Copyright 2008 by The American Law Institute. Reproduced with permission. All rights reserved.
INTELLECTUAL PROPERTY:
PRINCIPLES GOVERNING JURISDICTION, CHOICE OF LAW,
AND JUDGMENTS IN
TRANSNATIONAL DISPUTES
(with Comments and Reporters’ Notes)
Part I
DEFINITIONS AND SCOPE
OF THE PRINCIPLES
Introductory Note:
These Principles are designed for transnational disputes involving intellectual property
rights. There are several reasons to believe that this is an area particularly ripe for the
development of international litigation practices. The mismatch between the international
scope of demand for creative products and the local scope of application of prescriptive
authority over intellectual property has been a longstanding problem. In the 19th century, a
series of important agreements, such as the Berne Convention (on copyrights) and the Paris
Convention (on trademarks and patents) emerged to deal with the problems of acquiring and
recognizing intellectual property rights. See Berne Convention for the Protection of Literary
and Artistic Works, Sept. 9, 1886, 123 L.N.T.S. 233, revised July 24, 1971, 25 U.S.T. 1341,
1161 U.N.T.S. 3, available at http://www.wipo
.int/treaties/en/ip/berne/trtdocs_wo001.html (last visited Jan. 3, 2008) (hereinafter Berne
Convention); Paris Convention for the Protection of Industrial Property, Mar. 20, 1883, as
revised at Stockholm July 14, 1967 (amended 1979) 21 U.S.T. 1583, 828 U.N.T.S. 305,
available at http://www.wipo.int/treaties/en/ip/paris/
pdf/trtdocs_wo020.pdf (last visited Jan. 3, 2008) (hereinafter Paris Convention). Difficulties
in enforcing these rights, and in defending against enforcement actions, are, in some ways, of
more recent origin in that they stem largely from contemporary technological developments
(such as translation software and digitized methods of distribution), cultural transformations
(such as convergence on English as a lingua franca and growing local taste for foreign
creative products), as well as changes in the way that business is conducted (such as the
growth of transnational media). The decision of the World Trade Organization (WTO) to
include copyright, patent, trademark, and related rights into its framework agreements
demonstrates the importance now attached to the enforcement of intellectual property rights.
As a result of the intellectual property community’s familiarity with the earlier conventions
and the WTO’s more recent TRIPS Agreement, there is a common understanding of core
intellectual property values and their enforcement. See Agreement on Trade-Related Aspects
of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement establishing the World
Trade Organization, Annex 1C, 1869 U.N.T.S. 299, available at http://www.wto.org/english/
tratop_e/trips_e/t_agm0_e.htm (last visited Jan. 3, 2008) (hereinafter TRIPS Agreement).
These shared norms provide a foundation for successfully utilizing a system such as the one
proposed here.
The Principles concern private-international-law matters that are specific to intellectual
property and to the coordination of transnational intellectual property disputes. The Principles
do not reiterate general rules on judicial or legislative competence, nor do they directly
address general concerns regarding fair process. Thus, in most instances, they leave to the
forum general issues of private international and procedural law, such as those concerning
standing, characterization, the method of proving foreign law, and appellate process. With
respect to norms not specific to intellectual property, see generally ALI/UNIDROIT
Principles of Transnational Civil Procedure.
§ 101. Definitions
The following definitions apply to these Principles:
(1) “Agreement” means a bargain of two or more parties that results in legal
obligations. The term includes agreements, contracts, licenses, assignments, pledges,
grants, and other voluntary transfers, regardless of how the particular transaction or
transfer is denominated.
(2) “Judgment” means any final judgment or final order of a court determining a
legal controversy; a judgment or order is “final” for the purposes of these Principles
when it is subject to enforcement in the State of origin and not stayed by a court in that
State.
(3) “Registered right” means any intellectual property right covered by § 102(1)
that is not valid unless and until granted by a competent State authority.
(4) “Standard form agreement” means an agreement that:
(a) is prepared by one party for repeated use;
(b) is presented to another party or parties (the “nondrafting party”) by the party
on behalf of whom the draft has been prepared (the “drafting party”); and
(c) does not afford the nondrafting party a meaningful opportunity to negotiate its
terms.
(5) “State” means an entity with a defined territory and a permanent population,
under the control of its own government, which engages in, or has the capacity to engage
in, foreign relations with other such entities. A regional economic integration
organization is considered a “State” for purposes of the Principles when the
organization created the intellectual property right at issue in the dispute. The allocation
of authority between a State and its territorial subdivisions is determined under the law
of that State.
(6) “Transnational civil dispute” means a civil action in a court of a State (the
“forum State”) in which:
(a) there is a claim or defense under the intellectual property rights of another
State (the “non-forum State”); or
(b) there is a claim arising out of activities that implicate intellectual property
rights where the activities occur, at least in part, outside the forum State.
Comment:
a. Agreement. There are technical differences between agreements, contracts, licenses,
and other voluntary transfers. For example, the Uniform Commercial Code (2004) defines an
“agreement” as “the bargain of the parties in fact,” § 1-201, and it defines a “contract” as “the
total legal obligation that results from the parties’ agreement,” id. However, the Principles are
meant to apply to diverse legal systems and thus avoid technical definitions that may not be
universally understood. Accordingly, these terms are used interchangeably.
b. Judgment. “Judgment” should be understood in the same way as is employed in the
ALI Project on Recognition and Enforcement of Foreign Judgments: Analysis and Proposed
Federal Statute (hereinafter ALI Foreign Judgments Project) § 1(b). Provisional orders are
subject to special rules. See §§ 214 and 401(4).
c. Registered right. An important concept in international intellectual property law is the
distinction between registered and unregistered rights. When used in the Principles,
“registered rights” include only intellectual property rights the protection of which is
conditioned upon a grant by a competent State authority. This applies, for example, to patents,
industrial designs, plant varieties, semiconductor-chip designs, and registered trademarks (as
opposed to trademark rights arising from use), all of which are valid only when deposited or
registered with, or granted by, the competent State authority.
Some international agreements facilitate multinational deposits or registrations and
related grant procedures. Typically, under these agreements, a single deposit, registration, or
grant with or by a central authority is deemed to have the same effect as a national deposit,
registration, or grant in each country designated by the depositor, registrant, or applicant. An
example is the Protocol Relating to the Madrid Agreement Concerning the International
Registration of Marks, June 27, 1989, S. TREATY DOC. NO. 106-41, available at
http://www.wipo.int/madrid/en/legal_texts/
pdf/madrid_protocol.pdf (last visited Jan. 3, 2008) (hereinafter Madrid Protocol). A right
registered under such an agreement is considered a “registered right” under the Principles.
Purely permissive deposit, registration, or recordation regimes under which the deposit,
registration, or recordation is not a condition for protection will not make the intellectual
property right in question a “registered right” within the meaning of the Principles.
Consequently, copyrights and neighboring rights will generally not be registered rights as
defined herein. While registration of copyrights is possible in some countries, namely the
United States, it “is not a condition of copyright protection.” 17 U.S.C. § 408(a). Rather,
copyright protection is generally afforded as a matter of law upon the creation of a
copyrightable work. No registration or recordation is required for protection. In fact, art. 5(2)
of the Berne Convention prohibits formalities as a prerequisite for enjoyment of the rights
guaranteed by it.
d. Standard form agreement. Standard form agreements are standard form, prepackaged,
prepared, and presented unilaterally by one party, without the other party having any
meaningful opportunity to negotiate the terms, and are typically intended by a provider of a
product that is sold or licensed widely to the general public. They are common in transactions
involving information products, appearing in products delivered in physical form as so-called
“shrinkwrap” licenses and in products delivered digitally as “clickwrap” licenses.
e. State. As used here, “State” should be understood in the same way as is employed in the
Restatement Third, The Foreign Relations Law of the United States (hereinafter Restatement
of Foreign Relations) § 201. Thus, the term does not refer directly to the constituent units of
federal States or the political subdivisions of States. For example, it does not refer to states of
the United States, because “under the Constitution of the United States foreign relations are
the exclusive responsibility of the Federal Government”; see Restatement of Foreign
Relations § 201, Comment g. However, a State’s authority may be divided among a central
government and territorial subdivisions. These Principles do not address the competence of a
territorial subdivision (such as a state of the United States) to promulgate intellectual property
law. Nor do they address the competence of a subdivision’s court (such as a court of a U.S.
state) to hear a case, assert jurisdiction over a party, or enforce a judgment. These allocations
of competence are determined under local law. For example, a trademark registered in a state
of the United States is a registered right under the Principles because it is “granted by a
competent State authority.”
The member states of the European Union are “States” because they have the capacity
to engage in foreign relations. The same may be true of the members of other regional
economic integration organizations. In addition, in some circumstances a regional economic
integration organization will be considered a “State” for purposes of the Principles because it
has created a supranational intellectual property right, such as the European Community
trademark, enforceable in its member States.
f. Transnational dispute. These Principles accommodate disputes that arise out of the
changing technological environment in which intellectual property is developed,
disseminated, and exploited. The current environment enhances the possibility that one State
will be called upon to adjudicate a dispute that requires it to interpret the intellectual property
law of another State or other States, or to apply either domestic or foreign intellectual
property law to activities that occur in another State or other States. Global exploitation of
intellectual property also increases the likelihood that the same transactions or occurrences
will spawn in several States litigation that could usefully be coordinated.
Courts faced with disputes connected in other ways to more than one State may find
guidance in these Principles. However, the Principles are not intended directly to affect purely
domestic cases.
Illustrations:
1. A, a resident of Patria, sues B, a resident of Xandia, alleging that B’s activities in
Patria infringe A’s Patrian patent. The suit is brought in Patria.
The Principles do not apply to this dispute. Although the dispute involves litigants from
more than one State, the Patrian court will apply the patent law of Patria to activities
occurring in Patria.
2. Same facts as in Illustration 1, except that A also holds patents in Xandia, Tertia, and
Quatria, and alleges that B has infringed all of these as well. A sues in each State, and B seeks
to coordinate the dispute pursuant to Part II of the Principles.
The Principles apply to this dispute. Although none of the individual cases arise under
the Principles, coordinated adjudication requires a court to consider claims, defenses, and
activities arising outside its forum.
3. A, a resident of Patria, sues B, a resident of Patria, in Patria to determine their
respective rights to exploit B’s copyrighted work in Patria and Xandia.
The Principles apply to this dispute. Although A and B are both residents of Patria, the
Patrian court will be called upon to determine the effect of activities in Xandia (which may or
may not involve application of Xandian copyright law).
4. A, a resident of Patria, owns a facility in Xandia from which it can receive television
programs broadcast in Patria. It streams the programs back into Patria. B, the holder of Patrian
copyrights in the programs, sues A in Patria for copyright infringement.
The Principles apply to this dispute for the reasons stated in Illustration 3.
5. Same facts as in Illustration 4; assume that B wins and brings an action to enforce the
judgment in Xandia. Assume that Xandia is a federated government, with two territorial
subdivisions, South and North. B brings the action in a Xandian federal court, and A moves to
dismiss on the ground that, under Xandian law, the courts of South have sole enforcement
authority.
If the suit was brought under the Principles, the enforceability of the judgment will be
determined by the Principles; see Part IV. However, the allocation of judicial authority as
among the federal courts in Xandia and the courts of South and North is determined by
Xandian law.
6. A, a resident of Patria, registers its Patrian trademarks with the Patrian customs
authority and asks that goods bearing that trademark be excluded at the border. B, C, and D,
residents of Xandia, Tertia, and Quatria, ship goods bearing that trademark into Patria. A
brings an exclusion action in the administrative tribunal that Patria established to hear these
disputes.
The Principles do not apply to this dispute. Although the dispute involves litigants from
several jurisdictions, the Patrian court will apply Patrian trademark law to decide whether
these goods can lawfully be imported into Patria. More generally, the Principles are not
focused on in rem actions or adjudications in administrative tribunals. In rem actions are
easily localized; thus, they rarely present the extraterritorial issues to which the Principles are
directed. Further administrative adjudication presents procedural problems that are beyond the
Principles’ scope.
REPORTERS’ NOTES
1. Registered rights. For the distinction between registered rights and nonregistered
rights in a jurisdictional context, see Pearce v. Ove Arup P’ship Ltd., [2000] Ch. 403 (C.A.
Civ. D. 1999) (U.K.); Coin Controls Ltd. v. Suzo Int’l (UK) Ltd. [1999] Ch. 33 (1997) (U.K.);
Vanity Fair Mills v. T. Eaton Co., 234 F.2d 633 (2d Cir. 1956); London Film Prod. Ltd. v.
Intercontinental Commc’ns, Inc., 580 F. Supp. 47, 49 (S.D.N.Y. 1984); Brussels Regulation
art. 22(4); Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and
Commercial Matters, Sept. 16, 1988, 28 I.L.M. 620, available at http://europa.eu.int/eur-
lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:41988A0592:EN:HTML (last visited Jan. 3,
2008), art. 16(4); as revised 30 October 2007,
http://www.ofj.admin.ch/etc/medialib/data/wirtschaft/ipr.Par.0022.File.tmp/260307_entw_lug
ano_convention-e.pdf (last visited Jan. 3, 2008), art. 22(4), (hereinafter Lugano Convention).
For examples of rights registered through an international system, see, e.g., Madrid Protocol
art. 4(1) (“From the date of the registration or recordal effected in accordance with the
provisions of Articles 3 and 3ter, the protection of the mark in each of the Contracting Parties
concerned shall be the same as if the mark had been deposited directly with the Office of that
Contracting Party.”); Geneva Act of the Hague Agreement Concerning the International
Registration of Industrial Designs art. 14(1), July 2, 1999, available at
http://www.wipo.int/hague/en/legal_texts/wo_haa_t.htm (last visited Jan. 3, 2008) (“The
international registration shall . . . have at least the same effect in each designated Contracting
Party as a regularly-filed application for the grant of protection of the industrial design under
the law of that Contracting Party.”); Convention on the Grant of European Patents (European
Patent Convention) art. 64(1), Oct. 5, 1973, 1065 U.N.T.S. 255, available at
http://www.epo.org/patents/law/legal-texts/html/epc/1973/e/ma1.html (last visited Jan. 3,
2008) (hereinafter EPC) (“A European patent shall . . . confer on its proprietor from the date
of publication of the mention of its grant, in each Contracting State in respect of which it is
granted, the same rights as would be conferred by a national patent granted in that State.”).
For purposes of the Principles, the resulting national right in question is treated as a registered
right of the State for which the deposit, registration, or grant is deemed to be effective under
the applicable international agreement.
2. Standard form agreements. The Principles utilize the concept of standard form
agreements, i.e., agreements the offer of which are unilaterally prepared by or on behalf of
and presented by one party, intended to be used repeatedly, and that the other party (the
“nondrafting party”) has no meaningful opportunity to negotiate. The concept is consistent
with emerging norms for international commercial contracts. See, e.g., UNIDROIT Principles
of International Commercial Contracts 2004, arts. 2.1.19-2.1.22. The more general treatment
of “standard form contracts” has been preferred to approaches specific to consumer contracts
(as under art. 5 of the Convention on the Law Applicable to Contractual Obligations, June 19,
1980, 19 I.L.M. 1492, available at http://www.rome-
convention.org/instruments/i_conv_orig_en.htm (last visited Jan. 3, 2008) [hereinafter the
Rome I Convention; in the Rome I Regulation, the relevant provisions on consumer contracts
appear in art. 6] or arts. 15-17 of the Brussels Regulation, for example), because the approach
by overall categorization (“consumers” vs. “providers”) may not be just and equitable for the
providers; for example, a provider of programs to a large company may be subject to
unreasonable terms of a standard form agreement without any meaningful opportunity to
negotiate. On the other hand, unlike, for example, under art. 17 of the Brussels Regulation,
choice-of-court and choice-of-law contracts with consumers are not per se unenforceable.
Rather, they are subject to special scrutiny, §§ 202(4) and 302(5).
3. State. For other definitions of “State,” see ALI Foreign Judgments Project § 1(c);
Hague Convention on the Law Applicable to Matrimonial Property Regimes arts. 17, 18,
March 14, 1978, 16 I.L.M. 14 available at
http://www.hcch.net/index_en.php?act=conventions.text&cid=87 (last visited Jan. 3, 2008);
Hague Convention on the Law Applicable to Agency arts. 19-21, Mar. 14, 1978, 16 I.L.M.
775, available at http://www.hcch.net/index
_en.php?act=conventions.text&cid=89 (last visited Jan. 3, 2008) (dealing with States having
subdivisions); WIPO Copyright Treaty art. 17(3), S. TREATY DOC. No. 105-17; 36 I.L.M.
65, available at http://www.wipo.int/treaties/en/ip/wct/trt
docs_wo033.html (last visited Jan. 3, 2008) (dealing specially with the European Union).
§ 102. Scope and Applicability of the Principles
(1) These Principles apply to transnational civil disputes that involve copyrights,
neighboring rights, patents, trade secrets, trademarks, geographic indications, other
intellectual property rights, and agreements related to any of these rights.
(2) A court shall, upon a party’s timely request or upon its own motion, make a
specific finding as to whether a dispute before it comes within the Principles.
Comment:
a. Territorial coverage. See § 101(6) and Comment f.
b. Intellectual property coverage. Intellectual property rights are exclusive rights created
by law to protect intellectual creations. The core international intellectual property
agreements, supplemented by emerging international norms, provide the basis for interpreting
the subject matter of intellectual property rights. Thus, the TRIPS Agreement applies to
patents, copyrights, and trademarks, as well as to neighboring rights (the rights of performers,
phonogram producers, and broadcasting organizations that are akin to copyright), geographic
indications, industrial designs (designs and models), layout designs, plant varieties, and rights
in undisclosed information (trade secrets), and, to the extent covered in the Berne Convention,
artists’ resale rights (droit de suite). Through its incorporation of the Paris Convention, the
TRIPS Agreement also covers “honest practices” and practices “established in international
trade.” These terms encompass claims that create private rights against passing off,
unauthorized use of unregistered trademarks and trade dress, dilution, false association,
misrepresentation, breaches of confidential relationships, and misappropriation. In addition,
the Principles cover forms of intellectual property that are generally recognized, albeit outside
the scope of enforcement proceedings under the TRIPS Agreement. This includes moral rights
(droit moral) and contractual rights limiting the use of transferred information. For purposes
of applicable law, the source of these claims may be States or their federal subunits.
As the contents of “intellectual property” evolve and receive international recognition, the
Principles should be sufficiently open-ended to encompass them. It may even become
appropriate for courts to apply the Principles in a case in which not all countries in the world
recognize the right claimed. For example, many countries protect the interests secured in
(some of) the United States under the name “right of publicity” and in many European
countries under the name “right to one’s own image.” The rights may not be identical in scope
or in rationale (though that may also be true of more formal intellectual properties), but if a
dispute arises involving at least one jurisdiction where these rights exist, the court should look
to these Principles for guidance as to both judicial and legislative competence. Another
example is broadcasting rights, such as for sporting events.
c. Patents and other registered rights. There is a shared understanding that patents are
intellectual property rights—they are, for example, covered by both the Paris Convention and
the TRIPS Agreement. However, a strong argument could be made that registered-rights cases
in general, and patent cases in particular, pose special problems and should be excluded from
the Principles. Registered-rights cases are subject to a special jurisdiction rule in the Brussels
Regulation; without a change in that Regulation, some of the goals of these Principles could
not be realized in cases subject to the Regulation. In addition, registering and maintaining
registration can be considered what U.S. doctrine calls “acts of state”—State administrative
determinations that foreign courts should not upset. And because the social costs of patenting
are so high (particularly for pharmaceuticals), some fora might become “information havens,”
over-eager to invalidate patents on a worldwide basis. There are also concerns over
adjudicatory process. Both validity and infringement issues may be considered too technical
to be decided by courts of general jurisdiction. Differing discovery opportunities could lead to
important differences in outcome, particularly on issues, like priority of invention, that are
unique to the law of the United States, where broad discovery is available.
Nonetheless, the Principles have been drafted to cover patent and registered-right cases,
to demonstrate how the problems associated with coordinated adjudication can be resolved.
Thus, limitations on the use of declaratory-judgment actions (§§ 213, 413), their significance
for choice-of-court purposes (§ 222(4)(c)), and the power given courts through the
coordination provisions (§§ 221-223) should reduce concerns about forum manipulation. The
technical-incompetence issue might be addressed by using the cooperation option or by
situating consolidated patent actions in those States that have specialized technically
competent jurisdictions, like the United States Court of Appeals for the Federal Circuit, and
similar courts in other jurisdictions
(§ 222(4)(c)). A court could find that the prejudicial absence of adequate discovery is a
ground for refusing enforcement and recognition (§ 403(1)(a) and Comment b). The
Comments to §§ 211 and 213 include a further discussion of the problems presented by patent
litigation.
d. Domain names. Domain-name disputes that are covered by special systems of dispute
resolution such as the Uniform Dispute Resolution Policy (UDRP) adopted by The Internet
Corporation for Assigned Names and Numbers (ICANN), are not within the Principles.
However, such disputes can involve claims explicitly governed by the TRIPS Agreement or
the Paris Convention. (For example, claims of conflict with trademark rights raise issues of
consumer confusion, misrepresentation, dilution, or false association.) When the system for
resolving such disputes through nonjudicial means is nonbinding (as is, for example the
ICANN system), then the Principles apply to any ensuing litigation. See also § 202, Comment
g. Although a domain name could be considered to be localized in the jurisdiction of
registration, the Principles take the position that intellectual property disputes are transitory.
There is little reason to focus any more on the “property” dimension of domain names than on
the property dimension of other intellectual property rights.
e. Supplemental jurisdiction. Principles limited to intellectual property matters could
lead to bifurcation of cases and thus to the expenditure of extra resources, as parties choose to
litigate, or seek enforcement of, the intellectual property portions of their cases in courts that
have adopted these Principles, while other parts of their dispute wind up in other places. Such
situations could surely arise, but these Principles should avoid more duplicative litigation than
they will cause. In addition, § 212 permits the assertion of authority to consider claims that
arise out of the transaction, occurrence, or series of transactions or occurrences on which the
original claim is based, such as foreign claims, when the court has personal jurisdiction over
the litigant under §§ 201-207 to hear these “supplemental” claims. Similarly, the antitrust
claim in Illustration 2, below, could be determined by the court that heard the patent-validity
issues.
f. Line-drawing. Intellectual property claims are sometimes embedded in other disputes.
For example, a case involving the sale of the assets of a corporation may raise questions about
the value of intellectual property assets. Antitrust cases may also involve claims of patent
misuse or invalidity. Employment disputes can include claims about who owns rights to
information developed in the course of employment. Some claims denominated as “unfair
competition” or “unfair trade practices” implicate subject matter covered by intellectual
property rights or analogous to such subject matter (and are thus intended to be covered by the
Principles); others do not. An example of the former would be misleading comparative
advertisements identifying goods by their trademarks. An example of the latter is predatory
pricing of consumer goods. Determining which of these cases are within the scope of these
Principles will not always be easy. However, this problem is not uncommon in any litigation
system in which there are specialized rules of procedure or courts of specialized subject-
matter jurisdiction. Thus, it is not insuperable. The Principles cover a dispute when it involves
claims for remedies expressly granted by intellectual property laws or raises significant
questions on the construction of intellectual property laws. In such circumstances,
adjudication can benefit from the Principles’ coordination and applicable-law provisions.
Illustrations:
1. Organizations servicing Manufacturing Co.’s complex equipment sue Manufacturing
Co., claiming that its refusal to sell them parts needed to repair their equipment violates the
competition laws of the United States, the European Community, and Japan. Manufacturing
Co. defends on the ground that the parts are patented and this gives them the right to refuse to
deal. The plaintiffs do not dispute the validity of Manufacturing Co.’s patents.
This case does not fall within the Principles. The complaint is for an antitrust violation.
Although patent scope issues may emerge in the defense, resolution of those questions is
incidental to and independent of the issues of competition policy.
2. Nosh Co. brings an antitrust action against Runner, claiming that Runner attempted to
monopolize the global market for food processing through the use of patents procured by
fraud. Runner defends on the ground that its various national patents were properly obtained.
This case falls within the Principles because resolution of the case hinges on the
determination of whether Runner’s patents are valid.
3. Professor X sues his university for claiming rights to worldwide patents on inventions
generated in his laboratory. The university claims that Professor X’s employment contract
assigned rights in all future inventions to the university.
This case falls within the Principles because the transfer of intellectual property rights is
a concern of the international intellectual property system. Indeed, one important reason to
adopt a system of international dispute resolution is to deal efficiently with conflicting rules
on title and transfers. See §§ 311-317.
In some cases, the intellectual property issue arises in the defendant’s case. For
example, in Illustration 2, validity issues arise in the counterclaim. Arguably, subject-matter
issues should be determined only by looking at the complaint, as is the practice in U.S. federal
courts. However, there is little reason to look only to plaintiff’s claim to determine the
applicability of the Principles. Within specific jurisdictional systems, courts with special
subject-matter authority tend to work best when they are small enough for judges to stay in
close contact with and abreast of one another’s decisions. But docket restraint is not an issue
here. Indeed, the opposite is the case: since coordination and enforcement of foreign
judgments save judicial resources, the scope of these Principles should be broad.
The U.S. federal courts’ approach of determining the scope of subject-matter authority
by looking only at the complaint also permits the question of allocating judicial authority to
be decided at the earliest stage of the pleadings, before significant development and resource
expenditure have occurred. Again, this is not a concern here because the plaintiff will
presumably want at least part of the case adjudicated in the chosen court, no matter what the
international ramifications of the judgment. Thus, there is no need to limit coverage to the
first claims that the plaintiff raises. So long as a case mainly resolves transnational intellectual
property issues, it should fall within these Principles, no matter who raised the claim or when
in the initial stages it was raised.
g. Declaration of scope. There will often be a point in the litigation when the parties will
want to know whether their case will terminate in a judgment entitled to enforcement in all
States whose courts have adopted these Principles. They may only need to learn this at the
end, or they may need to think about it at the stage where they are formulating their case,
determining whether global adjudication might be coordinated. Similarly, they will want to
know whether the Principles apply when issues of court selection arise. Because there will be
marginal cases where the decision will be difficult (especially in the years before a
jurisprudence on the question has developed), § 102(2) instructs the court to determine the
applicability of these Principles to its adjudication. Similar techniques have been suggested in
connection with the application of the ALI/UNIDROIT Principles of Transnational Civil
Procedure to litigation. This action will not make drawing the line easier, but it will give
parties full notice of the rules, including applicable-law rules, that will apply to the case and
of the effects of the judgment at the stage at which they are making important strategic
choices. The court rendering the judgment is better suited to declare the applicability of the
Principles than is the court that later may be asked to enforce the judgment.
REPORTERS’ NOTES
1. Relevance of intellectual property instruments. The TRIPS Agreement and its
attendant organizations have fostered a legal environment in which an informal accord on
adjudicative rules can work. The States most likely to entertain actions where these Principles
would be of value have joined the TRIPS Agreement or have implemented law compatible
with it; see §§ 204(3) and 222(4)(f). As a result, potential litigants will have some assurance
that their disputes will be adjudicated in places that have agreed to enforce the laws that will
be at issue. Indeed, many disputes will be resolved in States that, through their adherence to
the TRIPS Agreement, have agreed to assure transparent and efficient judicial process, and
that are amenable to dispute-resolution proceedings should they fail to fulfill their obligations
fairly and adequately. Moreover, although litigants resolving disputes under these Principles
will not have access to a centralized and authoritative appellate body (such as the United
States Supreme Court or the European Court of Justice), TRIPS has institutional mechanisms
(such as dispute-resolution panels, the Dispute Settlement Board, and the Council for TRIPS)
for examining and revising the law as it develops.
2. Line-drawing: In the U.S. system, there is substantial jurisprudence on line-drawing,
developed in connection with choosing the cases that can be heard in a federal (as opposed to
state) court and also to determine the route of appeal as between a regional circuit and the
Court of Appeals for the Federal Circuit, which hears patent appeals. In general, the allocation
of jurisdiction turns on whether the case “arises under” federal (or patent) law, 28 U.S.C. §§
1331, 1338, 1295. In American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260
(1916), Justice O.W. Holmes interpreted this language as meaning that “[a] suit arises under
the law that creates the cause of action.” However, subsequent courts have regarded that test
as overly inclusive. In the intellectual property context, the formulation most often cited is
that of Judge Henry Friendly in T. B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir. 1964),
cert. denied, 381 U.S. 915 (1965):
Mindful of the hazards of formulation in this treacherous area, we think that an action “arises
under” the Copyright Act if and only if the complaint is for a remedy expressly granted by the
Act, e.g., a suit for infringement or for the statutory royalties for record reproduction, 17
U.S.C. § 101, cf. Joy Music, Inc. v. Seeco Records, Inc., 166 F. Supp. 549 (S.D.N.Y. 1958),
or asserts a claim requiring construction of the Act, as in De Sylva [v. Ballentine, 351 U.S.
570 (1956)] or, at the very least and perhaps more doubtfully, presents a case where a
distinctive policy of the Act requires that federal principles control the disposition of the
claim.
As a result of this narrowed conception of “arising under,” the claims in T.B. Harms—
which concerned ownership of copyrights—were not considered within the subject-matter
jurisdiction of federal courts. Id. (It is important to note that the Copyright Act in effect at that
time did not provide comprehensive treatment of ownership issues). See also Louisville &
Nashville R.R. Co. v. Mottley, 211 U.S. 149 (1908) (counterclaims, cross-claims, and issues
arising in defenses are ignored for determining a trial court’s subject-matter jurisdiction);
Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 829-830 (2002)
(same rule for determining the route of appeal). This is not the approach adopted to determine
the applicability of the Principles. (It will, of course, continue to be applied in the United
States to decide when there is jurisdiction in federal courts).
But even if the specific formulas proposed by Judge Friendly or Justice Holmes are not
apposite, the general approach they took is. Thus, both essentially looked for an allocation
rule that reflects the rationale for drawing lines in the first instance. Friendly, for example,
alluded to “a distinctive policy of the Act [that] requires that federal principles control.” T.B.
Harms, 339 F.2d at 828. The Principles aim to ensure that intellectual property disputes of
international dimensions are resolved efficiently and consistently with unambiguous
international norms, to the extent that they exist in this area. International intellectual property
agreements should, therefore, serve as a touchstone. Under such an approach, cases that
primarily concern constraints on competition, or the sale of a business, or termination of
employment, are not within these Principles’ scope.
Disputes involving ownership of covered intellectual property rights present a more
difficult issue. The proposal for a European Patent Court excludes from jurisdiction claims of
ownership and the import of the T.B. Harms case was similarly, to exclude ownership claims
from the scope of federal jurisdiction when those claims do not arise under the statute. See art.
30 of the Commission Proposal for a Council Regulation on the Community Patent, COM
(2000) 412 final, 2000 O.J. (C 337 E) 278 (Nov. 28, 2000), available at http://eur-
lex.europa.eu/LexUriServ/site/en/oj/2000/ce337/ce3372000112
8en02780290.pdf (last visited Jan. 3, 2008), as amended by Council Document 7119/04,
(disputes over patent ownership between employer and employee will fall under the
jurisdiction of national courts, not the European Patent Court), see also Council Document
7119/04, Note from Presidency to Council (Competitiveness), Preparation of the Meeting of
the Council on 11 March 2004 – Community patent = Proposal for a Council Regulation on
the Community patent (Mar. 8, 2004), available at
http://register.consilium.eu.int/pdf/en/04/st07/st07119.en04.pdf (last visited Jan. 3, 2008)
(hereinafter Council Document 7119/04). Moreover, as the Appellate Body Report relative to
the Havana Club case notes, ownership is not directly covered by the TRIPS Agreement.
Appellate Body Report, United States—Section 211 Omnibus Appropriations Act of 1998,
139-148, WT/DS176/AB/R (Jan. 2, 2002) (hereinafter Havana Club case).
Nonetheless, the efficiency and consistency goals that animate these proposed
Principles argue for including ownership disputes within its scope. Some issues of ownership
would be included in any event: those that are based directly on intellectual property law
provisions, see, e.g., Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730 (1989); New
York Times Co. v. Tasini, 533 U.S. 483 (2001), and those that arise in the context of
infringement actions, see, e.g., Boosey & Hawkes Music Publishers, Ltd. v. Walt Disney Co.,
145 F.3d 481 (2d Cir. 1998); Random House, Inc. v. Rosetta Books LLC, 150 F. Supp. 2d
613 (S.D.N.Y. 2001). In addition, the same Appellate Body Report found that the United
States had an obligation under art. 42 of the TRIPS Agreement to permit the assertion of
ownership claims under domestic law, Appellate Body Report in the Havana Club case, supra,
at 218, thus clarifying that the international intellectual property community regards
ownership issues, even when presented alone, as within the scope of intellectual property
agreements. For a European approach, see, e.g., Peter von Rospatt, Cross Border Protection of
European Patents, Part Two: Decisions of German Courts in Patent Infringement Cases with
Cross-Border Effect, 29 Int’l Rev. Intell. Prop. & Competition L. 504 (1998). See generally
William Patry, Choice of Law and International Copyright, 48 Am. J. Comp. L. 383, 410-447
(2000) (giving many examples of difficult choice-of-law questions regarding copyright
ownership).
The first two Illustrations are drawn from the facts of In re Independent Service
Organizations Antitrust Litigation, 203 F.3d 1322 (Fed. Cir. 2000) and Walker Process
Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965). Because both
cases involved federal antitrust claims, original subject-matter jurisdiction in federal court
was not an issue. Post-Holmes Group, both would be appealable to regional circuits, not the
Federal Circuit. They are used to emphasize that these rules do not follow the interpretation of
federal subject-matter-jurisdiction law. Similarly, Illustration 3 is based on University of
Massachusetts v. Robl, 2004 WL 1725418 (D. Mass. 2004), which took the view that the
dispute between an employee and his university over transfer of the employee’s patent rights
did not state a federal patent-law claim; such a claim would be encompassed by the
Principles.
3. Claim-splitting. In the U.S. federal system, the practice of permitting the assertion of
transactionally related claims took hold in Hurn v. Oursler, 289 U.S. 238 (1932), where the
plaintiff joined to a claim for copyright infringement a claim of unfair competition for
unauthorized use of the allegedly copyrighted play. Even though the second claim was based
on state law, it was adjudicated in federal court on the ground that these claims were “not
separate causes of action, but different grounds asserted in support of the same cause of
action,” id. at 247. The concept expanded to cover state and federal claims that “derive from a
common nucleus of operative fact,” United Mine Workers of Am. v. Gibbs, 383 U.S. 715,
725 (1966). Significantly, the practice was justified by “considerations of judicial economy,
convenience and fairness to litigants”—in other words, by the same concerns that animate
these Principles. Id. at 726. See also Nilssen v. Motorola, Inc., 255 F.3d 410 (7th Cir. 2001)
(trade-secret claim should be considered supplemental to patent claim to avoid wasting
judicial resources and the potential for inconsistent outcomes).
The Gibbs “common nucleus of operative fact” test was designed to define when a case
is within the constitutional authority of U.S. federal courts. Constitutional authority is not a
consideration here, however, as the court’s subject-matter power over the dispute comes
strictly from national law. The “transaction, occurrence, or series of transactions or
occurrences on which the original claim is based” language is easier to apply since it is used
in other contexts. Furthermore, it is similar to the language of art. 6(3) of the Brussels
Regulation (“arising from the same contract or facts on which the original claim was based”).
Accordingly, it is that language which is used in § 212 to determine the scope of the court’s
authority over the subject matter (as opposed to its authority over the litigants, which is
controlled by §§ 201-207).
4. Local v. transitory actions. Some courts have justified the dismissal of intellectual
property claims arising under foreign laws on the ground that intellectual property actions are
local, not transitory causes; the Principles reject that theory. Accord, Kabushiki Kaisha Sony
v. Van Veen, Civ-2004-485-1520 (H.C. 2006) (N.Z.); R. Griggs Group Ltd. v. Evans, [2004]
EWHC (Ch) 1088, aff’d on other grounds, [2005] EWCA (Civ) 11 (C.A.) (Eng.). In
registered-rights cases, however, the “local” characterization is more compelling when the
issue concerns the validity of the registration, because only the State that registered the right
has the power to cancel the registration. This kind of “local” action is more properly
conceived as an iteration of the act-of-state doctrine; the jurisdictional analysis would be more
coherent if courts were to forego the “local” and “transitory” appellations, and focused instead
on the sovereign interests captured by the act-of-state doctrine. Nonetheless, in Voda v.
Cordis Corp., 476 F.3d 887 (Fed. Cir. 2007), a panel of the Federal Circuit, over a powerful
dissent by Judge Newman, assumed arguendo that the act-of-state doctrine applied, and held
that patent infringement claims should be considered “local” actions.
5. Patents and other registered rights. Registered-rights cases have caused a great deal of
controversy because there is a strong intuition that the only tribunals with the expertise and
authority to declare a right invalid or a nullity are the courts (or patent office) of the State in
which the right is registered. See, e.g., Brussels Regulation; art. 22(4); Case C-4/03,
Gesellschaft für Antriebstechnik mbH & Co KG v Lamellen und Kupplungsbau Beteiligungs
KG, [2006] F.S.R. 45 (refusing to permit a German court to determine the consequences of
allegedly patent infringing activity in France when the case required the determination of the
validity of the French patent); cf. Case C-593/03, Roche Nederland BV v. Primus, [2007]
F.S.R. 5 (refusing to permit a Dutch court to join foreign defendants to a patent infringement
suit involving a resident defendant). In the United States, even entertainment of a foreign
infringement action raises concerns; thus a divided panel of the Federal Circuit held that a
district court abuses its discretion if it entertains foreign infringement actions as a matter of
supplemental jurisdiction under § 1367(c). Voda v. Cordis Corp., 476 F.3d 887 (Fed. Cir.
2007). As a result, these cases require special treatment because they cannot be consolidated.
The Principles create two options for disputes involving challenges to rights registered in
more than one State. First, some efficiencies can be achieved by having the courts in each of
the States in which a challenged right is registered cooperate with each other, § 222.
Alternatively, the parties and the court may decide that efficiencies can be achieved if only
one adjudicator is required to master the core features of the plaintiff’s technology. Those
efficiencies can be captured by consolidating adjudication of validity in a single court.
However, in such cases, the judgment will be effective only among the litigants, §§ 211(2),
212(4), 213(3), and 413(2). As protection in multiple countries is increasingly achieved under
the auspices of such unifying instruments as the Madrid Protocol, the PCT, June 19, 1970, 28
U.S.T. 7645; 9 I.L.M. 978, available at http://www.wipo.int/
pct/en/texts/pdf/pct.pdf (last visited Jan. 3, 2008) (hereinafter PCT), and the EPC, the impact
of discrete national registration on the efficiency of dispute resolution should be reconsidered.
6. Domain Names. For ICANN’s own dispute-resolution mechanism, see
http://www.icann.org/udrp/udrp.htm (last visited Jan. 3, 2008). ICANN dispute resolutions do
not exclude later recourse to national courts. See, e.g., Storey v. Cello Holdings, LLC, 347
F.3d 370 (2d Cir. 2003). (But if no recourse is made, then the panel decision is binding). The
UDRP’s imposition of a jurisdiction to which to appeal is not considered a choice-of-court
agreement within the meaning of § 202 of the Principles. For characterization of a domain
name dispute as in rem, see 15 USC § 1125(d)(2) (Anti Cybersquatting Consumer Protection
Act).
§ 103. Distinction Between Jurisdiction and Applicable Law
(1) Competence to adjudicate does not imply application of the forum State’s
substantive law.
(2) A court shall not dismiss or suspend proceedings merely because the dispute
raises questions of foreign law.
Comment:
a. Distinction between the law of the forum State and applicable law. One of the basic
tenets of private international law is the distinction between personal jurisdiction of the court
(judicial competence) and the applicable law (legislative competence). In intellectual
property, such a distinction was often ignored, mainly because of the principle of territoriality,
under which the forum was most often the place of the injury and the applicable law was
generally assumed to be the law of the forum State. But with the increasing advent of
infringements that have a simultaneous impact on multiple territories, assertion of judicial
competence over a multiterritorial infringement is increasingly likely to be sought, and courts
will have to consider what law or laws apply to the full territorial extent of the claim. There is
as yet no lex electronica that would supersede the national law and thus avoid the inquiry into
the appropriately applicable law(s), although the body of supranational substantive norms is
growing and may eventually come to supply rules of direct application in transnational
intellectual property matters. For the foreseeable future, there remains considerable room for
the application of national laws. This Section of the Principles therefore emphasizes the
independence of the identification of applicable law from the designation of an appropriate
court. It is especially important not to equate the two when the court is called upon to hear
claims arising out of acts occurring in many States. The forum’s courts may be competent to
hear a claim involving multiple States; that does not mean that the forum’s law should
determine the parties’ rights with respect to each of those States.
Illustration:
1. Freeforall.com is a distributor of pirated copies of recorded music, with its principal
place of business in Freedonia. Freeforall.com operates a website from which customers can
download unauthorized copies to their computers throughout the world. Customers in France,
Japan, Australia, Argentina, and the United States all download copies.
The courts of Freedonia have jurisdiction over copyright claims against Freeforall.com,
because Freeforall.com is established there. (See § 201.)
A different principle governs the choice of which law applies to each of the various acts
of alleged infringement in France, Japan, Australia, Argentina, and the United States. (See §
301.)
b. Cases involving foreign law. Courts should not make the presence of foreign law the
sole ground for dismissing a claim. Otherwise, the goal of consolidating worldwide claims
would be undermined. Some courts consider foreign rights too difficult to adjudicate. While
that may be a factor in certain patent cases, the convergence of the other branches of
intellectual property law makes this a weak reason to dismiss foreign copyright or trademark
claims. Patents that stem from a single application under the PCT or the EPC may likewise
present issues on which there is broad consensus. However, it may be appropriate to decline
to hear a foreign-law claim because the claim is novel or better handled by a specialized
tribunal; the law is unclear or violates local public policy; the evidence is all located outside
the forum; or because the potential remedy would be better administrated elsewhere.
REPORTERS’ NOTES
1. The distinction between the law of the forum State and the applicable law. On this
issue, see, e.g., Henri Batiffol & Paul Lagarde, 2 Droit international privé 668 (7th ed. 1983)
(distinguishing between “compétence judiciaire” and “compétence législative”). In
intellectual property cases, particularly in copyright, it is not unusual for the applicable law to
be different from the forum State’s law. See, e.g., Ch. Boucher, De la nature des règles
relatives à la protection en France des auteurs étrangers, 59 Journal du droit international 26
(1932) (citing French cases); François Perret, Territorialité des droits de propriété industrielle
et compétence “extra-territoriale” du juge de la contrefaçon: État de la question en droit des
brevets d’invention, in Études de procédure et d’arbitrage en l’honneur de Jean-François
Poudret 125, 141 (Phidias Ferrari et al. eds., 1999); R. Luzzatto, Problemi
Internazionalprivatistici del Diritto di Autore, Studi in Memoria di Mario Giuliano, Cedam,
589, 596 (1989). Cf. Hanson v. Denckla, 357 U.S. 235, 254 (1958) (distinguishing between
the level of contact required for choice-of-law purposes and to determine the question of
personal jurisdiction over a nonresident defendant).
2. Overlapping prescriptive authority. Because courts often do find sufficient contacts to
apply forum law to persons subject to personal jurisdiction, litigants can be exposed to
inconsistent judgments and multiple liability. That danger is a major impetus for these
Principles. An example is Society of Composers, Authors & Music Publishers of Canada v.
Canadian Ass’n of Internet Providers, [2004] 2 S.C.R. 427, 78 (Can.) (noting that the
decision to find jurisdiction over an Internet service provider “raises the spectre of imposition
of copyright duties on a single telecommunication in both the State of transmission and the
State of reception, but as with other fields of overlapping liability . . . the answer lies in the
making of international or bilateral agreements”).
3. Cases involving foreign law. It is not unusual for common-law courts to invoke
forum non conveniens when foreign law is involved and to dismiss foreign claims within their
subject-matter authority. See, e.g., Murray v. British Broad. Corp., 81 F.3d 287 (2d Cir.
1996); Creative Tech., Ltd. v. Aztech Sys. Pte., Ltd., 61 F.3d 696 (9th Cir. 1995) (both
copyright). For Commonwealth examples, see Plastus Kreativ A.B. v. Minnesota Mining &
Mfg. Co., [1995] R.P.C. 438, 447 (Ch. 1994) (Eng.); Potter v. Broken Hill Proprietary Co.
(1906) 3 C.L.R. 479, 492 (Austl.). See generally Richard Fentiman, Foreign Law in English
Courts: Pleading, Proof and Choice of Law (1998). (Civil-law jurisdictions have no such
doctrine). These Principles would require a change in that practice, but experience with the
Principles would also significantly weaken the rationales that support it. Further, courts may
be motivated to dismiss foreign claims because they are concerned that the litigants will spend
time on a case only to find the judgment unenforceable; the Principles ameliorate that concern
by making the coordination process contingent on the rendering of an enforceable judgment,
see §§ 222(1)(h) and 223(5), and by providing provisions on enforcement, see §§ 401-413.
For the proposition that courts should not dismiss foreign copyright or trademark
claims, or the claims that come in under the unfair-competition rubric, see Graeme W. Austin,
Domestic Laws and Foreign Rights: Choice of Law in Transnational Copyright Infringement
Litigation, 23 Colum.-VLA J.L. & Arts 1, 42-43 (1999). For judicial application of foreign
law when local rights are in issue, see, e.g., Itar-Tass Russian News Agency v. Russian
Kurier, Inc., 153 F.3d 82 (2d Cir. 1998) (U.S. copyright claims raising questions of ownership
under Russian law); Films by Jove, Inc. v. Berov, 341 F. Supp. 2d 199 (E.D.N.Y. 2004)
(same); Coral Corp. K.K. (Kabushiki Kaisha) v. Marine Bio K.K. (Tokyo District Court
October 16, 2003) (consolidating a U.S. patent claim with Japanese patent claims).