IP and Applicable Law in Recent International Proposals: Report for the International Law Association

• Author: Rita Matulionyte
• Position: Vilnius, Dr. iur. (Munich and Freiburg), LL.M. IP (Munich), deputy director at the Law Institute of Lithuania
• Pages: 263-305

IP and Applicable Law in Recent International Proposals

2012

263

3

Abstract: The report compares applicable law

rules to intellectual property (IP) disputes as pro-

posed in the recent international projects(ALI, CLIP,

Transparency, Kopila and Joint Japanese-Korean pro-

posals). Namely, it identifies the differences among

proposals, reveals the underlying reasons of differ-

ing rules, looks at how particular issues have been

until now solved at international and national levels,

and finally, overviews the main arguments for and

against particular solutions suggested in the propos-

als. This report was presented in the 1st meeting of

the Committee on Intellectual Property and Private

International Law of the International Law Associa-

tion (15-17 March 2012, Lisbon) and is expected to

contribute to the merge of current international pro-

posals into a single international initiative.

IP and Applicable Law in Recent

International Proposals

Report for the International Law Association

by Rita Matulionytė, Vilnius, Dr. iur. (Munich and Freiburg), LL.M. IP (Munich), deputy director at the Law Institute

of Lithuania

© 2012 Rita Matulionytė

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Recommended citation: Rit a Matulionytė, IP and Applica ble Law in Recent International Prop osals: Report for the Int ernational

Law Association 3 (2012) JIPIT EC 3, 263.

Keywords: Intellectual property, applicable law, conflict of laws, lex loci protectionis, lex originis, initial ownership,

ubiquitous infringement, party autonomy

A. Introduction

1 During the last years several proposals dealing with

private international law (PIL) and intellectual prop-

erty (IP) have been made public, namely the Princi-

ples by American Law Institute (ALI),1 proposal by



in Intellectual Property (CLIP),2 Japanese “Trans-

parency” proposal,3 Principles by Korean Private

International Law Association (KOPILA)

4

and Joint

Proposal drafted by Members of the Private Interna-

tional Law Association of Korea and Japanese Waseda

University Global COE Project (Joint JK).5

2 The goal of this study is to compare the abovemen-

tioned projects in order to facilitate their merge into

a single international proposal. The current report

focuses on applicable law rules to IP. It consists of

eight chapters covering the most important issues of

applicable law, namely, (1) the main applicable law

rule (lex loci protectionis); (2) initial ownership and (3)

transferability issues; (4) the rules to IP contracts;

:

A. Introduction

B. Main rule

C. Initial ownership

D. Transferability

E. Contracts

F. Security rights

G. Party autonomy

H. De minimis rule

I. Ubiquitous infringement

J. Secondary infringements

K. Summary

2012

Rita Matulionytė

264

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(5) party autonomy in infringement cases; (6) the de

minimis provision; and the rules for (7) ubiquitous

infringements as well (8) secondary infringements.

3 Each issue is discussed from four aspects. First, the

rules in all proposals are compared by highlighting

their differences. Second, the rationale underlying

the different provisions is outlined. When possi-

ble, it is taken from written comments by the draft-

ers or from individual consultations. In other cases,

the underlying reasons of particular solutions are

searched for in the legal practice of relevant ju-

risdictions. Third, the international legal situation

is overviewed in order to see where the proposals

stand in the context of current legal practice in dif-

ferent countries. Fourth, the main arguments for and

against the suggested rules are summarized, mostly

as they are discussed in legal doctrine or, if no sig-

-

spective of the author. More attention is devoted to

the issues on which the proposals differ (e.g. initial

ownership, secondary infringement), whereas some

highly controversial issues are less analyzed if the

proposals suggest similar rules (e.g. ubiquitous in-

fringement rule, transferability issue).

GENERAL RULES

B. Main rule

Sec. 301 ALI; arts. 3:102, 3:601, 3:701 CLIP; art. 19 Kopila; art.

301 Transparency; art. 301 Joint JK.

4 All proposals, as a general matter, maintain the ter-

ritorial approach and suggest very similar applicable

law rules to IP disputes. It could be generally called

“lex loci protectionis.” Some exceptions to this ap-

proach and other differences still remain.

I. Differences

5 First, although Transparency proposal, similar like

other proposals, follows the territorial approach

in regard to most issues, it suggests a loosened ap-

proach to territoriality with respect to IP infringe-

ment. The latter is subjected to the law of the place

of the results of exploitation (or a “market impact”

rule) (art. 301 Transparency). It deviates from the

strict territorial approach, which stipulates that the

state law governs only the conduct occurring in that

state. Rather, according to the market impact rule,

the law of a particular state A will govern conduct

occurring in state B if that conduct has (real or po-

tential) effects in the state A; and vice versa, the law

of the state B will not be applied to the conduct oc-

curring in its own territory if that conduct does not

have market effects there.

6

Further, although all proposals seem to suggest very

similar (if not identical) applicable law rules, their

formulations slightly differ. Some proposals distin-

guish between registered and unregistered rights:

the former is subject to the law of the “state of reg-

istration” whereas the latter is governed by the law

of the “state for which protection is sought”6 (sec.

301(1) ALI, art. 19 Kopila and art. 301 Joint JK). Dif-

ferently, the CLIP Proposal subjects all IP rights to

the law of the state “for which protection is sought.”

Similarly, Transparency proposal subjects all rights

(at least as far as issues related to a right as such are

concerned) to the same rule; however, it is formu-

lated in a unique way. It refers to the law of the state

“which grants the protection” (art. 305 Transpar-

ency). This is meant to avoid the ambiguity of the

notion “lex loci protectionis” and cover both the lex

loci protectionis and the state of registration rules.7

7

Different terminology is used for the above described

rules. The CLIP Proposal uses “lex loci protectionis”

when referring to the “law of the country for which

protection is sought.” Joint JK Proposal covers under

“lex loci protectionis” both the country “for which pro-

tection is sought” (as in CLIP) as well as the country

of registration.8 The latter two rules are called “ter-

ritoriality” in the ALI Proposal.9 Also, although ALI

subjects unregistered rights to the law of the state

“for which protection is sought” (like CLIP), in its

comments ALI group refers to “affected market” as

a usual point of attachment when the law of the pro-

tecting country is applied.10 In this way, the ALI ap-

proach comes closer to the “place of the results of

exploitation” rule as found in the Transparency pro-

posal. It is most likely that these differences in ter-

-

   

such basic concepts as “lex loci protectionis” or “ter-

ritoriality” is, however, important.

II. Rationale

8 The reasons for the market impact rule and a loos-

ened approach towards territoriality, as adopted in

the Transparency proposal, can be traced in the Jap-

anese court practice. The Japanese Supreme Court

formulated a strict approach to territoriality in the

BBS case 11 and reiterated it in the Card Reader case.12

In the latter case, the defendant situated in Japan

was producing the items covered by the U.S. patent

with the purpose of distributing them in the USA

(the item was not patented in Japan). The court de-

    

of territoriality in relation to patent rights means

that a patent right registered with each country is

to be governed by the laws of the relevant coun-

try with regard to issuance, transfer, validity and

the like thereof and such patent right can come into

force only within the territory of the relevant coun-

IP and Applicable Law in Recent International Proposals

2012

265

3

try.” Accordingly, it rejected the application of the

U.S. law in respect of conduct (production) occur-

ring in Japan since no patent was granted in Japan.

The court argued that the application of the U.S. law

would impinge the territoriality principle of IP rights

and would thus violate the public policy of Japan.13

Such a strict territoriality approach, however, was

met controversially by legal scholars. For instance,

some argued that the court had run into confusion

between different concepts of the territoriality prin-

ciple in private international and public law.

14

Keep-

ing this in mind, the drafters of the Transparency

proposal have suggested the market effect rule as

an alternative solution.15

9 The next question concerns the reasons of propos-

ing two distinctive rules for registered and unregis-

tered rights, namely country of registration for the

former and country for which protection is sought

(or “country of protection”) rule for the latter. In

other words, does the country of registration rule

lead to different results than the country of protec-

tion rule if applied to registered rights? It seems that

in most cases the results will be the same and the

country of registration rule is just a more straight-

forward rewording (or variation) of the country of

protection rule.16 On the other hand, in Japanese le-

gal practice the approach exists that these two rules

in some cases do not coincide. Some scholars suggest

that a “country of protection” may refer to differ-

ent states (e.g. country which grants the protection

or country where right holder raises a claim even if

the laws do not grant the protection, i.e. lex forum).17

Also, according to the Joint JK proposal, it is “as-

sumed” that the country of registration is the same

as the country of protection, however, this presump-

tion can be rebutted.18 In order to avoid the ambig-

uous lex loci protectionis rule and the confusion that

the usage of both lex loci protectionis and country of

registration rule may cause, the Transparency pro-

posal uses the expression “the law of the country

granting the right,” which represents a combina-

tion of the two concepts.19

III. International context

10 It is often assumed that territoriality and lex loci pro-

tectionis are accepted in most state legal practice in

a similar (if not the same) scope and, thus, the ana-



however, is more colorful than that.

11 First of all, it is worth noting that IP law is new in

many jurisdictions worldwide (especially in devel-

oping countries) and, naturally, they often have no

special PIL rules to IP disputes or practice related to

it. Then, most countries which have certain IP tradi-

tions treat IP rights as territorial; however, there are

also a few countries which have adopted a univer-

sal approach (e.g. Portugal, Romania and Greece).20

Even between countries that adhere to the territo-

rial approach there is no unitary notion of it. Some

countries stick to a traditionally very strict territo-

riality principle which does not allow courts to adju-

dicate disputes over foreign IP rights. Because of this

(and other) reasons courts would adjudicate only dis-

putes over local IP rights and simply apply lex forum

(thus, no applicable law rules are needed).21 Others

have since recognized that the territoriality princi-

ple does not preclude international jurisdiction in at

least disputes over foreign copyrights.22

12

Countries that allow the adjudication of foreign IP

disputes, often apply lex loci protectionis rule. Some

commentators argue that the lex loci protectionis

rule can be derived from art. 5(2) of the Berne Con-

vention for the Protection of Literary and Artistic

Works (Berne Convention),23 however, no agree-

ment on this issue exists.24 Similarly, there is no

agreement whether lex loci protectionis can be de-

rived from the national treatment provision as im-

plemented in the Paris Convention for the Protec-

tion of Industrial Property (Paris Convention)25 or

Agreement on Trade Related Aspects of Intellectual

Property Rights26 (TRIPS).27 In national jurisdictions

it is rarely implemented as a statutory rule (Switzer-

land28), and in some countries it is established only

through court practice (e.g. Germany29). It is often

not clearly distinguished from other similar rules

like lex forum (e.g. Austria,30 China,31 Taiwan32). Fur-

thermore, the same lex loci protectionis rule (or “coun-

try for which protection is sought”) may be under-

stood differently. In Germany it essentially refers to

the country that grants the protection, whereas in



33

Also, in

some countries “lex loci protectionis” and “territori-

ality” concepts are used interchangeably (U.S., UK),

whereas in others a clear line is drawn, at least on a

dogmatic level (e.g. Germany).34 Some states also ap-

ply other rules to IP disputes. For instance, the law of

country of registration is applied for registered in-

dustrial property rights (e.g. Portugal).

35

Other coun-

tries do not have any special applicable law rules to

IP disputes and thus general tort applicable law rules

(most often – lex loci delicti) apply (e.g. UK,36 Nether-

lands,37 U.S.38). In the U.S., lex loci delicti is often used

interchangeably with lex loci protectionis.39

13

Regarding the scope of lex loci protectionis, it has been

differing from country to country. In some countries

all issues (putting aside initial ownership and trans-

ferability) have been subject to lex loci protectionis

(Austria,40 Belgium,41 Germany,42 Italy,43 Switzer-

land,44 South Korea,45 China46). In other countries it

covers only proprietary issues (existence, scope, du-

ration, termination, etc.), whereas infringement-re-

lated issues (illegal conduct and remedies) have been

subject to general tort applicable law rules such as

lex loci delicti (e.g. U.S.,47 UK,48 France,49 Portugal50).

It is argued that, although lex loci protectionis and