Choice of Law and Intellectual Property Rights

2.1 The Paris and Berne Conventions

2.2 The TRIPs Agreement

The Paris and Berne Conventions have been revised on several occasions. Since 1968, the task of organising such revisions has rested with the World Intellectual Property Organization (WIPO). However, since the 1970s, due to an increasing divide between groups of countries with diverging interests, any attempt at revision of the two Conventions has been unsuccessful. Faced with a stalemate at WIPO, the industrialised countries introduced IPRs into the Uruguay round of trade negotiations under the General Agreement on Tariffs and Trade (GATT), which led to the foundation of the World Trade Organisation (WTO) in 1994, with an Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) being concluded as an Annex.¹⁷ The TRIPS agreement highlights the growing importance of IPRs and it finally confirms that IPRs are commodities for world trade and as such constitute property rights with strong economic connotations. The TRIPS Agreement, briefly put, stipulates full compliance with the Paris and Berne Conventions in their latest versions, and it acknowledges the principle of national treatment, alongside the trade policy principle of Most Favoured Nation treatment (MFN). In addition, however, there are some novel features that emphasise the increased value of IPRs. In particular, TRIPS enhances the minimum level of protection, and substantive harmonisation is moved to a new level that also includes mandatory principles regarding enforcement of IPRs.¹⁸

As such, the TRIPS agreement reinforces territoriality as the main principle in international collaboration in the field of IP law. As to the Agreement’s potential impact on private international law, it can only be said that by raising the level of harmonisation and by focusing on the economic aspects of IPRs, it is further confirmed that IPRs are increasingly regarded as rights similar to other forms of private property rights.

2.3 Is there a Choice of Law Clause in the Conventions?

It is generally assumed that the principle of territoriality governing the international conventions translates, as a matter of course, into the conflicts rule of lex loci protectionis (or lex protectionis for short), that is, application of the law of the country where (or rather: for which¹⁹) protection is sought. The close link between the two principles is indeed obvious in so far as registered IPRs are concerned: It appears self-evident that the country of registration is regularly the country of protection, and that it is the law of this country that must be applied in relation to disputes regarding IPRs registered there. Applying the law of another country – for instance the law of the country where the owner of the right is habitually resident – apparently does not make much sense, as the right may not even be registered in that other country, and even if so, the effect of the registration would be confined to the territory of that State. In spite of the close connection, however, it is important to note that the territoriality principle only operates on the level of substantive law; it is not a conflicts rule per se.²⁰ Therefore, it does not prevent legislatures from espousing or permitting other solutions, where that is deemed appropriate and feasible.²¹

For copyright, the matter is more complex. Pursuant to article 5(2) 1^st sentence Berne Convention, copyright comes into existence without any formal requirements having to be fulfilled. Thus, a book published in Australia will be given protection in Australia if Australian requirements for protection are fulfilled, but simultaneously also in the rest of the world if requirements in different national laws (eg in Germany, Norway or Sweden) are met, irrespective of the fact that the work has been published abroad. This is why it has been argued that copyright is ‘universal’ and ownership must therefore be determined according to a single law, namely the lex originis. Others argue that copyright in all its aspects, including first ownership, remains subject to the territoriality principle, which means that applying lex protectionis is the more suitable approach. The controversy between representatives of both theories first culminated in the 1970s when Eugen Ulmer published his work Intellectual Property and the Conflict of Laws,²² and it continues ever since. We revert to the issue in section 4 of this article.²³

Controversies also surround the understanding of two provisions in the Berne Convention. First, article 14^bis (2) (a) sets forth that ‘Ownership of copyright in a cinematographic work shall be a matter for legislation in the country where protection is claimed’. While this seems to confirm the ‘territorialist’ approach, there are also other possible explanations,²⁴ and so the matter remains inconclusive. Second, Article 5(2) 2^nd sentence stipulates that:

…the extent of protection, as well as the means of redress afforded to the author to protect his rights, shall be governed exclusively by the laws of the country where protection is claimed.

Again, debates have arisen²⁵ about whether this is a genuine conflicts rule, or whether it only extends the principle of non-discrimination to the applicable law.²⁶ Under the latter approach, Article 5(2) 2^nd sentence would be met already if it is set forth in the private international law of a given country that lex originis applies indiscriminately to infringements for which redress is claimed before the national courts.

Regardless of that debate, there is no doubt in practice that applying lex protectionis offers the most appropriate solution in so far as infringement of copyright is concerned.²⁷ Though the link with the territoriality principle may not be as close as with registered IPRs, it exists also here: after all, the principle of territoriality is meant to preserve, within the framework established by the Conventions, the sovereignty of national legislatures wishing to enact provisions best matching their own policy prerogatives. The enjoyment of that freedom would be counteracted if the national courts would have to apply foreign law (eg lex originis), even if the infringement occurs in the forum State and thereby directly affects the interests of the national public. Thus, while neither the territoriality principle nor, according to a majority opinion, article 5(2) 2^nd sentence Berne Convention impose any obligation under international law as regards choice of law, it is no wonder that for all kinds of IPRs, including copyright, applying lex protectionis conforms to a (nearly) universally observed practice, at least in infringement disputes. This is also true for the EU, where Article 8 of the Rome II Regulation stipulates the application of the law of the country for which protection is claimed.

4.1 Legal History

Unlike in the field of contractual obligations, where the applicable law prior to the Rome II Regulation was determined by the Rome Convention of 1980, there was no preceding agreement among the Member States as regards choice of law in the area of IPR infringements. However, due to the largely homogeneous practice developed on the basis of the territoriality principle and its anchoring in international conventions, the issue did not seem to be so urgent. Indeed, the issue even seems to have been overlooked in the first preliminary draft submitted by the Directorate-General for Justice and Home Affairs in May 2002,³⁵ which did not contain any provision on IP infringement. As infringements were not exempted either, the consequence would have been to submit them to the general provisions. This would have meant for example that if the holder and infringer of a patent are domiciled in country A, the law of that country would apply, even though the patent were only protected in country B.³⁶ A provision filling the gap was proposed – together with other suggestions for the Rome II project – by the ‘Hamburg Group of Private International Law’.³⁷ The relevant provision – Article 6a of the Hamburg Group proposal – distinguishes between national rights and ‘Community industrial property rights’. While the former are governed by the lex loci protectionis, the law applicable to the latter was declared to be ‘the law of the Member State where the infringement affects the right’. That binary structure was adopted also in the Commission proposal of 2003: The provision had two paragraphs, addressing national IPRs and unitary rights respectively, with the difference vis-à-vis the Hamburg group proposal that the law applying to the latter was said to be the ‘law of the Member State in which the act of infringement is committed’.³⁸ The structure and content of those provisions remained uncontested throughout the otherwise somewhat rough and lengthy legislative process preceding the enactment of the Rome II Regulation³⁹; it is reflected today in Article 8(1) and (2).

More contentious than that is Article 8(3) Rome II, which excludes any choice of law. In line with the Hamburg Group proposal,⁴⁰ the Commission obviously considered the exclusion of choice as a consequence of the territoriality of IPRs; a corresponding provision was therefore already contained in Article 10 of the 2003 proposal (the predecessor of current Article 14 Rome II). This is briefly commented in the Explanatory Memorandum by pointing out that ‘[f]reedom of will is not accepted, however, for intellectual property, where it would not be appropriate.’ That view was challenged in a report by the European Parliament’s Legal Committee (amendment 25), stating that there ‘seems to be no reason why such agreements cannot be concluded in relation to intellectual property.’⁴¹ The proposed amendment was, however, rejected on that point by the Commission without a reason being given.⁴²

4.3 The Relevant Scope: Article 8 in Conjunction with Article 15 Rome II

While the law applicable to non-contractual obligations is governed by Article 8, Article 15 determines the scope of application of the law thus determined. Apart from the legal basis for liability, this includes inter alia limitations, remedies and other legal measures to prevent damage and secure compensation, transfer of claims, and ways in which the claim is extinguished, for instance by prescription. From the perspective of IP, the items included in that list are less remarkable than what it does not include, namely a reference to (first) ownership.⁵⁰

The issue is without much relevance for (registered) industrial property rights, where ownership is determined by registration, which is necessarily territorial. Copyright, on the other hand, comes into existence by an act of creation that has manifested itself in some way. Following that act, the work is protected in all WTO Member States, subject to the requirements, scope and remedies set forth in the national laws.⁵¹ Copyright is thus universal and territorial at the same time. Before that backdrop, a controversy between ‘universalists’ and ‘territorialists’ has arisen: pursuant to proponents of the first theory, the law applying to copyright ownership is the law of the country where the right to the work came into existence (lex originis), whereas advocates of the latter theory insist on applying lex loci protectionis to initial ownership as well.⁵² A thorough investigation of both theories shows, however, that the arguments proffered on both sides are inconclusive.⁵³ For instance, application of lex originis is obviously advantageous in a situation when worldwide licenses are acquired, while under lex protectionis the licensee cannot be sure that he or she has contracted with the person actually holding the right under the various national laws for which the license shall be valid. On the other hand, determining the lex originis itself may be difficult and create uncertainties, as there is no uniform concept of ‘origin’, and as specific problems may arise in the case of multiple creators⁵⁴. Lastly, it must be added that the determination of the initial owner in practice is only the first step in a chain of exploitation, which in its subsequent stages necessarily falls under the rule of lex protectionis. That applies in particular to infringement, but also the transferability of rights is regularly considered as being subject to lex protectionis.⁵⁵ Choosing lex originis for the determination of initial ownership will therefore inevitably lead to dépeçage when it comes to adjudicating actual disputes.

This brief comparison of arguments shows that it does not matter so much whether a universalist or a territorialist approach is chosen, as both have certain flaws and merits.⁵⁶ The important aspect is only that the matter is firmly settled in one or the other way. It is true that ownership is just an incidental matter with regard to torts, but one that can be highly relevant. For a national legislature such as the Norwegian, it would be therefore highly recommendable to add a relevant clarification.

4.4 Article 8(1) Rome II – the Rule of lex loci protectionis

As pointed out above, applying lex loci protectionis to IPR infringement is a ‘natural’ but neither an ‘automatic’ nor strictly compelling consequence of the territoriality principle. Thus, in contrast to what the EU Commission seems to have assumed, the international conventions do not contain a binding choice-of-law rule. It was only by adopting in Article 8(1) Rome II closely similar wording to that used in Article 5(2) 2^nd sentence of the Berne Convention, that the EU legislature deliberately turned that concept into a genuine conflicts rule. It is worth noting in this context that the deviation in the wording of the respective provisions is slight but significant: Article 8(1) Rome II designates the law of the country ‘for which’ protection is claimed, instead of ‘where’, as in Article 5(2) 2^nd sentence of the Berne Convention. Thus the potential (mis)understanding is excluded that the applicable law is the law of the country where proceedings are brought.

By referring to the country ‘for which’ protection is claimed, Article 8(1) Rome II basically makes it a matter for the plaintiff to choose the applicable law. This could be considered as potentially dangerous as it might lead to ‘law-shopping’, with the plaintiff selecting the national law that is most favourable to his claim. However, making an arbitrary choice will not benefit the interests of the right holder: if he designates the law of a country where the right is not protected, or where the defendant has not acted in an infringing manner, the claim is rejected and the litigation lost. Depending on the national law in the forum State, the right holder could even be subject to (counter)claims for harassment or unfair competition. Inter alia, for those reasons Article 8(1) Rome II is rarely, if ever, misused in practice.

In traditional infringement scenarios, the country for which protection is claimed can be easily identified from the plaintiff’s statement of facts. If a trademark or patent right exists in country A and the plaintiff seeks to prohibit the defendant from selling allegedly infringing goods in that country, the matter is clear without the plaintiff expressly referring to the fact that protection is claimed for – and must therefore be decided under the law of – country A. Things are more difficult when potentially infringing acts extend over several countries, and the same or parallel rights are protected in all of them. In those scenarios, identifying the applicable law(s) and abiding by the principle of lex loci protectionis may become burdensome or, in extreme cases, even unfeasible. Article 8(1) Rome II neither addresses nor offers a way out of such situations. This is different from the adjacent area of competition (antitrust), where Article 6(3)(b) Rome II allows the application of a single law for calculating the damages ensuing from anti-competitive behaviour in more than one EU Member State.⁵⁷

For a more in-depth analysis, a distinction must be drawn between industrial property on the one hand and copyright on the other; furthermore, one must distinguish between intra- and extra-EU matters. In industrial property, a need to apply several different laws arises whenever an infringement extends over one or several national border(s). When the Rome II Regulation was promulgated, no specific redress was considered necessary,⁵⁸ and indeed, at least within the EU, there is not much to worry about. Entrepreneurs regularly engaging in cross-border business are well-advised to acquire unitary rights (where they exist), ie EU trademarks,⁵⁹ Community designs,⁶⁰ Community plant variety rights⁶¹ and – if plans proceed as envisaged – European patents with unitary effect.⁶² That way, uniform law applies instead of different national laws.⁶³ This is different, however, if the infringement extends to non-EU countries. While ‘mass infringements’ of parallel industrial property rights existing in a large number of countries (in and) outside the EU may not be very frequent at this date, their number is likely to increase as international registration systems make acquisition of parallel rights easier, and potentially infringing communication is disseminated over the internet.⁶⁴

Things are again more complex in copyright. There is no ‘unitary copyright’ in the EU that would alleviate the burden of pleading infringement of different laws in case of intra-EU cross-border infringement. And if content is disseminated over the internet, the geographic scope of infringement is broader anyhow – at least theoretically, it may result in copyright infringement in as many countries as are members of the WTO (and thus are bound to observe the TRIPs Agreement, with its imbedded reference to the Berne Convention).⁶⁵ Claims that such ubiquitous communication must be ceased altogether, and that damages are to be paid for the entire harm done, therefore effectively translate into a claim for worldwide protection. Under a strict understanding of Article 8(1) Rome II, this would trigger an obligation to apply 180-plus national laws. It is obvious that this is no realistic prospect.

In practice, courts faced with disputes over infringing internet communication tend to apply their domestic law without addressing the issue of potential worldwide infringement at all.⁶⁶ However, simply ignoring the cross-border effects such judgments may have does not seem to present an appropriate solution. It is true that until now, proposals made in that context⁶⁷ have not been implemented anywhere. This does not mean, however, that looking for adequate solutions in cases of ubiquitous or multi-state infringements is a futile effort. In particular where, as in Norway, national legislatures are free to ‘experiment’ with novel concepts, the challenge can be met more easily than within a supranational body such as the EU, or even on a worldwide basis. And such ‘experiments’ would not have to start from scratch: model solutions have been elaborated, and were thoroughly discussed, in the framework of the academic projects in IP and private international law that were mentioned before.⁶⁸ Without going into details, all those projects coincide in their basic concept, namely that when, in ubiquitous or multi-state infringements, application of lex protectionis becomes too burdensome or unfeasible, a single law – the law of closest connection with the dispute in its entirety – should be applied,⁶⁹ with a list of factors guiding the analysis.⁷⁰ Apart from that, three of the projects provide an option for the parties to prove that the law of a specific country (or countries) differs from the applicable law in certain aspects. In that case, the court must fashion a solution that takes account of the other law as well.⁷¹ Irrespective of the differences in detail, all those projects thereby try to establish a balanced solution that ensures that the interests of both parties as well as the interests of the public underlying the different national laws are duly respected.

4.5 Article 8(2) Rome II – Unitary Rights

If a unitary right such as an EU trade mark (EUTM) or a Community design is infringed, the applicable law is that set forth in the legal instrument by which that right has been created. Thus, in so far as matters covered by the respective regulations, identifying the applicable law does not pose any problems. This is different only where gaps are left in the regulations, such as with regard to so-called ancillary sanctions (damages, third-party information, etc.). For instance Article 130 of the EU Trade Mark Regulation (Reg. (EU) 2017/1001, EUTMR) only prescribes that in case of infringement, national courts acting as EU trade mark courts must ‘issue an order prohibiting the defendant from proceeding with the acts which infringed or would infringe the EU trade mark.’ In all other matters, national law applies. Somewhat more explicitly, Article 89 of the Community design regulation (Reg. (EG) 2002/6, CDR) stipulates that in addition to issuing prohibitory injunctions, national courts acting as Community design courts can order the seizure and destruction of goods. In all other regards, national law applies, either on the basis of Article 89(1) lit. d or Article 88(2) CDR.⁷²

The references in Article 130 EUTMR and Article 88(2) and 89(1) lit. d CDR to national law also include the private international law. As national private international law has been replaced by the Rome II Regulation, the substantive national law governing ancillary sanctions that are not set forth in the EUTMR and the CDR respectively is the law designated by Article 8(2) Rome II, that is, the ‘law of the country in which the act of infringement was committed.’ It has been contentious for some time whether the formulation was to be understood as compelling a so-called mosaic approach – meaning that the law of all Member States must be applied where the right was affected by the infringement – or whether a single connecting factor could be identified. In Nintendo,⁷³ the CJEU answered the question in the latter sense, declaring that the court seised must identify ‘the law applicable by using a single connecting factor linked to the place where the act of infringement at the origin of several acts alleged against a defendant was committed or threatened’,⁷⁴ with the determination of that law being based on an overall assessment of the defendant’s conduct.

For courts outside the EU – such as Norwegian courts – it is certainly appropriate to apply the Nintendo principles to infringing conduct initiated in the EU. For instance if a Norwegian company is sued in Norway for EUTM infringement, with the goods being produced and disseminated throughout the EU from the company’s establishment located eg in Sweden, computation of damages could – and should – proceed on the basis of Swedish law. But what if production took place in Norway? For courts within the EU the Nintendo principles would become inapplicable, as the right – the EUTM – does not exist in Norway. This has the consequence that the law of each EU Member State must be applied where an individual act of infringement has been committed – ie where infringing goods were offered and sold (mosaic approach). Depending on the geographic scope of activities in the EU, identifying and applying the individual national laws under the mosaic approach can be very burdensome. It is true that sanctions have been harmonised at a minimum level by the IP Enforcement Directive (IPRED); however, there are still a lot of differences when it comes to the details.

One could therefore question whether courts in Norway are necessarily tied to the same principles that must be observed by courts in the EU. In other words, is it really so that application of national (Norwegian) law is necessarily excluded if infringements of unitary rights are committed from the Norwegian territory? After all, as an EEA member, Norway has fully implemented the EU Acquis including sanctions. From that perspective, no harm would be done in principle if the Nintendo doctrine were extended so as to cover acts undertaken within Norway that cause infringements in the EU. Arguably, the principle of lex loci protectionis would advise against applying the law of a non-protecting country, even if only ancillary sanctions or other accessory matters are concerned.⁷⁵ On the other hand, as we have seen, applying lex protectionis is not compelling in the sense that any deviation would clash with overarching international obligations. Although this is therefore a matter to be decided by the Norwegian lawmaker, a recommendable, prudent solution would be to refrain from an extra-EU extension of the Nintendo principles and limit their application to intra-EU acts. There may be other, less problematic ways to alleviate the burden resulting in practice from the mosaic approach applied to sanctions. One of those is to broaden the possibility for choosing the applicable law, as is pointed out below.

4.6 Article 8(3) Rome II – Exclusion of Choice

Pursuant to Article 14 Rome II, parties may always choose the applicable law applying to non-contractual obligations after the obligation arose, or, if both engage in commercial activities, even before the relevant event. Excluded from that rule are only claims under Article 6 (competition law) and Article 8 Rome II. As set forth under section 1 above, the motivation given for that exclusion in the travaux is rather thin; it seems that exclusion of choice was considered as a necessary consequence of the territoriality principle. That view prevailed, though it was challenged, without success, by the Legal Committee of the European Parliament.

It is crucial for an informed discussion on the possibility of choice in IP matters to distinguish between the infringement as such and the remedies claimed. If the parties were free to derogate from lex protectionis in its entirety, the scope of the right, including the exceptions and limitations, would be put at their disposal, and the binding force of rules developed under national law to determine the positive and negative boundaries of the exclusive position entailed by IP protection would be negated. This is different with regard to remedies. Although they also form an important part of the IP regime, the type and dimension of remedies are not an essential element of the basic claim to validity of the national rules. To some extent, the manner in which remedies are claimed in practice involves an element of choice anyhow: it is neither necessary nor usual that the entire arsenal of sanctions is claimed in a lawsuit; plaintiffs rather pick and choose among the available remedies, preferring those that they consider as most efficient and for which the requirements are least complicated to establish. If, instead of the plaintiff invoking the options available under national law in a selective manner, the parties agree on one particular law as governing the sanctions, the outcome will in all probability not be less appropriate or efficient.

The position that permitting choice of law with regard to the remedies does not disrupt fundamental principles of IPRs is also corroborated by the fact that in Swiss law, choice of law for the consequences of infringement is accepted at least to some extent.⁷⁶ Article 110 (2) of the Swiss Private International Law Code stipulates that ‘in regard of claims resulting from violation of intellectual property rights, the parties may always agree, after the harmful event has occurred, that the law of the forum shall be applied’.⁷⁷ As is emphasised in the legal literature, the term ‘claims’ refers in this context only to the remedies, ie damages, disgorgement of profits, removal, and injunctions, whereas the issue of whether the right was actually violated – as well as the preliminary questions of its existence and validity – remain subject to lex protectionis.⁷⁸

It is also worth noting – and hardly surprising – that the international projects referred to above endorse the option for the parties to choose the applicable law, and that they do so in a rather generous fashion.⁷⁹ Three of the four projects⁸⁰ accept pre- as well as post-infringement agreements. Two – CLIP and the Japanese Transparency project – are confined to the remedies, while the ALI principles and, to an even greater extent, the Waseda/Korean project, also allow choosing the law governing the infringement as such, with certain safeguards being imposed (in the ALI principles) with regard to arbitrary choices and (in both projects) regarding the rights of third parties. All projects further coincide in the fact that the choice of a particular law may be inferred to some extent from a pre-existing relationship between the parties.⁸¹

Some of that may appear too ambitious for a contemporary, pragmatic lawmaker. On the other hand, the unanimous support given in the projects to at least some relaxation of a total exclusion as that spelled out in Article 8(3) Rome II is a powerful sign of discontentment with the complete dominance of lex loci protectionis over the principle of party autonomy. In that light, it would be highly recommendable for the Norwegian legislature also to follow the Swiss example and allow for an opening, if only confined to the remedies and – if that is considered appropriate for reasons of policy – to the law of the forum.