[Hague-jur-commercial-law] Contracts that restrain competition or impede the transfer of technology

[James Love]

From:  James Love, CPTech
Date:  30 March 2004

To:  Members of Study Group on Enforcement of Judgments,
      Secretary of State Advisory Committee on Private
      International Law

Re:  Contracts that restrain competition or impede the
	transfer of technology


Version 1

      1.3 g)  anti-trust or competition matters, including
      but not limited to cases where a member country has
      determined that a licensing practice is an abuse of
      intellectual property rights having an adverse effect
      on competition."


Version 2

      "1.3 g)  anti-trust or competition matters, including
      but not limited to cases alleging that a licensing
      practice is an abuse of intellectual property rights
      having an adverse effect on competition."


CPTech is concerned that the proposed Hague Convention on
Jurisdiction has been repositioned to introduce sweeping
changes in international contract law, making nearly all
contractual choice of court provisions automatic and
enforceable, undermining national discretion on a number of
sensitive and controversial policy issues.  This, combined
with the very strong provisions regarding enforcement of
foreign judgments is a recipe for a new round of bold forum
shopping.

In the current draft, all judgments regarding contract and
license disputes over intellectual property would have very
strong enforcement measures.  The treaty would "salami"
slice certain aspects of intellectual property disputes, so
that litigation over validity of all non-copyright
registered rights (patents, trademarks, plant breeder
rights, sui generis database rights, rights in traditional
knowledge, etc) would always be held in the country of
registration, unless they were "incidental" to the main
litigation, but litigation over infringement, the scope of
claims, the fairness of the contracts and other provisions
would be in the foreign courts, with very strong enforcement
measures for the foreign judgments.

The European Union is asking for a special "carve out" that
would automatically give the European courts exclusive
rights on all community intellectual property rights cases,
including not only validity but also infringement or scope
of rights/claims.  But for the rest of the world, the Hague
Convention changes would be very important.

We have asked for a number of changes in the Convention,
including for example our request in a separate note that
the Convention exclude matters involving parallel trade or
the exhaustion of rights.  The following is an elaboration
of our request that the Convention recognize the problem of
anti-competitive practices in contractual licenses.  I draw
your attention to Article 40 of the TRIPS, which is attached
below.  It says that [WTO] "Members agree that some
licensing practices or conditions pertaining to intellectual
property rights which restrain competition may have adverse
effects on trade and may impede the transfer and
dissemination of technology," and further, that "Nothing in
this Agreement shall prevent Members from specifying in
their legislation licensing practices or conditions that may
in particular cases constitute an abuse of intellectual
property rights having an adverse effect on competition in
the relevant market."

We ask that the proposed Convention recognize this issue,
and provide that in cases where a member determines that
licensing practices constitute an abuse of intellectual
property rights having an adverse effect on competition in
the relevant market," the Convention would not apply.  This
could be given effect by modifying Article 1, paragraph 3,
g), to read as follows:

      1.3 g)  anti-trust or competition matters, including
      but not limited to cases where a member country has
      determined that a licensing practice is an abuse of
      intellectual property rights having an adverse effect
      on competition."


Alternatively, one might prefer the following approach:

      "1.3 g)  anti-trust or competition matters, including
      but not limited to cases alleging that a licensing
      practice is an abuse of intellectual property rights
      having an adverse effect on competition."

I think it is important that the Convention seek balance to
protect consumer interests, as is the case for the TRIPS.
Thank you for considering this proposal.  James Love, CPTech

-----------------

       SECTION 8:  CONTROL OF ANTI-COMPETITIVE PRACTICES
                    IN CONTRACTUAL LICENCES


                           Article 40

   1.    Members  agree  that  some  licensing  practices  or
      conditions pertaining to intellectual property rights which
      restrain competition may have adverse effects on trade and
      may impede the transfer and dissemination of technology.

   2.    Nothing in this Agreement shall prevent Members from
      specifying in their legislation licensing practices  or
      conditions that may in particular cases constitute an abuse
      of intellectual property rights having an adverse effect on
      competition in the relevant market.  As provided above, a
      Member may adopt, consistently with the other provisions of
      this Agreement, appropriate measures to prevent or control
      such practices, which may include for example exclusive
      grantback conditions, conditions preventing challenges to
      validity and coercive package licensing, in the light of the
      relevant laws and regulations of that Member.

   3.     Each   Member  shall  enter,  upon  request,   into
      consultations with any other Member which has cause  to
      believe that an intellectual property right owner that is a
      national or domiciliary of the Member to which the request
      for  consultations  has been addressed  is  undertaking
      practices in violation of the requesting Member's laws and
      regulations on the subject matter of this Section, and which
      wishes to secure compliance with such legislation, without
      prejudice to any action under the law and to  the  full
      freedom of an ultimate decision of either Member.   The
      Member  addressed  shall accord  full  and  sympathetic
      consideration to, and shall afford adequate opportunity for,
      consultations  with the requesting  Member,  and  shall
      cooperate  through  supply of publicly  available  non-
      confidential information of relevance to the matter  in
      question and of other information available to the Member,
      subject to domestic law and to the conclusion of mutually
      satisfactory agreements concerning the safeguarding of its
      confidentiality by the requesting Member.

   4.   A Member whose nationals or domiciliaries are subject
      to  proceedings  in  another Member concerning  alleged
      violation of that other Member's laws and regulations on the
      subject matter of this Section shall, upon request,  be
      granted an opportunity for consultations by the other Member
      under the same conditions as those foreseen in paragraph 3.




-- 
James Love, Director, Consumer Project on Technology
http://www.cptech.org, mailto:james.love@cptech.org
tel. +1.202.387.8030, mobile +1.202.361.3040