[Hague-jur-commercial-law] The Hague Convention and Exhaustion

[Thiru Balasubramanian]

I attended the Hague roundtable on March 5, 2004 and found Drew Clark's 
piece in the Technology Daily an accurate and interesting analysis of 
the current state of play.  One key item of discussion that was not 
mentioned however was the question of parallel importation.

The issues of exhaustion and the first sale doctrine were raised by 
CPTech at last week's Hague roundtable.    James Love of CPTech asserted 
that Chapter 1, Article 1, Paragraph 3 should include a carve out for 
exhaustion following this text:

This convention shall not apply to proceedings that have their [main] 
object any of the following matters -

[n) exhaustion of intellectual property rights]

That would make it consistent with TRIPS Article 6
*/ Article 6/*/

Exhaustion/

For the purposes of dispute settlement under this Agreement, subject to 
the provisions of Articles 3 and 4 nothing in this Agreement shall be 
used to address the issue of the exhaustion of intellectual property 
rights.

http://www.wto.org/english/tratop_e/trips_e/t_agm2_e.htm

Mr. Love noted that CPTech had communicated its concerns regarding 
possible limitations posed to exhaustion and the first-sale doctrine in 
a previous communication to the FTC dated, December 7, 2001.   Mr. Love 
reminded the participants that the reason that exhaustion was removed 
from the ambit of the dispute settlement mechanism of the World Trade 
Organization, was that there was no consensus among negotiating parties 
as to what regime of exhaustion WTO Members should adopt.  Therefore, it 
was left up to individual Members to determine their own regime of 
exhaustion whether it be national, regional, or international.  A 
negative consequence of not including a carve out in the Hague treaty is 
that current public policy measures to permit the parallel importation 
of cheaper medicines from Canada and other OECD countries would be 
forestalled if sellers chose fora where the first sale doctrine for 
patents was not respected.

See the link below for the CPTech letter to the FTC.

http://www.cptech.org/ecom/jurisdiction/ftc-hague12072001.html

Thiru

Manon Ress wrote:

> March 5, 2004.  Technology Daily
>
> Groups Restate Objections To Treaty For Business Disputes
> by Drew Clark
>
> Groups representing consumers, libraries and educators on Friday 
> expressed their continuing reservations to the State Department about 
> a proposed international treaty on jurisdiction`for e-commerce and 
> other cross-border  businesses disputes.
>    Groups like the Consumer Project on Technology (CPT) still strongly 
> criticized the treaty, the Hague Conference on Private  International 
> Law, which would establish a set of global rules about whose laws and 
> which judiciary would hear court cases  arising from contract 
> disputes. "The Hague changes everything because
> everyone then is subject to everyone's jurisdiction," CPT's James Love 
> said. He said drug companies and movie studios could use the 
> convention to force distributors into contracts constraining resale 
> rights.
>
> The treaty, which had been in slow motion for nearly a decade, last 
> year picked up momentum as European nations narrowed their ambitions 
> and U.S. negotiators successfully narrowed provisions opposed by U.S. 
> businesses and consumer groups.
>    Some of the most controversial provisions to CPT, the American 
> Library Association and others relate to intellectual property, form 
> contracts like those included with "shrink wrap" or "click wrap" 
> software, and how judgments contrary to U.S. public policy would be 
> enforced in American courts. "It is a much more focused project than 
> it was before," said Jeff Kovar of the State Department, who is 
> leading the U.S. negotiations. "There are a lot fewer issues to deal 
> with" than
> previously.
>    The convention is now limited to enforcing choice-of-court clauses 
> within business-to-business contracts that identify which country's 
> courts would have jurisdiction over disputes involving businesses in 
> two countries. It also would enforce those courts' judgments.
>    That approach is significantly less ambitious than the original 
> proposal. The treaty would not exclude returning later to more 
> controversial issues, such as business-to-consumer contracts. But even 
> the ability to choose which courts would hear disputes could convey 
> disproportionate power to some, particularly holders of patents and 
> copyrights, said Love and Miriam Nisbet of the American Library 
> Association.
>    Libraries are particularly concerned about form contracts content 
> providers that might limit their ability to lend digital materials to 
> patrons, Nisbet said. "If the library has negotiated such a license 
> and is willing to restrict its ability [to lend] because [of] getting 
> such a good deal, that may be one thing," she said. "But we have a 
> huge problem with a non-negotiated contract" like a click-wrap 
> electronic publishing agreement.
>    Some public-interest groups consider such agreements on digital 
> goods to be legally suspect, although American courts generally have 
> upheld them. But in the United States, those contracts are limited by 
> the "first sale" doctrine, which declares that a library or a video 
> store retains the right to lend or resell books or videos.
>    The power to impose one-sided agreements would worsen, Love said, 
> if drug companies or copyright holders could dictate that disputes are 
> heard in certain countries. "Part of it is [making it] inconvenient" 
> for businesses to be sued, Love said. "Part is forum shopping, a way 
> of picking your legislator" with the country whose laws are most 
> agreeable to intellectual property holders.
>
>
>
>