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What are the best practices to implement around choosing the applicable law for international licens

August 2019 - Intellectual Property. Legal Developments by IR Global.

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The following article discusses session one in the IR Global Virtual Series on 'International IP Licensing - Creating effective contracts'

France - François Illouz (FI) The applicable law issue is important, because if there is litigation or a problem with the contract, it will be influenced by the applicable law, the applicable jurisdiction and also the cost.

When we have an intellectual property license in a contract, we usually refer to the recommendation of the Roma 1 regulations. This doesn’t always help though, because it says that the contract has to be ruled by the law chosen by the parties.

With regard to the law chosen by the parties; most of the time it has to be linked with the contract, along such lines as the registration of the brand or the country where the license is granted. The problem is that everybody wants the law or the jurisdiction to be theirs.

We always recommend that the applicable law is the same as the jurisdiction, because, otherwise, you have to ask for legal opinion and rely on the judges to apply the law correctly.

I like to make the applicable jurisdiction that of the defendant in any dispute. This means that if the claimant wants to make a claim, or go to trial, they have to make the effort to do so under the law of the defendant. This often helps to drive an amicable settlement. I stress the points that in France we have specialised courts for IP matters, and they are only eight in France and one in the French Antilles. So, it is important to be sure that the right court will be chosen.

We do sometimes stipulate international litigation in licensing agreements, when a dispute is between parties in different countries. That would be good for Sergio, because, in France, we usually use Swiss law as a neutral ground.

We will also consider arbitration, which is faster, but sometimes more expensive.

Switzerland - Sergio Leeman, (SL) We do help a lot of countries and a lot of international contracts with our law. We're open to that, but our judges will not always accept the venue of a licensing agreement dispute to be Switzerland. Sometimes there has to be a link to Switzerland to qualify it as the place of jurisdiction.

If it's a European country, then, of course, we would be more likely to accept it. If it an agreement involving China or an African country, our judges may refuse to have the lawsuit in Switzerland. Arbitration proceedings, on the other hand, will be held in Switzerland, if the parties choose to have them here.

I can agree with François though with regard to international jurisdiction on Swiss agreements. If we have an agreement between an American company and a Swiss party, we often choose England as a jurisdiction, because they're very open to foreign lawsuits and are used to handling them. London courts deal with them in a fast and effective manner.

If an international jurisdiction is not required, we always try to have it back in Switzerland, where we know the law. Swiss courts are very safe, very predictable and very fast. A licensing lawsuit shouldn’t take more than six months to complete, which is pretty fast in international comparison. That's one of our biggest advantages.

Romania - Madalina Hristescu (MH) Applicable international private law provisions send to the law of origin, that will apply in any related litigation.

In addition, we recommend that the contractual parties take into account the fact that in most cases, the material law applicable to the place of performance of the contract may be an important factor in choosing the jurisdiction also from the place of performance of the contract. In this way, the courts and authorities called upon to resolve any possible dispute in connection with a license agreement are also familiar with material rights in relation to any of the intellectual property rights invoked.

For example, for most intellectual property rights that benefit from registration protection, the special Romanian legislation provides for the license to be published in the Official Gazette of the State Office for Inventions and Trademarks in order to make it opposable to any third party. Any litigation in connection with the contract will raise discussions both in terms of material law and any procedural exceptions deriving from the particular circumstances mentioned.

Courts in Romania benefit from specialized court cases with intellectual property rights, having extensive experience in interpreting and executing licensing contracts for such rights.

Regarding the administrative procedures deriving from the registration of the license agreements, the Bucharest Court of First Instance is the court competent to settle in the first instance any litigation of this nature. In the licensing contracts, we also recommend arbitration seated in Romania.

U.S - Oklahoma - Peggy Millikin (PM) If the agreement is between two US entities, then we will, of course, select US law. We have a federal and a state regime of governing law, so we would look at the particular state, along with the federal regulatory scheme that governs that particular IP.

We tend to go to either Delaware or New York, unless we have more local parties and they are comfortable with Oklahoma law.

In terms of international licensing agreements, some licensees are comfortable with US law, but we often go to the law of England and Wales, or Singapore if we're dealing with somebody in the Asian Pacific Rim.

I would like to emphasise, that the choice of law is also dependent upon the particular IP assets that are subject to the licensing agreement. In this respect, the choice of law may change, whether we're licensing in or out trade secrets or trademarks or patents or copyrights.

Taking trade secrets for example, not all countries of the world have an established developed body of statutory law or case law governing trade secrets. If I have a client who is setting up an R&D centre in some country of the world, we have to consider trade secret laws. It is important that the jurisdiction has developed strong laws to protect and enforce trade secrets.

The United Kingdom and the United States have common law trademarks. This means you don't have to actually register the trademark, in order to develop common law rights in it.

So, these are the kinds of factors relating to the substance of law of the country and the particular IP assets that are being licensed, that help us decide what law we're going to choose to govern the contract.

U.S - Connecticut - Walter Welsh (WW) Choice of law and venue provisions significantly impact the rights of the client and the cost and complexity of resolving disputes arising under an IP license.

I’ll touch a bit on the venue side. We always want a venue that has experience handling IP disputes and does so efficiently. That’s really important, because it helps avoid disputes if the parties can predict how a court is going to work. It's a lot easier to advise the client if this is the case, so we're looking for an efficient process, an accessible location and experience applying the selected law.

Ideally, we would like the Southern District of New York because the court is sophisticated, has a well-developed body of law, and routinely applies outside law. In my experience, however, it can be a deal breaker to push for a home venue in an IP negotiation. We understand this and routinely look at different courts. The UK is possible sometimes, while we often work with German courts, particularly with patent matters.

We will also consider arbitration. In trademark licensing cases, we might use the WIPO arbitration forum. There are many different alternative dispute mechanisms in different US states that will hear disputes as well. These are particularly efficient where there are multiple licensees in a single territory.

Another important aspect is to include provisions under which both parties submit to the jurisdiction of the selected venue. They must also agree that judgments from that venue will be enforceable upon them in their home jurisdictions. Finally, we look to include provisions in which both parties agree to waive service requirements under the Hague Convention, to the extent possible, to prevent a party from avoiding a dispute based on procedural grounds.

Japan - Kazuto Yamamoto (KY) Japanese laws and legal systems are quite stable, reliable and clean, so we usually recommend our clients to select Japanese laws as applicable laws. We would also recommend Japan as the exclusive jurisdiction for arbitration.

Legal fees in Japan, without any discovery procedure, are significantly lower than those in the US, which is unfortunate for us as Japanese lawyers, but good for clients. If we need to choose neutral ground, then we will usually choose Singapore law, because Singapore is the best venue in Asia.

Hong Kong is also very renowned and reliable for arbitration, but since Hong Kong is closely linked with China, we usually prefer Singapore arbitration. Sometimes we choose the jurisdiction where enforcement will occur, but that depends on the legal system, which can be unpredictable.

CONTRIBUTORS

François Illouz (FI) Illouz Avocats - ISGE – France www.irglobal.com/advisor/francois-illouz

Sergio Leemann (SL) Wicki Partners AG – Switzerland www.irglobal.com/advisor/sergio-leemann

Walter B. Welsh (WW) Whitmyer IP Group – US – Connecticut www.irglobal.com/advisor/walter-b-welsh

Peggy Millikin (PM) Millikin IP Law – U.S – Oklahoma www.irglobal.com/advisor/peggy-millikin

Kazuto Yamamoto (KY) Daiichi Legal Professional Corporation – Japan www.irglobal.com/advisor/kazuto-yamamoto

Madalina Hristescu (MH) Hristescu & Partners – Romania www.irglobal.com/advisor/madalina-hristescu