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 IV
RECOGNITION AND ENFORCEMENT
OF FOREIGN JUDGMENTS
IN TRANSNATIONAL CASES
Chapter 2
Remedies
Introductory Note
States take disparate approaches to remedies. As a general matter, the Principles take
these differences into account by applying to remedies the same territorial approach that is
used for substantive law (§ 301). Nonetheless, it must be expected that there will sometimes
be differences between the remedies ordered by the court that rendered the judgment and the
law of the State where enforcement or recognition is sought. First,
§§ 302, 311-313, and 321(1) contemplate some exceptions to territoriality. Second, the
rendering court may be unable to award a remedy that is not available under its domestic law
or it may order relief not available in the court where enforcement is sought. As a last resort,
the public-policy provision of § 403(1)(e) will apply. But that provision is meant to be used
sparingly; in most instances, normative differences should be reconciled through the remedial
provisions of this Chapter. Thus, the enforcement court is not obliged to enforce an award for
types of monetary relief that it would not have awarded as the rendering court; it is never
required to order local injunctive relief that exceeds the scope of relief available under its
domestic law. However, denial of a remedy in the enforcement court does not amend the
judgment; rather, the judgment stands, and the party seeking its enforcement can go to a court
in another State to obtain fuller relief. Declaratory judgments respecting the invalidity of
foreign registered rights are effective only as between the parties.
At the same time, however, it is important to acknowledge that judgments entered
pursuant to another jurisdiction’s appropriately chosen law incorporate the remedies
envisioned by that law. Thus, assuming the rendering court’s judgment is not to be denied
enforcement on the ground that the rendering court applied a manifestly unreasonable choice
of law, the enforcement court should normally enter the remedy devised by the rendering
court.
REPORTERS’ NOTE
Consideration of local circumstances. International agreements covering intellectual
property recognize the variability of rules on remedies. Thus, the TRIPS Agreement requires
member States to empower courts to order injunctive relief, art. 44; it does not mandate such
relief in every case. Similarly, damages are measured by local demand, art. 45. The standard
for compliance is “effective action against act[s] of infringement,” art. 41(1). While the
Agreement envisions fair, equitable, and timely procedures, art. 41(2), nothing requires a
member to provide a system for adjudicating intellectual property rights that is different from
that provided for other rights, art. 41(5). Significantly, the AIPPI Resolution on Question
Q174 makes clear that local conditions should be taken into account at the enforcement stage,
AIPPI, Q174 Resolution art. 3 [§ 2].
§ 411. Monetary Relief
If a foreign judgment is recognized by the enforcement court under these
Principles:
(1) The rendering court’s order awarding compensatory damages, including attorney’s
fees, costs, accounting for profits, and damages intended to compensate the plaintiff
without requiring proof of actual damages, shall be enforced; and
(2) The rendering court’s order awarding noncompensatory damages, including
exemplary or punitive damages, shall be enforced at least to the extent that similar or
comparable damages could have been awarded in the State of the enforcement court.
The enforcement court shall take into account whether and to what extent the damages
awarded by the rendering court are not punitive but serve to cover costs and expenses
relating to the proceedings not otherwise covered by provisions relating to the award of
attorney’s fees.
Comment:
a. Noncompensatory damages. A major difference between jurisdictions is the approach
to punitive damages. In some States, these are considered necessary to deter infringement, and
awarded as punishment in an amount that reflects the defendant’s ability to pay or by applying
a multiple to the proven damages. In other places, different approaches are taken to
deterrence. Section 411 accommodates this disparity by relieving the court where
enforcement is sought of the obligation to award noncompensatory damages in an amount
greater than that which would have been awarded under its domestic law.
Illustration:
1. Trademark holder receives a judgment in State A that Defendant infringed in both
States A and B, and that the infringements were willful. The court awards treble damages for
infringements in A in accordance with its own law. Trademark holder seeks enforcement of
the judgment in State B, where all of defendant’s assets are located.
If the court in State B could not have awarded treble damages in a domestic action, it
can limit enforcement to compensatory damages. If Trademark holder wants to recover these
damages, it must seek enforcement in State A.
Note that this rule supplies a disincentive to forum-shop: If the Defendant in the
Illustration has no assets in A, Trademark holder will have gained nothing by bringing the suit
in that jurisdiction in order to take advantage of the availability of treble damages in the
rendering court.
b. Statutory damages. If the law in the State where the enforcement court is located does
not provide for statutory or enhanced damages, the enforcement court may perceive that any
damage award not substantiated by a specific showing of injury (right holder’s loss or
defendant’s profits) is noncompensatory. However, not all such awards are punitive in nature.
In the United States, for example, statutory damages are awarded in lieu of actual damages
and profits in copyright cases (17 U.S.C. § 504(c)) and trademark law uses an analogous
approach (15 U.S.C. § 1117(a)). Where there is a statutory basis for this form of
compensation, the enforcement court should enforce the full amount of the damages. In other
cases, the burden is on the prevailing parties to elicit a characterization of the award from the
rendering court.
Illustration:
2. Same facts as above. If the rendering court made clear that the damage award was
compensatory, Trademark holder can collect the full amount of the award.
c. Reasonable royalties. The European Community adopts a remunerative technique akin to
statutory damages. When actual damages are not proved, courts in EU States have authority to
award the plaintiff a judicially determined reasonable royalty. U.S. courts in patent cases
frequently use reasonable royalties as a substitute measure for damages.
d. Liquidated damages. When the rendering court gives effect to a contract’s
specification of damages, the enforcing court should regard the award as the parties’
agreement on what amount would have been required to offset the harm to the nonbreaching
party. Thus, unless the rendering court specifically characterizes all or part of the liquidated
damages as exceeding the amount necessary to compensate, these awards should be regarded
as compensatory and fully enforceable. An agreement to submit all monetary relief to the law
of a given jurisdiction should be regarded as akin to liquidated damages, and therefore fully
enforceable.
e. Costs and attorney’s fees. States take differing approaches to awards of costs and
attorney’s fees. The so-called British Rule shifts costs and fees to the loser. Ostensibly, the
American Rule requires each party to pay his or her own way. However, some “American
Rule” courts may, in fact, cover part or all of these costs by using their discretionary authority
to shape awards. An enforcement court in a jurisdiction that awards costs and attorney’s fees
should take this possibility into account when comparing the relief ordered by the rendering
court with the relief that would have been awarded locally.
REPORTERS’ NOTES
1. Statutory damages. As in the Hague Convention on Choice of Court Agreements art.
11(1), the court where enforcement is sought need not enforce an award for noncompensatory
damages. However, not all awards that are independent of proof of harm are
noncompensatory. For example, in the United States, so-called “statutory damages” do not
require proof of actual damages and yet they are intended to compensate the plaintiff. These
are not considered exemplary or punitive damages, as they are designed to replace income or
opportunities lost to infringement. The rendering court typically has considerable discretion to
set the award, although the statute may impose a floor and a ceiling. Those States that award
statutory damages vest judges with this discretion because they recognize that proving the
amount of lost sales can be particularly difficult if the defendant has failed (deliberately or
otherwise) to keep reliable business records. An enforcement court should not decline to
enforce an award of statutory damages that are awarded under these circumstances.
2. Reasonable royalty. For U.S. examples, see, e.g., Georgia-Pacific Corp. v. U.S.
Plywood-Champion Papers Inc., 446 F.2d 295 (2d Cir. 1971) (patents); On Davis v. The Gap,
Inc., 246 F.3d 152 (2d Cir. 2001) (copyright; “reasonable license fee”). For States of the
European Union, see Parliament and Council Directive 2004/48/EC of 29 April 2004 on the
Enforcement of Intellectual Property Rights, art. 13(1)(b), 2004 O.J. (L 195) 16, available at
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri
=CELEX:32004L0048R(01):EN:HTML (last visited Jan. 3, 2008), art. 13(1)(b).
3. Liquidated damages. See, e.g., Restatement Second, Contracts
§ 356; Monsanto Co. v. McFarling, 363 F.3d 1336, 1345 (Fed. Cir. 2004) (applying Missouri
law respecting liquidated damages).
§ 412. Injunctions
(1) (a) Except as provided in subsection (1)(b), if a foreign judgment is
recognized by the enforcement court under these Principles, the rendering court’s order
awarding an injunction as a remedy for intellectual property infringement shall be
enforced in accord with the procedures available to the enforcement court.
(b) If injunctive relief would not have been available for the enforcement court’s
territory had the enforcement court been the rendering court and reached the same
decision on the merits, the enforcement court may decline to enjoin or to order the
commission of acts within the territory that impact exclusively within the territory. If
the court so limits the scope of the injunction, it shall award monetary relief in lieu of
the injunction.
(2) The enforcement court may order such other relief as provided in the
judgment, including seizure and destruction of infringing articles and the means of their
manufacture or reproduction and to order the publication of the judgment.
Comment:
a. Forms of relief. The rendering court’s decision on the merits of the action for
injunctive relief may be enforced in a variety of ways, depending on local law. In most cases,
a local injunction may be issued, but there may be situations in which it is appropriate to
achieve the result intended by the rendering court by using forms of relief available under the
law of the enforcement court’s State. For example, an injunction ordered by a court in the
United States might be enforced through a French court’s order of an astreinte.
b. Availability of injunctive relief. The ALI Foreign Judgments Project does not require
direct enforcement of injunctive orders (§ 2(b)(ii)), on the theory that injunctions are not
transferable from one court to another and that even in “the context of sister-state judgments
in the United States,” the recognition due to injunctive relief is unclear; see § 2, Comment g.
However, intellectual property rights are essentially rights to exclude. Some States further
include affirmative obligations: orders to publish the court’s decision come within the scope
of the prevailing claimant’s remedy. This public vindication of the claim is particularly
valuable to clarify the scope of protection of the intellectual property at issue and to promote
creators’ moral interests in their works. Thus, the injunctive award is usually of paramount
concern. Transnational adjudication will not be a viable option unless the award in a
transnational case is enforceable in all relevant territories.
c. Circumstances for declining to recognize orders for injunctive relief. With respect to
an injunction that orders the defendant to engage in certain acts within the enforcement
court’s territory, the enforcement court must give effect to the judgment at least to the extent
those acts impact outside the enforcement court’s jurisdiction in other territories covered by
the injunction. However, unlike many private suits, intellectual property cases have strong
public dimensions. Thus, for example, courts use their equity powers to deny injunctive relief
to a patentee when the defendant’s activity is addressing unmet health and safety needs.
Although the balance between public and proprietary interests are arguably best struck by the
court hearing the case on the merits, needs of individual territories may differ in respect to
safety and health concerns. For example, the October 2001 anthrax attack created a specific
need for the patented pharmaceutical Cipro in the United States that was not experienced in
other places. As was the case with Cipro, it is likely that the patent holder will not withhold
product from the market in such circumstances. However, if the court entertaining an action
ordered multijurisdictional injunctive relief, and the rights holder persists in enforcing the
order in a territory with special needs, the enforcement court may refuse it on the ground of
local need. The denial of relief should extend only to the area of special need. Compensation
must be ordered in lieu of the injunction.
Cultural policies may raise similar concerns. Although the States most likely to
participate in these Principles are likely to have also obligated themselves to minimum
intellectual property standards through the TRIPS Agreement, there may be situations where
access interests are particularly strong. Section 412(1)(b) allows, but does not oblige, a court
to decline to impose injunctive relief in such circumstances. In the event an injunction is
refused, however, the enforcement court must afford compensatory relief.
Absent the flexibility of § 412, enforcement courts would likely rely more heavily on
the public-policy exception of § 403(1)(e). Section 412 offers a better solution because it may
afford some scope for injunctive relief and, in any case, it requires that prevailing right
holders receive compensation for use of their property.
d. Compensation. When injunctive relief is declined, the court should award
compensatory relief in an amount sufficient to afford an effective remedy for that territory and
to compensate for future use of the intellectual property at issue. The monetary relief ordered
could be less than the amount that the rights holder would have charged. At the most, it would
be measured by the price set by local demand. However, in special cases such as
pharmaceuticals, it may be even lower than the unregulated market rate. For example, a court
can reduce the relief below the market rate in situations where other countries control prices
directly, or in situations where there is no international norm requiring that intellectual
property rights be accorded to the product. In a case where injunctive relief is regarded as
inappropriate, in no event should the compensatory reward, in and of itself, present an
obstacle to access.
REPORTERS’ NOTES
1. Injunctions generally. Courts have been reluctant to enforce nonmonetary orders
awarded by foreign courts. In contrast to monetary judgments, injunctive relief may require
the enforcement court to interpret foreign law and provide significant levels of judicial
assistance. As one commentator noted, when a court recognizes another court’s injunctive
order, it permits the rendering court “to reach deeply into [the enforcement court’s]
enforcement regime,” Vaughn Black, Enforcement of Foreign Non-money Judgments: Pro
Swing v. Elta, 42 Can. Bus. L.J. 81, 89 (2006). Nonetheless, in intellectual property cases,
where global transactions are common and injunctions are the core safeguard of exclusivity,
courts need to adopt a more flexible approach, see Pro Swing, Inc. v. Elta Golf, Inc., [2006]
SCC 52, 7 (Can.). As the Canadian Supreme Court in that case stated, “such a change must
be accompanied by judicial discretion enabling the [enforcement] court to consider relevant
factors so as to ensure that the orders do not disturb the structure and integrity of the Canadian
legal system.” Id. 15. Section 412(1) provides that discretion: it allows the enforcement court
to utilize its own enforcement procedures and permits it to limit local relief to that which it
would have granted had it reached the same decision on the merits of the case.
2. Health and safety. It is well recognized in international intellectual property law that
health and safety concerns can outweigh proprietary interests. Art. 8 of the TRIPS Agreement
specifically reserves to member States the right to formulate and amend law “to protect public
health and nutrition”; art. 27(2) allows members to exclude inventions from patentability “to
protect human, animal or plant life or health”; and art. 31(b) gives members flexibility to
order compulsory licensing of inventions needed to address “national emergency or other
circumstances of extreme urgency.” Domestic laws reflect similar concerns, see, e.g.,
Hybritech Inc. v. Abbott Labs., 4 U.S.P.Q.2d 1001, 1015 (C.D. Cal. 1987) (public interest
required that injunction not stop supply of medical test kits that the patentee itself was not
marketing), aff’d, 849 F.2d 1446 (Fed. Cir. 1988); Vitamin Technologists, Inc. v. Wisconsin
Alumni Research Found., 64 U.S.P.Q. 285 (9th Cir. 1945) (public interest warranted refusal
of injunction on irradiation of oleomargarine); City of Milwaukee v. Activated Sludge, Inc.,
21 U.S.P.Q. 69 (7th Cir. 1934) (injunction refused against city operation of sewage-disposal
plant because of public-health danger).
3. Other concerns. While injunctions typically afford the most basic relief in intellectual
property cases, courts, particularly in the United States, have recognized circumstances in
which the public interest may be better served by permitting dissemination of the infringing
work, while requiring payment to the right holder. See, e.g., eBay Inc. v. MercExchange,
L.L.C., 126 S. Ct. 1837, 1839 (2006) (for an award of injunctive relief, a successful plaintiff
must demonstrate, among other things, “that the public interest would not be disserved by a
permanent injunction”); New York Times Co. v. Tasini, 533 U.S. 483, 505 (2001) (“[I]t
hardly follows from today’s decision that an injunction against the inclusion of these Articles
in the Databases (much less all freelance articles in any databases) must issue.”); Campbell v.
Acuff-Rose Music, Inc., 510 U.S. 569, 578 n.10 (1994) (suggesting that in cases of high
public interest that fall short of fair use, compensatory relief may be preferable to an
injunction). Cf. Stewart v. Abend, 495 U.S. 207 (1990) (allowing lower-court order denying
injunctive relief to stand, thereby allowing the rights holder in a motion picture to continue to
exploit the work without authorization from the holder of the rights in the underlying story);
19 U.S.C. § 1337(2) (unauthorized importation of copyrighted, patented, and trademarked
material can be barred “only if an industry in the United States, relating to the articles
protected . . . , exists or is in the process of being established.”).
4. Compensation. The requirement of compensation in lieu of injunctive relief is
consistent with the TRIPS Agreement, which contemplates some unauthorized utilization for
local circumstances, considered individually, when the right holder receives “adequate
remuneration in the circumstances of [the] case, taking into account the economic value of the
authorization,” TRIPS Agreement art. 31(h). The economic value is, at most, measured by the
amount that locals can afford to pay. However, even under the TRIPS Agreement, it could be
lower. For example, the TRIPS Agreement allows countries to refuse patent protection to
inventions needed to protect ordre public, including health and the environment, art. 27(2). If
a State decides to provide patent protection to an invention that could be excluded, its courts
should be allowed to set a price that protects the public by assuring availability.
§ 413. Declarations of Validity, Invalidity, Infringement, and Ownership of Rights
(1) Except as provided in subsection (2), declarations by a foreign court of validity,
invalidity, infringement, or ownership of intellectual property rights shall be recognized
and enforced by the enforcement court.
(2) If a court in one State declares that a right registered in another State is invalid, the
declaration is effective only to resolve the dispute between or among the parties to the
litigation.
Comment:
a. Actions in the nature of declaratory relief. On the theory that declaratory judgments
“do not ordinarily call for enforcement,” the ALI Foreign Judgments Project merely
authorizes their recognition (§ 2(b)(ii) and Comment g). However, like injunctions,
declaratory relief can be important in intellectual property disputes. Further, such
determinations can sometimes require enforcement, such as through an order of equitable
title, or, in registered-rights cases, removal of the registration from the registry. Thus, the
Principles set out an explicit proposal regarding their effect.
b. Choice-of-law agreements. When the parties have validly agreed to the law applied in
the rendering court, that court’s declaration of infringement or ownership should be
recognized and enforced. This promotes party autonomy and predictability.
c. Declarations of invalidity of registered rights. For reasons discussed in § 213,
Comment c and Reporters’ Notes 2 and 3, parties are permitted to determine the scope of their
legal relationship, even if that requires determining the validity of registered rights. However,
judgments of invalidity are effective only between the litigants who were joined in the first
action; see § 222, Illustration 6.
In cases where the right is declared invalid, the judgment may put the user of the work in a
competitive advantage relative to licensees who must continue to pay royalties to the rights
holder. However, that result may work less violence on the innovation policies in the State of
registration than would a rule that would invalidate the rights in one State on the basis of a
determination by a foreign court. Furthermore, any jurisdiction concerned with inequitable
treatment of licensees can institute a procedure for notifying the public of judgments adverse
to the patent holder.
As patent law becomes harmonized and more national trademarks and patents stem
from single, multijurisdiction applications (such as the Madrid Agreement, the PCT, or the
EPC), the need to limit the effect of declarations of invalidity may recede.