failure to fulfil their contractual obligations to provide information as well as liability in tort and unjust enrichment. The ECJ noted that Article 5(3) should be interpreted autonomously and cover all actions which seek to establish the liability of the defendant except for actions related to ‘contract’ within the meaning of Article 5(1) of the Brussels Convention/Regulation.222 Another important decision concerning infringement jurisdiction was handed down in the Shevill case. A UK national, Fiona Shevill, brought an action in the UK against the French publisher of a newspaper which published an article stating that Fiona Shevill and other plaintiffs were part of a money laundering network. In answer to which courts have jurisdiction to hear an action for damages for harm caused by distribution of a defamatory newspaper article in several Contracting States, the ECJ ruled that courts of the country where the publisher is established shall have jurisdiction to award damages for all harm caused by the defamation.223 While the courts of the country where the publisher is established would have jurisdiction pursuant to Article 2 (defendant’s domicile), the victim of the defamatory publication would also have the option to file a suit in the place where damage occurred. Here, the ECJ stated that the place of damage should be understood as the place where the publication was distributed; however, the jurisdiction of the courts of the place of publication should be limited solely to the harm caused within the state whose courts are seised.224 Thus, in the case of Shevill the ECJ took a restrictive approach with regard to the amount of damages which may be awarded pursuant to Article 5(3). As in the case of other special grounds of jurisdiction in the Brussels/Lugano regime, it is generally understood that special jurisdiction provisions, such as those provided in Article 5 of the Regulation, form an exception to the general rule of forum domicilii, and have to be interpreted narrowly. The ECJ judgment in the Shevill case illustrates the European Court of Justice’s commitment to assure sound administration of justice and avoid multiplication of proceedings and forum shopping.225 The Shevill decision was not always supported by legal practitioners and academics, who criticised this judgment as being not always applicable due to the factual characteristics of defamatory infringements.226 220   Case C-364/93 Antonio Marinari v Lloyds Bank plc and Zubaidi Trading Company [1995] ECR I-2709, paras 14–15. 221   Case C-220/88 Dumez France SA and Traboca SARL v Hessische Landesbank and others [1990] ECR I-49, para 22. 222   Case 189/87 Kalfelis v Bankhaus Schröder [1988] ECR 5565, paras 17 and 19. 223   Case C-68/93 Shevill [1995] ECR I-415, para 24. 224   ibid, paras 29–30. 225   For comments, see Belgian Report, answers to HC 1. 226   Italian Report, answers to HC 1 with a more detailed analysis.

General Report  55

5.3.2  Application of Article 5(3) to Infringements of IP Rights As of October 2010 there were no cases decided by the ECJ regarding the applicability of Article 5(3) of the Brussels I Regulation to IP infringement disputes. However, it is generally accepted that Article 5(3) also applies to IP infringement actions227 even if claims are related to the infringement of foreign IP rights.228 Yet, there are two main areas of controversy: it has to be clarified, first, what is the scope of the jurisdiction of the court which exercises its authority on the basis of Article 5(3), and secondly, how Article 5(3) should be applied to Internet-related infringements. As previously mentioned, the ECJ judgment in the case of Shevill dealt with an infringement of intangible property (person’s honour or reputation). National reports singlehandedly confirmed that this approach to the application of Article 5(3), as established in Shevill, would be followed by domestic courts in multi-state defamation cases.229 Besides, if the same approach is adopted with regard to IP infringements, it would generally mean that the plaintiff could bring claims for the infringement of IP rights either before the courts of the country where the defendant is established (pursuant to Art 2), or before the courts of the country where the infringing act/omission was committed or the damage occurred. Most of the European national reports mentioned that this interpretation of Article 5(3) is or would be followed by domestic courts as well in IP cases.230 For example, the Swedish Report referred to the judgment of the Supreme Court of Sweden concerning a multi-state trade mark infringement. In this case a Swedish company filed a suit against a German defendant before the courts of Sweden arguing that the defendant had infringed the plaintiff ’s ‘FireDos’ trade mark which was registered in Sweden, Benelux, France, the UK and Spain. The plaintiff sought an injunction as well as compensation of damage sustained in all countries where the trade mark was registered. The appeal court and the Supreme Court found that claims brought pursuant to Article 5(3) do not confer jurisdiction upon Swedish courts to decide over damages for the infringement of foreign trade marks.231 The Belgian Report provided for a number of examples illustrating how Article 5(3) of the Brussels Convention was applied to patent, copyright and trade mark infringement cases by Belgian courts.232 However, it remains controversial whether the Shevill jurisprudence could be applied to IP infringement cases.233 Some national reports indicated that according to the principle of territoriality of IP rights, the place where the event giving rise to the damage cannot be distinguished from the place where the damage occurred. Accordingly, IP rights cannot be infringed in the country where they do not exist.234 Therefore, it is sometimes argued that 227   See eg Belgian Report, para 44; French Report, answers to HC 1; Greek Report, answers to HC 1; Portuguese Report, answers to HC 1; Spanish Report, answers to HC 1; Swedish Report, answers to HC 1. 228   Italian Report, section 1.2.2.6 and n 65. 229   See eg, Greek Report, answers to HC 1; Dutch Report, section 3.2 with further references to domestic case law; Italian Report, Answers to HC 1 with further references to domestic case law (nn 111 and 112); Slovenian Report, answers to HC 1; UK Report, answers to HC 1. 230  See Austrian Report, section 3.2.3 and n 142 as well as section 4.1 with further explanation of the Austrian jurisdiction regime; Belgian Report, para 44 with further references; Dutch Report, section 3.2; German Report, answers to HC 1; Greek Report, answers to HC 1; Italian Report, section 1.2.2.3 and answers to HC 1; Portuguese Report, answers to HC 1; Spanish Report, answers to HC 1 and n 52 for further references; Swedish Report, answers to HC 1; UK Report, answers to HC 1. 231   Swedish Report, answers to HC 1. 232   Belgian Report, para 44 with further references, esp nn 167–74. 233   Italian Report, section 1.2.2.3 and answers to HC 1; Spanish Report, answers to HC 1. 234   Italian Report, section 1.2.2.6 with further references to Italian domestic case law and also answers to HC 1.

56  Toshiyuki Kono and Paulius Jurcˇys according to the Brussels/Lugano regime, pure IP infringement cases can only be brought either before the country of the defendant’s domicile (pursuant to Art 2) or before the country where the harmful event occurred or is likely to occur (pursuant to Art 5(3)). In the latter case, the place where the harmful event occurred or is likely to occur is the country where the IP rights are protected. In addition, the Slovenian Report also emphasised that such an approach is taken with regard not only to Article 5(3) of the Brussels I Regulation, but also to Article 55(1) of the Slovenian Private International Law and Procedure Act (PILP).235 Further, opinions differ regarding whether Article 5(3) of the Regulation also allows the possibility to bring actions for negative declaratory judgments seeking the ascertainment that a particular IP right of another country is not infringed. In the absence of any guidance from the European Court of Justice, some national courts have relied on Article 5(3) as a jurisdictional ground to hear such actions.236 However, there are few cases where a court would issue negative declaratory judgment with regard to the infringement of foreign IP rights. Conversely, the prevailing opinion seems to be that claims for negative declaratory judgments cannot be brought on the basis of Article 5(3).237 For example, the Swedish Supreme Court rendered a judgment in the so-called Flootek case where the plaintiff filed an action for a negative declaratory judgment seeking confirmation that its product did not infringe a Swedish patent held by a Norwegian company. Although the defendant (patent owner) argued that Swedish courts do not have international jurisdiction pursuant to Article 5(3) of the Lugano Convention, the Swedish courts in all three instances interpreted Article 5(3) narrowly and refused to exercise jurisdiction to hear an action for negative declaratory judgment.

5.3.3  Jurisdiction over Internet-Related Infringements One of the main sources of uncertainty concerning the application of Article 5(3) of the Brussels I Regulation is related to IP infringements on the Internet. In these situations the damage is ubiquitous and allegedly occurs in a number of states. Hence, for the purposes of asserting international jurisdiction the court must face the difficult task of determining the degree of connection between the infringement and the forum country.238 Opinions differ with regard to the language of the website where the alleged infringement of IP rights occurs. For instance, the Spanish Report noted that Article 5(3) was interpreted by Spanish courts in such a way so they could assert international jurisdiction over the infringement action even if the infringing material is distributed in a foreign language or is available on the Internet.239 The Austrian Report referred to the judgment of the Supreme Court in a case concerning trade mark infringement via the Internet. The Austrian Supreme Court decided that the harmful event occurred in the forum state because the website was directed to Austria. In such a case, Austrian courts would assert international jurisdiction to hear IP infringement claims if infringing acts were directed to Austria where IP rights are protected.240 As   Slovenian Report, general part, section 1.4.1.   Belgian Report, para 44 as well as nn 169–70; Decision of the Hague Court of 21 January 1998, Evans Medical v Chiron Corporation, reported by van den Broek in (1998) 20 European Intellectual Property Review 61. 237   See Belgian Report, para 44. 238   Spanish Report, answers to HC 1. 239   ibid and further references in n 52. 240   Austrian Supreme Court, OGH 4 Ob 110/01g, BOSS-Zigaretten (2001) Medien und Recht 320. 235 236

General Report  57 long as the jurisdiction of a court to decide over the entire damage sustained in different countries is on the basis of ubiquitous infringement, courts would have jurisdiction to decide only on the damage sustained in the forum country (unless the defendant is resident in the forum country).241 The French Report discussed one of the benchmark decisions of the Court of Cassation concerning international jurisdiction over an action for infringement of Internet trade marks.242 In this case a French court followed the reasoning of the Shevill case and decided it had international jurisdiction over damages sustained in France on the ground that, first, the plaintiff was a holder of a French trade mark and, second, the website was accessible (albeit passively) in France. In addition, the French Report noted that in the case of multistate infringements of IP rights, the assertion of international jurisdiction depends on whether there is a ‘close, substantial and significant link’ between the allegedly infringing act, the place where the damage was sustained and the forum state; albeit some scholars argue that the mere accessibility of a website is sufficient to exercise jurisdiction.243 It is expected that some clarity will be given by the ECJ in Case C-509/09244 where the German Federal Supreme Court referred to the ECJ asking for a preliminary ruling on the application of Article 5(3) to infringements of personal rights in the digital environment. In particular, the German Court asked whether the phrase ‘place where the harmful event may occur’, entrenched in Article 5(3), should be interpreted as meaning that in the event of possible infringements of personality rights on an Internet website, the person concerned may also bring an action against the operator of the website in any Member State in which the website may be accessed and irrespective of the Member State in which the operator is established. The German Supreme Court also enquired whether, alternatively, additional requirements related to the contents of the website should be established, and if so, what those requirements should be.

5.3.4  Third-Country Situations The Brussels I Regulation does not apply in situations where the defendant is not resident in any EU or EFTA Member State. In such circumstances, domestic jurisdiction provisions of the forum state will have to be applied. The answers provided by national reporters highlighted the differences in practice among various states. In some countries the grounds of exercise of international jurisdiction in tort cases are similar to that of the Brussels/Lugano regime. For instance, in Slovenia the court would have jurisdiction if the wrongful act (the event causing damage) was committed in the territory of the forum state or if the damage occurred in Slovenia (Art 55(1) of the Slovenian PILP). Similarly, in France, a plaintiff may bring an action before the courts of the place where the event causing damage occurred or in the courts of the place where the damage was sustained (Art 46 of the French CCP). The French national reporter noted that the practice of the Court of Cassation was largely influenced by the ECJ judgment in the Shevill case. With regard to the competence to award damages in multi-state IP infringement cases, French courts’ jurisdiction would be limited to damages sustained in France in cases where

  Austrian Report, section 3.2.3.   Cass 1re civ., 9 December 2003 as cited in the French Report, nn 67, 75 and 76 for further references. 243   French Report, section 2.2. 244   Case C-509/09, eDate Advertising GmbH v X. 241 242

58  Toshiyuki Kono and Paulius Jurcˇys the event causing damage was committed abroad.245 As for jurisdiction over disputes concerning infringements committed on the Internet, French courts will also consider whether there is ‘a sufficient, substantial and significant link’ between the alleged infringement and the forum.246 In Austria, international jurisdiction over infringement claims can be exercised if the court has personal jurisdiction or if the harmful event occurred in Austria (section 83(c) (1) of the Austrian Civil Jurisdiction Act). Yet, the Austrian Report indicated that section 83(c)(1) has been interpreted differently from Article 5(3) of the Brussels I Regulation so as to allow Austrian courts to decide on the overall damage resulting from infringing activities undertaken in Austria, even if the defendant is not resident in Austria.247 In the UK, the reach of jurisdiction of the English courts would depend on whether a non-European defendant could be served with or without leave. If the defendant could be served within the jurisdiction without requiring leave, the territorial jurisdiction of English courts would be unlimited.248 In Sweden, Chapter 10 of the Swedish Code of Judicial Procedure confers jurisdiction to Swedish courts on the ground that the property of a foreign defendant is located in Sweden. This provision has been interpreted as protecting Swedish plaintiffs especially in light of the fact that foreign judgments from states other than EU Member States are unlikely to be declared in Sweden. A jurisdiction based on the location of property is also significant in cross-border IP litigation scenarios, because the Supreme Court decided that patents registered in Sweden constitute an asset insofar as the exercise of international jurisdiction is concerned.

5.3.5  Infringement Jurisdiction in the CLIP Principles In the CLIP Principles, jurisdiction rules over actions concerning infringements of IP rights are drafted with regard to the principle of territoriality of IP rights. Article 2:201 stipulates that in disputes concerned with the infringement of an IP right, a person may be sued in the courts of the state where the alleged infringement occurs or may occur. However, this rule does not apply if an alleged infringer did not act in that state to initiate or further the infringement and this activity cannot reasonably be seen as having been directed to that state. As regards the extent of jurisdiction of the court seised, the CLIP Principles introduce slight modifications to the previous practice shaped by the ECJ in the Shevill judgment. As a general rule, Article 2:203 follows the territoriality principle and stipulates that a court hearing an infringement dispute shall have jurisdiction over infringements that occur or may occur within the territory of the state in which that court is situated. Nevertheless, in light of difficulties related to the recovery of damages which arise from infringements of IP rights performed through ubiquitous media, the court whose jurisdiction is based on Article 2:202 shall also have jurisdiction over infringements that occur or may occur within the territory of any other state, provided that the infringement has no substantial effect in the state or any of the states where the infringer is habitually resident. Additionally, one of the two following alternative requirements must be fulfilled: first, substantial activities in furtherance of the infringement in its entirety had been carried out within the territory of   French Report, section 2 and nn 75–76 for further references.   French Report, section 1.2.4 and n 13 for further references to the French jurisprudence. 247   Austrian Report, sections 3.2.3 and 4.1.5 providing for a detailed account. 248   UK Report, answers to HC 1. 245 246

General Report  59 the country in which the court is situated, or, secondly, the harm caused by the infringement in the state where the court is situated is substantial in relation to the infringement in its entirety. The solution adopted in the CLIP Principles is based on the prevailing approach in Europe, that IP rights can be infringed only in the country of protection. More generally, the CLIP Principles aim to concentrate jurisdiction in the courts of a state which has the closest nexus with the dispute, especially as the taking of evidence is concerned.249 Moreover, such legislative framework mirrors the intention to implement the targeting test as well as accommodate jurisdiction rules to effects-based considerations.250

5.4  Asian Countries 5.4.1  India and Taiwan Claims for damages sustained in India or Taiwan may be brought to the respective courts of these countries. However, the Indian Report indicated that Indian courts would not have international jurisdiction to decide upon claims for damages suffered in foreign countries. This means that a plaintiff will face certain difficulties if the action concerns foreign IP rights.251 However, according to the Taiwanese Report, such problems would not necessarily arise in Taiwan because Taiwanese courts would in principle assert jurisdiction over actions concerning infringements of foreign IP rights.252

5.4.2  Jurisdiction over IP Infringements according to Japanese Law, and Latest Legislative Proposals Article 5(9) of the Code of Civil Procedure of Japan provides that courts of the place where a tort was committed shall have jurisdiction. However, this provision applies only with regard to domestic torts (ie torts which occur in Japan), and allocates territorial jurisdiction among Japanese courts. Nevertheless, the majority opinion is that Japanese courts can exercise international jurisdiction with regard to torts which occur in Japan. The same provision has also been applied to IP infringement actions. More particularly, Japanese courts would assert international jurisdiction in cases where the damage occurs in Japan, unless there are special circumstances which would require the courts to decline international jurisdiction.253 Article 3-3(viii) of the CCP (2011) provides for broader jurisdiction rules regarding tort-related actions. It stipulates that Japanese courts shall have jurisdiction over actions concerning unlawful acts if such acts occurred in Japan. However, this rule shall not apply with regard to infringing acts undertaken abroad, the effects of which occurred in Japan, if it could not have been generally foreseen that the effects of such acts will occur in Japan. It should be noted that the CCP (2011) does not contain any special rules for particular kinds of torts. Thus disputes related to IP rights will fall under the general jurisdiction rule for 249  C Heinze, ‘A Framework for International Enforcement of Territorial Rights: the CLIP Principles on Jurisdiction’ in J Basedow, T Kono and A Metzger (eds), above n 1, 65 et seq. 250  ibid. 251   Indian Report, answers to HC 1. 252   Taiwanese Report, answers to HC 6. 253   Japanese Report answers to HC 1 with further references.

60  Toshiyuki Kono and Paulius Jurcˇys torts. The decision not to have any special jurisdiction provisions for IP infringements was based on the agreement that exclusive jurisdiction of the courts of the granting / registering country should not cover IP infringement actions.254 Article 105 of the Transparency Principles contains a special provision establishing rules of international jurisdiction over claims related to IP infringements. It provides that ‘Japanese courts shall have jurisdiction over claims of IP, when the results of an IP infringement occurred or are to occur in Japan, or when [the] infringing act took place or is to take place in Japan’. The proposed Article 105 aims to broaden the scope of infringement jurisdiction rules by making it clear that the right-holder can bring actions with regard to certain activities which might lead to the infringement of certain IP rights.255 In so far as the question of localisation of a multi-state (ubiquitous) infringement is concerned, the commentary notes that the Transparency Principles focus on the results of an infringement or infringing acts.256 The notion of ‘results’ is understood as being apart from the market effects test, established in Article 301, which deals with the applicable law to the infringement of IP rights. Further, the Transparency Principles provides that Japanese courts can exercise international jurisdiction if the results of such ubiquitous infringement are maximised in Japan (second part of Art 105). The maximisation of results of the infringement requirement was incorporated in order to assure more legal certainty and foreseeability.257 Article 203 of the Joint Japanese-Korean Proposal (Waseda Proposal) contains a special jurisdiction rule for IP infringement cases. The general rule is that a person may be sued in the courts of any state where the alleged infringement occurs (Art 203(1) first sentence). The Waseda Principles seem to follow the conventional understanding of an infringement of IP rights whereby infringing activities can only occur in the state where the IP rights are protected. The Waseda Principles posit a special jurisdiction rule for multi-state IP infringements and the so-called ‘ubiquitous infringements’ of IP rights. The second sentence of Article 203(1) stipulates that if injuries occur in several states, a person may be sued in the courts of the state in which the majority of the activities that initiate the alleged infringement occur. This provision has to be considered in conjunction with Article 211, which establishes a special circumstances test allowing the court to decline jurisdiction if such principles as fairness between the parties, due process or promptness of the proceedings are undermined.258 Notably, Article 203(1) to some extent resembles the Shevill doctrine by establishing that a court of the state where the activities initiating the alleged infringement were undertaken has international jurisdiction with regard to all injuries even if they occur in foreign states. Where an alleged infringement of an IP right is directed against a particular state, the court of that state may have jurisdiction only over those claims which are concerned with infringements occurring in its state (Art 203(2)). The drafters of the Waseda Principles also took into account the peculiarities of litigation concerning regis254   Kokusai saiban kankatsu kenky¯u-kai [International Jurisdiction Study Group], ‘Kokusai saiban kankatsu kenky¯u-kai h¯okoku (4) [Report of the International Jurisdiction Study Group (4)]’ 886 New Business Law No (2008.8.1) 88. 255   S Chaen, T Kono and D Yokomizo, ‘Jurisdiction in Intellectual Property Cases: The Transparency Proposal’ in J Basedow, T Kono and A Metzger (eds), above n 1, 98. 256   ibid, 98–99. 257   ibid, 99. 258  ‘Commentary on Principles of Private International Law on Intellectual Property Rights (Joint Proposal Drafted by Members of the Private International Law Association of Korea and Japan)’ (2011) 2(6) Kigy¯o to H¯os¯oz¯o, available at www.globalcoe-waseda-law-commerce.org/activity/pdf/28/08.pdf, Commentary to Arts 203 and 211.

General Report  61 tered and non-registered IP rights. Article 209(2) provides that exclusive jurisdiction rules do not apply and courts could decide over such issues as acquisition, registration, validity or revocation of IP rights if they arise as a preliminary or incidental question. However, decisions upon such issues would not affect later proceedings.

5.4.3  Infringement Jurisdiction in Korea In asserting international jurisdiction over actions concerning IP infringements, Korean courts would first seek to determine whether the parties or the dispute are substantially connected to the forum (Art 2 of the Korean Private International Act). In light of the fact that there are no statutory provisions determining international jurisdiction in IP infringement cases, the Korean courts would defer to general jurisdiction rules. Further, exclusive jurisdiction provisions do not apply to actions concerning infringements of foreign IP rights. Besides, according to the Korean Report, it is likely that Korean courts would assert international jurisdiction if the infringing acts were committed in Korea.259 In the Sonata of Temptation case, the Seoul Central District Court decided that a Korean court had international jurisdiction, because the defendant was domiciled in Korea, the infringement of copyrights occurred in Korea and there were no special grounds which would undermine procedural principles such as fairness between the parties, appropriateness and expediency of adjudication.260 In cases where the plaintiff seeks compensation for damage suffered in numerous states, the question of whether Korean courts have international jurisdiction to decide the overall damage sustained in several countries would not depend on the defendant’s domicile in Korea.261 In other words, Korean courts could decide over the damage sustained in the forum as well as other countries even if the defendant is not resident in the forum country and the international jurisdiction of the court is based upon the place of the infringement of IP rights. Article 11 of the Korean Principles deals with jurisdiction over IP infringement actions and provides that courts of a country where the defendant undertook the main infringing activities shall have jurisdiction over actions related to that IP right. In such a case, court jurisdiction shall cover actions for damage arising from the defendant’s infringing activities regardless in which country such damage occurred. However, in cases where the acts of the defendant were directed to one specific country in which the damage occurred, the court shall have jurisdiction over claims related to the damage which was sustained in that particular country (Art 11(2)).262 Article 11 states that the Korean Principles make no distinction between registered and non-registered IP rights. It should also be noted that the Korean Principles do not contain any specific jurisdiction rules concerning ubiquitous IP infringement cases. Instead, Article 11 refers to the place of ‘main infringing activities’ and accordingly confers jurisdiction to the courts of the state where such main infringing activities occurred. This absence of special jurisdiction rules for ubiquitous infringements could be explained by the general understanding of the drafters that ubiquitous infringement cases should fall under the jurisdiction rules which determine objective joinder of actions (Art 15).   Korean Report, answers to HC 1 and HC 2.   Seoul Central District Court, Judgment of 13 March 2008, Case No 2007 Gahap53681 as referred to in the Korean Report, section 2.1 and answers to HC 1 and 2. 261   Korean Report, answers to HC 1. 262   Korean Report, n 234 and answers to HC 2. 259 260

62  Toshiyuki Kono and Paulius Jurcˇys

5.5  Comparative Observations The comparative analysis of the laws of different jurisdictions highlighted rather different approaches of adjudication of IP infringement actions. The territorially limited approach of the American and Canadian courts stands in contrast to the more flexible Brussels/ Lugano regime and the laws of represented Asian countries. Yet, a number of issues remain controversial and are subject to different jurisdiction rules. For instance, the answers submitted in national reports highlighted the need for a more comprehensive discussion concerning the relationship between a jurisdiction based on the defendant’s domicile/habitual residence and a jurisdiction based on the place of infringement. In this regard, significant differences exist among national laws regarding the scope of a court’s authority to decide over claims concerning the infringement of IP rights protected in the forum state, as well as the ability of submitting claims concerning infringements of foreign IP rights. In the area of IP, it appears that national legal systems generally have no established principles of adjudicating disputes which involve ubiquitous IP infringements. This area is pretty nebulous. Yet, some practical proposals have been laid down in some of the legislative proposals.263 Besides these legislative proposals, the results achieved at the negotiations to draft the Hague Judgments Convention could be a solid starting point if further harmonisation initiatives on a multilateral level are pursued.

6  Jurisdiction in Contract-Related Disputes One of the ways to exploit IP rights is to grant licences to third parties. Such contracts concerning the exploitation of IP rights venture into international waters whenever the contracting parties are from different states or when the exploitation of IP rights occurs in several states. In the case of a breach of such a contract, a number of intricate questions arise: which court should hear the case and what issues is the court competent to decide upon? A number of jurisdiction-related issues could be solved by contractual choice of forum clauses. However, if the parties did not include any agreement on jurisdiction, the national law of the court seised comes into play. As in other areas, jurisdiction to adjudicate contractual disputes is based on divergent methodologies and approaches employed by national courts. This section aims to briefly discuss general principles of international jurisdiction over contractual disputes and what specificities arise in the context of contracts for the exploitation of IP rights.

6.1  The 2001 Draft of Hague Judgments Convention Article 6 of the 2001 Hague Draft Convention entrenched two alternative sets of jurisdiction rules for actions brought on the basis of contractual obligations. Alternative A provides for a general ‘activity-based jurisdiction’ rule which should encompass various kinds 263   See s 204 of the ALI Principles; Art 2:202 of the CLIP Principles; Art 11 of the Korean Principles and Art 105 of the Transparency Principles.

General Report  63 of contracts.264 More precisely, it stipulates that a plaintiff may bring an action in contracts in the courts of the state in which the defendant has conducted or directed frequent or significant activity. This rule would be applicable only if the claim is based on a contract directly related to that activity. In addition, the proposed Alternative A also established several possible definitions of ‘activity’. Alternative B of Article 6 was identical to the provisions of the 1999 draft text of the Convention. In particular, Alternative B stipulated that a plaintiff may bring an action in contracts in the courts of a state in which: (a) in matters related to the supply of goods, goods were supplied; (b) in matters related to the provision of services, services were provided; or (c) in matters related both to the supply of goods and the provision of services, performance of the principal obligation took place in whole or in part. The characterisation of which of these rules to follow should be made under the national law.265 The provision applies also if only part of the goods or services were supplied in the forum state, which means that a plaintiff may have several available forums to file a suit. The Hague Draft Convention does not provide for any definition of goods, services or place of performance of an obligation. Hence, the court will also have to apply forum law if it is necessary to determine the place of the supply of goods or the provision of services. Yet, the Explanatory Report notes that the jurisdiction rule concerning contracts for the supply of goods also includes subcontracting, letting, leases and other contracts concerning the supply of goods. Notably, this provision however, does not cover contracts concerning sale of company shares of IP rights.266

6.2  Jurisdiction in Contract Disputes in the ALI Principles The ALI Principles provide for a special rule concerning international jurisdiction over claims alleging the breach of a contract for transferring or licensing IP rights. Section 205 states that courts of the state for which the exploitation of IP rights were transferred or licensed shall have jurisdiction. The underlying rationale behind such ground of jurisdiction is that the courts of the state where IP rights are exploited are best situated to access the evidence relevant to the dispute. In addition, the ALI Principles stipulate that if the jurisdiction of a court can be asserted on the sole ground of the transfer of IP rights exploited in the forum state, the scope of jurisdiction shall be limited only to those IP rights which are provided in the forum state (second sentence of section 205). Nevertheless, in multi-state disputes the plaintiff still has the possibility to bring an action before the courts of the defendant’s residence or to seek the consolidation of the proceedings pursuant to sections 221–23.

6.3  European Countries 6.3.1  The Brussels/Lugano Regime Special jurisdiction rules concerning actions related to the performance of contractual obligations are established in Article 5(1)(a) of the Regulation.267 According to this provision, a   Nygh-Pocar Report, above n 77, 50.   ibid, 49. 266   ibid, 50–51. 267   Also Art 5(1) of the Lugano Convention (1988) and the revised Lugano Convention (2007). 264 265

64  Toshiyuki Kono and Paulius Jurcˇys person who is domiciled in a Member State can be sued in matters related to contract in the courts of the state where the obligation in question has to be performed. The same rule was also posited in the Brussels Convention of 1968. However, in practice, national courts have faced considerable difficulties in determining the place of performance of contractual obligations and in deciding upon the scope of the application of Article 5(1). In order to at least partially remedy the existing ambiguities of interpretation, two additional alternative rules had been introduced in Article 5(1)(b) of the Brussels I Regulation. The first rule stipulates that in the case of the sale of goods, the place of performance is the Member State where, under the contract, the goods were delivered or should have been delivered. The second rule deals with service contracts and states that the place of the provision of services is in the Member State where the services were provided or have been provided. Yet, if the contract at hand is neither a sales contract nor a contract for the provision of services, the Brussels I Regulation again indicates that the general rule – according to which the jurisdiction should be asserted according to the performance of the characteristic obligation – shall be applied (Art 5(1)(c)). Jurisdiction of the courts of the place where the obligation in question has to be performed is based upon the assumption that such a place is most closely connected to the forum.268 Besides, the place of performance of obligation was intended to provide for a clear and precise connecting factor.269 However, in cases where complex contracts are involved the clarifications introduced in the Brussels I Regulation provided little for the determination of the characteristic obligation as well as the place of performance of obligation. The ECJ was requested to render preliminary rulings concerning the interpretation of Article 5(1). The material scope of the application of Article 5(1) was elucidated in the Tacconi case. In Tacconi, the question was whether an action, whereby the plaintiff seeks to establish a pre-contractual liability of the defendant, falls within the ambit of Article 5(1) or Article 5(3) of the Convention. In this case, the plaintiff sought compensation of damages allegedly caused by the defendant in breach of the duty to act honestly and in good faith during the contractual negotiations. The ECJ decided that for Article 5(1) to apply, it is essential to identify the obligation and the place where such obligation had to be performed. Further, the ECJ noted that Article 5(1) does not cover situations where there is a lack of obligation freely assumed by one party to another.270 As a result, an action concerning the pre-contractual liability of the defendant was considered to fall under the ambit of Article 5(3) which applies to matters relating to tort, delict or quasi-delict, and not Article 5(1), which establishes jurisdiction based on the place of performance.271 6.3.1.1  Determining the Place of Performance of Obligation For the purposes of international jurisdiction, the ECJ refused to interpret Article 5(1) of the regulation as referring to a particular obligation of a contract.272 Instead, the Court noted that the term ‘obligation’, as used in Article 5(1), implies only the obligation which 268   Case 266/85 Hassan Shenavai v Klaus Kreischer [1987] ECR 239, para 20; Case C-288/92 Custom Made Commercial Ltd v Stawa Metallbau GmbH [1994] ECR I-2913, para 13. 269   Case C-288/92 Custom Made Commercial Ltd v Stawa Metallbau GmbH [1994] ECR I-2913, para 15. 270   Case C-334/00 Fonderie Officine Meccaniche Tacconi v HWS [2002] ECR I-7357, paras 22–23. 271  Case C-26/91 Handte v Traitements Mécanochimiques des Surfaces [1992] ECR I-3967, para 18; Case C-334/00 Tacconi [2002] ECR I-7357, para 27. 272   Case 14/76 A De Bloos, SPRL v Société en commandite par actions Bouyer [1976] ECR 1497, para 10.

General Report  65 forms the basis of court proceedings and which corresponds to the contractual right upon which the plaintiff ’s action is grounded.273 It follows that in cases where the plaintiff seeks dissolution of a contract and compensation for damages, Article 5(1) would only be applicable if the court could identify the obligation which the plaintiff is reliant upon.274 By adopting a narrow approach to determining the obligation which forms the basis for a claim, the ECJ intended to limit situations where courts of several states have jurisdiction over the same action.275 Furthermore, it means that a court does not have international jurisdiction to hear the whole action founded on the ground of several obligations of equal rank and arising from the same contract if, according to the choice-of-law rules of the forum state, one of those obligations is to be performed in the forum state and the others in additional Member States.276 In the case of Tessili, the ECJ decided that the place of performance of the obligation in question shall be determined by the court seised according to the law which governs the obligation in question. In particular, the governing law should be determined by the choiceof-law rules of the forum state.277 The reference to the governing law also encompasses situations where according to the law of the forum the governing law has to be determined according to ‘uniform laws’ applicable in the forum state.278 The ECJ had also decided that for the purposes of Article 5(1), the contracting parties are allowed to specify the place of performance of an obligation.279 Nevertheless, such place of performance must have a real connection with the substance of the contract.280 The ECJ has placed much emphasis on the principle of legal certainty and predictability, so that a normally well-informed defendant should be able to reasonably foresee where he may be sued.281 Hence, the place of performance of obligations in the case of contracts which are neither sales nor services contracts shall be determined according to the law governing the obligation which is consistent with the conflicts provisions of the court seised.282 If a contractual obligation has been, or is to be performed in a number of places, for the purposes of Article 5(1), a single place of performance for the obligation in question must be identified. The ECJ held that in such a case the place where the obligation giving rise to the action is to be performed will normally be the most appropriate for deciding the case.283 In practice there may be cases where it is not possible to determine which court has the closest connection to the place of performance of certain contractual obligations. It may be questioned, for example, where the place of performance is in the case of sales contracts   ibid paras 11 and 13; Case 266/85 Hassan Shenavai v Klaus Kreischer [1987] ECR 239, para 20.   Case 14/76 A De Bloos, SPRL v Société en commandite par actions Bouyer [1976] ECR 1497, para 14. 275   ibid, paras 8–10; Case C-420/97 Leathertex Divisione Sintetici SpA v Bodetex BVBA [1999] ECR I-6747, para 31. 276   Case C-420/97 Leathertex Divisione Sintetici SpA v Bodetex BVBA [1999] ECR I-6747, para 40. 277   Case 12/76 Industrie Tessili Italiana Como v Dunlop AG [1976] ECR 1473, para 13. 278   Case C-288/92 Custom Made Commercial Ltd v Stawa Metallbau GmbH [1994] ECR I-2913, paras 27–29. 279   Case 56/79 Siegfried Zelger v Sebastiano Salitrini [1980] ECR I-89, para 5. 280   Case C-106/95 MSG v Gravières Rhénanes [1997] ECR I-911, paras 30–31. 281  Case C-26/91 Handte v Traitements Mécanochimiques des Surfaces [1992] ECR I-3967, para 18; Case C-440/97 GIE Groupe Concorde and Others v The Master of the vessel ‘Suhadiwarno Pankan’ and Others [1999] ECR I-6307, para 24; Case 256/00 Besix SA v Wasserreiningungsbau Alfred Kretzschmar GmbH & Co KG and others [2002] ECR I-1699, para 26; Case C-368/05 Color Drack GmbH v Lexx International Vertriebs GmbH [2007] ECR I-3699, para 19. 282   Case C-440/97 GIE Groupe Concorde and Others v The Master of the vessel ‘Suhadiwarno Pankan’ and Others [1999] ECR I-6307, para 32. 283   Case 256/00 Besix SA v Wasserreiningungsbau Alfred Kretzschmar GmbH & Co KG and others [2002] ECR I-1699, para 31. 273 274

66  Toshiyuki Kono and Paulius Jurcˇys involving a carriage of goods clause. The ECJ had previously decided that the national court should initially consider the provisions of a contract and, if the place of performance is not evident, the place where the goods are physically transferred or should have been transferred must be considered as the place of performance in terms of Article 5(1)(b).284 Furthermore, as for a non-competition clause without any geographical limit, the ECJ found that in cases where it not possible to identify a link to one particular forum, the general rule of a defendant’s domicile should be applied.285 In the case of Color Drack there were several places of delivery of goods within one Member State. The question which arose in that case was whether a plaintiff can bring an action against a defendant in the courts of the place of delivery of its choice with regard to all deliveries in that state. The ECJ found that the place of performance in that case had to be the place ‘with the closest linking factor between the contract and the court having jurisdiction’; the closest linking factor being determined on the basis of economic criteria.286 Notably, this approach applies with regard to both kinds of contracts: namely, contracts for the sale of goods and contracts for the provision of services.287 However if such a close link cannot be identified, the plaintiff can choose which court to bring an action before. In the opinion of the ECJ, allowing the plaintiff to decide the court would not undermine the interests of the defendant, who would in any case be sued in one of the courts of the state where goods were delivered.288 Besides, there may be disputes which concern several obligations of equal rank and each of those obligations shall have to be performed in different Member States. The ECJ ruled that in such circumstances the court of every state, where a particular obligation has to be performed, will have jurisdiction to hear actions which are based on that particular obligation. Therefore, the court of one state does not have jurisdiction to hear claims concerning obligations which were performed in another state, even if such obligation arises from the same contract.289 The ECJ was aware of the inefficiencies related to such a restrictive interpretation of Article 5(1); however, it noted that the plaintiff always has the right to bring an action before the courts of a defendant’s domicile pursuant to Article 2 of the Regulation.290 National courts were given some discretion to determine the place of performance and the existence of their jurisdiction in complex contracts. In particular, there may often be cases where the contract indicates that obligations are to be provided in several Member States. It may even be that the contract does not expressly provide for any definite place where the obligation has to be performed. In such circumstances the ECJ indicated that national courts shall take factual aspects and evidence of the dispute into consideration to determine the place of performance of the obligation.291 In the case of contracts for the provision of services in several states, a national court would have to identify (i) the place where the main provision of services is to be carried out, and (ii) the place with the closest   Case C-381/08 Car Trim GmbH v KeySafety Systems Srl [2010] ECR I-1255, para 58.   Case 256/00 Besix SA v Wasserreiningungsbau Alfred Kretzschmar GmbH & Co KG and others [2002] ECR I-1699, paras 49–50. 286   Case C-368/05 Color Drack GmbH v Lexx International Vertriebs GmbH [2007] ECR I-3699, para 40. 287   Case C-19/09 Wood Floor Andreas Domberger GmbH v Silva Trade SA [2010] ECR I-2121, para 31; Case C-204/08 Peter Rehder v Air Baltic Corporation [2009] ECR I-6073, para 36. 288   Case C-368/05 Color Drack GmbH v Lexx International Vertriebs GmbH [2007] ECR I-3699, paras 43–44. 289   Case C-420/97 Leathertex Divisione Sintetici SpA v Bodetex BVBA [1999] ECR I-6747, paras 38–39. 290   ibid, para 41. 291   Case C-368/05 Color Drack GmbH v Lexx International Vertriebs GmbH [2007] ECR I-3699, para 41; Case C-19/09 Wood Floor Andreas Domberger GmbH v Silva Trade SA [2010] ECR I-2121, para 40. 284 285

General Report  67 linking factor between the contract in question and the court having jurisdiction.292 The ECJ has provided an illustration of how these principles should be applied in the two following kinds of service contract. First, if the place of the provision of services is not clearly stipulated in a commercial agency contract, the place of performance should be the state where the agent is domiciled.293 Second, as regards contracts for the transportation of passengers, the place of performance of services is at the place of either departure or arrival of the aircraft.294 6.3.1.2  The Structure of Article 5(1) of the Regulation A number of issues arose with regard to the relationship between different sub-paragraphs of Article 5(1). According to lit (c), Article 5(1)(a) applies when contractual action does not fall under lit (b). In order to apply the special rule established in lit (b), the court would have to classify the contract as either a contract for the sale of goods or a contract for the provision of services. If the contract cannot be classified as either of these two types, the general rule established in lit (a) must be applied.295 In other words, sub-paragraph (a) is applicable with regard to all other contracts which cannot be classified as contracts for the sale of goods or provision of services. Further, a systematic interpretation of Article 5(1) implies that for sub-paragraph (b) to apply, two requirements must be fulfilled: first, the place of delivery of goods or provision of services must be in a Member State; and, second, the place of delivery of goods or provision of services must be established in the contract. If a court finds that a contract is a sales or services contract, lit. (b) shall be applied even if the place of performance of obligation is in several Member States. In some preliminary reference cases the ECJ was requested to clarify the notion of a contract for the sale of goods. In the case of Car Trim, the ECJ noted that Article 5(1)(b) does not provide for any definition of sales of contract services. Therefore, it is necessary to identify the obligation which characterises the contract in question. In the case at hand, it was decided that contracts for the sale of goods are also contracts where the purchaser specifies special requirements concerning the provision, fabrication and delivery of goods, and the seller is responsible for the quality of the goods and their compliance with the contract.296 The ECJ also handed down several judgments concerning the jurisdiction over actions related to the provision of services. Since the Regulation does not establish any definition of the ‘provision of services’, the ECJ provided some guidance by deciding that the concept of the provision of services implies that the party who is providing services should at least fulfil a particular activity in return for remuneration.297 In the case of Wood Floor, the ECJ confirmed that for the purposes of Article 5(1) of the Regulation, commercial agency contracts should be considered as contracts for the provision of services.298 However, in its 292   Case C-19/09 Wood Floor Andreas Domberger GmbH v Silva Trade SA [2010] ECR I-2121, para 42; Case C-204/08, Peter Rehder v Air Baltic Corporation [2009] ECR I-6073, para 38. 293   Case C-19/09 Wood Floor Andreas Domberger GmbH v Silva Trade SA [2010] ECR I-2121, para 43. 294   Case C-204/08 Peter Rehder v Air Baltic Corporation [2009] ECR I-6073, paras 40–44. 295   Case C-533/07 Falco Privatstiftung and Thomas Rabitsch v Gisela Weller-Lindhorst [2009] ECR I-3327, para 40. 296   Case C-381/08 Car Trim GmbH v KeySafety Systems Srl para 38. 297   Case C-533/07 Falco Privatstiftung and Thomas Rabitsch v Gisela Weller-Lindhorst [2009] ECR I-3327, para 29. 298   Case C-19/09 Wood Floor Andreas Domberger GmbH v Silva Trade SA [2010] ECR I-2121, para 34.

68  Toshiyuki Kono and Paulius Jurcˇys landmark judgment in Falco, the ECJ decided that in the case of a contract for the exploitation of IP rights, the owner of an IP right does not perform any services.299 As a result, the contract was not considered a contract for the provision of services within the context of Article 5(1).300 6.3.2  The CLIP Principles Some modifications to the existing Brussels/Lugano regime with regard to jurisdiction over IP contract disputes were proposed in the CLIP Principles. According to Article 2:201(1), in disputes concerned with contractual obligations a person may be sued in the state where the obligation in question is to be performed. In order to establish a more coherent regime than the one previously established under the Brussels I Regulation, the CLIP Principles provide for an autonomous definition covering all contractual obligations which arise from contracts having as their main object the transfer or licensing of an IP right. Namely, Article 2:201(2) stipulates that the state where the obligation is to be performed must be the state for which the IP licence is granted or the IP right is transferred. Therefore, unless otherwise agreed by the parties, the courts of the state for which the licence is granted or the right is transferred shall have jurisdiction. Further, the CLIP Principles contain two additional rules concerning the extent of the court’s jurisdiction. First, the CLIP Principles specify that if the place of performance of obligation is the sole ground of jurisdiction, the court’s jurisdiction will only cover activities relating to the licence or transfer of the IP right for the forum state (Art 2:201(2) second sentence). Second, in contrast to the previously established ECJ practice,301 the CLIP Principles allow the bringing of infringement claims, arising out of a contractual relationship between parties, before the court which would have jurisdiction to hear claims regarding the performance of contractual obligations (Art 2:201(3)).

6.4  Asian Countries 6.4.1  Jurisdiction over Contractual Disputes according to Japanese Law If an action concerns the performance of contractual obligations, Japanese law provides that the courts of the place where the obligation has to be performed shall have jurisdiction. This is entrenched in Article 5(1) of the Japanese CCP. Similar to other jurisdiction rules, Article 5(1) was originally perceived to allocate the domestic jurisdiction of Japanese courts. Yet actual court practice extended the scope of this provision as equally applicable to cases with a foreign element.302 Jurisdiction based on the place of performance of contractual obligations had been initially established in the practice of the lower courts in cases concerning the recognition and enforcement of foreign judgments.303 Gradually the place

299   Case C-533/07 Falco Privatstiftung and Thomas Rabitsch v Gisela Weller-Lindhorst [2009] ECR I-3327, paras 31 and 36. 300  The Falco jurisprudence was adopted in the practice of several domestic courts; See Portuguese Report, answers to HC 3 and n 103 in particular. 301   See Case 189/87 Kalfelis v Bankhaus Schröder [1988] ECR 5565, para 19. 302   See eg Nagoya District Court, Judgment of 12 November 1979, 35 Minsh¯u 1241. 303   Tokyo District Court, Judgment of 31 January 1994, 837 Hanrei Taimuzu 300.

General Report  69 of performance became generally acknowledged as a ground for international jurisdiction and was applied together with the so-called special circumstances test.304 The rationale of conferring jurisdiction to the courts of the place where the obligation has to be performed is that these are the proper courts, not only to decide issues of performance of the obligation, but also to gather evidence or interrogate witnesses. In addition, it is said that a jurisdiction based on the place of performance also serves the interests of the defendant, increases the foreseeability in commercial transactions and is in line with the principles of fair trial.305 As in other states, a number of controversial issues exist with regard to the performance of the obligation as a ground for international jurisdiction. First, the prevailing opinion is that the place of performance of the obligation should be determined by the law of the state which governs the contract.306 In many cases Japanese courts would refer to Article 484 of the Japanese Civil Code that applies the law of the creditor’s/plaintiff ’s domicile and accordingly confers jurisdiction upon the courts of the state where the creditor is domiciled.307 Secondly, there is no prevailing opinion concerning the scope of the court’s jurisdiction. Some have argued that Article 5(1) applies only to actions concerning the performance of contractual obligations and does not cover tortious and other kinds of claims. Hence, claims concerning tortious acts have been brought according to infringement jurisdiction rules.308 The other argument is that a court of the place of performance is competent to hear contractual and other kinds of claims which may arise from unjust enrichment, torts etc.309 The CCP (2011) is based on the existing practice of Japanese courts. It provides that Japanese courts shall have international jurisdiction over actions concerning contractual obligations, unjust enrichment or negotiorum gestio if the place of performance of the contractual obligation is in Japan or, if according to the law, it is designated in a contract that the place of performance of the obligation is in Japan (Art 3-3(i)). 6.4.2  Legislative Proposals According to the Transparency Principles, Japanese courts have international jurisdiction over claims brought on the basis of contracts for the transfer of IP rights (Art 104). In order to provide for more legal certainty and foreseeability, the Transparency Principles provide that the place of the performance of obligation is the country of registration or the country which grants IP rights. The drafters also supported this approach because the jurisdiction is vested to the courts of the country where the IP rights are in fact exploited.310 The jurisdiction of Japanese courts would however be limited only to claims concerning the exploitation of IP rights in Japan. Nonetheless, the Transparency Principles also provide for a

304   Tokyo District Court, Judgment of 25 April 1995, 898 Hanrei Taimuzu 245; Tokyo High Court, Judgment of 24 March 1999, 1700 Hanrei Jih¯o 41; Tokyo District Court, Judgment of 19 March 1998, 997 Hanrei Taimuzu 286. 305   Osaka District Court, Judgment of 25 March 1991, 783 Hanrei Taimuzu 252. 306   Kobe DC 1993 September 22, 1515 Hanrei Jih¯o 139; Tokyo District Court, Judgment of 1962 October 17, 18 Kaminsh¯u 1002. 307   Tokyo District Court, Judgment of 1962 October 17, 18 Kaminsh¯u 1002; Shizuoka District Court, Judgment of 30 April 1993, 824 Hanrei Times 241. 308   Tokyo District Court, Judgment of 25 April 1995, 898 Hanrei Taimuzu 245. 309   Shizuoka District Court, Judgment of 30 April 1993, 824 Hanrei Taimuzu 241. 310   S Chaen, T Kono and D Yokomizo, ‘Jurisdiction in Intellectual Property Cases: The Transparency Proposal’ in J Basedow, T Kono and A Metzger (eds), above n 1, 92–93.

70  Toshiyuki Kono and Paulius Jurcˇys possibility to consolidate actions which are objectively related (Art 110(1)) or to bring an action before the courts of a defendant’s domicile (Art 101). Article 204 of the Waseda Principles establishes a set of special jurisdiction rules concerning disputes over contracts for the transfer of IP rights. The general rule is that in disputes arising out of a contract concerning transfer or enforcement of IP rights, a person may be sued in the court of a state where that IP right is to be enforced under the contract (Art 204). In disputes over contracts for the exploitation of IP rights in multiple states, the Waseda Principles take a restrictive approach and establish that the courts of each of those states have jurisdiction to hear disputes concerning the exploitation of IP rights in the forum state (Art 205).311

6.5  Comparative Observations The fact that parties have limited capacities has direct implications to the negotiation and performance of the contract: contracts are often incomplete, the rights and duties of the parties are not clearly defined and the potential for renegotiation of contractual terms increased, especially in long term contractual relations. Contracts for the exploitation of IP rights are usually complex. Even though there were no controversial judgments rendered by the national courts, this does not mean that problematic issues may not potentially arise in the area of international jurisdiction over IP-related contracts. Conversely, as seen from the negotiations to adopt the Hague Judgments Convention as well as the ECJ judgment in the Falco case, contracts for the exploitation of IP rights hardly fit within the traditional criteria for the exercise of international jurisdiction over contractual disputes. The recent legislative proposals concerning adjudication of multi-state IP disputes aim to clarify the situation and establish more specific jurisdiction rules for disputes which arise out of IP-related contracts. These legislative proposals share two common features. First, all legislative proposals try to reconcile judicial competence with the principle of territoriality of IP rights and establish that courts shall have jurisdiction over actions concerning the exploitation of IP rights that are protected in the forum state. Secondly, legislative proposals clarify the situation concerning the scope of a court’s jurisdiction. In particular, it is provided that the court shall have jurisdiction to hear only those claims which are related to the exploitation of IP rights within the forum state. However, if the defendant is resident in the forum state, or if it possible to consolidate the claims, courts could hear claims concerning foreign IP rights only if there are also other grounds of jurisdiction. Nevertheless, further discussion may still be necessary with regard to such issues as whether legislative proposals will manage to assure proximity between the dispute and the forum, and how to approximate the rules on international jurisdiction with choice-oflaw provisions.

311   Art 12 of the Korean Principles stipulates that the court of the state where IP rights are exploited shall have jurisdiction over contractual disputes concerning the assignment, usage as collateral, licensing or other exploitation of IP rights.

General Report  71

7  Consolidation of Proceedings Consolidation of cross-border IP disputes became one of the most debated topics in recent years. High costs of country-by-country adjudication of multi-state IP infringement disputes have often been described as an Achilles heel. In order to overcome limitations posed by the principle of territoriality of IP rights, the consolidation of proceedings has been viewed as one of the most needed measures in creating an efficient cross-border IP litigation system.312 Several notorious court decisions were handed down in different jurisdictions which thus fuelled the debate on the desirability of possible venues of consolidation. The Supreme Court of the United States,313 as well as the European Court of Justice,314 had in principle dismissed the possibility of consolidation of multi-territorial patent claims; such a strict approach could also be interpreted as a sign that a legal change must take place at the legislative level. Indeed, some proposals to amend the present IP litigation system have already been suggested by academics on both sides of the Atlantic. The present chapter is formulated from answers provided in the national reports to hypothetical case no 3, which raised a number of questions with regard to the possibilities of consolidating claims brought against multiple defendants. The first scenario of the hypothetical case concerned a situation where a proprietor of parallel patent rights in several different states initiates proceedings and seeks to enjoin a number of foreign defendants who allegedly infringe the plaintiff ’s foreign patents. The national reporters were asked whether the law of their respective countries would allow the consolidation of claims in the courts of the plaintiff ’s domicile if neither of the defendants have any establishments in the forum state. In addition, national reporters were asked to explain whether such consolidation of claims against foreign defendants would be possible if the parties were bound by pre-existing contractual relations. In addition, the second alternative of the hypothetical case provided for a so-called ‘spider-in-the-web’ situation. The national reporters were asked whether the law of their state would allow the courts to assert international jurisdiction of multiple defendants given that (a) all the defendants belong to the same corporate group; (b) they infringe the claimant’s parallel IP rights based on a common policy; and (c) the coordinator of the infringing activities is domiciled in the forum state.

7.1  Consolidation of Claims in the 1999 Draft of the Hague Convention Article 14 of the 1999 Hague Draft of Judgments Convention contained a special jurisdiction rule concerning actions against multiple defendants. Despite the fact this rule was later removed from the 2001 Draft of the Hague Judgments Convention, it is still noteworthy to briefly address because Article 14 has been taken into consideration by drafters of subsequent legislative proposals on cross-border enforcements of IP rights. Article 14 of the 1999 312   P Torremans, ‘The Way Forward for Cross-Border Intellectual Property Litigation: Why GAT Cannot be the Answer’, in S Leible and A Ohly (eds), above n 1, 207; A Kur, ‘A Farewell to Cross-Border Injunctions? The ECJ Decisions GAT v LuK and Roche Nederland v Primus Goldenberg’ (2006) 7 International Review of Intellectual Property and Competition Law 854–55. 313   Voda v Cordis Corp 476 F 3d 887 (Fed Cir 2007). 314   Case C-539/03 Roche Nederland BV and Others v Frederick Primus and Milton Goldenberg [2006] ECR I-6535.

72  Toshiyuki Kono and Paulius Jurcˇys Draft of the Hague Convention established that a plaintiff, bringing action against a defendant in a court of the state in which that defendant is habitually resident, may also proceed in that court against other defendants who are not habitually resident in that state if two conditions are fulfilled: first, the claims against the defendant habitually resident in that state and the other defendants are so closely connected that they must be adjudicated together to avoid a serious risk of inconsistent judgments; and, secondly, as regards each defendant who is not habitually resident in that state, there must be a substantial connection between that state and the dispute involving that defendant. By and large, Article 14 was drafted in light of Article 6(1) of the Brussels Convention. However, the provisions of the Hague Draft Convention are more restrictive. Namely, at the time when the text of the Hague Draft Convention was prepared, the Brussels Convention was interpreted as requiring proof of the existence of a close connection between the claims brought against different defendants.315 In the Hague Draft, two additional conditions of close relationship between the claims and the connection between the forum and the dispute which involves a non-resident defendant, were imposed to limit possible procedural advantages that a plaintiff might obtain by instituting proceedings against multiple defendants before courts of a single country.316 This requirement of a close relationship between the claims against different defendants aims to limit the multiplication of proceedings before courts of different countries which might conclude in inconsistent judgments. Further, in order to avoid situations where a non-resident defendant is sued before a clearly inappropriate forum, the Draft Convention required a substantial connection between the dispute concerning that particular defendant and the state of the forum seised.317 Lastly, rules provided in Article 14 of the 1999 Hague Draft Convention would not be applicable with regard to a co-defendant invoking an exclusive choice of court clause agreed with the plaintiff (Art 14(2)).

7.2  North American Countries 7.2.1  Canadian Approach to the Consolidation of Claims Subject-matter jurisdiction rules have significant implications in other matters related to the adjudication of cross-border IP disputes. In cases where the right-holder seeks consolidation of actions before the court of his own domicile against foreign defendants for the alleged infringements of IP rights, Canadian courts would follow a strict territoriality approach and not allow the consolidation of claims concerning foreign IP rights. The consolidation would be pre-empted also in the case where the alleged infringement was coordinated by a parent company even if it had its place of business in Canada. The mere fact that there is a close connection between the defendants would not overcome limitations imposed according to subject-matter jurisdiction rules. However, it is nevertheless possible that Canadian courts would assert jurisdiction if the jurisdiction simpliciter existed and it was clear that the Canadian court was the most appropriate forum.318 The possibility of a joinder of claims would be greater if the claims brought by the rightholder were for a breach of contract. Except for those situations where the defendants   Case 189/87 Kalfelis v Bankhaus Schröder [1988] ECR 5565, para 13.   Nygh-Pocar Report, above n 77, 75. 317   ibid, 75–76. 318   Canadian Report, answers to HC 3. 315 316

General Report  73 (alleged infringers of the contract) did business in one of the Canadian provinces, the claims could be brought against the defendants if one of the categories of the service ex juris were satisfied. Such categories in matters concerned with contractual obligations could include, for example, where the contractual obligation was to be largely performed in the Canadian province or the contract is governed by the law of the Canadian province. In addition, the plaintiff will have to prove that the Canadian court is the forum conveniens despite the fact that the rights involved are foreign IP rights.319

7.2.2  Consolidation of Claims in the United States With regard to US law, parties have tried to enjoin claims related to foreign IP rights on the basis of supplemental jurisdiction. In particular, 28 USC section 1367 confers district courts with a ‘supplemental jurisdiction’ to entertain certain non-federal claims brought in the same action that are not otherwise supported by the original jurisdiction. Courts can enjoin claims that are related so that they form part of the same controversy under Article III of the United States Constitution (section 1367(a)). However, the Federal Circuit has consistently denied the possibility to entertain foreign IP claims. In Mars Inc v Nippon Conlux Kabushiki-Kaisha320 an action was brought against Nippon Conlux, a Japanese corporation, and its subsidiary in the United States. The plaintiff argued that an alleged direct infringement of the United States and respective Japanese patent constituted an act of unfair competition pursuant to 28 USC section 1338(b) (1988). The defendant argued that the claim concerning the alleged infringement of the Japanese patent should be dismissed on the ground that the court did not have subject-matter jurisdiction. The Federal Circuit first interpreted section 1338(b) and held that Congress did not intend to establish a notion of ‘unfair competition’ which would cover infringements of foreign patents. The court also found that the foreign patent infringement was not related to the United States patent since the underlying patents, devices, alleged acts and governing laws were different. In addition, the Federal Circuit noted that ‘public interest’ implies that localised controversies had to be decided at home, and that the hearing of claims related to matters involving a Japanese patent would undermine international comity. Another landmark judgment was handed down in the Voda v Cordis case321 where the Federal Circuit reversed the decision of the district court which found subject-matter jurisdiction over foreign patent infringement claims pursuant to the rules of supplemental jurisdiction (section 1367). Voda was a proprietor of patents issued under the Patent Cooperation Treaty in the United States, Canada and a number of European Patents in the UK, Germany and France. The defendant, Cordis, was a US-based corporation established in Florida with foreign affiliates in France, Germany, Italy, and the Netherlands. Voda filed a suit against Cordis US alleging infringements of US patents. Later, Voda amended his complaint and added claims of alleged infringements of European, British, French, German and Canadian patents. The district court decided it had supplemental jurisdiction over foreign patent claims. Yet, despite Voda’s arguments that a consolidated multinational patent adjudication would be more efficient, the Federal Circuit decided that the district court erred in asserting supplemental jurisdiction over foreign patent infringement claims. In particular, the Federal Circuit decided that the district court abused its discretion by   For a more detailed account see Canadian Report, answers to HC 3.   Mars Inc v Nippon Conlux Kabushiki-Kaisha 24 F 3d 1368 (Fed Cir 1994).   Jan K Voda v Cordis Corp 476 F 3d 887 (Fed Cir 2007).

319 320 321

74  Toshiyuki Kono and Paulius Jurcˇys asserting jurisdiction and held that considerations of comity, judicial economy, convenience, fairness and other exceptional circumstances constituted compelling reasons to decline supplemental jurisdiction. In coming to this conclusion, the Federal Circuit relied on such notions as independence of national patents (stating that ‘only a British court, applying British law, can determine the validity and infringement of British patents’). In discussing an issue of comity, the court noted inter alia that the plaintiff had not succeeded in identifying an international duty for American courts to adjudicate foreign patent infringement claims.

7.2.3  Claims against Multiple Parties and Other Possibilities of Consolidation in the ALI Principles The ALI Principles provide for a set of specific rules dealing with situations where the plaintiff seeks to sue multiple defendants. Section 206(1) of the ALI Principles establishes that the plaintiff bringing an action against a person in a state in which that person is resident may also proceed in that state against one or more non-resident defendants if the claims against the resident defendant and other defendants are so closely connected so as to be adjudicated together in order to avoid risk of inconsistent judgments. Such joint action against multiple defendants is possible if one of the two additional requirements is fulfilled: (1) there is a substantial, direct, and foreseeable connection between the forum’s IP rights at stake and each non-resident defendant; or (2) as between the forum and the states in which the additional defendants are resident, there is no forum that is more closely related to the entire dispute. This rule does not apply with regard to a co-defendant who invokes an exclusive choice-of-court agreement. The court which has jurisdiction according to section 206(1) is competent to decide injuries that arise out of activities that allegedly create the risk of inconsistent judgments; notwithstanding the place where such injury occurs. Section 206(2) further lists three instances when there is a risk of inconsistent judgments. Namely, inconsistency may arise if the ensuing judgments: (a) impose redundant liability; (b) conflict so that the judgment in one case would undermine the judgment in another case; or (c) conflict so that a party is unable to conform its behaviour to both judgments. Besides jurisdiction rules for claims against multiple defendants, the ALI Principles propose a legal framework for coordination of multi-territorial actions. In order to simplify and reduce the costs of the adjudication of multi-territorial IP disputes, the ALI Principles allow the court seised with related actions to choose one of the following mechanisms of adjudication: cooperation, consolidation or the combination of the two (sections 221–23). These innovative proposals are further discussed in section 8.2.2 of this report.

7.3  Consolidation of Claims in European States 7.3.1  Brussels/Lugano Regime: General Considerations The Brussels Regulation does not contain any specific rules for the consolidation of actions. However, there are some specific provisions which allow the plaintiff to consolidate proceedings. One such possibility is established in Article 6(1) of the Brussels I Regulation,322 which states that a person domiciled in a Member State may also be sued, where he is one   Art 6(1) of the revised Lugano Convention.

322

General Report  75 of a number of defendants, in the courts of the place where any of them is domiciled. The text of Article 6(1) was considered to be quite lenient as it enables the plaintiff to choose one of several states where actions against multiple defendants could be brought. Nevertheless, the Explanatory Report of the Brussels Convention indicated that for Article 6(1) to be applicable, a connection between the actions against multiple defendants has to be established (eg joint liability of defendants for the performance of contractual obligations).323 It was argued that such a narrow interpretation of Article 6 would help maintain the general jurisdictional ground of a defendant’s domicile and prevent national courts from exercising exorbitant jurisdictions.324 Such a restrictive interpretation of Article 6(1) of the Brussels Convention was established also in the jurisprudence of the European Court of Justice. In one of its early judgments the ECJ decided that Article 6(1) is an exception to the principle that jurisdiction is vested in the courts of the state where the defendant is domiciled (actor sequitur forum rei) and the existence of such a principle should not be challenged by an extensive application of exceptions to the general jurisdiction rule established in Article 2.325 Therefore, Article 6(1) could be applied where there is a connection between actions against different defendants that makes it expedient to determine those actions together to avoid the risk of irreconcilable judgments resulting from separate proceedings.326 However, the ECJ allows the national courts to decide on a case-by-case basis whether such a connection between the actions exists or not.327 In subsequent cases, the ECJ provided some additional guidance concerning the existence of a close connection between claims. For example, in the Réunion européenne case, it was decided that two claims in an action, one regarding compensation directed against different defendants and based in one instance on contractual liability and the other on the liability in tort or delict, cannot be regarded as connected.328 It should however be noted that the ECJ borrowed the notion of ‘irreconcilable judgments’ from Article 22 of the Brussels Convention (Art 28 of the Brussels I Regulation), which deals with the coordination of related proceedings. Although not mentioned in Article 6(1) of the Brussels Convention, the requirement of close connection between claims against multiple defendants was later included in the text of Article 6(1) of the Brussels I Regulation which provides that ‘a person domiciled in a Member State may be also sued where he is one of a number of defendants, in the courts for the place where any of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings’. Within the framework of the Brussels Convention, Article 6 of the Brussels I Regulation is an exception from the general rule that actions should be brought before a court of the defendant’s domicile (Art 2). Therefore, in 323   P Jenard, ‘Report on the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters signed at Brussels’ (27 September 1968) [1979] OJ C59/1 (hereinafter ‘Jenard Report’), 49. 324  ibid. 325   Case 189/87 Kalfelis v Bankhaus Schröder [1988] ECR 5565, para 8; Case C-51/97 Réunion européenne SA and Others v Spliethoff ’s Bevrachtingskantoor BV and the Master of the vessel Alblasgracht V002 [1998] ECR I-6511, paras 46–47; Case C-462/06 Glaxosmithkline v Jean-Pierre Rouard [2008] ECR I-3965, where the ECJ decided that Art 6(1) of the Regulation should be interpreted strictly, and refused to apply Art 6(1) to unilateral rules of jurisdiction provided for individual employment contracts (paras 28 and 32). 326   Case 189/87 Kalfelis v Bankhaus Schröder [1988] ECR 5565, para 8. 327  ibid, paras 12–13. For the practice of Italian courts, see Italian Report, answers to HC 3 and n 134. 328   Case C-51/97 Réunion européenne SA and Others v Spliethoff ’s Bevrachtingskantoor BV and the Master of the vessel Alblasgracht V002 [1998] ECR I-6511, para 50.

76  Toshiyuki Kono and Paulius Jurcˇys order to assure legal certainty as to the place of litigation, the Regulation allows proceedings against several defendants only in exceptional cases.

7.3.2  The Early Practice of Domestic Courts in IP Infringement Cases The application of Article 6(1) to IP matters raised many controversial questions. For instance, national reporters were asked whether a proprietor of parallel patent rights in three different countries would be able to bring an action against three persons who independently infringed the patent rights in those three foreign countries respectively. In other words, the question raised in hypothetical case no 3 was whether a patent-holder could institute proceedings before a court of his own place of domicile merely on the basis that the claims against those parties concern infringements of parallel IP rights. Most national reporters from the EU Member States responded that the right-holder would not be able to institute such proceedings because (a) neither of the defendants had their domicile in the forum country, (b) the place of damage would be in every state where the infringement occurred (ie where the patents were granted); and (c) that there is no connection between the claims.329 It should be also noted that the consolidation of claims would be only possible if the court to which an application for the consolidation had been seised first (otherwise, ie if the proceedings had been first instituted before courts of other states, the court second seised may have to stay the proceedings according to Arts 27–31 of the Brussels I Regulation).330 The practice of the national courts varied significantly. For instance, English courts have usually adhered to the territorial nature of IP rights and refused to exercise jurisdiction over foreign IP rights. In Coin Controls v Suzo International,331 the plaintiff, who was an owner of three European patents in the UK, Germany and Spain for the coin-dispensing device used in gaming machines, sought interlocutory relief before the English courts against four defendants: a Dutch company and its three subsidiaries established in the UK, Germany and the Netherlands (Suzo UK, Suzo Germany and Suzo Holland, respectively). The plaintiff argued that the Dutch and German subsidiaries were responsible for the development and manufacturing of the coin-dispensing device, while the Dutch parent company provided financial assistance. The defendant requested the court remove all of the defendants except Suzo UK. Justice Laddie decided that the court had jurisdiction only with regard to claims against Suzo UK and Suzo Holland concerning the infringement of the UK patent. All other claims were dismissed on the basis that there was not enough evidence that the defendants had taken part in infringing different national patents. Such a decision was largely based on two main legal arguments. First, as regards claims related to the infringement of foreign patent rights, Justice Laddie decided that English public policy considerations prevented UK courts from adjudicating foreign IP rights.332 Secondly, joinder of actions against multiple defendants according to Article 6(1) of the Brussels Convention was not possible because the validity of each of the patents was challenged and such matters related to validity of registered foreign IP rights are subject to exclusive jurisdiction of the courts of granting states.333 329   Austrian Report, section 4.3.1; Belgian Report, answers to HC 3; French Report, answers to HC 3; Greek Report, answers to HC 3; Italian Report, answers to HC 3; Portuguese Report, answers to HC 3; Slovenian Report, answers to HC 3; Swedish Report, answers to HC 3; UK Report, answers to HC 3. 330   For a more detailed analysis, see Ch 8. 331   Coin Controls Ltd v Suzo International Ltd et al [1997] Ch 33. 332   ibid, 40–44. 333   ibid, 48 et seq.

General Report  77 In the Fort Dodge case the first plaintiff, Akzo, was a Dutch company and a proprietor of corresponding English and Dutch patents. The second plaintiff, Intervet International, was a fully owned subsidiary who also had exclusive licence under the patent. The patents concerned were granted by the European Patent Office. Akzo and Intervet instituted proceedings before Dutch courts seeking preliminary and final injunctions against a group of companies for alleged acts of infringements of both the Dutch and the UK patent. The action brought before Dutch courts was against various companies who either produced, imported or distributed allegedly infringing products in the Netherlands and the UK. The representative of Akzo and Intervet argued before the English Court of Appeal that the decision reached in the previous Pearce v Ove Arup case should be reversed so as to enable the proceedings related to infringement of the UK patent at stake to be brought against the defendants before Dutch courts. The Court was not persuaded by the arguments and stated that strict interpretation of Articles 2, 5(3) and 6(1) as established in the jurisprudence of the ECJ should be followed, which in this case meant that Akzo and Intervet had to initiate separate proceedings before the English courts if they wished to enforce their rights stemming from the UK patent. The reasoning behind such a decision was based on the territorial nature of patent rights which meant that there could be no irreconcilable judgments relating to the infringement of two national patent rights.334 The courts of continental European countries took a more liberal approach and allowed the consolidation of actions related to infringements of national bundle patents granted in accordance with the European Patent Convention. A number of remarkable decisions were made by Dutch courts. In one of its landmark judgments, Expandable Grafts v Boston Scientific,335 the Hague Court of Appeal had to decide (a) whether it had jurisdiction over an action for an injunction brought by a proprietor of a European patent who sought to prohibit the defendant domiciled in the Netherlands from infringing the Dutch Patent of the European bundle of patents, and (b) whether its jurisdiction could also be extended with regard to an action for an injunction against a French defendant, seeking the prevention of an infringement of the French patent. The plaintiff ’s argument was based on the fact that the same infringing products were put into different domestic markets by corporations belonging to the same corporate group. The Hague Court was of the opinion that the general rule allowing the suing of the defendant before courts of the country where it is domiciled should be maintained. However, the Court also noted that the need for a proper administration of justice requires simultaneous hearing of actions brought against several companies belonging to the same corporate group if such companies are selling identical products in different national markets based on a joint business plan. Nevertheless, such joinder of actions should not result in a situation where the plaintiff is given the possibility of suing all the parties in the courts, of his own choosing, of the domicile of any one of the companies belonging to the group. The Hague Court of Appeal held that the best way to strike a balance between Article 2 and Article 6(1) is to allow the bringing of actions in their entirety only before courts of the domicile of the head office which is in charge of the business operations in question or from which the business plan originated. The decision in the Expandable Graft case restricted the possibility of bringing actions only before the courts of the domicile of the main infringer, and thus limited forum   Fort Dodge Animal Health Limited et al v Akzo Nobel NV [1998] ILPr 732, paras 21–22 (Lord Woolf).   IEPT19980423, Hof Den Haag, EPG v Boston Scientific; as referred in n 19 of the Dutch Report.

334 335

78  Toshiyuki Kono and Paulius Jurcˇys shopping possibilities. Hence, a great number of previous cases where Dutch courts assumed jurisdiction over actions for the infringement of bundle patents brought against multiple alleged infringers were reversed.336 The approach taken by the Hague Court of Appeal, whereby the plaintiff was allowed to sue alleged infringers belonging to the same group of companies before the courts of the main infringer, was labelled the ‘spider-in-theweb’ doctrine and was subsequently applied by courts of other European countries.337

7.3.3  ‘Roche Nederland’ and its Aftermath To a large extent, the decision of the ECJ in Roche Nederland put an end to divergent interpretations of the applicability of Article 6(1) of the Brussels Convention to IP disputes. In this case, two American companies, Primus and Goldenberg, which were proprietors of the European patent in 10 EU states, brought an action in the Hague, where the main infringer (Roche Nederland) was established. The plaintiffs also sought to enjoin eight other companies belonging to the Roche group. Primus and Goldenberg argued that those companies had all infringed the patents by committing infringing acts in accordance to the common policy elaborated by Roche Nederland. Both the trial court and the court of second instance approved the existence of jurisdiction; the Dutch Supreme Court (Hoge Raad), however, was not so convinced and referred the case to the ECJ for a preliminary ruling. The ECJ was asked to clarify whether it is possible to bring a lawsuit for an infringement of a bundle of European patents against a defendant whose registered office is in the forum state and also sue other defendants having their registered offices in Contracting States other than that of the forum. The judgment in the Roche case was rendered the same day as another milestone judgment in GAT v LuK. The ECJ decided that Article 6(1) of the Brussels Convention does not apply in European patent infringement proceedings involving a number of companies established in various Contracting States which concern acts committed in one or more of those states even where those companies, belonging to the same group, may have acted in an identical or similar manner in accordance with a common policy elaborated by one of them.338 In coming to such a conclusion, the ECJ followed the same line of reasoning as was established in its previous case law. The court again emphasised that for Article 6(1) of the Convention to be applicable, actions against multiple defendants must have a connection of such a kind that it is expedient to determine the actions together in order to avoid the risk of irreconcilable judgments which might result from separate proceedings. The parties in the Roche Nederland case suggested different interpretations as to the meaning of ‘irreconcilable judgments’. The plaintiffs argued that the Court should follow a broader notion of irreconcilable judgments, as established in the interpretation of Article 22 of the Brussels Convention which dealt with the coordination of related proceedings. If this interpretation was adopted, ‘irreconcilable judgments’ would have meant that the risk of conflicting judgments would not necessarily cause the risk of giving rise to mutually

336   For example, in the case of Organon the Hague Court of Appeal enjoined defendants from infringing a European Patent in the Netherlands, Germany, France, Lichtenstein, Luxembourg, Austria, the UK, Switzerland and Sweden (Court of Appeal of the Hague, decision of 3 February 1994, Applied Research Systems BV v Organon et al (1995) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 253 – Follikelstimulationshormon). 337   Dutch Report, section 3.4. 338   Case C-539/03 Roche Nederland BV and Others v Frederick Primus and Milton Goldenberg [2006] ECR I-6535, para 41.

General Report  79 exclusive legal consequences.339 On the other hand, the defendants and the Advocate General supported a narrower understanding of the notion of ‘irreconcilable judgments’. In their view, the Court should have followed its established jurisprudence when applying rules related to the recognition of judgments where irreconcilable judgments were interpreted as entailing legal consequences which are mutually exclusive.340 The ECJ did not find it necessary to decide on this issue. Instead, it merely stated that even if broader interpretation of the notion of ‘irreconcilable judgments’ is accepted, there is no risk of such decisions being given in European patent infringement proceedings.341 The Court followed the proposal of AG Léger in deciding that decisions rendered in separate domestic proceedings could be contradictory if they are related to the same factual and legal situation. The ECJ stated that in the case of infringements of parallel patent rights, factual situations are not the same, because different persons are sued in different Member States for varied infringing acts.342 Furthermore, the principle of the independence of national patent rights, even though the patents at stake were granted under the European Patent Convention, led the Court to the conclusion that the legal situation is also different.343 Similarly, as regards ‘spider-in-the-web’ situations where individual companies pursue a common business policy that leads to infringements of patents held in different countries, the ECJ acknowledged that although factual circumstances are similar, from a legal perspective, infringements were not identical because of the independence of national patent rights.344 The ECJ explored further the policy objectives of the Brussels Convention, namely, the predictability of the rules of jurisdiction, the prevention of forum shopping and the need to assure speedy litigation.345 Finally, even if an action against multiple infringers was possible, it is very likely that the defendants will raise invalidity defences which, according to the previous judgment in GAT v LuK, would again lead to territorial litigation according to exclusive jurisdiction rules.346 The practical outcome of the ECJ decisions in the cases of Roche and GAT is that crossborder IP litigation, at least insofar as it is related to the registered IP rights, should be conducted on a country-by-country basis before the courts of each protecting state. 347 Even though it is possible to sue the main infringer in a court of his domicile and try to bring actions concerning infringements in other countries, such actions would fail if the plaintiff does not succeed to prove the causal link between the infringements of sister IP rights protected abroad. The national reporters indicated that as a result of the ECJ decision in the Roche case, a proprietor of parallel patent rights would be able to sue the coordinator of the infringement and in the same court seek a consolidation of claims against a number of defendants who belong to a group of corporations that jointly infringe parallel patent rights. Some national reports referred to the domestic case law where the ECJ reasoning in the Roche case was adopted348 or where it is expected that the domestic international   ibid, paras 22 and 24; Case C-406/92 The Tatry v Maciej Rataj [1994] ECR I-5439, para 58.   Case C-539/03 Roche Nederland [2006] ECR I-6535, paras 23–24; Case 145/85 Hoffman [1986] ECR 645, para 22. 341   Case C-539/03 Roche Nederland [2006] ECR I-6535, para 25. 342   ibid, paras 27–28. 343   ibid, para 31. 344   ibid, paras 34–35. 345   ibid, paras 37–39. 346   ibid, para 40. 347   Belgian Report, answers to HC 3. 348   As for the court practice of Belgian courts, see Belgian Report, answers to HC 3 and n 336. 339 340

80  Toshiyuki Kono and Paulius Jurcˇys jurisdiction rules might be adjusted to reflect the recent ECJ decision on the Roche case.349 The decision of the ECJ in the Roche Nederland case ignited many discussions within the patent community. On one hand, the UK report noted that such a decision of the ECJ affirmed the earlier practice of English courts.350 On the other hand, national reporters – mainly from the continental countries – were quite sceptical of the approach adopted by the ECJ.351 Taken together, the criticism of the ECJ judgment in Roche rests upon three main arguments. First, the conclusion that there can be no inconsistent judgments in socalled ‘spider-in-the-web’ situations was considered unconvincing. By stating that the infringements and defendants are different and that infringing acts would usually occur in different states, the ECJ decided that there can be no contradictory decisions even if patents were granted according to the EPC. However, it has been argued that the ECJ could have come to a different conclusion if it took into account what constitutes an object of infringement in such disputes as the Roche case. In particular, it has been argued that in European patent infringement proceedings the object of an infringement is the same; therefore there actually is a likelihood of contradictory judgments.352 Even though national law plays a certain role in European patent infringement proceedings, to the extent provided in Article 64 of the EPC, usually the allegedly infringed invention would be the same and the court dealing with the infringement case would have to determine the scope of the allegedly infringed patent according to the patent claims which would be identical to all patents in the bundle (Art 69(1) EPC).353 The second criticism is related to the need to protect the interests of the non-resident defendants. It stands to reason that the general principle of a defendant’s domicile should be maintained, and only limited exceptions to this rule are desirable. Although predictability of jurisdiction rules is one of the underlying policy objectives of the Brussels regime, it does not pre-empt jurisdiction rules from a dynamic interpretation. Insofar as crossborder IP litigation is concerned, it is argued that the ECJ should have adopted the interpretation of Article 6(1) as it was established in the Expandable Grafts decision of the Hague Court of Appeal because it ‘has laid a solid foundation for a balanced and pragmatic solution’.354 Further, commentators submit that the ‘spider-in-the-web’ doctrine does not threaten the objectives of predictability or legal certainty; instead, it balances the interests of both parties and facilitates efficient dispute resolution.355 Thirdly, the Roche judgment is criticised on the basis that it failed to take into account the interest of the business community for an efficient patent litigation structure. By referring to its previous decision in GAT, the ECJ reiterated the existence of exclusive jurisdiction rules which would come into application whenever the invalidity defence is raised. Taking into account relatively high litigation costs, the combined effects of the ECJ rulings   French Report, answers to HC 3.   UK Report, answers to HC 3. 351   Italian Report, answers to HC 3; Spanish Report, answers to HC 3. Also RC Dreyfuss, ‘Resolving Patent Disputes in a Global Economy’, in R Moufang and T Takenaka (eds), Patent Law: A Handbook of Contemporary Research (Cheltenham, Edward Elgar Publishing, 2009) 627–29. 352   A Kur, ‘A Farewell to Cross-Border Injunctions? The ECJ Decisions in GAT v LuK and Roche Nederland v Primus and Goldenberg’ (2006) International Review of Intellectual Property and Competition Law 850. 353   See eg German Report, answers to HC 3; Spanish Report, answers to HC 3; A Kur, ibid 850; G Beilfuss, ‘Is there Any Web for the Spider? Jurisdiction over Co-defendants after Roche Nederland’ in A Nuyts (ed), above n 1, 84–86. 354   A Kur, ibid 850. 355   A Kur, ibid 580–51; CG Beilfuss, above n 353 at 85–86. 349 350

General Report  81 in the GAT v LuK and Roche cases will cause litigation costs to be even higher, because of the segmentation of state-to-state patent litigation. This might have dramatic effects on small and medium undertakings that might no longer be able to enforce their IP rights. Therefore, it might be questioned whether another fundamental right to access of justice is not undermined. On a more general scale, territorially based litigation might have further systemic effects, namely, because of high costs associated with the enforcement of patent rights, companies might be discouraged from applying for the legal protection of their creative products. Nonetheless, some national reporters argued that the ECJ judgment in Roche did not completely eliminate the possibility of a joinder in multi-state IP infringement proceedings.356 The post-Roche jurisprudence of some national courts illustrates that, notwithstanding the strict approach taken by the ECJ, there might be further possibilities for the application of the ‘spider-in-the-web’ doctrine. In this regard there is one noteworthy decision, handed down by the Hague Court of Appeal in 2007,357 where the Court applied the Roche test requiring an investigation into the likeliness of inconsistent judgments in actions brought before courts of the country where each defendant is domiciled. As regards factual sameness, the Court decided that they may be the same where the defendant companies, belonging to the same corporate group, act in an identical or similar manner in accordance with the common policy prepared by one of them. Since the case at hand involved infringement of a Community trade mark, the Court had the opportunity to test whether this infringement would lead to the same factual situation even if the actions were litigated before the courts of each protecting country. Different from proceedings concerning the infringement of European bundle patents, the Hague Court of Appeal found that in the case of Community IP rights, the danger of irreconcilable judgments actually does exist because Community IP rights regulations create truly uniform supranational IP rights which are effective within the entire European Union.358 It follows that the ‘spider-in-theweb’ doctrine was not completely eliminated by the ECJ and could still be applied in cases of multi-state infringements of Community IP rights by companies who belong to the same group and who act in an identical or similar manner. Similarly, the Italian Report referred to one judgment of an Italian court in a trade mark dispute, where the court interpreted Article 6(1) broadly and joined claims related to the ownership of Italian and US trade marks.359 More generally, the answers provided in the national reports highlighted differing opinions as to whether the implications of the Roche case should affect consolidation of claims in cross-border cases concerning other kinds of IP rights (especially non-registered IP rights such as copyrights).360

7.3.4  Third-Country Situations The possibility of consolidating claims against defendants domiciled in third states should be decided according to domestic jurisdiction provisions. At the outset, it should be noted that there are very few (or no) domestic court decisions with regard to this matter. Therefore, the answers given in the national reports were based primarily on existing   French Report, answers to HC 5.  Decision of the Hague Court of Appeal of 23 August 2007, available at www.iept.nl/files/2007/ IEPT20070823_Hof_Den_Haag_Bacardi_v_Mad_Bat.pdf (in Dutch). 358   Dutch report, section 3.7. 359   Italian Report, answers to HC 3 and n 135. 360   Spanish Report, answers to HC 3. Similar doubts are expressed in the Swedish Report, answers to HC 3. 356 357

82  Toshiyuki Kono and Paulius Jurcˇys domestic statutory provisions361 or prevailing academic opinions. Due to the lack of domestic court decisions, some national reporters merely noted that it was unclear whether consolidation of the proceedings, where the defendant is not resident in any EU or EFTA Member State, would be possible.362 Three alternative regimes for the coordination of claims exist in Austrian domestic law. First, claims against multiple defendants could be consolidated in the Commercial Court of Vienna (section 162 of the Patent Act). However, in this case the consolidation of claims is limited only to claims concerning infringements of Austrian (and not foreign) patents.363 Second, an additional possibility of consolidation of claims is entrenched in Article 83c(2) of the Civil Jurisdiction Act. In this case a proprietor of IP rights could seek consolidation of claims against defendants who are domiciled in a third country but have their business establishments in Austria and undertake IP infringement activities in Austria. In order to consolidate the claims, an Austrian court must have international jurisdiction vis-à-vis every defendant in the proceedings.364 Hence the possibility of consolidating multi-state infringement proceedings against several defendants will depend upon the factual circumstances of each particular case. More precisely, if an action is brought against a number of foreign defendants who belong to the same corporate group and engage in infringing activities of several foreign IP rights, Austrian courts would not be able to consolidate proceedings against those foreign defendants merely on the ground that the defendant who coordinated those infringing activities is domiciled in Austria.365 Third, consolidation of claims could be possible pursuant to Article 93(1) of the Civil Jurisdiction Act. A consolidation based on this provision is possible if the following three requirements are met. First, the Austrian court should have general international jurisdiction over all defendants. The scope of this requirement is further defined by the Austrian Supreme Court which determined that it is sufficient if an Austrian court has international jurisdiction over at least one of the defendants.366 Second, the proceedings must concern the same situation of law or fact. Third, Article 93(1) of the Civil Jurisdiction Act requires that jurisdiction be conferred upon the court where the proceedings are to be consolidated. According to the Austrian Report, consolidated adjudication of ‘spider-in-the-web’ disputes are possible before Austrian courts because the second requirement of the sameness of fact or law has not been interpreted strictly by Austrian courts, thus allowing consolidated adjudication of coordinated infringements of parallel IP rights.367 The possibility of bringing an action against several co-defendants theoretically exists under French law, provided that there is a close connection between the claims.368 However, in cases where claims are brought against several co-defendants, French courts would be able to decline international jurisdiction if there is an insufficient link between the defendant’s domicile and the forum state. In practice, although the doctrine of forum non conveniens is unknown in France, courts nevertheless have certain discretion to evaluate whether

361   Art 5 §1 of the Belgian CPIL; Art 37 § 1 of the Greek Code of Civil Procedure; see Greek Report, answers to HC 1. 362   UK Report, answers to HC 3. 363   Austrian Report, section 4.3.3. 364   Austrian Report, section 4.3.3. 365  ibid. 366   Austrian Report, section 4.3.3. 367   Austrian Report, section 4.3.3 for further references to Austrian court practice. 368   French Report, section 1.2.3.

General Report  83 the exercise of international jurisdiction would not be exorbitant.369 On the other hand, some national reporters noted that the consolidation of actions against defendants, some of whom are not resident in a forum state, is not possible.370

7.3.5  Consolidation Possibilities according to the CLIP Principles Keeping in mind the criticism of the ECJ decision in the Roche judgment, the CLIP Principles put forward a proposal for a modified regime concerning actions against multiple defendants. The drafters of the CLIP Principles aimed to determine international jurisdiction of the court of the state where the main infringing activities occurred. Accordingly, Article 2:206(1) of the CLIP Principles establishes that a person who is one of a number of defendants may also be sued in the courts of the country where any of the defendants is habitually resident, given that the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. According to this rule, jurisdiction is only conferred upon the courts in the country of the habitual residence of the defendant who coordinated the activities leading to the infringement or is otherwise most closely connected with the dispute in its entirety (Art 2:206(2)). Hence, the CLIP Principles recall the ‘spider-in-the-web’ doctrine. The CLIP Principles also stipulate that the risk of irreconcilable judgments, so far as they concern the application of the rules on actions against multiple defendants, exists in disputes involving essentially the same legal and factual situation. The notion of ‘essentially the same factual and legal situation’ is also clarified in Article 2:206(1). The same infringement disputes involve essentially the same factual situation if the defendants have acted in an identical manner or in accordance with a common policy. The same legal situation exists in disputes even if different national laws have to be applied to claims against different defendants, given that the relevant national laws are harmonised to a significant degree by rules of regional organisations or by international treaties. The latter approach demonstrates the critical view of the recent ECJ practice in applying the Brussels I Regulation. Namely, the drafters of the CLIP Principles were of the opinion that at least within the EU, partial harmonisation of IP rights should not be disregarded. As for European patents, not only their issuance, but also sanctions and certain other aspects of enforcement of patent rights have been harmonised by the adoption of the Enforcement Directive371 and implementation of certain provisions of the TRIPS Agreement.372 In adopting such an interpretation, the CLIP Principles should open the possibility of bringing actions for infringement of regionally harmonised IP rights such as European bundle patents or European trade marks.373

7.3.6  European Patent Litigation Scheme In order to overcome the existing limitations concerning the adjudication of multi-state patent disputes, two possible legal instruments have been proposed: (a) a Community  ibid.   Slovenian Report, answers to HC 3.   Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights [2004] OJ 195/16. 372  C Heinze, ‘A Framework for International Enforcement of Territorial Rights: The CLIP Principles on Jurisdiction’ in J Basedow, T Kono and A Metzger (eds), above n 1, 76. 373  ibid. 369 370 371

84  Toshiyuki Kono and Paulius Jurcˇys patent, and (b) a European and Community Patents Court. One of the objectives of creating a system of Community Patent is to create additional incentives for small and medium enterprises and to make the access to the patent system less costly. A unitary Community title would provide for equal protection within the EU and thus help fight against counterfeiting and patent infringements. The Community patent can be granted only in respect of the whole Community (Art 2(2)). The examination of patent applications, the grant of Community patents as well as other administrative functions are to be carried out by the EPO. In particular, applications for Community patents should be filed through the national patent authorities or directly to the EPO. The EPO shall be also in charge of the administration of the Registry of Community Patent. As for substantive law provisions, the European Patent Convention should be applied together with national law, insofar as it complies with the Community law. The European and Community Patents Court would be for disputes concerning the infringement and validity of European and Community patents. The main objective of establishing a special patents court is to provide for a legal mechanism which would ensure expeditious and high-quality decisions, and would strike a balance between the interests of various stakeholders. The Court would have exclusive jurisdiction concerning: (a) actions for actual or alleged infringements of patents, supplementary protection certificates and related defences as well as declarations of non-infringement; (b) actions for provisional and protective measures and injunctions; (c) counterclaims for revocations of patents; (d) actions for damages and compensation derived from the provisional protection conferred by a published patent application; (e) actions relating to the use of the invention prior to the granting of the patent or the right based prior to use of the patent; and (f) actions for the grant and revocation of compulsory licences concerning Community patents (Art 15(1)). The national courts of Contracting States shall have jurisdiction in actions related to Community and European Patents unless they fall under the exclusive jurisdiction of the Patent Court. In particular, actions referred to in (a), (b) and (d) of Article 15(1) shall be brought to either (a) the court of the Contracting State where the infringement occurred or may occur, or (b) the local court of the Contracting State where the defendant is domiciled. If the defendant is domiciled outside the territory of Contracting States, the action shall be brought before the courts of the state where the infringement occurred or threatened to occur. Other kinds of actions referred to in Article 15(1) shall be brought before the central division. Such actions may only be initiated if the infringement proceedings have not been initiated before the local or regional division. An action for a declaration of non-infringement that is pending before the central division shall be stayed if an infringement action concerning the same patent between the same parties, or between the holder of the exclusive licence and the person requesting a declaration, is initiated within three months of a local action. The Patent Court may impose measures which are described in the Statute of the Court and Rules of Procedure. In particular, the Court can issue orders to produce or preserve evidence, orders to inspect property, freezing orders, provisional and protective measures, permanent injunctions as well as corrective measures in infringement proceedings (Arts 34–38). The Patent Court may also render a decision upon the validity of a patent and award damages. In the case of Community patents, the decisions of the Patent Court shall have effect within the whole territory of the EU. If the dispute concerns European patents, the effects of the decision shall be limited to the territory in which the European patent has effect (Art 16).

General Report  85

7.4  Asian Countries 7.4.1  Consolidation of Claims in India and Taiwan International jurisdiction of Indian courts in IP infringement disputes can be asserted if the court has jurisdiction over the defendant, and only with regard to claims which are related to infringement of Indian IP rights. Accordingly, as regards consolidation of claims against multiple defendants resident in different countries, who independently infringe parallel patent rights in those countries, Indian courts would not have jurisdiction over such claims concerning foreign IP rights. Similarly, the ‘spider-in-the-web’ doctrine is unknown to Indian courts; hence Indian courts would not join actions concerning the infringements of parallel patent rights even if the alleged infringers belong to the same group of companies. However, the Indian Report notes that Indian courts would nevertheless be competent to adjudicate disputes concerning the infringement of IP rights which were transferred by a contractual agreement between the right-holder (plaintiff) and alleged infringers of the contract.374 Taiwanese courts would also refuse to assert international jurisdiction over defendants who do not have their domicile in Taiwan. The ‘spider-in-the-web’ doctrine is not known in Taiwan; hence, Taiwanese courts would not have in personam jurisdiction over foreign defendants who infringe parallel IP rights even if such alleged infringers belong to the same corporate group.375

7.4.2  Consolidation of Claims according to Japanese Law Japanese law embeds a rather peculiar system concerning the consolidation of claims. There are two main areas of consolidation: (1) ‘objective joinder’, which means joinder of related claims and (2) ‘subjective joinder’, which means joinder of claims brought against different defendants. The legal basis for the joinder of claims is posited in Article 7 of the Japanese CCP which states that joinder of claims is possible if a (Japanese) court has jurisdiction over one of the claims pursuant to jurisdiction rules of the CCP. Similarly to Article 6(1) of the Brussels I Regulation, objective joinder in Japanese law is considered to be one of the special grounds of jurisdiction; therefore, Article 7 of the Japanese CCP should be interpreted and applied restrictively. Article 7 of the CCP does not directly require that there is any connection between the claims brought before a court; however, the prevailing opinion is that Japanese courts can assert jurisdiction only if there is a close connection between the claims.376 One of the benchmark decisions in the area of objective joinder is the Supreme Court decision in the so-called Ultraman case.377 In this case a dispute arose between a Japanese corporation, Tsuburaya Production, and a Thai national. The defendant’s corporation did not have its registered office in Japan, but its president was resident there. According to the licence contract concluded between Tsuburaya and the Thai counterparty in 1976, the object of the contract was a transfer of rights to use copyright products in a number of countries, including Thailand. In 1996 Tsuburaya allegedly sent a letter confirming the   Indian Report, answers to HC 3.   Taiwanese Report, answers to HC 3. 376   Japanese Report, answers to HC 3. 377   Supreme Court, Judgment of 8 June 2001, 55 Minsh¯u 727. 374 375

86  Toshiyuki Kono and Paulius Jurcˇys transfer of exclusive rights to the Thai counterparty. Later, Tsuburaya licensed the use of the copyright works to another party, a Japanese corporation, Bandai; according to this agreement, the territorial scope of use covered Japan and South East Asian countries. In April 1997 the corporation whose president was the Thai defendant, sent warning letters to Bandai and its subsidiaries as well as Sega Entertainment, arguing that he had obtained exclusive licence from Tsuburaya Corporation, and requesting the stopping of infringements. Subsequently, Tsuburaya Corporation brought a suit in Japan against the defendant, making a number of claims for compensation and requiring the court to issue declarations regarding a number of facts. Having decided that Japanese courts rightly asserted international jurisdiction, the Supreme Court briefly addressed the question of joinder of claims. It confirmed that joinder of claims is possible only if the close relationship between the claims exists. In the case at hand, the plaintiff made a number of claims, including: (1) a claim for compensation of damages for the disturbance of business by the defendant via warning letters; (2) a claim for a declaration that the defendant did not have a copyright over the copyrighted works concerned; (3) a claim for recognition of the fact that the contract of 1976 was not authentic (and indeed, the plaintiff argued that the defendant had forged the contract); and (4) a claim for the recognition that the plaintiff had the copyrights to use the works in Thailand etc. The Supreme Court found that the first and the second claims were closely related to the third and fourth claims. The Court emphasised that the joinder of claims would facilitate international adjudication of disputes and therefore was justifiable, considering the international allocation of judicial functions among the courts of different countries. Another form of joinder of claims is known as subjective joinder, ie joinder of claims raised by multiple plaintiffs or multiple defendants. According to Article 38 CCP, ‘if rights or obligations that are the subject matter of the suits are common to two or more persons or are based on the same factual or statutory cause, these persons may sue or be sued as coparties’. This provision is to be read in conjunction with Article 7 CCP which also requires that such joint claim is brought to a court which has a general venue pursuant to Article 4. In other words, courts which have jurisdiction on the basis of Article 4 (defendant’s domicile, place of establishment or place of business is in Japan) may assert jurisdiction over claims between joint parties, given that such claims are based on the same factual or statutory cause. In theory, Article 38 aims to allow the consolidation of closely related claims between the same parties thus facilitating dispute resolution, potentially reducing procedural costs and preventing inconsistent judgments. Besides, it is generally acknowledged that there should be a close connection between the claims and also between joint parties.378 In court practice, this provision has been interpreted in a restrictive fashion.379 Courts have often refused to exercise their international jurisdiction over multiple defendants who do not have residence in Japan. This was generally based on the argument that suing multiple foreign defendants may undermine their right to fair trial and procedural defence rights.380 Accordingly, although Japanese courts would not in principle have international jurisdiction over infringements of IP rights in foreign countries, they might nevertheless assert international jurisdiction over several closely related claims, provided that jurisdiction   Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853.   Tokyo District Court, Judgment of 25 April 1995, 898 Hanrei Taimuzu 245.   Tokyo District Court, Judgment of 5 February 1997, 936 Hanrei Taimuzu 242.

378

379 380

General Report  87 could be asserted over one of these claims.381 However, according to the Japanese Report, such close connection would not be affirmed in cases where parallel IP rights are infringed by persons who act independently in different foreign countries.382 In addition, it is hardly likely that Japanese courts would assert international jurisdiction in so-called ‘spider-inthe-web’ cases where infringement of parallel IP rights was committed by corporations belonging to the same corporate group. Hence, the question of whether the invalidity defence is raised or not is not relevant.383 Consolidation of claims brought for the breach of contract might be possible if contractual obligations were to be performed in Japan. However, for claims related to the performance of contractual obligations by different parties to be joined, Japanese courts would apply a special circumstances test. According to the special circumstances test, Japanese courts would consider whether joinder of claims against different parties does not undermine the principle of fairness between the parties, proper and speedy adjudication and the burden of defendants against whom the action is brought before Japanese courts. Hence, the Japanese Report notes that a joinder of the foreign parties for the performance of contractual obligations before a foreign court might also be problematic.384 7.4.2.1  Joinder of Claims in the CCP (2011) The drafters of the CCP (2011) were aware of the efficiency gains if several related claims are heard together in the same proceedings. Article 3-6 follows the established court practice and stipulates that Japanese courts can exercise international jurisdiction whenever they are competent to hear at least one claim of the action, provided that there is a close connection between the claims of the action. According to the Explanatory Report to the Interim Proposal, the exercise of international jurisdiction over claims which are not related might be considered an exorbitant exercise of jurisdiction. In addition, the question of whether there is a close connection between the claims should be interpreted in the light of territorial jurisdiction rules and, moreover, the discretion of the court should be restricted. Such an approach is said to be in line with the protection of the interests of the defendant, who should be given a fair opportunity to defend the case.385 The special rule concerning the joinder of claims would not apply if the claims are related to matters which fall under exclusive jurisdiction. In cross-border IP litigation this exception will be especially important, because most patent disputes involve issues which are related to registration, and fall under exclusive jurisdiction rules. 7.4.2.2  The Transparency Principles One of the most notable proposals to modify existing Japanese law, put forward in the Transparency Principles, is related to the treatment of joinder of claims. According to the comments to the Proposal, the members of the Transparency group were very much concerned about the need to provide litigating parties with a forum which could singlehandedly decide cases related to patent infringements occurring in multiple countries. Courts   Japanese Report, answers to HC 3.  ibid. 383  ibid. 384  ibid. 385   Kokusai saiban kankatsu kenky¯u-kai [International Jurisdiction Study Group], ‘Kokusai saiban kankatsu kenky¯u-kai h¯okoku (6) [Report of the International Jurisdiction Study Group (6)]’ NBL No 886 (2008.8.1), 72. 381 382

88  Toshiyuki Kono and Paulius Jurcˇys having jurisdiction over joint multiple claims would also be in a position to issue preliminary protective measures with extraterritorial effects and thus concentrate proceedings before a court of a single country. These efficiency considerations prevailed over the problems that might arise if courts of Japan had to apply foreign patent statutes which might often raise an issue of the differing scope of patent protection as well as the danger that judgments might not be easily recognised and enforced in other countries.386 Practical efficiency concerns justify the need of a legislative framework favouring joinder of claims; yet, conferral of authority to hear cases concerning joint claims in multi-territorial disputes requires the additional awareness of judges dealing with the dispute. As regards objective joinder of claims, the Transparency Principles provide that Japanese courts shall have international jurisdiction over joint claims or counterclaims between the same parties if, first, Japanese courts have jurisdiction over one of the claims and, secondly, the claims or counterclaims are closely connected to each other (Art 110(1)). Thus, according to Article 110(1), a Japanese court would be competent to join claims which are related to infringement of IP rights held in different countries, even if such infringing acts are not identical. The underlying requirement for such a joinder would be the close connection between the claims.387 Therefore, it seems that a Japanese court could join claims seeking legal redress on the basis of infringement of IP rights and claims of the counter-party, based on unfair competition statutes.388 Besides the requirement of close connection between the claims, Article 110(1) sentence 2 adds an additional condition that objective joinder of claims is possible if Japan is the country where primary contractual obligations were performed or primary infringing acts occurred. This approach reflects previous Japanese court practice.389 As for subjective joinder of claims, Article 101 provides for two special provisions. Article 101(2) entrenches a ‘general’ rule according to which claims raised by several plaintiffs or claims against several defendants may be joined if Japanese courts have jurisdiction over one of these claims and there is a close relationship between the claims. In addition, Article 101(2) stipulates that claims against several defendants may be joined if defendants could ordinarily foresee that Japanese courts would have international jurisdiction over them. By and large, the Transparency Principles follow the previous Japanese court practice whereby joinder of claims against multiple defendants was possible only in very limited cases. However, in order to balance the interests of various stakeholders, the Transparency Principles introduced a distinctive requirement of foreseeability which, together with the requirement of close connection between the claims, should strike a balance between legal certainty and flexibility.390 The second provision on subjective joinder of claims is entrenched in Article 110(3) of the Transparency Principles. It provides for a more specific situation of cooperative infringement of parallel IP rights in different countries. In particular, Article 110(3) deals with situations where parallel IP rights are infringed by legal entities belonging to the same corporate group (so-called ‘spider-in-the-web’ situations). According to this provision, Japanese courts could assert international jurisdiction against multiple defendants if 386   S Chaen, T Kono and D Yokomizo, ‘Jurisdiction in Intellectual Property Cases: The Transparency Proposal’ in J Basedow, T Kono and A Metzger (eds), above n 1, 144. 387  ibid. 388  ibid. 389   Supreme Court, Judgment of 8 June 2001, 55 Minsh¯u 727. 390   S Chaen, T Kono and D Yokomizo, ‘Jurisdiction in Intellectual Property Cases: The Transparency Proposal’ in J Basedow, T Kono and A Metzger (eds), above n 1, 142.

General Report  89 Japanese courts have jurisdiction over one of the claims and the following four requirements are fulfilled: (1) IP rights at stake should exist in different countries; (2) those IP rights should be substantively related; (3) in cases where Japanese courts are competent to hear the dispute according to special jurisdiction rules, the ‘primary’ contractual obligations have to be performed in Japan, or, in case of infringement, ‘primary’ facts should occur or should have occurred in Japan; and (4) the jurisdiction of Japanese courts is limited only with regard to those potential defendants who could have ‘ordinarily foreseen’ that they might be brought in court proceedings in Japan. The source of inspiration in drafting this provision was a set of legal developments in Europe. Since the landmark judgment was handed down in Roche,391 a number of preceding legislative proposals (ALI and CLIP Principles) have put forward possible jurisdiction rules enforcing the possibility of bringing suits against co-defendants belonging to the same corporate group. In the same vein, Japanese Transparency Principles follow this legislative trend and propose an alternative improvement of Japanese positive law. Article 110(3) should be read as a lex specialis of Article 110(2). While Article 110(2) deals with the rather traditional problem of multiple parties, Article 110(3) aims to solve the problem of consolidation of claims against defendants belonging to the same corporate group and who undertake, jointly or under the coordination of another member of the corporate group, certain acts which infringe parallel IP rights granted in different countries (‘spider-in-the-web’). Having regard to the fact that Japanese courts had not dealt with such infringements, and seeking to duly protect the interests of the defendants, the drafters of Article 110(3) entrenched a number of conditions which significantly restrict the material scope of this provision. Such additional requirements illustrate the spirit of Article 110(3) and help drive a wedge between the scope of paragraphs 2 and 3. Furthermore, Article 110(3) should be read in conjunction with Article 110(1) which deals with objective joinder of claims because ‘spider-in-the-web’ situations would usually be related to infringements of identical patents granted in different countries and such infringing acts would be committed jointly. Notably, Article 110(3) of the Transparency Proposal provides for a more stringent requirement regarding the objective connection between claims; namely, paragraph 3 posits that IP rights should be ‘substantively’ connected (whereas paragraph 1 requires ‘close’ connection between the claims). In addition, Japanese courts could have jurisdiction against multiple defendants only if the primary obligations (in case of contractual disputes) or primary facts (in case of infringement of parallel patent rights) occur in Japan. Therefore, it appears that Article 110(3) would be applicable only if the dispute has a close objective connection to Japan. In practical terms, this would mean, for example, that essential coordination activities should have taken place in Japan. 7.4.2.3  The Joint Japanese-Korean Proposal (Waseda Principles) The Waseda proposal contains provisions dealing with objective and subjective consolidation of claims. The earlier drafts of the Waseda Principles were based on the assumption that objective joinder of claims would be possible only in ubiquitous infringement cases.392 Nonetheless, having regard to the established case law of Japanese and Korean courts, the 391   Case C-539/03 Roche Nederland BV and Others v Frederick Primus and Milton Goldenberg [2006] ECR I-6535. 392   S Watanabe, ‘Chiteki zaisanken funs¯o no kokusai saiban kankatsu r¯uru ni tsuite no Nihon an [International jurisdiction rules for intellectual property disputes: The Japanese proposal]’ (2009) 6(2) Kigy¯o to h¯os¯oz¯o 149–50.

90  Toshiyuki Kono and Paulius Jurcˇys final draft of the Waseda Principles extended the material scope of the rules dealing with the objective consolidation of claims. Article 207(1) established that in the case where the plaintiff has more than one claim against the same defendant, the court that has international jurisdiction over one of those claims may also exercise jurisdiction over any other claim that is closely connected to the former. It should be also noted that the Waseda Principles adopt a narrow approach towards objective consolidation of claims because courts are not allowed to hear any claims arising out of a transaction of an infringement occurring in any state other than the forum state. The only exception is provided for claims concerning ubiquitous IP infringement activities that are directed to a particular state (second sentence of Art 207(1)). With regard to subjective joinder, Article 208 of the Waseda Principles establishes that a person who is one of a number of defendants may be sued in the state in which any of those defendants has a habitual residence. However, the possibility of suing several defendants before a single forum under the Waseda Principles exists only if those claims against the person and any other defendant are so closely connected that they should be adjudicated together to avoid risk of inconsistent judgments resulting from separate proceedings (Art 208(1)). In addition, paragraph 2 of Article 208 provides that in cases where there is an exclusive choice of court agreement between the plaintiff and the defendant, subjective consolidation is not possible if the defendant invokes the choice-of-court clause. According to the commentary, Article 208 is based on the assumption that it is necessary to provide for an efficient protection of IP rights by establishing a special provision which would allow the consolidation of claims and should be generally applied in cases where several parties infringe the same IP right.393

7.4.3  Consolidation of Proceedings in Korea According to Korean law, consolidation of actions falls under the notion of ‘joinder of claims’. Although statutory law does not provide for a clear-cut answer as to the joinder of claims, Korean court practice generally favours the need to protect the interests of the defendant. Hence, international jurisdiction over multiple claims could be asserted if the defendant (or multiple defendants) is not unreasonably forced to appear before a court seised and procedural defence rights are not undermined.394 Moreover, there should be a close connection between the claims. Hence, in order to determine whether joinder of claims is possible, the courts of Korea would take into consideration all relevant facts of the case. The court practice with regard to joinder of claims in multi-state IP disputes is scarce, and from a purely theoretical point of view, it is likely that Korean courts would assert jurisdiction over claims if the court has jurisdiction over one these claims. Nevertheless, it remains rather unlikely that such close connection could be affirmed in cases where parallel IP rights are infringed by persons acting independently in different foreign countries.395 Only where disputes arise over contracts for the transfer of IP rights and the obligations have to be performed in Korea, Korean courts might find that the joinder of claims against   Comments to Art 208 of the Waseda Principles.   Supreme Court of the Republic of Korea, Judgment of 26 September 2003, Case No 2003 Da29555; Tokyo District Court, Judgment of 5 February 1997, 936 Hanrei Taimuzu 242; Supreme Court of Japan, Judgment of 28 April 1998, 52 Minsh¯u 853; Supreme Court of Japan, Judgment of 8 June 2001, 55 Minsh¯u 727 (‘Ultraman’ case). 395   Korean Report, answers to HC 3. 393 394

General Report  91 several defendants (who are also parties to the same contract) is possible.396 As regards the subjective joinder of claims against multiple defendants domiciled in different states, the Korean Supreme Court had once indicated that the joinder should not unreasonably force them to appear before the court. Further, the Supreme Court noted that it is necessary to take into consideration all relevant factors, including the relation between the claims, the possibility of a resolution of a dispute in one proceeding and the possibility of defendants appearing in the proceedings.397 In the light of these considerations, the Korean Report indicated that in a case where alleged infringers belonged to the same corporate group and the habitual residence of the main infringer was in Korea, Korean courts may consolidate claims against such infringers. Therefore, consolidation would be possible only if it did not impose too great a burden upon the defendants to appear in the court proceedings.398 The decision concerning the consolidation would not alter if the defendants raised counterclaims arguing that foreign patents are invalid. This is so because Korean courts would find that the validity of patents should be decided as a preliminary matter. Special rules for joinder of claims are entrenched in the Korean Principles. Article 15399 deals with an objective joinder and provides that a court can join claims between the same parties if they are based on the same chain of contracts or infringing acts, given that a court has jurisdiction over one of the claims. However, such authority of the court to join the claims does not extend to claims concerning the existence and validity of registered IP rights (Art 15(2)). It should be noted that the requirements for a joinder according to the Korean Principles are more flexible than those established in the practice of Korean courts.400 Further, Article 16 of the Korean Principles provides that a claim against multiple defendants can be brought before a single court of a country where one of multiple defendants is habitually resident and (1) there is a close connection between the claims; (2) there is a need to prevent inconsistent judgments; and (3) there is substantial, direct, and predictable connection between the forum’s IP rights and other defendants.401 The provisions of the Korean Principles, especially concerning the subjective joinder of claims, were drafted on the basis of the Brussels Regime.402

7.5  Comparative Observations As in other matters related to the adjudication of multi-state IP disputes, consolidation of claims is often affected by the need to balance the interests of the litigants. At the same time, the territorial nature of IP rights must be taken into consideration. As a result, courts are rather reluctant to enjoin actions with multiple claims, even more so if such claims are raised against foreign defendants or if IP rights at stake were granted in foreign states. The answers received from various states illustrate that disputes concerning IP rights to a large extent still have to be adjudicated on a country-by-country basis. Yet, in order to improve the multi-state IP dispute settlement regime the first step should be the adoption of a more flexible and efficient approach to the joinder of claims. The second step should be the  ibid.   ibid and n 301.   Korean Report, answers to HC 3. 399   For the text of Art 15 see n 244 of the Korean Report. 400   Korean Report, section 2.4.2. 401   Art 16 of the Korean Principles as cited in Korean Report n 245 and answers to HC 1 part [3]. 402   S Watanabe, above n 392, 150. 396 397 398

92  Toshiyuki Kono and Paulius Jurcˇys introduction of an adjudication system which allows consolidation and coordination of proceedings: this would help reduce litigation costs. Besides, consolidation of claims would also be in the interest of the public because the aggregate amount of cases pending before courts of different states would diminish. Some academic proposals which have been made with regard to multi-state IP disputes403 and other matters (eg international insolvency disputes) could serve as a source of inspiration.

8  Parallel Proceedings in IP Disputes The existence of different grounds of jurisdiction in international IP cases means that the plaintiff may often have the possibility of choosing the forum for litigation. This may result not only in a situation where the defendant is sued before an improper forum, but also situations where the same or similar disputes are litigated before the courts of several different countries. For example, it may happen that before the plaintiff files an action for an infringement of IP rights, the defendant files a suit in a court of another country seeking to deny the existence of a contractual obligation or to deny liability for the alleged infringement. The laws of different states often contain specific legal mechanisms which are designed to control such multiplication of proceedings. Civil law countries in principle follow the lis alibi pendens doctrine according to which the court first seised should be given priority to conduct the proceedings. Common law countries adhere to the so-called forum non conveniens mechanism which aims to assure the court proceedings are conducted before a ‘natural’ or ‘more appropriate forum’. The issue of parallel proceedings is one of the difficulties arising in the cross-border adjudication of IP disputes. Some of the underlying problems might be related to the principle of territoriality of IP rights. In jurisdictions where a more flexible interpretation of the territoriality principle is adopted, the likelihood of parallel proceedings is relatively greater than in countries where the territorial nature of IP rights is interpreted strictly. In the latter countries, IP-related disputes can be adjudicated only before the courts of the country where IP rights were created, which also means that the likelihood of parallel proceedings is almost non-existent. In the context of cross-border IP disputes, several remarkable modes of IP litigation strategies had emerged. Namely, European Union courts had to solve a dilemma concerning actions for negative declaratory judgments, which were usually instituted by alleged infringers who intended to obstruct the actual plaintiff ’s possibilities of bringing a suit for IP infringement. EU domestic courts took different approaches, which caused some friction within the European jurisdictional regime. As a result, many attempts to establish a more uniform approach have been undertaken and will be discussed in this section. The proposed solutions are closely intertwined with the efficiency of adjudication of crossborder IP disputes. This section aims to identify and highlight the peculiarities of how parallel proceedings are controlled in different jurisdictions, and explore the possible avenues for further developments. Its findings are based mainly on the answers received from the national reports;  See chap III of the ALI Principles and Arts 2:701–2:206 of the CLIP Principles.

403

General Report  93 in particular those of hypothetical case no 5. The hypothetical case provided for a situation where patent rights in two countries X and Y are allegedly infringed. B, who is resident in a third country Z, manufactures infringing goods and imports them to countries X and Y. Having found out about B’s infringing acts, the right-holder A files an infringement action before a court of country Z where the alleged infringer is domiciled. However, before such infringement action is brought, the alleged infringer launches actions before courts of the countries X and Y where patents are granted seeking declarations that B’s acts do not constitute an infringement of the patents. Assuming that the country of the national reporters was country Z, they were asked how the courts of their country would decide with regard to pending parallel proceedings abroad and whether the decision would differ if IP rights involved were not patents, but other non-registered IP rights. In addition, national reporters were asked to indicate whether the decision of the court would be somehow affected if the validity of IP rights which are subject to the dispute was challenged by the alleged infringer.

8.1  Parallel Proceedings in the 2001 Draft of the Hague Judgments Convention The complexity of the problems related to international parallel proceedings was acknowledged during the preparation of the Hague Judgments Convention. The negotiations related to the most appropriate legal framework regarding parallel proceedings were very intense and protracted. The outcome of these deliberations resulted in a legal regime established in Article 21 of the 2001 Draft of Hague Judgments Convention. This provision remained almost identical in both drafts of 1999 and 2001. Article 21 aims to balance two competing approaches: the continental lis pendens doctrine and the forum non conveniens approach stemming from common law jurisdictions.404 In principle, Article 21 is an adapted version of the European lis pendens rule which would mean that priority should be given to the proceedings conducted by the court first seised. However, some exceptions, e.g. with regard to actions for negative declaratory judgments, are also established. Further, Article 22 is based on forum non conveniens considerations and provides for a set of ‘exceptional circumstances’ for declining jurisdiction. More particularly, Article 21(1) of the 2001 Hague Draft provides that when the same parties are engaged in proceedings in courts of different Contracting States and when such proceedings are based on the same causes of action, the court second seised shall suspend the proceedings if: (a) the court first seised has jurisdiction according to provisions of the Convention or domestic law and (b) is expected to render a judgment capable of being recognised under the Convention in the state of the court second seised. This rule would not apply only if the court second seised has exclusive jurisdiction pursuant to Article 4 (choice of court agreements), Article 11 (trusts) or Article 12 (exclusive jurisdiction) of the 2001 Draft. The notion of the ‘cause of action’ should be understood as referring to the subject matter of litigation and should not depend on the relief sought.405 The requirement that a judgment of the court first seised shall be capable of being recognised under the Convention means that the decision of the court first seised must fall within the notion of   Nygh-Pocar Report, above n 77, 89.  ibid.

404 405

94  Toshiyuki Kono and Paulius Jurcˇys ‘judgment’ (Art 23); hence Article 21 would not be applicable to court proceedings for provisional and protective measures pending before courts of different countries. As for IP matters, exclusive jurisdiction rules prevail over other grounds of jurisdiction. Hence, in cases where the court second seised has exclusive jurisdiction in the proceedings which have as their object registration, validity or nullity, or revocation of infringements of IP rights subject to registration (Art 12(4)), the court first seised will lack jurisdiction in the proceedings. Further, the 2001 Draft of the Convention clarifies when the court is deemed to be seised. Namely, Article 21(4) of the 2001 Draft establishes two possible instances: (a) when the document instituting the proceedings is lodged within the court; or (b) if such document has to be served before being lodged within the court, when it is received by the authority responsible for service or served on the defendant. Given that the conditions provided for in Article 21 are satisfied, the court second seised shall stay the proceedings on its own motion. In other words, the existence of conditions established in Article 21 creates an obligation for the court second seised; parties do not have to file any separate application for the proceedings to be stayed. The jurisdiction of the court second seised can be declined only when it is presented with a judgment rendered by the court first seised which should comply with the requirements for the recognition and enforcement in the country second seised (Art 21(2)). The judgment of the court first seised shall meet the requirements established in Article 25 of the 2001 Hague Draft and has to be based on the merits of the dispute between the same parties.406 The court second seised can however reopen the proceedings if, upon the request of a party, the plaintiff in the court first seised has failed to take necessary steps to bring the proceedings to a decision or if that court has not rendered such a decision within a reasonable period of time (Art 21(3)). The 2001 Hague Draft contains, inter alia, special provisions dealing with negative declaratory judgments. The members of the Special Commission who prepared the numerous drafts of the Convention were aware of the potential abuse of negative declaratory judgments, especially where the action for a negative declaration is brought with the intention of pre-empting the plaintiff ’s possibility of choosing the country of litigation. Therefore, Article 21(6) provides that if in an action before the court first seised the plaintiff seeks a declaration that it has no obligation to the defendant, and an action seeking substantial relief is brought before the court second seised, the court first seised shall suspend the proceedings at the request of a party if the court second seised is expected to hand down a decision which can be recognised according to the provisions of the Draft Convention in the country of the court first seised. The court first seised may, in exceptional circumstances, decline jurisdiction if upon application of a party it finds that the court second seised is clearly more appropriate to resolve the dispute. The conditions for when a court first seised should decline jurisdiction are specified in Article 22, which was drawn on the basis of the forum non conveniens doctrine. It should be noted that according to the Draft Convention, the court first seised can decline jurisdiction only in favour of the court second seised, which should be a court of another Contracting State;407 thus, rules of the Draft Convention would not be applicable if the court first seised finds that courts of a third country are more appropriate to resolve the dispute.   ibid, 90.   ibid, 92.

406 407

General Report  95 The jurisdiction can be declined only in exceptional cases. According to Article 22(1), the court first seised cannot decline jurisdiction if it is based on Articles 4 (choice of court agreements), Article 7 (consumer contracts), Article 8 (individual employment contracts) or Article 12 (exclusive jurisdiction). The court first seised cannot decline jurisdiction on its own motion, instead, the application to decline jurisdiction should be made by the defendant. In addition, Article 22(1) enumerates three circumstances which have to be satisfied; namely, (1) it is clearly inappropriate for the court first seised to exercise jurisdiction; (2) a court of another state should have jurisdiction over the dispute; and (3) the court of another Contracting State is clearly the more appropriate forum to resolve the dispute. Even though it is not directly specified in the text of the 2001 Draft of the Convention, it follows logically that the defendant should present facts and arguments supporting the request to decline jurisdiction.408 Nonetheless, the court retains its discretion that it is not obliged to decline jurisdiction (Art 22(1) stipulates that ‘the court may’ decline jurisdiction). In order to decline jurisdiction, the court first seised should be satisfied that the court of another state has international jurisdiction over the parties as well as the subject matter of the dispute. Article 22(2) of the 2001 Draft Convention sets out a non-exhaustive list of factors which might be taken into account in deciding whether the court of another State is more appropriate to hear the dispute. These factors include (a) inconvenience to the parties in view of their habitual residence; (b) the nature and the location of evidence as well as procedures for obtaining such evidence; (c) applicable limitation or prescription periods; and (d) the possibility of obtaining recognition and enforcement of any decision on the merits. Paragraph 3 of Article 22 establishes another important condition, ie in deciding whether there is another more appropriate forum to resolve the dispute, the court first seised shall not discriminate on the basis of nationality or habitual residence of the parties. Hence, it should not make any difference whether the plaintiff is habitually resident in another state. Article 22 of the 2001 Draft Convention also provides for several procedural steps which should be taken by the court first seised if it decides to decline jurisdiction. First, the court first seised should suspend the proceedings if it finds that a court of another country is more appropriate to hear the dispute. Second, the court first seised shall decline jurisdiction if the court of another State asserts jurisdiction over the dispute. The jurisdiction should be also declined if the plaintiff does not bring the proceedings in that state within the period specified by the court. However, if the court of another country decided not exercise jurisdiction, the court of the country first seised shall resume the proceedings and resolve the dispute.

8.2  North American Countries 8.2.1  Parallel Proceedings According to Canadian Law The question of international parallel proceedings under Canadian law is subject to several considerations. First, the situation of international parallel proceedings would occur if the dispute is pending before Canadian courts and courts of another country. As it was demonstrated in previous chapters, Canadian courts would generally hear the case if there are grounds for both territorial and subject-matter jurisdiction. Second, having established   ibid, 94.

408

96  Toshiyuki Kono and Paulius Jurcˇys that there are general grounds of international jurisdiction, Canadian courts would analyse how to deal with the issue of parallel proceedings. The Canadian Report noted the fact that parallel proceedings which are pending before courts of foreign countries is an important element of the forum non conveniens doctrine.409 Accordingly, Canadian courts would try to undertake a general evaluation whether Canadian courts or the court of a country seised is a more appropriate forum to hear the dispute. In cases where it appears that both Canadian and foreign courts are more or less equal to adjudicate the dispute, Canadian courts may decline jurisdiction if the foreign court was the court first seised or if the foreign court was first to assert its international jurisdiction.410 Nevertheless, the problem of parallel proceedings according to Canadian law is to a large extent affected by the limitations posed by the subject-matter jurisdiction requirement. Namely, Canadian courts would not in principle assert jurisdiction over actions concerning infringements of foreign IP rights which would mean that the situation of parallel proceedings does not arise. In addition, a subject-matter jurisdiction bar would also affect the issuance of anti-suit injunctions. In the case where the proprietor of foreign IP rights seeks to sue an alleged infringer who is located in Canada, Canadian courts would not issue antisuit injunctions to prevent the alleged infringer from seeking declaration of no liability (especially where the defendant seeks the issuance of negative declaratory judgment before courts of the country in which the IP rights exist).411

8.2.2  Parallel Proceedings in US Law and the ALI Principles Chapter 3 of the Second Part of the ALI Principles deals with the so-called ‘jurisdiction over simplification’. Jurisdiction over simplification is one of the cornerstone proposals of the ALI Principles which is designed to minimise litigation costs and simplify procedures for the adjudication of cross-border IP disputes.412 More particularly, sections 221–23 establish quite detailed rules concerning the coordination authority of the court first seised and possible ways of coordinating related actions pending before courts of different states. Coordination of multi-territorial actions according to the ALI Principles involves several stages. The first issue to be determined is the identification of the court first seised. This is important because a motion for the coordination of actions involving the same or series of transactions or occurrences should be submitted to the court first seised (section 221(1)). If the parties in all actions are not the same, the motion should be made in the court first seised with an action involving the moving party (section 221(1)(b)). The ALI Principles specify inter alia that a court which is seised with a coercive action is considered to be ‘first seised’ when three conditions are fulfilled: (a) the subject matter of the action is not within another tribunal’s exclusive jurisdiction (including cases where parties had made a choice of court agreement); (b) no other court has been previously seised with an action seeking substantive relief; and (c) in the case of actions between different parties, no other court has a pending motion to coordinate actions (section 221(5)). The second step in the coordination of multi-territorial actions is the need to establish that actions are sufficiently connected (‘arising out of the same transaction, occurrence, or   Canadian Report, answers to HC 5.   ibid and nn 206–7 for further references. 411   Canadian Report, answers to HC 5. 412   American Law Institute, Intellectual Property, above n 38, 92. 409 410

General Report  97 series of transactions or occurrences’, section 221(1)). Thirdly, having decided that related actions will be coordinated, the court should choose one of three possible forms of coordination: (i) cooperation, (ii) consolidation or (iii) a combination of cooperation and consolidation. It should be emphasised that the ALI Principles aim to preserve the notion of party autonomy and require that all related parties must agree to coordinated adjudication.413 Further, section 222(1) also establishes an exemplary list of factors to be taken into account by a court in determining which form of coordination should be chosen. These factors include the determination of whether centralised adjudication or cooperation would be more convenient and efficient; the cost of pursuing related actions in multiple courts; the need for specific expertise; the time required to resolve all claims; the relative resources of the parties; whether adjudication by multiple courts could result in inconsistent judgements and the possibilities for enforcement of a judgment resulting from consolidated proceedings. The form of coordination chosen may often depend on whether or not the parties in parallel actions are the same.414 However, the court does not need to have personal jurisdiction over all of the parties involved in the proceedings.415

COORDINATION OF MULTITERRITORIAL ACTIONS

COOPERATION

CONSOLIDATION

COOPERATION & CONSOLIDATION

Figure 1  Possible ways of coordinating multi-territorial actions according to the ALI Principles If it determines that cooperative resolution of all or part of the dispute is appropriate, the court shall inform all courts involved in the coordination and order the parties to formulate a plan for resolving the dispute in a just and expeditious manner (section 222(3)). In this case, the court has a duty to help the parties create a plan for the resolution of a dispute in a just and timely manner.416 But if the court determines that consolidation of all or part of the dispute is appropriate, the court shall next decide, in a timely manner, whether to retain jurisdiction over the consolidated action or instead suspend the proceedings in favour of another court. In deciding whether consolidation should be the form with which to handle multi-territorial dispute, the court again must take into consideration which state has the closest connection to the dispute; which court has authority to adjudicate the fullest scope of the consolidated action; the difficulties of managing the litigation;   ibid, 94–95.   ibid, 92–93. 415   ibid, 95. 416   ibid, 100. 413 414

98  Toshiyuki Kono and Paulius Jurcˇys the availability of process to summon and examine witnesses and obtain evidence; as well as the scope of a court to award an adequate remedy (section 222(4)). As was mentioned above, the court first seised may also decide that the adjudication of a dispute should continue in a combined form of cooperation and consolidation. In cases where the court decides that a dispute should be adjudicated in the form of coordination pursuant to section 221, other courts in which related actions are pending shall suspend the proceedings to await a determination by the designated court that the suit falls within the scope of the ALI Principles; and awaiting also the court’s decision in which way – cooperation or consolidation – the dispute shall be resolved (section 223(1)). Cooperative resolution of a dispute means that courts in which related actions are pending shall consult with the parties, the court first seised and other courts in which related actions are pending. During these consultations, the authority and timeline of adjudication before each of these courts shall be established (section 223(2)). In the case of consolidated adjudication of multi-territorial actions, courts other than the consolidation court shall suspend proceedings with regard to actions which fall within the scope of consolidation (section 223(3)).

8.3  European Countries Brussels I Regulation establishes two cornerstone provisions related to the coordination of parallel proceedings. Article 27 of the Regulation provides for a rule which deals with parallel proceedings that arise between the same parties and are based upon the same cause of action. Article 28 applies to situations where related actions are pending before courts of several Member States. The following sections deal with those two rules more specifically as well as focus on the problems which have emerged in the context of cross-border enforcements of IP rights.

8.3.1  Parallel and Related Proceedings Article 27 of the Brussels I Regulation417 deals with lis pendens situations and entrenches the first-in-time principle. In particular, Article 27 applies to proceedings which fulfil two conditions: first, parallel proceedings must have the same cause of action, and, second, proceedings must be between the same parties. If both requirements are fulfilled, any court other than the court first seised shall of its own motion stay the proceedings until the jurisdiction of the court first seised is established. The court second seised has no discretion and must stay the proceedings. Further, if the court first seised decides to hear the case, any other court later seised shall decline jurisdiction in favour of the court first seised (Art 27(2)). Such lis pendens framework as entrenched in the Brussels I Regulation is justified on several grounds. First, the lis pendens rule is designed to preclude, as far as possible from the outset, the possibility of a situation where judgment given in a particular case is not recognised on the basis of its irreconcilability with a judgment given in proceedings between the same parties in the state in which recognition is sought.418 Second, the lis pendens rule contributes to the protection of the right to access courts, which means that parties can submit   Also Art 27 of the Lugano Convention and the Revised Lugano Convention (2007).   Case 144/86 Gubisch Machinenfabrik KG v Giulio Palumbo [1987] ECR 4861, para 8.

417 418

General Report  99 their dispute only to one court.419 Thus, the underlying objective of the prior temporis rule is to eliminate judicial inefficiency and retain mutual trust between the Member States. In its previous case law, the ECJ made it clear that the requirements for the application of the lis pendens rule should be interpreted autonomously from those laid down in the national procedural statutes.420 Such autonomous interpretation should contribute to the proper administration of justice within the EU and prevent parallel proceedings before national courts of different Member States. Hence, according to the ECJ, the application of the lis pendens rule does not depend on any other conditions besides: (1) that the action should be between the same parties; (2) those involving the same cause of action; and (3) the same subject matter.421 Therefore, the determination of the content of these requirements is crucial for the application of Article 27 of the Brussels I Regulation. One of the most controversial issues which the courts of EU Member States had to face was the determination of whether parallel proceedings had the same cause of action and the same object. In its early case law, the ECJ ruled that the notion of the same ‘cause of action’ comprises the facts and the rule of law which form the basis of the action, whereas the ‘object of the action’ for the purposes of Article 21 of the Brussels Convention (Art 27 of the Regulation) means the ultimate goal of the action.422 According to the ECJ, Article 21 of the Convention should be interpreted broadly so as to cover various situations where cases having the same cause of action are pending before courts of different courts and might end in conflicting decisions.423 Based on these considerations the ECJ found, for example, that a situation of lis pendens arises where one party brings an action for the rescission or discharge of an international sales contract whilst another party institutes proceedings before a court of another Member State seeking to enforce the same contract.424 For example, in the Tatry case, the ECJ decided an action for a declaration where the plaintiff is not liable and subsequently, an action commenced whereby the plaintiff in the first action is sued for compensation of damages having the same object.425 In this case the shipowners brought an action in the Netherlands seeking a declaration that they are not liable for damage to the cargo; subsequently, the cargo owners brought actions before English courts seeking damages for their alleged loss. The second condition of the application of Article 27(1) of the Regulation is the sameness of the parties. According to the ECJ ruling in the Gubisch case,426 the ‘sameness of the parties’ is established regardless of the procedural position of each of the parties in parallel proceedings. Therefore, the parties are considered the same even if one party who is a plaintiff in one proceeding is the defendant in a proceeding before another court. Hence, it is only important that the basic legal relationship from which the dispute arises involves the

419   See eg T Schilling, ‘Internationale Rechtshängigkeit vs Entscheidung binnen angemessener Frist’ (2004) Praxis des Internationalen Privat- und Verfahrensrecht 296. 420   Case 144/86 Gubisch Machinenfabrik KG v Giulio Palumbo [1987] ECR 4861, para 11. For instance, the ECJ held in the Tatry case that the distinction which is made between actions in personam and actions in rem according to English law is not relevant to the interpretation of Art 21 of the Brussels Convention (Case C-406/92 The Tatry v Maciej Rataj [1994] ECR I-5439, para 46). 421   Case 144/86 Gubisch Machinenfabrik KG v Giulio Palumbo [1987] ECR 4861, para 14. 422   Case C-406/92 The Tatry v Maciej Rataj [1994] ECR I-5439, paras 38 and 40. 423   Case C-351/89 Overseas Union Insurance Ltd et al v New Hampshire Insurance Company Co [1991] ECR I-3317, paras 12–17. 424   Case 144/86 Gubisch Machinenfabrik KG v Giulio Palumbo [1987] ECR 4861, paras 17–19. 425   Case C-406/92 The Tatry v Maciej Rataj [1994] ECR I-5439, para 44. 426   Case 144/86 Gubisch Machinenfabrik KG v Giulio Palumbo [1987] ECR 4861.

100  Toshiyuki Kono and Paulius Jurcˇys same parties regardless of their procedural status. The same interpretation of the Brussels I Regulation is also followed by the domestic courts of the EU Member States.427 In practice, there may also be situations where more than two parties are involved in parallel proceedings before courts of different countries but not all of the parties are identical. According to the ECJ ruling in the Tatry case, where two actions involved the same cause of action but only some of the parties to the second action were the same as those in proceedings instituted earlier before courts of other countries, it would be necessary for the court second seised to stay and eventually decline jurisdiction only on the basis that the parties are also involved in proceedings before a court of another Member State. Hence, the court second seised could (a) continue the proceedings with regard to the parties that are not involved in the proceedings before a court first seised; or (b) stay the proceedings; or (c) decline jurisdiction according to the rules provided in Article 27 of the Regulation.428 According to Article 28 of Brussels I Regulation, a court may stay the proceedings or decline jurisdiction if a related action is pending in another Member State. Notably divergent from Article 27, Article 28 does not require absolute sameness of cause of actions which are pending before courts of different Member States. More particularly, Article 27 is designed to solve the problem where two legally conflicting judgments may be rendered in courts of different Member States. The sister rule in Article 28 deals with a broader scope of the matter – inconsistent judgments that may legally be compatible but provide for different legal outcomes. In other words, Article 27 deals with conflicting judgments that are legally congruent: those in which parties dispute over the same legal object and may result in competing awards.429 Whereas Article 28 applies to parallel proceedings that are related without necessarily having the same legal object.

8.3.2  IP Litigation Strategies Strict interpretation of Article 21 of the Brussels Convention (Art 27 of the Regulation) facilitated the development of unseen litigation techniques whereby an alleged infringer of IP rights in one Member State launches action for a negative declaration seeking the establishment that certain acts do not constitute IP infringement, or that certain IP rights are not valid. Such actions are often obviously abusive: they are launched before a court that hardly bears any relationship with the dispute or is known for lengthy adjudication of disputes. In this regard, Italian and Belgian courts became (in)famous as places where such abusive actions are filed. In particular, alleged infringers of IP rights often filed an action for a negative declaratory judgment before Italian courts, where litigation usually takes more time than in other EU Member States. Such abusive actions became ironically known as ‘torpedoes’430 because of the procedural advantages resulting from the mandatory stay of proceedings by the court second seised. Hence, the plaintiff of a torpedo action could win time even in the situation where the court first seised declined jurisdiction. National courts of EU Member States have several times referred to the ECJ to seek clarification concerning the compatibility of such abusive actions with the European jurisdiction framework. In Turner v Grovit the UK courts heard a dispute where an English national,   Austrian Report, section 4.5.   Case C-406/92 The Tatry v Maciej Rataj [1994] ECR I-5439, paras 33–35. 429   U Magnus and P Mankowski (eds), Rome I Regulation (Munich, Sellier, 2009) 477 para 3. 430   M Franzosi, ‘World-wide Patent Litigation and the Italian Torpedo’ (1997) 19 European Intellectual Property Review 382; M Franzosi, ‘Torpedoes are here to stay’ (2002) 3(2) International Review of Intellectual Property and Competition Law 154–63. 427 428

General Report  101 Mr Turner, brought an action against his former Spanish employer. The employer contested the jurisdiction of the English courts and brought another action in Spain. The question in this dispute was whether the English courts could grant restraining orders against defendants who are threatening to commence or continue legal proceedings before courts in other countries, when those defendants were acting in bad faith and with the intention to frustrate or obstruct proceedings pending before the English courts. The ECJ decided that injunctions, whereby courts of one Member State prohibit a party from continuing the proceedings pending before a court of another Member State, cannot be granted under the Brussels Convention even if that party is acting in bad faith with the purpose of frustrating the existing proceedings.431 The reasoning of the ECJ was based on the principle of mutual trust, which allows a compulsory system of jurisdiction that does not permit the jurisdiction of a court to be reviewed by a court of another Member State. This principle also extends to situations where the defendant threatens to commence or continue legal proceedings before a court of another state. In the view of the ECJ, a court decision that questions whether such a party is acting in bad faith by having recourse to the jurisdiction of courts of another state amounts to inferring with the jurisdiction of the foreign court and therefore undermines the principle of mutual trust.432 In another case Gasser, the ECJ again had an opportunity to clarify whether lis pendens rules requiring the court second seised to decline jurisdiction should be followed in situations where the proceedings before a court first seised takes an excessively long time. The ECJ did not endorse any possible deviations to the strict interpretation of the lis pendens rule. It was decided that the possibility to disregard a duty to stay the proceedings, if the proceedings before the court first seised is excessively long or if it obvious that the court seised has no jurisdiction over the merits, would run counter to the letter and spirit of the Brussels Convention.433 The court reiterated that the Brussels jurisdiction regime is based on the principle of mutual trust which all courts of Member States have to follow.434 In this decision the ECJ gave unconditional preference to legal certainty and closed the doors to the introduction of any exceptions which might have allowed some flexibility in the application of Article 27. As a result, the court second seised may only stay the proceedings and cannot sua sponte examine the jurisdiction of the court first seised. The practical implications of the territoriality principle should be carefully taken into consideration when dealing with parallel IP proceedings. Namely, torpedo actions had been possible because the ECJ considered infringement actions and actions for negative declaratory judgments as based on the same cause of action. However, in the area of IP rights, the same cause of action exists only when both actions instituted before courts of different states are related to the same IP right.435 In other words, both actions should concern an IP right protected in the same country. Yet, in situations where parallel proceedings concern the protection of different national IP rights, it is obvious that these proceedings do not have the same cause of action.436 This also follows from the ECJ Roche decision   Case C-159/02 Gregory Paul Turner v Felix Fareed Ismail Grovit and Others [2004] ECR I-3565, para 31.   ibid, para 28. 433   Case 21/76 Handelskwekerij GJ Bier BV v Mines de potasse d’Alsace SA [1976] ECR 1735; Case C-116/03 Erich Gasser GmbH v MISAT Srl [2003] ECR I-14693, paras 71–73. 434   Case C-116/03 Erich Gasser GmbH v MISAT Srl [2003] ECR I-14693, paras 70–72. 435   Austrian Report, section 4.5; French Report, answers to HC 5; Swedish Report, answers to HC 5. 436   Spanish Report, answers to HC 5. The French Report referred to one judgment concerning European patents. In that case the First Instance Court of Paris refused to acknowledge the sameness of the object where French patent infringement proceedings had been instituted in France and an action for a declaration of non-infringement of 431 432

102  Toshiyuki Kono and Paulius Jurcˇys where it was held that parallel proceedings concerning patents granted in different countries have different cause of action.437 In such situations, it is not relevant whether the objective of parallel proceedings is the infringement of IP rights, declaration of noninfringement or validity. It follows that Article 27 of the Regulation would not be applied. Theoretically, a court could exercise its discretion and stay the proceedings pursuant to Article 28 of the Brussels I Regulation; however, it is very unlikely that the court second seised would stay the proceedings especially if a court of another state was previously seised with a torpedo claim.438 Next it has to be clarified whether the same cause of action exists between the proceedings for the validity of IP rights and IP infringement proceedings.439 Based on hypothetical case no 5, two possible situations should be distinguished. First, the alleged infringer may file a suit challenging the validity of IP rights before a court of a third state which is not the protecting state and the right-holder subsequently brings an infringement action before a court of a state where the alleged infringer is domiciled. Second, the alleged infringer may file a suit challenging the validity of IP rights before a court of the protecting country (in the case of patents – the granting country) and the right-holder brings an infringement action before courts where the alleged infringer is domiciled. Both cases are identical in that (a) the right-holder seeks legal redress before courts of the defendant’s domicile pursuant to Article 2 of the Brussels I Regulation; and (b) the IP rights at stake are the same in all proceedings. Generally, the national reporters were not unanimous as to whether the invalidity action and the infringement action have the same cause of action and what procedural steps should be taken by the court second seised.440 In the first scenario where an action for invalidity is brought before a court of a third country which bears no connection to the dispute, if the proceedings are considered to have the same cause of action, the court second seised would be obliged to stay the proceedings (regardless of the fact that the action to the court first seised was a clear abuse of rights) pursuant to Article 27 of the Brussels I Regulation. However, it may be argued that invalidity proceedings and infringement proceedings do not have the same cause of action and therefore the court second seised could continue the proceedings.441 Following this approach, such invalidity proceedings would not even be considered as related proceedings in terms of Article 28 and the court second seised would not be obliged to stay its proceedings. The situation would be rather different in the second constellation where an invalidity action is brought before a court of a protecting state. The question which has to be answered is how to control parallel proceedings involving the same IP rights. In this case, the ECJ ruling in GAT v LuK would imply that the two actions are based on the same cause and that the proceedings before the court second seised have to be stayed and jurisdiction declined as soon as the court first seised asserts jurisdiction.

parallel Italian patent. See TGI Paris, decision of 9 March 2001 (2005) 33 International Review of Intellectual Property and Competition Law 225; French Report, answers to HC 5. 437   Case C-539/03 Roche Nederland BV and Others v Frederick Primus and Milton Goldenberg [2006] ECR I-6535. 438   Spanish Report, answers to HC 5; Swedish Report, answers to HC 5. 439   French Report, answers to HC 5; Swedish Report, answers to HC 5; UK Report, answers to HC 5. 440   See Belgian Report, answers to HC 5; Slovenian Report, answers to HC 5; where it was argued that invalidity action and infringement action are not based on the same cause of action. 441   Belgian Report, answers to HC 5; Slovenian Report, answers to HC 5; UK Report, answers to HC 5.

General Report  103 According to most European national reports such territoriality considerations would be equally applicable with regard to unregistered IP rights.442 Hence proceedings involving different IP rights, whether registered or not, will not be considered as having the same cause of action, and the lis pendens rule requiring the court second seised would not be applicable. The UK Report referred to several court decisions where English courts refused to defer to foreign parallel proceedings involving parallel IP rights.443 It should be also noted that the only situation where the requirement to stay the proceedings pursuant to Article 27 is if the court second seised has exclusive jurisdiction over the claim which had been previously brought before a court of another state.444 In order to tackle the torpedo problem, a number of solutions have been proposed. In order to avoid abusive torpedo actions, it has been argued that courts second seised should not defer to foreign proceedings where it is obvious that a judgment of a court first seised cannot be recognised in the forum country. However, as it was stated above, such an approach is incompatible with the Brussels I regime.445 Further, it has been proposed that in cross-border IP litigation, actions for a declaration of non-infringement should be allowed only before courts of the state where the proprietor of IP rights has his domicile.446 Since the possibility of bringing an action before a court of a foreign protecting state where the proprietor of allegedly infringed IP rights is not domiciled would still keep the gates open for potential abuse of procedural rights. It was argued that this approach should be adopted also with regard to alleged infringements of European bundle patents. In addition, the CLIP Principles also contain a modified regime to control parallel proceedings which will be addressed below.

8.3.3  Third-Country Situations The provisions of the Brussels I Regulation are applicable only to parallel proceedings pending before the courts of EU Member States. Therefore, Articles 27 and 28 are not applicable when the parallel proceedings occur before courts of a third state. In such situations, national jurisdiction rules of the forum would determine the manner of coordination of parallel proceedings. The answers submitted by the national reporters highlighted differences among the national regulation of parallel proceedings. In general, two different approaches could be distinguished: first, countries where the control of parallel proceedings depends, inter alia, on the condition of whether a foreign judgment rendered in the parallel proceedings could be recognised in the forum state; and second, countries, where the courts would not take into consideration the fact that there are pending parallel proceedings in a third state. A number of continental European countries belong to the first group of states where the control of foreign parallel proceedings depends on whether a foreign judgment could be recognised in a forum state. In Germany, for an action brought before a court of a third 442   See, in particular, Austrian Report, section 4.5; Belgian Report, answers to HC 5; Greek Report, answers to HC 5; UK Report, answers to HC 5. 443   Abkco Music & Records v Jodorowski [2003] ECDR 3; Prudential Assurance Co Ltd v Prudential Insurance Co of America (No 1) [2003] EWCA Civ 327, [2004] FSR 25; see also UK Report, answers to HC 5. 444   Case C-351/89 Overseas Union Insurance td et al v New Hampshire Insurance Company Co [1991] ECR I-3317; Case C-116/03 Erich Gasser GmbH v MISAT Srl [2003] ECR I-14693. The same approach was adopted by the Hague District Court, Rb Den Haag, IEPT20070926 Nooteboom v Faymonville. 445   Austrian Report, section 4.5; Greek Report, answers to HS 5. 446   Spanish Report, answers to HC 5.

104  Toshiyuki Kono and Paulius Jurcˇys country, the Code of Civil Procedure would be applied and the rules entrenched in section 261 paragraph 3 would be applied, mutatis mutandis. A German court would decline jurisdiction if there were a likelihood of the judgment being enforced in Germany.447 If an action for a negative declaratory judgment is raised before a court of a third country challenging the validity of foreign patents, German courts would assert jurisdiction on the basis that a judgment rendered by a court of the third country would not be recognised in Germany on the ground that the court would not have jurisdiction over the dispute related to the validity of foreign patent rights (section 328 para 1 no 1 of the German Code of Civil Procedure). In Austria, parallel litigation issues related with claims raised before courts of third countries would be decided pursuant to section 233(1) of the Civil Procedure Act which provides that the court second seised has to dismiss the claim of its own motion if the same claim is already pending before a court of another state. This rule was originally applied for domestic lis pendens situations, but later its application was extended to include foreign parallel proceedings.448 The notion of the ‘same claim’ is interpreted differently from the notion of ‘the same cause of action’ of the Brussels I Regulation. However, the most remarkable feature of the Austrian domestic regime is that the control of parallel proceedings is possible only if there is a risk of irreconcilable judgments. Such irreconcilability may arise when a foreign court judgment is rendered and the recognition is sought in Austria (section 233(1) of the Civil Procedure Act). Hence, the Austrian court would have to ascertain whether the disputes are based on the same cause of action and whether a foreign judgment can be recognised in Austria.449 As regards foreign parallel proceedings, the Austrian Supreme Court had previously decided that IP rights are territorial in nature; therefore, the cause of action is different where foreign proceedings are related to the protection of unregistered IP rights in that foreign country and Austrian proceedings are about the protection of Austrian IP rights.450 According to the Austrian Report, such findings of the Supreme Court are in line with the ECJ practice established in the Roche judgment.451 Italian domestic jurisdiction provisions dealing with foreign parallel proceedings are somewhat similar to the Austrian regime. Pursuant to Article 7(1) of the Italian PIL Statute, a judge shall stay the proceedings in situations where a dispute between the same parties, having the same object and being based on the same grounds is pending before a foreign court and a judgment rendered in such foreign proceedings, can be recognised in Italy.452 In Switzerland, the issue of parallel proceedings is governed by Article 9 of the Federal Private International Act according to which the proceedings have to be stayed if an action having the same subject matter and between the same parties are pending before a court of a foreign country and it is expected that the foreign court will, within reasonable time, render a decision which can be recognised in Switzerland. In Belgium, Article 14 of the CPIL allows the court to stay the proceedings where, firstly, the parallel disputes have the same cause of action and, secondly, will be likely recognised and enforced in Belgium. Similarly, Dutch courts do not seem to be bound by such strict jurisdiction rules as those entrenched in the   German Report, HC 5.   Austrian Report, section 4.5.   Austrian Report, section 4.5 for a more elaborate presentation. 450   Austrian Supreme Court, Decision OGH 4 Ob 91/90 (1991) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 384 and Austrian Report, section 4.5 with further references. 451   Austrian Report, section 4.5. 452   Italian Report, answers to HC 5. 447 448 449

General Report  105 Brussels I Regulation. Article 12 Rv leaves more discretion to the courts, which are allowed to stay the proceedings, but are not obliged to do so.453 In Spain there are no procedural rules that would deal with the control of international parallel proceedings. In practice, Spanish courts have been reluctant to take into consideration foreign parallel proceedings. Hence, according to the national report, it is very unlikely that Spanish courts will defer to foreign parallel proceedings in IP disputes.454 According to the French report, French courts usually decline international jurisdiction or stay the proceedings if they are courts second seised.455 In cases where the Brussels I regime does not apply, the jurisdiction of UK courts would be determined according to the common law. International jurisdiction of UK courts in IP-related cases would be to a large extent affected by the strict territoriality principle and the forum non conveniens doctrine. Namely, English courts may decline jurisdiction over disputes involving infringements or validity of foreign IP rights even if in personam jurisdiction over the defendant was established. Accordingly, UK courts would not take into consideration proceedings which are brought before a foreign court challenging the validity of UK IP rights.456 The question of how to control parallel proceedings pending before Croatian and foreign courts are determined by the provisions of Article 80 of the Croatian PIL. According to this provision, Croatian courts would take into consideration pending proceedings in a foreign country only upon the request of one of the parties. If such a request is made, the Croatian court may stay the proceedings if the following four requirements are satisfied: 1) both disputes must be between the same parties and concern the same legal matter; 2) the Croatian court is the court second seised, i.e. proceedings must firstly have been instituted before a foreign court; 3) Croatian courts do not have exclusive jurisdiction over the subject matter; and 4) reciprocity exists.457As regards the sameness of the parties, Croatian law establishes that the parties are considered to be the same even if their procedural status is different. The disputes are considered as being the same if the decision in one proceeding has res iudicata effects in other parallel proceedings. In this regard it should be noted that Croatian law does not provide for exclusive jurisdiction rules over cases related to infringements of IP rights. Further, the requirement of reciprocity is satisfied if there is factual reciprocity, notwithstanding the existence of any international agreement between Croatia and the country where parallel proceedings are pending. According to the national report, the relevant factor concerning the existence of reciprocity is that a foreign court where the parallel proceedings are pending should also recognise the priority of Croatian courts to hear disputes if the proceedings are first instituted in Croatia. In cases of parallel proceedings involving IP rights, the application of the abovementioned requirements would result in the following situation. If the alleged infringer launches proceedings for a declaration of non-infringement before courts of countries where IP rights were granted and the right-holder later files an infringement suit before the court of the country where defendant is resident, the decision of the Croatian courts would largely depend on the qualification of whether the actions pending before different courts are objectively identical and could have res iudicata effects. In particular, the Croatian   Dutch Report, sections 3.4 and 3.6.   Spanish Report, answers to HC 5. 455   French Report, section 1.2.4. 456   UK Report, answers to HC 5. 457   Croatian Report, answers to HC 5. 453 454

106  Toshiyuki Kono and Paulius Jurcˇys report indicated that the prevailing approach considers actions for condemnation (eg infringement action whereby the right-holder seeks termination of an infringement) are not treated as identical to actions for a (negative) declaration. Accordingly, res iudicata effects of the decision in infringement proceedings would not extend to pending foreign parallel proceedings concerning the action for negative declaration. This would mean that Croatian courts would not stay the proceedings, despite the fact that infringing proceedings have been first instituted before courts of foreign countries.458 The decision would be the same regardless of whether IP rights at stake are subject to registration or not. 8.3.4  Review of the Brussels I Regulation: Parallel Proceedings in the Commission Proposal and the CLIP Principles Some of the issues concerning the modernisation of the Brussels I Regulation were also related to parallel proceedings. In particular, as regards parallel IP infringement proceedings, the EC Commission proposed to enhance the communication as well as interaction between the national courts of different Member States which deal with parallel proceedings.459 In addition, some further alternatives were discussed with regard to the coordination of IP infringement and validity proceedings,460 as well as the coordination of proceedings concerning the validity of the arbitration clause before a national court and an arbitral tribunal.461 Section 7 of the CLIP Principles entitled ‘congruent proceedings’ provides for a more comprehensive legal framework containing significant corrections and improvements to the established legal practice concerning the application of Articles 27–30 of the Brussels I Regulation. The principle that the court first seised has the priority to hear the case is maintained, but with certain qualifications. Namely, Article 2:701 provides that where proceedings involving the same cause of action and between the same parties are brought in the courts of different states, any court other than the court first seised shall stay its proceedings. This provision follows the wording of Article 27 of the Brussels I Regulation, which also means that the CLIP Principles should be viewed in the previously established practice of the ECJ. If this is indeed the case, disputes pending before courts of different Member States should arise between the same parties, have the same cause of action and the same object. In this regard it should be noted that the CLIP Principles also bring further clarity as regards the situation where a court of one state conducts the proceedings concerning issuance of provisional and protective measures whereas the main proceedings are conducted by a court of another state. In such situations the Clip Principles establish that proceedings for the issuance of provisional and protective measures do not involve the same cause of action as the main proceedings (Art 2:207(3)). The CLIP Principles do away with the strict interpretation of Article 27 of the Brussels I Regulation by entrenching a number of exceptions when the courts later seised are not obliged to stay the proceedings. First, the lis pendens rule does not apply if the court later seised has exclusive jurisdiction under the CLIP Principles, or, secondly, if it is manifest that  ibid.   Green Paper on the review of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (21 April 2009), COM(2009) 175, 7. 460   ibid, 6. 461   ibid, 9; Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee on the application of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (21 April 2009), COM(2009) 174, 9. 458 459

General Report  107 the judgment of the court first seised will not be recognised under these principles (Art 2:207(1) lit a and b). In addition, any court other than the court first seised may terminate the stay in proceedings and continue the litigation if (a) the court first seised does not proceed within the reasonable time or (b) the court first seised decides not to hear the case (Art 2:207(2)). These exceptions aim to suppress abusive ‘torpedo’ actions which were possible because of a rigid interpretation of the lis pendens rule established in Article 27 of the Brussels I Regulation. Similarly to Article 28 of the Brussels I Regulation, the CLIP Principles also contain a specific provision dealing with the coordination of related proceedings. The definition of related proceedings is similar to one known under the Brussels I/Lugano framework: proceedings are deemed to be related where they are so closely connected that it is expedient to hear and determine them together in order to avoid the risk of inconsistent holdings or judgments (Art 2:702(3)). If related proceedings are pending in the courts of different states, any court other than the court first seised may stay its proceedings (Art 2:702(1)). Further, the CLIP Principles establish a non-exhaustive list of factors which should be taken into consideration in deciding whether the proceedings should be stayed or not. Such factors to be taken into account by a court are: (a) a determination of which court seised is best placed to adjudicate the fullest scope of the related proceedings; (b) the assessment of which state has the closest connection to the dispute; (c) the consideration of the procedural efficiency of centralised adjudication compared with procedural efficiency in multistate proceedings. As mentioned in the overview of the application of the Brussels I Regulation to IP matters, there is no firm opinion when the infringement proceedings have the same cause of action and the same object as proceedings related to registration, validity or revocation (etc.) of registered IP rights. The CLIP Principles go a step further and establish a special rule that if proceedings, having as their object a judgment on the grant, registration, validity, abandonment or revocation of a registered IP right, are brought in the state of registration after related proceedings of those in a court of another state concerned with that IP right, the court first seised may stay its proceedings (Art 2:703(1)). In cases where the court first seised decides to stay the proceedings, it may order provisional and protective measures for the duration of the stay according to Article 2:501 of the CLIP Principles. Similarly, if proceedings, which have as their object provisional and protective measures according to Article 2:501 of the CLIP Principles and which involve the same cause of action and the same parties, are brought before the courts of different countries, then any court other than the court first seised may stay its proceedings (Art 2:705(1)). In cases where related proceedings are pending before the courts of different countries the CLIP Principles aim to facilitate, to the extent permitted under the applicable procedural rules, the use of evidence produced in the proceedings before another court as well as awareness of findings and decisions made by other courts where congruent or related proceedings are pending. For these purposes, the CLIP Principles provide that the courts where parallel disputes are pending should exchange relevant information such as the status of the proceedings and court findings (Art 2:704).

108  Toshiyuki Kono and Paulius Jurcˇys

8.4  Asian Countries 8.4.1  Parallel Proceedings according to the Laws of India and Taiwan The Indian Report provided for a specific answer concerning the situation where the patent-holder brings an infringement action before an Indian court against the alleged infringer, arguing that the defendant’s acts infringe the plaintiff ’s patents held in foreign countries. Indian courts would not take into consideration proceedings pending before courts of foreign countries, on the basis that Indian courts generally do not have jurisdiction to hear actions related to the infringements of foreign IP rights. Moreover, the alleged infringer may bring an action before Indian courts seeking an interim injunction which would prevent the right-holder from filing an infringement suit before Indian courts.462 According to the Civil Procedure Law of Taiwan, a Taiwanese court would stay the proceedings if the same dispute had been previously initiated before a court of another country and the following two requirements are satisfied: first, the possibility that the foreign judgment on the action can be recognised in the Republic of China; and second, it is not substantially inconvenient for the defendant to participate in the proceedings. However, in IP disputes the situation is rather less certain. The Taiwanese court would not stay the proceedings if the court discovered that the defendant filed an additional suit before another country’s court challenging the validity of IP rights which were not registered in that country.463

8.4.2  Parallel Proceedings according to Japanese Law and Recent Asian Legislative Proposals The Japanese legal framework concerning international parallel proceedings is also not explicitly addressed in the Code of Civil Procedure. The only pertinent statutory provision is entrenched in Article 142 of the CCP which states that ‘neither of the parties can bring another action regarding the case which is pending before the court’. However, Japanese courts have consistently refused to apply Article 142 to situations where a similar case is pending before a foreign court. Hence, it was questioned whether international parallel proceedings should be prohibited in principle and if so what jurisdictional rules would be most appropriate. The national report identifies three prevailing approaches: 1) so-called ‘anticipated recognition’ theory;464 2) theory according to which parallel proceedings should be treated as an issue of standing to sue; and 3) opinion that the decision concerning parallel proceedings is based on the ‘special circumstances’ test.465 In the early case law, Japanese courts tended to turn a blind eye to parallel proceedings pending before foreign courts. Recently, however, the prevailing approach among both legal scholars and Japanese courts supports the special circumstances theory. According to this theory, Japanese courts would take into consideration whether there are certain   Indian Report, answers to HC 5.   Taiwanese Report, answers to HC 5. 464   According to the advocates of this theory, Japanese courts should decline jurisdiction whenever the proceedings are pending before a foreign court and the decision of that court can be recognised and enforced in Japan. Such conditions of the recognition of foreign judgments established in Art 118 of the CCP are satisfied, it is assumed that foreign judgments have the same legal effects as judgments rendered by Japanese courts, and the jurisdiction of Japanese courts should be declined. 465   Japanese Report, answers to HC 5. 462 463

General Report  109 circumstances that would require Japanese courts to decline jurisdiction. Such circumstances affecting whether jurisdiction should be declined or not are those of the burden of the parties, location of evidence, time factors etc. There are no cases related to the handling of parallel proceedings simultaneously pending before Japanese and foreign courts. Nevertheless, existing case law sheds some light on possible parallel IP litigation situations. Hence in such situations where the alleged infringer brings an action before foreign courts where IP rights are granted, and asks the court to issue a declaration of non-infringement, Japanese courts seised by the right-holder with an infringement action of foreign IP rights would consider which court is better situated to adjudicate the dispute. If a Japanese court found that there are some special circumstances showing that a foreign court would be better located to hear the dispute, the Japanese court would decline the jurisdiction. The situation would be the same if the defendant in infringement proceedings challenged the validity of allegedly infringed foreign patents: Japanese courts again will take all relevant factors into consideration in order to determine in which country the dispute would be best adjudicated.466 8.4.2.1  New Rules on International Jurisdiction The question of international parallel proceedings was also vigorously deliberated among the members of the CCP reform group. At an early stage of drafting, the majority opinion was that in cases where parallel proceedings concerning the same action are pending before courts of different countries, Japanese courts should dismiss the action if Japanese courts were seised of the case later than the foreign court.467 The Interim Draft (2009) prepared by the Ministry of Justice working group contained several alternative rules for international parallel proceedings. The proposed rules stipulated that Japanese courts would have had the authority to stay the proceedings until the foreign court decides the case, given that such future decisions may be recognised in Japan. However, due to fierce criticism and opposition, the idea of establishing a special rule for parallel proceedings was abandoned during the drafting. Instead, it was decided that the handling of international parallel proceedings should fall under the rule establishing a court’s discretion to dismiss an action if there are special circumstances (Art 3-9468). 8.4.2.2  Parallel Proceedings in the Transparency Proposal Article 201 of the Transparency Proposal provides for a more comprehensive legal framework for the coordination of proceedings. During the drafting process of the Transparency Principles, it was recognised that the prior temporis rule might not always provide the best solution in cross-border IP litigations. Therefore, it was decided to assign more emphasis to the spatial considerations of a particular dispute. Therefore, the underlying premise of the Transparency Principles is to examine the substance of the dispute and try to identify the   Japanese Report, answers to HC 5.   Kokusai saiban kankatsu kenky¯u-kai [International Jurisdiction Study Group], ‘Kokusai saiban kankatsu kenky¯u-kai h¯okoku (6) [Report of the International Jurisdiction Study Group (6)]’ 886 New Business Law (2008.8.1) 78. 468   Art 3-9 of the Act Amending CCP (2011) provides: ‘Courts can reject all or some claims of the action which they are competent to hear (except when parties have made an agreement conferring exclusive jurisdiction on a Japanese court) if from the nature of the case or the extent of the burden of the defendant caused by his/her appearance, the location of evidence or by reason of other circumstances the exercise of jurisdiction would be inequitable to the parties or hinder the conduct of a proper and speedy trial.’ 466 467

110  Toshiyuki Kono and Paulius Jurcˇys country where the primary obligations or facts occurred. This approach is in accordance with another set of rules which aim to facilitate effective and timely resolution of crossborder IP disputes by joining related claims before one forum or disputes where parallel IP rights are involved.469 Accordingly, Article 201(1) of the Transparency Proposal provides that in cases where a suit is pending in a court in a foreign country and is based on the same or related cause of action, and when the primary obligation should be or should have been performed in that foreign country, or the primary facts occurred or should occur in that foreign country, in the absence of special circumstances, the claim brought to Japanese courts shall be dismissed. However, the court may stay the procedure for a reasonable period of time if the primary obligations should be or should have been performed in a foreign country other than the foreign country where the suit is pending, or the primary facts occurred or should occur in a foreign country other than that foreign country (Art 201(2)). The Transparency Proposal also contains a special rule for those situations where courts of one country deal with an IP infringement suit and courts of the other country have to decide on the validity of the same intellectual property right. In such circumstances, the infringement court is given the authority to stay the proceedings for a reasonable period of time until the foreign court has decided upon the validity issue. The Transparency Proposal also goes a step further regarding the communications between the courts of different countries which might be dealing with related disputes. Namely, Article 201(4) provides that courts may communicate directly or may request information directly from the court in the foreign country in order to make the decision to dismiss the claim, stay the procedure or conduct subsequent deliberations. This provision was established with the intention of facilitating effective dispute resolution and reducing litigation costs. This provision was inspired by the 1997 UNCITRAL Model Law on CrossBorder Insolvency470 and the 2001 American Law Institute’s ‘Guidelines Applicable to Court-to-Court Communications in Cross-Border Cases’.471 8.4.2.3  Parallel Proceedings in the Joint Japanese-Korean Proposal (Waseda Principles) The Waseda Principles also follow the so-called prior temporis rule: where actions involving the same cause of action and between the same parties are brought in the courts of different states, the court later seised shall stay the proceedings if the judgment of the court first seised can be recognised under the Waseda Principles (Art 213(1)). If a judgment rendered by a court first seised can be recognised, the court later seised shall dismiss the action without any delay (Art 213(2)). Yet, the Waseda Principles envisage for two exceptions which should add flexibility when applying the prior temporis rule. First, a court second seised may terminate the stay of the proceedings if the plaintiff in the first suit fails to proceed or if the proceedings in the court first seised do not proceed within a reasonable period of time (Art 213(3)). Secondly, the proceedings of the court first seised with an action for a declaratory judgment seeking a declaration that no obligation exists, shall be stayed if an action for the performance of the obligation was brought before a court of another state. The court first seised can stay the proceedings before the defendant in the first-in-time 469   S Chaen, T Kono and D Yokomizo, ‘Jurisdiction in Intellectual Property Cases: The Transparency Proposal’ in J Basedow, T Kono and A Metzger (eds), above n 1, 143. 470  www.uncitral.org/uncitral/en/uncitral_texts/insolvency/1997Model.html. 471  www.amercol.org/images/DOC005.pdf.

General Report  111 proceedings files his defence and if the judgment rendered by a court second seised can be recognised according to the Waseda Principles. 8.4.2.4  Parallel Proceedings according to the Korean Principles The Korean Principles contain a special provision dealing with international parallel proceedings which to a large extent resembles the 1999 Draft of the Hague Judgments Convention. Article 17 of the Korean Principles stipulates that in cases where actions concerning related claims between the same parties arise from the same series of transactions or infringing activities and those actions are pending before courts of different countries, the court first seised shall have priority to exercise jurisdiction. The court second seised shall stay the proceedings until the court first seised establishes jurisdiction. However, this prior temporis rule does not apply if the country of the court second seised has exclusive jurisdiction or jurisdiction is conferred by a choice of court agreement (Art 17(2)). If the court second seised finds that the court first seised will assert jurisdiction and its decision meets the conditions of recognition in the country of the court second seised, the action should be immediately dismissed. The court second seised may, at the request of a party, continue the proceedings if the other party does not take necessary procedural steps before the court first seised, or the court first seised does not render a decision over the main claim within a reasonable period of time (Art 17(5)). In addition, the Korean Principles aim to provide a solution for the so-called torpedo problem. If the court first seised hears an action for a negative declaratory judgment, and the defendant in these proceedings files an action before the court of another country for the performance of obligations, the court first seised shall lose its priority in exercising jurisdiction if the defendant in these proceedings makes no further statement or answer to the merits. In such a situation, the court second seised shall have jurisdiction if its decision can be recognised in the country of the court first seised and the court first seised shall stay the proceedings (Art 17(5)).472 Moreover, the Korean Principles also contain a special provision which helps to determine which court is seised first.473 It should be noted that the scope of Article 17 of the Korean Principles is wider than Article 21 of the 1999 Draft of the Hague Judgments Convention.474 Namely, Article 17 of the Korean Principles is not limited to only the duplication of identical proceedings, but also applies to related actions. Such an approach was taken mainly because the drafters of the Korean Principles considered the rules concerning international parallel proceedings as vital to the formation of a crossborder IP litigation framework.

8.5  Comparative Observations The analysis of the question whether courts of represented states deal with international parallel proceedings has highlighted different approaches. Courts of common law countries in most cases would not defer to foreign proceedings. In Europe, although the Brussels/ Lugano regime contains uniform rules to tackle parallel proceedings giving priority to the action at the court first seised, differences still exist with regard to proceedings pending 472   For a practical illustration concerning the application of these rules see Korean Report, section 2.4.2 and answers to HC 5. 473   Korean Report, section 2.4.2 and n 253. 474   Korean Report, section 2.4.2.

112  Toshiyuki Kono and Paulius Jurcˇys before courts of third states. Approaches also differ in the represented countries of Asia. In addition, answers provided by national reporters illustrated, on one hand, the absence of clear rules concerning international parallel proceedings as a source of uncertainty; while, on the other hand, the existence of clear-cut rules might lead to rigidity and possible avenues for abuse and forum shopping. In light of such considerations, the cross-border enforcement of IP rights could be fostered if a ‘middle approach’ could be established. Namely, the 2001 Draft of the Hague Convention could serve as the basis for further improvements, while IP related aspects of parallel proceedings could be elaborated according to academic proposals (eg ALI Principles etc).

9  Jurisdiction to Order Provisional or Protective Measures in IP Disputes Provisional measures play an important role in international IP litigation. Practitioners often note that IP rights holders are primarily interested in stopping the allegedly infringing activities and only then considering what other remedies should be sought. Yet, a number of problems concerning international jurisdiction to order provisional and protective measures exist in the area of IP. Although it appears to be a widely established principle that courts have jurisdiction to order provisional or protective measures in relation to property located in the forum state, it nevertheless remains controversial whether and if so under what circumstances courts can order measures which would have extraterritorial effects. Although certain efficiency-related considerations in favour of allowing cross-border provisional or protective measures in multi-state IP disputes could be raised, such possibilities of ordering provisional measures is triggered by the territorial nature of IP rights. This section of the General Report is based mainly on answers received to the questions posed in hypothetical case no 11, which involved sales of fake branded goods in an Internet auction. The national reporters were asked to explain whether and under what conditions courts of their countries would have international jurisdiction to order provisional measures; how does the territoriality of the IP rights principle affect international jurisdiction to order provisional or protective measures; and whether such measures could have extraterritorial effects. In addition, national reporters were also asked to explain whether the person who seeks issuance of provisional or protective measures is required to grant a security or guarantee.

9.1  Provisional and Protective Measures in the 2001 Draft of the Hague Judgments Convention Matters related to international jurisdiction to grant provisional or protective measures were addressed in Article 13 of the 2001 Draft of the Hague Judgments Convention. Article 13 of the 2001 Draft provided for two alternative provisions. Alternative B was rather concise and provided that a court which is seised with a claim and has jurisdiction over the merits pursuant to Articles 3–15 may order provisional and protective measures intended to preserve the subject matter of the case. A more comprehensive proposal was proposed in

General Report  113 Alternative A of Article 13. According to the first paragraph, a court which has jurisdiction over the merits of the case also has jurisdiction to order provisional and protective measures. The Draft Hague Judgments Convention did not prevent the possibility of seeking relief simultaneously before courts of different states. Thus, even if a court does not have jurisdiction over the merits of the claim, it can still order provisional and protective measures with regard to the property which is located in the forum state. In such circumstances, the legal effects of the measure would be limited to the territory of the forum (Art 13(2)). Besides, the jurisdiction of the court to order provisional or protective measures for protecting the interim basis of a claim is not triggered if substantive proceedings are pending before a court of another state (Art 13(3)). Alternative A was mainly based upon Article 13 of the 1999 Hague Proposal. The 2001 draft aimed to bring more clarity and establish a definition of provisional and protective measures. According to Article 13(4), provisional and protective measures meant: (a) a measure to maintain the status quo pending the determination of a trial; (b) a measure providing a preliminary means of securing assets out of which an ultimate judgment may be satisfied; or (c) a measure to restrain conduct by a defendant to prevent imminent or future harm. The common understanding was that a measure ordered by a court should be both provisional and protective.475 It was up to the law of the forum state to determine what measures are available, in what circumstances and under what conditions an order for such measures can be made.476 It was also agreed in the diplomatic conferences that jurisdiction rules of Article 13 would not apply to remedies in which the purpose is to obtain evidence and anti-suit injunctions.477

9.2  Jurisdiction to Grant Provisional Measures and Interim Injunctions under the Laws of North American Countries 9.2.1  Legal Situation in Canada The in personam nature of injunctive orders means that Canadian courts can issue injunctions if they have personal jurisdiction over the defendant. Therefore, Canadian courts would issue an injunction against defendants who are resident in a Canadian province. In addition, the claim for an injunction must be justiciable by a Canadian court which in principle requires that Canadian courts should have jurisdiction to decide upon the merits. Hence, Canadian courts would not have jurisdiction to issue injunctions against persons who are resident in a foreign country and who committed infringing activities outside Canada, unless that person submits to the jurisdiction of a Canadian court or it is proved that the dispute has a real and substantial connection with Canada.478 As regards injunctions in IP cases, the Canadian Report noted that Canadian courts would have jurisdiction to issue orders concerning activities of the alleged infringer who has his personal residence in a Canadian province. In such cases the order of a Canadian court could also extend to the defendant’s activities in foreign countries. However, insofar as actions for injunctions for the protection of foreign IP rights are concerned, the   n 92 of the 2001 Hague Draft.   Nygh-Pocar Report, above n 77, 70–72. 477   ibid, 72. Anti-suit injunctions were considered to be concerned with jurisdiction matters and therefore outside of the scope of Art 13 of the Draft Convention. 478   Canadian Report, answers to HC 11. 475 476

114  Toshiyuki Kono and Paulius Jurcˇys subject-matter jurisdiction criterion would bar Canadian courts from issuing such injunctions. On the other hand, a Canadian court could issue an injunction if it is related to the protection of Canadian IP rights. Canadian courts might request the party seeking an injunction to provide a security for the compensation to the defendant in case the claim for injunction appears to be invalid.479 Besides, the Canadian Report indicated that Canadian courts could also issue an injunction regardless of whether the dispute has been submitted to arbitration proceedings. The Canadian Report also drew attention to the fact that interim injunctions are characterised to be procedural measures and are granted in accordance with Canadian law. This means that the plaintiff cannot successfully claim an injunction on the basis that such relief is provided for in the foreign law governing the action. 480

9.2.2  Provisional and Protective Measures in the ALI Principles Jurisdiction rules concerning the granting of provisional and protective measures are provided in section 214 of the ALI Principles. The ALI Principles acknowledge inefficiencies arising from interim orders whose effects are limited to one particular state and aim to establish a more flexible legal regime allowing cross-border provisional and protective measures.481 Three different grounds of jurisdiction for the issuance of provisional and protective measures are established in the ALI Principles. First, provisional and protective measures can be ordered by a court which has jurisdiction over the substance of the dispute (section 214(1)). The court having jurisdiction over the merits can issue also ex parte relief measures as well as measures which have transborder effects.482 This provision aims to assure that the court which has authority over consolidated claims has also the necessary powers with regard to provisional relief measures. Secondly, provisional and protective measures can be ordered by a court of a state where IP rights are registered or where tangible property is located (section 214(2)). In such cases the effects of the measure are limited to the state of the registration or location of the property. Within the overall structure of the ALI Principles, such jurisdiction to grant local relief measures is necessary to facilitate cross-border adjudication of disputes. Thirdly, the ALI Principles establish that courts of a state where the person having custody or control over goods in transit is located, have jurisdiction over provisional and protective measures while the owner or owners of the goods are identified and joined to the proceedings.

9.3  Provisional and Protective Measures in the European Countries 9.3.1  Brussels/Lugano Regime In addition to general, special and exclusive grounds of jurisdiction, the Brussels I Regulation also deals with the allocation of jurisdiction in granting provisional, including protective, measures. The Brussels I Regulation creates a two-tier jurisdiction regime for provisional and protective measures. On one hand, provisional measures could be granted by the courts of the state which have international jurisdiction over the substance of the

 ibid.  ibid. 481   American Law Institute, Intellectual Property, above n 38, 89–90 (Reporter’s Notes). 482   ibid, 88 (Comments to section 214). 479 480

General Report  115 case. On the other hand, Article 31 of the Regulation483 stipulates that provisional measures may be ordered by any other domestic court even if courts of another Member State have jurisdiction over the merits of the case pursuant to Articles 2 and 5–24. It should be recalled that the Brussels I Regulation is not applicable in cases where the residence of the parties and infringing acts occur in the forum country; in such cases the jurisdiction of a court to grant provisional or protective measures will have to be assumed according to domestic jurisdiction provisions.484 Domestic law will also determine the availability of provisional and protective measures. Article 31 of the Brussels I Regulation has been sometimes described as an ‘opening clause’485 because it opens the gates for the application of domestic jurisdictional rules concerning provisional and protective measures. Such an additional layer of jurisdiction rules has been considered a tool which facilitates the effective protection of legal rights.486 Although in adopting the Brussels I regime the European legislator intended to create a ‘highly predictable’ set of rules ‘founded on the principle that jurisdiction is generally based on the defendant’s domicile’,487 it has been also argued that neither goal was achieved.488 Namely, the exercise of jurisdiction on the basis of Article 31 had threatened the uniformity of the European jurisdiction regime because of existing differences among domestic jurisdiction rules, especially if national procedural rules allow far-reaching provisional and protective measures. For instance, under Dutch law, courts may order so-called kort geding measures which do not impose any time limit to the initiation of the main proceedings, and such measures may eventually become definite if the main proceedings are never initiated.489 In order to curtail rather broad grounds of jurisdiction490 to grant provisional and protective measures as well as to alleviate differences among national legal systems, two additional requirements were introduced by the ECJ in its case law. First, the ECJ had previously decided that provisional measures granted pursuant to Article 31 of the Brussels I Regulation should not only fulfil the requirements provided in relevant domestic legal provisions, but there should also exist ‘a real connecting link between the subject matter of the measures sought and the territorial jurisdiction of the Contracting State of the court before which those measures are sought’.491 Secondly, the ECJ had provided for an autonomous definition of ‘provisional, including protective, measures’ which are to be understood as referring to measures which, in matters within the scope of the Brussels Convention, are intended to preserve the factual or legal situation so as to safeguard rights of which the recognition is otherwise sought from the court having jurisdiction over the merits of the   Art 24 of the Lugano Convention and Art 31 of the revised Lugano Convention.   See eg Belgian Report, answers to HC 11.  C Heinze, ‘A Framework for International Enforcement of Territorial Rights: The CLIP Principles on Jurisdiction’ in J Basedow, T Kono and A Metzger (eds), above n 1, 73. 486   Art 31 provides that: ‘Application may be made to the courts of a Member State for such provisional, including protective, measures as may be available under the law of that State even if under this Regulation, the courts of another Member State have jurisdiction as to the substance of the matter.’ 487   Recital 11 of the Regulation. 488   See eg A Dickinson, ‘Provisional Measures in the “Brussels I” Review – Disturbing the Status Quo?’ (2010) Praxis des Internationalen Privat- und Verfahrensrechts 203. 489   Dutch Report, sections 3.1 and 3.5. 490   Proposal for a Council Act establishing a Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, COM(97) 607 final OJ [1997] C 33/20. 491   Case C-391/95 Van Uden Maritime v Kommanditgesellschaft in Firma Deco-Line and others [1998] ECR I-7091, para 40; Case C-99/96 Hans-Hermann Mietz v Intership Yachting Sneek BV [1999] ECR I-2277. 483 484 485

116  Toshiyuki Kono and Paulius Jurcˇys case.492 Thus, such measures as the order to hear the witness or those that aim at the acquisition of evidence to enable the applicant to decide whether to bring the case, or determine whether it would be well founded and assess the relevance of the evidence which might be adduced in that regard, are not considered to be provisional measures within the Brussels/ Lugano system.493 According to the ECJ, the main purpose of Article 31 of the Brussels I Regulation is to avoid losses to the parties as a result of the long delays inherent in any international proceedings. Such intentions for a speedy process do not cover proceedings with regard to measures related to the establishment of facts on which the resolution of future proceedings may depend.494 However, such a stance by the ECJ was not necessarily upheld by legal scholars. For instance, it was questioned whether such ECJ practice was restrictive enough, especially in such areas as cross-border IP litigation where the importance of provisional and protective measures is crucial.495

9.3.2  Provisional Measures and IP-Related Issues In order to assess the practical implications of Article 31 of the Brussels I Regulation to the functioning jurisdiction framework, a more careful analysis of the application of domestic jurisdiction rules in granting provisional and protective measures is necessary. In this regard, it is worth mentioning that most national reports indicated that their courts have jurisdiction to issue provisional and protective measures even in those cases where they do not have jurisdiction over the merits.496 However, private international law problems do not arise if parties are domiciled in the forum state, IP infringing acts take part in the forum state and the protection is sought only with regard to IP rights protected in the forum state. The application of domestic jurisdiction rules concerning the issuance of provisional and protective measures in cross-border IP disputes brings about questions related to the effects of the principle of territoriality of IP rights and national sovereignty of states. In particular, one of the main questions is whether a court can issue a provisional measure with extraterritorial effects in foreign countries. The hypothetical case proposed was concerned with a trade mark infringement on the Internet. Many national reporters stated that domestic courts may issue preliminary and protective measures with cross-border effects especially in cases where the defendant is domiciled in the forum state.497 Some reporters noted that national courts would take into consideration whether that particular provisional or protective measure could be enforceable in respective foreign states.498 Cross-border provisional and protective measures are also available in cases concerning infringements of Community IP rights499 or Benelux trade marks500 492   Case C-261/90 Mario Reichert, Hans-Heinz Reichert and Ingeborg Kockler v Dresdner Bank AG [1992] ECR I-2149, para 34; Case C-391/95 Van Uden Maritime v Kommanditgesellschaft in Firma Deco-Line and others [1998] ECR I-7091, para 37; Case C-104/03 St Paul Diary Industries NV v Unibel Exser BVBA [2005] ECR I-3481, paras 12–13. 493   ibid 25. 494   Case C-104/03 St Paul Diary Industries NV v Unibel Exser BVBA [2005] ECR I-3481, paras 15–16. 495   Spanish Report, answers to HC 11. 496   See Belgian Report, Austrian Report, German Report, Dutch Report, Swiss Report (answers to HC 11). 497   Dutch Report, sections 3.1 and 3.5; Belgian Report, answers to HC 11. 498   Belgian Report, answers to HC 11; German Report, answers to HC 11; Greek Report, answers to HC 11; Italian Report, answers to HC 11. 499   Arts 94(2)(a) and 103 of the Community Trade Mark Regulation. 500   Belgian Report, answers to HC 11.

General Report  117 provided that the defendant is domiciled in the forum state. In the Netherlands, it is established practice that courts having jurisdiction pursuant to Article 2 of the Brussels I Regulation would also have cross-border jurisdiction to issue provisional and protective measures.501 In cases where the defendant is not resident in the forum state, the legal effects of such measures are limited within the territory of a granting state.502 The situation is not uniform in cases where courts grant provisional or protective measures according to their domestic jurisdiction rules (Art 31 of the Regulation). The answers provided in the national reports suggest that the question of the territorial reach of provisional and protective measures often depends on the particular circumstances of the case and domestic court practice. In some EU states, the ECJ practice had, to some extent, influenced the jurisprudence of national courts in interpreting domestic jurisdiction provisions. For instance, the Belgian and Swedish Reports noted that courts would refrain from issuing orders granting provisional or protective measures with extraterritorial effects if the requirement of the ‘real connecting link’ between the subject matter of the measure at stake and the territorial jurisdiction of the forum state is not met.503 It should be also noted that according to the established ECJ practice,504 Article 31 of the Brussels I Regulation cannot mandate the courts to order provisional measures which have effects only in foreign countries.505 National reporters were also asked whether the courts’ exercise of international jurisdiction would somehow be affected if the IP rights for which protection is sought were granted for another state. Some national reporters answered that the courts could order provisional or protective measures if they have jurisdiction over the substance of the case regardless of the fact that IP rights at stake are registered abroad.506 It is unclear whether a court of a Member State could order cross-border provisional or protective measures concerning foreign IP rights if it does not have jurisdiction over the merits.507 If courts asserted international jurisdiction on the ground that the defendant is domiciled in the forum state, courts would be able to issue provisional or protective measures with extraterritorial effects.508 Yet, some national reporters noted that in practice, it is rather unlikely that a court would issue a provisional or protective measure with regard to foreign IP rights, especially in cases where the defendant is not resident in a forum state.509 However in Sweden, their courts would not have international jurisdiction to order provisional or protective measures if a dispute involves foreign IP rights.510 It is unclear whether the jurisdiction of a court seised with an application for a provisional or protective measure could be affected by the invalidity defence in cases concerning foreign-registered IP rights.511   Dutch Report, section 3.2.   Italian Report, answers to HC 11; although the situation is again controversial, see Austrian Report, section 3.2.3. 503   Belgian Report, answers to HC 11; Swedish Report, answers to HC 11. 504   Case C-391/95 Van Uden Maritime v Kommanditgesellschaft in Firma Deco-Line and others [1998] ECR I-7091; Case C-125/79 Denilauler v Couchet Frère [1980] ECR I-1553. 505   Belgian Report, answers to HC 11. 506   French Report, answers to HC 11; German Report, answers to HC 11. 507   French Report, answers to HC 11; Slovenian Report, answers to HC 11. 508   German Report, answers to HC 11. 509   The Italian reporter referred to a ruling where the Court of Rome decided that orders related to foreign IP rights cannot have extraterritorial effects; see Italian Report, answers to HC 11 and n 183; UK Report, answers to HC 11. 510   Swedish Report, answers to HC 11. 511   Italian Report, answers to HC 11. 501 502

118  Toshiyuki Kono and Paulius Jurcˇys Another source of controversy is the scope of a court’s jurisdiction to order provisional and protective measures in cases concerning alleged IP infringements occurring over the Internet. The practice of national courts in this area is scarce or non-existent. The Italian Report referred to one court decision where an Italian court applied the market impact rule to decide that the blocking of a US website displaying signs allegedly infringing an Italian trade mark could only be possible if the products are offered for sale in Italy. However, Italian courts would not feel bound by any territorial constraints in ordering provisional or protective measures if they have jurisdiction over the merits.512 The opinions of national reporters differed on this point: some argued that international jurisdiction over IP infringements on the Internet would be asserted following general rules on jurisdiction, whereas others noted that courts would be unable to order measures with cross-border effects.513 National reporters were also asked whether the court of their country would require the person who seeks a preliminary measure to provide a security or guarantee. A provision that a party requiring to issue an order for provisional or protective measure may be requested to provide a guarantee is also established in the TRIPS Agreement. Some national reports indicated that such provision of security is not necessarily required, but may be requested, depending on the circumstances of the case.514 Portugal’s courts may require an adequate guarantee, pursuant to national civil procedure law. This decision would be made according to the particular circumstances of the case. For instance, an adequate guarantee may be required in case a defendant suffers some damages because of the revocation of the preliminary or protective measure.515 Spanish law (Art 737 of LEC 2000) also provides that in some cases, courts may require that the person who seeks a preliminary measure grant a guarantee before the enforcement of the measures.516 In the case of German courts, they may require a guarantee for the issuance of preliminary measures (section 921 of the German CCP); the claimant for whose benefit the measure is granted may be held strictly liable for damages if the preliminary measure is later revoked (Art 945 of the German CCP).517 However, as regards issuance of provisional or protective measures in cases concerning registered IP rights, the UK Report pointed out that the combined effect of Articles 22(4) and 31 of the Brussels I Regulation is that courts have no jurisdiction to order measures with cross-border effects.518 In EU states, courts are competent to grant provisional measures in cases which are pending before an arbitral tribunal, given that the subject matter of the dispute falls within the material scope of the Brussels I Regulation. This follows from the ECJ judgment in the Van Uden case.519 European national reporters noted that the mere fact that proceedings have been instituted before an arbitration tribunal does not affect a court’s jurisdiction to order preliminary and protective measures unless the arbitration agreement provides oth512   Italian Report, answers to HC 11; similar approach would be taken by Slovenian courts, see Slovenian Report, answers to HC 11. 513   Slovenian Report, answers to HC 11. 514   French Report, answers to HC 11; Greek Report, answers to HC 11; Italian Report, answers to HC 11; Slovenian Report, answers to HC 11; Swedish Report, answers to HC 11. 515   Portuguese Report, answers to HC 11. 516   Spanish Report, answers to HC 11. 517   German Report, answers to HC11. 518   UK Report, answers to HC 11. 519   Case C-391/95 Van Uden Maritime v Kommanditgesellschaft in Firma Deco-Line and others [1998] ECR I-7091; UK Report, answers to HC 11.

General Report  119 erwise.520 Portuguese courts would also be internationally competent to order preliminary and protective measures in cases where the parties submit the dispute to arbitration proceedings; there is also a national case law supporting this stance.521

9.3.3  Third State Situations In cases where the defendant is not domiciled in any EU state, the situation concerning the jurisdiction to order provisional or protective measures is not uniform. There is no common approach among the legal systems and the court practice to make more general observations is scarce. According to Article 10 of the Italian PIL Statute, Italian courts could order provisional and protective measures if the defendant is resident in the forum state or if the measure is to be enforced in Italy.522 In the Netherlands, Article 13 of the Statute on Civil Procedure allows the issuance of cross border measures. In Croatia, where the Brussels/ Lugano regime does not apply, courts could also order provisional or protective measures with extraterritorial effects in cases where a Croatian court does not have jurisdiction over the merits. Yet, it is not clear whether the fact that those IP rights at stake are foreign would have an effect on the international jurisdiction of Croatian courts to order provisional or protective measures.523

9.3.4  Provisional and Protective Measures in European Reform Proposals In order to improve the coordination of proceedings before courts of different states, the Commission Proposal for a Regulation524 contains certain suggestions for the modification of the existing framework. Generally, measures granted by a court which has jurisdiction over the substance of a case are to be recognised and enforced in other states (proposed Art 35). Such an objective to accelerate free circulation of provisional and protective measures would be extended (subject to certain conditions) also to ex parte measures.525 Besides, due to the divergent practices of domestic courts in granting provisional and protective measures on the basis of domestic procedural rules, the Commission Proposal prevents the free circulation of measures granted by a court which does not have jurisdiction over the substance of the dispute (proposed Art 36).526 Namely, if a provisional or protective measure is granted on the basis of domestic jurisdiction rules, the legal effects of such a measure are limited to the forum state. This should prevent abusive forum-shopping actions. Finally, courts shall closely cooperate if provisional measures are requested before a court of another state other than the state where main proceedings are pending.527 520   German report (s 1033 of the German CCP), Swedish Report, Spanish report, Italian Report, answers to HC 11. 521   Portuguese Report, answers to HC 11. 522   Italian Report, answers to HC 11. 523   Croatian Report, answers to HC 11. 524   Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast) (14 December 2010), COM(2010) 748. 525   Green Paper on the review of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (21 April 2009), COM(2009) 175, 8; Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast) (14 December 2010), COM(2010) 748, 9–10. 526   Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast) (14 December 2010), COM(2010) 748, 9–10. 527  ibid.

120  Toshiyuki Kono and Paulius Jurcˇys The Third Draft of the CLIP Principles generally follows the system existing under the Brussels/Lugano regime; however, certain clarifications regarding provisional and protective measures were introduced. Namely, Article 2:501(1) provides that courts having jurisdiction over the substance of the case may also issue provisional and protective measures. In addition to that, courts of a country where the measure is to be enforced or the country for which protection is sought also have jurisdiction to issue provisional and protective measures (Art 2:501(2)). Such reference to the place of enforcement and place for which protection is sought clarifies the ambiguity which existed with regard to the interpretation of Article 31 of the Brussels I Regulation. As was observed from the national reports of EU Member States, courts of the place where the property is located would usually have jurisdiction under their domestic jurisdiction rules; jurisdiction of the courts of the state for which protection is sought may also exist under infringement and other jurisdiction rules.528 However, the territorial reach of measures granted by the courts which exercise their authority on the basis of the infringement jurisdiction are limited to the territory of the forum. This is further specified in Article 2:604 of the CLIP Principles, which states that an injunction issued shall concern only activities affecting IP rights protected under the national law of the forum or laws of different states applied by the court. Thus the CLIP Principles aim to avoid situations where the courts, hearing cases related to an infringement of a domestic IP right, issue a worldwide provisional measure restraining the activity of the defendant.529 Such limitations, however, would not be applicable where the infringement occurs through ubiquitous media. In this case, it shall be presumed that the injunction concerns IP rights protected in all states where the signals can be received (Art 2:604(2)). In addition, measures granted by a court which does not have jurisdiction to decide over the merits of the case are excluded from the recognition and enforcement regime (Art 4:301(1)). The CLIP Principles also aim to eliminate existing differences among the laws of different Member States by positing that preliminary or protective measures granted in ex parte proceedings are not covered by the rules of recognition and enforcement. Finally, it should be noted that the CLIP Principles provide for an IP-specific definition of provisional and protective measures (Art 2:501(3)).

9.4  Jurisdiction to Order Provisional and Protective Measures in Asian States 9.4.1  India and Taiwan The Indian Report noted that Indian courts could order provisional measures only with regard to infringements affecting India; hence, cross-border measures could not be ordered. If the procedural requirements are met, Indian courts may also order ex parte interim measures. In Caterpillar v Kailash Nichiani the Delhi High Court decided that in cases concerning injunctions to cease copyright infringements, it is sufficient if the plaintiff proves that the alleged infringer undertakes certain factual business activities and provides sufficient evidence proving copyright infringement.530 528  C Heinze, ‘A Framework for International Enforcement of Territorial Rights: The CLIP Principles on Jurisdiction’ in J Basedow, T Kono and A Metzger (eds), above n 1, 73. 529   A Kur and B Ubertazzi, ‘The ALI Principles and the CLIP Project: A Comparison’, in S Bariati (ed), Litigating Intellectual Property Rights Disputes Cross-border: EU Regulations, ALI Principles, CLIP Project (Milan, CEDAM, 2010) 112–13. 530   Indian Report, answers to HC 11.

General Report  121 Taiwanese courts would generally issue provisional measures with cross-border effects only if they have jurisdiction over the main dispute and it is clear that such interim measures will be recognised and enforced in the foreign country concerned. The requirement of likeliness of recognition was interpreted as meaning that there exists a mutual recognition of judgments between Taiwan and the foreign country concerned.531 Taiwanese courts might order provisional measures also with regard to foreign IP rights according to procedural requirements established in Taiwanese Civil Procedure Law. Taiwanese courts also have the discretion of requiring the party who seeks issuance of provisional measures to provide a guarantee. Provisional and protective measures could also be ordered if the main dispute is submitted to an arbitration tribunal.532

9.4.2 Japan Japanese legislation does not contain special international jurisdiction rules concerning orders for provisional measures. However, Article 12 of the Provisional Civil Remedies Act533 was applied ex analogia by Japanese courts in cases where one party was seeking provisional measures in cross-border disputes. The prevailing approach is that in cases where Japanese courts have jurisdiction over the merits of the dispute, or if IP rights that should be preserved or the subject of the dispute are located in Japan, Japanese courts will assert international jurisdiction. However, in deciding whether to order provisional or protective measures, Japanese courts will take into account whether there are special circumstances in which an exercise of international jurisdiction would not run counter with the impartiality between the parties, fairness or speedy trial which would prevent Japanese courts from issuing provisional or protective measures. The Japanese Report also noted that the possibility of provisional measures is a rather difficult issue in IP disputes, especially if foreign IP rights are involved. Namely, in the Card Reader case,534 which involved the application for provisional measures ordering the defendant to cease infringing activities, the Japanese Supreme Court refused to issue an injunction which would have prevented the defendant from producing and exporting the infringing materials from Japan to the United States. The Supreme Court carefully analysed the case and decided that the application for an injunction based on a foreign IP statute could not be granted mainly because it would run counter to the principle of territoriality. Nonetheless, the Japanese Report also noted that Japanese courts could issue provisional measures in cases concerning infringement of foreign IP rights given that the requirements of international jurisdiction are met.535 The mere fact that the rights for which protection is sought are foreign IP rights does not negatively affect the existence of international jurisdiction of Japanese courts. Further, Japanese courts would generally be able to issue provisional measures in cases where they do not have jurisdiction over the merits of the dispute or if the case was submitted by the parties to an arbitration tribunal. Finally, Japanese courts may order the party who is seeking the issuance of provisional measures to

  Taiwanese Report, answers to HC 11.  ibid.   Art 12 of the Provisional Civil Remedies Act provides that ‘A case of a temporary restraining order shall be under the jurisdiction of the court having jurisdiction over the case on the merits or the district court having jurisdiction based on the location of the property to be provisionally seised or the subject matter of the dispute.’ 534   Supreme Court of Japan, Judgment of 26 September 2002, 56 Minsh¯u 1551. 535   Japanese Report, answers to HC 11. 531 532 533

122  Toshiyuki Kono and Paulius Jurcˇys grant a guarantee or security in order to make sure that the interests of the defendant are safeguarded.536 The drafters of the Transparency Principles were considering possible alternatives of establishing various grounds of jurisdiction to grant provisional and protective measures and their implications to the principle of territoriality of IP rights, as well as the interests of the business community.537 Article 111(1) of the Transparency Proposal provides that Japanese courts should have jurisdiction to order provisional measures, when (a) Japanese courts have international jurisdiction over the case on the merits, or (b) the applications for provisional measures concern the protection of Japanese IP rights. In addition, when the object to be provisionally seised is located in Japan, Japanese courts shall have international jurisdiction to order a provisional seizure (Art 111(2)). In the latter case, court jurisdiction is limited to ordering provisional seizures.538 The general principle underlying the Transparency Principles is that the reach of provisional and protective measures will be dependent on the scope of the jurisdiction of a court hearing a case. Nonetheless, the explanatory report indicated that in certain exceptional cases, such as dealing with ubiquitous infringements, Japanese courts would have international jurisdiction to issue crossborder provisional and protective measures.539 International jurisdiction rules to grant provisional and protective measures in the Waseda Principles were drafted in light of Article 13 of the Draft Hague Judgments Convention.540 Article 209 of the Waseda Principles provides that a court which has jurisdiction pursuant to Articles 201–9 also has the jurisdiction to order any provisional or protective measure. Further, a court of any state where the property is to be seised or the dispute is located is also granted jurisdiction to order provisional and protective measures. In the latter case, the legal effects of such measures are limited to the territory of the state where the property is located.

9.4.3 Korea In Korea, provisional measures could be ordered if a Korean court has international jurisdiction over the dispute. In assessing the existence of international jurisdiction over the merits of the case, Korean courts would have to apply general international jurisdiction principles. According to the Korean Report, Korean courts which have jurisdiction over the main dispute could issue provisional measures having effects also in foreign countries. At the request of the defendant, a Korean court may ask a plaintiff who has no domicile, office or business place in Korea to provide a security. If the plaintiff fails to comply with the requirement, the defendant is entitled to refuse to respond to the lawsuit.541 Similar provisions are also established in the proposed Korean Principles. Namely, a court may order provisional and protective measures if it has jurisdiction over the merits of the case. In such circumstances, the court could order provisional measures which have also effect in other countries (Art 18(1)). Further, courts of the state where the assets are

 ibid.   S Chaen, T Kono and D Yokomizo, ‘Jurisdiction in Intellectual Property Cases: The Transparency Proposal’ in J Basedow, T Kono and A Metzger (eds), above n 1, 134. 538   ibid, 135. 539  ibid. 540   Comments to Art 210 of the Waseda Proposal. 541   Korean Report, answers to HC 11. 536 537

General Report  123 located are also entitled to exercise their jurisdiction and order provisional measures with regard to assets which are located in the territory of the forum state (Art 18(2)).542

9.5  Comparative Observations The answers received from the represented countries confirmed that much further dis­ cussion is necessary with regard to jurisdiction to grant injunctions and other provisional and protective measures. Generally, it seems to be widely accepted that courts which have jurisdiction over the substance of the case can order provisional and protective measures. Yet, some divergent solutions to cross-border effects of such provisional and protective measures follow from the subject-matter jurisdiction requirement which exists in common law jurisdictions. It remains necessary to investigate the implications of the principle of the territoriality of IP rights and the scope of courts’ jurisdiction to grant provisional measures in multi-state IP infringement cases. This is particularly significant concerning the jurisdiction to grant provisional and protective measures in cases over ubiquitous IP infringements. The solid basis for future work could be the 2001 Draft of the Hague Judgments Convention (Art 13) together with subsequent legislative proposals concerning crossborder enforcement of IP rights. The principles established in the 2001 Hague Draft have been to a large extent adopted in recent academic proposals: it has been suggested that courts which have jurisdiction on the ground of the defendant’s residence/domicile should be competent to order provisional or protective measures with cross-border effects. In other cases where the court does not have jurisdiction over the substance of the case, the effects of measures are supposed to be limited to the territory of the forum state.

10  Choice of Court Agreements in Cross-Border IP Disputes Choice of court agreements play an important role in international litigation. Prorogation or derogation clauses are often included in international commercial transactions and thus facilitate legal certainty and foreseeability of the parties. Nevertheless, such advantages of the choice of court agreements become meaningless if the designated court fails to give effect and enforce choice of forum clauses. Therefore, from a legal policy perspective it seems to be desirable to assure that the requirements for the validity of choice of court agreements are as much as possible harmonised in the domestic laws of different countries. Cross-border IP litigation brings about similar efficiency considerations. Although it is true that due to the differences of the interests of the parties the choice of courts can only play a limited role in IP infringement proceedings, the possibility of the parties to agree on international jurisdiction should not be underestimated. In particular, prorogation of jurisdiction in cross-border IP disputes might be an ‘elegant’543 way, and the most efficient way, to avoid the application of complex jurisdictional rules and the fragmentation of litigation.   Korean Report, section 2.4.2 and answers to HC 11.   A Metzger, ‘Jurisdiction in Cases Related to IP Infringements on the Internet. Brussels-I-Regulation, ALI Principles and Max Planck Proposals’ in S Leible and A Ohly (eds), above n 1, 266. 542 543

124  Toshiyuki Kono and Paulius Jurcˇys Hypothetical case no 4 of the Questionnaire aimed to identify the legal framework concerning the enforceability of choice of forum clauses and what role such agreements play in the system of jurisdiction rules of a particular country. The hypothetical case provides for the following situation: A, who is the holder of a bundle of patents in different countries concludes a licensing agreement with B. B received a licence to make, use or offer for sale and otherwise dispose of licensed products. Although B paid the initial licence fee, it later refused to pay subsequent instalments. A files a suit against B and seeks to recover damages for patent infringement. A refers to a prorogation clause in the licence agreement. For its part, B challenges the validity of the choice of forum clause and submits that the court shall not exercise jurisdiction because the dispute involves foreign patents. The questions put forward in the hypothetical case aim to discover whether: 1) such choice of court clauses are enforceable and whether parties are allowed to make a choice of court agreement after the dispute has arisen; 2) whether a choice of court clause would be valid if the defendant raised a counter-claim that (foreign) patents at stake are invalid; 3) whether choice of court agreements could be enforceable in IP infringement proceedings; and 4) whether parties could submit their IP-related disputes to arbitral tribunals.

10.1  The 2005 Hague Choice of Court Convention 10.1.1  General Principles of the Hague Convention After prolonged negotiations to adopt a global judgments convention, the Hague Choice of Court Convention was signed on 30 June 2005.544 Similar to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, the 2005 Hague Convention was a great leap forward in creating a comprehensive legal framework that ensures the effectiveness of exclusive choice of court agreements. The future of the 2005 Hague Choice of Court Convention seems to have more potential since, as of the end of February 2010, the United States and European Union had signed it and Mexico had ratified it.545 IP matters have posed significant hurdles in drafting the Hague Judgments Convention and were partially resolved in the 2005 Hague Choice of Court Convention. In order to provide a more comprehensive picture of the role of choice of court agreements in IP disputes, it is necessary to first describe the general structure of the Convention. Pursuant to Article 3 of the Convention, ‘exclusive choice of court agreements’ are agreements concluded in writing or by any other alternative means designating one or more courts of a Contracting State to decide disputes which have arisen or may arise in connec544  Available at www.hcch.net/index_en.php?act=conventions.text&cid=98. Before that, two conventions on choice of court agreements, namely, the 1958 Convention on the Jurisdiction of the Selected Forum in the Case of International Sales of Goods and the 1965 Convention on the Choice of Court, had been adopted, but did not enter into force. The Hague Convention of 2005 was already widely discussed in academic literature. See eg MA Adler, ‘The Hague Convention on Choice of Court Agreements: The United States Joins the Judgment Enforcement Band’, 27 Northwestern Journal of International Law & Business 1–36; G Rühl, ‘Das Haager Übereinkommen über die Vereinbarung gerichtlicher Zuständigkeiten: Rückschritt oder Fortschritt?’ (2005) Praxis des Internationalen Privat- und Verfahrensrecht 410–15; C Thiele, ‘The Hague Convention on Choice-ofCourt Agreements: Was It Worth the Effort?’ in E Gottschalk, R Michaels, G Rühl and J von Hein (eds), Conflict of Laws in the Globalized World (Cambridge University Press, 2007) 63–88; P Beaumont, ‘Hague Choice of Court Agreements Convention 2005: Background, Negotiations, Analysis and Current Status’ (2009) 5 Journal of Private International Law 125–59. 545  Status of the 2005 Hague Choice of Court Convention is available at www.hcch.net/index_en. php?act=conventions.status&cid=98.

General Report  125 tion with a particular legal relationship. Choice of court agreements which designate courts of one or more Contracting States are deemed to be exclusive unless the parties have expressly agreed otherwise. While formal validity requirements are harmonised in the Convention itself, substantial validity of a choice of court agreement (eg fraud, mistake, misrepresentation, duress or lack of capacity) should be decided pursuant to the law of the forum.546 The Hague Convention also entrenches the so-called ‘separability’ principle which means that the validity of a choice of court agreement is independent from the validity of other terms of a contract. Hence, the validity of a choice of court clause cannot be challenged merely on the basis that the contract is invalid (Art 3(d) of the Convention). Article 5 of the 2005 Hague Convention entrenches another cornerstone rule that a court designated in a choice of court agreement shall have jurisdiction over the dispute and shall not decline jurisdiction on the sole ground that a court of another Contracting State is competent to decide the dispute. Any other court of another Contracting State is obliged to suspend or dismiss the proceedings to which an exclusive choice of court agreement applies except where the choice of court agreement is null and void, giving effect to a choice of court agreement would result in a manifest injustice; the court designated in the choice of court clause decides not to hear the case if there are other exceptional reasons beyond the control of the parties (Art 6). Recognition and enforcement issues are governed by Articles 8–15 of the Convention. The general underlying principle is that a judgment given by a court of a Contracting State designated in a choice of court agreement shall be recognised by courts of other Contracting States. A judgment can be recognised only if it is effective in the country of origin. Moreover, recognising courts cannot review the merits of judgments handed down by a court designated by the parties. In other words, révision au fond is not permitted under the Convention (Art 8). The recognition or enforcement may be refused only if there are certain legal grounds provided in Article 9 of the Convention: namely, if the agreement was null and void, a party lacked capacity to conclude the agreement, the judgment was obtained by fraud or if the recognition or enforcement would be against public policy of the requested state or inconsistent with another judgment.

10.1.2  Choice of Court Agreements in IP Disputes The agreement on the final text of the 2005 Hague Choice of Court Convention witnesses a significant step forward to legal certainty and foreseeability in the area of international commercial transactions. IP-related concerns which arose at an early stage of the drafting of the Hague Judgments Convention were to a large extent resolved in the final text of the Convention adopted in 2005. The approach towards IP matters can be best understood from the material scope (application ratione materiae) of the Convention. The final text of the Hague Choice of Court Convention excludes a number of matters from its scope.547 The Convention does not apply inter alia to choice of court agreements pertaining to the validity and infringement of IP rights other than copyrights and related rights (Art 2(2)(n)), except where infringement proceedings are brought for a breach of contract between the parties relating to such rights, or could have been brought for breach of the contract (Art 2(2)(o)). Hence, two issues should be clarified. First, the Convention makes a distinction between copyrights, related rights and other (registered) IP rights   T Hartley, M Dogauchi, Explanatory Report, available at www.hcch.net/upload/expl37e.pdf, paras 125–26.   IP matters were not excluded from the 1965 Choice of Court Convention (Art 2 of the Convention).

546 547

126  Toshiyuki Kono and Paulius Jurcˇys (eg patents, trade marks, designs). Such distinction is drawn mainly on the ground that the existence of copyrights and related rights does not depend on the registration. Conversely, such IP rights as patents, designs or trade marks are usually created by the act of registration at competent national authorities. Public acts of registration are usually considered as closely related with the sovereignty of a granting state and the granting of rights depends on the fulfilment of certain requirements posited in the national laws. Similarly to the granting of rights, the declaration of invalidity as well as corrections in the registries require the involvement of national authorities and are made according to local procedural rules. The Hague Choice of Courts Convention exempts choice of court agreements pertaining to registration and validity of (registered) IP rights mainly because in many national legal systems such disputes fall under exclusive jurisdiction of the granting country. Nevertheless, the Convention would still apply to choice of court agreements concerning disputes where validity of a registered IP right is challenged as a defence (eg, in disputes for payment of royalties where the licensee raises a claim that the licensed IP right is invalid548). In such cases the court can decide upon the validity of the IP right as a preliminary matter; but such decisions would not be subject to recognition under the Convention. Secondly, the Convention does not apply to choice of court agreements which designate a competent court to hear IP infringement disputes unless such a dispute arises from a preexisting relationship. An example of a pre-existing legal relationship could be a licensing contract and the infringement proceedings related to it. According to the Official Commentary, IP ‘infringement actions are covered, even if brought in tort, provided they could have been brought in contract’.549 It should be noted that copyright-related disputes are fully covered by the Convention (including infringement disputes and disputes where the court should decide upon the validity, Art 2(2)(o)).

10.2  Choice of Court Agreements in North American Countries 10.2.1 Canada Choice of court agreements are enforceable before Canadian courts, and non-residents may agree to submit disputes to Canadian courts. Canadian courts would usually exercise their jurisdiction unless it is obvious that the litigation is absolutely unconnected to the province or the litigation would be unjustified. In so far as foreign IP rights are concerned, parties may have to put forward convincing arguments why the designated Canadian court should exercise jurisdiction. However, since Canadian courts take a rather restrictive approach in cases pertaining to foreign IP rights, it appears to be unclear whether choice of court agreements designating Canadian courts will be enforced. The enforceability of choice of court clauses in IP infringement cases and cases where the registration or validity of the contested (registered) IP right is challenged appears to be even less likely due to the hostile attitude towards foreign IP rights under the guise of subject-matter juris­diction.550

  T Hartley, M Dogauchi, above n 546, para 37.   ibid, para 39.   Canadian Report, answers to HC 4.

548 549 550

General Report  127

10.2.2  Choice of Court Agreements according to the ALI Principles Section 202 of the ALI Principles provides for a detailed framework concerning choice of court agreements in IP disputes. Most of the provisions concerning choice of court agreements are drafted in light of the Hague Convention on Choice of Court Agreements.551 According to section 202, parties are allowed to make a choice of court agreement regarding existing and future disputes. Unless the parties agree otherwise, the designated court has exclusive jurisdiction over the dispute. Moreover, the ALI Principles stipulate that in the absence of the parties’ agreement to the contrary, it is deemed that the parties have waived objections regarding personal jurisdiction of the designated court (lit (a) and (b) of section 202(1)). The choice of court agreement is formally and substantially valid if it is valid under the law of the forum state (including conflict-of-laws rules of the forum). The ALI Principles aim is to give preference to the principle of party autonomy. Therefore, the ALI Principles do not adopt such limitations as those established in the Hague Convention whereby the designated court can refuse to enforce a choice of forum clause if it would lead to a manifest injustice or undermine public policy considerations of the forum state.552 The capacity of the parties is treated separately and is determined under the law of the state in which that party had its residence at the time when the agreement was concluded. If that party (in most cases a legal entity) had more than one residence, the capacity to enter into an agreement is recognised if it existed under the law of any of its residences. By establishing a special rule regarding the capacity of the parties, the ALI Principles goes a step further than the Hague Convention which remains silent on this issue. It should be emphasised that the chosen court can only hear the case if it has subjectmatter jurisdiction over the dispute. This requirement of subject-matter jurisdiction reflects the idea that the dispute and the chosen court should have certain proximity.553 Cases revolving around the declaration that certain registered IP rights are invalid shall be brought before a court of a registering country. However, if the validity of the registered right arises as a preliminary question, the court’s decision would have only inter partes effects (sections 211(2) and 212(4)). The ALI Principles also establish a special rule for those situations when a choice of court clause is included in a standard form agreement. In such cases, the validity of a choice of court clause should be decided with regard to the reasonableness criterion (section 202(4)). Reasonableness should be determined by taking into consideration such factors as: (a) the location and resources of the parties, especially resources and sophistication of the non-drafting party; (b) interests of any states; and (c) the availability of remote adjudication (eg online dispute resolution). In addition, the ALI Principles aim to protect the interests of the non-drafting parties by establishing that the choice of court clause should be readily accessible and available for subsequent reference by the court and the parties. These requirements are especially significant in the context of online contracting.

  American Law Institute, Intellectual Property, above n 38, 38–40.  ibid.  ibid.

551 552 553

128  Toshiyuki Kono and Paulius Jurcˇys

10.3  European Countries 10.3.1  Choice of Court Agreements according to the Brussels/Lugano Regime It is generally agreed that parties are free to make a choice of court agreement with regard to any legal relationship (Art 23 of the Brussels I Regulation/Revised Lugano Convention). Choice of court agreements are deemed to be exclusive unless the parties agree otherwise. The Brussels I Regulation does not require any specific connection between the dispute and the forum state. A choice of court agreement is enforceable if at least one of the parties is resident in a Member State. Besides, in cases where neither of the parties is resident in a Member State, courts of other Member States shall have no jurisdiction unless the court chosen has declined its jurisdiction (Art 23(3)). It should be also noted that in cases where none of the parties is resident in a Member State, the effectiveness of a choice of court clause is determined under the law of the court seised.554 The Brussels I Regulation also allows the parties to conclude a choice of court agreement before or after the dispute arose. However, in order to be enforceable, choice of forum clauses have to meet the written form requirement. Hence, choice of court agreements must be concluded in writing or evidenced in writing or be in a form which accords with practices which the parties have established between themselves. If a choice of court agreement is concluded by electronic means, it is considered equivalent to an agreement made in writing as long as there is a durable record of the agreement. Agreements conferring jurisdiction in international trade or commerce should be concluded in a form which accords with a usage of which the parties are or ought to have been aware and in which such trade commerce is widely known to and regularly observed. Besides that, no other formal requirements such as language etc can be established under the domestic laws of Member States.555 Parties’ freedom to enter into choice of court agreements is limited by the mandatory nature of exclusive jurisdiction rules from which the parties cannot escape. It follows that parties’ choice of court agreements concerning matters falling under exclusive jurisdiction provisions of Article 22 of the Brussels I Regulation (including proceedings dealing with the registration or validity of registered IP rights) would not be enforceable. Additional limitations are established with regard to jurisdiction over consumer contracts (Art 17) and individual employment contracts (Art 21). Namely, in cases related to consumer or individual employment contracts, prorogation of jurisdiction is possible only if the choice of court agreement was concluded after the dispute has arisen or if such choice of court agreement allows the consumer/employer to bring proceedings in courts other than those indicated in the respective sections of the Brussels I Regulation which deal with jurisdiction over these types of contracts. Similar limitations are also established with regard to insurance contracts (Art 13). Such limitations of party autonomy are imposed with the objective of assuring the protection of the weaker party (consumer or the employee).556

554   The requirements for the enforceability of choice of court agreements according to domestic jurisdiction rules might be somewhat different from those established in the Brussels I Regulation. For instance, Belgian courts might analyse whether the dispute has a significant connection with Belgium (Art 6 of Belgian CPIL), Austrian courts would inter alia consider the international jurisdiction of a court whose jurisdiction choice of court agreement purports to exclude (Austrian report, answer to HC 4). 555   Case C-150/80, Elefanten Schuh v Pierre Jaqmain [1981] ECR 1671, para 26. 556   Recitals 13 and 14 of the Preamble of the Brussels I Regulation.

General Report  129 According to the established practice of the ECJ, the Brussels I Regulation does not permit courts, other than those designated by the parties, to control the grounds of jurisdiction of a court chosen by the agreement.557 Such practice has also been followed by the domestic courts of Member States.558 Nevertheless, courts can declare null and void choice of court agreements which are considered unfair.559 Similarly, the court can also decline jurisdiction of its own motion if it becomes clear that a choice of court clause is an unfair standard term.

10.3.2  Choice of Court Agreements in IP Disputes Enforceability of choice of court agreements in IP disputes might be problematic sometimes because of the territorial nature of IP rights and the mandatory nature of exclusive jurisdiction rules from which the parties cannot escape by concluding a choice of court agreement. Overall, European national reports indicated that parties’ choice of court agreements are enforceable regardless of whether a particular dispute is related to domestic or foreign IP rights. In other words, the designated court of a Member State cannot decline jurisdiction merely on the basis that the dispute involves foreign IP rights. Some national reports pointed to ECJ jurisprudence560 where the Court held that no other issues than those established in Article 23 shall be taken into consideration when deciding whether the choice of court agreement is enforceable. In the case of IP disputes, this means that such considerations as the territorial nature of IP rights (namely, the fact that IP rights which are the object of the dispute are foreign IP rights, or the allegation that infringement activities occurred in another state) shall not be taken into consideration by the court in deciding whether it should accept jurisdiction or not.561 Similarly, there is no dispute that a designated court can decide upon the infringements of IP rights which occur in any country other than the forum country as long as the parties agree (explicitly or implicitly) on the unlimited territorial jurisdiction of the court chosen.562 Parties’ choice of court agreements have prevalence over general and special grounds of jurisdiction. Yet, parties cannot contract out from exclusive jurisdiction provisions (namely, Art 22(4) of the Regulation) or alter material and functional jurisdiction of national courts.563 However, as far as patents and other registered IP rights are concerned, such exclusive jurisdiction rules are applicable only with regard to registration and validity. Hence, parties’ choice of court agreement with regard to infringement claims will be enforceable as long as the defendant does not challenge the validity or registration of the patent.564 Once a registration/validity defence is raised, infringement proceedings turn into proceedings over registration/validity, which accordingly leads to the application of   Case C-281/02 Andrew Owusu v NB Jackson [2005] ECR I-1383, paras 37–40.   Judgment of the Lisbon Court of Appeal as referred to in the Portuguese Report, nn 44 and 116. 559   Case C-167/00 Verein fur Konsumenteninformation v Karl Heinz Kenkel [2002] ECR I-8111, para 50; Joined Cases C-240/98 to 244/98 Oceano Grupo Editorial v Roció Munciano Quintero [2000] ECR I-4941, paras 29 and 32. 560   Case C-159/97 Transporti Castelleti Spedizioni Internationali SpA v Hugo Trumpy SpA [1999] ECR I-1597, para 40. 561   Austrian Report, answers to HC 4, where it is also indicated that the same approach would be taken under the Austrian Civil Jurisdiction Act, which would be applicable if neither of the parties are resident in the EU. 562   German Report, reply to HC 4. 563   D Stauder, ‘Die Anwendung des EWG Gerichtsstands- und Vollstreckungsübereinkommens auf Klagen im gewerblichen Rechtsschutz und Urheberrecht’ (1976) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 465. 564   French Report, answers to HC 4 where it is also noted that if an invalidity defence is raised, a French court hearing an IP infringement dispute will stay the proceedings. 557 558

130  Toshiyuki Kono and Paulius Jurcˇys exclusive jurisdiction rules established in Article 22(4) of the Regulation. This follows from the recent ECJ judgment in the case of GAT v LuK.565 The Brussels I Regulation does not provide a clear-cut answer as to whether parties are allowed to conclude choice of court agreements in anything other than contractual disputes. Article 23(1) of the Brussels I Regulation only establishes that choice of court agreements can be made with regard to ‘any disputes which have arisen or may arise in connection with a particular legal relationship’. Hence, it is unclear whether parties can make a choice of court agreement in tort or unjust enrichment etc cases. This is also true in IP-related litigation (eg infringement of licensing contracts). The notion of a ‘particular legal relationship’ should be given an autonomous meaning. According to the jurisprudence of the ECJ, the question of what claims are covered by a choice of court agreement mainly depends on the intention of the parties. As the ECJ put it, choice of court agreements confer jurisdiction only with regard to obligations which are freely accepted by the parties.566 This approach is followed by some domestic courts of EU Member States.567 Yet, it is uncertain whether the parties’ choice of court agreement which is part of an IP licensing contract can also be adhered to by a party seeking legal redress for infringement of licensed IP rights. The controversy over the interpretation of Article 23 could be best observed by taking into account the jurisprudence of the domestic courts of the Member States and academic opinion. Some national reports indicate that domestic courts would refuse to give effect to choice of forum clauses with regard to claims related to the infringement of IP rights in cases where parties were not previously bound by a contractual relationship.568 Nonetheless, the courts of some Member States adopted a broader interpretation of Article 23 than the one established by the ECJ. For instance, Portuguese courts have recently handed down decisions which upheld that the jurisdiction of a designated court by the parties includes all issues, contractual or not, that arise out of the main contract.569 Academic opinions are also in favour of giving effect to contractual choice of court agreements also with regard to claims related to infringement of licensed IP rights.570 The Italian Report noted that the designated court would enforce the choice of court agreement in ‘pure’ infringement cases. This is so because the choice of court agreements can only be deprived of efficiency with regard to insurance, consumer and individual employment contracts or if they are contrary to exclusive jurisdiction rules of the Regulation (Arts 13, 17, 21 or 22). The French Report indicated that the question regarding the material scope of a choice of court agreement, which is part of a contract for the exploitation of copyrights, is usually interpreted in favour of the author.571 Yet, a closer look at the case law of French courts also illustrates the tendency to interpret choice of court clauses broadly and enforce them regardless of whether a dispute is of a contractual or tortious nature.572   Case C-4/03 GAT v LuK [2006] ECR I-6509, para 24.  Case C-26/91 Handte v Traitements Mécanochimiques des Surfaces [1992] ECR I-3967; Case C-334/00 Fonderie Officine Meccaniche Tacconi v HWS [2002] ECR I-7357. 567   Austrian Report, answers to HC 4. 568   Belgian Report, answers to HC 4; Greek Report, answers to HC 4; Hungarian Report, answers to HC 4. 569   Portuguese Report, n 127. Similarly, the Swiss Report also noted that parties’ choice of court agreements concerning disputes which arise out of contractual or tortious relationship or unjust enrichment (see Swiss Report, answers to Question 4 of Part II). 570   Italian Report, answers to HC 4. 571   French Report, section 1.2.5. 572   ibid and answers to HC 4. 565 566

General Report  131 In comparison to the Brussels I Regulation, the situation is somewhat different in Croatia, which is not a member of the EU. The Croatian PIL Act does not provide for any special rules concerning the requirements of enforceability of choice of court clauses before Croatian courts. Accordingly, parties may chose Croatian courts only if one of the parties has Croatian nationality or a registered seat in Croatia. In cases where parties would prefer to make a derogatory choice of court agreement and confer jurisdiction to a foreign court, such clauses would be upheld by Croatian courts if three of the following requirements are met: a) one of the parties is a foreign national or legal person with legal establishment in a foreign country; b) Croatian courts do not possess exclusive jurisdiction over the matter; and c) the dispute is not related to personal status or family relations.573 Parties can make a choice of court agreement after the dispute has arisen; however, prorogation and derogation clauses are not enforceable in tort disputes (Art 53(1) of the Croatian PIL Act). According to the Croatian Report, Croatian law does not establish any specific provisions with regard to the enforceability of choice of court clauses in IP disputes. Nevertheless, it is the prevailing academic opinion that such choice of court agreements in IP disputes would be enforceable, as long as the general enforceability requirements are met.574

10.3.3  Choice of Court Agreements according to the CLIP Principles The existing ambiguities of interpretation of the Brussels I Regulation would be resolved if the proposal made by the CLIP working group was adopted. Although the Max Planck draft principles of jurisdiction of 2004 did not contain any specific rules relating to choice of court agreements, a number of special provisions regarding prorogation of jurisdiction were included in the Second Draft of the CLIP Principles (2009). Article 2:301 of the CLIP Principles generally follows the practice established under the Brussels I Regulation and posits parties’ freedom to agree on jurisdiction in cross-border IP disputes. Choice of court agreements are deemed to be exclusive unless the parties have agreed to the contrary. The validity of a choice of court agreement shall be determined according to the national law of the state of the designated court. It should be also noted that Article 2:301(3) of the CLIP Principles adopts identical written form requirements to those established in the Hague Choice of Court Convention. The CLIP Principles follow a separability doctrine according to which the invalidity of the contract does not render a choice of court clause invalid (Art 2:301(5)). The court designated in a choice of court agreement shall have jurisdiction over contractual and non-contractual obligations as well as all other claims which arise from that legal relationship. Parties’ choice of court agreement cannot override exclusive jurisdiction rules established in the CLIP Principles (Art 2:301(4)). Therefore, according to the CLIP Principles, in cases where jurisdiction of a court is conferred by the parties’ choice of court agreement, such agreements on jurisdiction shall be enforceable as long as the registration or validity of the registered IP right is not challenged in the main claim or counterclaim (Art 2:401(2)).

  Croatian Report, section 1.2.3.   ibid and answers to HC 4.

573 574

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10.4  Choice of Court Agreements in Asian Countries 10.4.1  Choice of Court Agreements in India and Taiwan Although choice of court agreements would be enforceable in most represented countries, the situation is quite restrictive under Indian law. Indian courts do not give effect to choice of court agreements. The parties’ agreement to designate an Indian court to hear a case would not be enforceable if it was made after the dispute arises.575 The situation is more flexible in Taiwan, where the parties’ choice of court agreements will be enforceable in disputes related to contractual obligations assumed by the parties. Taiwanese courts may also assert their jurisdiction and enforce the parties’ agreement with regard to a non-contractual obligation of the parties, given that the dispute at hand is sufficiently related to the forum. Finally, the question of the relationship between the exclusive jurisdiction rules and choice of court agreements is not clearly delineated under Taiwanese law. Nonetheless, the Taiwanese Report notes that it is likely that a Taiwanese court will not refuse to give effect to the choice of court agreement even if the counterparty raises an invalidity defence that the patent is not valid.576

10.4.2  Choice of Court Agreements in IP Disputes according to Japanese Law and other Asian Legislative Proposals Article 11 of the Japanese CCP deals only with domestic choice of court agreements and stipulates inter alia that ‘choice of court agreements can be made in the proceedings at the court of first instance’. In practice, this means that Japanese courts would enforce choice of court agreements made before the date of the oral arguments. Choice of court agreements shall be made in writing (Art 11(2) CCP). The written form requirement is also satisfied if the choice of court agreement is concluded by electronic means (Art 11(3) CCP). The written form requirement has been interpreted as requiring the parties to specify clearly the substance of the disputes which should fall under the ambit of the choice of court agreement and indicate the court which should decide the dispute. If a choice of court clause is a part of a larger contract, the nullity of a contract does not render the choice of court clause invalid (‘separability doctrine’). Choice of court agreements do not necessarily have to be in one document (eg offer and acceptance). Choice of court agreements which are included into B2C contracts have to be interpreted to the benefit of a weaker party, who cannot be deprived of the home court advantage. Hence choice of court agreements which are obviously detrimental when considering the interests of the weaker party may be considered as not enforceable. Similarly, choice of court agreements preventing the parties to raise any claims with regard to particular issues also may not be enforceable. The prevailing opinion in Japan is that choice of court agreements are enforceable before Japanese courts.577 In 1975 the Japanese Supreme Court handed down the landmark   Indian Report, answers to HC 4.   Taiwanese Report, answers to HC 4. 577   Osaka District Court, Judgment of 23 March 1986, 1200 Hanrei Jih¯o 97, available at tomeika.jp/search/ content.php?did=1521; Tokyo District Court, Judgment of 28 February 1994, 876 Hanrei Taimuzu 268, available at tomeika.jp/search/content.php?did=1096 (declining jurisdiction on the grounds that parties have concluded choice of court agreement designating courts of California as exclusively competent); Kobe District Court, 575 576

General Report  133 judgment in the so-called Chisadane case and upheld the validity of an exclusive choice of court agreement.578 In this case the dispute arose with regard to the damage to crude sugar which occurred during transportation from Brazil to Osaka. The question was whether a choice of forum clause included in a bill of lading was enforceable. The Supreme Court followed the established practice under Article 11 of the CCP and held that it is sufficient if the parties specify a country where the dispute is to be resolved. The choice of court agreement shall be in writing, although the parties are not obliged to sign the agreement as long as its content is drafted sufficiently clearly. International choice of forum clauses are valid unless they are contrary to public policy, or fall under the exclusive jurisdiction of Japanese courts. In the case where parties refer to a particular court but do not specify whether the designated court has exclusive jurisdiction, such a choice of court clause is deemed to confer exclusive jurisdiction upon the chosen court. Besides, the court stated that the reciprocity requirement which is one of the conditions for recognising foreign judgments is not a necessary condition in determining the validity of a choice of court agreement. Japanese courts have not dealt with choice of court agreements pertaining to IP disputes. According to the Japanese Report, the majority opinion supports the idea that the parties’ agreements conferring jurisdiction upon Japanese courts would be enforceable even if no relationship between the dispute and the forum exists.579 The majority opinion seems to follow the approach that parties would be free to make a choice of court agreement also at the time when the dispute arose. However, it is not clear whether a Japanese court would assert jurisdiction in disputes related to foreign-registered IP rights where the validity defence is raised. 10.4.2.1  New Rules on International Jurisdiction The legislative proposals introduced significant improvements. Article 3-7, to be introduced into the CCP by the Act Amending CCP (2011), contains a set of special rules concerning parties’ agreements on jurisdiction. This provision allows the parties to conclude a choice of court agreement. In order to be valid, choice of court agreements must arise out of a specific legal relationship made in written form. However, the parties’ choice of court agreement is not effective if a chosen foreign court cannot assert jurisdiction according to the forum law (Art 3-7(iv)). Besides, according to the Explanatory Report of the Interim Proposal, agreements on jurisdiction would be null and void if they are obviously contrary to public policy. The Act contains additional provisions concerning choice of court agreements over disputes in consumer and individual employment contracts (Arts 3-7(v) and 3-7(vi)). Insofar as IP rights are concerned, these matters are open to interpretation.580 Generally, parties cannot make choice of court agreements concerning matters related to registration or entries in public registries which also cover matters related to the registration of IP rights. It should also be reiterated that claims related to the existence and validity of regisJudgment of 10 November 1997, 981 Hanrei Taimuzu 191, available at tomeika.jp/search/content.php?did=1537; Tokyo High Court, Judgment of 28 November 2000, 1743 Hanrei Jih¯o 137, available at www.tomeika.jur.kyushuu.ac.jp/procedure/E-label/LA1-H12.11.28.pdf (where the exclusive choice of court clause in employment contract was upheld); Tokyo District Court, Judgment of 26 September 2003, 1153 Hanrei Taimuzu 268, available at www. tomeika.jur.kyushu-u.ac.jp/procedure/E-label/LA1-H15.09.26HT.pdf (where the Tokyo district court enforced parties’ exclusive choice of Hawaiian court agreement). 578   Supreme Court, Judgment of 28 November 1975, 29 Minsh Jih¯u 1554. 579   Japanese Report, answers to HC 4. 580  ibid.

134  Toshiyuki Kono and Paulius Jurcˇys tered IP rights fall under the exclusive jurisdiction of Japanese courts when the IP rights concerned are registered in Japan (Art 3-5(iii)). In cases where the validity of registered IP rights arises as a preliminary question or is raised as a counter-claim by the defendant, the Explanatory Report indicates that the possibility of making an invalidity defence depends on the applicable law (eg the question of whether the invalidity of an American patent can be challenged in proceedings concerning the infringement of an American patent shall be decided pursuant to the applicable American patent law). According to the Explanatory Report, this issue of the invalidity defence is treated as a problem of parallel proceedings which has to be decided on the basis of the special circumstances test. Such a legislative approach again does not offer much legal certainty and is open to interpretation.581 10.4.2.2  Choice of Court Agreements in the Transparency Principles Article 107 of the Transparency Principles allows parties to make choice of court agreements with regard to contractual and non-contractual disputes concerning IP rights. At the same time, the drafters of the Transparency Principles acknowledged that choice of court agreements in IP infringement cases would be rare. Article 107 resembles the proposed rule on choice of court agreements in the Act Amending the CCP (2011). In particular, according to the Transparency Principles, a designated court can hear all disputes referred to by the parties in a choice of court agreement, unless the object of the dispute falls under the exclusive jurisdiction rules. In the case where a court designated in a choice of court agreement has to decide upon the existence, registration, validity or ownership of foreign IP rights as a preliminary matter, such a decision shall have only inter partes effects. The drafters of the Transparency Principles were also aware of possible situations where one of the parties to a choice of court agreements might institute proceedings (eg for a negative declaratory judgment) before a court other than the one designated in the choice of court agreement with the aim to hamper the bringing of the suit against it (‘torpedo’ claims). Pursuant to Article 201 of the Transparency Principles, the court second seised which is also the designated court can stay the proceedings until the court first seised decides on its jurisdiction. Yet, the court designated in the choice of court agreement may directly contact the court first seised in order to facilitate the proceedings. 10.4.2.3  The Korean Proposal Article 206 of the Korean Proposal establishes a special rule dealing with choice of court agreements. It provides that the court chosen by the parties shall have jurisdiction to hear the dispute. Choice of court agreements can be made either before the dispute (e.g. as a clause in a contract) or after the dispute has arisen. The court chosen shall have exclusive jurisdiction unless parties agree otherwise (Art 206(2)). However, parties may not conclude choice of court agreements if the main issue of the dispute is related to the registration or validity of IP rights. Nevertheless, in cases where the question of registration or validity arises as a preliminary matter, choice of court agreements are enforceable under the Korean proposal (Art 206(4)). By establishing such rules, the Korean proposal basically follows previous Korean doctrine and court practice.582  ibid.   H Lee, ‘Chiteki zaisanken jiken no kokusai saiban kankatsu – Ni-kan s¯oan no taihi kent¯o to t¯oron no kekka [International jurisdiction over intellectual property cases – comparative analysis and outcomes of the discussions of the Japanese and Korean proposals]’ (2009) 6(2) Kigy¯o to h¯os¯oz¯o 131. 581 582

General Report  135

10.5  Comparative Observations The information provided by national reporters indicates that many unresolved legal questions exist also in the area of international choice of court agreements. Generally, national laws and court practices still differ with regard to the requirements for the validity of choice of court agreements. Even if a choice of court agreement is given effect by a designated court, national laws also follow different approaches concerning the scope of party autonomy. Namely, the question whether parties’ choice of court agreement could be made only with regard to claims arising out of contract, or whether infringement claims could also be brought on the basis of the choice of court agreement. Insofar as IP-related disputes are concerned, the relationship between the choice of court agreements and various provisions concerning jurisdiction in IP disputes could be further clarified and eventually harmonised. The national reports indicated that their states follow different approaches and interpretations of jurisdiction rules, and vary in their application to IP disputes. In this regard, the relationship between the choice of court clauses and jurisdiction rules concerning IP infringements and validity/registration issues has to be clarified. If any further harmonisation initiatives in the area of cross-border enforcement of IP rights is pursued, the 2005 Hague Convention in conjunction with more recent legislative proposals provides a solid basis for further developments.

Part III Choice-of-Law Issues in Intellectual Property Disputes 11  Applicable Law to Proprietary Matters of IP Rights One of the primary questions which arise in multi-state disputes is related to the nature of the IP rights at stake. The court must first of all determine whether IP rights exist, who is the legitimate right-holder of the IP rights and what is their content and limitations. For instance, in contractual as well as non-contractual controversies the court must first determine whether the rights exist and whether a party who claims protection is actually entitled to such protection. These issues of initial title, creation, existence, contents, limitations and exceptions as well as transferability have been often described as ‘matters pertaining to the IP right itself ’ or ‘proprietary matters’ of IP rights. Although several issues such as the protected subject matter as well as the formalities of protection have, to a certain extent, been harmonised by the adoption of international treaties and conventions, a number of controversial problems concerning the interpretation of these international instruments still exist. For instance, as regards the initial title to unregistered IP rights such as copyrights, Article 5(2) of the Berne Convention was subject to different interpretations as to the meaning of ‘country of origin’. A reconsideration of these conventional notions appeared to be necessary in the advent of the development of the digital environment. This section is based on the answers submitted by the national reporters to hypothetical cases nos 8 and 9 where a number of questions relating to the applicable law to initial ownership and other proprietary aspects of IP rights were raised.

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11.1  Applicable Law to Proprietary Aspects of IP Rights in North American Countries 11.1.1  The United States The leading case concerning the initial title to copyrights in the United States is Itar-Tass Russian News Agency v Russian Kurier, Inc.583 In this case a dispute arose between a major publisher of Russian-language newspapers in Russia and Israel, and the defendant Kurier, a Russian-language weekly newspaper published in the New York area. An extensive number of articles, headlines, pictures and graphics were copied from the plaintiffs’ publications and appeared in Kurier without the permission of the plaintiffs. The district court granted a preliminary injunction and awarded damages. The United States Court of Appeals for the Second Circuit upheld the decision of the lower instance court and further elaborated on the choice-of-law issues pertaining to copyright ownership and infringement. The Court in particular noted that the Berne Convention itself does not establish any choice-of-law rule for initial ownership. The Court therefore held that initial ownership of a copyright should be determined according to ‘the law of the country with the closest relationship’. In the case at hand the Court found that the ownership of illegally copied works had to be determined according to the law of the country of first publication (lex originis).

11.1.2  The ALI Principles The general choice-of-law rule established in the ALI Principles is based on the territoriality of IP rights. Section 301 inter alia stipulates that the law applicable to determine the existence, validity, duration, attributes, and infringement of registered IP rights is the law of each state of registration; and for other IP rights the law of each state for which protection is sought. The drafters of the ALI Principles intended to create a set of choice-of-law rules which would maintain the principle of territoriality and incorporate only those modifications necessary to adapt the exploitation of IP rights to the demands of the global economy. As regards the law governing the determination of initial title, the ALI Principles distinguish choice-of-law rules for three different groups of IP rights: registered rights; unregistered trade marks and trade-dresses; and IP rights that do not arise out of registration. As for registered rights, the ALI Principles contain a two-pronged rule. On the one hand, the initial title to registered rights is still subject to the territoriality principle, which means that the initial title to the patent will be determined pursuant to the law of the country where the patent is registered. In the comments to the provision cited above, the commentary to the ALI rules indicates that it is important to follow conventional wisdom and apply the same law which determines the existence and scope of the registered right. On the other hand, the ALI principles introduce an important modification to the principle of territoriality for situations where the creation of a registered right is based on the pre-existing contractual relations between the parties. Section 311(2) of the ALI Principles entrenches the rule that the initial ownership shall be determined pursuant to the law which governs their contractual relationship.

  Itar-Tass Russian News Agency v Russian Kurier Inc 153 F 3d 82 (1998).

583

General Report  137 The initial title to unregistered trade mark or trade dress is governed by the law of each state in which the trade mark or trade dress identifies and distinguishes the source of goods or services (section 312(1)). One of the significant departures from the strict territoriality approach in the ALI Principles is related to the determination of the initial title to non-registered rights. The drafters of the ALI Principles were concerned that legal certainty may be jeopardised if the question of initial ownership to unregistered IP assets is determined on a country-bycountry basis.584 Therefore, the ALI Principles refer to the ‘creator’s residence’ as a connecting factor. In particular, section 313(1) provides that if there is one creator, the law of the state of the creator’s residence at the time when the subject matter was created should be applied. If there are several creators, the initial title to the subject matter is determined according to the law of the state designated in a contract between the creators. If no choice of law is indicated, then the law of the state in which the majority of creators are resident at the time of the creation of the subject matter shall be applied (section 313(1)(b)). However, if this is not possible, the ALI Principles indicate that the law of the state which has the closest connection to the first exploitation of the subject matter should be applied. Section 314 of the ALI Principles follows a strict notion of territoriality in positing that the transferability of IP rights is governed by the law of each state for which the rights are transferred. Further, the law of the state for which the right is transferred will also have to be applied with regard to any recordation rules related to the transfer as well as the consequences in case those rules are not complied with. Section 314 applies to all kinds of intellectual property rights and does not seek to override the rules of national laws imposing certain registration requirements. As is explained in the Reporters’ Notes,585 one of the practical considerations for maintaining the territoriality principle is that the question of transferability may be closely related with other limitations and conditions for the transfer of IP rights (eg, right to mandatory remuneration in cases of rental rights under the EC law586). However, under the ALI Principles, such transferability restrictions and recordation requirements would be effective only with regard to the particular country where these transferability restrictions are imposed.

11.2  European Countries 11.2.1  Early European Proposals One of the first proposals to adopt choice-of-law rules for IP matters was drafted by Professor Ulmer under the auspices of the European Commission (the so-called ‘Ulmer Proposal’). Article D of the Proposal stipulated that the creation, scope and termination of copyright shall be governed by the principle of the protecting country. Article E of the Ulmer Proposal deals with the question of initial ownership of copyright works. The general principle is that the law of the protecting country should be applied to determine the initial owner of the copyrights. Issues related to the determination of the author in cases where several persons collaborate (co-authorship) and to the term of protection should be also governed by the law of the country where the work is actually exploited (lex   American Law Institute, Intellectual Property, above n 38, comments to s 313.  ibid. 586   Art 5(2) of the Directive 2006/115/EC of the European Parliament and the Council of 12 December 2006 on rental rights, lending rights and on certain rights related to copyright in the field of intellectual property. 584 585

138  Toshiyuki Kono and Paulius Jurcˇys protectionis).587 The law of the protecting country should also determine such issues as the assignability and the granting of exclusive and non-exclusive rights to exploit the work (Art F(1)(a)).588 In addition, lex protectionis also governs the limitations concerning the grant of licenses to exploit the work as well as the available remedies for the infringement of copyright (Art F(1)(b)). The effects of the assignment or grant of licenses vis-à-vis third parties are also governed by the law of the protecting country (Art F(1)(c)). This same principle of the protecting country should also be applicable with regard to works created in the course of employment relations. However, the underlying idea is that the employer and employee are free to agree on the transfer of rights (Art E(2)). The Ulmer Proposal contained a special rule for the transfer of copyrights (Art F): Article F envisaged the parties’ freedom to choose the governing law of the contract. In the absence of choice, agreements on the transfer of rights were governed by the law specified in Article 5 of the proposed Convention on the Law Applicable to Contractual and Non-Contractual Obligations. Namely, Article 5 provided that in the absence of choice, the employment contract should be governed by the law of the country in which the employee habitually carries out his work in performance of the contract. If such place cannot be determined, the employment contract shall be governed by the law of the country where the business, through which the employee was engaged, is established. A more elaborate legal framework was instituted with regard to industrial property rights. Article G of the Ulmer Proposal contained a general rule providing for a definition of industrial property rights which would fall under the scope of the subsequent provisions. Industrial property rights are defined as patents for inventions, rights to industrial designs as well as rights to trade marks used in commercial activity. The aim of establishing such a general rule was to assure that industrial property rights which arise out of public registration are covered by the subsequent choice-of-law provisions.589 Further, Article G(2) provided that the law of the protecting country (lex protectionis) should be applied in cases where there are differences between national and international rules related to the registration of industrial property rights. Moreover, the Ulmer Proposal followed the principle of territoriality in such matters as existence, effects and revocation of industrial property rights which were accordingly governed by the law of the protecting country (Art H).

11.2.2  European States The transferability and proprietary aspects of the transfer of IP rights were not covered by the 1980 Rome Convention, nor are they governed by the Rome I or Rome II Regulations.590 It might be questioned whether transferability should be characterised as a contractual matter or as an issue pertaining to the right itself. If transferability was characterised as a contractual issue, then the law chosen (lex contractus) would determine also the question of the transfer of IP rights. In other words, characterising transferability as a contractual matter allows the parties to agree on the applicable law. However, according to most of the European national reporters, the law of the protecting country (lex protectionis) should be 587   E Ulmer, Die Immaterialgüterrechte im internationalen Privatrecht: Rechtsvergleichende Untersuchung mit Vorschlägen für die Vereinheitlichung in der Europäischen Wirtschaftsgemeinschaft (Cologne, Carl Heymanns, 1975) 40–41. 588   ibid, para 69. 589   ibid 72. 590   Austrian Report, section 2.4.

General Report  139 applied to the issues of transferability or waivability of rights.591 This approach is established either in the domestic private international statutes592 or developed in the court practice.593 The application of the lex protectionis principle to transferability matters means that contractual aspects of the transfer (validity of the contract or other conditions voluntarily agreed by the parties) are governed by the lex contractus. The prevailing approach is that such IP-related proprietary questions as initial ownership, registration, existence, validity, content, duration, transferability or effects against third parties are also not governed by any of the provisions of the Rome II Regulation.594 In particular, the scope of the applicable law pursuant to the Rome II Regulation is determined in Article 15. However, this provision is understood as not touching upon the proprietary issues of IP rights.595 Consequently, proprietary issues will have to be determined according to the choice-of-law provisions of the forum country. Therefore, the following paragraphs will focus on the analysis of the approaches adopted in the domestic private international law statutes of the European states. The majority of European national reports indicated that the question of initial ownership as well as other proprietary matters shall be decided according to the law of the country for which protection is sought.596 For instance, Article 54 of the Italian Private International Law Statute entrenches a special rule on rights related to intangible assets and provides that rights related to these assets shall be governed by the law of the state in which they are exploited. This rule has been interpreted as mandating the application of the law of the protecting country (lex protectionis). The lex protectionis principle determines the existence and creation of the right as well as the scope, validity, transferability, transfer, attributes, duration, infringement and remedies.597 Lex protectionis therefore is applied to determine the initial ownership to IP assets with the only exception being employee’s inventions which are determined under the law chosen by the parties (lex contractus).598 In Austria, section 34(1) of the PIL Act stipulates that the law of the country for which protection is claimed governs the existence, the contents and the termination of IP rights. This rule has been interpreted so as to cover also such proprietary issues as the initial ownership, transferability and infringement of IP rights. Further, the Austrian Report indicated that section 34(1) also applies to other proprietary elements of agreements for the transfer of IP rights (so-called agreement of a transfer as such, Verfügungsgeschäft).599 A choice-oflaw agreement between the parties, pursuant to the Austrian PIL Act, with regard to the proprietary aspects of IP rights is not possible. Article 93 paragraph 1 of the Belgian Code of Private International Law (CPIL) establishes a rule that all issues related to initial copyright ownership (validity, scope, initial ownership, transfer etc) should be governed by the law of the country for which protection is sought. With regard to copyright works created in the course of an employment relationship, the Belgian report draws attention to Article 21 of CPIL which allows the court to set   Belgian Report, para 68.   Art 54 of the Italian PIL Statute; Art 93 Belgian CPIL.   In Germany the lex protectionis principle to matters concerning transferability was established by the decision of the Federal Supreme Court (BGH), German Report n 128 for further references. 594   Austrian Report, section 2.4.2. 595  ibid. 596   Greek Report, answers to HC 8; Dutch Report, para 4.1, Swiss Report, answers to HC 8; German Report, answers to HC 8; Swedish Report, section 2.1.3. 597   Italian Report, section 1.2.3.1. 598   Italian Report, answers to HC 8. 599   Austrian Report, section 3.4.1. 591 592 593

140  Toshiyuki Kono and Paulius Jurcˇys aside the application of a foreign law where it is considered to be contrary to international public order. With regard to copyright works created in the United States, the work-for-hire doctrine might be regarded as contrary to Article 21, because according to Belgian law copyright may originate only from natural persons. Nevertheless, in accordance with the prevailing approach in Belgium, rules allocating initial copyright ownership are not considered an element of Belgian international public policy.600 Similarly, Article 10.4 of the Spanish Civil Code contains a choice-of-law provision mandating the application of the law of the protecting country (lex protectionis). This principle would be applied to all matters related to IP rights that are not governed by the Rome II Regulation.601 According to Spanish law, parties are not allowed to agree on the applicable law on these issues.602 The Croatian Report noted that the PIL Act of Croatia remains silent on the law applicable to the initial ownership and transferability of IP rights. Nevertheless, the prevailing academic opinion is that the law of the protecting country (lex protectionis) should be applied to such matters as the transferability of IP rights and the determination of the initial owner of IP assets.603 The majority opinion in Germany supports the application of the lex protectionis principle to determine the question of initial ownership. Lex protectionis in the case of registered rights would lead to the application of the law of the country of registration. In the case of non-registered IP rights, especially copyrights, the Federal Supreme Court (Bundes­ gerichtshof ) follows the majority approach that the law of the country for which protection is sought should be applied.604 In the case of copyrights, German authors sometimes also argue for the application of the lex originis principle. This principle would require the application of the law of the country where the work has been first published. The advantage of this choice-of-law rule is that it would result in the application of the law of a single country. Arguably, this principle better suits authors and entertainment industries. The lex originis principle is generally applied by the French courts, the most notorious judgment in this area being handed down in the French Cour de Cassation in the so-called le Chant du Monde (also known as ‘John Huston’) case.605 The same principle – lex originis – would also be applicable with regard to initial ownership to collective works.606 In addition, national reporters discussed further alternatives to the principle of lex protectionis. It was specifically argued that initial ownership of copyright works could be also determined by the law of the country of origin (lex originis). In this case the law of the place where the IP asset was created has to be applied. The advantage of this choice-of-law rule is that it leads to more predictability as to the initial owner of the work, especially with regard to cases related to the Internet.607 However, very few court decisions were reported on this rule. Besides, there might be some dilemmas regarding IP infringement cases because of potential conflicts between the lex protectionis governing the infringement and lex originis determining the applicable law to initial ownership. Further issues related to the application of the lex originis principle may develop in cases stemming from problems over the   Belgian Report, answers to HC 8.   Spanish Report, para 28. 602   ibid, para 37. 603   Croatian Report, answers to HC 8 and 9. 604   German Report, answers to HC 8. 605   French Supreme Court, Decision of 28 May 1991 as referred to in the French Report, answers to HC 8. 606   ibid and n 157. 607   Dutch Report, para 4.1. 600 601

General Report  141 initial titles of IP assets created in the course of an employment (‘works made for hire’). Moreover, questions were also raised regarding the appropriateness of the application of the law of the domicile of the proprietor. This approach has been criticised for its circular reasoning: in order to determine the domicile of the owner of IP rights it is first necessary to determine the owner.608 Insofar as Community IP rights are concerned, such issues as existence and validity are handled by the Community regulations themselves (Art 88 of Community designs regulation; Art 101 of the Community TM regulation; Art 97(1) Plant variety Regulation). These Community regulations eliminated most of the problems related to choice-of-law by establishing a uniform supranational regime.

11.2.3  The CLIP Principles One of the cornerstone provisions concerning the applicable law to IP matters is established in Article 3:102 of the CLIP Principles. It provides that the law of the state for which protection is sought governs such issues as existence, validity, scope, duration and all other matters concerning the IP right. The usage of the open term ‘all other matters’ leaves some room for a broader interpretation of the content of the lex protectionis principle and may cover such issues as the maintenance of registered IP rights.609 It follows that the parties cannot choose the applicable law for these matters unless otherwise provided in the CLIP Principles (Art 3:103). The CLIP Principles follow the so-called ‘path dependency’ approach610 and aim to compensate for any omissions in the European law. Accordingly, the lex protectionis rule was adopted with regard to the determination of the initial ownership of registered and nonregistered IP rights (Art 3:201(1)). The law of the state for which protection is sought shall be applied also to such issues as co-ownership and transferability of shares of each coowner (Art 3:401). However this rule, based on the principle of territoriality of IP rights, is contingent upon two further clarifications. First, if the situation has a close connection with another state that has a work made for hire provision or deems a transfer or exclusive licence of all economic rights in the work to have taken place by virtue of the parties’ contractual relationship, effect may be given to such rules by constructing the parties’ relationship under the law applicable to the transfer or exclusive licence of all economic rights in the work as set forth in Article 3:201(1). Secondly, the CLIP Principles set out special rules concerning the right to claim a registered IP right which was created in the framework of an employment or a research and development contract (Art 3:201(3) and 3:503). The law of the protecting country also determines such issues as the transferability of IP rights as well as the question whether the transfer or licence can be invoked against third parties (Art 3:301). In the same vein, limitations and exceptions as well as the waivability of limitations and exceptions to an IP right are governed by the lex protectionis (Art 3:701).

 ibid.   A Kur and B Ubertazzi, ‘The ALI Principles and the CLIP Project: A Comparison’ in S Bariati (ed), Litigating Intellectual Property Rights Disputes Cross-border: EU Regulations, ALI Principles, CLIP Project (Milan, CEDAM, 2010) 113. 610   Comments in J Basedow, T Kono and A Metzger (eds), above n 1, 49. 608 609

142  Toshiyuki Kono and Paulius Jurcˇys

11.3  Applicable Law to Proprietary Aspects of IP Rights in Asian Countries 11.3.1  India and Taiwan Indian law follows the principle of territoriality in determining the initial owner of an IP product. However, given that disputes concerning foreign IP rights cannot be adjudicated before Indian courts, applicable law issues concerning initial title to IP assets do not seem to arise before Indian courts. Hence, Indian IP statutes would determine whether and to what extent IP rights are transferable and can be waived.611 In Taiwan, the issues of transferability and waivability are determined by the law of the protecting country.612

11.3.2 Japan The new Japanese PIL Act does not contain any specific choice-of-law provisions concerning the law applicable to proprietary matters of IP rights. Yet in legal scholarship as well as in the practice of Japanese courts it is well established that such issues as the initial title, existence, scope, transferability as well as the effects of IP rights are governed by the law of the protecting country.613 The principle of lex protectionis was abided by in two leading judgments rendered by the Supreme Court. Hitachi is one of the landmark cases in the area of initial ownership of IP rights, with the Supreme Court in 2006 awarding remuneration for the employee’s efforts in the making of an invention. In this case the Supreme Court mentioned in obiter dicta that the question of initial ownership shall be determined by the law of the protecting country.614 The lex protectionis principle was also referenced by the Supreme Court in the Card Reader case, concerning the cross-border infringement of an American patent.615 11.3.2.1  The Transparency Proposal The decisions of the Supreme Court rendered in the Card Reader and Hitachi cases largely influenced the approach adopted in the Transparency Principles. Article 305 of the Transparency Principles provides the following: The existence, primary ownership and effect of an intellectual property right shall be governed by the law of the country that granted the intellectual property right. Any choice of law agreement by the parties concerning these matters shall be invalid.

Similarly to other questions regarding the applicable law to IP matters, the applicable law to proprietary matters was discussed by the Transparency working group. One of the main questions was whether the principle of territoriality should be maintained, or whether more flexible solutions should be introduced. Nevertheless, since the aim of the Transparency Principles was to propose a possible legal mechanism for the amendment of the Japanese law, a decision was made to follow the Supreme Court’s judgments in the Hitachi optical disc case and the Card Reader case. The lex protectionis rule in these judg  Indian Report, answers to HC 8 and 9.   Taiwanese Report, answers to HC 9. 613   Japanese Report, answers to HC 8 and 9. 614   Supreme Court of Japan, Judgment of 17 October 2006, 60 Minsh¯u 2853 et seq, and section 14.2.1 below. 615   Fujimoto v Neuron Corporation (‘Card Reader’), 56 Minsh¯u 1551, abbreviated English translation available at www.courts.go.jp/english/judgments/text/2002.9.26–2000.-Ju-.No..580.html, and section 12.3.2 below. 611 612

General Report  143 ments was considered a reflection of the economic policies of the protecting state; accordingly, based on these public policy grounds, the choice of law regarding initial ownership of the rights was not established. 11.3.2.2  The Joint Japanese-Korean Proposal (Waseda Principles) The general choice-of-law principle adopted in the Waseda proposal is that all matters concerning IP rights such as existence, validity, content, revocation etc shall be governed by the lex protectionis (Art 301(1)). The principle of lex protectionis is conventionally understood to mandate the application of the law of the state for which protection is sought; or, in the case of registered IP rights, the law of the state in which IP rights are registered or deemed to be registered (Art 302(2)). As for copyrights, the initial title to a copyrighted work is determined by the law of the state in which the work is created. If the law of this state is not clear, the law of the place of the creator’s habitual residence shall be applied. Nevertheless, the lex protectionis principle is subject to a number of limitations. One of the remarkable features of the Waseda Principles is that the principle of party autonomy is given a much broader scope than in other legislative initiatives. In particular, parties are allowed to agree on the applicable law to any issue concerning IP rights including those of existence, validity, revocation, or transferability. Such a choice-of-law agreement, however, cannot affect the rights of third parties (Art 302). In order to safeguard the position of weaker parties, Article 302(3) provides that a choice-of-law agreement is valid if it is effective under the chosen law and complies with the mandatory rules of the lex fori. Such a flexible regime was established based on the drafters’ assumption that no clear choice-oflaw rules have been established in other East Asian countries.616 The Waseda Principles provide for alternative choice-of-law rules governing proprietary aspects of IP rights in such cases where the parties did not agree on the applicable law or which should be applied in situations involving third parties. As regards the transferability issue, the law of each state for which protection is sought should be applied, unless the parties have agreed otherwise (Art 309(1)). Lex protectionis should also be applied to the initial ownership of IP rights (Art 308(1)). Initial ownership of a copyrighted work is governed by the law of the state in which the copyrighted work was initially created. However, if the law of that state is not clear, the Waseda Principles establish a presumption that the law of the state where the creator has his habitual residence at the time of creation of the work should be applied instead (Art 308(2)). Further, Article 308 of the Waseda Principles envisages that there may be situations where the applicable law indicated by the abovementioned choiceof-law rules refers to a country where IP rights are not protected, the matters pertaining to the initial title should then be governed by the law of the state in which the subject matter is first exploited (Art 308(3)).

11.3.3 Korea Article 24 of the Korean Private International Act deals with the applicable law to the infringement of IP rights and mandates the application of the lex protectionis. Although this provision refers only to the infringement of IP rights, the Korean Report noted that the 616  ‘Commentary on Principles of Private International Law on Intellectual Property Rights (Joint Proposal Drafted by Members of the Private International Law Association of Korea and Japan)’ (2011) 2 Kigy¯o to H¯os¯oz¯o, available at www.globalcoe-waseda-law-commerce.org/activity/pdf/28/08.pdf, Commentary to Art 302, p 136.

144  Toshiyuki Kono and Paulius Jurcˇys prevailing opinion in Korea is that the law of the protecting country should be applied also to such proprietary issues as the determination of the initial right-holder and the existence, transfer and extinction of IP rights.617 This principle is also established in the court practice.618 Insofar as registered IP rights are concerned, the courts interpreted the lex protectionis principle to mandate the application of the law of the registering state to such issues as the determination of the right-holder and other proprietary matters.619 The Korean Report also noted that according to the existing law, a parties’ agreement concerning the initial ownership as well as other proprietary matters of IP rights is not enforceable.620 The Korean Principles envisage more elaborate choice-of-law rules for the determination of the existence, validity, contents, extinguishment, infringement, assignability and the effects of the assignment of IP rights. According to Article 20, parties are allowed to agree upon the law governing proprietary matters of an IP right; however, such a choice-of-law agreement has legal effect only between the contracting parties, and cannot be enforced vis-à-vis third parties. The existence and validity of the choice-of-law agreement shall be subject to the lex contractus. In the absence of choice by the parties, proprietary issues are to be governed by the law of the protecting country (if IP rights are not registered) and the law of the registering state (if IP rights are subject to registration). As regards the initial ownership of IP rights, the Korean Principles again makes a distinction between registered and non-registered IP rights. The law of the registering country should be applied to determine the initial owner of registered IP rights. In the case of non-registered IP rights, the Korean Principles diverges slightly from the strict territoriality principle and stipulates that the law of the state in which the IP asset was first created should be applied (Art 24(2)). This in practice means that the place where the creator has his habitual residence might often coincide with the law of the place where the IP asset was first created.621 Further, in cases where IP assets are created by several persons, the initial ownership should be determined according to the law of the state which has the closest connection to the creation if the parties have not agreed otherwise (Art 24(3)).622

11.4  Comparative Observations The answers provided by the national reporters confirmed that the determination of the initial owner of IP objects in most countries is made according to the principle of lex protectionis. This is especially true in the case of registered IP rights whose owner is usually determined according to the law of the registering country. Opinions differ however with regard to the initial ownership of copyrights: in some countries the lex protectionis principle is applied, whereas the law in other countries support the application of the law of the country where the work was first published (lex originis). In light of these considerations, it   Korean Report, section 2.2 and answers to HC 8.   Seoul High Court, Judgment of 8 July 2008, Case No 2007Na80093 (Von Dutch case) and its critical analysis in the Korean Report, section 2.2. In the Sonata of Temptation case the court applied Korean law, which was the law of the forum and also the law of the state for which protection was sought; see section 2.2 of the Korean Report. 619   Myspace Domain Name case (‘the State which has the closest connection with the trademark is the State of registration’) and discussed in the Korean Report, section 2.2 and answers to HC 8 and n 324. 620   Korean Report, answers to HC 8 and HC 9. 621   Korean Report, section 2.4.3 and answers to HC 8. 622  ibid. 617 618

General Report  145 is apparent that initial ownership of works in the digital environment is one field not established by the laws of the various countries. The ALI Principles and other academic proposals have put forward choice-of-law rules which could bring more clarity in terms of the existing laws. Yet some differences among the proposals are evident. The ALI Principles establish that the initial title to non-registered IP rights should be the law of the creator’s residence. Similarly, the Joint Japanese-Korean Proposal refers to the law of the country where the work was created. Meanwhile strict territoriality and legal certainty considerations have been maintained in the CLIP and Transparency Principles which adopt the lex protectionis approach. As regards matters related to the transferability of IP rights, the prevailing approach seems to be that the transferability issue is to be decided according to the law of the protecting state. A main reason why transferability is considered a part of the proprietary elements of IP rights is related to the various limitations imposed on the transfer of certain IP rights (eg, moral rights or remuneration claims for rental rights cannot be transferred).

12  Applicable Law to Infringement of IP rights One of the most debated questions in the field of choice-of-law to IP matters is related to the applicable law to infringements of IP rights. Although the traditional approach was to consider IP rights as firmly based on the principle of territoriality, the emergence of the Internet and global business models provoked new debates as to whether the principle of territoriality is appropriate to multi-state infringements of IP rights. This section of the General Report aims to provide an overview of the national reports and the answers received with regard to two hypothetical cases related to the infringements of IP rights. Hypothetical case no 6 focused mainly on the different notions of territoriality. The national reporters were asked to explain whether the laws of their respective countries would have (extraterritorial) effects over acts of a defendant who produces separate parts of a patented invention in the forum country and then exports them to foreign countries where those parts are assembled and put into use. In addition, the national reporters were asked whether courts of their country would apply foreign IP laws to allegedly infringing acts occurring in the foreign state. Hypothetical case no 7 dealt with the law applicable to the liability of students who created an Internet website which facilitated the exchange of digital media products. The national reporters were asked to indicate what choice-of-law principles would be applied in the courts of their countries to determine the liability of the website operators; whether parties would be allowed to agree on the governing law; and whether there are any special conflict rules determining the applicable law to ubiquitous infringements as well as the liability of the Internet service providers (‘ISP’).

12.1  North American Countries 12.1.1  Applicable Law to Infringements of IP Rights in Canada According to Canadian law, obligations arising out of torts are governed by the law of the jurisdiction in which the tort occurred (lex loci delicti). In Quebec, non-contractual

146  Toshiyuki Kono and Paulius Jurcˇys obligations are governed by the law of the country where the act causing injury occurred, unless the wrongdoer could have foreseen that the injury would occur in another country. Insofar as adjudication of IP disputes before Canadian courts is concerned, it should be recalled that Canadian courts would not have subject-matter jurisdiction with regard to infringements of foreign IP rights.623 Therefore, Canadian courts would hear only those claims which are related to infringements of Canadian IP rights. To put it differently, Canadian courts would have jurisdiction only with regard to IP infringements which are committed in Canada. The principle of territoriality of IP rights was established by Canadian courts in Beloit Canada Ltd v Valmet-Dominion Inc.624 In this case the court had to decide whether a Canadian patent was infringed by the manufacturing of components of a patented press machine which were exported and assembled abroad. The Federal Court of Appeal found that selling components in a substantially unified and combined form for the purpose of later assembly constitutes ‘making’ of the invention and amounts to an infringement of the Canadian Patent Act. However, the mere selling of the components, even if the seller is aware that such later usage of components may constitute infringement of the Canadian patent, is not an infringement as such. Only those cases when components are sold ‘as a kit for assembly of the invention’ are tantamount to an infringement of a patent.625 The Canadian Report noted that it is nevertheless possible to argue that infringements of IP rights (especially non-registered IP rights such as copyrights) could also take place if certain kinds of infringement or certain acts constituting an infringement take place outside of Canada. This might be the case where the infringement has a real and substantive connection with Canada. Infringements of IP rights occurring in the digital environment are also governed by subject-matter jurisdiction limitations. Therefore, only the parts of IP infringements occurring on the Internet which are related to the infringement of Canadian IP rights would be adjudicated before Canadian courts. The parties’ agreement on the applicable law would be possible only if the parties agree on the application of Canadian law. Canadian IP statutes, namely the Copyright Act, would be applicable to the liability of the ISP and the parties would not be able to invoke the application of IP statutes of other countries. Accordingly, the Canadian national report notes that given the subject-matter jurisdiction limitations, ‘it is hard to see how a concept of ubiquitous infringement could develop as a matter of common law’.626

12.1.2  Applicable Law to Infringements of IP Rights in the United States In the United States a general lex loci delicti principle determines the applicable law to IP infringements. In Itar-Tass Russian News Agency v Russian Kurier Inc627 the court held that the place of an American copyright infringement is in the United States. It is established practice of the American courts that the national treatment principle implies a rule of territoriality628 which means that no matter where the suit is brought, an action for an infringe  See section 4.2.1 above.   Beloit Canada Ltd v Valmet-Dominion Inc [1997] 3 FC 497, CA. 625   Canadian Report, answers to HC 6. 626   Canadian Report, answers to HC 7. 627   Itar-Tass Russian News Agency v Russian Kurier Inc 153 F 3d 82 (1998). 628   Subafilms Ltd v MGM-Pathe Communications Co 24 F 3d 1088 (9th Cir 1994), 1097. 623 624

General Report  147 ment of a US copyright will have to be decided according to US law.629 Besides, in the case of Creative Technology, the court found that Article 5(2) of the Berne Convention is a ‘choice-of-law rule mandating the applicable law to be the copyright law of the country in which the infringement occurred, not the law of the country in which the author is a citizen or in which the work was first published.’630 As illustrated in previous sections, US courts have consistently declined to assert jurisdiction over foreign patent infringement claims; therefore, the courts adjudicate only claims which arise under the United States Patent Act. It is established in the practice of the United States courts that ‘the legislation of the Congress, unless contrary intent appears, is meant to apply within the territorial jurisdiction of the United States’.631 Accordingly, it is generally accepted that US IP statutes cannot be applied to acts that occur abroad. This rule is known as a ‘presumption against extraterritoriality’, and was strictly interpreted and applied by the United States courts in a number of IP-related cases. For instance, much controversy arose with regard to the interpretation of section 271(f)(1) of the United States Patent Act,632 which inter alia provided that infringement does not occur when one supplies from the United States a patented invention’s components for assembly in combination abroad. The Supreme Court had to verify how this provision would apply to a case where computer software was first sent from the United States to a foreign manufacturer on a master disk or by electronic transmission, then copied by the foreign recipient for installation on computers made and sold abroad. For the purposes of section 271(f)(1), the Supreme Court held that ‘the copies of Windows software actually installed on the foreign computers were not themselves supplied from the US’. The Court refused to apply American law for foreign conduct because ‘foreign law may embody different policy judgments about the relative rights of inventors, competitors and the public’.633 As regards copyright, it is generally accepted that US copyright laws do not apply extraterritorially. This means that infringing acts that occur outside of the United States are not actionable under US copyright laws.634 In the case of Subafilms the court noted that an extraterritorial application of US Copyright laws ‘would be contrary to the spirit of the Berne Convention’ and would undermine Congress’s objective to attain an effective and harmonious system of copyright among all nations.635 Nonetheless, American law could be applied in exceptional cases, namely, when the type of infringement permits further reproduction abroad (eg unauthorised manufacturing of copyrighted material in the United States).636 For instance, a court held that ‘the unauthorized manufacture of infringing goods within the US for subsequent sale abroad may give rise to a cause of action under the United States Copyright Act, even where the actual sale and distribution of infringing goods occurs outside of the US’.637 In other words, the occurrence of predicate infringing   Dominic Murray v BBC 81 F 3d 287 (2d Cir 1996), 293.   Creative Technology Ltd v Aztech Sys PTE 61 F 3d 696 (9th Cir 1995), 700; also Subafilms Ltd v MGM-Pathe Communications Co 24 F 3d 1088 (9th Cir 1994), 1097. 631   EEOC v Arabian American Oil Co (Aramco) 499 US 244. 632   This provision was enacted after another Supreme Court decision in Deepsouth Packing Co v Laitram Corp 406 US 518 (1972), where it was decided that the shipment overseas of materials that, when assembled in combination, violated a US patent, did not result in liability for contributory infringement. 633   AT&T Corp v Microsoft Corp 414 F 3d 1366 (Fed Cir 2005); NTP Inc v Research in Motion Ltd 418 F 3d 1282 (Fed Cir 2005). 634   Ralphe A. Armstrong and Anna Music v Virgin Records, Ltd 91 F Supp 2d 628 (2000) 634. 635   Subafilms Ltd v MGM-Pathe Communications Co 24 F 3d 1088 (9th Cir 1994) 1097–98. 636   Update Art Inc v Modiin Pub Ltd 843 F 2d 67 (2d Cir 1988) 73. 637  ibid. 629 630

148  Toshiyuki Kono and Paulius Jurcˇys acts in the US could justify the application of US copyright laws to other infringements in foreign states.638 For instance, in NFL v PrimeTime 24, the court applied US law and found the defendant liable for unauthorised secondary transmissions of football broadcasts to its satellite subscribers in Canada, despite the fact that under Canadian law such acts were lawful.639 However, according to the existing law, there can be no liability under the United States Copyright Act for authorising an act that itself could not constitute infringement of IP rights secured by US law.640

12.1.3  Applicable Law to Infringements of IP Rights in the ALI Principles Section 301 of the ALI Principles stipulates that infringement of IP rights and the remedies for their infringement should be governed by lex protectionis. Accordingly, in the case of infringements of registered IP rights, the law of each state of registration should be applied; while in the case of infringements of other IP rights which are not subject to registration, the court should apply the law of the country for which protection is sought. In addition, the ALI Principles deal with the law applicable to a non-contractual obligation arising out of an act of unfair competition and establish that the law of each state in which direct and substantial damage results or is likely to result (irrespective of the state in which the act giving rise to the damage occurred) should be applied (section 301(2)). It is noteworthy that the ALI Principles require the court to apply those remedies which are available under the applicable law, even if such remedies are not available under the law of the forum.641 As regards applicable law to ubiquitous infringements of IP rights, the ALI Principles aim to put forward a set of special conflicts rules to simplify the process for determining the governing law. Hence, section 321 establishes that when the alleged infringing activity is ubiquitous and the laws of multiple states are pleaded, the court may choose to apply the law of one or several states that have close connection to the dispute to the issues of existence, validity, duration, attributes, and infringement of IP rights and remedies. Besides, the ALI Principles also provide for a list of factors which should facilitate the determination of the state that is closely connected to the dispute: (a) the place where the parties reside; (b) the place where the parties’ relationship is centred; (c) the extent of the activities and the investment of the parties; and (d) the principal markets toward which the parties directed their activities. Nevertheless, the ALI Principles take into account the sovereignty of states and the fact that the laws of the states might substantially differ.642 Accordingly, a party is entitled to prove that the solution provided by any of the laws of the states concerned differs from the law(s) chosen to apply to the case as a whole. Such differences shall be taken into consideration by the court in determining the scope of liability and remedies (section 321(2)). By establishing such a legal rule for ubiquitous infringements, the ALI Principles aim to reconcile the principle of territoriality of IP rights (which would require the application of the laws of each protecting state) with the ubiquity of digital networks. Besides, in order to assure that the sovereignty interests of states concerned are not undermined, section 321 also allows the parties to bring evidence concerning the differences resulting from the   Ralphe A Armstrong and Anna Music v Virgin Records Ltd 91 F Supp 2d 628 (2000) 635.   NFL v PrimeTime 24 211 F 3d 10 at 13 (2d Cir 2000). 640   Subafilms Ltd v MGM-Pathe Communications Co 24 F 3d 1088 (9th Cir 1994) 1093–94. 641   American Law Institute, Intellectual Property, above n 38, 125. 642   ibid, 155 (Reporters’ Notes). 638 639

General Report  149 application of different laws; such differences are to be considered by the court in deciding upon the governing law.643

12.2  European Countries 12.2.1  Rome II Regulation on the Law Applicable to Non-Contractual Obligations: General Rules The Rome II Regulation on the law applicable to non-contractual obligations644 was adopted on 11 July 2007 and came into force on 11 January 2009. The Rome II Regulation contains uniform choice-of-law rules which supersede domestic choice-of-law provisions of Member States. The Rome II Regulation would be applicable to non-contractual obligations by any court of an EU Member State which has jurisdiction over the dispute. Any law specified by the Rome II Regulation will apply whether or not it is the law of a Member State (Art 3, the so-called ‘universality principle’). There is no requirement that the dispute at hand should be connected to the EU, as long as a court of a Member State has international jurisdiction over the dispute. The material scope of application of the Rome II Regulation is limited, however. Hence, national choice-of-law provisions will continue to apply to those issues which are not governed by the Regulation. In particular, the national reports645 indicate that national choiceof-law rules will continue to be applied to initial ownership, registration, existence, validity, content/attributes, duration of protection, transferability, as well as effects of IP rights against third parties. The notion of ‘non-contractual obligation’ has to be understood in light of jurisdictional provisions established in the Brussels I Regulation. Therefore, according to previously established practices of the ECJ, the notion of ‘non-contractual obligation’ has to be interpreted autonomously.646 The general choice-of-law rule is that non-contractual obligations arising out of delict or tort should be governed by the law of the country where the damage occurs (lex loci damni, Art 4(1)). The place of damage is to be understood only as the place of direct damage. Hence, the locus damni rule points to the law of the place where the event giving rise to the damage occurred and does not comprise the place where indirect consequences of that event occurred. The Rome II Regulation establishes also an exception to the lex loci damni rule: the court may apply the law of the state if both the person claimed to be liable and the person sustaining damage have their habitual residence in that state at the time when damage occurs (Art 4(2)). In addition, these choice-of-law rules may be avoided if, from the circumstances of the case, it is clear that the tort/delict is manifestly more closely connected with another country. In this case, the law of that country which is manifestly more closely connected with the dispute shall be applied (Art 4(3)). Yet, in order to assure legal certainty and predictability courts should refer to such ‘escape clauses’ only in exceptional cases.647   ibid, 155–56.   Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) [2007] OJ L199/40. 645   Spanish Report, paras 26 and 36–37. 646   Case 189/87 Kalfelis v Bankhaus Schröder [1988] ECR 5565, para 16; Case C-26/91 Handte v Traitements Mécanochimiques des Surfaces [1992] ECR I-3967, para 10; Case C-51/97 Réunion Européene SA and Others v Spliethoff ’s Bevrachtingskantoor BV and the Master of the vessel Alblasgracht V002 [1998] ECR I-6511, para 15. 647   Recital 14 of the Rome II Regulation; Belgian Report, para 73. 643 644

150  Toshiyuki Kono and Paulius Jurcˇys

12.2.2  Special Choice-of-Law Rules for Infringements of IP Rights (Art 8) Different levels of harmonisation of IP rights within the EU affected the overall structure of the choice-of-law framework related to the applicable law to infringements of IP rights. Namely, Article 8 of the Rome II Regulation establishes two special conflicts rules for noncontractual obligations arising from infringements of IP rights: paragraph (1) deals with infringements of national IP rights; while paragraph (2) addresses infringements of unitary Community IP rights. In addition, there is a special provision stipulating that parties cannot make choice-of-law agreements with regard to non-contractual obligations arising from infringements of IP rights (Art 8(3)). Before making a closer analysis of Article 8, it is necessary to clarify which IP rights fall under the material scope of conflicts rules of the Rome II Regulation. According to Recital 26 of the Regulation, IP rights should be interpreted as covering for instance, copyright, related rights, the sui generis right for the protection of databases as well as industrial property rights; these are part of a non-exhaustive list of IP rights. Accordingly, some national reporters argued that the notion of IP rights should be interpreted broadly so as to cover infringements of IP rights which fall under the material scope of international conventions signed by the European Community.648 Consequently, applicable law to infringements of IP rights which are subject to the rules of TRIPs, the Paris and Berne Conventions, as well as the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations and the Washington Treaty on Intellectual Property in Respect of Integrated Circuits should be determined under the Rome II Regulation. In addition, special choice-of-law provisions for infringements of unitary Community IP rights also fall under the scope of the Rome II Regulation, which contains a special conflicts rule in Article 8(2). Although there is some room for discussion, the prevailing opinion is that the Rome II Regulation should also be applied with regard to infringements of other rights that are protected under domestic laws of individual Member States. Hence, the right of publicity, non-original writings, slavish imitations and passing offs should fall under the material scope of the Rome II Regulation.649 The same is true for know-how and trade secrets; albeit it might nevertheless be questioned whether Article 6 is applicable to acts of unfair competition or if Article 8 should be applied. 12.2.2.1  Infringements of National IP Rights: Lex Protectionis Article 8(1) of the Rome II Regulation introduced a special regime for non-contractual obligations arising from an infringement of IP rights, ie the ‘universally acknowledged principle’650 of lex protectionis according to which ‘non-contractual obligations arising out of infringements of IP rights are governed by the law of the country for which protection is claimed’. As previously stated, choice-of-law rules in the Rome II Regulation have universal application. This means that national courts can apply not only IP statutes of other EU Member States, but also those of any given third state where the infringement occurred (Art 3 of the Regulation). In addition, the principle of protecting country is also in line with the jurisdictional provision established in the Brussels I Regulation: according to   Dutch Report, section 4.2.  ibid.   Recital 26 of the Rome II Regulation.

648 649 650

General Report  151 which courts of one Member State may apply the law of another state whenever they are competent to hear cases submitted to them. The Rome II Regulation is the first supranational European instrument which directly established lex protectionis as a choice-of-law rule for non-contractual obligations arising from IP infringements. It should be noted that the language used in Article 8 of the Rome II Regulation is slightly different from the wording adopted in Article 5(2) of the Berne Convention. According to Article 5(2), ‘the extent of protection as well as the means of redress afforded to the author to protect his rights shall be governed exclusively by the laws of the country where protection is claimed’ (emphasis added). In order to avoid possible interpretations of this provision, namely, that claims have to be brought only before the courts of the country where the IP rights exist, Article 8(1) of the Rome II Regulation refers to ‘the law of the country for which the protection is claimed’ (emphasis added). Hence, the wording of the Rome II Regulation is adjusted to the interpretation of Article 5(3) of the Brussels I Regulation which empowers the courts of the Member States to assert international jurisdiction over IP infringement claims even if the infringing acts affect foreign IP rights. The scope of the applicable law is determined in Article 15 of the Rome II Regulation. The law applicable to non-contractual obligations specifically governs: (a) the basis and extent of liability, including persons who may be held liable for acts performed by them; (b) the grounds for exemption from liability, any limitation of liability and any division of liability; (c) the existence, the nature and the assessment of damage or the remedy claimed; (d) subject to the law of lex fori, the measures which a court may take to prevent or terminate injury or damage, or to ensure the provision of compensation; (e) the question whether a right to claim damages or a remedy may be transferred; (f) persons entitled to compensation for damage sustained personally; (g) liability for the acts of another person; and (h) the manner in which an obligation may be extinguished and rules of prescription and limitation. The establishment of the principle of lex protectionis, which is based on the territoriality of IP rights, leads to the situation where the different laws of each country for which protection is sought have to be applied. Such a ‘mosaic’ application of the laws of a protecting country is an inherent result of the lex protectionis principle. The mosaic application of the law of each state for which protection is sought has been subject to severe criticism. However, the limited possibilities of consolidated adjudication of multi-state IP disputes – especially disputes over registered IP rights – is consonant with the ‘strict’ territorial approach established in Article 8.651 Some national reporters discussed the possibilities of interpreting the notion of ‘infringement’ entrenched in Article 8 of the Regulation as limited to direct infringements of IP rights.652 In other words it was questioned whether indirect infringements of IP rights are covered by the lex protectionis rule. If the narrow notion of infringement is adopted, the applicable law to liability for acts constituting indirect infringements of IP rights would be subject to general choice-of-law rules of the Regulation. Hence, a completely different choice-of-law regime would apply with regard to direct and indirect infringements of IP rights and the results concerning the applicable law may vary. Such interpretation was not upheld by any of the national reporters. Hence, in the absence of any particular indication   UK Report, answers to HC 7.   Austrian Report, answers to HC 7.

651 652

152  Toshiyuki Kono and Paulius Jurcˇys by the European legislator, the applicable law to direct and indirect infringements as well as remedies concerning such infringements are to be determined by means of applying the lex loci protectionis principle (Art 8).

12.2.3  Prohibition of the Choice of Law The Rome II Regulation does not allow parties to make a choice-of-law agreement with regard to infringements of national IP rights (Art 8(3)). Hence, the parties can neither agree on the applicable law that would govern the infringement of IP rights, nor on the remedies. One possible explanation why freedom of choice was excluded for non-contractual obligations, arising from an infringement of IP rights, may lie in the overall structure of the Rome II Regulation: namely, Article 8 is a lex specialis to general choice-of-law rules envisaged in Article 4. The special nature of Article 8 suggests the European legislator’s intention not to allow freedom of choice in cases related to acts of unfair competition and infringements of IP rights. In one of the travaux prépatoires, the European Commission indicated that the freedom of choice in cases related to infringements of IP rights ‘would not be appropriate’.653 Some argue that this approach of the Commission was influenced by the academic opinion expressed with regard to early proposals of the Rome II Regulation.654 More particularly, scholars argued that freedom of choice should not be allowed because IP infringement cases are closely related to public policy considerations.655 Further, it was pointed out that the absence of freedom of choice contributes to the protection of national trade policies (eg parties are not allowed to evade the application of certain rules determining the consequences of infringement, such as double damages).656 The exclusion of freedom of choice with regard to IP and competition matters has been subject to criticism.657 Some scholars have argued that the public interest reasoning is not a convincing justification of the established lex protectionis rule. Besides, insofar as multistate infringements are concerned, the lex protectionis rule may lead to the application of 27 different laws, and this is only with regard to infringements limited within the borders of the EU. Therefore, it has been submitted that the possibility of choice on the applicable law after the infringement occurs would open the doors for a more case-specific, efficient and flexible choice-of-law methodology.658 However, such opposition against the exclusion of freedom of choice possibility was not only confined to academic discussions. The Dutch Report provided an illustration from their court practice: one lower instance court in the Netherlands enforced a parties’ agreement on the applicable Dutch law in a case where allegedly infringing copyright products manufactured in China were sold in the Netherlands.659 In addition, it should be noted that in Switzerland, which is not a Member of the EU, parties are conferred a limited possibility of choice to claims arising out of the 653  Proposal for a Regulation of the European Parliament and the Council on the law applicable to noncontractual obligations (‘Rome II’) COM(2003) 427 final (22 July 2003) 22. 654   Hamburg Group for Private International Law, ‘Comments on the European Commission’s Draft Proposal for a Council Regulation on the Law Applicable to Non-Contractual Obligations’ (2003) 67 Rabels Zeitschrift für für ausländisches und internationales Privatrecht 1–56, also available at www.mpipriv.de/de/data/pdf/commentshamburggroup.pdf. 655   See discussion in the Dutch Report, section 4.3. 656   German Report, answers to HC 7. 657   Italian Report, section 1.2.3.1; Spanish Report, answers to HC 7. 658   See Dutch Report, section 4.3; Spanish Report, answers to HC 11 with further references. 659   Decision of the District Court at Zutphen of 3 March 2010, Fashion Box v Virgino, see the Dutch Report, section 4.3.

General Report  153 violation of IP rights. Namely, parties are allowed to choose the law of the forum only after the infringement occurred. The approach taken by the drafters of the Rome II Regulation with regard to IP rights has been criticised because it does not elaborate on any special rules for different kinds of IP infringements.660 Ubiquitous IP infringements occurring on the Internet are governed by lex protectionis but without freedom of choice, it would mean the application of the laws of 27 Member States. The Dutch national report described that it would be a nightmare for the parties as well as for a judge hearing the case.661

12.2.4  Ubiquitous Infringements The answers provided by the national reporters highlighted the fact that neither the Rome II Regulation nor the domestic statutes of EU Member States provide for a special choiceof-law rule on ubiquitous infringements of IP rights. Therefore, a common definition of a ubiquitous infringement of IP rights is also missing.662 Some national reporters indicated that the definition of a ubiquitous infringement as well as the applicability of Article 8 of the Rome II Regulation should be clarified by the ECJ.663 Generally, Article 8 of the Rome II Regulation should be applied also to ubiquitous infringements of IP rights.664 This means that courts would have to consider the infringement of IP rights in each state separately and apply the law of each state for which protection is sought.665 Such legal framework leading to a mosaic application of a multitude of laws has been subject to fierce criticism. It was argued that the mosaic application of many different laws increases procedural costs related with the proof of the foreign law.666 It was proposed that, at least from a conceptual point of view, courts might try to limit the number of affected countries by using the ‘targeting’ (provided that such targeted countries can be identified) or country of origin approach.667 As an alternative, it has been argued that ubiquitous infringements should be governed by the law of the country which is more closely connected to the dispute, or that parties should be allowed to make an agreement on the governing law. Yet, as in the case of infringements of IP rights in general, Article 8(3) of the Rome II Regulation prohibits choice of law for ubiquitous IP infringements.668 On the other hand, it could be submitted that the lex protectionis rule offers legal certainty as to the law or laws which would have to be applied. Further, the application of the different laws will indeed be burdensome, but the qualification of whether acts of uploading constitute infringements of IPRs will not be so difficult because of the minimum harmonisation achieved by the adoption of the so-called Information Society Directive.669 In the case of multi-state infringements, one of the crucial questions is the determination of the place where the alleged infringement occurred. The Spanish reporter argues that   See Dutch Report, section 4.3.  ibid. 662   Austrian Report, section 3.2.3 and answers to HC 2; Belgian Report, answers to HC 7; UK Report answers to HC 7; Swedish Report, answers to HC 7. 663   Swedish Report, answers to HC 7. 664  ibid. 665   Belgian Report, answers to HC 7. 666   See Belgian Report, para 74. 667   Slovenian Report, answers to HC 7. 668   Italian Report answers to HC 7; Swedish Report, answers to HC 7; UK Report, answers to HC 7. 669   Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society, [2001] OJ L167/10. 660 661

154  Toshiyuki Kono and Paulius Jurcˇys in the case of ubiquitous infringements occurring via the Internet, Article 8 should be understood as meaning that the country of protection could be every country where the illegal files can be downloaded.670 Some national reporters indicated that for the purposes of the determination of applicable law, the location of the server is not significant.671 However, if the plaintiffs would like to seek an order related to the (closure of the) server where illegally uploaded data is stored, they would either have to institute proceedings before the courts of the state where the server is actually located or the courts of the state of defendant’s domicile. This is so because under the existing ECJ jurisprudence’s application of the Brussels I Regulation, only the courts of a defendant’s domicile might issue orders with cross-border effects.672

12.2.5  Law Governing the Liability of ISP As regards the liability of the intermediary, a number of legal instruments have been adopted at the EU level. For instance, the Information Society Directive673 aims to establish a harmonised legal framework, to increase the level of protection of IP rights, and to foster innovation and competitiveness. Besides substantive law rules which balance the rights and interests of different categories of right-holders, the Directive established an obligation of Member States to provide for effective sanctions and remedies for infringements. Such sanctions should be effective, proportionate and dissuasive. The Directive aims to assure that national laws provide for a broader protection against the acts of intermediaries and also include the possibility to seek injunctions against intermediaries (Art 8).674 Further, the right to seek provisional and precautionary measures is established in Article 9(1)(a) of the Enforcement Directive.675 Nonetheless, such choice-of-law issues pertaining to the liability of intermediaries are to a large extent controversial. Some national reporters indicated that the law of the country of origin could be applied to the liability of the ISP. This would be in line with the legal framework provided by the Satellite and Cable Directive676 even though it was not originally meant to apply to Internet-related matters.677 Similarly, the principle of origin is provided for in the Directive on Electronic Commerce678 pursuant to which EU Member States shall ensure that right-holders ‘are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right’ (Art 18). Yet, the material scope of this Directive covers only electronic commerce but does not extend to IP matters. In this regard, it should be noted that the Rome II Regulation does not contain any specific choice-of-law rules dealing with claims concerning the liability of the ISP. As it was   Spanish Report, answers HC 7.   Belgian Report, answers to the HC 7 and 8. 672   Belgian Report, answer to the HC 8. 673   Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society [2001] OJ L167/10. 674   For a discussion, see Belgian Report, answers to HC 7. 675   Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights [2004] OJ L195/16. 676   Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission [1993] OJ L248/15. 677   Portuguese Report, n 138. 678   Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market [2000] OJ L178/1. 670 671

General Report  155 already noted above, the scope of the applicable law is determined by Article 15 of the Rome II Regulation which inter alia provides that the law applicable to non-contractual obligations governs also the basis and extent of liability, including the persons who may be held liable for acts performed by them (Art 15(a)). Accordingly, the liability of the ISP for the infringement of IP rights would be the law of the protecting country (Art 8). 679 Yet, parties are not allowed to make a choice-of-law agreement (Art 8(3)). Some national reports were critical of the existing legal situation concerning the liability of intermediaries. For instance, the UK Report indicated that the scope of Article 8(1) is too broad to cover different categories of secondary liability.680

12.2.6  Infringements of IP Rights according to Swiss and Croatian Laws The Swiss Private International Law Act of 1987 inter alia contains general choice-of-law rules for torts as well as a special conflicts provision for infringements of IP rights. As regards the applicable law to torts, Article 133 et seq establish a cascade of conflicts rules: (a) the law of the state of parties’ habitual residence; (b) the law of the state where the tort was committed; or (c) in the case where the results occur in a state other than the state where the infringing acts were committed, and the tortfeasor could foresee that the results would occur in another state, the law of the state in which the results occurred should be applied.681 As regards IP matters, the Swiss PIL Act established the principle of lex protectionis. Article 110(1) stipulates that ‘rights in intellectual property are governed by the law of the country for which protection is sought’. It is generally understood that this choiceof-law provision deals with the applicable law to the existence, creation, contents, limitations and exceptions as well as termination of IP rights. In addition, the law of the protecting country will also determine the legal consequences of the infringement as well as the available measures for the infringement of IP rights. The law governing ubiquitous infringements of IP rights should be the law of every state for which protection is sought. Swiss law also endorses the principle of party autonomy with regard to infringements of IP rights. However, such freedom to agree on the applicable law is subject to two further limitations. Firstly, choice of the applicable law is possible only after the infringement/damage has occurred; and, secondly, parties may agree only to apply the law of the forum.682 Besides, some other provisions might be relevant in litigations over IP rights. For instance, Article 128 of the Swiss PIL Act stipulates that claims for unjust enrichment are governed by the same law that governs the legal relationship on which the basis of enrichment occurred, unless the parties agree that such claims are to be governed by the law of the forum (Art 128). The Croatian PIL Act establishes several choice-of-law provisions dealing with the applicable law to cross-border torts. Article 28(1) provides that non-contractual obligations are governed by the law of place where the tort was committed (lex loci actus) or the law of the place where the damage occurred (lex loci damni). The choice between these two alternatives is made in light of the interests of the suffering party; namely, the law of the country which is more favourable to the victim has to be applied. As regards the law applicable to   Italian Report, answers to HC 7.   UK Report, answers to HC 7. For the analysis of national legislation concerning the ISP liability see eg Slovenian Report, answers to HC 7. 681   Swiss Report, answers to question 3 of Part I. 682  ibid. 679 680

156  Toshiyuki Kono and Paulius Jurcˇys infringements of IP rights, the situation is not clear. In the case of Sten Eric Odman v Adris Grupa dd the High Commercial Court applied Croatian law to an infringement of copyrights. The Court did not provide any reasoning for such a decision, however, in legal scholarship such a choice of applicable law was explained by the fact that the infringing acts were committed in Croatia.683 Generally, Croatian law does not allow the parties to agree on the applicable law to non-contractual obligations unless the dispute is brought to an arbitral tribunal. Similarly, in cases concerning the ISP liability for infringements of IP rights or ubiquitous infringements of IP rights, the governing law is determined according to the same principles mentioned above. However, it was noted in the national report that such questions had not been addressed by Croatian courts by the time the report was drafted.684

12.2.7  The CLIP Principles Section 6 of the CLIP Principles deals with the law applicable to the infringement of IP rights and remedies. The general rule established in Article 3:102 is that the law applicable to infringement is the law of each state for which protection is sought (lex protectionis). By establishing this rule, the CLIP Principles follow the established practice of the EU Member States and Article 8 of the Rome II Regulation.685 At the same time, the CLIP Principles also contain a number of exceptions and special rules which aim to particularly address special issues related to the law governing infringements of IP rights. The first deviation from the lex protectionis principle is related to multi-state infringements. Namely, in cases where the infringement occurs in a number of states, the CLIP Principles allow the court to focus only on those states where (a) the defendants have substantially acted or taken substantial preparatory actions to initiate or further the infringement; or (b) the activity has substantial effect within (Art 3:602(1)). This approach has been developed on the basis of WIPO’s ‘Joint Recommendation Concerning the Protection of Marks and Other Industrial Property Rights and Signs on the Internet’.686 Insofar as regarding ubiquitous infringement, the CLIP Principles aim to establish a choice-of-law rule which would minimise inefficiencies associated with the application of the lex protectionis principle. Namely, Article 3:603 stipulates that the court hearing a dispute should apply the law of the state which has the closest connection with the infringement. The law of that particular state should also be applied to the existence duration, limitations and the scope of the infringement, to the extent that these issues arise as incidental questions in the infringement proceedings (second sentence of Art 3:603(1)). Additionally, in determining the state which has the closest connection to the infringement, the CLIP Principles require the court to take into consideration all relevant circumstances. In particular, the court should reckon: (a) the infringer’s habitual residence or (b) principal place of business; (c) the place where substantial activities in furthering of the infringement have been carried out; or (d) of the place where the harm caused by the infringement is substantial. One of the parties may prove that the substantive laws of related states differ from the law applicable to the dispute. In such a case, the CLIP Principles mandate the   Croatian Report, answers to HC 7.  ibid. 685  A Metzger, ‘Applicable Law under the CLIP Principles: A Pragmatic Revaluation of Territoriality’ in J Basedow, T Kono and A Metzger (eds), above n 1, 171–72. 686  Adopted in October 2001; WIPO Publication No 845, available at wipo.int/about-ip/en/development_ iplaw/pub845.htm. 683 684

General Report  157 application of different national laws unless this leads to inconsistent results; then the court must take such differences in consideration when fashioning the remedy. As regards secondary liability, the CLIP Principles stipulate that the law applicable to liability based upon acts that induce, contribute or further an infringement is the same as the law applicable to that infringement (Art 3:604(1)). The law applicable to the liability of the intermediary is the law of the state where the core of the activities of the intermediary is located. However, that law shall only be applicable if it provides for the (a) liability for failure to react in case of a manifest infringement; and (b) liability for active inducement. The CLIP Principles also establish special choice-of-law provisions for remedies. Generally, parties are allowed to make a choice of law which would govern the issue of remedies. Such a choice-of-law agreement is enforceable if it is made before or after the infringement occurred (Art 3:606(1)). Nonetheless, if the infringement is closely connected with a pre-existing relationship between the parties (ex contract), the law governing that pre-existing relationship shall also govern the remedies for the infringement unless (a) the parties have expressly excluded the application of the law governing the pre-existing relationship to the remedies; or (b) it is clear from all the circumstances that the claim is more closely connected with another state (Art 3:606). In addition, the CLIP Principles outline an exemplary list of remedies. Hence, the notion of ‘remedies’ includes injunctions, damages and other means of redress; claims based on unjust enrichment and negotiorum gestio; the question whether a right to a claim may be transferred as well as various ways of extinguishing obligations; the prescription and limitation of actions.

12.3  Asian Countries 12.3.1  India and Taiwan Adjudication of multi-state IP infringements is barred by the subject-matter jurisdiction of Indian courts which would only hear disputes concerning infringements of Indian IP rights. Accordingly, Indian courts are competent to hear only actions related to infringements of Indian IP rights and would not be able to decide upon infringements of foreign IP rights.687 Indian IP statutes contain special provisions dealing with infringements of IP rights and the liability of Internet service providers.688 In Taiwan, the law applicable to torts is governed by several Articles of the Act on the Application of Laws (1953). Article 9 stipulates that the law of the place where the tortious act was committed shall be applied. However, this lex loci delicti is subject to the double actionability rule which means that the foreign law would not be applicable if the allegedly tortious act does not also constitute a tort according to the law of Taiwan (Art 9(1)). In addition, Article 9(2) provides that the court shall order remedies which are available under the law of Taiwan. The 2011 Act on Private International Law of Taiwan aims to adjust the old choice-of-law methodology to the demands of the twenty-first century. Article 25 of this new Act retains the general lex loci delicti rule, yet this rule does not apply if the tort is more closely connected to another state (Art 25, second sentence). As a to-be-mentioned special rule on international tort, Article 27 deals with the applicable law to obligations arising from an   Indian Report, answers to HC 6.   For a detailed account see Indian Report, answers to HC 7.

687 688

158  Toshiyuki Kono and Paulius Jurcˇys infringement or restriction of competition, and provides inter alia that the law of the marketplace shall be applied. Insofar as infringements committed through the press, radio, TV, Internet or other mediums of communication are concerned, Article 28 establishes that the court should choose the law which is most closely connected to the infringement among the following three alternatives: (a) lex loci delicti; (b) the domicile of the tortfeasor, or (c) the national law of the party whose personality was infringed. Further, the 2011 Act allows for party autonomy in IP infringement disputes only if the parties choose Taiwanese law. As for IP infringement, no special rule is provided for, but it is established practice that IP infringements are governed by the laws of the country for which protection is sought.689 In cases where the action is brought against the ISP, the governing law of non-contractual obligations arising out of infringement of IP rights would be the law of the domicile of the ISP and the parties’ choice on applicable law would not be enforceable. The law governing ubiquitous infringements of IP rights would be the law of the place that has the most significant relationship to the infringement (Art 25).690

12.3.2 Japan The new Japanese PIL Act which came into force on 1 January 2007 introduced certain significant modifications with regard to choice-of-law rules in torts.691 The drafting process was largely influenced by the parallel reform of private international law in the EU (Rome I and Rome II Regulations). As regards the law governing non-contractual obligations, the new PIL Act first of all provides for a general choice-of-law rule (Art 17) which is supplemented by two special provisions concerning product liability and defamation claims (Art 18 and 19). These choice-of-law provisions can be ‘replaced’ if the law of any another country appears to be more closely connected with the case at hand (Art 20). Additionally, the parties are allowed to make a choice-of-law agreement after the tort occurs (Art 21). The new PIL Act provides that multi-state torts are governed by the law of a country where the damage occurs (Art 17(1). Furthermore, Article 17(2) provides for an exception: if the place of damage could not have been foreseen, the law of a place where a tort was committed should be applied. The ‘place of damage’ should be understood as a place where the direct damage occurs (eg bodily injury, but not cover medical treatment which should be considered as indirect damage). Besides, Article 19 stipulates that the applicable law to claims concerning defamation and damage to reputation shall be the law of the place of the victim’s habitual residence (or if the victim is a corporation or a non-profit organisation, the law of the country where that legal entity has its main place of business). This provision was drafted with regard to Internet-oriented infringements of personality rights. The new PIL Act of Japan remains silent on the applicable law to infringements of IP rights. The reason for such an omission was the argument that private international law aspects of IP have not been sufficiently crystallised in Japanese and foreign legal scholarship. Besides, some Japanese government officials stated that there is not much in terms of domestic court practice which would serve as a ground for creating a specific choice-of-law rule for IP infringements. However, the majority opinion is that cross-border IP disputes   Taiwanese Report, answers to HC 6.   ibid, answers to HC 7. 691   For a general overview see K Takahashi, ‘A Major Reform of Japanese Private International Law’ (2006) Journal of Private International Law 311; Y Nishitani, ‘Die Reform des internationalen Privatrechts in Japan’ (2007) Praxis des Internationalen Privat- und Verfahrensrecht 552. 689 690

General Report  159 should be considered in light of the principle of territoriality and that multi-state infringements of IP rights should be governed by the law of the country for which protection is sought (lex loci protectionis). This approach could be better illustrated by the following two notable Supreme Court judgments. In 1997 the Supreme Court of Japan handed down one landmark judgment in the socalled BBS Wheels III case, which was related to the cross-border enforcement of patent rights. In this case the plaintiff was a German manufacturer of aluminium car wheels and held parallel patents in Germany and Japan. The defendant was a Japanese party which had purchased aluminium wheels in Germany and then imported them to Japan. The wheels purchased by the defendant did not carry any message informing that certain import restrictions might apply with regard to further resale of such wheels. The plaintiff sought an injunction preventing the defendant from importing the patented products and also sought compensation for damages. The Supreme Court found in its decision692 that the aluminium wheels sold by the defendant in Japan fell under the scope of the patents granted in Japan and Germany. The Supreme Court applied the doctrine of international exhaustion of patent rights and decided that since the wheels had been placed in the German market, the patent-holder could no longer prevent further resale of the patented goods. The Supreme Court concurred with the findings of the Tokyo High Court, namely, that the patent-holder had received sufficient reward from the marketing of its product; hence, any further control of the resale of the patented goods could not be justified from a public interest perspective. The Supreme Court reiterated that according to the Paris Convention, patent rights are regarded as territorially independent rights, according to which the creation and the effects of patents are to be viewed regardless of the corresponding patents granted in other countries. Further, the Court referred to the principle of territoriality of patent rights, which should mean that the creation, transfer and validity of patent rights are subject to domestic legal provisions of the country for which the patent is granted. It was emphasised that the exploitation of those patent rights are also limited territorially and that the patent holder cannot succeed in arguing that the principle of territoriality of patent rights was infringed. Another famous decision concerning cross-border infringement of intellectual property rights was handed down in the so-called Card Reader case.693 In this dispute, the plaintiff, Fujimoto, a Japanese national residing in Japan, owned a patent in the United States but not in Japan. Neuron, a Japanese company with its principal place of business in Japan, produced an infringing product in Japan and exported it to the US through its wholly owned subsidiary allegedly inducing the infringement of the US patent. Having found that the infringing product was sold in the United States, Mr Fujimoto filed a suit against Neuron, making three claims for: a) an injunction against production and export of the infringing products to the United States; b) destruction of the infringing products; c) compensatory damages for Neuron’s wrongful acts. The Supreme Court of Japan first of all addressed the question whether it had any authority to issue an injunction for the prevention of the production of the infringing products in Japan and their export to the United States The Court classified the injunction 692   Supreme Court, Judgment of 1 July 1997, 51 Minsh¯u 2299; also available at The International Review of Intellectual Property and Competition Law (1998) 331; abbreviated English translation available at www.courts. go.jp/english/judgments/text/1997.07.01–1995-O-No.1988.html. 693   Fujimoto v Neuron Corporation (‘Card Reader Case’), 56 Minsh¯u 1551, abbreviated English translation available at www.courts.go.jp/english/judgments/text/2002.9.26–2000.-Ju-.No..580.html.

160  Toshiyuki Kono and Paulius Jurcˇys as an effect of US patent law: in the absence of any special provisions for intellectual property matters in the H¯orei, the Court found it necessary to decide the issue according to the general principle of j¯ori (fairness, reasonableness). The Court ruled that the country where the patent is registered should be applied to the question of an injunction. It was decided that according to section 271 of the United States Patent Law, both the infringer and the person who induced the infringement overseas are liable. Nevertheless, the Japanese Supreme Court went on to state that the extraterritorial application of US patent law would undermine fundamental values of Japan. Based on these considerations, the Court referred to the public policy exception (Art 22 of H¯orei) and refused to apply US Patent Law. Unfortunately, the Court did not state the precise reasoning as to why the application of the United States Law would run counter to the public policy of Japan. The Supreme Court only argued that injunctions are considered as public law legal redress and can only be granted on the basis of the law in force in the forum country. Further, it might be possible to infer from this reasoning that in the opinion of the Court, giving effect to a foreign statute with regard to activities which are partly committed in Japan would mean widening the reach of the American statute beyond US borders – the consequences of which would run counter with the strict understanding of the principle of territoriality of intellectual property rights. In addition, the second part of the claim concerning damages was also denied. In particular, the Court referred to the double-actionability rule and decided that there was no tort under Article 11 of H¯orei. The Card Reader case ignited discussion among Japanese scholars about the crossborder enforcement of IP rights; however, there was no unanimity on whether or not the decision of the Supreme Court in the Card Reader case was correct. Many arrows of criticism were directed towards the Court’s refusal to enforce foreign patent rights and grant injunctions. Last but not the least, the Supreme Court in its judgment stated that the applicable law to patent infringements should be governed by the law of the protecting country (according to the principle of territoriality of intellectual property rights). Nonetheless, this principle of protecting country was not applied by the Court itself.694 12.3.2.1  Transparency Principles During the preparation of the choice-of-law rules concerning the infringement of IP rights, the drafters of the Transparency Principles considered four underlying problems: (a) whether a distinction should be made between registered and non-registered IPRs; (b) whether a single choice-of-law rule could be employed for the infringement of IP rights as well as competition; (c) the relationship between the notions of territoriality and country of protection; and (d) to what extent party autonomy should be allowed.695 The Transparency Principles adopt the so-called market effects test. This test mandates the application of the law of state where the results of IP infringement or unfair competition acts occur or are to occur (Art 301(1)). The market effects test is in consonance with the principle of independence of industrial property rights. Yet, the determination of the market where the results of the allegedly infringing activity occur implies the application of certain economic criteria, which in turn means that the principle of territoriality must be

694   R Kojima, R Shimanami and M Nagata, ‘Applicable Law to Exploitation of Intellectual Property Rights in the Transparency Proposal’ in J Basedow, T Kono, A Metzger (eds), above n 1, 183. 695   ibid, 181–87.

General Report  161 reconsidered.696 The notion of ‘results’ of infringement covers only direct damages and does not comprise indirect damages.697 The law of the state where the results occur should also determine what remedies are available.698 In addition, the Transparency Principles allow the parties to agree on the law governing the formation and effects of an infringement of IP rights, or the competition after such infringement occurs (Art 304). As for ubiquitous infringement, the drafters of the Transparency Principles considered whether a special rule is necessary at all; and, if so, what connecting criteria are to be established.699 Article 302 of the Transparency Principles establishes a double-pronged choiceof-law rule. The general principle is that ubiquitous IP infringements shall be governed by the law of the place where the results of the exploitation of IP are maximised (Art 302(1)). This choice-of-law rule was considered to be in line with the general effects test established in Article 301(1). Besides, the drafters considered that the application of the effectsoriented choice-of-law rule would rationally balance the interests of the parties without depriving either of them of the foreseeability as regards the governing law.700 If the result of the application of the law of the state, where the exploitation of IP rights are maximised, is extremely unreasonable in relation to a particular state, the law of the state of maximisation shall not be applied with regard to the liability and remedies to the infringement in that particular state (Art 302(2)). The Transparency Principles do not contain any special choice-of-law rule determining the law which governs the liability of intermediaries. Nonetheless, the drafters of the Principles were of the opinion that the intermediaries’ role in the dissemination of know­ ledge is crucial and that their interests must be protected. Therefore, the choice-of-law rule should be drafted in a way that the intermediaries could easily foresee which law would be applicable to their activities. Therefore one of the possible options is the application of the law of the habitual residence of the intermediaries.701 12.3.2.2  The Joint Japanese-Korean Proposal (Waseda Principles) One of the underlying choice-of-law rules in the Waseda Principles is party autonomy. Parties are allowed to make a choice of law with regard to any issue; however, the effects of choice of law would have legal effects only between the parties (Art 302). As in the case of proprietary aspects of IP rights, parties are allowed to choose the governing law to infringement and remedies. Nonetheless, since in tort cases choice-of-law clauses are rather unlikely, the Waseda Principles establish that in the absence of choice, the law of each state for which protection is sought shall be applied to infringement and remedies (Art 304(1)). The same choice-of-law rule could also be applied to claims arising out of unjust enrichment or negotiorum gestio (Art 304(2)). In addition, Article 304(3) specifies that the law applicable to non-contractual obligations arising out of an act or acts initiating unfair competition is the law of the state in which a direct and substantial damage occurs or is expected to occur. In order to tackle the problems which arise in the context of cross-border infringements of IP rights, the Waseda Principles contain two special rules which establish a more flexible   For several examples of the application of the market effects test see ibid, 188–95.   ibid, 186 and n 20. 698  ibid. 699   ibid, 187–88. 700   ibid, 199–200. 701   ibid, 198–99. 696 697

162  Toshiyuki Kono and Paulius Jurcˇys interpretation of the principle of territoriality of IP rights. The first aims to clarify the situation concerning the applicable law to extraterritorial activities such as in the previously discussed Card Reader case.702 Hence, the Waseda Principles stipulate that courts should apply lex protectionis to the infringement of IP rights if substantive preparatory acts or direct inducement is directed to the state of protection and part of the infringing activities were committed outside of the protecting country, given that there is a threat of direct and substantive injury in the territory of the protecting state (Art 305). The second provision deals with ubiquitous infringements of IP rights which occur in several states. Namely, it is established that in such cases the court shall apply the law of the state which has the closest connection with that IP infringement in its entirety. In determining which state has the closest connection, the court ought to take into consideration the habitual residence or place of business of the infringer; the state in which the infringement activity mainly occurs; the state to which the infringement is directed; the state in which a substantial injury occurs; and the state in which the owner of such a right has principal interests (Art 306 paras 1 and 2). Similarly to the ALI and CLIP Principles, Article 304(4) of the Waseda proposal establishes the possibility for a party to prove that the law of the state in which the alleged infringement occurs, leads to a different legal solution and the court is obliged to apply that other law.

12.3.3 Korea Article 24 of the Korean Private International Act entrenches the lex protectionis principle according to which the protection of IP rights shall be governed by the law of the place where such rights are violated. Korean courts have interpreted this provision as requiring the application of the law of the registering state in the case of infringements of registered IP rights. Further, as previously noted, Article 24 of the Private International Act resembles the principle of territoriality of IP rights. Accordingly, Korean courts found that the law of the registering state should be applied to such matters as the creation, transfer and effect of a trade mark right.703 A very similar decision to that of the Japanese Card Reader case was also rendered in Korea. In the Myspace domain name case, the Korean court refused to apply the United States Anticybersquatting Consumer Protection Act on the ground that it was contrary to the Korean social order (pursuant to Art 10 of the Korean Private International Act); instead, the Korean Unfair Competition Act was applied. As regards copyright infringement, the lex protectionis principle is understood to mean that the applicable law is the law of the state where the infringing acts or the injury occurred. It should be recalled that Article 24 of the Korean Private International Act is based upon Article 5(2) of the Berne Convention. The relationship between Article 5(2) of the Berne Convention and Article 24 of the Private International Act was clarified in the so-called 49 Things to Do in Your Life case.704 In this landmark case an action for damages to compensate for a copyright infringement was brought by Shenyang Yuanliu, the copyright-holder of a Chinese book called 99 Things to Do in Your Life. This compilation of anecdotes was published by Beijing Industrial University, which later concluded an agreement with a Korean 702  ‘Commentary on Principles of Private International Law on Intellectual Property Rights (Joint Proposal Drafted by Members of the Private International Law Association of Korea and Japan)’ (2011) 2 Kigy¯o to H¯os¯oz¯o, available at www.globalcoe-waseda-law-commerce.org/activity/pdf/28/08.pdf, p 139. 703   Korean Report, answers to HC 7. 704   Seoul Central District Court, Judgment of 20 June 2008, Case No 2007 Gahap 43936 (‘49 Things to Do in Your Life’ case).

General Report  163 office of the international publisher Wisdom House. Wisdom House chose 45 excerpts from the book, added four other excerpts and published a book for the Korean market which became a 2005 bestseller. Shenyang Yuanliu brought an action for compensation against Wisdom House and eight of the largest Korean bookstores. In its judgment, the court inter alia noted that Article 24 of the Private International Act is pre-empted by Article 5(2) of the Berne Convention. The court found that in the case at hand the law of the state for which protection is claimed should be applied, thus the court should apply Korean law, that being the place where the copyright infringement occurred. It was decided that the publisher of the Chinese version of the book (Beijing Industrial University) had licence to publish only within the territory of the People’s Republic of China, which therefore led the court to the conclusion that the publication in Korea infringed the plaintiff ’s copyright. Accordingly, the court ordered the defendant to destroy all copies and pay compensation of 300 million Korean Won to the plaintiff. As regards the law applicable to infringing acts committed by an Internet service provider, the same choice-of-law principles set out in Article 24 of the Private International Act would be applicable. The Korean Principles establish that the law governing the infringement of IP rights should be the law of the protecting or registering country (Art 19). It is noteworthy that the drafters of the Korean Principles were aware of the shortcomings related to the application of the lex protectionis principle to infringements of IP rights which might occur in the digital environment.705 Therefore, as regards ubiquitous infringements concerning the infringement of IP rights in multiple states, the Korean Principles provide that the law of the state which has the closest connection to an infringement shall be applied. Similar to the ALI Principles (section 321), Article 21 of the Korean Principles establishes a list of factors which should be taken into account by the court in determining which law is most closely connected. These factors are: (a) the habitual residence of the defendant; (b) the state where the infringing activities are primarily committed or the state which the infringing activities are directed; (c) the activities and investments of the right-holder. However, the Korean Principles also establish a supplementary clause for those cases where it is not possible to determine the state which has the closest connection to an infringement. In such circumstances, the law of the state where the defendant has his habitual residence is deemed to be the most closely connected (Art 21(3)).706 Article 20 of the Korean Principles allows the parties to agree on the applicable law regarding the infringement of IP rights. Such agreements on the applicable law could be made before or after the dispute arises. The Korean Principles do not contain any specific choice-of-law rules concerning claims brought against the ISP.

12.4  Comparative Observations From the answers provided in the national reports, several remarkable conclusions with regard to the law governing infringements of IP rights could be drawn. On one hand, as regards court practice, it should be noted that the strict territoriality principle appeared to be followed in most jurisdictions. In common law countries the questions of applicable law to infringements of IP rights do not even arise because of the limitations resulting from   Korean Report, answers to HC 7.   Korean Report, section 2.4.3 and answers to HC 7.

705 706

164  Toshiyuki Kono and Paulius Jurcˇys subject-matter jurisdiction. Hence, peculiarities related to the exercise of international jurisdiction over claims involving foreign IP rights could be seen as one likely explanation why neither Canadian nor US laws provide for any choice-of-law regime concerning the infringements of IP rights. In European countries, even though courts are able to hear actions concerning infringements of foreign IP rights, in reality the application of the foreign lex protectionis could be only possible in cases concerning non-registered IP rights. On the other hand, various legislative proposals contain more specific conflicts rules for multi-state infringements of IP rights. Albeit the principle of lex protectionis is maintained with regard to registered IP rights, the parties are allowed to agree on the law governing damages. In addition, legislative proposals establish specific provisions to solve the problem of applicable law to ubiquitous infringements. Yet it remains to be seen whether and to what extent legislative proposals could affect the established practice of domestic courts.

13  Applicable Law to the Contracts for the Transfer of IP Rights A number of applicable law questions arise in cases related to the transfer of IP rights. As previously mentioned, one of the peculiar features of contracts for the transfer of IP rights is that contractual obligations between the contracting parties should be distinguished from matters related to the IP right itself. Accordingly, such a distinction between contractual and proprietary matters is epitomised in the case of international transfers of IP rights. Potential problems related to different applicable laws increase, not only because of differences with regard to potentially applicable laws of various countries, but also since it is quite likely that proprietary and contractual aspects of IP-related contracts will be governed by these different laws. This chapter discusses the following matters: whether, and if so, to what extent the parties are allowed to choose the governing law to their contracts for the transfer of IP rights and what would be the applicable law in the absence of choice. The following sections were prepared on the basis of the answers submitted to hypothetical cases nos 8 and 9. Hypothetical case no 8 related to the initial title of IP rights created in the course of an employment relationship. In hypothetical case no 9 several authors conclude an agreement for the transfer of copyrights to future works. Subsequently, after the alleged infringement had occurred, the right-holders sue for compensatory damages. The questions posed in the hypothetical case concern the enforceability of the transfer of economic and moral rights, the law governing transferability and the applicable law in the absence of choice.

13.1  North American Countries 13.1.1  Canadian Law According to Canadian common law, parties are allowed to choose the proper governing law to their contractual obligations. The Civil Code of Quebec also allows party autonomy, subject to the mandatory rules of the country whose law would be applicable in the absence

General Report  165 of choice. The proper law governs most of the issues related to the validity and operation of the contract. In the absence of choice, Canadian common law conflicts rules provide that contractual obligations are governed by the law that has the closest and most real connection to the contract. The Civil Code of Quebec follows the so-called ‘closest connection’ doctrine, which dictates that in the absence of choice, the contract is governed by the law of the country in which the party performing the obligation characteristic of the act is resident or has its business establishment.707 In cases of IP-related contracts, Canadian courts would distinguish the law applicable to contractual obligations and the law which governs issues related to IP rights themselves. The law chosen by the parties would only determine whether the parties were bound by the agreement and how this agreement should be interpreted; but, it would not affect such issues as the transferability or waivability of IP rights.708 It should be noted however that the jurisdiction of Canadian courts would be limited only with regard to claims concerning Canadian IP rights. This is the effect of jurisdictional bars resulting from subject-matter jurisdictions of Canadian courts. Accordingly, parties to an IP-related contract would be able to enforce only those claims which are related to Canadian IP rights.709

13.1.2  The United States US law generally allows the parties to determine the law governing the contract (section 187 of the Restatement (Second) of Conflicts). However, the principles followed in order to determine the law governing contracts with no choice-of-law clauses differ from state to state. As such, 12 states follow the traditional approach requiring the application of the law of the place of contracting (lex loci contractus);710 this approach stems from the First Restatement (sections 325 and 326). The scope of the lex loci contractus was interpreted as encompassing such issues as the form of a contract, contractual capacity, mutual assent, consideration, fraud, illegality and other circumstances that make a contractual promise voidable (section 332). Meanwhile, 23 US states follow the rules established in the Second Restatement.711 Section 188 is a cornerstone provision of the Second Restatement in determining the law applicable to contracts where the parties did not make a choice of law. It provides that the rights and duties of the parties with regard to contractual issues shall be governed by the law of the state which has the most significant relationship with respect to that issue. Besides, in the absence of an effective choice of law by the parties, the determination of the applicable law must be made having regard to the following factors: (a) the place of contracting; (b) the place of negotiation of a contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation, as well as place of business of the parties. The Restatement also provides that these factors are to be evaluated in light of their relative importance to the particular issue. Besides, section 188(1) requires that the choice-of-law analysis in a contract dispute be made with consideration to the factors of section 6(2): the needs of an   Canadian Report, answers to HC 9.  ibid. 709  ibid. 710   S Symeonides, American Private International Law (Alphen aan den Rijn, Kluwer Law International 2008) para 485. 711   ibid para 488. 707 708

166  Toshiyuki Kono and Paulius Jurcˇys interstate system; the relevant policies of the forum and other interested forums; the justified expectations of the parties; the basic foundational principles of the area of law at issue; the uniformity and predictability of the result; and the ease in determination and application. The Second Restatement sets out nine choice-of-law provisions for particular contracts such as interests in land, interests in chattel, various insurance contracts, suretyship, payments of money lent as well as contracts for transportation. The same choice-of-law principles are also applied in cross-border IP cases.712 For instance, in the case of Re Amica the claimant was a transferee of a debtor’s rights of ownership, usage, marketing, and copyrights in its computer software program. BB Asset Management Inc brought an action against a debtor seeking damages for alleged contract and copyright infringements. The court enforced the parties’ choice of Californian law as the law governing their rights and duties, noting that the chosen law determines also the validity of a contract. The court decided that the plaintiff ’s agent had fraudulently induced the debtor to enter into the copyright transfer agreement and that the debtor was entitled to rescind and cancel the contract because of the plaintiff ’s fraudulent misrepresentations.713 In Rano v Sipa Press the parties concluded a copyright transfer agreement whereby a professional photographer Kip Rano (a resident in the UK) granted the defendant Sipa Press (a French corporation with subsidiaries in several US states) a non-exclusive licence to reproduce, distribute, sell and authorise others to sell his photographs. During the first eight years of the contract Rano submitted several thousand pictures to Sipa, which paid royalties. Later, Rano decided to change agencies and informed Sipa that he would not authorise any further sales of his photographs. In particular, Rano reasoned that Sipa has failed to pay royalties in a timely manner, sales were low, and Sipa was unwilling to reimburse certain expenses. Subsequently Rano filed a copyright infringement suit citing numerous grounds; he sought an injunction preventing Sipa from further use of his photographs and asked the court to order compensatory and punitive damages. The copyright licence contract contained no provisions concerning choice of law, and since the parties had made no submissions, the court followed sections 188 and 206 of the Second Restatement in its decision to apply Californian law as the law of the place of the making and performance of the contract.714 In Houlihan v McCourt,715 a play producer brought a suit against the authors, claiming a percentage of the gross receipts from certain play performances as well as claiming interest in proceeds from the sale of the authors’ books and the movie based on subsidiary rights clause in the contract. The decision regarding the law governing the subsidiary rights clause of the contract was made on the basis of the Second Restatement of Conflicts. In particular, the court held that in this case all the parties were resident in New York at the time the initial contract was formed. New York was the place where the contract was negotiated and where initial performance of the contract took place. As a result, the law of New York, not Illinois, where producer currently resided, governed the breach of the contract claim. 712   See eg Great Clips Inc v Hair Cuttery of Greater Boston LLC and Great Cuts Inc 2009 WL 458554 (D Mass) (concerning the law governing to a settlement agreement which was prompted by a dispute over the trade mark registration); Getty Images (US) Inc v Advernet Inc f/k/a VR Marketing Inc 2011 WL 2732202 (noting that the law of the state with the most significant relationship to the agreement purporting to grant a copyright licence should be applied). 713   Re Amica Inc 136 BR 534 (1992), 545. 714   Rano v Sipa Press Inc 987 F2d 580, 585 (1993). 715   Mike Houlihan d/b/a Blaguards Productions v Malachy McCourt and Frank McCourt 2002 WL 1759822 (ND Ill, 2002).

General Report  167

13.1.3  Law Governing Transfers of Title and Grants of Licenses under the ALI Principles The ALI Principles establish that contractual obligations of the parties are governed by the law chosen by the parties. The parties are allowed to agree on the governing law at any time, even after the dispute arises (section 302). The ALI Principles aim to create a more flexible regime by allowing parties to choose the law of any third state. Besides, the state whose law was chosen by the parties does not necessarily have to be related to the parties or the dispute. In addition, the ALI Principles allow the choice of non-state body of laws such as the UNIDROIT Principles of International Commercial Contracts.716 Nonetheless, the principle of party autonomy is not absolute: section 302 of the ALI Principles establishes that parties may not choose the law that will govern the validity and maintenance of registered rights; the existence, attributes and duration of rights, notwithstanding whether they are registered or not; as well as the formal requirements for recording assignments and licenses. Choice-of-law agreements should not adversely affect the interests of third parties and are only legitimate if they satisfy the validity requirements under the law chosen. Besides, the ALI Principles stipulate that the capacity of the contracting parties is determined by the law of the state in which that party was resident at the time of the conclusion of the agreement. In the absence of choice or in cases where parties’ agreements on the governing law is invalid, the agreement pertaining to the transfer of title and grants of licence is governed by the law of the country of the state which has the closest connection to the contract. Section 315(2) of the ALI Principles further establishes that the contract is presumed to be most closely connected to the state in which the assignor or the licensor resided at the time of the execution of the contract. The Commentary to section 315 provides that such choice-oflaw methodology, which ultimately presumes that the contract is most closely connected to the law of the state where the transferor or assignor is resident, was selected taking into regard two factors. First, it was considered that in most cases the intangible subject matter of the transfer agreement had been developed by the transferor/assignor. Secondly, the ALI Principles appear to establish a characteristic performance doctrine which is often applied in European jurisdictions. According to the characteristic performance doctrine, the person who performs a characteristic obligation is considered to be the transferor or the licensor.717 Yet, the ALI Principles do not provide whether and in what circumstances the court is allowed to rebut the presumption and apply the law of another state. Some commentators have criticised this provision arguing that it actually does not leave any discretion to the court.718 In addition, the ALI Principles contain special rules concerning the law applicable to standard form agreements. Pursuant to section 302(5), choice-of-law clauses in such agreements are valid only if they meet the requirement of reasonableness and were reasonably accessible to the non-drafting party at the time when the agreement was concluded, and is available for subsequent reference by the court and the parties. The ‘reasonableness’ of the choice-of-law clause should be determined taking into account the two following sets of   American Law Institute, Intellectual Property, above n 38, 131.   ibid, 148–49. 718   A Kur and B Ubertazzi, ‘The ALI Principles and the CLIP Project: A Comparison’ in S Bariati (ed), Litigating Intellectual Property Rights Disputes Cross-border: EU Regulations, ALI Principles, CLIP Project (Milan, CEDAM, 2010) 135–36. 716 717

168  Toshiyuki Kono and Paulius Jurcˇys factors: (a) the closeness of the connection between the parties, the substance of the agreement and the state whose law is chosen; and (b) the parties’ residences, interests and resources, especially those of the non-drafting party (section 302(5) lit (b)). In the absence of choice, the law governing contractual obligations should be determined similarly to other kinds of IP-related contracts. According to the ALI Principles it is presumed that standard form agreements are most closely connected to the state in which the assignor or the licensor resided at the time of the execution of the contract (section 315(3)).

13.2  European Countries 13.2.1  Rome I Regulation: General Principles Article 3 of the Rome I Regulation entrenches a cornerstone principle of the freedom of choice. Accordingly, contracts shall be governed by the law chosen by the parties. The law chosen by the parties does not necessarily have to be connected to the contract or the domicile or nationality of the parties. Besides, the Rome I Regulation allows the parties to choose the applicable law to either the whole contract or a portion of it. An agreement on the applicable law can be also made or modified after the conclusion of the contract. Parties to a contract may also choose a non-state body of law or an international convention.719 This means that parties may incorporate into a contract a reference to instruments such as the Unidroit Principles of International Commercial Contracts or the ALI Principles on Intellectual Property. The choice of law by the parties shall be made expressly or be clearly demonstrated by the terms of the contract or the circumstances of the case. However, the Rome I Regulation does not require that the choice-of-law agreement be confirmed in writing. If there is a dispute concerning the validity of a choice-of-law clause the court will have to apply Articles 10 and 11 of the Rome I Regulation. The existence and validity of a contract should be determined by the law which would govern the contract under this Regulation, if the contract was indeed valid. Freedom of choice is limited with regard to consumer or individual employment contracts, which are subject to special provisions of the Regulation. Besides, in cases where all elements relevant to the case are located in one country, the law of that particular country shall be applied (Art 3(3) and 3(4)). The parties’ choice of law is also subject to the application of the public policy exception and the application of overriding mandatory rules (Art 9). In comparison to the Rome Convention, one of the most remarkable modifications introduced by the Rome I Regulation is related to the determination of the applicable law in the absence of choice. More precisely, Article 4 of the Regulation introduces a newly designed methodology for contracts containing no choice-of-law provisions. The main underlying objective of restructuring Article 4 was to increase the predictability of the outcomes of litigations and to assure legal certainty and foreseeability of the application of choice-of-law rules within the European judicial area.720 Such modifications reflect the European legislator’s response to the differences in application of the closest connection test and the relationship between presumptions stipulated in Article 4 of the Rome Convention by Member State courts.   Recital 13 of the Rome I Regulation.   Recitals 6 and 16 of the Rome I Regulation.

719 720

General Report  169 Article 4 of the Rome I Regulation establishes a four-step cascade system of conflict rules. First, Article 4(1) of the Regulation provides for clear-cut conflict rules for particular types of contracts (contracts of sale, provision of services, rights in rem in immovable property or tenancy, franchise and distribution contracts as well as sale of goods by auction or contracts concluded within a multilateral system). Secondly, where a contract is not covered by Article 4(1), or where the elements of a contract are covered by more than one conflict rule provided in Article 4(1), the applicable law should be determined according to the characteristic performance rule. Characteristic performance means that the contract shall be governed by the law of the place where the party required to effect the characteristic performance of the contract is domiciled (Art 4(2)). This provision was added at a very late stage of the drafting of the Regulation, and was based on the proposal made by the Legal Committee of the European Parliament.721 It should also be mentioned that in contrast to the Rome Convention, Article 4(2) is not framed as a rebuttable presumption. Thirdly, Article 4(3) of the Regulation provides that where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than those indicated in paragraphs 1 and 2, the law of that country shall apply. It is noteworthy that the 2005 Commission proposal for a Regulation did not provide for any exceptions to the closest connection principle.722 This was partly due to the Commission’s intention to reduce the extent of discretion of the courts in the hopes that a stricter regime will contribute to greater legal certainty. However, an exception mandating the application of the law of the country which is manifestly more closely connected to the contracts was inserted in a later stage of the drafting, and thus brought the choice-of-law mechanism closer to the framework which was established in the Rome Convention. It is also worth noting that the scope of the application of Article 4(3) is much narrower than the rule stipulated in the Rome Convention: Article 4(3) of the Regulation would apply only in exceptional cases. Fourthly, where the law applicable cannot be determined pursuant to paragraphs 1 or 2 of Article 4, the contract shall be governed by the law of the country with which it is most closely connected. The principle of freedom of choice is not absolute: international contracts are often subject to various limitations or restrictions imposed by laws of different countries (eg, import and trade restrictions, necessary authorisations related to quality or health requirements etc). Besides, national laws might provide additional restrictions of party autonomy, especially when it is necessary to protect the interests of the weaker party (employee or consumer). According to Article 9 of the Rome Convention, courts could have given effect to the mandatory rules of the law of another country, with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied regardless of the law applicable to the contract. The Convention did not however restrict the application of the rules of the law of the forum. In practice, a number of problems arose with regard to the interpretation of Article 9 of the Convention. National courts of the Member States took different approaches regarding what provisions should be mandatory and whether the notion of mandatory rules encompasses also the mandatory rules of the lex causae. Further, conflicting views were raised with regard to the relationship of 721   See, eg, U Magnus, ‘Article 4 Rome I Regulation: The Applicable Law in the Absence of Choice’ in F Ferrari and S Leible (eds), Rome I Regulation: The Law Applicable to Contractual Obligations in Europe (Munich, Sellier, 2009) 46. 722   Art 4 of the 2005 Commission proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM(2005) 650 final (15 December 2005).

170  Toshiyuki Kono and Paulius Jurcˇys mandatory rules established in the European Directives with those provided for in national statutes.723 The Rome I Regulation aims to clarify previous ambiguities and provide for a more reasonable approach regarding the application of mandatory rules. Article 9(1) introduces a legal definition of ‘overriding mandatory rules’, which are described as provisions that are regarded as crucial by a country for safeguarding its public interests, such as their political, social or economic organisations. Overriding mandatory rules should be applied irrespective of the law that would otherwise be applicable to the contract. This wording reflects the opinion taken by the ECJ in the Arblade case.724 Article 9(2) of the Regulation reiterates that the application of the overriding mandatory rules of the law of the forum are not preempted by other provisions of the Regulation. By establishing such a regulatory regime, the European legislator aims to balance the legal certainty and foreseeability of the applicable law with public interest considerations.725 Therefore, the notion of mandatory rules under the Rome I Regulation should be understood as being rules of the utmost importance to the safeguarding of public interests (‘overriding mandatory provisions’), the application of which should be limited to exceptional cases.726 In addition, Article 21 of the Rome I Regulation posits that the application of a provision of the foreign law may be refused in exceptional cases such as when the application of the foreign law is manifestly incompatible with the public policy of the forum (ordre public).

13.2.2  Problems Related to IP Contracts The principle of freedom of choice equally applies to parties’ contractual obligations arising from IP transfer agreements. Insofar as IP-related contracts are concerned, parties may choose the governing law to their contractual obligations of the contract as well as such issues regarding the scope of transferred rights and necessary formalities for the validity of a contractual transfer of IP rights. Such freedom of choice can be enjoyed as long as the contract contains certain international elements (eg parties are resident in different states; the transfer is related to the exploitation of an IP asset in a foreign state etc). Some national reporters indicated that many licence agreements related to the exploitation of IP rights contain choice-of-law clauses and that in practice almost no problems arise with regard to the expression of choice.727 The Rome I Regulation however does not apply to proprietary matters of the transfer of IP rights (in particular the transferability, attribution of rights etc). These proprietary matters are governed by the law of the protecting country (lex protectionis).728 Accordingly, the parties’ agreement with regard to those issues is not enforceable. Such an approach is followed in the domestic laws of the EU Member States.729 For instance, in one case a 723   See eg Max Planck Institute for Comparative and International Private Law, ‘Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I)’ (2007) 71 Rabels Zeitschrift für ausländisches und internationales Privatrecht 315 et seq. For a more comprehensive analysis see A Dickinson, ‘Third Country Mandatory Rules in the Law Applicable to Contractual Obligations: So Long, Farewell, Auf Wiedersehen, Adieu?’ (2007) 3 Journal of Private International Law 53. 724   Joined Cases C-369/96 and C-376/96 Arblade [1999] ECR I-8453, para 30. 725   See Recitals 6, 16 and 37 of the Preamble of the Rome I Regulation. 726  ibid. 727   See Dutch Report, section 5.1. 728   See section 11.2 above. 729   Austrian Report, sections 3.4.1 and 3.4.2.

General Report  171 Belgian court applied the parties’ choice of law to the contractual obligations, but applied lex protectionis to the proprietary issues of the IP rights.730 The Rome I Regulation has often been criticised for leaving many ambiguities which may likely arise in disputes over contracts involving IP rights. In particular, the Regulation did not provide for any solution as to the law applicable to certain types of contracts such as agency, or contracts related to the transfer of IP rights.731 This means that the applicable law to IP contracts will have to be determined in accordance with the choice-of-law rules established in paragraphs 2, 3 and 4 of Article 4. Yet, insofar as IP-related contracts are concerned, most of the EU national reporters shared the concern that the existing conflicts methodology of the Rome I Regulation is problematic and does not provide for a clear-cut solution.732 It is noteworthy that the Commission Proposal of December 2005733 contained a special conflicts rule for IP contracts. Article 4(1)(f) stated that a contract relating to intellectual or industrial property rights shall be governed by the law of the country in which the person who transfers or assigns the rights has his habitual residence. The proposed rule was controversial on the following two grounds.734 First, it was not clear what contracts ‘relating to intellectual or industrial property rights’ would fall under the substantive scope of this provision. Namely, it was not apparent if it applied to contracts which are not directly related to the transfer or the assignment of IP rights (eg licence agreements, publication contract). Moreover, the relationship of Article 4(1)(f) with regard to other conflicts rules dealing with specific contracts such as franchise (Art 4(1)(g) of the Proposal) or distribution (Art 4(1)(h)) was also unclear. Secondly, from a more political stance it was not uniformly agreed upon that the application of the law of the place where the transferor or assignor is habitually resident leads to such desirable results.735 This rule was later dismissed on the ground that it would not suit many contracts which have as their object the transfer or license of IP rights.736 Alternatively, some legal scholars have tried to argue that at least for copyright matters, Article 5(2) of the Berne Convention on the protection of literary and artistic works should be applied as lex specialis.737 Such reference to the Berne Convention does not seem very persuasive, for it would obviously distort the overall choice-of-law system established by the Rome I Regulation. Instead, other relevant choice-of-law provisions envisaged in Article 4 of the Regulation should be applied. The criticisms of the Rome I Regulation could be best illustrated by a closer analysis of the determination of the applicable law to IP contracts. Hence, it is necessary to see whether choice-of-law provisions established in Article 4 could be applied to IP contracts and what might be the drawbacks of the legal framework established in the Rome I Regulation. It might be questioned whether Article 4(1)(c), which provides that a contract relating to a right in rem in immovable property or to a tenancy of immovable property shall be   Brussels Court of Appeal, 8 October 2001, as cited in the Belgian Report, n 386.   L Garcia Gutiérez, ‘Franchise Contracts and the Rome I Regulation on the Law Applicable to International Contracts’ (2008) 10 Yearbook of Private International Law 238. 732   See eg, Austrian Report, section 2.3.1; UK Report, answers to HC 9. 733   Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), presented by the Commission on 15 December 2005, COM (2005) 650 final. 734  CLIP, ‘Comments on the European Commission’s Proposal for a Regulation on the Law Applicable to Contractual Obligations (“Rome I”) of December 15, 2005 and the European Parliament Committee on Legal Affairs’ Draft Report on the Proposal of August 22, 2006’ (2006) International Review of Intellectual Property and Competition Law 471, also available at www.ip.mpg.de/shared/data/pdf/clip-rome-i-comment-04–01–20062.pdf. 735   Austrian Report, section 2.3.1. 736   German Report, n 142. 737   See Belgian Report, para 17 and n 254 for further references. 730 731

172  Toshiyuki Kono and Paulius Jurcˇys governed by the law of the country where the property is situated, could be applied to IP contracts. Yet, the prevailing approach is that this choice-of-law rule is applicable only to land and other immovables, and does not extend to IP rights.738 This leads to another question, namely, whether IP contracts could fall under the scope of lit (a) or (b) of Article 4(1). Again, the majority opinion seems to be that IP contracts cannot be considered contracts for the sale of goods nor as service contracts.739 This could be partly explained by the fact that the 2005 Proposal of the Rome I Regulation contained a choice-of-law rule for contracts relating to IP rights. This also follows from the ECJ judgment in the Falco case.740 In particular, the ECJ had to decide whether a claim for royalties under a copyright licence falls under the notion of provision of services under Article 5(1) (b) of the Brussels I Regulation. In its decision, the ECJ refused to qualify such dispute as arising from a contract for the provision of services. Therefore, some national reports indicate that if the Rome I and II Regulations are to be treated in consonance with the application of the Brussels I Regulation, then IP contracts should not be considered as contracts for the provision of services.741 This implies that some additional thought must be given before applying the special choice-of-law provisions of the Rome I Regulation for franchise or distribution agreements. Two other choice-of-law rules concerning franchise and distribution contracts might be of a particular relevance to contracts for the transfer of IP rights. Article 4(1) provides that in the absence of choice, a franchise contract shall be governed by the law of the country where the franchisee has his habitual residence (Art 4(1)(e)). Similarly, in the case of a distribution contract, the law of the habitual residence of the distributor shall be applied (Art 4(1)(f)). Hence, both these conflict-of-law provisions highlight the approach taken by the European legislator that the franchisee or the distributor performs the characteristic obligations of the contract.742 According to the European Commission, the application of the law of the habitual residence of the franchisee or distributor reflects policy objectives to protect their interests because they are considered the weaker contracting parties.743 One of the criticisms with regard to choice-of-law provisions to franchise and distribution contracts is that the Rome I Regulation does not provide for any definitions of franchise or distribution contracts. In practice, franchise and distribution contracts usually contain numerous mutual obligations related to the marketing of goods and ancillary obligations (advertisement etc). Since the Regulation itself does not contain any definitions, it stands to reason that notions of franchise or distribution contracts will be subject to autonomous interpretation.744 Yet, according to Recital 17, franchise and distribution contracts are treated as contracts for services. The underlying rationale for such an approach was to align the choice-of-law rules with the rules on international jurisdiction entrenched in Article 5 of the Brussels I Regulation. The drafters considered the services, in the case of franchise contracts, to be rendered in the place where the franchisee has his habitual residence. However, as indicated in the Dutch report,745 in the case of master franchise agree  UK Report, answers to HC 9.   See eg, Austrian Report, section 2.3.1; UK Report, answers to HC 9. 740   Case C-533/07 Falco Privatstiftung and Thomas Rabitsch v Gisela Weller-Lindhorst [2009] ECR I-3327. 741   Dutch Report, section 5.2. 742   See Recital 21 of the Rome I Regulation. 743  See Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations, COM (2005) 650 final (15.12.2005) 6. 744   U Magnus, ‘Die Rom I-Verordnung’ (2010) Praxis des Internationalen Privat- und Verfahrensrecht 36. 745   Dutch Report, section 5.2. 738 739

General Report  173 ments the application of the law of the country of the franchisee’s habitual residence may prove to be problematic, because master franchise agreements can cover several jurisdictions. In such circumstances the rule stipulated in Article 4(3) might have to be applied. Albeit franchise or distribution contracts might also involve transfer of IP rights, such obligations related to IP rights will seldom account for the essential parts of the contract. Choice-of-law provisions established in Article 4(1) lit (e) and (f) shall be applied as long as a contract is characterised as a distribution or a franchise contract, and regardless of the allocation of contractual duties between the parties to the franchise or distribution contract. The fact that a contract contains an obligation to transfer IP rights does not affect the characterisation of the contract. Further, some national reporters noted that the elimination of the special choice-of-law rule for contracts relating to transfer of intellectual or industrial property rights might have resulted in the broadening of the scope of application of rules dealing with the applicable law to distribution and franchise contracts.746 Article 4(2) provides for a specific choice-of-law rule for contracts which are not covered by any of the default provisions for specific contracts or if the applicable law to a particular contract can be decided under several choice-of-law provisions of paragraph 1. In such cases, the contract shall be governed by the law of the country where the party, required to effect the characteristic performance of the contract, has his habitual residence. This provision will be of great relevance to the credit, rent or lease of movables, factoring as well as contracts related to IP rights.747 Already here there seems to be no general agreement as to which party performs the characteristic obligations to licence contracts. While the prevailing opinion seems to be that the transferor of rights (seller, lessor, transferor) effects the characteristic performance of the contract,748 some national reporters indicate that it is the licensee who undertakes the performance of characteristic obligations.749 Even more controversial is the question related to the application of Article 4(2) to complex contracts where both parties are required to undertake certain obligations. The Rome I Regulation itself does not provide much guidance as to the application of the characteristic performance rule with regard to complex contracts. Recital 19 only indicates that in the case of a contract consisting of a bundle of rights and obligations, the characteristic performance of the contract should be determined having regard to its centre of gravity. Yet the notion of the ‘centre of gravity’ remains unclear and has to be interpreted on a case-by-case basis. Potential difficulties concerning the application of this provision to IP contracts have been highlighted by a number of scholars.750 Clarification is still required as to what would be the applicable law to a licence agreement pertaining to the exploitation of IP rights. Some national reports indicate that, for example, according to Article 4(2) the applicable law to the publication contract should be the law of the publisher’s (ie transferee’s) habitual residence. However, if the publisher has no other duty than to pay a consideration, it might be that the characteristic performance is undertaken by the author who transfers the rights.751 It is argued that such cases resemble an outright sale of IP rights which justifies the application of the law of the place where the transferor has his habitual residence.752   Austrian Report, section 2.3.1.   U Magnus, ‘Article 4 Rome I Regulation: The Applicable Law in the Absence of Choice’ in F Ferrari and S Leible (eds), Rome I Regulation: The Law Applicable to Contractual Obligations in Europe (Munich, Sellier, 2009) 45. 748   See ibid. 749   See eg, Slovenian Report, answers to HC 9. 750   Belgian Report, para 70 and answers to HC 9. 751   German Report, answers to HC 9. 752  ibid. 746 747

174  Toshiyuki Kono and Paulius Jurcˇys Some national reports indicate that simple licence contracts where the parties are resident in different countries would have to be governed by the law of the licensee.753 But in such cases the methodology of determination of the applicable law may differ. According to the Dutch national report, the applicable law in such a case must be determined in light of Article 4(3) of the Rome I Regulation. Article 4(3) allows for an exception of the characteristic performance rule if it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country. On the other hand, several national reports support the position that the characteristic performance of complex IP licence contracts (where the licence is granted for several jurisdictions or in cases of exclusive licence agreements) should be considered as performed by the licensor. This approach is supported from the perspective of the management of IP rights: if the licence is granted for several jurisdictions, or is granted to several parties in different countries, the application of the same law of the licensor’s habitual residence would contribute to the effective management of IP rights.754 With regard to hypothetical case no 9, some national reporters indicated that such a contract, whereby one party (the musical band) agrees to transfer its rights to the recording company and the latter undertakes an obligation to publish the record and pay royalties, could be considered an outright sales contract. Following this interpretation, Article 4(2) of the Rome I Regulation should come into play and the law of the place where the band is habitually resident should govern the contract.755

13.2.3  Law Governing Contractual Obligations according to Swiss and Croatian Law In Switzerland, obligations between the parties to a contract for the transfer of IP rights are governed by the law designated by the parties. A choice-of-law clause may be included in the contract, or added after the contract is concluded. Matters which are related to the transferability of IP rights are governed by the law of the protecting country (lex protectionis, Art 110). The law of the protecting country would also determine what claims the licensee can exercise with regard to the exploitation of the transferred IP right. In the absence of choice, a contract related to the transfer or assignment of IP rights is governed by the law of country where the transferor or grantor of the IP right has his habitual residence (Art 122(1) of the Swiss PIL Act).756 The choice of the governing law should not be contrary to Swiss public policy and other mandatory rules (Art 17 and 18). The Croatian Report noted that contractual obligations between the parties would be subject to the parties’ choice-of-law agreement. In the absence of choice, Article 20(14) provides for a special choice-of-law rule for contracts concerning copyrights which establishes that the law of the author’s domicile or seat at the time of the receipt of the offer should be applied. Croatian law would then make a distinction between contractual obligations and matters which are not subject to a parties’ disposition. Namely, the question of whether moral rights can be transferred is a matter of public law which means that parties cannot override the application of mandatory rules by choosing another applicable law (Art 19 of the Croatian PIL Act). The Croatian Report notes that the question of transfer  Dutch Report, para 3.3.   See Dutch Report, section 5.3. 755   See Austrian Report, section 3.4.3. 756   Swiss Report, answer to question 3 (Part 1). 753 754

General Report  175 ability should be governed by the law of the protecting country (lex loci protectionis), although this view had not been confirmed in court practice.757

13.2.4  Applicable Law to Contracts according to the CLIP Principles The CLIP Principles follow the well-established approach regarding the applicable law to matters of IP-related contracts. As under the Rome I Regulation, a distinction is made between issues pertaining to the IP right itself and other contractual matters. Thus, the transferability question is characterised as a proprietary issue which accordingly is governed by the law of the protecting country (lex loci protectionis, Art 3:301). The same approach is also followed with regard to the transferability by operation of law and compulsory licenses (Art 3:507(2)). Transfer or licence agreements, as well as contracts which have as their main object the creation of IP rights and other agreements related to IP rights, are governed by the law chosen by the parties (Art 3:501(1)). In comparison to the Rome I Regulation, the CLIP Principles establish a slightly different language as to the requirements related to the expression of choice. The choice-of-law ‘must be expressed or demonstrated with reasonable certainty by the terms of the contract or the parties’ conduct’. Besides, under the Rome I Regulation, the agreement on the exclusive jurisdiction of a court of a Member State was considered one of the crucial factors in determining the applicable law.758 However, according to the CLIP Principles such agreements conferring exclusive jurisdiction on the court of a state with regard to disputes, which may arise out of contractual disputes, make presumptions that the law of the state is chosen as the governing law of the contract. By and large, the CLIP Principles follow legal rules entrenched in the Rome I Regulation with regard to formal and material validity of a contract as well as the scope of the applicable law to a contract (Arts 3:504–3:506).759 The CLIP Principles aim to create a legislative framework which would favour the formal validity of a contract (Art 3:504). The existence and substantial validity of a contract shall be determined by the law which governs the contract (lex contractus). The only exception is when a contracting party relies upon the law of the state of his habitual residence in order to establish that he did not consent to the contract (Art 3:505(2)). The law governing the contract regulates the: (a) interpretation; (b) performance; (c) consequences of the breach (including avoidance) as well as the assessment of damages; (d) extinguishing of obligations as well as prescription and limitation of actions; and (e) the consequences of nullity of the contract (Art 3:506(1)). In addition, as regards the performance of the contract, the CLIP Principles require the law of the state in which the performance takes place to be taken into consideration. Other remaining issues which are not covered by the CLIP Principles shall be governed by the law of the state which has to be applied by virtue of the choice-of-law rules of the forum. One of the major developments introduced by the CLIP Principles is related to the determination of the applicable law to a contract in cases where no choice-of-law was made by the parties. The Principles reflect the prevailing opinion760 at the time of the drafting and   Croatian Report, answers to HC 9.   Recital 12 of the Rome I Regulation.   A Metzger, ‘Applicable Law under the CLIP Principles’ in J Basedow, T Kono and A Metzger (eds), above n 1,

757 758 759

166. 760   A Kur and B Ubertazzi, ‘The ALI Principles and the CLIP Project: A Comparison’ in S Bariati (ed), Litigating Intellectual Property Rights Disputes Cross-border: EU Regulations, ALI Principles, CLIP Project (Milan, CEDAM, 2010) 130.

176  Toshiyuki Kono and Paulius Jurcˇys adopt the approach that in the absence of choice, the contract shall be governed by the law of the state with which the contract is most closely connected (Art 3:502(1)). However, differently from the Rome I Regulation, the CLIP Principles neither follow the characteristic performance doctrine, nor aim to identify one of the parties who is presumed to have performed characteristic obligations. Instead, the CLIP Principles provide for a list of certain criteria which should assist the judge in determining the law of the state with the closest connection to the contract. Two different sets of factors that might demonstrate the closest connection of the contract with the state where the (a) transferee/licensee or (b) transferor/ licensor has his habitual residence are specified in Article 3:502(2): Factors showing the closest connection with the State in which the transferee/licensee has his habitual residence:

Factors showing the closest connection with the State in which the creator/transferor/ licensor has his habitual residence:

• t ransferee/licensee has the explicit/implicit duty to exploit the right; • the rights are mainly exercised in the State of the transferee’s/licensee’s habitual residence/place of business; • royalties are expressed as a percentage of the sales price; • the licensee/transferee has a duty to report the exploitation of the rights.

• t ransferee/licensee has no other explicit/ implicit duty than to pay a flat sum as money consideration; • the rights are mainly exercised in the State of the transferor’s/licensor’s habitual residence/place of business; • the license is for a single use; • the creator of a protectable subject matter has the duty to create the matter.

If it is not possible to make a clear decision according to the factors indicated above and the transfer or licence concerns IP rights only for one state, it is presumed that the contract is most closely related with that state. However, if the transfer or licence concerns IP rights in multiple states, it is presumed that the state with which the contract is most closely connected is the state in which the creator, transferor or the licensor has his habitual residence at the time of the conclusion of the contract (Art 3:502(3)). It is worth noting that the proposed choice-of-law rules (Art 3:502) are designed to be applied only to contracts which have as their main objects the creation of protectable subject matter, or the transfer or the assignments of IP rights. Hence, this provision does not cover other kinds of contracts which may be related to the transfer of IP rights (especially franchising and distribution contracts).761 Such a legislative approach might be partly explained in that the CLIP Principles are founded upon the Rome I Regulation which already contains specific provisions with regard to the applicable law to franchise and distribution contracts together with additional alternative rules for other types of contracts (Art 4 of the Rome I Regulation).

  ibid 131.

761

General Report  177

13.3  Asian Countries 13.3.1  Applicable Law to IP Transfer Agreements in India and Taiwan The Indian Report noted that the parties to an IP-related contract are allowed to choose the law governing the contract. The governing law chosen by the parties cannot override Indian law determining transferability and initial ownership.762 In the absence of choice, Indian law does not provide for a clear-cut solution concerning the determination of the governing law. According to their national report, the law governing contractual obligations of the parties would be chosen by the court from the following alternatives: the law of the state for which protection is sought; the law of the place where obligations were performed; lex fori or another state’s laws.763 In Taiwan, pursuant to Article 6 of the 1953 Private International Law Act, the parties are allowed to determine the law applicable to their contractual obligations. In the absence of choice, a court must follow a cascade of connecting factors: nationality of the parties if they have the same nationality; the place of contracting; the place where the offer was issued; or the place of the offeror’s domicile. These connecting factors were considered extremely rigid and unsuitable for many types of contract. In order to remedy the existing situation, the principle of closest connection was introduced in the 2011 Private International Law Act. Article 20(1) of the 2011 Act provides for the principle of party autonomy; contracts which do not contain choice-of-law clauses shall be governed by the law of the state which is most closely connected (Art 20(2)). It is presumed that the law of the domicile of the defaulting party shall be the law which is most closely connected. According to Article 9, the application of foreign law shall be excluded if it is incompatible with the public policy or good morals of Taiwan. Moreover, the parties cannot evade the application of mandatory rules by making a choice-of-law agreement (Art 7 of the 2011 Act).

13.3.2 Japan Article 7 of the Japanese PIL Act of 2006 establishes the principle of freedom of choice, according to which the parties are allowed to choose the governing law. In the absence of choice, a contract shall be governed by the law of the country with which the contract has the closest connection (Art 8). The closest connection doctrine was borrowed from the European framework (1980 Rome Convention and Rome I Regulation). The closest connection doctrine was adopted in order to replace the previous choice-of-law rule established in Article 7(2) of the H¯orei, which required the application of the law of the state where the contract was concluded. Especially since the emergence of the Internet, Article 7(2) has received much criticism, mainly on the ground that it is either impossible to determine the place of contracting or that this choice-of-law rule would lead to the application of the law of the state which has no connection to a contract. As regards contracts for the transfer of IP rights, the Japanese courts would make a distinction between contractual obligations of the parties, which would be governed by the law designated by the parties, and matters pertaining to the IP right itself, which would be subject to the lex protectionis.764 This approach seems to be prevailing, although there are   Indian Report, answers to HC 8 and 9.   Indian Report, answers to HC 9.   Japanese Report, answers to HC 9.

762 763 764

178  Toshiyuki Kono and Paulius Jurcˇys very few court decisions where the law applicable to the contracts for the transfer of IP rights has had to be determined.765 Yet what law is to be applied to parties’ contractual obligations, in the absence of choice, remains controversial.766 13.3.2.1  Transparency Principles In the Transparency Principles two specific provisions deal with the choice-of-law issues concerning the transfer or licensing of IP rights. Since the Transparency Principles aim to propose possible improvements to the existing Japanese law, choice-of-law rules dealing with the contracts for the transfer of IP rights are built upon Article 7 of the new Japanese PIL Act. Accordingly, Article 306 of the Transparency Principles allows the parties to agree on the applicable law. In the absence of choice, the formation and effects of a contract are determined by the law of the country granting the IP right which is the object of a contract. Nevertheless, if a contract concerns the transfer of IP rights for multiple states, the law of the place where the right-holder has his habitual residence would have to be applied. The rationale of this residence-oriented approach is the difficulties associated with the widely accepted closest connection doctrine. Namely, the members of the Transparency working group were of the opinion that in practice it is almost impossible to determine the characteristic performance in contracts concerning the transfer of IP rights for multiple states. Instead, for the sake of legal certainty and foreseeability, another connecting factor should be established.767 In addition, the Transparency Principles establish an escape clause which accords that the law of another state that is more closely connected to the contract may be applied (Art 306(3)). 13.3.2.2  The Joint Japanese-Korean Proposal (Waseda Principles) Article 19 of the Waseda Principles provides for a set of general principles regarding the applicable law to contracts which have as their object the transfer or exploitation of IP rights. As in other legislative instruments, the Waseda Principles endorse the principle of party autonomy. Although a distinction is made between contractual and proprietary aspects of IP rights, parties are allowed to agree also on the law governing the proprietary aspects of IP rights. As mentioned already, such choice of law with regard to issues of transferability, existence, validity and revocation would have legal effects only between the parties (Art 302(2)). In cases where parties do not make any choice-of-law agreement or where the choice-oflaw agreement is not valid, the contract shall be governed by the law of the state most closely connected with the contract (Art 307(1)). In particular, the Waseda Principles stipulate that the court shall apply the law of the state in which the transferee or licensee is habitually resident. However, in determining the applicable law, the court is also required to take into account three considerations: the express or implied obligation to exploit the right; exclusiveness of the licensed right; and the connection between the place of substantial exploitation of IP and habitual residence of the parties (Art 307(2)). Notably, the Waseda Principles establish that the law applicable to the contract shall also govern any tortious activity committed by a contracting party (Art 307(2)).   Tokyo High Court, Judgment of 30 May 2001, 1797 Hanrei Jih¯o 111 (‘Kepwie’ case).   R Kojima, R Shimanami and M Nagata, above n 694, 218–21.   ibid, 224–25.

765 766 767

General Report  179 According to the Waseda Principles, the court is ordered to apply the mandatory rules of the forum state (Art 312(1)). The court is also allowed to apply the mandatory rules of a third state if it finds it necessary (Art 312(2)). This approach was largely influenced by the provisions of the ALI Principles (section 323) as well as the Rome I and Rome II Regulations.768 Yet, the application of foreign law may be excluded once the court finds that such an application would manifestly undermine the public policy of the forum state (Art 313).

13.3.3 Korea As regards contracts for the assignment, security or licence of IP rights, the parties are allowed to agree on the applicable law (Art 25 of the Private International Act). In the absence of choice, the contract shall be governed by the law of the state which has the closest connection to the contract. According to Article 26, the state where the defendant is resident is presumed to be the most closely connected to the contract. It should also be noted that matters related to the transferability and other proprietary matters of IP rights are to be governed by the lex protectionis (Art 24 of the Private International Act). The parties’ agreement concerning the law applicable to such proprietary matters as transferability will not be enforceable in Korea; instead, Korean IP statutes will have to be applied; this was confirmed in the lower court practice.769 The Korean Principles follow Article 24 of the Korean PIL Act (2001) and also establishes the principle of party autonomy in which the parties are allowed to make a choice-of-law agreement before or after the dispute arises (Art 20). Such an agreement may be also made to either the whole or a portion of the contract. Besides, the Korean Principles do not even posit a written form requirement for the choice-of-law agreement (Art 4(1)). It is noteworthy that the parties are also allowed to choose the applicable law to proprietary issues of the IP right itself (existence, validity, effects, extinction, transferability). However, such choice of law would be effective only between the contracting parties (Art 20(2)).770 The validity of the choice of law shall be determined under the law chosen by the parties. Further, the Korean proposal follows Article 26 of the Korean PIL Act and provides that where there is no choice of law, the law of the country which is most closely connected will be applicable to the contract. Article 23(1) of the Korean Principles establishes a presumption that the law of the state where the assignee, security holder or licensee is habitually resident is the most closely connected.771 However, the Korean Principles remains silent as to whether the presumption is irreversible, or what circumstances are to be taken into consideration in order to rebut the presumption.

13.4  Comparative Observations From the reports gathered, a few comparative remarks deserve attention. First, in most countries, there are no specific choice-of-law provisions dealing with contracts for the 768   S Kidana, ‘Chiteki zaisanken ni kan suru kokusai shih¯o gensoku-an – Nihon gur¯opu no junkyoh¯o ni kan suru bubun no teian [The proposal of private international law principles for intellectual property: Rules on the applicable law from the Japanese proposal]’ (2009) available at www.globalcoe-waseda-law-commerce.org/ activity/pdf/19/16.pdf, 171. 769   Seoul High Court, Judgment of 8 July 2008, Case No 2007Na80093 (Von Dutch case) and Korean Report, answers to HC 9. 770   Rules Pertaining to International Intellectual Property Litigation (11 December 2006, ‘Korean Proposal’), available at www.globalcoe-waseda-law-commerce.org/activity/pdf/19/22.pdf. 771   Korean Report, section 2.4.3 and answers to HC 8 and 9.

180  Toshiyuki Kono and Paulius Jurcˇys transfer of IP rights. The practical outcome is that general choice-of-law provisions are applied. Second, it is generally accepted that the parties can agree on the law governing their contractual obligations. The possibility of agreement on the law governing the contract is particularly relevant in practice, because an agreement between parties on the governing law may help avoid uncertainties related to the determination of the applicable law to contracts that do not contain choice-of-law clauses. Third, some differences seem to exist with regard to the extent of party autonomy. In other words, the existing laws of most countries would enforce the parties’ choice of law with regard to their contractual obligations, while proprietary matters would be governed by the lex protectionis. However, it seems that some further discussion about the relationship between the party autonomy and the lex protectionis is necessary. Particularly, it may be questioned whether it would not be more efficient to allow the parties to a contract for the exploitation of IP rights in multiple states to agree on the law governing both contractual and proprietary aspects of the transfer of IP rights. Fourth, the answers submitted by national reporters highlighted how divergent the approaches are towards the determination of the law governing the contract in the absence of choice. It is inevitable that further investigation is required to determine which of the possible choice-of-law methodologies (choice of a particular connecting factor or the establishment of an exemplary list of factors which would hint to the application of the law of a particular state) would best serve the interests of the stakeholders.

14  Applicable Law to IP Rights Created in the Course of Employment Relationship A significant amount of intellectual property assets are created in the course of an employment relationship, or on the basis of commission contracts. The allocation of rights and entitlements to IP assets affects the interests of many stakeholders: corporations, research institutes, universities and states. Two main questions have to be distinguished in cases regarding the exploitation of inventions created in the course of an employment contract and other forms of contractual arrangements. The first is related to the initial ownership of unprotected subject matter; the second is a question of who – employer or employee – has the right to file a patent application and obtain a patent to the invention. Hypothetical case no 8 was designed in light of these considerations. This case concerned an employee invention and the rights associated with its exploitation. The national reporters were asked to explain whether a parties’ choice of law with regard to the right to apply for a patent would be enforceable and how the problem of reasonable compensation for the exploitation of the subject matter in several states would be resolved.

14.1  North American Countries 14.1.1 Canada The Canadian Report provided an overview of possible resolutions to disputes related to the exploitation of inventions created on the basis of contractual agreements. The general principle is that an inventor is entitled to file a patent application. Yet, in situations where

General Report  181 the invention is created by an employee, the exploitation of the invention and the question of who – employer or employee – is entitled to apply for a patent can be agreed upon by the parties in their contract.772 Parties’ agreement on the applicable law may be implicit or explicit; the question of who will have the right to apply for a patent would be considered an issue of the contract. The Canadian courts would most likely consider agreements concerning the right to file for a patent application to be effective. In the absence of choice, the court would apply the law of the country with the closest and most real connection to the contract.773 The same rationale would be applied with regard to other IP rights (copyrights etc). Regarding the question of the remuneration for the employee’s efforts in creating an invention, the decision of a Canadian court would depend on how the claims are characterised. In particular, the court may look to the contractual agreement between the parties. If the claim for damages was made on the basis of an employer’s breach of obligation not to misuse the information, the claim would be determined by the law of the country which governs the obligation. On the other hand, if the claim for compensation was characterised as one of unjust enrichment, the employee’s claim would arise out of the breach of contractual obligation and the law governing the obligation would also apply to the claims for compensation.774

14.1.2  The ALI Principles The ALI Principles entrenches the principle of party autonomy. Accordingly, the initial ownership to registered IP rights, unregistered trade marks or trade dresses and IP rights that do not arise out of registration shall be determined pursuant to the law which governs their contractual relationship (section 311(2), section 312(2) and section 313(1)(c)). This rule applies to employment relationships as well as other kinds of pre-existing relationships, such as commission. If parties fail to designate the governing law, the ALI Principles requires the application of the law of the country with which the contractual relations are most closely related. In an argument in support of this legislative approach, the ALI principles indicate that the principle of party autonomy gives a ‘uniform answer throughout the world . . . facilitates marketability and enhances the value of the registered rights’.775 The drafters of the ALI principles were aware that the interests of employees might be undermined by referring to the law of the country which is less beneficial to the employees. Nevertheless, it is also assumed that most legal systems have some sort of employee-oriented legislation, so that they will not be at a disadvantage from the application of the principle of party autonomy in the context of initial ownership. In addition, the ALI Principles have second-tier protective rules such as the application of mandatory rules in case the agreement of the parties runs counter with the law of the forum of another country with which the contract is closely connected (section 323).776

772   The same approach is followed in the US: the parties of an employment contract can agree upon such questions as who is entitled to file a patent application and acquire patent rights to an invention created in the course of employment relationship. 773   For a more detailed analysis see Canadian Report, answers to HC 7. 774  ibid. 775   American Law Institute, Intellectual Property, above n 38, 135. 776  ibid.

182  Toshiyuki Kono and Paulius Jurcˇys

14.2  European Countries 14.2.1  Overview of the Laws in Different Countries One of the key rules concerning the initial title to the subject matter created in the course of an employment relationship is established in the European Patent Convention. Article 60 of the European Patent Convention provides that in the case where an inventor is an employee, the initial ownership question has to be decided under the law of the state where the employee is mainly employed. If this state cannot be determined, then the law of the state where the employer has his place of business shall apply. The approach adopted in the European Patent Convention excludes the lex protectionis approach. Under EU law, the principle of freedom of choice is also applicable in the case of individual employment contracts. Yet, in order to ensure that such a choice-of-law agreement does not deprive the employee of the protection afforded to him, Article 8(1) of the Rome I Regulation provides that parties cannot derogate from the mandatory provisions that would have been applicable in the absence of choice. In the absence of choice, a contract is governed by the law of the country where the employee habitually carries out his work, or, if such a place cannot be determined, by the law of the country where the place of business, through which the employee was engaged, is situated (Arts 8(2) and 8(3)). The choice-oflaw rules determining the governing law in the absence of choice are more restrictive than the conflicts rules established in Article 4. This is explained by the general intention of the European legislator to differentiate between service contracts and individual employment contracts. Strict choice-of-law rules established in Article 8 also reflect the practical characteristics of employment relations: close relations between the employer and the employee, as well as the employee’s integration into the employer’s business activities. The national laws of various countries provide for special rules concerning the allocation of ownership rights to the employee’s invention or works made for hire. The issue of ownership of IP products created on the basis of a pre-existing contractual relationship is usually considered an exception to the widely accepted principle that the law of the protecting country (lex protectionis) should be applicable. This means that parties to a contract are free to choose the governing law pursuant to Article 8 of the Rome I Regulation for such issues as obtaining a right to a patent or employees’ claims for reasonable compensation for inventions made in the course of their employment relationship.777 At the same time, parties’ agreements are subject to such general party autonomy limitations as public policy and domestic mandatory rules of the EU Member States (for instance, in Germany, the questions concerning the applicable law to contractual relationships between employers and employees are governed by a special statute (the Employees’ Inventions Act)). The Private International Law Statute of Belgium (2004) establishes that the parties’ agreement upon initial ownership refers to the law most closely connected, unless otherwise provided.778 Article 122(3) of the Swiss PIL Act contains a special choice-of-law rule for employment contracts on the basis of which IP assets are created. Swiss law provides 777   See eg Dutch Report, para 6.1; French Report, answers to HC 9; Italian Report, Swedish Report, answers to HC 9; UK Report, answers to HC 9. 778   Art 93(2) provides: ‘Nevertheless, the determination of the original owner of the industrial property right is governed by the law of the State with which the intellectual activity has the closest connections. If the activity takes place within a framework of contractual relations, that State is presumed to be the State of which the law applies to these contractual relations, until proof to the contrary is brought.’

General Report  183 that the rights to intellectual property are governed by the law which applies also to the employment contract. Under Spanish law, the principle of protecting country is also applied with regard to creations made in the course of employment relations. Article 10.4 of the Spanish Civil Code is mandatory, which also means that parties are not allowed to choose who will be the initial owner of the employee’s invention. However, parties are usually allowed to agree on the applicable law to other contractual obligations related to performance of employment duties. These mutual obligations are governed by the law chosen by the parties (Art 8 of the Rome I Regulation). Thus, parties may also choose the governing law to such issues as licence, waiver, consent and other matters related to the exploitation of the employee’s invention. According to Article 10.1 of the Spanish Patent Act, the inventor or any other successor in title shall have the right to patent the invention. Besides, the actual inventor may also transfer the right to obtain a patent to any other third party. Further, insofar as employee’s inventions are concerned, the Spanish Patent Act provides that the inventions shall belong to the employer (Art 15). However, there is much uncertainty related to the situation of foreign patent applications.779 According to Greek substantive law, three different types of inventions are distinguished: (1) free inventions, which belong to employees; (2) service inventions, which belong to the employer; (3) dependent inventions (when 40 per cent of the invention belongs to the employer and 60 per cent to the employee). In the case of dependent inventions, the employer is given priority rights in exploiting the invention, since a proportionate compensation is paid to the employee considering the economic value of the invention and the profits it brings. An employee who makes a dependent invention is obliged to inform the employer in writing, together with further data as dictated by the law. If the employer does not reply within four months, the employee obtains the right to file a patent application and exploit the invention himself.780 Such a regulatory regime is of a mandatory nature, which means that the parties are not allowed to agree on an applicable law which would lead to different results. The Greek reporters noted that the principle of territoriality should be followed and that Greek law governing initial ownership issues would have to be applied only with regard to patent applications made in Greece.781

14.2.2  The CLIP Principles The applicable law questions concerning IP assets created on the basis of employment relationships are specifically addressed in Article 3:503. The CLIP Principles set out that the mutual obligations between employer and employee in relation to the transfer or licence of an IP right arising from the employee’s efforts shall be governed by the law chosen by the parties. Namely, the parties are allowed to make a choice-of-law agreement with regard to the right of the employer to claim the IP right and the employee’s right to remuneration. In any event, the choice of law by the parties cannot deprive the employee of the protection afforded by the mandatory rules which would have to be applied in the absence of choice. If the parties have not exercised their right to choose the governing law, the law of the state in which (or, failing that, from which) the employee habitually carried out his work in performance of the contract shall be applied. Nevertheless, if from all the circumstances it   Spanish Report, answers to HC 8.   Greek Report, answers to HC 8.  ibid.

779 780 781

184  Toshiyuki Kono and Paulius Jurcˇys appears that the contract is more closely connected with another state, the law of that state shall be applied (Art 3:503(2) and 3:503(3)).

14.3  Asian Countries 14.3.1 Japan Many noteworthy cases concerning various legal aspects related to employees’ inventions exist in Japanese law. As regards the question of remuneration, one of the most notorious cases concerned a dispute between Hitachi Corporation and one of its employees, Yonezawa. After creating three inventions pertaining to the transfer of data to optical discs, Yonezawa and Hitachi signed an agreement for the transfer of rights to obtain patents. This contract did not explicitly deal with the territorial scope of the transferred rights. Later Hitachi made patent applications in Japan, the United States, the United Kingdom, France, Germany, the Netherlands, and various other countries. Yonezawa received about $20,000 as compensation for the invention, although it was apparent later that Hitachi made huge profits from the commercialisation of the patented inventions. After retirement, Yonezawa filed a lawsuit requesting the court to order the payment of reasonable compensation. In its judgment, the Supreme Court emphasised that a distinction should be made between the transfer of rights to patent an invention and the issuance of a patent per se. 782 In the case at hand, the object of the parties’ agreement was the transfer of rights to obtain patents in Japan and a number of foreign countries. From the Supreme Court’s perspective, the principle of territoriality is important to the extent that the question of patent issuance (ie fulfilment of patentability requirements) should be decided according to the law of each country where the patent application is made. It was decided the parties made an implied choice of law (Art 7(1) of the H¯orei). The Supreme Court also indicated that the Japanese Patent Act does not directly deal with such initial ownership issues regarding foreign patent applications. Instead, Articles 35(1) and 35(2) only deal with domestic situations, hence it would be difficult to conclude that the right to just compensation entrenched in Article 35(3) also covers patents granted in foreign countries. Nevertheless, the Court went on to argue that patents form an essential component of national industrial development. In order to make sure that national economic policy goals are achieved, the interests of the employees should be duly protected. Therefore, the Court asserted that it is not reasonable to make a distinction between situations where the transfer of rights to obtain patents covers only domestic cases versus those that comprise cross-border cases. Besides, from a practical point of view, it is not easy for the parties to anticipate ex ante under what kind of legal framework the invention will be protected (trade secrets or patents). Furthermore, if the patent protection is chosen, it is not clear in which state(s) the employee will seek such patent protection. Such contractual agreements often involve parties who are bound by long-term contractual obligations and the underlying invention will usually be the same. This led the Supreme Court to the conclusion that Articles 35(3) and 35(4) should also be applied by analogy to those cases where employee inventions become the subject of foreign patent applications. In other words, in ascertaining the amount of reasonable compensation, the profits for the exploitation of the invention should also include profits gained in foreign countries.   Supreme Court of Japan, Judgment of 17 October 2006, 69 Minsh¯u 2853 et seq.

782

General Report  185 Consequently, the Supreme Court issued an order to pay compensation of 34.89 million yen, the highest such compensation for an employee invention thus far. The Court found that Hitachi had actually made profits of around 1.18 billion yen, while the contribution to the invention made by Yonezawa was estimated to amount to some 14 per cent of the returns. The very next day judgment was rendered in another notorious case, Nakamura v Nichia.783 Similarly, this latter case involved the issue of compensation for an employee invention, this time the blue LED created by Shuji Nakamura, currently a professor at the University of California. Nakamura claimed compensation of around $190 million. After careful analysis of the facts of the case, the court of first instance was prepared to order triple the amount of compensation to that claimed by Nakamura himself. Such a skyrocketing amount was possible because the court took into account potential profits that the employee might have earned by exploiting the rights of the patented blue LED. However, due to procedural limitations, the court only ordered the initial compensation amount claimed by Nakamura. Even so, this remains the highest ever compensation ordered by a Japanese court for an employee invention. In the course of the appeal proceedings, however, Nakamura and Nichia concluded a settlement agreement according to which Nakamura received ‘only’ $2 million. The outcome of these cases is that Japanese law generally allows the parties to an employment contract for the creation of IP products to agree on who – employer or employee – would be entitled to file a patent application. However, the provisions of the Japanese Patent Act concerning the remuneration are considered to be of a mandatory nature. As a result, parties to a contract would not be allowed to agree on the application of the law of the state which would deprive the employee from the protection provided. Article 305 of the Transparency Principles provides that the existence, primary ownership and effect of an IP right is governed by the law of the state that granted the IP right. The same provision also clearly stipulates that the parties’ agreement with regard to these proprietary issues is not allowed. The Commentary of the Transparency Principles also lists a number of proprietary issues which should be governed by the lex protectionis. Among other matters, it is also indicated that insofar as employee inventions are concerned, the law of the protecting state determines the ownership and monetary compensation.784 A much more flexible approach is established in the Joint Japanese-Korean Proposal (Waseda Principles). Namely, if the IP was created on the basis of employment or any other pre-existent relationship, the initial title is governed by the law applicable to the contract (Art 308(4)). It should be recalled that the Waseda Principles allow the parties to agree on the law which would govern any issue concerning IP rights (the choice of law must not affect the rights and duties of third parties, Art 302).

14.3.2 Korea According to the Korean report, initial ownership issues are to be determined by the lex protectionis.785 However, the Korean Principles introduce a more flexible regime and allow the parties to make a choice-of-law agreement also with regard to proprietary issues. Such agreements shall have legal effects only between the parties, and cannot affect the rights and duties of third parties. As for IP assets which were created as an employee invention or on   Tokyo High Court, Decision No 13(wa) 17772 of 30 January 2006.   R Kojima, R Shimanami and M Nagata, above n 694, 213 and 215.   Korean Report, answers to HC 8.

783 784 785

186  Toshiyuki Kono and Paulius Jurcˇys the basis of the commission or other pre-existing contractual relationship, Article 25(2) of the Korean Principles establishes that the law of the place where the employer is habitually resident shall govern the relationship between the parties, unless it was agreed otherwise.

14.4  Comparative Observations From the answers submitted by the national reporters, it appears that the parties’ right to agree on their mutual obligations as well as entitlements to the subject matter created in the course of a contractual relationship is widely accepted. The same is also true as regards IP assets created in the course of an employment relationship. However, as the overview of the European and Japanese laws have demonstrated, such a choice-of-law agreement is also subject to limitations related to the protection of the interests of the employee. Insofar as an employee’s inventions are concerned, it also appears that such industrial/cultural policyoriented considerations, such as the need to promote the development of culture and science as well as the need to protect the interests of the employees, may have certain repercussions with regard to the application of the law of the forum and the choice of law (eg Hitachi case). It may be further argued that there is some room for discussion with regard to the determination of the governing law in cases where the parties did not make an explicit choice of the governing law. It would be desirable if the future instrument harmonising private international law aspects of IP could provide for a uniform solution.

15  Applicable Law to Securities in IP In the last few decades IP rights have become one of the most valuable assets of companies. One possible way to exploit IP rights is to use them as collateral in financial transactions. It is established business practice to bundle portfolios of IP rights together with other corporate assets as collateral. Such exploitation of IP rights generally falls under domestic regulations on secured transactions. International financial contracts are usually very complex and a number of particular problems related to creation, third-party effectiveness, registration, priority or insolvency may arise. For instance, the IP licensor (original payee) may securitise his rights of payment under an IP contract whereby a third party (eg, securitisation vehicle or a factor) obtains the right to be paid. A problem could arise if the original payee (IP licensor), who securitised his right to a third party, becomes bankrupt. The question then arises whether a third party is still entitled to payments from the payor (ie IP licensee), or whether the creditors of the original payee should be entitled to the payments. Issues related to the effectiveness against third parties and priority of rights become even more complicated in cross-border transactions. The national reporters were asked to explain whether and how the taking of security of IP rights is addressed within the choice-of-law framework of their countries. Most national reports indicated that in their country, IP rights can be used as collateral.786 This is usually established in statutes dealing with particular IP rights and sometimes is also provided in special acts dealing with security rights. Even if there are no special statutory provisions which   See Answers to HC 12.

786

General Report  187 would clearly stipulate that IP rights could be used as collateral, this would still be possible in actual business practice. Although initially only registered IP rights such as patents were used as collateral, eventually any kind of IP right became acceptable as an object of secured transactions. In practice, different due diligence procedures are undertaken with regard to registered and non-registered IP rights, principally because there is no public registry containing information about the status of non-registered IP rights. Further, as regards non-registered IP rights, securities could be created only with regard to economic rights. In common law jurisdictions of Canada, the validity, perfection, and the effects of perfection would typically be governed by the law, including the conflict of laws rules, of the jurisdiction in which the debtor is located at the time when the security interest attaches. Issues of priority would be governed by lex fori. In Quebec, which is a civil law jurisdiction, the law of the grantor of the security would govern the validity of the security as well as the publication and its effects (Art 3105 of the Civil Code of Quebec). In the United States, secured transactions are governed by the Uniform Commercial Code, with Article 9 providing for a comprehensive legal framework which likewise applies to securities of IP rights. According to Article 9-301(1) of the UCC, the perfection, the effects of perfection or imperfection, and the priority of a security interest in collateral are governed by the law of the place where the debtor (ie the person assigning the right to payment) is located. A similar approach was also followed in the 2001 UN Convention on Assignments of Receivables in International Trade787 which inter alia stipulates that the law of the state in which the assignor is located governs the priority of the right of an assignee in the assigned receivable over the right of a competing claimant (Art 22). In the EU, the Rome I Regulation deals with the applicable law to voluntary assignments. The concept of assignment includes outright transfers of claims, transfers of claims by way of security as well as pledges or other security rights over claims (Art 14(3)). According to Article 14(1), the relationship between assignor and the assignee shall be governed by the law that applies to the contract between the assignor and assignee under the Rome I Regulation; hence, the governing law can be chosen by the parties (Art 3). In the absence of choice, such contracts for the assignment of IP rights should be considered as a contract for the sale of goods,788 and therefore the law where the seller (assignor) has his habitual residence should be applied.789 A number of European national reports indicated that the principle of lex loci protectionis would be applied to the creation, effectiveness against third parties, priority and the enforcement of these security rights over IP.790 The law of the protecting state should be also applied according to the European Patent Convention (Art 74) as well as the ALI Principles (section 317) and the Transparency Principles (Art 308). The application of the lex protectionis principle to the creation of securities in IP rights has been subject to criticism because it would require compliance with the requirements of a valid creation of security interests in every state concerned. In particular, the application of the   Available at www.uncitral.org/pdf/english/texts/payments/receivables/ctc-assignment-convention-e.pdf.   Case C-533/07 Falco Privatstiftung and Thomas Rabitsch v Gisela Weller-Lindhorst [2009] ECR I-3327. 789   See also S Bariatti, ‘The Law Applicable to Security Interests in Intellectual Property Rights’ (2010) 6 Journal of Private International Law 395; TC Hartley, ‘Choice of Law Regarding the Voluntary Assignment of Contractual Obligations under the Rome I Regulation’ (2011) 60 International and Comparative Law Quarterly 29; L Stephens, ‘The New Rule on the Assignment of Rights in Rome I – the Solution to all our Proprietary Problems? Determination of the conflict of laws rule in respect of the proprietary aspects of assignment’ (2006) 14 European Review of Private Law 543. 790   eg Croatia, Italy (Art 54 of the Italian PIL Act), Portugal, or Spain (Art 10.4 of the Civil Code). The same approach is also taken in Japan and Korea (Art 24 of the Private International Act). 787 788

188  Toshiyuki Kono and Paulius Jurcˇys law of the country of protection does not fit the needs of financial markets where bundles (portfolios) of IP rights are used as single collateral. A notable project concerning secured transactions was undertaken under the auspices of the United Nations Commission on International Trade Law (UNCITRAL). At UNCITRAL the work on secured credit law was initiated in 2000. In 2001 Working Group IV (Security Interests) was entrusted with the task of developing an efficient legal regime for security interests in goods involved in commercial activity. The studies conducted over 12 sessions were exemplified in the preparation of the Legislative Guide on Secured Transactions which was adopted on 14 December 2007.791 The Legislative Guide deals with a number of substantial law issues including the creation, effectiveness against third parties, registration, priority and enforcement of a security right. In order to deal particularly with IP problems regarding the creation and enforcement of security rights, UNCITRAL prepared a ‘Supplement on Security Rights in Intellectual Property’ which was adopted on 29 June 2010.792 According to Recommendation No 208 of the Legislative Guide (2007), the law applicable to the creation, effectiveness against third parties and priority of a security right in an intangible asset is the law of the state in which the grantor is located. In addition, Recommendation No 248 further stipulates in the Supplement on Security Rights in IP that the law applicable to the creation, effectiveness against third parties and priority of a security right in IP is the law of the state in which the IP is protected. Besides, according to lit (c) of the same recommendation, the law applicable to the enforcement of a security right in intellectual property is the law of the state in which the grantor of the security is located.793 In light of these proposals made by UNCITRAL, three alternative provisions were included in the Third Draft of the CLIP Principles (Art 3:508). Issues concerning the creation of securities over IP rights will continue to be intensively debated topics within this decade. Acknowledging the great advancements in the area of security rights in IP, proposals made by UNCITRAL concerning choice-of-law issues should be thoroughly reviewed jointly by lawyers from both fields of IP and private international law.

16  Recognition and Enforcement of Foreign Judgments One element of the national sovereignty of states is that the effects of court judgments are limited to the territory of the forum states. In order to have legal effects in a third country, a judgment has to be recognised and declared enforceable. Recognition and enforcement of foreign judgments play an important role in the adjudication of multi-state IP disputes. Namely, in situations where a court decided a case concerning the protection of IP rights existing in several states, the recognition of such foreign judgments would significantly   Available at www.uncitral.org/pdf/english/texts/security-lg/e/09-82670_Ebook-Guide_09-04-10English.pdf.   Available at www.uncitral.org/pdf/english/texts/security-lg/e/Final.Draft.15_July.2010.clean.pdf; see also SV Bazinas, ‘Intellectual Property Financing under the Supplement to the UNCITRAL Legislative Guide on Secured Transactions’ (2011) 43 UCC Law Journal 601; S Bazinas, ‘Multi-Jurisdictional Receivables Financing: UNCITRAL’s Impact on Securitization and Cross-Border Perfection’ (2002) 12 Duke Journal of Comparative and International Law 365. 793   See also L Brennan, ‘Intellectual Property Financing: An Overview’, paper presented at UNCITRAL Third International Colloquium on Secured Transactions (1–3 March 2010) available at www.uncitral.org/uncitral/en/ commission/colloquia/3rdint.html and O Akseli, International Secured Transactions Law: Facilitation of Credit and International Conventions and Instruments (Oxon, Routledge, 2011). 791 792

General Report  189 reduce the costs of the parties and of the courts because essentially the same dispute would not have to be re-litigated in every state for which protection is sought. Another important – and more controversial – segment of multi-state adjudication of IP disputes is the recognition and enforcement of provisional and protective measures which have cross-border effects. However, since the failure of the most recent major attempt to adopt an international judgments convention, most of the matters concerning the recognition and enforcement of foreign judgments remain regulated by domestic or regional legislative acts. The following sections build upon answers received from the national reports. In hypothetical case no 10, national reporters were asked whether a court of their country would recognise a judgment given by a foreign court in a dispute over the ownership of a patent granted in the state of a particular national reporter. In particular, national reporters were asked what legal requirements the courts would employ before recognising or enforcing a foreign judgment; if the dispute concerns the ownership of a registered IP right, whether parties would be required to re-litigate the issue; and what are the procedural steps of enforcement of a foreign judgment.

16.1  Recognition and Enforcement in the 2001 Draft of the Hague Judgments Convention The 2001 Draft of the Hague Judgments Convention established quite a detailed legal regime concerning the recognition and enforcement of foreign judgments. The Draft Convention allows the recognition and enforcement of any ‘judgment’ which is rendered by a court, regardless of how it is termed. ‘Judgment’ means any decision, decree or order, as well as the determination of costs and expenses by an officer of a court (Art 23). The notion of judgment is to be understood broadly, and encompasses monetary and nonmonetary orders, orders concerning property rights and ‘negative declarations’ or judgments rendered in default of an appearance of the defendant.794 During the negotiations, the drafters of the Convention came to no definite conclusion as to what language most suitably describes the legal effects of a judgment in the state of origin (whether the judgment should ‘the effect of res judicata’, produce ‘effects’ or be ‘enforceable’ in the state of origin).795 This was due to the existing differences among the national laws of different states. The recognition and enforcement proceedings may be stayed or refused if the judgment is subject to review. The 2001 Draft generally allows the recognition and enforcement of foreign decisions ordering provisional or protective measures. However, the draft was not unequivocal as to what provisional and protective measures should be subject to the rules on recognition and enforcement. Therefore, the 2001 Draft Convention contained two alternative provisions. Alternative A of Article 23A is more specific and provides that ‘A decision ordering a provisional and protective measure which has been taken by a court seised with the claim on the merits, shall be recognised and enforced . . .’. Alternative A outlines a list of provisional and protective measures referenced: (a) measures to main the status quo of the issues at trial; (b) measures providing preliminary means of securing assets out of which an ultimate judgment may be satisfied; or (c) measures to restrain the conduct of a defendant. Alternative B is drafted in more open terminology: ‘orders for provisional and protective   Nygh-Pocar Report, above n 77, 98.   See Art 25 of the 2001 Draft of the Convention.

794 795

190  Toshiyuki Kono and Paulius Jurcˇys measures issued in accordance with Article 13 shall be recognised and enforced pursuant to the provisions of the Draft Convention.’ The Draft Convention allows the recognition and enforcement of judgments rendered by a court which exercised its international jurisdiction on the basis of Articles 3–13 of the Convention. However, judgments which were rendered on the basis of national law pursuant to Article 17 are not subject to the rules of recognition and enforcement (Art 24). Further, the Convention does not allow recognition or enforcement of judgments rendered by a court which: (a) did not comply with the provisions concerning choice of court or (b) the protection of weaker parties; (c) breached exclusive jurisdiction rules; (d) exercised jurisdiction on a ground which is prohibited by the Convention (Art 26). Such prohibition of recognition or enforcement was necessary in order to assure that national courts follow the jurisdiction provisions established in the Draft Convention.796 Hence, the court seised with a petition for recognition or enforcement must verify whether the court of the state of origin had jurisdiction according to the rules of the Convention (Art 27(1)). The verifying court must be bound by the findings of fact on which the rendering court based its jurisdiction. Article 28 of the Draft Convention provides for a list of circumstances in which a court may refuse to recognise or enforce a foreign judgment: (a) if the case between the same parties and having the same subject matter are pending before another court of the state addressed, provided that it was the court first seised; (b) the judgment is inconsistent with a judgment rendered in the state of the court seised or any other state; (c) foreign judgment was rendered in proceedings which were incompatible with the fundamental principles of procedure of the state addressed; (d) the document instituting the proceedings or an equivalent document was not notified to the defendant without giving sufficient time and in such a way that does not enable him to prepare for the defence; (e) the judgment was obtained by fraud; and (f) the recognition or enforcement would be manifestly incompatible with the public policy of the state addressed. This list of circumstances is exhaustive.797 As a result, the recognising court would not have discretion to refuse to recognise or enforce judgments due to other circumstances which may be established in national laws. The party which opposes the recognition and enforcement is obliged to prove the existence of one of the circumstances established in Article 28. However, the recognising court is not allowed to review the merits of the judgment rendered by the court of origin (Art 28(2)). The 2001 Draft of the Convention is based on the approach that recognition and enforcement of a foreign judgment are separate notions. This means that some judgments (such as declaratory judgments) can be recognised but need not be enforced; and some judgments which are not entitled to recognition can be enforced.798 In the latter case, this would most often be the question of enforcement of provisional or protective measures or other forms of intermediate decisions. Article 29 provides for a list of documents that a party seeking for the recognition or enforcement must produce (Art 29). Yet, the procedures for the recognition or enforcement were not established in the Draft Convention and are left to the domestic laws of the recognising state (Art 30). The 2001 Draft of the Judgments Convention provided for a balanced solution with regard to the recognition and enforcement of judgments awarding damages. In particular, a judgment awarding non-compensatory damages (including exemplary or punitive damages) must be recognised and enforced to the extent that the recognising court could have   ibid, 105–6.   ibid, 108.   ibid, 102.

796 797 798

General Report  191 awarded similar or comparable damages. Besides, the courts are also allowed to recognise and enforce a judgment up to the full amount of the damages if it is possible under the domestic laws (Art 33(1)). In addition, the Draft Convention generally would allow partial recognition or enforcement of a foreign judgment if certain elements of a judgment are severable (Art 34).

16.2  North American Countries 16.2.1  Recognition and Enforcement of Foreign Judgments in IP Disputes according to Canadian and US Law Just as in the case of the exercise of international jurisdiction, questions related to the recognition and enforcement of foreign judgments in Canada depends on whether the Canadian province follows common law principles or is a civil law jurisdiction (Quebec). According to Canadian common law, foreign judgments can be recognised or enforced if the following three requirements are met. First, the judgment debtor must have residence in the country where the judgment was rendered. Secondly, there should be a submission of the judgment debtor to the courts of the originating country. Thirdly, there should be a real and substantive connection between the defendant or subject matter of the dispute and the state where the judgment has been made. The latter ground was established by the Canadian Supreme Court in the case of Morguard, decided in 1990. Canadian courts would usually recognise monetary judgments but other kinds of court orders were not being recognised. However, the adoption of the Enforcement of Canadian Judgments and Decrees Act, which is in force in six Canadian provinces, opened the gates to the recognition of ‘decrees’ other than orders for monetary payments. The Supreme Court previously held that non-monetary orders are also enforceable in Canada, although the conditions of recognition had not been finally crystallised until 2010.799 With regard to the enforcement of foreign judgments, Canadian law established various alternatives which could be chosen by the plaintiff according to the particular circumstances of the enforcement.800 Recognition of judgments in IP disputes rendered by foreign courts would be subject not only to general conditions for recognition established in Canadian law but also to subjectmatter jurisdiction considerations which play a significant role in Canadian conflict-of-laws. More precisely, in such situations as presented in the hypothetical case of the questionnaire, where a foreign court issues a judgment concerning the change of entry in a patent registry with regard to the owner of a Canadian patent, the Canadian court would take into account such questions as the existence of in personam and subject-matter jurisdiction of a foreign court. Although a personal jurisdiction requirement could be easily established, subject-matter jurisdictions of a foreign court would hardly be recognised if the subject-matter jurisdiction of Canadian courts would cover the case. Therefore, foreign judgments in IP disputes over which Canadian courts have subject-matter jurisdiction would not be recognised in Canada. This would be especially the case with regard to the infringement or validity of a Canadian patent. Nevertheless, Canadian courts might recognise foreign judgments concerning the ownership of a Canadian patent if the original judgment was rendered in a contractual dispute.801   See Canadian Report, Part IV and answers to HC 10.   For a more detailed presentation see Canadian Report, Part IV and answers to HC 10. 801   According to the Canadian Report, such court practice exists in Canada. See Canadian Report, answers to HC 10. 799 800

192  Toshiyuki Kono and Paulius Jurcˇys In the United States, the question of recognition and enforcement of foreign judgments is not governed in federal laws; instead it is a matter of state law.802 While the recognition and enforcement of sister state judgments are subject to the constitutional Full Faith and Credit Clause,803 foreign judgments must not be contrary to international comity of the United States. The fundamental requirements concerning the recognition and enforcement of foreign judgments in the United States were established in Hilton v Guyot: Where there has been opportunity for a full and fair trial abroad before a court of competent jurisdiction, concluding trial upon regular proceedings, after due citation or voluntary appearance of the defendant, and under a system of jurisprudence likely to secure an impartial administration of justice between citizens of its own country and those of other countries, and there is nothing to show either prejudice in the court, or in the system of laws under which it was sitting, or fraud in procuring the judgment, or any other special reason why the comity of this nation should not allow it full effect, the merits of the case should not, in an action brought in this country upon the judgment be tried afresh.804

The principles established in the Hilton v Guyot judgment were largely followed in most US states. Three legal instruments which guide the court’s practice in recognising and enforcing foreign judgments have been adopted: the 1962 Uniform Foreign MoneyJudgments Recognition Act (‘UFMJRA’), the ALI Restatement (Third) of Foreign Relations, and a draft statute known as the Foreign Judgments Recognition and Enforcement Act. In Hilton v Guyot, reciprocity was one of the requirements of the non-recognition of a foreign judgment. Yet in most US states,805 courts no longer take into consideration whether there is reciprocity between the state of origin and the United States.806 The requirement of reciprocity was also abandoned in the Uniform Foreign Money-Judgments Recognition Act, the Restatement (Second) of Conflict of Laws (section 98); and the Restatement (Third) of Foreign Relations Law (section 481). Nevertheless, the proposed statute on recognition and enforcement contains reciprocity as one of the mandatory grounds for nonrecognition. Section 7 of the statute further establishes certain presumptions of cases where reciprocity would be absent. In order to be recognised, a foreign judgment should also meet certain procedural and substantive law requirements. A foreign judgment must be rendered by a court which had international jurisdiction over the defendant (UFMJRA, section 4(a)). The jurisdiction of the rendering court must exist under both the law of the rendering state as well as section 421 of the Restatement (Third). Additionally, in proceedings in which the judgment was rendered, the defendant must have been properly served, or have appeared voluntarily before the court. Default judgments are generally recognised and enforced in the United States,807 although the defendant can always challenge the foreign judgment. Absence of fair trial,808 bribery or corruption of the judge,809 fraud810 or failure to comply with the notice   British Mainland Airways Ltd v Int’l Travel, Inc 497 F 2d 869 (9th Cir 1974).   Art 4 s 1 of the US Constitution and 28 USC § 1738 (1988).   Hilton v Guyot 159 US 113 (1895), 202–3. 805   Only seven states maintain the requirement of reciprocity: Florida, Georgia, Idaho, Massachusetts, North Carolina, Ohio and Texas. 806   Tonga Air Services, Ltd v Fowler 118 Wash 2d 718, 826 P 2d 204 (1992), 209; Nicol v Tanner 256 NW 2d 796, 800 (Minn 1976); The Toronto-Dominion Bank v John W Hall, 367 F Supp 1009, 1013–14. 807   Chabert v Bacquie 694 So 2d 805 (Fla Ct App 1997); s 481 of the Restatement (Third). 808   Hilton v Guyot 159 US 113 (1895), 202; Bank Melli Iran v Pahlavi, 58 F 3d 1406 (9th Cir 1995). 809   Bridgeway Corp v Citibank, 201 F 3d 134 (2nd Cir 2000); Films by Jove, Inc v Berov 250 F Supp 2d 156 (EDNY 2003). 810   Fairchild, Arabatzis & Smith, Inc v Prometco (Produce and Metals) Co 470 F Supp 610 (SDNY 1979), 615. 802 803 804

General Report  193 requirements may constitute a barrier for the recognition or enforcement of foreign judgments. However, only an outrageous departure from due process requirements could prevent recognition or enforcement.811 A foreign judgment can be recognised and enforced in the United States if is not against the public policy of the recognising state. However, the courts did not find any infringement of public policy of the recognising state in cases where foreign judgments had been enforced based on the law of other jurisdictions, even if that foreign law upon which the judgment was based was different from the forum’s law.812 International comity requires that ‘courts of a separate sovereign not interfere with concurrent proceedings based on the same transitory claim, at least until a judgment is reached in one action’ allowing res judicata to be pleaded in defence.813 One of the elements of international comity is the first-in-time principle concerning parallel proceedings before courts of different states. The first-in-time principle requires federal courts to decline jurisdiction over a particular property over which another court has already asserted jurisdiction.814 In particular, as regards actions in rem and quasi in rem, the court first seised may exercise jurisdiction in exclusion of any other court.815 This principle had been first developed in the context of US federalism; and has subsequently been applied to proceedings pending before courts of foreign states.816 In the case of GlobalSantaFe, the court refused to take into consideration the fact that a Korean court had rendered a judgment which blocked the transfer of a squatted domain name. The reason for refusing to defer to the Korean judgment was that the foreign proceedings had been instituted with the intent of blocking the proceedings before American courts which had in rem jurisdiction over the dispute.817 As regards the substantive law defences, the most often invoked ground for nonrecognition of a foreign judgment is its contrariety to US public policy. Although in the Hilton v Guyot case the court did not make a direct reference to public policy, it was generally considered that public policy is one of the elements of international comity. It should be also noted that in contrast with the proposed Foreign Judgments Recognition and Enforcement Act, both the Uniform Foreign Money-Judgments Recognition Act and the Restatement (Third) of Foreign Relations establish that public policy is one of the discretionary grounds for non-recognition. In practice, American courts have endorsed the recourse to public policy to only a limited extent. In fact, public policy as a ground for nonrecognition could be used ‘only in those unusual cases where the foreign judgment is repugnant to fundamental notions of what is decent and just in the state where the enforcement is sought’818 or if the judgment ‘“tends clearly” to undermine public interest, the public confidence in the administration of the law, or security for individual rights or personal liberty or private property’.819

  British Midland Airways Ltd v International Travel Inc 497 F 2d 869 (9th Cir 1974), 871.   Untersteiner v Untersteiner, 32 Wn App 859 (1982), 863; The Toronto-Dominion Bank v John W Hall, 367 F Supp 1009, 1014. 813   Laker Airways Ltd v Sabena, Belgian World Airlines 731 F2d 909 (DC Cir 1984), 937; SEC v Banner Fund Int, 211 F 3d 602 (DC Cir 2000), 612. 814   Princess Lida of Thurn & Taxis v Thompson 305 US (1939) 456, 465–66. 815   SEC v Banner Fund Int, 211 F3d 602 (DC Cir 2000), 611. 816   Chesley v Union Carbide Corp 927 F2d 60 (2nd Cir 1991), 66; Dailey v NHL 987 F2d 172 (3d Cir 1993), 175–78. 817   GlobalSantaFe Corp v Globalsantafe.com 250 F Supp 2d (E.D. Va. 2003) 610, 625. 818   McCord v Jet Spray Intern Corp 874 F Supp 436 (D Mass 1994). 819   Ackerman v Levine 788 F 2d 830 (2d Cir 1986), 841. 811 812

194  Toshiyuki Kono and Paulius Jurcˇys

16.2.2  Recognition and Enforcement of Foreign Judgments in the ALI Principles According to the ALI Principles, the first task for a court seised with a request to recognise and enforce foreign judgment is to ascertain whether the rendering court applied the ALI Principles. If the judgment was rendered on the basis of the ALI Principles, then these Principles shall also be applied for the recognition and enforcement of proceedings, otherwise the judgment should be recognised and enforced according to the domestic rules of the forum state (section 401 lit (a) and (b)). In cases where the judgment was rendered according to the ALI Principles, such judgment can be recognised and enforced in a foreign state if it is enforceable in the rendering state. According to the ALI Principles, only final judgments are entitled to recognition and enforcement (section 401(2)). A judgment is ‘final’ if it enforceable in the country where that particular judgment was rendered. Hence, in order to determine the finality and the scope for the judgment to be recognised and enforced, the ALI Principles mandate the court of a recognising state to refer to the law of the rendering state. In this regard it is noteworthy that the ALI Principles aim to provide for a more flexible solution to situations where a foreign judgment is subject to review in the rendering state or the time limit for the review has not expired. In such cases the proceedings for recognition and enforcement, which were initiated before the judgment became final, should be stayed until the judgment becomes final and enforceable in the rendering state (section 401(2)). This rule was influenced by the Brussels I Regulation and the Second Restatement.820 Furthermore, the ALI Principles establish a broader notion of foreign judgments which are subject to recognition and enforcement in a third state. The effect shall be given not only to foreign final judgments but also to provisional and protective orders (section 401(4)), injunctive relief (section 412) as well as decisions on validity or invalidity, and infringement as well as ownership of IP rights (section 413). Effect may be also given to default judgments provided that the personal jurisdiction of the rendering court was consistent with the law of the rendering state or the ALI Principles. In assessing the existence of personal jurisdiction of the rendering court, the court of the enforcing country shall rely on the facts found by the rendering court (section 402). The ALI Principles establish one important rule concerning the effects of a foreign judgment. According to section 401(3), the preclusive effect given a foreign judgment should be no greater than the preclusive effect of the judgment in the rendering state. This provision aims to balance the sovereignty considerations of different states. Further, such limitation also affords greater legal certainty to the litigating parties. The grounds of non-recognition were drafted in light of the ALI Foreign Judgments Project.821 Accordingly, sections 403(1) and 403(2) of the ALI Principles establish mandatory and discretionary grounds of non-recognition. Grounds of non-recognition established in paragraphs (1) and (2) of section 403 should be read together with paragraph (3), which requires the recognising court to defer to the facts found by the rendering court except in those cases where the defendant did not appear in the court proceedings. Among eight grounds of mandatory non-recognition, four are related to principles of fundamental procedural fairness: (a) impartiality of the tribunal or procedures; (b) the integrity of the rendering court; (c) proper and timely notice to the defendant about the pending proceed  American Law Institute, Intellectual Property, above n 38, Reporters’ Note to § 401, 171.   The American Law Institute, ‘Recognition and Enforcement of Foreign Judgments: Analysis and Proposed Federal Statute’ available at www.ali.org. 820 821

General Report  195 ings; (d) the requirement that the judgment must not be obtained by fraud. However, the absence of certain procedural institutions, which are known in certain jurisdictions (e.g. discovery or jury trials), is not considered an infringement of procedural fairness.822 In addition, a foreign judgment must not be recognised if it is contrary to the public policy in the state in which the enforcement is sought (section 403(1)(e)). In assessing the violation of public policy, the recognising court should only consider the outcome of the litigation (not the substance or procedure) and only investigate how the outcome of the case affects the interests of the state in which recognition is sought.823 Foreign judgment should not be recognised if the rendering court exercised jurisdiction on the basis of a standard-form choice-of-court agreement which deprives one of the parties of the procedural guarantees envisaged in section 202. Further, the ALI Principles establish that a judgment cannot be recognised if the rendering court exercised its jurisdiction in breach of section 207 (which provides for insufficient grounds of jurisdiction) or in breach of the forum’s own rules on judicial competence. Such rules on mandatory non-recognition should facilitate the parties to engage into legitimate litigation as well as discourage the courts from adjudicating cases over which they do not have international jurisdiction. Discretionary grounds of non-recognition are established in section 403(2). Subparagraph (a) provides that a foreign judgment may not be recognised if the rendering court exercised its jurisdiction in a manner which is inconsistent with sections 201–6 of the ALI Principles. In the case where the jurisdiction of the rendering court is founded on the basis of a negotiated choice-of-court agreement, the recognising court should take into consideration whether the choice-of-court clause was reasonable according to section 202, and whether the party resisting the enforcement had ample opportunity to present its objections in the proceedings.824 In addition, section 413(2) of the ALI Principles also establishes that the judgment of a foreign country may not be recognised if the rendering court’s choice of applicable law to the dispute was inconsistent to the choice-of-law rules established in the ALI Principles (sections 301 et seq), or the rendering court did not properly apply sections 221 and 222 which establish special rules on parallel proceedings and the coordination of claims. Although the ALI Principles are founded on the principle of territoriality of IP rights (section 301), the Principles also stipulate some exceptions to territoriality. The establishment of a complex system in the ALI Principles, coupled with differences of national laws, may result in a situation where enforcement is not always possible. In order to duly reflect differences of local circumstances, the ALI Principles contain special rules concerning the enforcement of three types of remedies: monetary relief, injunctions and declarations. First, section 411(1) stipulates that in the case of the recognition of a foreign judgment, the enforcement court shall also recognise the rendering court’s order awarding compensatory damages without requiring proof of actual damages. However, in order to reconcile the differences between legal systems concerning non-compensatory (ie exemplary or punitive) damages, the ALI Principles establish that orders awarding such damages should be recognised at least to the extent that similar damages could have been awarded in the state of the enforcement court (section 411(2)).   American Law Institute, Intellectual Property, above n 38, Comments to s 403, pp 173–74 and 180–81.   For an overview of particular examples of when a foreign judgment should not be recognised, see Reporters’ Note to s 403, pp 180–85. 824   American Law Institute, Intellectual Property, above n 38, Comments to s 403, p 177. 822 823

196  Toshiyuki Kono and Paulius Jurcˇys Secondly, as regards the recognition and enforcement of foreign injunctions, section 412(1)(a) of the ALI Principles establishes that if a foreign judgment is recognised by the enforcement court, the rendering court’s order to award an injunction as a remedy for IP infringement must be enforced according to procedures available to the enforcement court. However, if injunctive relief were not available for that enforcement court’s territory, in the case of the enforcement court also being the rendering court, the enforcement court may decline to enjoin or to order the commission of acts within the territory of the recognising court. In those cases where the scope of an injunction is limited, the enforcement court must award monetary relief instead of an injunction (section 412(1)(b)). By allowing such discretion of the enforcement court, the ALI Principles aim to give more weight to local industrial and cultural considerations of particular countries.825 Moreover, such flexibility should reduce the possibility of the enforcement court in making recourse to the public policy exception (section 403 of the Principles). Thirdly, the ALI Principles address the issue of the recognition and enforcement of declarations of validity, infringement and ownership of rights. In particular, section 413 stipulates that declarations of foreign courts concerning the validity, invalidity, infringement or ownership of IP rights must be recognised; such declarations registered in another state can be enforced only between the parties to the litigation.

16.3  European Countries As in other instances concerning international jurisdiction of the courts of EU Member States, the recognition and enforcement of foreign judgments are subject to a dual regime: judgments rendered by courts of other Member States are subject to rules established in the Brussels I Regulation/Lugano Convention; whereas judgments rendered by courts of third states are recognised according to domestic provisions.

16.3.1  Recognition and Enforcement of Foreign Judgments according to the Brussels/ Lugano Regime The Brussels I Regulation establishes special rules for the recognition and enforcement of judgments rendered by courts of other Member States. In order to facilitate efficient and rapid recognition of judgments, Article 33(1) of the Regulation provides that judgments rendered in an EU Member State are to be recognised in other Member States without any special proceedings being required. The aim of the European legislator was to ensure that the declaration of the enforceability of a judgment is issued after purely formal checks of the documents, thus leaving only the possibility to enforce the rights of the defence.826 Such legal framework was established with regard to the consideration of mutual trust in the administration of justice, a central part of the Brussels/Lugano system. The Brussels I Regulation establishes a broad definition of ‘judgment’ which encompasses ‘any judgment given by a court or tribunal of a Member State, whatever the judgment may be called, including a decree, order, decision or writ of execution, as well as the determination of costs or expenses by an officer of the court’ (Art 32).827 In other words,   ibid, Comments to s 412.   See Recitals 17 and 18 of the Brussels I Regulation. 827   Case C-394/07 Marco Gambazzi v DaimlerChrysler Canada Inc and CIBC Mellon Trust Company [2009] ECR I-2563, para 22. 825 826

General Report  197 ‘judgment’ refers to only judicial decisions rendered by a court or a tribunal of a Member State.828 In order to fall within the scope of the Regulation, judicial decisions must have been rendered in adversarial proceedings.829 Hence, judgments by default also fall within the scope of the Regulation.830 Notably, settlements reached during court proceedings do not fall under the notion of a judgment because they are merely contractual agreements between the parties, and depend upon the intentions of these parties.831 Accordingly, court decisions rendered in IP disputes equally fall under the ambit of the notion of ‘judgment’ and are subject to the same jurisdiction and enforcement provisions. Article 34 of the Brussels I Regulation832 establishes four grounds when judgments granted in one EU Member State shall not be recognised: (1) manifest contrariety to the public policy of the state where the recognition is sought; (2) in cases where the judgment was rendered in default, the defendant was not served with the document which instituted the proceedings excepting if the defendant failed to commence proceedings to challenge the judgment when it was possible to do so; (3) a foreign judgment is irreconcilable with a judgment rendered in a dispute between the same parties by a court of a Member State where the recognition is sought; or (4) irreconcilability of a foreign judgment with a judgment given in another Member State. Besides, a judgment cannot be recognised if it was issued in breach of other jurisdiction rules of the Brussels I Regulation (Art 35). According to the ECJ, the list of grounds for non-recognition is exhaustive.833 The requirements for non-recognition shall be interpreted strictly. Recourse to public policy is to be made only in exceptional cases.834 In one of its landmark decisions in the case of Krombach, the ECJ decided that a court can refer to public policy only when the recognition or enforcement of a foreign judgment ‘would be at variance to an unacceptable degree with the legal order of the State in which the enforcement is sought inasmuch as it infringes a fundamental principle’.835 In order to promote legal certainty and uniformity of the application of the Regulation, the ECJ has the authority to review the limits within which national courts may have recourse to public policy.836 Article 35(3) of the Regulation stipulates that public policy cannot be applied to rules relating to jurisdiction. Hence the public policy exception cannot be raised to bar the recognition or enforcement of a judgment rendered in another Member State merely on the ground that the court of origin did not comply with the rules on jurisdiction.837 Brussels I Regulation strictly forbids the recognising court from reviewing the substance of the judgment of which recognition is sought (Art 36). According to the ECJ, the recognising court cannot review the accuracy of the findings of the law or fact made by the originating court.838 This means that a foreign

  Case C-414/92 Solo Kleinmotoren GmbH v Emilio Boch [1994] ECR I-2237, para 17.   Case 125/79 Denilauer [1980] ECR 1553, para 13. 830   Case C-394/07 Marco Gambazzi v DaimlerChrysler Canada Inc, and CIBC Mellon Trust Company [2009] ECR I-2563, para 25. 831   Case C-414/92 Solo Kleinmotoren GmbH v Emilio Boch [1994] ECR I-2237, paras 18 and 20. 832   Also Art 34 of the Revised Lugano Convention. 833   Case C-414/92 Solo Kleinmotoren GmbH v Emilio Boch [1994] ECR I-2237, para 10 834   Case 145/86 Hoffman v Krieg [1988] ECR I-645, para 21; Case C-78/95, Hendrikman [1996] ECR I-4943, para 23. 835   Case C-7/89 Dieter Krombach v André Bamberski [2000] ECR I-1935, para 37. 836   ibid, paras 22–23. 837   ibid, paras 32–34 where the ECJ decided that the public policy clause cannot be referred to in cases where the court of origin based its jurisdiction on the nationality of the victim of the offence. 838   ibid, para 29. 828 829

198  Toshiyuki Kono and Paulius Jurcˇys judgment may be refused recognition or enforcement only if the court of origin made an infringement which constitutes a manifest breach of a rule of law of the recognising state.839 The procedural public policy should be ascertained in light of the European Convention for the Protection of Human Rights and Fundamental Freedoms as well as the jurisprudence of the European Court of Human Rights.840 Hence, even though the Regulation aims to establish a legal framework which would simplify the formalities governing recognition and enforcement, fundamental procedural rights, such as the right to a fair hearing, cannot be undermined.841 The assessment of the measure adopted by the court of the state of origin through the lens of the public policy of the state where the enforcement is sought must be made in the light of all the circumstances.842 According to established ECJ case law, the second requirement of non-recognition aims to ensure that the judgment is not recognised or enforced if the defendant had no opportunity to defend himself.843 Situations when the lawyer appears before the court first seised on the behalf of but without a defendant’s authorisation are considered a default of appearance.844 The temporal criterion to determine whether sufficient time was provided to defendant is the point of time when the court proceedings are instituted. It is not sufficient if the defendant has subsequent possibilities of taking certain legal remedies against a judgment in a default of appearance.845 It is for the recognising court to determine whether such circumstances exist where the defendant was not able to defend himself.846 The judgment shall be declared enforceable immediately on the completion of formalities provided in Article 53 of the Regulation. The judgment debtor is not allowed to make any submissions at this stage (Art 41). The Regulation further requires that the judgment debtor is notified of the decision of enforceability of the foreign judgment. However, the decision about the enforceability may be appealed by any of the parties to the competent court within one month of service thereof, or within two months if the judgment debtor is resident in a country other than the country where the recognition is sought. In practice, it is enough to present the recognising court the original judgment. With regard to IP matters, foreign judgments are not subject to recognition, if a court of a Member State decided the case is in breach of the exclusive jurisdiction rules of the Brussels I Regulation. The ECJ judgment in the Duijnstee case is worthy of further attention: in this case the ECJ decided that the exclusive jurisdiction rule should be applied to IP infringement and validity matters but does not cover disputes between the parties over the determination of entitlement to an existing IP right created on the basis of a previously existing contractual relationship.847 Hence, foreign judgments concerning ownership of IP rights should be recognised in other EU Member States. Other court judgments ordering

  ibid, para 37.  ibid, para 44; Case C-341/04, Eurofood IFSC Ltd [2006] ECR I-3813, para 65; Case C-394/07, Marco Gambazzi v DaimlerChrysler Canada Inc and CIBC Mellon Trust Company [2009] ECR I-2563, para 28. 841   Case C-7/89 Dieter Krombach v André Bamberski [2000] ECR I-1935, para 43. 842  Case C-341/04 Eurofood IFSC Ltd [2006] ECR I-3813, para 68; Case C-394/07 Marco Gambazzi v DaimlerChrysler Canada Inc and CIBC Mellon Trust Company [2009] ECR I-2563, paras 40–41. 843   Case C-166/80 Klomps v Michel [1981] ECR 1593, para 9; Case C-172/91, Sonntag v Waidmann [1993] I-1963, para 38. 844   Case C-78/95, Bernardus Hendrikman and Maria Feyn v Magenta Druck & Verlag GmbH [1996] ECR I-4943, para 18. 845   ibid, para 20. 846   ibid, para 18. 847   ECJ, Case 288/82 Ferdinand Duijnstee v Lodewijk Goderbauer [1983] ECR 3663. 839 840

General Report  199 the revocation of IP rights registered in another Member State cannot be recognised because of the infringement of exclusive jurisdiction provisions.848 Refusing to recognise a foreign judgment on the ground of public policy does not seem possible even if the court mistakenly determines the applicable law. This could be also deduced from the ECJ judgments in the Renault 849 and Krombach case.850 However, the public policy exception could be also used as a ground in refusing to recognise decisions concerning moral rights or punitive damages.851 Further, national reporters did not share a common position with regard to a foreign court decision concerning the ownership of a patent of a third state. Some national reporters noted that a foreign court decision determining the owner of a foreign patent would have to recognised and enforced;852 while others were of the opinion that the dispute concerning the ownership of a patent would have to be re-litigated before the courts of the recognising state.853

16.3.2  The Recognition and Enforcement of Third-Country Judgments The Brussels I Regulation does not apply to the recognition and enforcement of judgments which were handed down by courts of third countries.854 Thus, in the absence of uniform rules established at the EU level, domestic rules are applicable. From the responses submitted by the national reporters it is evident that domestic rules concerning the recognition and enforcement of judgments rendered in third states vary greatly. Only in Belgium and Italy are domestic rules concerning the recognition and enforcement of foreign judgments very similar to those of the Brussels I Regulation. In Italy, however, unlike the Brussels I Regulation, their enforcement procedure requires the presence of both parties at the time when an enforcement order is issued.855 In Spain, the Civil Procedure Law of 2000 contains no special rules on recognition; therefore, the provisions of the old Civil Procedure Law of 1881 are still applicable.856 They are relevant in cases where the recognition and enforcement of foreign judgments are not governed by international convention or EU legislation. Although Spanish law contains a requirement of reciprocity, it is not actually employed in practice. General requirements that have to be met in order for a foreign judgment to be recognised are entrenched in Article 954 of the LEC 1881. Spanish courts would need to verify the jurisdiction of the rendering court, review the compatibility with substantial and procedural public policy, investigate whether the defaulting defendant was properly notified and consider whether the foreign judgment is not incompatible with a judgment given or recognised in Spain. Besides, in the case of parallel proceedings between the same parties having the same cause of action, the Spanish court would need to ascertain where the proceedings were first instituted. However, differently from Brussels I, Lugano and other bilateral and multilateral 848   See eg, Belgian Report, answers to HC 10; French Report, answers to HC 10, Italian Report, answers to HC 10; Spanish Report, answers to HC 10. 849   Case C-38/98 Renault [2000] ECR I-3009, para 30 850   Arts 36 and 45 of the Brussels I Regulation and Case C-7/89 Dieter Krombach v André Bamberski [2000] ECR I-1935. 851   See Italian Report, section 1.2.4.1. 852   See Belgian Report, answers to HC 10; French Report, answers to HC 10; Italian Report, answers to HC 10; Spanish Report, answers to HC 10 and nn 1–4. 853   Greek Report, answers to HC 10. 854   Case C-129/92, Owens Bank Ltd v Fulvio Bracco and Bracco Industria Chimica SpA [1994] ECR I-117. 855   Italian Report, answers to HC 10. 856   See Spanish Report, paras 32 and 39–40.

200  Toshiyuki Kono and Paulius Jurcˇys treaties, automatic recognition is not possible under Article 955. General rules on recognition and enforcement are also applicable to foreign judgments handed down in IP disputes. In Portugal the Code of Civil Procedure establishes general principles for the recognition of foreign judgments. As in other countries, foreign judgments are subject to judicial review and confirmation unless they are used as proof in proceedings before a Portuguese court (Art 1094 of the Portuguese CCP). The requirements for recognition are provided in Article 1096 and include fair trial, finality of judgment, and public policy requirements.857 In Greece, foreign judgments may be recognised and enforced if foreign judgments are enforceable in the country of origin; are not contrary to public policy; the losing party was not deprived of basic procedural defence rights; and are not contrary to existing judgments rendered by Greek courts (Arts 323 and 905 of the Greek CCP).858 Similarly in Germany, section 328 of the Code of Civil Procedure determines matters of recognition and enforcement. German courts would confirm several requirements of recognition, which include the jurisdiction of the rendering court and reciprocity.859 In France, a foreign judgment could be recognised if four requirements are satisfied: the rendering court must have international jurisdiction; there was no fraud; foreign judgment must not be contrary to the substantive and procedural public policy of France; and the foreign judgment must not be contrary to other French judgments.860 In French law the distinction is made between measures in personam and measures in rem. French courts have recognised measures in personam (eg, Mareva injunctions), and Dutch kort geding orders prohibiting the commercialisation of products which allegedly infringe the French portion of a European patent.861 In Switzerland, in the areas where there are no special agreements existing between the state of the recognising court and Switzerland, the Swiss Federal Private International Act governs questions concerning the recognition and enforcement of foreign judgments. Article 25 et seq of the Swiss PIL Act provides general requirements for the recognition and enforcement of foreign judgments. According to Article 111, a foreign judgment in an IP infringement case would be recognised if the rendering court was the court of the state (1) where the defendant was domiciled or (2) where the act or result of the infringement occurred. In addition, decisions concerning the existence, validity or registration of IP rights could be recognised if the rendering court was a court of the state where the protection was sought or if such a decision could be recognised there (Art 111(2) of the Swiss Federal Private International Act).862 Sweden has no bilateral treaties with foreign states. This raises some practical concerns about the recognition and enforceability of foreign judgments. In particular, foreign judgments are considered as evidence for proceedings in Swedish courts.863 However, the national report highlighted that in cases where Swedish courts do not possess international jurisdiction (eg cases concerning the validity of a foreign IP right), a foreign judgment may nonetheless be recognised.864 However, in the UK, the recognition of foreign judgments concerning ownership of IP rights would not be possible because of the limitations posed   See Portuguese Report, section 1.2.3.1.   Greek Report, answers to HC 10. 859   See German Report, answers to HC 10. 860   French Report, section 1.4.3 and 1.4.4 as well as answers to HC 10. 861   See French Report, section 1.4.3 and nn 45–46 for further references. 862   Swiss Report, Part 1 question 4. 863   Swedish Report, section 1.2.3. 864  ibid. 857 858

General Report  201 in the Moçambique case. However, purely contractual arrangements of foreign judgments between the parties would be recognised in the UK.

16.3.3  Brussels I Reform Proposals Given the existing differences among national rules for the recognition and enforcement of judgments from third countries, the European Commission proposed the possibility of extending the Brussels/Lugano regime with regard to judgments by third countries.865 One of the main objectives of the revision of the Brussels I Regulation was the abolition of the exequatur procedure. According to statistical data of the European Commission, more than 90 per cent of applications for the declaration of enforceability are successful.866 Such a high percentage of positive applications raised the question of whether exequatur proceedings are necessary, given the high cost to the parties and the burden of the courts; however, the Commission did not intend to eliminate exequatur proceedings completely. Among other issues, it was questioned whether and to what extent the free circulation of authentic instruments should be allowed, and how to solve the formalities concerning the standardised form to be used at the enforcement stage. The CLIP Principles establish a very broad notion of a foreign judgment. The notion of a judgment is based upon Article 32 of the Brussels I Regulation. A ‘judgment’ means monetary and non-monetary judgments such as writs of execution, decisions determining the costs of the court officers, orders for the payment of money, judgments rendered in default of appearance, declaratory judgments as well as court settlements (Art 4:801). The definition of a judgment depends neither on the characteristics of a court or tribunal, nor the form of the proceedings in which the judgment was adopted.867 In order to facilitate the efficient resolution of multi-state IP disputes868 the definition of a judgment in the CLIP Principles comprises both provisional and protective measures (Art 4:301). One of the main underlying rules in the CLIP Principles is favor recognitionis: a general concept aimed at making foreign judgments more easily recognised and enforceable (Art 4:103).869 Accordingly, the CLIP Principles do not require any special procedure (so-called ‘automatic recognition’ principle). A judgment must have in the state of origin the effect whose recognition is sought in the requested state (Art 4:102(2)). The effects of a judgment shall be determined according to the law of the state of origin (Art 4:102(3)). The recognising court should also take into consideration the subjective, territorial and substantial scope of the judgment and whether there has been any change of circumstances. According to the commentators, this means that in principle, the enforcement of a foreign judgment should not extend beyond the limits of res judicata.870 One of the requirements for the recognition is that such a judgment should be final and conclusive in the rendering state. However, the requirements of finality and conclusiveness are to be loosely interpreted according to the law of the rendering state. Such a relaxed 865   Report from the Commission on the application of Regulation (EC) No 44/2001, COM(2009) 174 final, 5; Green Paper on the review of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (21 April 2009), COM(2009) 175, 4. 866   Report from the Commission on the application of Regulation (EC) No 44/2001, COM(2009) 174 final, 4. 867   PA de Miguel Asensio, above n 68, 251. 868  ibid. 869   PA de Miguel Asensio, above n 68, 250. The favor recognitionis principle emanates from the 1959 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Art VII.1) and 2005 Hague Convention on Choice of Court Agreements (Art 26). 870   PA de Miguel Asensio, above n 68, 260 et seq; although this issue remains controversial.

202  Toshiyuki Kono and Paulius Jurcˇys approach had been taken with the consideration that the determination of the finality of a judgment varies from state to state.871 However, in order to balance the interests of the parties, the CLIP Principles also provide that the recognition and enforcement of a foreign judgment (including provisional, interim or interlocutory judgments) can be postponed or refused if an ordinary appeal against the judgment has been filed in the rendering state or if the time limit for ordinary review of a judgment has not expired (Art 4:102(5)). Article 4:201(1) entrenches the main principle that a judgment cannot be recognised or enforced if the rendering court did not have jurisdiction according to Part 2 of the CLIP Principles. It is presumed that a court has jurisdiction if it adjudicates the dispute according to the CLIP Principles.872 Yet again, the fact that the judgment was rendered by a court exercising its jurisdiction on a ground which is not provided for in the CLIP Principles does not necessarily mean that such a judgment cannot be recognised or enforced. Instead, the recognising court would have to assess whether the jurisdiction of the rendering court was sufficient.873 In any case, the CLIP Principles make it clear that recognition or enforcement would not be possible if the jurisdiction of the rendering court was exercised in a way that conflicts with the exclusive jurisdiction rules stipulated in the CLIP Principles (Arts 2:401, 4:201 and 4:202). One of the requirements for recognition, according to the CLIP Principles, is that a foreign judgment must not be contrary to the public policy of the recognising state. Article 4:401 of the CLIP Principles makes a distinction between substantive and procedural aspects of public policy. It provides that a judgment shall not be recognised or enforced if the recognition or enforcement of a foreign judgment would be manifestly incompatible with the public policy or fundamental principles of procedural fairness of the recognising state. The reference to ‘manifest’ incompatibility with the public policy suggests that according to the CLIP Principles, public policy could be used as a ground of non-recognition or nonenforcement only in exceptional cases; namely, when the recognition or enforcement of a foreign judgment would undermine fundamental legal or moral principles of the recognising state. However, due to the high degree of harmonisation of substantive IPs, only a few ‘manifest’ differences can be foreseen which could lead to non-recognition or nonenforceability (e.g. differences in patentability requirements). Insofar as substantive public policy is concerned, the CLIP Principles do not allow the recognising court to review the merits of the case nor refuse recognition of a foreign judgment on the basis that the substantive laws of the state of origin and the recognising state differ. As for private international law matters, the application of a different law than the one which should have been applied if the proceedings had been instituted before the state of the recognising court does not constitute grounds for non-recognition. This would be the case in the adjudication of disputes concerning ubiquitous infringements especially if the court decided to apply the law of one or several states instead of the laws of each state for which protection is sought. This is closely intertwined with the prohibition to review the substance of a foreign judgment (Art 4:601). Another issue related to substantive public policy is that in the case of the recognition of judgments awarding non-compensatory damages, a recognising court is given discretion not to award damages which exceed the actual loss or harm suffered if it is contrary to the law of the recognising state (Art 4:402(1)).   PA de Miguel Asensio, above n 68, 268.   ibid, 273; also Art 4:201(2) of the CLIP Principles.   PA de Miguel Asensio, above n 68, 273–75.

871 872 873

General Report  203 As regards the recognition of provisional and protective measures, the CLIP Principles establish two additional requirements. First, recognition and enforcement is possible only with regard to those provisional or protective measures which have been adopted by the court with jurisdiction over the merits of the case (Art 4:301(1)). Second, provisional or protective measures adopted without prior hearing of the adverse party and enforceable without prior service of process to that party shall neither be recognised nor enforced (Art 4:301(2)). This restrictive approach was adopted following the existing legal practice in IP law of the EU Member States.874 Nevertheless, the drafters of the CLIP Principles left room for the establishment of a more lenient regime regarding the enforcement of provisional or protective measures among the members of the regional economic integration organisations (Art 4:103).875 Generally, the same requirements applicable to the recognition of a foreign judgment must also followed in cases where a declaration of enforceability is sought. The CLIP Principles only stipulate one additional requirement; namely, that a judgment must be enforceable in the state of origin. Albeit no special procedure can be imposed for the recognition of a foreign judgment, states are nonetheless allowed to maintain special methods or procedures for enforcement (Art 4:703).

16.4  Asian Countries 16.4.1  Recognition and Enforcement of Foreign Judgments in Taiwan Article 402 of the Taiwanese Civil Procedure Law establishes the following grounds when foreign judgments or interim measures are not recognised in Taiwan: 1) if a foreign court does not have jurisdiction according to Taiwanese law; 2) the judgment was rendered in ex parte proceedings; 3) foreign proceedings were conducted in a manner which is contrary to Taiwanese public policy or moral principles; or 4) there is no mutual recognition between Taiwan and the country whose judgment is to be recognised. Moreover, Taiwan’s Compulsory Enforcement Law provides for further requirements related to the enforceability of a foreign judgment.876 According to the national report, a foreign decision concerning amendments to the registered owner of a Taiwanese patent would not be recognised; hence parties would have to re-litigate the matter in order to change the register entry concerning the owner of the patent.

16.4.2  Recognition and Enforcement of Foreign Judgments in Japan In Japan, foreign judgments can be recognised according to Article 118 of the Code of Civil Procedure. The enforcement of foreign judgments is governed inter alia by Article 24 of the Civil Execution Act (Minji shikk¯o h¯o). Japanese law is not clear on whether foreign judgments granted in ex parte proceedings as well as interim and provisional measures can be recognised and enforced in Japan, albeit scholars strongly support that general recognition requirements of Article 118 CCP should be applied. With regard to foreign judgments in IP 874   In particular, as regards the provisional and protective measures granted for the protection of unitary community IP rights: Art 90 of the Community Designs Regulation; Art 103(1) of the Community Trade Mark Regulation. Also EMI Records Ltd v Modern Music Karl-Ulrich Walterbach GmbH [1992] QB 115. 875   PA de Miguel Asensio, above n 68, 270. 876   Taiwanese Report, answers to HC 10.

204  Toshiyuki Kono and Paulius Jurcˇys cases, the Japanese Report noted that general requirements of recognition and enforcement would be applied; however, Japanese courts would be reluctant to recognise foreign judgments which had been rendered in breach of the exclusive jurisdiction rules of Japanese courts. One of the preconditions for the recognition and enforcement in Japan is that a judgment should be rendered by a ‘court’. A ‘court’ is defined as a state authority which is competent to exercise judicial functions and is authorised to render judgments in disputes arising under private law. The notion of a court includes courts of general competence as well as specialised courts of foreign states. In its 1998 decision, the Supreme Court provided that a ‘foreign judgment’ subject to recognition and enforcement in Japan can be any court decision regardless of the name, form or procedure. A judgment should be rendered by a foreign court in a dispute between two or more parties in accordance to the principles of due process.877 Japanese courts can also recognise court orders which are rendered after the contested proceedings or in the absence of an appearance of the defendant.878 Japanese courts would also recognise foreign court judgments which were granted in summary proceedings879 as well as judgments concerning the distribution of costs and expenses of litigation.880 As regards interest which has to be paid on the basis of a foreign judgment, the majority opinion is that such interest payments are enforceable pursuant to Article 24 of the Civil Enforcement Act.881 Nevertheless, authentic instruments issued by public notaries do not fall under the notion of a foreign judgment and thus are not subject to recognition and enforcement.882 Similarly, according to the existing law, provisional measures also will not be recognised and enforced in Japan.883 A foreign judgment can be recognised and enforced if it is final and binding (Art 118 of the CCP and Art 24(3) of the CEA). This requirement is interpreted to mean that a judgment must not be subject to any further forms of judicial review. In other words, a foreign judgment would not be recognised as long as the review proceedings are still pending before courts of the rendering state.884 Furthermore, a foreign judgment shall be valid in the state of origin; otherwise it would neither be recognised nor enforced.885 The requirements for the recognition of foreign judgments are established in Article 118 of the CCP. The first requirement for the recognition is the so-called ‘indirect jurisdiction’: the jurisdiction of the rendering court must be recognised under the laws or regulations of international treaties ratified by Japan (Art 118(i) CCP). The majority opinion is that the jurisdiction of the rendering foreign court must exist also from the perspective of Japanese

  Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853.   Tokyo District Court, Judgment of 14 January 1994, 1509 Hanrei Jih¯o 96; Nagoya District Court, Judgment of 6 February 1987, 1236 Hanrei Jih¯o 113; Tokyo District Court, Judgment of 31 January 1994, 1509 Hanrei Jihō 101, Mito District Court, Judgment of 29 October 1999, 1034 Hanrei Times 270. 879   Tokyo District Court, Judgment of 25 February 1998, 972 Hanrei Times 258. 880   Tokyo District Court, Judgment of 13 November 1967, 18 Kaminsh¯u 1093; Nagoya District Court, Judgment of 6 February 1987, 1236 Hanrei Jih¯o 113; Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853. 881   Supreme Court, Judgment of 11 July 1991, 51 Minsh¯u 2530 and (1998) 41 Japanese Annual of International Law 107; Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853. 882   T Kono, N Tada and M Shin, ‘Recognition and Enforcement of Foreign Judgments Relating to IP Rights and Unfair Competition’ in J Basedow, T Kono and A Metzger (eds), above n 1, 298. 883   ibid, 299. See also Supreme Court, Judgment of 26 February 1985, 37 Kagetsu 25. 884   See Tokyo High Court, Judgment of 28 May 2003 (‘Salvador Dalí’), 1831 Hanrei Jih¯o 135. 885   There is one quite old Japanese court judgment on this issue: Tokyo District Court, Judgment of 21 July 1960, 11 Kaminsh¯u 1535. 877

878

General Report  205 law (so-called ‘mirror theory’).886 In one of its landmark cases the Supreme Court decided that the requirements for determining indirect jurisdiction of the rendering court should be similar to the standards adhered to by Japanese courts when deciding whether they have international jurisdiction over a particular dispute. Hence, indirect jurisdiction shall be verified in light of reason and in accordance with the territorial jurisdiction provisions of the CCP, as well as take into account the existence of special circumstances.887 This requirement of the existence of jurisdiction is also justified by the policy goal to protect the rights of the defendant in foreign proceedings. The second requirement is the service of documents informing the defendant about the commencement of the proceedings. Japan is a party to two international conventions on service.888 Hence, the requirement of service pursuant to Article 118(ii) would be fulfilled in documents served according to the formalities prescribed in one of the conventions. Further guidance concerning the notion of ‘service’ was provided by the Supreme Court.889 In particular, the Supreme Court held that court documents do not have to be served on the basis of Japanese civil procedure law; however, the service must be sufficient for the defendant to become aware of the commencement of the court proceedings and to defend himself by providing facts and evidence in the case. In addition, the requirements of service within the context of Article 118(ii) CCP are fulfilled as long as documents are served according to the formalities prescribed in an international treaty recognised by both Japan and the state of the court seised. In practice, Japanese courts have refused to recognise foreign judgments in cases where the defendant was served according to the procedural rules of the foreign state but without any translation of the documents into the Japanese language. In one case a Japanese husband left his wife and child in Japan and flew to the United States. He obtained a judgment in a US court declaring the marriage dissolved. The Japanese wife brought an action for declaration that the foreign decision was not legally effective because the requirements of Article 200(2) were not fulfilled. The Japanese court found that the foreign decision was not effective in Japan; namely, the court noted that Article 200(2) of the CCP is intended to protect Japanese nationals who may not be able to defend themselves in foreign proceedings.890 In another case an American corporation filed a suit for the compensation of damages sustained from the breach of a contract. The action was brought against the Japanese corporation before the court of Hawaii. After the decision was rendered, the plaintiff sought its recognition and enforcement in Japan. The Tokyo District Court refused to satisfy the claims of the action on the following grounds: the served documents must enable a normally reasonable person to understand that these documents are an invitation to court 886   Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853; Tokyo District Court, Judgment of 30 November 1973, 26 Kasai Geppo 83; Osaka District Court, Judgment of 25 March 1991, 1408 Hanrei Jih¯o 100; Osaka District Court, Judgment of 25 February 1992, 45 Kominsh¯u 29. 887   Japanese courts affirmed indirect jurisdiction on the following grounds: defendant’s domicile (Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853; Osaka High Court, Judgment of 25 February 1992, 783 Hanrei Times 248); place of performance of obligation (Tokyo District Court, Judgment of 14 January 1994, 1509 Hanrei Jih¯o 96); the place of tort (Tokyo District Court, Judgment of 14 January 1994, 1509 Hanrei Jih¯o 96; Tokyo District Court, Judgment of 13 February 1998, 987 Hanrei Times 282); related actions (Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853; Tokyo District Court, Judgment of 14 January 1994, 1509 Hanrei Jih¯o 96); choice of court agreements (Nagoya District Court, Judgment of 6 February 1987, 1236 Hanrei Jih¯o 113; Tokyo District Court, Judgment of 31 January 1994, 1509 Hanrei Jih¯o 101). 888  1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters and the 1954 Hague Convention on Civil Procedure. 889   Supreme Court, Judgment of 28 April 1998, 53 Minsh¯u 853. 890   Tokyo District Court, Judgment of 11 November 1988, 1315 Hanrei Jih¯o 96.

206  Toshiyuki Kono and Paulius Jurcˇys proceedings and these documents must be submitted according to formal rules of service. This would be in line with the principle of non-discrimination and fair trial. However, in the case at hand the documents were served to the defendant according to the procedural rules of Hawaii: by post and without any translation into Japanese.891 According to the prevailing approach, parties may challenge the recognition of a foreign judgment arguing that its conclusion or the grounds of the foreign judgment are contrary to the substantive or procedural public policy of Japan. In one of the cases, the Tokyo District Court decided that the ‘public policy’ requirement should be understood as contrariety to Japan’s fundamental legal order, moral values or principles of international cooperation in international cases.892 In addition, the prohibition of the review of the merits (révision au fond) has been interpreted as not allowing any challenges to the recognition of the foreign judgment on such grounds as the determination of the applicable law (Art 24(2) of the CEA). As regards procedural public policy, such issues as the service of documents or minimum requirements of due process fall under separate conditions for the recognition and enforcement of foreign judgments (Art 118(1) and 118(3) of the CCP). Substantive public policy was successfully invoked to prevent the recognition and enforcement of judgments ordering punitive damages893 or foreign judgments which were incompatible with judgments rendered by Japanese courts.894 One further ground for non-recognition has been established in court practice. Namely, a foreign court judgment may not be recognised if it is incompatible with another judgment rendered by a Japanese court in the same dispute between the same parties.895 Reciprocity is the last necessary requirement for the recognition of foreign judgments in Japan (Art 118(4) CCP). According to the Supreme Court, reciprocity exists when the same kind of Japanese judgment can have legal effects in a foreign state according to conditions which are not substantially different from the requirements established in Article 118 of the CCP.896 In practice, Japanese courts have decided that reciprocity exists between Japan and various developed states (Germany,897 UK,898 Switzerland,899 Queensland (Australia),900 California,901 Washington DC,902 Singapore, Hong Kong903 etc). Yet, Japanese courts have refused to affirm the existence of reciprocity between Japan and Belgium904 and the People’s Republic of China.905   Tokyo District Court, Judgment of 26 March 1999, 857 Kin’y¯u Sh¯oji Hanrei 39.   Tokyo District Court, Judgment of 13 February 1998, 987 Hanrei Times 282. 893   Supreme Court, Judgment of 11 July 1997, 51 Minsh¯u 2573. 894   Osaka District Court, Judgment of 22 December 1977, 361 Hanrei Times 127. 895  ibid. 896   Supreme Court, Judgment of 7 June 1983, 37 Minsh¯u 611, also (1984) 27 Japanese Annual of International Law 119. 897   Nagoya District Court, Judgment of 6 February 1987, 1236 Hanrei Jih¯o 113. 898   Tokyo District Court, Judgment of 31 January 1994, 1509 Hanrei Jih¯o 101. 899   Tokyo District Court, Judgment of 13 November 1967, 18 Kaminsh¯u 1093. 900   Tokyo District Court, Judgment of 25 February 1998, 972 Hanrei Times 258. 901   Tokyo District Court, Judgment of 13 February 1998, 987 Hanrei Times 282. 902   Osaka District Court, Judgment of 22 December 1977, 361 Hanrei Times 127; Supreme Court, Judgment of 7 June 1983, 37 Minsh¯u 611, also (1984) 27 Japanese Annual of International Law 119. 903   Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853. 904   The relevant judgment of the Tokyo District Court dates back to 20 July 1960, 11 Kaminsh¯u 1522. Albeit the Tokyo District Court refused to recognise a Belgian judgment on the ground that there is no reciprocity; this may be no longer a problem because the Belgian law was amended according to the principles established in the Brussels I Regulation, see Belgian Report, Part I, para 84. 905   Osaka High Court Judgment of 9 April 2003, 1141 Hanrei Times 270. 891 892

General Report  207 16.4.2.1  The Transparency Principles Part IV of the Transparency Principles provides for a set of rules concerning recognition and enforcement of foreign judgments in IP matters. Since the Transparency Principles were prepared with a view to improving domestic Japanese law, many of the proposed provisions re-establish principles developed in the practice of Japanese courts. The promotion of the international movement of judgments had been one of the main objectives of the Transparency Principles. The recognition and enforcement regime is based on the following four considerations: (a) the convenience of the parties; (b) prevention of incompatible judgments; (c) judicial economy; and (d) the maintenance of the public policy.906 One of the main innovations proposed by the Transparency Principles is related to the range of court decisions which could be recognised. According to the established practice of the Japanese courts, only final and binding judgments can be recognised in Japan. Nonetheless, in order to increase the level of protection of IP rights, the Transparency Principles also allow for the recognition and enforcement of foreign court decisions which are not final and binding (Art 403). The latter proposal has been considered as an innovation of the Transparency Principles in the field of recognition and enforcement.907 The Transparency Principles adopt the same notion of a judgment of a foreign court as had been established in Japanese court practice.908 Accordingly, the Transparency Principles allow the recognition of monetary and non-monetary judgments (eg, injunctive orders); declaratory judgments and judgments ordering affirmative relief; judgments rendered in the default of appearance of the defendant; or judgments issued in summary proceedings. The notion of a foreign court whose judgment is to be recognised in Japan means any authority of a foreign state which is competent to settle disputes between private parties. This means that the Transparency Principles allow also the recognition and enforcement of judgments which were issued by administrative authorities such as patent offices. In addition, the Transparency Principles make a distinction between foreign judgments which are ‘final and binding’ and judgments which are not ‘final and binding’. As for final and binding judgments, general requirements of recognition and enforcement are applied. Yet, foreign judgments which are not final and binding can be recognised according to the rules for the enforcement of provisional measures (Art 403(4)). The Transparency Principles also allow the recognition and enforcement of provisional and protective measures (Art 401). This is one of the most innovative features of the Transparency Proposal because according to the existing Japanese law, recognition and enforcement were not possible. Hence, foreign court decisions ordering measures prohibiting the alleged infringer from infringing activities could be recognised and enforced if prescribed criteria are satisfied. Three types of provisional measures could be recognised and enforced in Japan pursuant to Article 401(2): (a) provisional seizure of property or provisional disposition of an object in dispute; (b) measures for securing the enforcement of the right on the merits in a civil action; and (c) provisional disposition to establish a provisional state on the merits in a civil action. The enforcement proceedings should take place according to the existing statutes (Civil Provisional Remedies Act). The requirements for the recognition and enforcement of final and binding foreign judgments are established in Article 402. The Transparency Principles generally follow   T Kono, N Tada and M Shin, above n 882, 311.   ibid, 296.   Supreme Court, Judgment of 28 April 1998, 52 Minsh¯u 853.

906 907 908

208  Toshiyuki Kono and Paulius Jurcˇys existing Japanese law; however, for the sake of clarity, two additional requirements – concerning international parallel proceedings and incompatible judgments – had been introduced. The first requirement for recognition and enforcement is the verification of the indirect jurisdiction (Art 402(1)): a foreign judgment can be recognised in Japan if the rendering court had international jurisdiction according to the provisions of the Transparency Principles. In terms of the indirect jurisdiction, there could be controversy over issues related to the existence of exceptional circumstances pursuant to Article 109 of the Principles. Potentially, if certain special circumstances exist, the rendering court could be considered as lacking jurisdiction from the viewpoint of the Japanese courts. In this regard, it should be also noted that the drafters of the Principles aimed to make it clear that the standard of indirect jurisdiction is not tantamount to direct jurisdiction.909 Namely, the requirement of an indirect jurisdiction should be interpreted narrowly and in a flexible manner.910 The second requirement is service. The Transparency Principles again follow the existing positive law and provide that a final and binding foreign judgment can be recognised if the losing defendant has received a service, a summons or order necessary for the commencement of the suit (Art 402(ii)). The service requirement is also met if the defendant appeared before the foreign court without receiving such a service. Thirdly, a foreign judgment can be recognised and enforced if it is not contrary to public policy in Japan (Art 402(iii)). The question of whether a judgment is contrary to public policy in Japan should be decided on a case-by-case basis. The notion of public policy includes a number of matters pertaining to substantive and procedural issues. Notably, the drafters of the Transparency Principles were considering the option of providing an exhaustive list of questions which could be considered as falling under the public policy exception. However, such an idea was abandoned due to various policy considerations.911 According to the Commentary, the recognition and enforcement of a foreign judgment may be refused if, for instance, (a) the rendering court which decided a dispute over foreign IP rights did not apply the mandatory rules of the protecting country; (b) if the status of a foreign IP right upon which the judgment is based conflicts with that of the protecting country; (c) the parties were not provided opportunities to produce allegations concerning the validity and scope of an IP right. Fourth, regardless of the fact that both the ALI Principles and the CLIP Principles abandon the requirement of reciprocity, the Transparency Principles follow domestic Japanese practice and retain reciprocity as one of the conditions for recognition and enforcement (Art 402(vi)). The requirement of reciprocity was subject to many discussions, and eventually it was retained based first on the consideration that the Transparency Principles primarily aim to modernise Japanese law; and, secondly, that the laws of most of the developed countries still maintain this requirement.912 Lastly, the Transparency Principles introduce new requirements regarding recognition and enforcement. First, a foreign judgment can be recognised in Japan if parallel proceedings in Japan, based on the same or similar claim, have been suspended or the claim was dismissed (Art 402(iv)). Further, a foreign judgment can be recognised if it is not incompatible with another judgment rendered by a Japanese court (Art 402(v)).   T Kono, N Tada and M Shin, above n 882, 311.   ibid, 312. 911   ibid, 318–19. 912   ibid, 330. 909 910

General Report  209 As mentioned above, the Transparency Principles allow the enforcement of foreign provisional measures, but not final and binding judgments. In order to be enforced, a foreign measure must not only satisfy requirements for the recognition of foreign final and binding judgments as established in Article 402, but must also meet additional procedural conditions. These procedural requirements have been established in light of the fact that the actual effects of the enforcement of a provisional measure may be detrimental to the interests of the party against whom the measure is issued. Therefore, the Transparency Principles would allow the enforcement of a measure if the parties to the original proceedings were given opportunities to be heard and to state their opinions on the validity of the IP rights at stake (Art 403(1)). In addition, a court may request the provision of security or stay the proceedings for the enforcement (Arts 403(2) and 403(3)). Article 404 of the Transparency Principles also establishes several provisions dealing with the legal effects of foreign judgments in Japan. The general principle is that a foreign judgment shall not have greater effect than in the state of origin. If only a part of a foreign judgment meets the requirements of recognition and enforcement, a Japanese court may recognise and enforce only that portion of the judgment. If a foreign court declares the invalidity of a registered IP right protected in a third state, such a decision has only effects between the parties (Arts 404(2) and 103(3)). Lastly, in the case where a foreign judgment cannot be enforced in Japan in whole or in part because of the existence of a compulsory licence, the right-holder shall receive adequate compensation (Art 404(3)). 16.4.2.2  Joint Japanese-Korean Proposal (Waseda Principles) Issues pertaining to the recognition and enforcement of foreign judgments are dealt with in Part IV of the Waseda Principles. Similar to the Transparency Proposal, the Waseda Principles were drafted after a close analysis of other legislative proposals (ALI, CLIP etc). Hence, foreign judgments, injunctions as well as provisional and protective measures can be generally recognised and enforced (Art 401, 403 and 405). Although the Waseda Principles follow the general trend and aim to facilitate the resolution of multi-state IP disputes, some of the provisions are rather peculiar if compared with other legislative proposals. For instance, Article 401 establishes three conditions for recognition and enforcement: indirect jurisdiction, service and public policy. Hence, in contrast to the Transparency Principles, the Waseda Principles do not differentiate between the standards of direct and indirect jurisdiction. Secondly, the Waseda Principles do not require the existence of reciprocity between the rendering and recognising states. According to Article 402, it is possible that only part of a judgment is recognised and enforced. Notably, foreign judgments invalidating IP rights registered in a third state may be recognised and enforced only between the parties (Art 404, also Art 209). The recognition and enforcement of provisional and protective measures is possible under the condition that the adverse party had an opportunity participate in the court proceedings where such measure was adopted. The Waseda Principles also follow established Japanese law and other legislative proposals in stipulating that punitive damages and other orders of monetary relief shall not be recognised or enforced beyond the amount of compensatory damages. The court is able to refuse recognition and enforcement of a foreign judgment which is inconsistent with another judgment in a dispute between the same parties.

210  Toshiyuki Kono and Paulius Jurcˇys

16.4.3  Recognition and Enforcement of Foreign Judgments in Korea Korea has signed only the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1959 and two bilateral treaties with China and Australia. Hence, in most cases the recognition and enforcement of foreign judgments in Korea are governed by the Civil Procedure Act and the Civil Enforcement Act. General requirements for the recognition of a foreign judgment in Korea are provided in Article 217 of the Civil Procedure Act: (a) the rendering court shall have international jurisdiction according to the laws of Korea; (b) the defendant should be properly served; (c) foreign judgement should not be contrary to good morals and social order in Korea; and (d) a mutual guarantee requirement should be met.913 An enforcement judgment is necessary in order to enforce a foreign judgment in the Republic of Korea. The enforcement judgment is adopted without any substantial examination of the foreign judgment to be enforced (Arts 26 and 27 of the Civil Enforcement Act). However, a foreign judgment cannot be recognised nor enforced if it is not final and conclusive, and if the rendering court did not have international jurisdiction pursuant to Article 217 of the Civil Procedure Act.914 These general requirements established in those two statutes would be applied to the recognition and enforcement of foreign judgments rendered in IP-related disputes. The Korean Principles establish several particular provisions concerning the recognition and enforcement of foreign judgments in IP cases. In order to be recognised, the rendering court shall have international jurisdiction according to the Korean Principles. Nevertheless, the Korean Principles would allow the enforcement of a judgment if the jurisdiction of the rendering court was asserted on a ground which is not prescribed in the Korean Principles.915 Further, the Korean Principles do not require the existence of reciprocity between the rendering and enforcing States. The Korean Principles also broaden the notion of judgments which can be recognised and allow for the recognition and enforcement of provisional measures, interim judgments as well as other forms of judicial decisions (settlements, waivers of claims, etc).916 However, the Korean Proposal excludes from recognition and enforcement protective orders which were granted in ex parte proceedings. As regards decisions which are not final, the Korean Proposal allows the court of the recognising country to stay the proceedings for the recognition and enforcement of such judgments which are not final. Besides, some discretion is granted to the court in determining to what extent foreign judgments ordering damages and payment of other fees should be recognised (Art 28).917

16.5  Comparative Observations In light of answers provided in the national reports several important conclusions can be made. First, the law of every represented state contains established mechanisms for the recognition and enforcement of foreign judgments. Yet, recognition and enforcement is still to a large extent viewed from the perspective of the recognising country. This leads to the second consideration which is particularly relevant to IP matters, ie the influence of   See Korean Report, section 1.4.2 for a detailed overview of the Korean court practice.   See Korean Report, section 1.4.2 and answers to HC. 915   See Korean Report, section 2.4.2. 916   Arts 26 and 27 of the Korean Principles; see also Korean Report, section 2.4.4. 917   For further discussion see Korean Report, section 2.4.4. 913 914

General Report  211 exclusive (subject-matter) jurisdiction over particular IP issues affects the recognition of a foreign judgment: if the judgment was rendered in breach of exclusive jurisdiction rules of the state where the recognition is sought (even though the rendering court finds itself competent to decide the case), such judgment is not likely to be recognised. The Canadian Report referred to the ruling in the Pro Swing case918 dealing with the recognition of foreign judgments related to IP ownership. Nevertheless, the practical effects of this judgment in IP matters will be of rather limited importance. More generally, it can be concluded that in the area of private international law of IP, the recognition and enforcement of foreign judgments seems to be one of the least harmonised fields. A closer investigation of national reports showed that differences exist with regard to the notion of a foreign judgment as well as the possibility to recognise and enforce provisional and protective measures. Besides, national laws employ different doctrines on the finality of foreign judgments. Little uniformity exists also with regard to certain requirements for recognition such as indirect jurisdiction, public policy or the existence of reciprocity. In the area of IP, it remains questionable whether the public policy exception could not be applied in order to refuse recognition or enforcement of a foreign decision on the basis that the law of a different state has been applied. This is particularly relevant to judgments in multi-state IP disputes such as ubiquitous infringements or the determination of initial ownership. It stands to reason that further harmonisation in the area of the recognition and enforcement of foreign judgments is inevitable. Therefore, different regulatory approaches existing in national laws and legislative proposals will have to be reconsidered. A set of more detailed rules could be established once the underlying policy objectives have been identified.

Concluding Observations Codification, Specialisation and Approximation The last decade of the twentieth century and the beginning of the new millennium have been marked with the signpost of codification in the areas of conflict of law and IP. A number of states and regional economic organisations have adopted new private international law statutes in order to adjust national legal frameworks to rapid technological changes that have touched every country. New private international law statutes were adopted in the European Union (namely, the Rome I and Rome II Regulations), Turkey, Russia, Japan, Taiwan, Korea, and China. The improvement of the choice-of-law rules was also brought to the discussions in the United States, where scholars question the prospects of the adoption of the Third Restatement of the Conflict of Laws.919 The process of codification of private international law is related to another important change: the adoption of more specialised choice-of-law rules for particular cross-border controversies. For example, in the European continent, the harmonisation of the law 918   Pro Swing Inc v Elta Golf Inc [2006] 2 SCR 612; RF Oppong, ‘Canadian Courts Enforce Foreign Non-Money Judgments’ (2007) 70 Modern Law Review 654–79; SGA Pitel, ‘Enforcement of Foreign Non-Monetary Judgments in Canada (And Beyond)’ (2007) 3 Journal of Private International Law 241–60. 919   S Symeonides, ‘A New Conflicts Restatement: Why Not?’ (2009) 5 Journal of Private International Law 383.

212  Toshiyuki Kono and Paulius Jurcˇys applicable to contractual obligations that was inaugurated by the adoption of the 1980 Rome Convention was deepened by the Rome I Regulation in 2008. As regards international jurisdiction, the Brussels Convention of 1968 was considered to be one of the more successful documents in the area of private international law. The territorial scope of the jurisdiction provisions entrenched in the Brussels Convention was extended to EFTA states by the Lugano Convention. Similarly, despite the failure of the attempts to adopt an international convention harmonising issues of international jurisdiction, the 2001 Draft of the Hague Judgments Convention is a significant advance in the field. On the basis of the negotiations at The Hague, the Convention on the Choice of Court Agreements was prepared. The development of legislation in the area of private international law can be noted also in Asian countries. New international jurisdiction and choice-of-law rules were enacted in China, Korea and Japan. One of the areas which drifted into the trend of developing more specialised choice-oflaw provisions is intellectual property. Many of the private international statutes adopted during the last few decades in civil law states contain certain rules related to IP rights. It could be noted that these statutes often contain a general clause establishing the principle of lex protectionis. In some countries, more comprehensive choice-of-law provisions for IP matters were enacted. Nevertheless, it could be generally stated that many issues concerning the jurisdiction over multi-state IP cases as well as the applicable law to IP matters need to be further clarified. As shown throughout this report, strict territorial approach and lex protectionis principle have often been criticised for to their rigidity and inaptness in multistate IP cases. As a result of the failure to adopt an international convention on jurisdiction and recognition of foreign judgments, a number of non-statutory codifications which aim to overcome the problems related to cross-border enforcement of IP rights. Six legislative proposals were drafted by academics in cooperation with practitioners (ALI Principles, CLIP Principles, Transparency Principles, Waseda and Korean Proposals, as well as a Taiwanese Proposal which was not discussed here). Despite some slight differences, all these legislative proposals could be considered as an attempt to afford greater legal certainty to international business and thus foster innovation and the development of national economies. These recent academic proposals also mark another important change in international harmonisation of private law: bearing in mind increasing difficulties related to the adoption of an international convention harmonising certain matters pertaining to international jurisdiction, these legislative proposals aim to not only fill in the lacuna with regard to the legal framework of international jurisdiction and applicable law in IP matters, but also help to disseminate certain underlying principles which form the basis of the new legal framework for cross-border enforcement of intellectual property rights.

Requirements for the Exercise of International Jurisdiction In the context of international jurisdiction, several general features could be highlighted. First, according to the national laws, courts can generally assert international jurisdiction if there is a sufficient connection between the dispute and the forum. In countries which could be viewed as belonging to the civil law tradition, the domicile of the defendant in the forum state is generally considered to be a sufficient ground for the exercise of jurisdiction (Art 2 of Brussels I Regulation, Japan, Korea, Croatia, Switzerland, France). This means that

General Report  213 other grounds of jurisdiction (eg, place of tort, place of performance of the contract) are considered to be exceptional/alternative grounds of jurisdiction. In common law countries (United States, Canada, India) courts can hear a case with a foreign element if they have both in personam and subject-matter jurisdiction.920 In personam jurisdiction can be asserted if a court finds that the defendant has sufficient minimum contacts with the forum. In addition, a court of a common law country must also determine whether it has subject-matter jurisdiction over the merits of the case and whether there are any grounds to dismiss the case based on the forum non conveniens considerations. The additional subject-matter jurisdiction requirement is one of the main features which distinguishes between common law and civil law countries. The implications of the subject-matter jurisdiction requirement are particularly obvious in the area of cross-border IP disputes. Courts of common law countries have consistently refused to hear claims related to foreign IP rights, even if the defendant was resident in the forum state. In European countries, the Brussels/Lugano regime generally allows a court to hear a case, as long as one of the grounds of jurisdiction exists. Hence, if a defendant is resident in a forum state, a court could assert international jurisdiction regardless in a dispute concerning foreign IP rights. Further, a court could also hear claims concerning foreign IP rights if one of the alternative grounds of jurisdiction exists (eg, claims concerning the infringement of a foreign IP right could be brought before a court together with claims concerning the infringement of rights protected in the forum state). Similar principles are followed also in Asian countries (Japan, Korea). Another significant issue related to the exercise of international jurisdiction concerns the authority of courts’ powers. Since courts of common law countries usually hear claims related to IP rights protected in the forum state, judicial powers are in fact limited to circumstances occurring in the forum state. In civil law countries, additional set of issues related to the court powers regarding adjudication disputes over foreign IP rights emerged. First, it remains controversial whether ECJ jurisprudence established in the Shevill case should be followed in the context of IP. If so, then the court of the state in which the defendant is resident could have jurisdiction over disputes concerning IP rights protected in the forum state as well as in other states. However, if the defendant was not resident in the forum state, a court could hear claims (and order provisional and protective measures) only within the territorial limits of the forum state. Secondly, particular litigation techniques whereby one of the parties challenges the validity of IP rights developed. In the context of multi-state IP disputes, challenging the validity of foreign registered IP rights caused enormous problems because of the exclusive jurisdiction conferred upon the courts of the registering state (Art 22(4) of the Brussels I Regulation) and the strict approach adopted by the ECJ in GAT v LuK case.921 The adjudication of multi-state IP disputes both in common law as well as civil law countries has been very territorial, costly and inefficient. In order to facilitate the adjudication of multi-state IP disputes a number of legislative proposals have been put forward. By establishing clear rules concerning international jurisdiction, the ALI, CLIP, Transparency Principles and other proposals aim to increase legal certainty and provide for more predictability. The proposed rules concern not only general grounds of jurisdiction, but also deal 920   The situation in the UK has been heavily influenced by the Brussels I Regulation. Besides, one significant judgment was handed down by the Supreme Court in Lucasfilm Ltd v Ainsworth (2011) UKSC 39. 921   Case C-4/03 Gesellschaft für Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I-6509.

214  Toshiyuki Kono and Paulius Jurcˇys with specific issues (eg, adjudication of actions for negative declarations, provisional and protective orders etc). One of the common denominators among all the legislative proposals is that they allow the courts to decide upon the validity of foreign IP rights if such issue arises as a preliminary question. The proposed principles also establish that that such decision upon the validity can only have limited – inter partes – effects. It has been submitted that the interests between various stakeholders (mainly, sovereign states and business community) are properly balanced. Yet, the gap between the court practice and legislative proposals is still huge.922

Cooperation Mechanisms A strict territorial approach towards subject-matter/exclusive jurisdiction creates significant hurdles for the adjudication of multi-state IP disputes before a court of one country. The adoption of a more flexible interpretation of subject-matter/exclusive jurisdiction rules is one of the necessary preconditions for the creation of the legal framework for the adjudication of cross-border IP disputes. In fact, a number of proposals have been put forward in the ALI and CLIP Principles as well as other Principles drafted by academics in Japan and Korea. In particular, three complementary institutional settings could be distinguished. First, the adoption of a more flexible approach towards the subject-matter/exclusive jurisdiction rules could help to coordinate parallel proceedings pending before courts of different states and involving same IP rights. Such proceedings involving same parties and identical IP rights have been considered as non-justiciable923 or not identical;924 as a result, the claims for consolidation of such cases have not been upheld by the courts. In order to remedy this situation, academic proposals have been made laying down specific rules of when or how such disputes involving the same parties and same IP rights could be consolidated. Secondly, if the consolidation of claims is not possible, there should be at least uniform rules providing how to treat related proceedings which are pending before different courts. Thirdly, academic proposals lay down specific proposals concerning the direct cooperation between the courts – another method of how to streamline the adjudication of multi-state IP disputes.

Choice-of-Law Matters A number of controversies arise in the context of the applicable law matters. As it could be seen from the national reports, there is no uniform opinion whether Article 5(2) of the Berne Convention can be considered as a choice-of-law rule. Yet, the territorial nature of IP rights had also repercussions to the determination of the law governing initial title, transferability, infringement and other proprietary IP matters. In common law countries non-justiciability of claims concerning foreign IP rights or the absence of subject-matter over such claims have resulted in the situation where courts did not have to solve intricate questions related to the governing law. In the civil law countries it was generally considered that matters pertaining to IP rights should be governed by the law of the state where the protection is sought.   But see Lucasfilm v Ainsworth (2011) UKSC 39.   Jan K Voda v Cordis Corp 476 F 3d 887 (Fed Cir 2007). 924   See eg, Case C-539/03 Roche Nederland BV and Others v Frederick Primus and Milton Goldenberg [2006] ECR I-6535. 922 923

General Report  215 The increasing number of international commercial transactions as well as the development of modern information technologies brought about novel cases related multi-state exploitation of IP rights. While territoriality of IP rights remained the general rule mandating the application of the law of the state for which protection is sought; the need for more particular choice-of-law rules became obvious. In this context, four main areas should be distinguished. First, as regards the initial ownership as well as other proprietary issues related to IP rights (eg, existence, scope of protection, transferability etc), different approaches have developed depending on the fact whether rights at stake are subject to registration or not. If rights at stake are subject to registration, the prevailing approach is that the law of the registering state should be applied. Yet, several possible choice-of-law rules have emerged with regard to proprietary aspects pertaining to non-registered IP rights (the law of the protecting country (lex protectionis) or the law of the country of origin (lex originis925)). Secondly, the law of the protecting country (lex protectionis) has been often referred to as a general principle determining the applicable law to infringements of IP rights. Since the adjudication of infringement claims related to foreign IP rights has been consistently preempted by the subject-matter/justiciability doctrines, the law governing infringements of IP rights usually the law of the forum (lex fori). The principle of lex protectionis was also entrenched in such recent codifications as the Rome II Regulation (Art 8) as well as domestic private international law statutes. However, rules providing for the principle of lex protectionis to IP infringement cases were not always considered as appropriate. Instead, the trend appears to be to provide for a more comprehensive set of choice-of-law provisions which would distinguish between various kinds of infringements IP rights (particularly, concerning ubiquitous infringements of IP rights occurring in the digital environment). Further, it was also often suggested that party autonomy be introduced with regard to available remedies in the case of infringement of IP rights as well as to crystallise the matters to which concrete choice-of-law rules are applicable. Thirdly, many intricate problems exist with regard to the determination of the applicable law to contracts concerning the transfer of IP rights. Albeit national reports showed that parties’ choice-of-law agreements are generally upheld, the complexity of contractual relationship in practice often leads to much uncertainty concerning the determination of the governing law. In particular, problems arise in those cases where contracting parties have failed to agree on the law governing their contractual obligations. Different choice-of-law methodologies exist in common law and civil law countries. In common law countries, the law of the state with the ‘closest and most significant relationship’ would have to be applied. In countries of the civil law tradition, contractual obligations of the parties should be determined by the law of the state in which the party who is to perform the characteristic obligation is resident. The newly adopted Rome I Regulation provides for a more comprehensive set of choice-of-law rules. Yet, it appears that many of the issues related to the determination of the applicable law to contracts involving the transfer of IP rights remained unresolved. Therefore, generally, it could be noted that the practice of national courts in this area is not uniform. Hence, the legislative proposals provide for various sets of rules which should, at least partially, fill in the gaps related to the determination of the governing law in the absence of parties’ choice.

  See French John Huston case and Itar-Tass Russian News Agency v Russian Kurier Inc 153 F 3d 82 (1998).

925

216  Toshiyuki Kono and Paulius Jurcˇys Fourthly, a number of other issues related to cross-border exploitation of IP rights emerged. Securities in IP is one of the areas which has become more and more important in practice. Several parallel projects concerning the securitisation of IP have been launched and are in progress under the auspices of UNCITRAL as well as academic institutions.

Looking to the Future The increasing number of cases concerning cross-border exercise of IP rights marks the confluence of two different areas of law – intellectual property and private international law. IP has become a valuable asset for individuals as well as corporations and is often an object of international transactions. However, the existing legal framework concerning the exploitation of IP rights does not always provide for optimum solutions. In order to promote creativity as well as the flow of the objects resulting from creative activities, it is necessary to reconsider the existing institutional settings and think of possible ways how they could be improved. Much of the work has been accomplished already and has taken the form of legislative proposals (ALI, CLIP, Transparency, Waseda and Korean Principles). Since these proposals lack binding force, it is also possible to think of an international instrument which would establish a set harmonised rules related to the cross-border exploitation of IP rights. This work has been started under the auspices of the International Law Association.926 The ILA working group aims to draft a legal instrument which would be based on the previous projects (Hague Judgments Project, academic proposals in the area of IP and private international law) and put forward a set of rules concerning international jurisdiction, choice of law as well as recognition and enforcement of foreign judgments in IP matters.

 www.ila-hq.org/en/committees/index.cfm/cid/1037.

926

Austria THOMAS PETZ*

Contents 1. Introduction................................................................................................................................... 218 2. The Law Applicable to Intellectual Property Rights: An Analysis................................................ 220 2.1. The Domestic and European Sources of Austrian Conflict of Laws.................................. 220 2.2. The Law Applicable to the Infringement of Intellectual Property Rights......................... 222 2.2.1. The General Rule of the Lex Loci Damni and the Special Rule of the Lex Loci Protectionis.............................................................................................................. 222 2.2.2. The Main Differences between the General Rule and the Special Rule............... 223 2.3. The Law Applicable to Contracts Relating to Intellectual Property Rights....................... 229 2.3.1 The Legislative History of Article 4 Rome I and Its Repercussions..................... 229 2.3.2 The Determination of the Characteristic Performance and Its Alternatives....... 230 2.4 The Law Applicable to the Property Aspects of Intellectual Property Rights................... 239 2.4.1 The Application of Rome I to the Property Aspects of Intellectual Property Rights...................................................................................................................... 239 2.4.2 The Application of Rome II to the Property Aspects of Intellectual Property Rights...................................................................................................................... 243 2.4.3 Property Aspects and Employment Relationships................................................ 246 2.5 Choice of Law....................................................................................................................... 246 2.5.1 Choice of Law and Contractual Obligations......................................................... 247 2.5.2 Choice of Law and Non-Contractual Obligations................................................ 247 2.5.3 Choice of Law and the Property Aspects of Intellectual Property Rights........... 248 2.6 Summary............................................................................................................................... 250 3

Revisiting the Applicable Law: Four Case Studies........................................................................ 251 3.1 The Principle of Territoriality.............................................................................................. 251 3.1.1 The Application of Austrian Law to Infringing Activities that Occur Abroad.... 251 3.1.2 The Application of Foreign Law to Infringing Activities in Austria.................... 258 3.2 The Law Applicable to the Infringement of Intellectual Property Rights......................... 258 3.2.1 Direct Infringement............................................................................................... 259 3.2.2 Contributory Infringement................................................................................... 260 3.2.3 Ubiquitous Infringement....................................................................................... 264

* Research Fellow, Max Planck Institute for Intellectual Property and Competition Law, Munich; LLM (Berkeley); Mag iur, Karl-Franzens-Universität Graz, Austria. An earlier version of this contribution limited to the conflict of laws issues has been published as T Petz, ‘Conflict of Laws in Intellectual Property: An Analysis of Rome I, Rome II and domestic Austrian conflict rules’, in B Verschraegen, Austrian Law – An International Perspective (Vienna, Jan Sramek, 2010).

218  Thomas Petz 3.3

3.4

The Law Applicable to Initial Ownership........................................................................... 270 3.3.1 Initial Ownership of a Patent................................................................................. 270 3.3.2 Initial Ownership in Case of a Joint Collaboration.............................................. 273 3.3.3 Initial Authorship and Initial Title to Trade Mark................................................ 275 3.3.4 Reasonable Compensation for Use in Several Countries..................................... 277 The Law Applicable to Transfer of Rights Agreements...................................................... 278 3.4.1 The Enforceability of a Choice of Law Agreement............................................... 278 3.4.2 Transferability......................................................................................................... 281 3.4.3 Absence of a Choice of Law Agreement................................................................ 282

4

Jurisdiction, Recognition and Enforcement in Intellectual Property Case by Case.................... 282 4.1 General and Special Grounds of International Jurisdiction.............................................. 283 4.1.1 Jurisdiction at the Domicile of a Natural Person.................................................. 284 4.1.2 Jurisdiction at the Main Place of Business of a Corporation............................... 285 4.1.3 Jurisdiction Based on Distribution in Austria...................................................... 287 4.1.4 Jurisdiction Based on Distribution Abroad.......................................................... 291 4.1.5 Jurisdiction and the Amount of Damages Awarded............................................. 294 4.2 Subject-Matter Jurisdiction................................................................................................. 297 4.2.1 Jurisdiction for Proceedings Concerning the Infringement of Foreign Rights... 298 4.2.2 Jurisdiction for Proceedings Concerning the Validity of Foreign Rights............ 300 4.2.3 The Validity of a Foreign Right as an Incidental Question.................................. 305 4.3 Consolidation of Proceedings.............................................................................................. 310 4.3.1 Consolidation in Cases of Multiple Infringements.............................................. 310 4.3.2 Consolidation in Case of a Breach of Licence Agreements.................................. 313 4.3.3 Consolidation in Case of a ‘Spider in the Web’..................................................... 317 4.4 Choice of Court Agreements............................................................................................... 322 4.4.1 Choice of Court in Proceedings Concerning Licence Agreements...................... 322 4.4.2 Choice of Court in Infringement Proceedings..................................................... 326 4.4.3 The Counterclaim of Invalidity in Infringement Proceedings............................. 328 4.4.4 Arbitration Agreements......................................................................................... 331 4.5 Parallel Proceedings.............................................................................................................. 333 4.5.1 Parallel Proceedings in the Country of Registration............................................ 333 4.5.2 Parallel Proceedings outside the Country of Registration................................... 337 4.6 Recognition and Enforcement of Foreign Judgments........................................................ 339 4.6.1 Recognition of a Foreign Judgment in Austria..................................................... 339 4.6.2 Enforcement of a Foreign Judgment in Austria.................................................... 342 4.6.3 Enforcement by Registration in the Austrian Patent Registry............................. 344

5

On the ECJ: A Brief Summary of the Rules on International Jurisdiction.................................. 345

1 Introduction The purpose of this chapter is to assess how policy considerations on which intellectual property law is based affect Austrian rules on international jurisdiction, conflict of laws, and the recognition and enforcement of foreign judgments.1 To this avail, we will 1   As used here, the notion of ‘conflict of laws’ refers to the rules that determine the applicable law. On the origin of this notion and its relation to the more general notion of ‘private international law’, see M Schwimann, Internationales Privatrecht, 3rd edn (Vienna, Manz, 2001) 7–8; W Posch, Bürgerliches Recht, vol 7, 5th edn (Vienna,

Austria  219 apply two different approaches which, by and large, echo the structure of the questionnaire on jurisdiction and the applicable law in matters of intellectual property for the 18th International Congress on Comparative Law which took place in Washington, DC, in July 2010. The first approach is of a more theoretical nature: taking the rules on the applicable law as an example, we will observe how policy considerations of intellectual property influence the application of general conflict rules, and under what circumstances they mandate the development of special conflict rules for intellectual property. The reason why we apply this approach only to the rules on the applicable law is that contrary to those on international jurisdiction and the recognition and enforcement of foreign judgments, this field of law has recently undergone considerable changes within the European Union, with the adoption of the Rome I and Rome II Regulations.2 As there is as yet little case law on either of the Regulations, answering the questionnaire’s conflict of laws questions properly thus requires starting from scratch.3 Consequently, in this regard, rather than being a report on the Austrian conflict rules for intellectual property rights, this chapter provides an analysis of both Regulations and their interaction with the respective domestic Austrian conflict rules. This will be done in Section 2. We will start with a brief introduction to the Austrian conflict rules and proceed by analysing the rules that apply to the infringement of intellectual property rights, to contracts relating to intellectual property rights and to the property aspects of these rights. Further, before we summarise the results of this part, we will illustrate, in a synopsis, to what extent these rules allow choice of law. By contrast, the second approach is a more practical one: we will discuss four case studies that reflect some of the classical challenges that intellectual property law poses to conflict of laws and the solutions provided for – or that could be provided for – by Austrian law. These cases concern the principle of territoriality, the infringement and the initial ownership of intellectual property rights and finally contracts relating to such rights. Section 3 of this chapter is devoted to these issues. In Section 4, we will extend this approach to the rules on international jurisdiction and the recognition and enforcement of foreign judgments. The latter fields of law will thus be presented only in a case-based fashion: in six case studies, we will deal with general and special grounds of international jurisdiction for proceedings concerning intellectual property rights, subject-matter jurisdiction for infringement proceedings and proceedings concerning the validity of intellectual property Springer, 2010) no 1/5. See also for a German perspective, J Kropholler, Internationales Privatrecht, 6th edn (Tübingen, Mohr Siebeck, 2006) 7–9. 2   Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), (2008) OJ L 177/6, and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), (2007) OJ L 199/40. The competence of the European Union to adopt Regulations with regard to issues of conflict of laws follows now from Art 81(2)(c) of the Treaty on the Functioning of the European Union (TFEU), (2008) OJ C 115/78. 3   The following questions of the questionnaire relate to conflict of law issues and are thus dealt with, directly or indirectly, in this chapter: Section I no I 3 on international and domestic sources of conflict of laws provisions (see below 2.1) and general principles of choice of law in torts, contracts and transfers of rights (see below 2.5); Section I no II on special conflict rules (see below 2.2 for infringement and 2.3.2.4 for licence agreements), the application of more general conflict rules to intellectual property rights (see below 2.3 for contracts relating to intellectual property rights and 2.4 for the property aspects of intellectual property rights) and the relationship and differences between general choice of law rules and choice of law rules for intellectual property rights (see below 2.5); Section II case 5 on the principle of territoriality (see below 3.1), case 6 on the infringement of intellectual property rights (see below 3.2), case 7 on the law applicable to initial ownership (see below 3.3) and finally, case 8 on the law applicable to transfer of rights agreements (see below 3.4).

220  Thomas Petz rights, the consolidation of multiple proceedings, the enforceability of choice of court agreements, the procedural treatment of parallel proceedings, and the recognition and enforcement of foreign judgments concerning registered intellectual property rights. In order not to lose sight of the bigger picture, however, we will set out the general principles of these fields of law where appropriate. Finally, in Section 5 we will briefly summarise the main differences concerning international jurisdiction for proceedings relating to intellectual property rights between the European regime and its domestic Austrian counterpart.

2  The Law Applicable to Intellectual Property Rights: An Analysis 2.1  The Domestic and European Sources of Austrian Conflict of Laws In Austria, the main source of conflict of laws has long been the 1978 Private International Law Act (hereinafter, PIL Act).4 Due to recent activities of the European legislator, however, the importance of this Act has diminished considerably. As regards the rules determining the law applicable to intellectual property rights, the entering into force of the Rome I and the Rome II Regulation was of particular importance. The first Regulation applies to all contracts concluded after 17 December 20095, the latter Regulation to all events giving rise to damage that occurred after 11 January 2009.6 As these dates are very recent, case law is still lacking. For Rome I, however, recourse may be made to the case law on those provisions of its predecessor, the Rome Convention on the law applicable to contractual obligations (hereinafter, Rome Convention),7 that have remained unchanged.8 Further, a

4   BGBl 1978/304, most recently amended by BGBl I 2009/109. On this Act in particular and on Austrian conflict of laws in general see A Duchek and F Schwind, Internationales Privatrecht (Vienna, Manz, 1979); M Schwimann, Grundriss des Internationalen Privatrechts (Vienna, Manz, 1982); F Schwind, Internationales Privatrecht – Lehr- und Handbuch für Theorie und Praxis (Vienna, Manz, 1990); M Schwimann in P Rummel (ed), Kommentar zum Allgemeinen bürgerlichen Gesetzbuch, vol 2, 2nd edn (Vienna, Manz, 1992); Schwimann, above n 1; B Verschraegen in P Rummel (ed), Kommentar zum Allgemeinen bürgerlichen Gesetzbuch, vol 2, Part 6, 3rd edn (Vienna, Manz, 2004); M Neumayr in H Koziol, et al (eds), Kurzkommentar zum Allgemeinen bürgerlichen Gesetzbuch, 3rd edn (Vienna, Springer, 2010); Posch, above n 1. 5   Art 29 Rome I and Corrigendum to Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), (2009) OJ L 309/87. See also W Posch, ‘Strukturelle und semantische Unzulänglichkeiten im vergemeinschafteten Internationalen Schuldrecht’ (2008) Wirtschaftsrechtliche Blätter 571, 572. 6   Arts 31, 32 Rome II. On the relationship and interpretation of these two provisions from a German perspective see J Drexl, ‘Internationales Immaterialgüterrecht’ in HJ Sonnenberger (ed) Münchener Kommentar zum Bürgerlichen Gesetzbuch vol 11, 5th edn (Munich, Beck, 2010) no 149. 7   BGBl III 1998/166 as amended last by BGBl III 1998/208. For an Austrian perspective on the Rome Convention see D Czernich and H Heiss, Das Europäische Schuldvertragsübereinkommen: Übereinkommen über das auf vertragliche Schuldverhältnisse anzuwendende Recht (Vienna, Orac, 1999); Verschraegen, above n 4; G Musger in H Koziol, et al (eds), Kurzkommentar zum Allgemeinen bürgerlichen Gesetzbuch 2nd edn (Vienna, Springer, 2007). 8   On the relationship of Rome I to the Rome Convention see Art 24 Rome I. For the methodology developed by the ECJ for interpreting the Rome Convention, see Case C-133/08 Intercontainer Interfrigo (2010) Zeitschrift für Rechtsvergleichung, 4 with a case note by C Rudolf.

Austria  221 substantial amount of legal writings on both Regulations in general9 and their intellectual property aspects in particular has been published.10 At the outset, two important differences between the PIL Act and the Regulations have to be stressed; a more general one, and one that is particular to conflict of laws. The first concerns the interpretation of the respective provisions. The provisions of the domestic PIL Act are construed in the last instance by the Austrian Supreme Court (OGH) applying the traditional methods of interpretation of domestic Austrian law.11 In contrast to that, the Regulations are construed autonomously in preliminary rulings by the European Court of Justice (ECJ), that is, without recourse to any domestic law, and by using the methods of European Union law only.12 The second difference is that both Regulations refer to the substantive law rules of the applicable law.13 Consequently, the substantive law rules of the country to which the conflict rules of the Regulations refer apply regardless of that 9   A genuine Austrian perspective on these Regulations is offered by H Heiss, ‘Die Vergemeinschaftung des internationalen Vertragsrechts durch “Rom I” und ihre Auswirkungen auf das österreichische internationale Privatrecht’ (2006) Juristische Blätter 750; H Heiss and L Loacker, ‘Die Vergemeinschaftung des Kollisionsrechts der außervertraglichen Schuldverhältnisse durch Rom II’ (2007) Juristische Blätter 613; H Ofner, ‘Die Rom II-Verordnung – Neues Internationales Privatrecht für außervertragliche Schuldverhältnisse in der Europäischen Union’ (2008) Zeitschrift für Rechtsvergleichung 13; H Heiss, ‘Europäisches IPR der außervertraglichen Schuldverhältnisse (Rom II) – Bedeutung für das europäische Kollisionsrecht und Folgen für das österreichische IPRG’ in G Reichelt (ed), 30 Jahre österreichisches IPR-Gesetz – Europäische Perspektiven (Vienna, Manz, 2009) 1; G Musger in H Koziol, et al (eds), Kurzkommentar zum Allgemeinen bürgerlichen Gesetzbuch, 3rd edn (Vienna, Springer, 2010); Neumayr, above n 4; C Rudolf, ‘Europäisches Kollisionsrecht für außervertragliche Schuldverhältnisse – Rom II-VO’ (2010) Österreichische Juristenzeitung, no 36; and the contributions in D Beig, et al (eds), Rom II-VO – Neues Kollisionsrecht für außervertragliche Schuldverhältnisse (Vienna, Manz, 2008). 10   For an Austrian perspective on these aspects see A Grubinger, ‘Die Rom-II-VO und die Verletzung von freiem Wettbewerb sowie von Rechten des geistigen Eigentums’ in D Beig, et al (eds), Rom II-VO – Neues Kollisionsrecht für außervertragliche Schuldverhältnisse (Vienna, Manz, 2008) 55; C Handig, ‘Rom II-VO – Auswirkungen auf das Internationale Wettbewerbs- und Immaterialgüterrecht’ (2008) Wirtschaftsrechtliche Blätter 1; C Handig, ‘Das Leck im Schutzlandprinzip’ (2009) ecolex 775. Any comprehensive analysis of an act of European Union law, however, requires looking beyond domestic scholarship. Thus, for a non-Austrian perspective on the intellectual property aspects of the Regulations, see J Basedow and A Metzger, ‘lex loci protectionis europea – Anmerkungen zu Artikel 8 des Vorschlags der EG-Kommission für eine Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht (“Rom II”)’ in A Trunk et al (eds), Russland im Kontext der internationalen Entwicklung: Internationales Privatrecht, Kulturgüterschutz, geistiges Eigentum, Rechtsvereinheitlichung. Festschrift Boguslawskij (Berlin, Berliner Wissenschafts-Verlag, 2004) 153; B Buchner, ‘Rom II und das Internationale Immaterialgüter- und Wettbewerbsrecht’ (2005) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 1004; EI Obergfell, ‘Das Schutzlandprinzip und Rom II’ (2005) Praxis des Internationalen Privat- und Verfahrensrechts 9; N Boschiero, ‘Infringement of Intellectual Property Rights – A Commentary on Article 8 of the Rome II Regulation’ (2007) Yearbook of Private International Law 87; P de Miguel Asensio, ‘Applicable law in the absence of choice to contracts relating to intellectual property or industrial property rights’ (2008) Yearbook of Private International Law 199; R Sack, ‘Das IPR des geistigen Eigentums nach der Rom II-VO’ (2008) Wettbewerb in Recht und Praxis 1405; P Torremans, ‘Licenses and assignments of intellectual property rights under the Rome I Regulation’ (2008) Journal of Private International Law 397; M Grünberger, ‘Das Urheberrechtsstatut nach der Rom II-VO’ (2009) 108 Zeitschrift für vergleichende Rechtswissenschaft 134; P Mankowski, ‘Contracts Relating to Intellectual Property and Industrial Property Rights under the Rome I Regulation’ in S Leible and A Ohly (eds), Intellectual Property and International Private Law (Tübingen, Mohr Siebeck, 2009) 31; Y Nishitani, ‘Contracts Concerning Intellectual Property Rights’ in F Ferrari and S Leible (eds), Rome I Regulation – The law applicable to Contractual Obligations in Europe (Munich, Sellier, 2009); Drexl, above n 6, no 140–69; EI Obergfell, ‘Verträge über Rechte am Geistigen Eigentum’ in C Reithmann and D Martiny (eds), Internationales Vertragsrecht, 7th edn (Cologne, Schmidt, 2010) 825; U Stimmel, ‘Lizenzverträge unter der Rom I Verordnung’ (2010) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 783. 11   This, of course, refers only to the methods. It does not mean, however, that a notion used in a domestic Austrian conflict rule has the same meaning as in substantive Austrian law. 12   For the ECJ to issue a preliminary ruling, a request of a court of a Member State of the European Union is required. In such a ruling the ECJ does not make a final determination of the matters in question, but only construes the act of European Union law in question. In detail, see Art 267 TFEU. 13   Art 20 Rome I, Art 24 Rome II.

222  Thomas Petz country’s conflict rules. By contrast, the rules of the PIL Act regularly refer to the conflict rules of the country whose law shall be applied.14 Thus, it depends on those foreign conflict rules whether the law that is deemed applicable by the domestic Austrian conflict rules actually applies. In conflict of laws terminology, the difference thus is that both Regulations exclude the renvoi, whereas regularly the PIL Act does not.

2.2  The Law Applicable to the Infringement of Intellectual Property Rights 2.2.1  The General Rule of the Lex Loci Damni and the Special Rule of the Lex Loci Protectionis Article 4(1) Rome II provides that the law of the country in which the damage occurs shall apply to all non-contractual obligations arising out of a tort.15 Further, it makes clear that neither the law of the country where the event occurs that gives rise to the damage, nor that of the country where indirect consequences of the event occur, is applicable. The general rule for torts thus provides for the application of the lex loci damni. A court may deviate from this rule under two circumstances: first, if the person claimed to be liable and the person sustaining the damage both have their habitual residence in the same country at the time when the damage occurs.16 The rationale of this exception is that there is a closer connection to that country. Second, if the tort is manifestly more closely connected with a country other than that where the damage occurs or that of the parties’ common residence, the law of that other country shall apply.17 This is a general opening clause. An example of such a closer connection would be a pre-existing relationship between the parties such as a licence agreement. In addition to this general rule, Rome II provides for two special provisions for intellectual property rights. The first provision is Article 8 Rome II. The first paragraph of this provision determines the law of the country for which protection is claimed – that is, the lex loci protectionis – as the law applicable to the infringement of intellectual property rights; the third paragraph declares any choice of law regarding the infringement of intellectual property rights as inadmissible. Which rights are considered to be intellectual property rights is indicated by the non-exclusive list of Recital 26. This list includes industrial property rights, copyright and related rights, and the sui generis right for the protection of databases.18 The second provision dealing exclusively with intellectual property rights is Article 13 Rome II. It states that Article 8 Rome II is also applicable to claims based on unjust enrichment, agency without authority and pre-contractual liability. Consequently, the lex loci protectionis applies to all claims arising from the infringement of an intellectual property right, regardless of the nature of the claim.

  s 5 PIL Act.   For a comparison with the domestic Austrian regime before Rome II entered into force, see J Schacherreiter, ‘Rom II im Überblick’ in D Beig, et al (eds), Rom II-VO – Neues Kollisionsrecht für außervertragliche Schuldverhältnisse (Vienna, Manz, 2008) 1, 2–4. For an assessment of this rule see W Posch, ‘Zur Bestimmung des Deliktsortes bei außervertraglichen Schuldverhältnissen mit Auslandsberührung’ in P Apathy, et al (eds), Festschrift für Helmut Koziol zum 70 Geburtstag (Vienna, Jan Sramek, 2010) 835. 16   Art 4(2) Rome II. 17   Art 4(3) Rome II. 18   See Grubinger, above n 10, 60. See also below 3.1.1. 14 15

Austria  223

2.2.2  The Main Differences between the General Rule and the Special Rule This juxtaposition already reveals two main differences between the general rule applicable to all torts, and the special rule applicable only to the infringement of intellectual property rights. The first difference is that in the absence of exceptions, escape clauses and the possibility of choosing the applicable law, the rule on the infringement of intellectual property rights is a strict one. This difference, however, is not unique to intellectual property rights: for both claims arising out of an act of unfair competition which does not exclusively affect the interests of a specific competitor, and claims arising out of a restriction of competition, there is also no escape clause and no choice of law.19 This indicates that for both fields of law, intellectual property and competition, the policy considerations mandate the adoption of a special rule.20 The second difference to the general rule is that in the event of an infringement of an intellectual property right, one and the same law applies to all claims arising from this infringement regardless of whether they are rooted in tort, unjust enrichment, agency without authority or pre-contractual liability. In addition, however, there is a third hidden difference, dogmatic by nature, which is of utmost importance.21 For the purposes of this chapter, the latter two differences deserve to be scrutinised, and we will start with the dogmatic one. 2.2.2.1  The Dogmatic Difference between the Lex Loci Damni and the Lex Loci Protectionis As set out above, tort claims are governed by the law of the country in which the damage occurs. This requires determining what constitutes the damage, and where it occurs. Both issues are a matter of interpretation of the conflict rules and thus, of the Rome II Regulation. If it results from this interpretation that in a particular country no damage has occurred, the law of that country is not applicable. As a result, the law of a different country – that where the damage has actually occurred – will be applied by the Austrian court seised.22 By contrast, with regard to the infringement of an intellectual property right, the plaintiff unilaterally determines the applicable law by indicating in his submissions to the court the country for which he claims protection. The law of this country, then, applies regardless of whether the damage has actually occurred there. The crucial issue is thus not one of the rules determining the applicable law, but of the applicable law itself. Whether the allegedly infringing activities are actually infringing depends on the concept of infringement 19   Art 6(1), (3)(a) and (4) Rome II. By contrast, if the act of unfair competition affects exclusively the interests of a specific competitor, the general regime of Art 4 Rome II applies. Whether this also allows choice of law for non-contractual obligations arising out of such an act, however, is controversial. See Neumayr, above n 4, at Artikel 6 Rom II no 2 with further references. The proper solution seems to be that no such choice is allowed as only construed that way, the reference of Art 6(2) Rome II to the general regime of Art 4 Rome II has a normative value. See J Drexl, ‘Internationales Recht gegen den unlauteren Wettbewerb’ in HJ Sonnenberger (ed), Münchener Kommentar zum BGB, vol 11, 5th edn (Munich, Beck, 2010) no 160. 20   For these policy considerations see below 2.5.2 and Heiss and Loacker, above n 9, 630; Grubinger, above n 10, 63–64. It has to be stressed, however, that the policy considerations of unfair competition law and intellectual property law are not necessarily the same. Nevertheless, in both fields of law, the interests of third parties are deemed to deserve more protection than in ordinary tort cases. 21  On this difference see in detail S Briem, Internationales und europäisches Wettbewerbsrecht und Kennzeichenrecht (Vienna, Orac, 1995) 112–14; Drexl, above n 6, no 12. 22   In this regard, it is important whether the court has to determine the applicable law on its own motion. The PIL Act s 2 imposes such a duty on Austrian courts. See OGH 4 Ob 398/85, Noverox/Ferrox (1986) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 92 (with case note by H Schmidt).

224  Thomas Petz endorsed by the substantive rules of the applicable law. It may well be that this concept is limited to activities occurring on the territory of the country for which protection is claimed.23 Indeed, such a limitation follows from public international law: international comity requires that the substantive law of a country covers only those activities that occur within the territorial boundaries of that country.24 To honour this principle, thus, the substantive law of the country for which protection is claimed may consider only those activities to be an infringement that occur on its territory.25 For activities that occur abroad but have economic effects on the territory of the country for which protection is claimed, this means that the effects themselves have to be considered infringing activities under the law of the country for which protection is claimed.26 In this context, the place where the allegedly infringing activities occur is important to the extent that it distinguishes territorial from extraterritorial activities. Thus, it is decisive only for the application of the applicable law, but not for the determination of the applicable law. In this regard, the rule on the law applicable to the infringement of intellectual property rights differs considerably from the general rule which requires determining the place where the damage has occurred.27 As a result of this difference, if a court finds that no infringement of an intellectual property right has occurred in the country for which protection is claimed, the plaintiff loses his case on the merits whereas under the general rule, if the court finds that arguably no damage has occurred in a particular country, it simply does not apply the law of this country, but the law of the country where the damage arguably occurred.28 Constructing the dogmatic difference between the lex loci damni and the lex loci protectionis this way, however, has provoked considerable criticism, in particular from copyright scholars.29 This criticism is based mainly on two arguments. The first is that by making the applicable law dependent on a unilateral determination by the plaintiff, the conflict of laws issue in effect disappears. Consequently, the law of any country may apply, should the plaintiff claim protection for that country. This is considered to make it unforeseeable to   See below 3.1.1.   Drexl, above n 6, no 261. See also R Dittrich, ‘Internet und On-Demand-Dienste im IPR’ (1997) ecolex 166 and H Schack, Urheber- und Urhebervertragsrecht, 5th edn (Tübingen, Mohr Siebeck, 2010), no 912 and 915 who consider this limitation to be immanent to the principle of territoriality. See also below n 199. 25   Schack, above n 24, no 915. 26   See for Austrian law before the entry into force of Rome II OGH 4 Ob 72/88, RTL Plus, (1989) Medien und Recht 19 (considering for the purpose of compulsory licences a broadcast from Luxemburg that can be received in Austria by cable to be an Austrian broadcast as it is also directed to Austria); OGH 4 Ob 19/91, Tele-Uno III, (1991) Medien und Recht 195 (applying Austrian copyright law to an Italian broadcast directed to Austria and finding for infringement of the authors’ Austrian copyrights); OGH 4 Ob 44/92, Schott II, (1992) Medien und Recht 194 (applying Austrian copyright law to a German broadcast and finding for no infringement as the exclusive licence on which the plaintiff based his claim did not confer on him the broadcasting right for Austria). By contrast, for tort claims, the effects of infringing activities that occurred abroad have been considered to be infringing activities in Austria at the level of conflict of laws. See OGH 4 Ob 89/92, Macht und Magie, (1995) Medien und Recht 55 (applying in a personality rights case Austrian law to a broadcast that originated from Germany because the broadcast could be received by cable in Austria). See in detail M Walter, ‘Anwendbares Recht’ in U Loewenheim (ed), Handbuch des Urheberrechts, 2nd edn (Munich, Beck, 2010) § 58, no 97–100. 27   Briem, above n 21, 113; C Handig, ‘Neues im Internationalen Wettbewerbsrecht – Auswirkungen der Rom II-Verordnung’ (2008) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 24, 28; Drexl, above n 6, no 12; Neumayr, above n 4, § 34 IPRG no 2. 28   As regards the general tort rule, it has to be stressed that at the level of conflict of laws the court may not finally determine whether the damage has actually occurred in the country where it is claimed to have occurred. Rather, this determination is left to the substantive rules of the applicable law. See B Lurger, ‘IZVR und IPR bei Internet Domain Namen’ in V Schönberger, et al (eds), Das Recht der Domain Namen (Vienna, Manz, 2001) 103, 112 and 127. 29   See Walter, above n 26, no 16 and 17. 23 24

Austria  225 the defendant, at the time he engages in his allegedly infringing activities, which law will apply to these activities.30 The second argument is that such a construction requires that the substantive law rules of the country for which protection is claimed determine whether an allegedly infringing activity that occurs outside the territory of the country for which protection is claimed amounts to an infringement. As regularly the substantive law rules on infringement are silent on the territorial aspects of the infringement, this construction is considered to be impractical.31 Based on these arguments, a different construction of the dogmatic difference between the lex loci damni and the lex loci protectionis has been advanced. Its starting point is the observation that the lex loci protectionis applies to both the infringement of intellectual property rights and their property aspects. As far as infringement is concerned, the lex loci protectionis is considered to be identical to the lex loci damni, but as the lex loci damni does not apply to the property aspects of intellectual property rights, this identity is limited to their infringement.32 Thus, under this construction also the lex loci protectionis is distinguished from the lex loci damni. For the infringement of intellectual property rights, however, it follows from the identity of the first with the latter that determining the applicable law requires determining the place where the damage arguably occurred.33 Before the entry into force of Rome II, this construction found some support in the wording of section 34(1) PIL Act. This provision provides that the existence, contents and termination of intellectual property rights are governed by the law of the country where the allegedly infringing activities occurred. Thus, on its face it applies only to the property aspects of intellectual property rights. As the claims arising from the infringement of an intellectual property right are closely related to these aspects, however, this provision ever since has been considered to apply also to infringement claims.34 Taken literally, the law applicable to these claims would then be the law of the country where the allegedly infringing activities occurred. Construed that way, thus, as far as infringement is concerned, section 34(1) PIL Act would be nothing but a modified expression of the general tort rule which before the entry into force of Rome II provided for the application of the lex loci

30   See Walter, above n 26, no 10 and in his case note to OGH 4 Ob 139/90, Gleichgewicht des Schreckens (1991) Medien und Recht 112; B Lurger, ‘Internationales Deliktsrecht und Internet – ein Ausgangspunkt für grundlegende Umwälzungen im Internationalen Privatrecht?’ in J Basedow, et al (eds), Aufbruch nach Europa. 75 Jahre MaxPlanck-Institut für Privatrecht (Tübingen, Mohr Siebeck, 2001) 495, n 69. 31   To both arguments there are valid counter-arguments: the applicable law is not unforeseeable to the defendant, as the plaintiff will regularly claim protection for the country where the defendant has engaged in his allegedly infringing activities. Thus, by deciding on where to engage in these activities, the defendant in effect determines the applicable law. See Schack, above n 24, no 1044. In addition, if the plaintiff claims protection for a country where no infringing activities occurred, he risks losing on the merits. Further, for determining the territorial scope of the concept of infringement in substantive law, one may make recourse to the methods that have been developed in conflict of laws for determining the place where the allegedly infringing activities occurred. See Drexl, above n 6, no 259–88; Walter, above n 26, no 18. 32   Walter, above n 26, no 12; Schack, above n 24, no 1051. 33   Walter, above n 26, no 10; Schack, above n 24, no 1051. 34   OGH 4 Ob 345/82, Attco/Atco, SZ 56/107; OGH 4 Ob 408/5, Hotel Sacher (1986) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 73; OGH 4 Ob 309/86, Hotel-Video-Systeme, SZ 59/100; OGH 4 Ob 81/01t, CICLON (2001) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 269; Schwimann 1992, above n 4, § 34 IPRG no 3; HG Koppensteiner, Österreichisches und europäisches Wettbewerbsrecht, 3rd edn (Vienna, Orac, 1997) § 37 no 4; Verschraegen, above n 4, § 34 IPRG no 4; Neumayr, above n 4, § 34 IPRG no 2. Contra Schwind, above n 4, 191 and Lurger, above n 28, 127 who argue for the application of the general tort rule of s 48(1) PIL Act. It has to be stressed, however, that both approaches have a common goal, that is, the application of one and the same law to both the contents of the allegedly infringed right and its infringement.

226  Thomas Petz delicti commissi.35 The Austrian Supreme Court has endorsed such a literal construction of section 34(1) PIL Act in a copyright case concerning the distribution of a book in Germany: it held that German law applies only if the plaintiff succeeds in establishing that the book was actually distributed in Germany.36 More recently, however, in a trade mark case, the court held that advancing infringement claims based on Austrian trade mark law is sufficient for Austrian law to apply.37 Contrary to the first decision, in this decision it thus did not matter for determining the applicable law where the allegedly infringing activities occurred. But the case law of the Austrian Supreme Court has remained ambiguous: in a case on neighbouring rights, the Court on the one hand made the application of Austrian law dependent on the fact that the allegedly infringing activities occurred in Austria, but on the other stressed that Austrian law applied because the plaintiff had based his claim on his Austrian neighbouring rights.38 This ambiguity was also reflected in scholarly writings: Whereas some found the wording of section 34(1) PIL Act to indicate that the occurrence of the allegedly infringing activities is the connecting factor,39 others stressed that rather it is the plaintiff ’s claim for protection in a certain country.40 The practical consequences of these different dogmatic approaches, however, have been considered to be only minimal.41 Be this as it may, for Article 8 Rome II the criticism of the dogmatic construction endorsed here has to fail anyway.42 It does so for two reasons: first, the wording of Article 8(1) Rome II clearly refers to the law of the country for which protection is claimed as the applicable law. Thus, the connecting factor is the plaintiff ’s claim for protection, not the place where the damage occurred. Second, whereas the European legislator expressly declared that the rules on the law applicable to acts of unfair competition laid down in Article 6 Rome II are merely clarifications of the general rule for torts, he did not do so with regard to Article 8(1) Rome II.43 This indicates that the latter rule is dogmatically different. For these reasons, at least under Rome II determining the lex loci damni is different from 35   See OGH 4 Ob 89/92, Macht und Magie (1995) Medien und Recht 55 (with case note by M Walter) (considering in a personality rights case the lex loci delicti commissi to be an expression of the same principle as the lex loci protectionis). The rule on the law applicable to the infringement of intellectual property rights would be ‘modified’ because contrary to the general rule on the law applicable to torts it would not allow for choice of law and for the application of the law of a country that is more closely connected with the infringement. 36   OGH 4 Ob 125/93, Adolf Loos II (1994) Medien und Recht 26 (with case note by M Walter). See also OGH 4 Ob 238/03h, Journalistenbüro (2004) Medien und Recht 123 (with case note by M Walter). 37   OGH 4 Ob 81/01t, CICLON (2001) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 269. See also OGH 4 Ob 398/85, Noverox/Ferrox (1986) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 92 (with case note by H Schmidt); OGH 4 Ob 19/91, Tele-Uno III (1991) Medien und Recht 195 (with case note by M Walter); OGH 4 Ob 44/92, Schott II (1992) Medien und Recht 194 (with case note by M Walter). On the latter two decisions, see above n 26. 38   OGH 4 Ob 135/06s, Fall Gruppe D (2006) Medien und Recht 387 (with case note by M Walter). For this ambiguity see also OGH 4 Ob 139/90, Gleichgewicht des Schreckens (1991) Medien und Recht 112 (with case note by M Walter). 39   F Schönherr, Gewerblicher Rechtsschutz und Urheberrecht. Grundriss – Allgemeiner Teil (Vienna, Manz, 1982) no 907.4; Dittrich, above n 24, 166; Koppensteiner, above n 34, § 37 no 3; Lurger, above n 28, 127 and above n 30, 495 n 69; M Fallenböck, ‘Internationales Urheberrecht und digitale Wirtschaft’ in M Fallenböck, et al (eds), Urheberrecht in der digitalen Wirtschaft (Vienna, Manz, 2005) 155, 165; Walter, above n 26, no 35. 40   Schwimann 1992, above n 4, § 34 IPRG no 3; Verschraegen, above n 4, § 34 IPRG no 11; Neumayr, above n 4, § 34 IPRG no 2. 41   cf W Dillenz and D Gutman, Praxiskommentar zum Urheberrecht, 2nd edn (Vienna, Springer, 2004), § 81 UrhG no 36. The main practical differences concern the admissibility of choice of law and the possibility to apply the law of a country that is more closely connected with the tort. 42   See also below 3.1.1. 43   Recital 21 to Rome II. See Schacherreiter, above n 15, 7. For a critical view on this, see Handig, above n 27, 27–28.

Austria  227 determining the lex loci protectionis.44 Under this approach, Article 8(1) Rome II gives the plaintiff the advantage of determining the applicable law unilaterally by claiming protection for a particular country, but this advantage is counterbalanced by the risk that he will lose on the merits if he claims protection for a country where the defendant has not engaged in any activities.45 2.2.2.2  The Relationship to Non-Contractual Obligations Other than Tort The second difference that deserves closer scrutiny is the fact that one and the same infringement may give rise to several distinct non-contractual obligations. Some of these obligations could arise out of a tort, some out of unjust enrichment, and some out of agency without authority.46 Rome II applies to all these non-contractual obligations, but provides different rules for them. This may lead to the application of different laws to one and the same dispute.47 For intellectual property rights, however, Article 13 Rome II ensures that the lex loci protectionis applies to all non-contractual obligations regardless of their character. Consequently, one and the same law governs all non-contractual obligations arising from the infringement of an intellectual property right. A closer look, however, reveals that this is not really different from the violation of rights other than intellectual property rights. The reason for this is that often such a violation gives rise not only to noncontractual obligations arising out of unjust enrichment or agency without authority, but also to non-contractual obligations arising out of a tort. In this case, however, Articles 10(1) and 11(1) Rome II provide that if the unjust enrichment or agency without authority is closely connected with a ‘relationship existing between the parties’, the law applicable to that relationship also applies to these obligations. Consequently, the crucial issue is whether a tort claim which arises out of the same violation as a claim based on unjust enrichment or agency without authority qualifies as such a ‘relationship’. In my view, it does. This follows on the one hand from the wording of the respective provisions which, contrary to Article 4(3) Rome II, does not require the relationship to ‘pre-exist’, but merely to ‘exist’, and on the other from their purpose to ensure that the entire legal situation is governed by the same law.48 Thus, the lex loci damni applies to these claims even though they are not tort 44   Like here Drexl, above n 6, no 13; Grünberger, above n 10, 152–53; more cautious Heiss and Loacker, above n 9, 636. See also Grubinger, above n 10, 65. Contra Walter, above n 26, no 36 and 54. 45   Drexl, above n 6, no 12. But see based on a different dogmatic approach Schack, above n 24, no 1044. 46   The terminology used here is derived from Rome II. Thus, even though domestic laws may consider noncontractual obligations arising out of unjust enrichment or agency without authority as torts, they are not necessarily torts for the purpose of Rome II. 47   This is particularly true for non-contractual obligations arising out of agency without authority. According to Art 11(3) Rome II, such obligations are governed by the law of the country where the unauthorised act was performed. This is considered to be a reference to the law of the country where the event giving rise to the damage occurred rather than to the law of the country where the damage occurred. See Heiss and Loacker, above n 9, 643. By contrast, for non-contractual obligations arising out of unjust enrichment, Art 10(3) Rome II provides for the application of the law of the country where the unjust enrichment took place. This will regularly be the law of the country where the damage occurred and thus the law that also applies to the tort claim. See G Wagner, ‘Die neue Rom II Verordnung’ (2008) Praxis des Internationalen Privat- und Verfahrensrechts 1, 11. 48   This difference in the wording is not particular to the English version of the Regulation, but can equally be found in the German and the French versions. In the initial proposal, however, there was no such distinction. As the European legislator has not explained this change in the wording, one could argue that no importance should be attributed to it, and that a non-contractual obligation arising out of a tort which arises out of the very same violation of a right as the other non-contractual obligations, does not constitute an ‘existing’ relationship. According to this view, the latter obligations are thus not necessarily governed by the same law. See with regard to the initial proposal P Huber and I Bach, ‘Die Rom II-VO’ (2005) Praxis des Internationalen Privat- und Verfahrensrechts 73, 81. As laid down above in n 47, however, at least for non-contractual obligations arising out of

228  Thomas Petz claims. Against this background, Article 13 Rome II cannot be understood as a special rule for intellectual property rights, but only as echoing the general rule of Articles 10(1) and 11(1) Rome II to apply a single law to all non-contractual obligations arising from the same violation.49 The ‘relationship’ existing between the parties, however, could arise not only out of a tort, but also out of a contract. Damaging a rented car may serve as an example. The general rule is that the law applicable to the contract also governs the claims based on tort, unjust enrichment and agency without authority.50 This ensures that a single law applies to all claims, regardless of their nature, while also leading to the application of the law governing the contract to non-contractual obligations. The latter is important in two regards: First, the law applicable to the contract, and thus to the non-contractual obligations, can be chosen by the parties regardless of the restrictions imposed by Article 14 Rome II. Second, absent a choice of law clause, the applicable law is regularly determined by the principle of characteristic performance which leads to the application of the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence.51 This, however, is not necessarily the country where the damage has occurred. In our car rental case, for example, the law applicable to the rental agreement is the law of the country where the rental company has its habitual residence.52 This law also applies to the company’s tort claims advanced against us if we drive the car in breach of the rental agreement to a different country and have an accident there – even though the damage occurred in that country. With regard to intellectual property rights, the situation is different: The lex loci protectionis applies to all non-contractual obligations, regardless of their connection to a contractual relationship. Consequently, different laws may apply to claims arising out of contractual obligations and to claims arising out of non-contractual obligations. This means that in the standard case in which a licensee breaches the licence agreement and thus infringes the intellectual property right that has been licensed, two different laws may apply,

unjust enrichment, nevertheless the same law will regularly apply because the unjust enrichment takes place at the place where the damage occurs. 49   Even if the European legislator had not adopted Art 13 Rome II, the same law would still apply to all noncontractual obligations arising out of the infringement of an intellectual property right. For non-contractual obligations arising out of unjust enrichment, this follows from the fact that the place where the unjust enrichment occurs is the place where the damage occurs. In this regard, there is no practical difference between general tort claims and claims arising from the infringement of an intellectual property right. By contrast, for non-contractual obligations arising out of agency without authority a different law may apply as the place where the act is performed may be different from the place where the damage occurs. For intellectual property rights other than unitary Community rights, however, the damage always occurs only at the place where the act of infringement is committed. See C von Bar, Internationales Privatrecht, vol 2 (Munich, Beck, 1991) 662; R Sack, ‘Das internationale Wettbewerbs- und Immaterialgüterrecht nach der EGBGB-Novelle’ (2000) Wettbewerb in Recht und Praxis 269, 271; H Schack, ‘Internationale Urheber-, Marken- und Wettbewerbsrechtsverletzungen im Internet – Internationales Privatrecht’ (2000) Multimedia und Recht 59, 65; Lurger, above n 28, 111 n 28 (opposing the dogmatic approach of von Bar and Schack, but agreeing on their results); J Drexl, ‘Internationales Immaterialgüterrecht’ in HJ Sonnenberger (ed), Münchener Kommentar zum Bürgerlichen Gesetzbuch, vol 11, 4th edn (Munich, Beck, 2006) no 118; contra S Strömholm, ‘The immovable lex loci delicti in international copyright law – traditional or rational?’ in J Basedow, et al (eds), Aufbruch nach Europa. 75 Jahre Max-Planck-Institut für Privatrecht (Tübingen, Mohr Siebeck, 2001) 517, 522. See also below 4.2.1 with regard to international jurisdiction. Thus, were Art 11 (3) Rome II applied to intellectual property rights, the claim based on agency without authority would be governed by the same law as the infringement claim. 50   Arts 4 (3), 10 (1) and 11 (1) Rome II. See Neumayr, above n 4, Art 10 Rom II no 2. 51   Art 4 (2) Rome II. 52   See Musger, above n 9, Art 4 Rom I no 9.

Austria  229 the lex loci protectionis to the tort claim and the law of the country where the licensor53 habitually resides to the contractual claim. This deviates from the principle that one and the same law applies to all claims of a dispute but ensures that the law applicable to the infringement of intellectual property rights may not be chosen by the parties. In this regard, Article 13 Rome II provides a special rule mandated by the policy considerations of intellectual property.54

2.3  The Law Applicable to Contracts Relating to Intellectual Property Rights 2.3.1  The Legislative History of Article 4 Rome I and Its Repercussions Absent a choice of law by the parties, Article 4(1) Rome I provides special rules to determine the applicable law for certain types of contracts, in particular, contracts for the sale of goods, contracts for the provision of services, distribution contracts and franchise contracts. These rules have in common that they stipulate a specific connecting factor, contrary to the more flexible connecting factor of the characteristic performance endorsed by the general rule of Article 4(2) Rome I. In addition to the list of types of contracts finally adopted by the European legislator, the initial draft of Article 4(1) Rome I contained a special rule on the law applicable to contracts relating to intellectual property rights.55 The specific connecting factor for these contracts was the habitual residence of the transferor or assignor of the intellectual property right. This rule, however, faced substantial criticism for two reasons.56 The first was the ambiguity with regard to the types of contracts to which it applied. One aspect of this ambiguity was whether the rule applied to contracts relating to intellectual property rights other than those providing for a transfer or an assignment of the right. Prominent examples of such contracts are licence agreements and publishing contracts. Another aspect of this ambiguity was whether the rule also applied to contracts that deal only incidentally with intellectual property rights. As Article 4(1) Rome I listed special conflict rules for the most important examples of such contracts, distribution contracts and franchise contracts, the crucial question was how these rules related to the special rule for contracts relating to intellectual property rights. Both aspects of this ambiguity would regularly come up when qualifying an individual contract. The second reason causing severe criticism was the contents of the rule itself. A fixed connecting factor providing for the application of the law of the country where the transferor or assignor is habitually resident adversely affects the 53   The licensor effects the characteristic performance at least if the licence agreement does not impose a duty to exploit on the licensee. On the law applicable to licence agreements, see in detail below 2.3.2. 54   Against this background, Art 13 Rome II has three purposes: first and foremost, to ensure that the applicable law is determined for all non-contractual obligations arising from the infringement of an intellectual property right without determining the place where the infringement occurred. See above 2.2.2.1. Secondly, to prevent different laws from applying to different non-contractual obligations based on the escape clauses of Arts 10 and 11 Rome II. Thirdly, to bar choice of law also for claims based on unjust enrichment and agency without authority and thus, to extend the strict character of Art 8 Rome II to these claims. See above 2.2.2. 55   Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), presented by the Commission on 15 December 2005, COM(2005) 650 final. 56   See European Max Planck Group for Conflict of Laws in Intellectual Property (CLIP), ‘Comments on the European Commission’s Proposal for a Regulation on the Law Applicable to Contractual Obligations (“Rome I”) of December 15, 2005 and the European Parliament Committee on Legal Affairs’ Draft Report on the Proposal of August 22, 2006’ (2006) International Review of Intellectual Property and Competition Law 471; Mankowski, above n 10, 32.

230  Thomas Petz transferee or assignee. This could lead to inappropriate results, in particular if the rule were also applied to licence agreements. Whether for these two reasons or for others, the proposal was finally dropped.57 The fact, however, that initially a special rule for contracts relating to intellectual property rights had been provided that was later dropped has two repercussions on Article 4 Rome I as it now stands. The first concerns the rules determining the law applicable to contracts for the sale of goods and contracts for the provision of services. The initial existence of a special rule on contracts relating to intellectual property rights indicates that these rules have not been designed to apply to contracts relating to intellectual property rights. Thus, intellectual property rights are neither ‘goods’ within the meaning of Article 4(1)(a) Rome I nor ‘services’ within that of Article 4(1)(b) Rome I.58 The second repercussion concerns the rules on distribution contracts and franchise contracts. In the absence of a special rule on contracts relating to intellectual property rights, there seems to be more room to apply these rules to both distribution and franchise contracts that incidentally deal with intellectual property rights. This follows from the fact that the general rule of Article 4(2) Rome I applies if the elements of the contract are covered by more than one rule of Article 4(1) Rome I. In the absence of a rule on contracts relating to intellectual property rights, the general rule applies only if the court finds that the contract may not be qualified as a distribution contract or a franchise contract.59 The fact that such a contract contains some intellectual property elements, however, does not seem to influence its qualification as a distribution or franchise contract.60

2.3.2  The Determination of the Characteristic Performance and Its Alternatives As a result of the legislative history, Article 4(1) Rome I is not applicable to contracts that relate primarily to intellectual property rights. The general rule of Article 4(2) Rome I provides for the application of the law of the country where the person effecting the characteristic performance is habitually resident. Thus, the crucial issue is which performance is the characteristic one. This is determined by analysing the mutual obligations of the parties in order to single out the centre of gravity of the contract. Regularly, this analysis proceeds in two steps. First, for each contracting party individually, the primary obligation to which all other obligations are only ancillary is singled out. Second, based on the primary obligations of both parties, it is determined which contractual obligation distinguishes the contract   Mankowski, above n 10, 56.   In this regard, the repercussions of the legislative history of Art 4 Rome I also extend to the Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) (2001) OJ L 12/1. Recital 17 to Rome I provides that the concept of ‘provision of services’ and ‘sale of goods’ should be interpreted in the same way as when applying Art 5 Brussels I. Brussels I, which predates Rome I, does not contain such an express requirement of a coherent interpretation, but one can make the systematic argument that as both Regulations endorse the same concepts of ‘provision of services’ and ‘sale of goods’, Art 5 Brussels I should also be interpreted in the same way as Art 4 Rome I. With regard to licence agreements, this would mean that from the legislative history of Rome I it follows for Art 5 Brussels I that licence agreements are no service contracts. Indeed, this was the result reached by the ECJ in Case C-533/07 Falco Privatstiftung [2009] ECR I-3327, but based on a different reasoning. Thus, in this regard, there is interpretative coherence even though the ECJ did not take the legislative history of Rome I into account when reaching its decision. Cf the case note by P Mankowski in (2009) Juristenzeitung 958, 959. 59   On the law applicable to franchise contracts before and after Rome I, see L García Gutiérerrez, ‘Franchise contracts and the Rome I Regulation on the law applicable to international contracts’ (2008) Yearbook of Private International Law 233. 60   cf Mankowski, above n 10, 35–38. 57 58

Austria  231 from other types of contracts. Thus, the relative weight of the mutual obligations and their distinctiveness in relation to other types of contracts is decisive. Under this test, regularly the performance for which payment is due is the characteristic one. For most contracts it is obvious which obligation of a party is the primary one, so the analysis is limited to the second step. For some contracts, however, in particular those that establish a long-lasting relationship between the parties, the first step is crucial as it is not always obvious which obligation is the primary one. Regularly, licence agreements are a typical example of such contracts. As this outline indicates, the applicable law depends on the mutual obligations of the parties to a contract. To get an impression which obligations may be imposed by contracts relating to intellectual property rights, a brief detour to substantive law may be helpful. 2.3.2.1  The Substantive Law Background: The Mutual Obligations in Contracts Relating to Intellectual Property Rights In substantive Austrian intellectual property law, two main types of contracts relating to intellectual property rights can be distinguished: transfers and licence agreements. For transfers of intellectual property rights, the mutual obligations of the parties seem to be rather straightforward: the transferor is required to transfer the right and the transferee is required to make a payment. Any transfer of a right, however, in order to be effective requires that the right that is transferred exists. Registered intellectual property rights regularly come into existence by registration, unregistered intellectual property rights by creation. Consequently, a transfer of an intellectual property right requires creating a piece of work, making and registering an invention or developing and registering a trade mark to be effective. These obligations may be agreed upon expressly, but regularly they follow implicitly from the agreement to transfer (Verpflichtungsgeschäft). But not only the obligations of the transferor, also the obligations of the transferee may be more complex than they appear at first sight. He may be required, for example, to effect payment not by a lump sum, but by royalties that depend on his exploitation of the intellectual property right. From this form of payment, it may be derived that the parties have implicitly agreed on a duty to exploit the intellectual property right. Nevertheless, the mutual obligations of the parties in the case of a transfer of an intellectual property right do not raise as many difficulties as those in the case of licence agreements. For the latter, the difficulty starts with the minimum obligation of the licensor. In legal writings, some consider the licensor to be obliged only to refrain from challenging the use of his intellectual property right by the licensee whereas others consider him to be obliged to grant the licensee a right to exploit the intellectual property right.61 The obligation not to challenge the use is only ancillary to this right. This controversy may be traced back to the more fundamental question of whether the legal order is an order of rights, in which case the obligations follow from the right, or an order of obligations in which case the right 61   cf L Friebel and O Pulitzer, Österreichisches Patentrecht. Das materielle Recht, 2nd edn (Cologne, Heymann, 1972) 304–5; Schönherr, above n 39, no 418 and 428.l; P Gräser, ‘Der “Gebrauchszwang” im Markenrecht’ (1982) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 109, 111; C Liebscher, Lizenzverträge. Rechtsgrundlagen und Muster für den Patentlizenzvertrag, Know-how-Lizenzvertrag, Markenlizenzvertrag in Deutsch und Englisch (Vienna, Orac, 2001) 19; G Kucsko, Geistiges Eigentum (Vienna, Manz, 2003) 929; K Hiti, ‘Zur Drittwirkung von Marken- und Patentlizenzen. Die Auswirkungen der BOSS-Brillen-E des OGH auf Aktivlegitimation und Sukzessionsschutz von Marken- und Patentlizenznehmern’ (2003) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht, 2; W Nauta, ‘Die Rechtsstellung des Lizenznehmers – Entscheidung des OGH 15.10.2002, 4 Ob 209/02t’ (2003) Österreichische Juristenzeitung, 22.

232  Thomas Petz follows from the obligation. Rather than this theoretical dispute, however, the reason for the rather diverse picture in legal writings may be that different intellectual property rights and different types of licences are considered. In this vein, the Austrian Supreme Court held that exclusive licences grant the licensee a right to exploit, regardless of the intellectual property right that had been licensed.62 By contrast, the Court long considered nonexclusive licences to impose on the licensor only a duty to refrain from challenging the use of the intellectual property right, at least in the case of trade marks.63 When trade marks, however, became recognised as property rights, it abandoned the latter view and concluded that non-exclusive trade mark licences also grant a right to exploit.64 The main practical consequence of this difference in the dogmatic construction of the licence agreement is whether a duty to maintain the intellectual property right is imposed on the licensor.65 This duty is of particular importance for registered rights. For those who consider the licensor only obliged not to challenge the use of the intellectual property right by the licensee, such a duty only follows from an express agreement between the parties whereas for those who consider the licensor obliged to grant a right to exploit the intellectual property right, it follows implicitly from the licence agreement. Thus, in the first case the licensor is only obliged to refrain from activities, whereas in the latter case he could be required to engage in some activities. Consequently, depending on which view one endorses, the minimum obligation of the licensor is either the obligation not to challenge the use of the intellectual property right by the licensee or the obligation to grant the licensee a right to exploit the intellectual property right and to maintain this right. In addition to his minimal obligation, the licensor may also be obliged to sue third parties who infringe the intellectual property right. This may be the case in particular if the licence agreement does not entitle the licensee himself to sue third parties. In substantive Austrian intellectual property law, this is the case if the licence is non-exclusive.66 Further, like in the case of a transfer, the licensor is regularly required to create a piece of work, to make and register an invention or to develop and register a trade mark. These obligations may be agreed on expressly, but regularly they follow implicitly from the licence agreement because intellectual property rights can only be effectively licensed if they exist. Thus, this type of obligation is part of all licence agreements, regardless of which intellectual property right is licensed. It has to be noted that it is distinct from the duty to maintain the intellectual property right, as only once a right exists does the need to maintain it arise. Similarly, it is different from the minimum obligation of the licensor, as the existence of the intellectual property right that is licensed is a precondition for any effective license agreement. Thus, it is of no relevance to the duty to create whether the minimum obligation of the licensor is the obligation not to challenge the use of the intellectual property right by the licensee or the obligation to grant the licensee a right to exploit. In the first case, the licensee 62   OGH 4 Ob 173/90, Trennwand (1991) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht, 153 (patents); OGH 4 Ob 178/00f, Boss-Brillen II (2001) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht, 89 (trade marks). On the latter, see also the case note by R Schanda, ‘Kritisches zur Aktivlegitimation des Markenlizenznehmers’ (2001) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 151. 63   OGH 4 Ob 7/92, Gullivers Reisen (1992) Wirtschaftsrechtliche Blätter 406; OGH 4 Ob 115/94, Slender you, Sammlung der Entscheidungen des österreichischen Obersten Gerichtshofs in Zivilsachen 67/174; OGH 4 Ob 77/95, Plus (1996) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 143. 64   OGH 4 Ob 209/02t, Brühl (2003) Evidenzblatt no 26. 65   Liebscher, above n 61, 19. 66   According to the prevailing view, such a duty does not follow implicitly from the licence agreement, but has to be expressly agreed. Cf for German patent law, R Kraßer, Patentrecht – Ein Lehr- und Handbuch, 6th edn (Munich, Beck, 2009) 939–40.

Austria  233 exploits the intellectual property right because the licensor is barred from prohibiting this exploitation, in the latter because he has a right to exploit. In both cases, however, exploitation requires that there is an intellectual property right. Thus, the duty to create is not an aspect of the minimum obligation, but a different type of obligation. In sum, there are four distinct obligations which may be imposed on the licensor: the minimum obligation not to sue respectively to grant a right to exploit, the obligation to sue third parties, the obligation to create the intellectual property right, and – in the case of registered intellectual property rights – the obligation to maintain the right. On the part of the licensee, the minimum obligation is the payment of a lump sum or royalties. In addition, however, he may be required to exploit the intellectual property right. Such a duty to exploit may either be agreed upon expressly or derived implicitly from the purpose of the licence agreement. An implicit duty to exploit exists, for example, if a contract provides that payment is due once the copyrightable work is distributed67 or if it provides for royalties without fixing minimum payments.68 By contrast, the mere fact that an exclusive licence has been granted does not mandate the presumption of an implicit duty to exploit.69 The most prominent example of a contract containing a duty to exploit is a publishing contract, as in such a contract the publisher regularly agrees to produce and distribute copies of the work. This is recognised by Austrian substantive law: section 1172 of the Civil Code imposes on the publisher a duty to exploit.70 2.3.2.2  The ‘Easy’ Case of Transfers and the ‘Hard’ Case of Licence Agreements Having analysed briefly the mutual obligations of the parties to contracts relating to intellectual property rights in substantive law, we return to the conflict rules. Conflict law scholars commonly make a distinction between ‘easy’ cases and ‘hard’ cases of contracts relating to intellectual property rights.71 The ‘easy’ cases are the agreements to transfer or assign an intellectual property right. These agreements amount to an outright sale of the intellectual property right. In these cases, the transferor is obliged to transfer the right, whereas the transferee is regularly only obliged to pay a lump sum.72 Thus, as the transferor is obliged to effect the characteristic performance, the law of the country where he is habitually resident applies. The ‘hard’ cases are the licence agreements. For these types of contracts, a gliding scale of mutual obligations may be developed. This, however, gives rise to a methodological problem: if the parties have agreed expressly and in writing on a particular obligation, this obligation may easily be established. Implicit obligations, however, may only be derived by interpretation, and the rules of interpretation are those of the applicable law. The result could be a vicious circle: whether there is an implicit duty to create or an implicit duty to   cf OGH 4 Ob 62/99t, Guide40+ (1999) Medien und Recht, 339 (with case note by M Walter).   OGH 3 Ob 208/53 and 3 Ob 207/53, Blockfräse, Sammlung der Entscheidungen des österreichischen Obersten Gerichtshofs in Zivilsachen 26/125. Cf for German patent law Kraßer, above n 66, 940–41. 69   OGH 3 Ob 208/53 and 3 Ob 207/53, Blockfräse, Sammlung der Entscheidungen des österreichischen Obersten Gerichtshofs in Zivilsachen 26/125. For a different view, see L Munk, Die patentrechtliche Licenz (Berlin, Heymann, 1897) 126. 70   M Büchele in G Kucsko (ed), Urheberrecht. Systematischer Kommentar zum Urheberrechtsgesetz (Vienna, Manz, 2008) 380; M Walter, Österreichisches Urheberrecht. Handbuch, vol 1 (Vienna, Medien und Recht, 2008) no 1807. 71   Czernich, above n 7, Art 4 no 122; Verschraegen, above n 4, Art 4 EVÜ no 114. For the application of the law of the country for which protection is claimed, see D Martiny in HJ Sonnenberger (ed), Münchener Kommentar zum BGB, vol 10, 5th edn (Munich, Beck, 2009) Art 4 Rom I no 221. 72   Czernich, above n 7, Art 4 no 121; Verschraegen, above n 4, Art 4 EVÜ no 115. 67 68

234  Thomas Petz exploit is determined by the applicable law, but what law is applicable depends on the existence of such a duty.73 The solution can only be to keep the requirements for establishing such a duty rather low at the level of the conflict rules and take the risk that in rare cases a law applies based on the existence of a duty that eventually turns out to be non-existent. 2.3.2.3  Three Models of Licence Agreement: ‘Standard’, ‘Exploitation’ and ‘Creation’ The standard model of a licence agreement reflects the minimum obligations of both parties: the licensor is obliged not to challenge the use of the right by the licensee, and the licensee is obliged to pay for this use. In this case, the contract is characterised by the licensor’s obligation not to challenge. Consequently, the law of the country where the licensor is habitually resident applies.74 However, as soon as the mutual obligations differ from those of the standard model, the situation becomes less clear. In case a duty to exploit is imposed on the licensee, he is required to fulfil two different duties: the duty to pay the licence fee on the one hand and the duty to exploit the intellectual property right on the other. This model may be called the ‘exploitation model’. The latter duty could be considered to be only an ancillary one, and thus the law of the country where the licensor is habitually resident may apply. As a result, the transfer and the licence of an intellectual property right would be treated the same way. Contrary to that, the duty to exploit could be considered to be the primary duty and consequently, the law of the country where the licensee is habitually resident is applicable. The situation becomes even more difficult if the duty to create is regarded as the primary duty of the licensor. This model may be called the ‘creation model’. In this case, the licensor is not merely obliged not to challenge the use of the right, but also to engage in some activities. This duty could be considered to shift the contract’s centre of gravity to the licensor. As at least an implicit duty to create is imposed by any licence agreement, this would lead to the application of the law of the country where the licensor is habitually resident to all licence agreements. The result would thus be the same as if there was no duty to exploit. By contrast, one could argue that the duty to create does not shift the centre of gravity of the contract, but leads to the result that the contract imposes no characteristic performance at all. In this case, Article 4(4) Rome I provides for the application of the law of the country that is most closely connected to the contract. Such a connection may be established without further difficulties if the licence is granted for one country only. In this case, the law of that country, that is, the country of distribution, will apply. In effect, this amounts to the application of the law of the country for which protection is claimed.75 If, however, the licence has been granted for a multitude of countries, there is no single country of distribution to which a closest connection may be established. For this case, it has been argued that the closest connection of the contract leads to the law of the country where the licensee is habitually resident.76 These latter considerations reveal that the distinction of the three models of licence agreements relies on the assumption that the characteristic performance of these agreements can be singled out. The distinction fails, however, if there are duties of equal weight imposed on the licensor and the licensee. This is arguably the case, for example, if the licensor is obliged   On this problem see de Miguel Asensio, above n 10, 213; Mankowski, above n 10, 54.   Czernich, above n 7, Art 4 No 121; Verschraegen, above n 4, Art 4 EVÜ no 115 (but compare § 34 IPRG no 13); Musger, above n 9, Art 4 Rom I no 10; OGH 4 Ob 90/09b, Falco Privatstiftung (2010) Zeitschrift für Rechtsvergleichung 10 (with case note by H Ofner). 75   cf W Posch, Bürgerliches Recht, vol 7, 4th edn (Vienna, Springer, 2008) no 13/10. 76   Torremans, above n 10, 419. 73 74

Austria  235 to create a piece of copyrightable work and the licensee is obliged to exploit the copyright. Here, no performance may be considered to be the characteristic one. Thus, even though the three models of licence agreements may well illustrate the importance of the mutual duties of the parties on the level of conflict of laws, they are of little help in practice. 2.3.2.4  The Proper Solution for the Law Applicable to Licence Agreements If we turn to practice in Austria, the first observation is that the case law is sparse. So far, the Supreme Court has only held that absent a duty to exploit, the licensor effects the characteristic performance.77 When holding so, however, it also stressed that the licence agreement had been concluded for a multitude of countries, so there was no closer connection to a country other than that where the licensor was habitually resident. Austrian literature on the law applicable to licence agreements is split. According to the majority view, the law of the country where the licensor is habitually resident applies to all types of licence agreements78, whereas according to the minority view,79 the law of the country where the licensee is habitually resident should apply at least to licence agreements that impose a duty to exploit on the licensee. What is common to both the majority and the minority view is that they try to single out the characteristic performance.80 Contrary to the minority view, however, the majority view does not indicate which duty of the licensor is the one which performance is the characteristic one. As the licensor assumes a variety of duties, this could be any of them: His duty not to sue, his duty to grant a right to exploit, his duty to sue third parties, his duty to create the intellectual property right, or his duty to maintain that right.81 Apart from a different balancing of the interests of the licensor and the licensee, one reason for the split opinion could be the method employed for determining the characteristic performance. If one determines it indirectly, that is, by looking at which party to the licence agreement makes the payment, he will conclude that the other party effects the characteristic performance.82 As regularly the licensee makes the payment, this approach has the advantage that the duties of the licensor do not have to be determined in detail. Hence, it is only of minor importance whether the licensor is just obliged to refrain from challenging the use of the intellectual property right by the licensee, or whether he is also required to create a piece of work, to make and register an invention or to develop and register a trade mark. By contrast, the characteristic performance could also be determined directly, that is, by looking at the duties other than the duty to pay in the first place. Among these duties, the duty of the licensor to create a piece of work, to make and register an 77  OGH 4 Ob 90/09b, Falco Privatstiftung (2010) Zeitschrift für Rechtsvergleichung 10 (with case note by H Ofner). 78   Czernich, above n 7, Art 4 no 121; Verschraegen, above n 4, Art 4 EVÜ no 115 (but compare § 34 IPRG no 13). 79  M Fallenböck, ‘Zur kollisionsrechtlichen Anknüpfung von Immaterialgüterrechtsverträgen nach dem Europäischen Vertragsrechtsübereinkommen (EVÜ)’ (1999) Zeitschrift für Rechtsvergleichung 98, 102; Musger, above n 9, Art 4 Rom I no 10; Neumayr, above n 4, § 34 IPRG no 4. Cf with regard to German law Schack, above n 24, no 1287; Stimmel, above n 10, 787. 80   See Neumayr, above n 4, § 34 IPRG no 4. On the validity of this approach, see Posch, above n 1, no 13/11 n 36, who argues that the legislative history of Art 4 Rome I indicates that the applicable law has to be determined based on the principle of characteristic performance rather than by recourse to the law of the country for which protection is claimed as the one most closely connected to the licence agreement. 81   If rather than the performance of one of these duties, the performance of all of them is considered to be decisive, this is no longer an issue of the characteristic performance but of the closest connection and thus, of Art 4(4) Rome I. 82   On this rule of thumb, see above 2.3.2.

236  Thomas Petz invention or to develop and register a trade mark could be considered to be the primary one. Alternatively, if the licensee assumes a duty to exploit the intellectual property right, this duty may be considered to be the primary one. The two methodical approaches have in common that they are based on the assumption that one of the parties to the licence agreement effects the characteristic performance. Due to the method it employs for determining the characteristic performance, however, the indirect approach may fail to take into account the duties of the licensor. But if the licensor is obliged to create a piece of work, to make and register an invention or to develop and register a trade mark, he is required to engage in considerable activities. Similarly, if the licence agreement imposes on the licensee a duty to exploit, he is also required to engage in some activities. In Falco, a decision on Article 5(1) Brussels I, the ECJ endorsed a direct approach to determining the characteristic performance.83 In applying this approach it concluded that for the licence agreement in question, the licensor’s duty not to sue is the characteristic one.84 In addition, it held that it would be immaterial for this conclusion whether a duty to exploit was imposed on the licensee.85 By contrast, the possibility of a duty to create was not even considered. As a result, under a strict understanding of Falco, the characteristic performance for licence agreements would always be effected by the licensor, and only by the licensor. Such an understanding, however, is irreconcilable with Article 4 Rome I. As the legislative history of this provision indicates, the European legislator declined to provide for the application of the law of the country where the licensor is habitually resident to all licence agreements. Such a strict application of that law, however, would be the result of Falco if it was applied to Article 4 Rome I. Thus, to honour the legislative history of this provision, despite its broad wording the decision in Falco has to be limited to the facts of the case: It involved a licence agreement that was concluded after the copyrightable piece of work has been created86 and that did not impose a duty to exploit on the licensee.87 Consequently, as far as a licence agreement imposes neither a duty to create on the licensor nor a duty to exploit on the licensee, it follows from Falco that the licensor effects the characteristic performance as he is obliged not to sue the licensee.88 Once the contract imposes at least one of these duties, however, Falco does not apply.89 83   Case C-533/07 Falco Privatstiftung [2009] ECR I-3327. At first sight, this decision seems to deal only with the construction of the notion ‘provision of services’ in Art 5(1)(b) Brussels I and thus not with what constitutes a ‘characteristic performance’ for the purpose of Art 4(2) Rome I. In Car Trim, however, the ECJ held that the connecting factor in Art 5(1)(b) Brussels I is the obligation which characterises the contract. Case C-381/08 Car Trim GmbH v KeySafety Systems Srl (2010) Wirtschaftsrechtliche Blätter no 87. Thus, both Art 5(1)(b) Brussels I and Art 4(2) Rome I employ the same connecting factor: the characteristic performance of the contract. For this reason, the conclusions of the ECJ in Falco on who effects the characteristic performance are also decisive for Art 4(2) Rome I. As here Mankowski, above n 58, 959. 84   Again, at first sight the decision seems to deal only with whether there are any activities on part on the licensor. This, however, requires under the approach of the characteristic performance that his performance is the characteristic one. From this perspective, it is also logical to hold that the obligations of the licensee may not be taken into account: they are not the characteristic ones. 85   Case C-533/07 Falco Privatstiftung [2009] ECR I-3327 para 32. 86   This follows from the fact that the distributed sound recordings dated from 1993 whereas the licence agreement was concluded by the heirs of the performer after his death in 1998. 87   See OGH 4 Ob 90/09b, Falco Privatstiftung (2010) Zeitschrift für Rechtsvergleichung 10 (with case note by H Ofner). 88   This was endorsed by the Austrian Supreme Court which referred this case to the ECJ in its follow-up decision, see OGH 4 Ob 90/09b, Falco Privatstiftung (2010) Zeitschrift für Rechtsvergleichung 10 (with case note by H Ofner). 89   Regardless of these duties, Falco does not apply to cross-licences as in this case both parties are obliged to refrain from suing the other and thus both would effect the characteristic performance. Consequently, for such

Austria  237 This leaves us without precedent as to who effects the characteristic performance in a non-Falco situation. In this case, the applicable law depends on the duties imposed on the parties to the licence agreement. If that agreement imposes only a duty on one of the parties, the person who has to perform this duty effects the characteristic performance. Thus, if the licensor is obliged to create, the law of the country where he is habitually resident applies, whereas if the licensee is obliged to exploit the right, the law of the country where he is habitually resident applies. But what if a licence agreement imposes both a duty to create and a duty to exploit? In this case, the characteristic performance cannot be singled out. Consequently, the applicable law has to be determined by recourse to the principle of the closest connection, as laid down in Article 4(4) Rome I.90 In my view, this requires distinguishing between single-state licences and multi-state licences.91 For single-state licences this is regularly the law of the country of distribution. As section 34(1) PIL Act provides that the law of the country for which protection is claimed applies to the existence, contents and termination of an intellectual property right, under this approach one and the same law may apply to the property aspects and the contractual aspects of the licence agreement.92 A different law may apply, however, if both parties to the licence agreement are habitually resident in the same country.93 By contrast, for multi-state licences the law that is most closely connected to the contract is regularly that of the country where the licensee is habitually resident. The reason for this is that in the event of such licence agreements, the licensee is required to exploit the right in a multitude of countries and thus he assumes a higher risk compared to single-state licences.94 As for multi-state licences, the law where the licensee is habitually resident applies anyway; contrary to single-state licences, the closer connection of a common habitual residence would not lead to the application of a different law. In sum, recourse to the principle of the closest connection in a licence agreement that contains both a duty to create and a duty to exploit allows a very flexible approach for determining the applicable law.95

licence agreements the applicable law has to be determined by recourse to the principle of the closest connection as laid down by Art 4 (4) Rome I. Before the entry into force of Rome I, general recourse to this principle was rejected for methodological reasons, see Schwimann 1992, above n 4, § 43 IPRG no 2; Briem, above n 21, 116; Koppensteiner, above n 34, § 37 no 8. 90   As under the approach developed here Art 4(2) Rome I is considered to be inapplicable only in the case that the licence agreement imposes both a duty to create and a duty to exploit, this does not amount to making Art 4(4) Rome I the general conflict rule for licence agreement. Considering Art 4(4) Rome I to be a general rule for contracts relating to intellectual property rights may indeed be irreconcilable with the legislative history of Art 4 Rome I, as indicated by Posch, above n 1, no 13/11 n 36. 91   It seems that the Austrian Supreme Court also considers this approach to be viable as it takes into account whether a licence has been granted for a single country or for a multitude of countries, see OGH 4 Ob 90/09b, Falco Privatstiftung (2010) Zeitschrift für Rechtsvergleichung 10 (with case note by H Ofner). As here Stimmel, above n 10, 788. 92   Whether the same law actually applies depends on the renvoi. As stated above in 2.1, contrary to Rome I, the Austrian PIL Act regularly provides for a renvoi. Thus, in the event that the conflict rules of the country for which protection is claimed refer back to Austrian law, or to the law of another country, different laws may apply. With regard to registered intellectual property rights, this risk is minimal as the conflict rules of nearly all countries provide for the application of the law of the country for which protection is claimed. For copyright, however, the situation is different, because the conflict rules of some countries, such as Portugal and Greece, provide for the application of the law of the country where the work was created. Thus, different laws may apply to the licence agreement and to the existence, contents, and termination of the copyright. 93   See Walter in his case note to OGH 4 Ob 139/90, Gleichgewicht des Schreckens (1991) Medien und Recht 112 94   See ibid; Briem, above n 21, 115. Contra Koppensteiner, above n 34, § 37 no 8. 95   See also Stimmel, above n 10, 787–88.

238  Thomas Petz To some extent this solution echoes that of section 43 PIL Act as applied to licence agreements imposing a duty to exploit.96 This provision was abolished when the predecessor of the Rome I Regulation, the Rome Convention, entered into force in Austria on 1 December 1998.97 It focused on the particularities of intellectual property rights at the cost of being in line with the conflict rules on contracts. Thus, it was an example of a special conflict rule for intellectual property rights that deviated from the general conflict rules. The crucial difference to the construction of Article 4 Rome I proposed here is that it did not allow for the application of the law of the country of the common habitual residence as the one being most closely connected to the licence agreement. This reveals that contrary to section 43 PIL Act, Article 4 Rome I is a general conflict rule, rather than one tailored specifically to the particularities of intellectual property rights. One way to explain the results of the approach endorsed here is the attribution of the economic risk.98 This risk comes from the investments required for commercially exploiting an intellectual property right. The investment of a publisher in the production, distribution and marketing of a book may serve as an example. If there is no duty to exploit, it is up to the licensee to decide whether he makes this investment.99 Consequently, the attribution of the economic risk is neither subject to, nor part of the contract. It becomes part of the contract, however, once there is a duty to exploit. As the attribution of the economic risk changes, the characteristic performance may also change. Similarly, the duty to create would induce the licensor to undertake an economic risk by concluding the contract: He will engage in activities in which he would not have engaged otherwise. Thus, if the licensor assumes a duty to create and the licensee a duty to exploit, the economic risk of the licensee is balanced with the risk of the licensor. As a result, no characteristic performance may be singled out. At first sight, this seems to be similar to franchise and distribution contracts. Even though these contracts are regarded as service contracts, the general rule on service contracts providing for the application of the law where the service provider is habitually resident does not apply.100 Rather, the law of the country where the franchisee or distributor is habitually resident applies. This rule could be considered to be based on a shift of the centre of gravity of the contract to the franchisee or distributor due to the economic risk he assumes. There is, however, clear evidence that these special rules are mandated by the protection of the weaker party.101 Consequently, the rationale is different and the similarity of licence agreements to franchise and distribution contracts only one of first sight.

  On this rule and its shortcomings see Schwimann 1992, above n 4, § 43 IPRG no 2; Fallenböck, above n 79,

96

100. 97   For the importance of this provision in the negotiations on Rome I see R Wagner, ‘Der Grundsatz der Rechtswahl und das mangels Rechtswahl anwendbare Recht (Rom I-Verordnung) – Ein Bericht über die Entstehungsgeschichte und den Inhalt der Artikel 3 und 4 Rom I-Verordnung’ (2008) Praxis des Internationalen Privat- und Verfahrensrechts 378, 385. 98   cf Martiny, above n 71, Art 4 Rom I no 151. 99   For the situation in Austrian substantive law see above 2.3.2.1. 100   Art 4(1)(b) Rome I. 101   Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), presented by the Commission on 15 December 2005, COM(2005) 650 final, 6. For a criticism of this approach, see Mankowski, above n 10, 35–36. Following Mankowski, there are indeed strong parallels between franchise contracts and distribution contracts on the one hand and licence agreements on the other.

Austria  239

2.4  The Law Applicable to the Property Aspects of Intellectual Property Rights Section 34(1) PIL Act provides that the law of the country for which protection is claimed is applicable to the existence, the contents and the termination of intellectual property rights. All these issues are expressions of the property aspects of intellectual property rights. As the list of issues is considered to be non-exclusive, the rule has been found applicable to other issues relating to the property aspects of intellectual property rights, in particular to initial ownership102 and transferability.103 Further, even though the wording of this provision is limited to the property aspects, it has been considered applicable also to the infringement of intellectual property rights.104 Thus, like Rome II, the domestic Austrian conflict rules did not apply the general tort law regime to the infringement of intellectual property rights. This aspect is of particular importance, as meanwhile Article 8 Rome II provides that the law of the country for which protection is claimed applies to the infringement of intellectual property rights. Thus, as far as infringement is concerned, section 34(1) PIL Act is not applicable to events giving rise to damage that occurred after 11 January 2009. Whether this provision still has a scope of application depends on whether the Rome Regulations apply to the property aspects of intellectual property rights. If they do, it does not have any such scope; if they do not, it has. It has been argued that this question has to be answered differently for both Regulations: Rome I applies to the property aspects, but Rome II does not.105 In my view, the Regulations do not mandate such a different treatment. Rather, neither Rome I nor Rome II apply to the property aspects of intellectual property rights.106 As this conclusion is of considerable importance, it deserves closer scrutiny. For this purpose, we will start with Rome I and then proceed to Rome II.

2.4.1  The Application of Rome I to the Property Aspects of Intellectual Property Rights As a general rule, the scope of application of Rome I is limited to ‘contractual obligations’.107 What qualifies as a ‘contractual obligation’ has to be determined by autonomous construction, that is, without recourse to the concepts of domestic law. In this regard, the interpretation of the notion ‘contract’ in Article 5(1) Brussels I may be instructive.108 The ECJ has considered a situation to be a contract if a person freely assumes an obligation against another.109 The concept of a contract is thus rather wide. But even under this wide concept, 102  OGH 4 Ob 309/86, Hotel-Video-Systeme, Sammlung der Entscheidungen des österreichischen Obersten Gerichtshofs in Zivilsachen 59/100; Schwimann 1992, above n 4, § 34 IPRG no 3; Verschraegen, above n 4, § 34 IPRG no 4. 103   Schwimann 1992, above n 4, § 43 IPRG no 3; Verschraegen, above n 4, § 34 IPRG no 17. 104   See above n 34. 105   Handig 2009, above n 10, 776. 106   As here Stimmel, above n 10, 790. 107   Art 1(1) Rome I. 108   Recital 17 to Rome I expressly provides for a uniform interpretation only with regard to the notions of ‘provision of services’ and ‘sale of goods’. Nevertheless, recourse may also be made to the concept of ‘contract’, as for the qualification as a contract for the ‘provision of services’ and ‘the sale of goods’ it is required in the first place that the situation qualifies as a contract. For possible differences between the concept of contracts in Art 5(1) Brussels I and the concept of contractual obligations in Article 1(1) Rome I, see Martiny, above n 71, Art 1 Rom I no 7. 109   Case C-334/00 Fonderie Officine Meccaniche Tacconi [2002] ECR I-7357.

240  Thomas Petz most property aspects of intellectual property rights are not covered, as they concern the shape of the right rather than obligations. This is true in particular for the existence, contents, termination and the initial ownership of an intellectual property right. There are some property aspects, however, that may be considered to qualify as ‘contractual obligations’ as they are related to the transfer of the right.110 These aspects concern essentially the requirements for a valid transfer of the right from the patrimony of the transferor to that of the transferee and the priority of competing property interests in respect of the same right.111 And indeed, some of these aspects may be qualified as contractual issues. The most prominent examples are the issue of transferability and the transfer itself (Verfügungsgeschäft). To the extent that transferability is considered to be only a requirement for the performance of a contract providing for the transfer of a right, it qualifies as a contractual issue, but to the extent that it is a requirement for the transfer of the right from the patrimony of the transferor to the transferee, it qualifies as a property issue.112 Similarly, if we put the emphasis on the fact that it is an agreement between the transferor and the transferee, the transfer itself may qualify as a contract, but if we put it on the fact that it affects a right rather than imposes obligations on the parties, it qualifies as a property aspect. These ambiguous property aspects may be called ‘transfer-related property aspects’. The issue of transferability and the transfer itself are not unique to intellectual property rights, but come up also in the context of a transfer of real property and the assignment of claims. Neither for the transfer-related property aspects of intellectual property rights nor for those of real property does Rome I provide an express rule. One is thus inclined to conclude that these aspects are not considered to qualify as ‘contractual obligations’ so that no conflict rule is required as Rome I does not apply anyway. The situation is different, however, with regard to the assignment of claims. Article 14(2) Rome I provides an express rule on the ‘assignability’ of claims: The law governing the assigned claim also determines its assignability. Further, Article 14(1) Rome I provides that the ‘relationship’ between the assignor and the assignee is governed by the law that applies to the contract between them. Recital 38 to Rome I stresses that instead of the notion ‘obligations’, the notion ‘relationship’ has been employed deliberately to clarify that the rule applies not only to the contractual obligations between assignor and assignee, but also to its property aspects. Thus, Article 14 Rome I applies at least to some transfer-related property aspects of claims.113 Consequently, the question arises whether this provision could be applied by analogy to the transferability and the transfer itself of intellectual property rights. Methodically, such an application by analogy requires in the first place that there is a lacuna in Rome I with regard to these issues – that is, for systematic reasons these issues should be dealt with, but they are not. 110   The notion of ‘transfer’ is used in a broad sense here so that it also covers the property aspects of licence agreements. 111   cf with regard to the assignment of a claim H Verhagen and S Van Dongen, ‘Cross-border assignments under Rome I’ (2010) 6 Journal of Private International Law 1, 2. 112   cf F Alférez, ‘Assignment of claims in the Rome I Regulation: Article 14’ in F Ferrari and S Leible (eds), Rome I Regulation – The law applicable to Contractual Obligations in Europe (Munich, Sellier, 2009) 217, 229. 113   S Leible and M Lehmann, ‘Die Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht (“Rom I”)’ (2008) Recht der internationalen Wirtschaft 528, 539; P Mankowski, ‘Die Rom I-Verordnung – Änderungen im europäischen IPR für Schuldverträge’ (2008) Internationales Handelsrecht 133, 150; U Magnus, ‘Die Rom I-Verordnung’ (2010) Praxis des Internationalen Privat- und Verfahrensrechts 27, 42; B Verschraegen, ‘Kritische Bestandsaufnahme zur Rechtswahl’ in B Verschraegen (ed), Rechtswahl – Grenzen und Chancen (Vienna, Jan Sramek, 2010) 111, 112; Musger, above n 9, Art 14 Rom I no 2.

Austria  241 In this regard it has to be stressed that the wording and the structure of Article 14 Rome I is the very reason why this provision is considered applicable to the property aspects of an assignment of claims. By contrast, the general conflict rule of Article 4 Rome I determines only the law applicable to the ‘contract’. This is true in particular with regard to rights in rem in immovable property: If Rome I should also apply to the property aspects of the transfer of such a right from the transferor to the transferee, Article 4(1)(c) Rome I would have to refer to their ‘relationship’. Absent such a reference, the rule does not apply to these aspects. Consequently, to the extent that Article 14 Rome I applies to the property aspects of the assignment of a claim, it constitutes an exception rather than the general rule. Thus, the absence of any conflict rules on the property aspects of the transfer of intellectual property rights in Rome I does not amount to a lacuna. But even if one concludes that there is a lacuna as regards the transfer of intellectual property rights, applying Article 14 Rome I would not be a suitable solution. This is because the most important transfer-related property aspects with regard to intellectual property rights are the effects of the transfer on third parties. It is highly controversial, however, whether Article 14 Rome I covers these aspects.114 The reason for this controversy is that Recital 38 refers expressly to the property aspects between the assignor and the assignee only. This reference has been construed in three different ways.115 The first is that it mandates a split of the property aspects of the assignment into the effects on the relationship between assignor and assignee on the one hand, and the effects against the debtor and all other third parties on the other. To the first type of effects, the law governing the contract should apply; to the latter, the law governing the assigned claim.116 The intellectual property equivalent of the latter would be the law of the country for which protection is claimed. Construed thus, the third party effects are not covered by Rome I. The second solution that has been advanced is that the reference to the property aspects between the assignor and assignee indicates that Article 14 Rome I does not at all apply to the effects of the assignment on third parties. As a consequence, the law applicable to this issue is determined by the domestic conflict rules. The crucial question for the transfer of intellectual property rights thus is whether section 34 PIL Act applies117 – but Rome I does not. The third solution finally proposes to apply the law governing the contract between assignor and assignee also to the third party effects of the assignment.118 This solution has the advantage that one and the same law applies to all property aspects of the assignment so that they do not have to be split up in their effects on the assignor and assignee on the one hand and on the   See Musger, above n 9, Art 14 Rom I no 4.   In detail see T Petz, ‘Conflict of Laws in Intellectual Property: An Analysis of Rome I, Rome II and domestic Austrian conflict rules’, in B Verschraegen, Austrian Law – An International Perspective (Vienna, Jan Sramek, 2010) 211, 237–40. 116   On the feasibility of such a split against the background of French civil law, see Verhagen and van Dongen, above n 111, 6–9. 117   See below 2.4.2. 118  A Flessner, ‘Die internationale Forderungsabtretung nach der Rom I Verordnung’ (2009) Praxis des Internationalen Privat- und Verfahrensrechts 35, 39; D Einsele, ‘Die Forderungsabtretung nach der Rom I-Verordnung – Sind ergänzende Regelungen zur Drittwirksamkeit und Priorität zu empfehlen?’ (2010) Rabels Zeitschrift für ausländisches und internationales Privatrecht 91, 96 (arguing that all property aspects are covered by Art 14(1) Rome I save ‘absolute’ disclosure requirements which have to be qualified as overriding mandatory provisions according to Art 9 Rome I); Verhagen and van Dongen, above n 111, 5; Verschraegen, above n 113, 112. Cf also with regard to Art 12 Rome Convention the decision by the Dutch Hoge Raad, 15 May 1997, (1998) Nederlandse Jurisprudentie No 585 and the case note by C Joustra in (1999) Praxis des Internationalen Privat- und Verfahrensrechts 280; A Stadler, ‘Der Streit um das Zessionsstatut – eine endlose Geschichte?’ (2000) Praxis des Internationalen Privat- und Verfahrensrechts 104. 114 115

242  Thomas Petz debtor and other third parties on the other. Technically, that way the applicable law is determined only indirectly, that is, by reference to the law that applies to the contract.119 In effect, what happens is that the scope of the applicable law is extended beyond the contractual issues to all property issues. This technique ensures that once the parties have chosen the law applicable to the contract that law also applies to the relationships between them, and that the law applicable to the property aspects may not be chosen separately. Thus, only the third solution results in Rome I being applicable to all property aspects of the assignment – and only this solution would provide for the application of the lex contractus rather than the lex loci protectionis to the transfer-related property aspects of intellectual property rights. Consequently, the two arguments on which this solution is based must be scrutinised. The first argument aims at establishing that Article 14 Rome I is applicable to the third party effects of the assignment and thus to all property aspects. This argument is based on the wording of the special review clause on the effectiveness of the assignment against third parties in Article 27(2) Rome I.120 This clause provides that the European Commission has to produce a report on the question of the effectiveness of an assignment of a claim against third parties that may be supplemented by a ‘proposal to amend’. As any amendment requires that the issue is already dealt with, it is inferred from this wording that Article 14 Rome I applies to the third party effects of an assignment. The second argument aims at establishing that the first rather than the second paragraph of Article 14 Rome I applies to the third party effects of the assignment. This argument relies on the reference to the property aspects of the assignment in Recital 38 to Rome I, but considers its limitation to the relationship between assignor and assignee inapplicable because any relationship against third parties builds on the relationship between assignor and assignee so that the effects of the assignment against third parties are intrinsically intertwined with its effects on the relationship between assignor and assignee.121 Thus, this argument is based on substantive law.122 Whether it really mandates that the same conflict rule applies to the effects against third parties may be doubted123, but shall not be assessed here, as already the first argument seems incorrect. This conclusion already follows from the wording of Article 27 Rome I.124 The special review clause of this provision on the effectiveness of an assignment against third parties differs in two regards from its general review clause: First, the report which it requires to be 119   In German conflict of laws terminology, this may be called ‘akzessorische Anknüpfung’. Cf Flessner, above n 118, 37. 120   Flessner, above n 118, 38–39; Einsele, above n 118, 92; Verhagen and van Dongen, above n 111, 11–12. 121   Flessner, above n 118, 40; Verhagen and van Dongen, above 111, 5. With regard to Art 12 Rome Convention see EM Kieninger, ‘Das Statut der Forderungsabtretung im Verhältnis zu Dritten’ (1998) Rabels Zeitschrift für ausländisches und internationales Privatrecht 678, 709–10. 122   Thus, those who focus mainly on the conflict rules do not consider it valid. See Leible and Lehmann, above n 113, 541; T Pfeiffer, ‘Neues Internationales Vertragsrecht – Zur Rom I-Verordnung’ (2008) Europäische Zeitschrift für Wirtschaftsrecht 622, 629; Magnus, above n 113, 42. 123   cf Stadler, above n 118, 106–7; Alférez, above n 112, 226. In addition, the legislative history of Art 14 Rome I indicates that Recital 38 to Rome I was introduced to ensure that the law applicable to the contract between assignor and assignee also applied to the property aspects between them rather than the law of the habitual residence of the assignor which was proposed to apply to the third party effects of the assignment. When the latter proposal was dropped, the reverse effect of Recital 38 became important. See Alférez, above n 112, 226. Further, it has been argued that the issue of the effectiveness of the assignment against third parties was so controversial that it is unlikely that it would be dealt with only in a Recital. See R Plender and M Wilderspin, The European Private International Law of Obligations, 3rd edn (London, Sweet and Maxwell, 2009) no 13.040. 124   cf Alférez, above n 112, 226.

Austria  243 submitted has to deal with the ‘question’ of the effectiveness rather than with the ‘application’ of Rome I. Second, this report may be supplemented not only by a ‘proposal to amend’, but also by an ‘assessment of the impact of the provisions to be introduced’. Were the third party effects already covered by Article 14 Rome I, the report would rather be on its application to these effects and no provisions dealing with them would have to be introduced. Thus, no special review clause would be required at all.125 Further, whereas the general report is due by 17 June 2013, the special report was already due by 17 June 2010, only six months after Rome I had entered into force. Within such a short period of time, there will be almost certainly no case law on this issue, so the report has to deal with an issue different from the application of Article 14 Rome I.126 Thus, the wording of Article 27 Rome I and the purpose of the special review clause indicate that Article 14 Rome I does not apply to the third party effects of the assignment.127 This conclusion is crucial for the property aspects of intellectual property rights as the effects against third parties are the most important ones. Thus, even if we assume that Article 14 Rome I applies by analogy to the transfer of intellectual property rights, the provision does not provide for a solution with regard to the effects of the transfer on third parties, but leaves it to the conflict rules of domestic law. In sum, the absence of an express rule on the transfer-related property aspects of intellectual property rights in Rome I does not constitute a lacuna and thus Article 14 Rome I may not be applied by analogy. Consequently, it follows from an autonomous interpretation that the property aspects of intellectual property rights are not covered by Rome I.128 This applies in particular to transfer-related property aspects such as the transferability, the effectiveness of the transfer, the property aspects of a licence, and the transfer itself (Verfügungsgeschäft).129

2.4.2  The Application of Rome II to the Property Aspects of Intellectual Property Rights Article 8 Rome II sets up a conflict rule for the infringement of intellectual property rights. In infringement proceedings, however, the existence, contents, termination and initial ownership of the allegedly infringed right constitute incidental questions. Thus, the crucial issue is whether Rome II applies to incidental questions at all.130 This issue must be solved 125   This seems to be recognised by Verhagen and van Dongen who thus construe Art 27(2) Rome I narrowly so that it does not apply to the property aspects of the assignment, but only to the question whether certain creditors may ignore an intrinsically valid transfer; see Verhagen and van Dongen, above n 111, 12–13. 126   For a different conclusion, see Magnus, above n 113, 42; Verschraegen, above n 113, 112. 127   For a different conclusion, see Martiny, above n 11, Art 14 Rom I no 16. The solution proposed here does not necessarily mean that different laws apply to the effectiveness of the assignment between assignor and assignee and to the effectiveness against third parties. If the Austrian legislator wishes that the same law applies to all property aspects of the assignment, it may simply adopt either a conflict rule that provides for the same as Art 14(1) Rome I or refers to Art 14(1) Rome I. In both cases, however, it has to be ensured that the renvoi is excluded. 128   cf Schack, above n 24, no 1290. 129   Thus, the situation is identical to that before the entry into force of Rome I. Rather than applying the provision on contracts relating to intellectual property rights (s 43 PIL Act) to the property-related aspects of a licence agreement, the Austrian Supreme Court applied the provision on the existence, contents and termination of intellectual property rights (s 34 PIL Act). See OGH 4 Ob 44/92, Schott II, (1992) Medien und Recht 194. That way, it could apply the lex loci protectionis to those aspects even though the licence agreement was concluded for a multitude of countries and thus, under the contracts rule the law of the country where the licensee is habitually resident would have applied. Technically, this result was received by characterising the licence as an intellectual property right and consequently the question of the rights conferred on the licensee a question of the contents of the right. By contrast, in scholarly writings the application of the lex contractus at least to the transfer itself was preferred; see Schwimann 1992, above n 4, § 43 IPRG no 2. 130   On this issue in detail see Drexl, above n 6, no 155–64.

244  Thomas Petz by an autonomous interpretation of the Regulation. Arguments for applying Rome II to property aspects in general and those of intellectual property rights in particular may be based on Article 15 Rome II. This provision states in lit (a) that the applicable law governs the basis and extent of liability, and in lit (f) that it applies to determining the persons who are entitled to compensation for the damage sustained personally. Indeed, these two provisions have been considered to be only expressions of the more general principle that the applicable law applies to all the requirements for liability and thus, also to the existence, content, termination and initial ownership of the right that has allegedly been infringed.131 This approach, however, is correct only to the extent that it concerns the contents of the allegedly infringed intellectual property right. By the content of a right, we mean the rights conferred on the right-holder, such as the right to distribute, and the exceptions to these rights.132 As liability for the infringement of an intellectual property right requires that a right is infringed, the content of a right concerns the basis and extent of liability. Thus, at least this property aspect is covered by Rome II if it comes up in infringement proceedings.133 For all other property aspects and in all other procedural set-ups, however, it follows from an analysis of Article 15(a) and (f) Rome II that the contrary is true. As regards the basis and extent of liability, it should be recalled that Rome II not only applies to the infringement of intellectual property rights, but also to the damage to movable property.134 Thus, assuming that Rome II applied to the property aspects, in the case of a car crash, the law determining the ownership issue would be the law of the country where the accident occurred rather than the law of the country where the car was located at the time the owner bought it. Depending on the substantive rules of property law of the country where the accident occurred, a different person may be the owner. This not only seems to be an inappropriate result, but also deviates from the conflict rules of most European countries as they follow the lex rei sitae approach. Absent of any indication by the European legislator, such a considerable change of the conflict rules is not to be assumed. Thus, the reference to the basis and extent of liability in Article 15(a) Rome II does not include the property aspects of rights.135 As regards the determination of the persons who are entitled to compensation for the damage they sustained personally, neither the purpose nor the wording of Article 15(f) Rome II mandates a construction according to which the applicable law should apply to all requirements for liability. The provision refers to the entitlement to compensation rather than the existence of a right. A person may claim to be entitled to compensation, but this does not mean that a right exists on which such a claim could be based.136 In addition, the emphasis of this provision is on persons who suffer indirect harm, not on those who suffer direct harm.137 Consequently, neither Article 15(a) Rome II nor Article 15(f) Rome II mandates the application of Rome II to the property aspects of intellectual property rights. 131  Basedow and Metzger, above n 10, 162 (but see now A Metzger, ‘Perspektiven des internationalen Urheberrechts – Zwischen Territorialität und Ubiquität’ (2010) Juristenzeitung 929, 933); Sack, above n 10, 1409– 10; Walter, above n 26, 56 (with an exception for initial authorship). 132   Walter, above n 26, no 56. 133   Drexl, above n 6, 164; Walter, above n 26, no 56; Metzger, above n 131, 933. Contra Schack, above n 24, no 1011 and 1051. The reason for this seems to be that the infringement of a right is so closely connected to its contents that one and the same law has to apply. See with regard to Austrian law before the entry into force of Rome II above n 34. 134   Drexl, above n 6, no 158. 135   contra Walter, above n 26, no 56. 136   cf Drexl, above n 6, no 159. 137   ibid, no 161.

Austria  245 In addition, applying Rome II to the property aspects of intellectual property rights causes considerable practical problems. The first problem is that regularly, infringement claims are closely connected with claims arising out of the breach of a licence agreement.138 This follows from the fact that usually non-performance of a licence agreement amounts to an infringement of the intellectual property right that has been licensed. Consequently, proceedings concerning the infringement of an intellectual property right often also require construing the licence agreement and determining whether it has been breached. In this procedural set-up, the issue of the identity of the owner of the intellectual property right comes up as an incidental question to both claims, the claim arising out of the breach of the contract and the claim arising from the infringement of the intellectual property right. If Rome II were to be applied to the issue of ownership, the law applicable to this property aspect would be determined by Rome II in the context of the infringement, but by section 34(1) PIL Act in the context of the contractual claims. As the connecting factor of both rules – the lex loci protectionis – is the same, they will regularly lead to the application of the same law. Under certain circumstances, however, because of the fact that contrary to the PIL Act, Rome II does not accept a renvoi, different laws may apply to one and the same issue in one and the same dispute. This is particularly true with regard to initial authorship because for copyright the conflict rules of some countries do not determine the lex loci protectionis, but the lex originis as the applicable law.139 Thus, if section 34(1) PIL Act refers to the conflict rules of such a country, this reference is not accepted if the copyrightable work does not originate from there. The latter observation that at least with regard to copyright some domestic conflict rules do not consider the lex loci protectionis, but the lex originis as being the appropriate applicable law reveals another practical problem.140 For those Member States of the European Union, such as France, Greece and Portugal,141 which have adopted for copyright the lex originis approach, the entry into force of the lex loci protectionis regime of Rome II would amount to a sudden change in the applicable law (Statutenwechsel). Again, in the absence of any reference in this regard, it cannot be assumed that this was intended by the European legislator. This analysis demonstrates that the better arguments are those against the application of Rome II to the property aspects of intellectual property rights. This also seems to be the view of the Austrian legislator when it recently adapted the PIL Act to the Rome Regulations: Despite proposals to the opposite,142 it refrained from deleting section 34 PIL Act. Thus, the law applicable to the existence, termination and initial ownership of an intellectual property right as well as to its transferability and the transfer itself is determined by this provision, with the effect that the lex loci protectionis applies to all these issues.143 By contrast, if an issue concerning the contents of an allegedly infringed intellectual property right comes up in infringement proceedings, this issue is covered by Article 8 Rome II. In this case, this   See Walter in his case note to 4 OGH 139/90, Gleichgewicht des Schreckens (1991) Medien und Recht 112.   Drexl, above n 6, no 145; Walter, above n 26, no 6.   See Drexl, above n 6, no 161. 141   cf J Schacherreiter, ‘Die Anknüpfung der ersten Inhaberschaft bei Film- und Arbeitnehmerwerken’ (2006) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 252, 255; Schack, above n 24, no 1011. 142   Handig 2009, above n 10. 143   cf Heiss and Loacker, above n 9, 613; Ofner, above n 9, 19; Neumayr, above n 4, Art 8 Rom II no 1 and 6. Contra Walter, above n 26, no 56 (with the exception of initial authorship) and Schwimann 1992, § 43 IPRG no 2 (applying the lex contractus to the transfer itself at least before the entry into force of Rome I). See also M Walter, ‘Die Vertragsfreiheit im Urheberrecht aus der Sicht des Internationalen Privatrechts’ in E Reimer (ed), Beihefte zu der Zeitschrift Gewerblicher Rechtsschutz und Urheberrecht (Munich, Beck, 1977) 137, 147–52. 138 139 140

246  Thomas Petz property aspect is also governed by the lex loci protectionis, but with the difference that a renvoi is excluded.

2.4.3  Property Aspects and Employment Relationships For intellectual property rights relating to the activities of an employee, section 34(2) PIL Act provides that the law governing the employment relationship also applies to the intellectual property rights. Thus, this conflict rule merely refers to the conflict rules for employment contracts. For employment contracts concluded after 17 December 2009, the applicable law is determined by Article 8 Rome I.144 This provision allows the parties to choose the applicable law but does not consider this choice effective if, in result, it deprives the employee of the protection afforded him by the mandatory rules of the law that would have been applicable in the absence of such choice. As regards the determination of the latter law it regularly provides for the application of the law of the country where the work is habitually carried out in the performance of the employment contract. At first sight, section 34(2) PIL Act thus seems to determine the lex contractus rather than the lex loci protectionis as applicable to the property aspects of intellectual property rights relating to an employment relationship. This, however, is only true for particular property aspects. As the wording of this provision clearly indicates, it applies only to the relationship between the employee and the employer. This restriction is generally considered to introduce a distinction relating to the property aspects between the employee and the employer and those against third parties.145 Thus, for example, the assignment of initial authorship between the employee and the employer is governed by the law applicable to the employment contract, whereas its effects against third parties are governed by the law of the country for which protection is claimed. The purpose of this distinction, however, and its feasibility, have been subject to speculation ever since.146 In particular, the parallel application of the lex contractus to the property aspects inter partes and the lex loci protectionis to the property aspects erga omnes could impose on the court the difficult task of accommodating both laws.147

2.5  Choice of Law In practice, one and the same dispute concerning an intellectual property right may involve at the same time contractual issues, infringement issues and property issues. These three types of issue, however, differ considerably when it comes to the balance struck between party autonomy on the one hand and the policy considerations based on which a domestic legislator grants and shapes an intellectual property right on the other. For conflict of laws, this means that different rules on choice of law may apply, and these different rules have to be considered separately. To illustrate the gliding scale of restrictions on choice of law, the   For a hypothetical case concerning this provision see below 3.3.1.   Introductory Remarks to the 1978 Act on Private International Law, reprinted in R Dittrich, Österreichisches und Internationales Urheberrecht, 5th edn (Vienna, Manz, 2007) 556; Schönherr, above n 39, no 908.1; Neumayr, above n 4, § 34 IPRG no 5; Verschraegen, above n 4, § 34 IPRG no 31. See also Art 14 Rome I. 146   cf R Dittrich, ‘Ausgewählte Grundsatzfragen des Arbeitnehmerurheberrechts’ (2006) Zeitschrift für Arbeitsund Sozialrecht, 2; Schacherreiter, above n 141, 255. 147   Schwimann 1982, above n 4, 197. 144 145

Austria  247 rules on contractual issues will be considered first, those on non-contractual issues second, and those on property issues third.148

2.5.1  Choice of Law and Contractual Obligations For contractual obligations, Article 3 Rome I provides for free choice of law as the general rule. Thus, the parties are not only free as to the law of which country they choose, but also as to when they choose it – that is, before, at or after the conclusion of the contract. If, however, all elements relevant to the situation are located in a country other than that whose law has been chosen, notwithstanding the choice of law, the mandatory provisions of that country shall apply according to Article 3(3) Rome I. To give an example, if both the author of a work and the publisher are domiciled in Austria and the book will be published in Austria only, the parties may not derogate from section 23(3) of the Austrian Copyright Act149 – which provides that no transfer of the copyright is possible – by agreeing on the application of US copyright law. Free choice is also the general rule for individual employment contracts. Article 8 Rome I, however, ensures that this choice does not result in depriving the employee of the protection afforded to him by the mandatory provisions of the law that would have been applicable in the absence of a choice. Regularly, this is the law of the country in which the employee habitually carries out his work in performance of the contract.150 This approach is stricter than that of Article 3(3) Rome I in two regards. First, it is not required that all other elements relevant to the situation are located in a country other than the one whose law has been chosen. Second, the law that would be applicable in the absence of a choice applies only if it is more favourable to the employee than the law that has been chosen. The reason for this distinction is that employment contracts differ from other contracts, in particular, service contracts, in so far as they create a lasting bond which brings the employee to some extent within the organisational framework of the business of the employer.

2.5.2  Choice of Law and Non-Contractual Obligations For non-contractual obligations, Rome II limits the admissibility of choice of law, compared to Rome I. This does not come as a surprise, as party autonomy is the dominant principle for contractual obligations, but is of only minor importance for non-contractual obligations, compared to the place where the damage occurred. This is revealed by the restrictions on the point in time when the parties may agree on a choice of law. As a general rule, Article 14 Rome II provides that a choice of law agreement is valid only if it is made after the event giving rise to the damage has occurred. There is an exception, however, if both parties to the dispute pursue commercial activities. In such a case, they may choose the applicable law even before that event. With regard to the infringement of intellectual property rights, however, Article 8(3) Rome II provides that Article 14 Rome II does not apply. Thus, a choice of law is not admissible.151 The reason for this inadmissibility seems to 148   On choice of law under Rome I and Rome II, see in particular T Thiede, ‘Die Rechtswahl in den Römischen Verordnungen’ in B Verschraegen (ed), Rechtswahl – Grenzen und Chancen (Vienna, Jan Sramek, 2010) 51. 149   BGBl 1936/111 as last amended by BGBl I 2010/10. 150   Art 8(2) Rome I. 151   Schack, above n 24, no 1052 (but opposing this result de lege ferenda). By contrast, Walter argues that Art 8(3) Rome II applies only to the infringement of intellectual property rights, but not to the remedies. See Walter, above n 26, no 55. In my view, however, such a construction would run counter to Art 15(c) Rome II, which provides that the applicable law also applies to the remedies. See below 3.2.1.

248  Thomas Petz be that the policy considerations based on which a domestic legislator grants intellectual property rights are considered to be more important than the principle of party autonomy. Surprisingly, these policy considerations are regarded as less important when it comes to immovable property. Thus, in the event that such property is damaged, the parties may choose the applicable law. By contrast, no choice is allowed for acts of unfair competition and restrictions of competition. Thus, the reason seems to be the specific nature of the public policy considerations. For intellectual property rights and unfair competition, it is obviously assumed that the domestic policy considerations of each country differ considerably, whereas for property rights, this may not necessarily be the case. The inadmissibility of choice of law for claims arising from the infringement of an intellectual property right may prove problematic if the infringement claim is combined with a contractual claim based on a licence agreement. Whereas the lex loci protectionis applies to tort claims, the lex contractus applies to the contractual claim, and thus different laws may apply even though the issues are intertwined. In this regard, however, it has to be borne in mind that the parties are free to settle their respective claims, and the law applicable to this settlement can be chosen based on Article 3 Rome I. Consequently, at least for choice of law after the event giving rise to the damage had occurred, the importance of Article 8(3) Rome II is only reduced: it is limited to those cases where the parties do not reach a settlement. Further, as already indicated, the inadmissibility of a choice of law agreement is not unique to intellectual property rights: Article 6(4) Rome II provides the same for unfair competition and acts restricting free competition. There is, however, a slight difference to the inadmissibility of choice of law for intellectual property rights. The plaintiff in proceedings concerning the infringement of intellectual property rights determines the applicable law by claiming protection for a particular country.152 This amounts to a unilateral choice of law. Whether this choice was clever depends on whether there is infringement under the applicable law. By contrast, for unfair competition and acts restricting free competition, the applicable law is determined by localising the competitive relations or the collective interests of consumers that are, or are likely to be, affected. Thus, the plaintiff may not unilaterally determine the applicable law simply by claiming protection for a particular country.153

2.5.3  Choice of Law and the Property Aspects of Intellectual Property Rights Finally, as has been elaborated above, both Rome Regulations do not apply to the property aspects of intellectual property rights.154 These aspects comprise the existence, contents, termination and initial ownership of an intellectual property right as well as its transferability and the transfer itself. Consequently, the law applicable to these aspects is determined by the domestic Austrian conflict rules.155 Section 34(1) PIL Act provides for the application of the law of the country for which protection is claimed. As regards choice of law, it seems generally accepted that the law applicable to the property aspects of intellectual property rights cannot be chosen by the parties.156 Two arguments have been advanced in   See above 2.2.2.1.   For the dogmatic reason for this difference, see above 2.2.2.1. 154   See above 2.4.1 and 2.4.2. 155   This does not apply to the contents of an intellectual property right if it comes up as an issue in infringement proceedings. See above 2.4.2. 156   Schwimann 1982, above n 4, 194; Briem, above n 21, 114; Verschraegen, above n 4, § 34 IPRG no 8; Neumayr, above n 4, § 34 IPRG no 1; Posch, above n 1, no 13/10 n 28; OGH 4 Ob 408/85, Hotel Sacher (1986) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 73 (trade mark); OGH 4 Ob 252/04v, Tourismusinformations­ systeme (2005) Medien und Recht 183 (with case note by M Walter) (copyright). 152 153

Austria  249 favour of this view: a formal one and a substantial one. The first relates to the wording of the provision of the PIL Act on choice of law, section 11, which limits the provision’s scope of application expressly to claims arising out of contractual obligations and claims relating to marital property. As all property aspects of intellectual property rights save the transfer itself (Verfügungsgeschäft) do not arise out of a contractual obligation, section 11 PIL Act does not apply to them. The second argument points to the fact that the property aspects of an intellectual property right are so closely related to the shape of that right that no law other than that of the country which grants the right should be applied. As indicated, the odd man out is the transfer itself.157 On the one hand it is an agreement, because the transferor offers to transfer the right and the transferee accepts this offer. However, contrary to other agreements, the transfer itself does not impose on the transferor an obligation to transfer the right. This obligation already follows from the agreement to transfer. Rather, it affects the ownership of the right and thus, touches upon a property aspect. As the transfer itself imposes no obligations on the parties, Rome I does not apply.158 Therefore, recourse has to be made to the domestic conflict rules. On its face, section 34(1) PIL Act does not apply to the transfer itself as it concerns neither the existence nor the contents nor the termination of an intellectual property right. By contrast, the wording of section 31(1) PIL Act on the law applicable to real property is wider, as it refers also to the acquisition of the real property. Indeed, it has been argued that the law applicable to the transfer itself of real property may be chosen.159 If this is correct, such choice seems even more appropriate with regard to intellectual property.160 The substantive argument against choice of law advanced above does not apply to the transfer itself as the transfer does not affect the shape of the right. The formal argument, however, applies: the provision of the PIL Act on contractual obligations, section 35(1), endorses the same concept of contractual obligations as employed by Rome I. This follows from the legislative history of this provision: When adapting the PIL Act to Rome I, the Austrian legislator emphasised that section 35(1) PIL Act applies to those contractual obligations which Article 1(2) Rome I expressly excluded from the Regulation’s scope of application.161 These contractual obligations have in common that they are all contractual obligations within the meaning of Article 1(1) Rome I.162 As there is no indication that the Austrian legislator intended to extend the scope of application of section 35(1) PIL Act beyond that of Article 1(1) Rome I, the concept of contractual obligations in both provisions is the same. The purpose of section 35(1) PIL Act is thus to apply to those contractual obligations to which Rome I does not apply, but not to agreements that do not impose obligations. As it follows from the construction of Rome I elaborated above, the transfer itself is no contractual obligation within the meaning of Article 1(1) Rome I. Given that the concept of contractual obligations in Article 1(1) Rome I and section 35 PIL Act is the same, the transfer itself is also no contractual obligation under section 35(1) PIL Act. The provision of the PIL Act on choice of law, section 11, however, makes the admissibility of a   See above 2.4.1.   See above 2.4.1. 159   cf Schwimann 1982, above n 4, 180; A Flessner, ‘Rechtswahl im internationalen Sachenrecht – neue Anstöße aus Europa’ in P Apathy, et al (eds), Festschrift für Helmut Koziol zum 70. Geburtstag (Vienna, Jan Sramek, 2010) 125. 160   For a limited choice of law for the transfer itself in Austrian law before the entry into force of Rome I, see Schwimann 1992, above n 4, § 43 IPRG no 2. Against such a choice Koppensteiner, above n 34, § 37 no 6. 161   Explanatory Remarks to the Proposal of the Federal Government 332 BlgNR 24. GP, 3. See below 3.4.1. 162   See above 2.4.1. 157 158

250  Thomas Petz choice of law dependent on the scope of application of section 35(1) PIL Act. Consequently, as this scope does not cover the transfer itself, section 11 PIL Act is inapplicable. As a result, the law applicable to the transfer itself cannot be chosen. It has to be stressed, however, that there is one exception to the general rule that the law applicable to the property aspects of intellectual property rights may not be chosen. But this exception is limited to a particular type of property aspects, that is, the property aspects between employer and employee.163 For these aspects, the applicable law may be chosen by choosing the law applicable to the employment contract. As indicated above, however, there are considerable restrictions imposed on this choice.164

2.6 Summary Before we turn to the case studies, let us reconsider the results of this part. As far as the law applicable to contracts relating to intellectual property rights in the absence of a choice of law agreement is concerned, Rome I contains no special rule, and the prevailing view in Austrian literature does not apply the general rule of Article 4(2) Rome I differently to contracts relating to intellectual property rights. As a result, the law applicable to a transfer of an intellectual property right is the law of the country where the transferor is habitually resident, and the law applicable to a licence agreement is regularly the law of the country where the licensor is habitually resident. With regard to licence agreements, however, we have argued for an interpretation of Article 4 Rome I that takes into account the particularities of intellectual property rights. What is crucial for this approach is that in case a duty to create is imposed on the licensor and a duty to exploit is imposed on the licensee, the law of the country having the closest connection to the licence agreement should apply. In the case of single-state licences, this would regularly be the law of the country of distribution, in the case of multi-state licences the country where the licensee is habitually resident. As regards the infringement of intellectual property rights, Article 8 Rome II provides for a special conflict rule that differs considerably from the general conflict rule for torts in Article 4 Rome II. The main difference is of a dogmatic nature, and this difference does not only distinguish Article 8 Rome II from the general conflicts rule, but also from the special conflict rule for unfair competition in Article 6 Rome II with which Article 8 Rome II otherwise has some similarities. In addition to this dogmatic difference, contrary to the general rule Article 8 Rome II provides neither for a special rule in case of a common habitual residence of the parties, nor for a general escape clause, nor for choice of law, nor for the application of special conflict rules for claims based on non-contractual obligations other than tort. As a result, Article 8 Rome II is a clear-cut, but very strict rule. This specific nature is arguably mandated by the policy considerations of intellectual property. Concerning the property aspects of intellectual property rights it has been elaborated in some detail that rather than Rome I or Rome II, the domestic conflict rule of section 34 PIL Act applies. Consequently, these aspects are governed by the lex loci protectionis. The approach of Rome I and Rome II not to cover property aspects is not unique to intellectual property, but applies equally to real property. Only with regard to the assignment of claims, there are some property aspects that are covered by Article 14 Rome I. As we have argued, however, this provision does not apply to the most important property aspects with regard   See s 34(2) PIL Act; Posch, above n 1, no 13/12.   See above 2.5.1.

163 164

Austria  251 to intellectual property rights, that is, the effectiveness of the transfer against third parties. In sum, thus, there is a special conflict rule for the property aspects of intellectual property rights, but this rule is one of domestic law. Finally, as regards choice of law, there is no special rule for contracts relating to intellectual property rights and – with the exception of section 34(2) PIL Act which deals with the property aspects between employer and employee – for the property aspects of intellectual property rights. For contracts, the general rule of Article 3 Rome I and the special rule on employment contracts of Article 8 Rome I are applicable to contracts relating to intellectual property rights in the same way as they are to contracts relating to other rights. For the property aspects including the transfer itself, no choice of law is admissible – except a limited choice as far as property aspects between employer and employee in an employment relationship are concerned. Thus, neither for contracts nor for the property aspects do the policy considerations of intellectual property mandate a solution that is different from that of other rights. Only with regard to the infringement of intellectual property rights, there is a special rule: Article 8(3) Rome II provides that the general rule of Article 14 Rome II which allows for a limited choice of law does not apply. Consequently, the law applicable to the infringement of intellectual property rights may not be chosen by the parties. This is similar, but not identical to the situation concerning unfair competition and acts restricting free competition. Thus, in this regard, the policy considerations of intellectual property seem to mandate a different solution.

3  Revisiting the Applicable Law: Four Case Studies In this part of the chapter, some of the results that have been reached in the previous part will be put to the test. For this purpose, four case studies will be advanced, one on the principle of territoriality, one on the infringement of intellectual property rights, one on the law applicable to initial ownership, and one on the law applicable to transfer of rights agreements. All four case studies consist of several hypothetical cases.

3.1  The Principle of Territoriality A owns a patent over an engine in Austria. B produces separate parts of the patented engine in Austria and exports them separately to his customers in countries Y and Z. Customers of B can easily assemble the parts of the patented engine in a very short time. Having found out about B’s activities, A files a suit in Austria requesting an injunction and recovery of damages for patent infringement. B argues that the export of separate parts of an invention does not amount to patent infringement, and that the Austrian Patent Act does not extend to activities abroad.

3.1.1  The Application of Austrian Law to Infringing Activities that Occur Abroad Assuming that an Austrian court has jurisdiction, could it apply the Austrian Patent Act to allegedly infringing acts that occur in country Z?

The crucial issue in this hypothetical case is that the activities of the defendant occur in one country, but the patent is registered in another. Thus, the country of protection differs

252  Thomas Petz from the country of infringement. Whether this issue matters for the determination of the applicable law depends on the applicable conflict rule. As a general rule, if an Austrian court has international jurisdiction, it determines the applicable law based on the Austrian conflict rules.165 In this regard, two issues are important: First, which Austrian conflict rule does apply to a particular claim? Second, what issues raised by the claim are covered by the applicable law? As far as the first question is concerned, our hypothetical case involves a patent infringement claim. For non-contractual obligations arising from the infringement of an intellectual property right, the applicable law is determined by Article 8(1) Rome II. Recital 26 of Rome II provides a non-exclusive list of intellectual property rights which includes copyright, related rights, the sui generis right for the protection of databases and industrial property rights. The latter notion seems to refer to the definition of industrial property in Article 1(2) of the 1883 Paris Convention for the Protection of Industrial Property.166 This provision defines industrial property as patents, utility models, industrial designs, trade marks, service marks, trade names, indications of source or appellations of origin, and the repression of unfair competition. To the extent that this concept of industrial property also applies to unfair competition, it is wider than that of Recital 26 of Rome II as Rome II provides in its Article 6 for a separate conflict rule for unfair competition.167 With regard to patents, however, Article 1(2) Paris Convention is instructive. But recourse to this provision does not seem necessary as it is considered to be self-evident that Article 8(1) Rome II applies to the infringement of patents.168 And indeed, to what intellectual property right would it apply if not to patents?169 As regards the second question, the scope of the applicable law is determined by Article 15 Rome II. In our hypothetical case, the plaintiff asked the court to issue an injunction and to award damages. Article 15(c) Rome II provides that the applicable law governs the existence, the nature and the assessment of damage or the remedy claimed, Article 15(d) Rome II adds that the applicable law also governs measures which a court may take to prevent or terminate injury or damage. As a result, the applicable law covers both remedies claimed by the plaintiff, the injunction as well as the award of damages.170 Having settled on the applicable conflict rule and the scope of application of the applicable law, we return to the issue that the country for which the patent has been granted is different from the country where the allegedly infringing activities occurred. In this context, it has to be noted that the determination of the applicable law by an Austrian court depends to a large extent on the submissions of the plaintiff. If in these submissions he claims protection for a foreign country, the law of that country will apply. By contrast, if he claims protection for Austria, Austrian law will apply. But claiming protection for a partic  See above 2.1.   Paris Convention for the Protection of Industrial Property of March 20, 1883 as revised at Stockholm on 14 July 1967, BGBl 1973/399 as last amended by BGBl 1984/384. 167   cf Grünberger, above n 10, 140–41. 168   K Kreuzer, ‘Die Vergemeinschaftung des Kollisionsrechts für außervertragliche Schuldverhältnisse (Rom II)’ in G Reichelt and W Rechberger (eds), Europäisches Kollisionsrecht (Vienna, Manz, 2004) 13, 41; Heiss and Loacker, above n 9, 613; Sack, above n 10, 1406; Wagner, above n 47, 9; Grubinger, above n 10, 60. 169   This is true not only for patents granted by the Austrian Patent Office based on the proceedings provided for by the Austrian Patent Act, but also for the Austrian part of a European patent granted by the European Patent Office. For the latter patents, this follows from Art 64(3) of the European Patent Convention (hereinafter, EPC), BGBl 1979/350 as last amended by BGBl I 2008/2, which provides that the national law applies to the infringement of a European patent. 170   cf Sack, above n 10, 1409. 165 166

Austria  253 ular country is no easy task for the plaintiff. The reason for this is that Austrian procedural law regularly requires the plaintiff to substantiate his claim also with regard to substantive law.171 Thus, the plaintiff has not only to indicate for which country he claims protection, but also to submit in what allegedly infringing activities the defendant has engaged and in which country these activities have occurred. This requires the plaintiff to argue on the application of both the conflict rules and the rules of substantive law.172 This double task could pose a considerable risk for the plaintiff: If he does not succeed in distinguishing between both layers of law properly, the court could be inclined to conclude that protection was actually claimed for the country where the allegedly infringing activities had occurred. In our hypothetical case, this would mean that based on his submission that the infringing activities occurred in country Z, the court would hold that the plaintiff claimed protection for that country rather than for Austria. At first sight, this problem seems to be one of practical importance only to the plaintiff. A closer look, however, reveals that it is linked to the core issue of this hypothetical case, that is, the question at which level the principle of territoriality is operative. This question is not only decisive with regard to the submissions of the plaintiff, but also with regard to the determination of the applicable law by Austrian courts. Three approaches to answer this question have been advanced, the first two considering the principle of territoriality operative already at the level of the conflict rules, the third only at the level of the rules of substantive law.173 As the solution of our hypothetical case depends on which approach we endorse, all three of them have to be scrutinised. Under the first approach, the principle of territoriality is considered to be a conflict rule.174 This rule provides for the application of the law of the country where the allegedly infringing activities occurred. Thus, determining the applicable law requires determining the place where these activities occurred. As protection may be claimed for no country other than the one where the allegedly infringing activities occurred, the practical problem of distinguishing between the submissions of the plaintiff as to the applicable law and the substantive law does not arise. Under this approach thus Austrian law would not be applicable because the allegedly infringing activities occurred in country Z. Consequently, the Austrian court would apply the law of that country. Technically, this approach requires construing the phrase ‘for which protection is claimed’ in Article 8(1) Rome II as ‘where the damage occurs’.175 Obviously, such a construction is not feasible.176 But if one nevertheless construes Article 8(1) Rome II that way, its normative value would be reduced to a mere derogation of the escape clauses in Article 4(2) and (3) Rome II. From Recital 21 to Rome II it follows that this was not how the European legislator conceived this provision.177

  s 226 Civil Procedure Act [Zivilprozeßordnung], RGBl 1895/113 as amended last by BGBl 1983/135.   cf N Klass, ‘Urheberkollisionsrecht der ersten Inhaberschaft – Plädoyer für einen universalen Ansatz’ (2007) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 373, 376–77. See also Lurger, above n 28, 109. 173   See above 2.2.2.1. 174   Koppensteiner, above n 34, § 37 no 1; Walter, above n 26, no 10. 175   For intellectual property rights other than unitary Community intellectual property rights the place where the allegedly infringing activities occur is also the place where the damage occurs, see above n 49. For Art 8(2) Rome II – which provides that the law of the country where the infringing act was committed governs certain non-contractual obligations arising out of the infringement of unitary Community rights – to make sense, however, Art 8(1) Rome II has to refer to the place where the damage occurred. 176   But see Walter, above n 26, no 54: Claiming protection for a particular country is only the consequence of the fact that the infringing activities occurred in that country. 177   In detail, see above 2.2.2.1. 171 172

254  Thomas Petz Under the second approach, the plaintiff submits for which country he claims protection, but the court applies the law of that country only if it concludes that the allegedly infringing activities also occurred there.178 Even though this does not require the court to determine whether the activities were actually infringing – a task that is still left to the applicable law – it is required to single out which particular activity of a series of activities is the one that allegedly infringed the intellectual property right, and in which country that activity occurred.179 Thus, rather than the plaintiff ’s claim for protection in a particular country, the place where the act of infringement was committed is decisive. This, in effect, amounts to a limitation on the locus protectionis imposed by the locus delicti commissi.180 As a result, if the allegedly infringing activities have occurred in a country other than the one for which the plaintiff claims protection, the law of the country for which he claims protection does not apply even though the plaintiff claimed so. Under this approach, the principle of territoriality is considered to require that the allegedly infringing activities occurred in the country for which protection is claimed.181 Technically, this could be achieved by construing the notion ‘infringement’ in Article 8(1) Rome II accordingly. As a result, it would impose a restriction on the plaintiff ’s claim for protection for a particular country. Among the proponents of this approach, however, the proper way of constructing the notion ‘infringement’ is controversial. One way is to construe it by recourse to the concept of infringement of the lex causae. As a result, the law of the country for which protection is claimed would also determine whether infringing activities arguably occurred in that country. Another way is to construe it based on the concept of infringement of the lex fori.182 Consequently, the law of the country where the court is seated would determine whether infringing activities arguably occurred in the country for which protection is claimed. Again another way is to consider the notion ‘infringement’ to be an autonomous concept of Rome II so that recourse neither to the lex causae nor to the lex fori may be made. Contrary to the first two solutions, the concept of ‘infringement’ would thus be one of conflict of laws, not of substantive law. Arguably, only the latter approach is reconcilable with the principle of autonomous interpretation of Rome II.183 Be it as it may, in our hypothetical case the only infringing activities arguably carried out by the defendant were those carried out in country Z. Thus, there is some reason to assume that under all three solutions, there would be an ‘infringement’ in that country.184 For our hypothetical case it follows from this approach that even if the plaintiff based his infringement claim on his Austrian patent, the court would apply the law of country Z as the infringing activities arguably occurred there. For three reasons, Article 8(1) Rome II is irreconcilable with this approach. First, were the limitations imposed by the principle of territoriality limitations imposed on the conflict rule itself, they would lead to the application of the law of the country where the 178  Buchner, above n 10, 1006; Handig 2008, above n 10, 10; KH Fezer and S Koos, ‘Internationales Immaterialgüterprivatrecht’ in U Magnus (ed), J von Staudingers Kommentar zum Bürgerlichen Gesetzbuch, vol 6 Pt 2, 13th edn (Munich and Berlin, Sellier-De Gruyter, 2010) no 915. 179   See on this problem in general P Mankowski, ‘Das Internet im Internationalen Vertrags- und Deliktsrecht’ (1999) Rabels Zeitschrift für ausländisches und internationales Privatrecht 203, 262–64; Heiss and Loacker, above n 9, 643; T Thiede, Internationale Persönlichkeitsrechtsverletzungen (Vienna, Jan Sramek, 2010) 350–81. 180   Walter, above n 26, no 19. 181   Buchner, above n 10, 1006. 182   See Walter, above n 26, no 19. 183   See in detail below 3.2.2, n 220. 184   For the proponents of this approach this would follow from the principle of territoriality. Cf in general Dittrich, above n 24; Schack, above n 24, no 915.

Austria  255 infringing activities were carried out. For intellectual property rights, this country is regularly at the same time the country where the damage occurs.185 Thus, the special rule for intellectual property rights in Article 8(1) Rome II would only restate what already follows from the general rule for torts in Article 4(1) Rome II.186 This neglects the fact that Article 8(1) Rome II was designed not as an expression of, but an exception to, Article 4(1) Rome II.187 Second, if the plaintiff claims protection for a particular country but the court concludes that the defendant has not engaged in any allegedly infringing activities there, the law of that country will not be applied. The question thus is how should the applicable law be determined in this case. Article 8(1) Rome II provides for no solution, because protection was claimed only for the country where no allegedly infringing activities were carried out, and so it bars the application of the law of any other country. The decision would thus stop short at the level of the conflict rules. Third, for unitary Community intellectual property rights, Article 8(2) Rome II provides for the application of the law of the country where the act of infringement was committed to certain non-contractual obligations arising from the infringement of such rights. Thus, this provision also employs the notion ‘infringement’. If this notion has a normative value – as the proponents of the second approach argue – it has to have the same meaning in both paragraphs of Article 8 Rome II. In this case, however, Article 8(2) Rome II would contain two connecting factors, one referring to the place where the act was committed, the other to the place where the damage occurred.188 This does not seem to be a feasible construction.189 Thus, what remains is the third approach. Under this, the principle of territoriality does not impose a limitation on the conflict rule, but on the activities of the defendant that could amount to an infringement under the substantive rules of the applicable law.190 In our hypothetical case, this approach would result in the application of Austrian patent law if the plaintiff claimed protection for Austria. When applying this law, however, the court would have to consider whether the allegedly infringing activities of the defendant that occurred abroad amount to an infringement. Contrary to the first two approaches, under this approach this is an issue of the applicable rules of substantive law. In my view, only the latter approach is reconcilable with the wording and the purpose of Article 8 Rome II.191 Further, with regard to the plaintiff ’s practical problem of how to claim protection for a particular country, it follows from this approach that for determining the applicable law the court may not take into account the plaintiff ’s submissions on infringing activities that occur in a country other than that for which protection is claimed.192 Like under the first approach, the practical problem lined out at the outset thus does not come up under this approach either. For our hypothetical case this means that if   See above n 49.   See above 2.2.2.1. 187   cf Recitals 21 and 26 to Rome II. 188   Contrary to domestic intellectual property rights, for unitary Community rights the place where the infringing activities occurred is not identical to the place where the damage occurred: Whereas the first is regularly located within one of the Member States, the latter is the entire Community. Thus, this difference matters. See above n 49. 189   In particular, applying the law of the country where the damage occurred as it would follow from attributing a normative value to the notion ‘infringement’ does not solve the issue with which Art 8(2) Rome II is concerned, that is, the fact that because of the Community-wide grant of the unitary Community right the damage occurs in all the Member States rather than in only one of them. 190   Briem, above n 21, 111; Drexl, above n 6, no 14; Heiss and Loacker, above n 9, 635. 191   cf also above 2.2.2.1. The same conclusion is reached by Heiss and Loacker, above n 9, 635. 192   cf Drexl, above n 6, no 12. 185 186

256  Thomas Petz the plaintiff claims protection for Austria – for instance by basing his infringement claims on the provisions of the Austrian Patent Act193 – Austrian law applies. This brings us to the level of substantive law. On this level, what is crucial is whether the infringing activities in which the defendant has engaged constitute an infringement under Austrian patent law. This requires, in the first place, considering which activities occurred in which country. In Austria, the defendant produced the parts of the patented invention and prepared them for export whereas in country Z he offered them for sale and delivered them to the customers. If the patent is already infringed by the defendant’s activities in Austria, there is no practical need for considering his activities in country Z. Thus, the question of whether Austrian patent law applies to activities abroad comes up only if there is no infringement in Austria. For this reason, we have to consider first whether the production and possession of the parts of the patented invention in Austria amount to an infringement. Section 22(1) Patent Act confers on the patent holder several exclusive rights, among them the right to put the patented invention into circulation.194 The Austrian Supreme Court has recently considered the possession of the patented product for the purpose of export to amount to an infringement of this right even though the invention was not patented in the importing country.195 Thus, already the activities of the defendant in Austria may amount to an infringement provided that the export of individual parts of a patented invention is infringing. In Austrian patent law, producing an individual part of a patented invention amounts to an infringement only if that part contains the essential elements of the invention.196 Whether the elements contained in such a part are essential depends on the patent claims and their construction.197 In our hypothetical case, the fact that the customers have to assemble the patented engine indicates that rather than an individual part, all the parts in their entirety contain the essential elements of the patented invention. Thus, we assume that the possession of the individual parts for the purpose of exporting them to country Z does not amount to a patent infringement. Having found no infringement in Austria, the activities of the defendant in country Z have to be considered in a second step. In addition to the right to put the patented invention into circulation, section 22(1) Patent Act also confers on the patent holder the exclusive right to offer it to his customers.198 Whether this right is infringed by offering and delivering parts that contain unessential elements of the patented invention has to be determined only if the patent-holder’s right to offer the patented invention covers activities that occur in country Z. Thus, the territorial scope of this right has to be considered first. On its face, this right is unlimited, but the principle of territoriality limits it to offering the patented invention to customers in Austria. This limitation is considered to be inherent to the Patent Act. It follows from the fact that the jurisdiction to prescribe of the Austrian legisla cf OGH 4 Ob 81/01t, CICLON (2001) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht

193

269.   This right was introduced to meet the requirements of Art 28(1) TRIPS.   OGH 17 Ob 24/09t, Nebivolol (2010) ecolex no 57 with a case note by G Schönherr and T Adocker who contrary to the court consider the list of rights conferred on the patent holder by s 22(1) Patent Act to be exclusive and the reference by the court to the parallel provision of the Trade Mark Protection Act which expressly refers to the export inappropriate. 196   OGH 4 Ob 319/86, Schlüssel-Schloßkombination (1986) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 147; Friebel and Pulitzer, above n 61, 207–8; A Weiser, Östereichisches Patentgesetz, 2nd edn (Vienna, Weiser, 2005) 163. 197   OGH 4 Ob 319/86, Schlüssel-Schloßkombination (1986) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 147; Friebel and Pulitzer, above n 61, 206; Weiser, above n 196, 158. 198   cf OGH 14.01.1997, 4 Ob 4/97k (unpublished). 194 195

Austria  257 tor is limited to those situations that take place in Austria.199 Thus, as the Patent Act does not confer on the patent-holder the exclusive right to offer the patented invention to customers in country Z, there is no right that could be infringed by the activities of the defendant in that country. The principle of territoriality thus limits the patent protection to situations that take place in Austria. Alternatively, depending on their design, the plaintiff may argue that the individual parts produced by the defendant are non-infringing devices that relate to an essential element of his invention and may be used for exploiting the patented invention.200 Section 22(3) Patent Act bars any person other than the patent-holder and his licensees from offering such devices if the person offering them knows or should know that they could be used to exploit the invention.201 It is important to note that this rule does not extend the patent-holder’s right to offer and deliver the patented invention because any third person can offer and deliver non-infringing devices, as long as she is not aware that they could be used to exploit the patented invention.202 Thus, the patent-holder does not have an exclusive right to offer and deliver these devices. What happens instead is that the concept of patent infringement is extended to activities that would otherwise be non-infringing. As a result, the provision does not confer a right on the patent-holder, but prohibits third persons from engaging in certain activities. With regard to the principle of territoriality, the crucial question thus is what activities are prohibited. On its face, section 22(3) Patent Act applies to the offering and the delivery of non-infringing devices regardless of the country where they take place. Again, however, the principle of territoriality limits it to offers and deliveries that take place in Austria.203 By contrast, in our hypothetical case, the offers were made to consumers in country Z.204 Thus, if protection is claimed for Austria, Austrian patent law will apply, but the court will find for no infringement. As a result, regardless of the theory of infringement on which the plaintiff advances his claim, he will lose on the merits. This is because on the one hand Article 8(1) Rome II provides that Austrian patent law applies to the patent infringement claims, but on the other the principle of territoriality narrows down the rights Austrian patent law confers on the patent holder and the obligations it imposes on third parties so that activities of the defendant in country Z neither infringe the plaintiff ’s Austrian patent nor violate any obligations 199   Schwimann, above n 1, 146; Buchner, above n 10, 1005; Posch, above n 1, no 13/9; Handig, above n 10, 10; Heiss and Loacker, above n 9, 633; Schacherreiter, above n 15, 9; Neumayr, above n 4, § 34 IPRG no 1. The principle of territoriality is thus not an equivalent to the lex loci protectionis, as suggested by Grubinger, above n 10, 62. See also above n 24. 200   cf OGH 4 Ob 42/93, Gebißmodell (1994) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 33. 201   This type of infringement, the so-called mittelbare Patentverletzung, has been introduced only recently to Austrian patent law, see BGBl I 2004/149. The concept is taken from s 10 of the German Patent Act, see Weiser, above n 196, 155. Before that, it has not been recognised in Austria, see OGH 4 Ob 42/93, Gebißmodell (1994) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 33. 202   This indicates that these activities do not infringe the patent, but rather affect adversely the proprietary interests of the patent-holder or the licensee. Thus, the ground of liability is not the act committed by the direct infringer – this act may even be non-infringing – but the contributory infringer’s awareness of the fact that the devices could be used by third parties to infringe the patent. Cf below 3.2.2. 203   R Heidinger, ‘Die mittelbare Patentverletzung’ (2006) Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht 156, 156–57. Cf with regard to s 10 of the German Patent Act Kraßer, above n 66, 810. 204   Even if we assume that the parts were offered to the customers in Austria and were only delivered to country Z, the result would not be different. This is because s 22(3) Patent Act requires that the devices could be used to exploit the invention. From the principle of territoriality it follows that also this use has to take place in Austria. As the customers have assembled the patented invention in country Z, this requirement is not met. Cf with regard to German law Kraßer, above n 66, 810.

258  Thomas Petz of third parties. This risk of losing on the merits, however, is counterbalanced the fact that the plaintiff can unilaterally determine the applicable law by claiming protection for a particular country.

3.1.2  The Application of Foreign Law to Infringing Activities in Austria Assuming that the Austrian court has jurisdiction for the infringement proceedings, could it apply the patent law of country X where the patent has been granted to allegedly infringing activities that occur in Austria?

Solving this hypothetical case requires us to recall our main conclusions in the previous hypothetical case. These conclusions were that Article 8(1) Rome II applies to patent infringement claims and that the remedies sought by the plaintiff are well within the scope of application of the applicable law. Further, we concluded that under Article 8(1) Rome II the applicable law is unilaterally determined by the plaintiff claiming protection for a particular country. Thus, as far as the level of conflict of laws is concerned, the place where the allegedly infringing activities occurred does not matter. Against this background, in the present hypothetical case the Austrian court would apply the law of country X if the plaintiff claimed protection for that country.205 Further, depending on whether infringement under the patent law of country X is limited to activities carried out within the territory of that country, the activities carried out in Austria could be considered to be infringing. This decision is a decision on the merits of the case. Thus, if the activities in which the defendant has engaged in Austria do not qualify as an infringement under the patent law of country X, the plaintiff will lose his case on the merits. As a result, the Austrian court will apply the patent law of country X to infringing activities carried out in Austria, but the plaintiff will succeed only if that law regards these extraterritorial activities as an infringement.206

3.2  The Law Applicable to the Infringement of Intellectual Property Rights Three IT students A, B and C created a website facilitating speedy exchange of digital files (music, videos, software etc) among users from all over the world. After several months when the website became very popular, A, B and C introduced an additional paid service: the speedy exchange of big capacity digital files. Although A, B and C knew that some files that are stored in the server of their website are illegal, they did not take any actions to prevent infringements of intellectual property rights. Major international entertainment industry companies file an infringement suit against A, B and C requesting to close the website and pay damages. It is assumed that an Austrian court has international jurisdiction in this case. 205   In this context it should be noted that before the entry into force of Rome II, if the plaintiff in a multi-state case claimed protection not only for Austria, but also for another country, the latter claim for protection had to be indicated clearly in his submissions. Otherwise, the court would assume that protection was claimed only for Austria. See OGH 4 Ob 125/93, Adolf Loos II (1994) Medien und Recht 24 (with case note by M Walter). Such a scenario would come up in our hypothetical case if the plaintiff claimed protection for both Austria and country X. Arguably, the assumption that absent of a clear indication to the contrary protection is claimed only for the country whose courts are seised is still valid under Rome II. See Neumayr, above n 4, § 34 IPRG no 2. 206   If the patent law of country X indeed provides that infringing activities that occur in Austria amount to an infringement of A’s patent in X and thus it does not endorse the principle of territoriality, this runs counter the principle of international comity. Consequently, the Austrian court seised with the proceedings may be inclined to construe the law of country X in way that ensures that it conforms to this principle. This, in effect, could result in finding for no infringement. See above 2.2.2.1 and Drexl, above n 6, no 261.

Austria  259

3.2.1  Direct Infringement Which law would be applied to determine the liability of A, B and C for direct infringement acts? Would the parties be allowed to agree on the applicable law (infringement and remedies)?

Article 8(1) Rome II provides that the law applicable to non-contractual obligations arising from the infringement of an intellectual property right is the law of the country for which protection is claimed. Thus, which law determines the liability of the defendants for their allegedly infringing activities depends on the country for which the plaintiffs claim protection. If they claim protection only for one country, the law of that country applies, if they claim protection for several countries, the laws of all these countries apply (‘mosaic approach’).207 The crucial question then is whether Article 8(1) Rome II determines the applicable law only for the infringement of the intellectual property right in question or also for the remedies resulting from this infringement.208 The starting point for answering this question is the wording of Article 8(1) Rome II. If it was considered to apply only to the infringement, the law applicable to the tort law remedies resulting from this infringement would have to be determined based on the general rule of Article 4 Rome II. This rule, however, has a different structure as it contains opening clauses and allows the parties to choose the applicable law within the limits of Article 14 Rome II. Thus, limiting Article 8(1) Rome II to infringement could lead to the application of different laws to such closely connected issues as the infringement of an intellectual property right and the remedies resulting thereof. This result seems rather impracticable. Further, as far as non-contractual obligations other than tort – such as unjust infringement and agency without authority – are concerned, the reference in Article 13 Rome II to Article 8 Rome II stops short at the level of the infringement. Thus, the remedies concerning such non-contractual obligations would be governed by Articles 10 and 11 Rome II. If this is the case, however, why does the wording of Article 13 Rome II contain no hint of this distinction? Finally, Article 15 Rome II on the scope of the applicable law determines which issues are governed by the law determined applicable by the conflict rules of Rome II. These issues include not only the basis and extent of liability (lit a), but also the existence, the nature and the assessment of the remedy claimed (lit c) and the measures which a court may take to prevent or terminate injury (lit d). This indicates that the law determined by a conflict rule of Rome II applies to both the infringement and the remedies. From this it follows for the construction of the conflict rules that they may not be limited to the infringement. For these reasons, Article