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

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

More from IR Global