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The Enforcement of Intellectual Property Rights under International Commercial Agreements and the Alternative Dispute Resolution Systems

By Rafaela Sanchez Vissoky
29/06/2022
  1. INTRODUCTION

Intellectual property rights are one of the most relevant assets of today’s companies, with a broad spectrum of types of protection, such as trademarks, patents, copyrights, and industrial designs. The first case known in which the lexicon of “intellectual property” was used by general population was in the United States. It was about a dispute between David Letterman and Jay Leno, in which they were fighting for a job, and then Letterman was threatened by the hirer enterprise to avoid the use of his running gags.[1]

As known, intellectual property rights are oftentimes transferred by license agreement between the parties. This kind of agreement is basically a contract in which one of the parties grants the other party the right to use or benefit from the fruits of something, in exchange to money or other economic advantage. One relevant point about this agreement is that the understanding of the parties and their obligations and rights must be clear, especially regarding the exclusivity of these IP rights.[2]

Notwithstanding, when dealing with international commercial law, one of the most important aspects to avoid future litigation is the conformity of the goods, no matter if they are physical or intangible assets. Thus, even though intellectual property rights cannot be considered as “goods”, it must be in accordance with the contractual terms signed between the parties.

Furthermore, many legal systems as UNIDROIT Principles, UNCITRAL and CISG are used to solve international commercial matters, including arbitration proceedings. Accordingly, international disputes involving IP rights are being solved by alternative dispute resolution systems, either because of the availability of this kind of legal asset, or because of its speediness and cost-effectiveness. Likewise, the nations are constantly taking efforts to establish a Common Frame of Reference regarding contract law, as for example, the European Commission's 2003 Action Plan on the harmonization of contract law.

From the same perspective, these arbitration proceedings usually preserve the parties’ autonomy, especially concerning the choice of the law applicable. Clearly, the principle of the parties’ autonomy supremacy does exist in many arbitration laws and arbitration rules.

Therefore, many legal systems are available to solve conflicts between private parties, although not all of them are suitable for any case. Moreover, the insurance of IP rights in international commercial agreements is threatened by ambiguous contractual clauses, or even the lack of it, which leads the jurists to look for more efficient and practical solutions.

  1. THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS UNDER THE CISG: OBLIGATIONS AND RIGHTS OF THE PARTIES

Firstly, there is a difference between a contract of sales and license agreements. While contract of sales refers to the payment of a price in exchange of the receipt and retention of a good, license agreements are those in which the “buyer” makes several regular payments without retaining it after each payment. Thus, the main difference between these two kinds of contracts is the intention of the parties to transfer property or not. In the field of private law, the United Nations Convention on Contracts for the International Sales of Goods - CISG, is the most successful convention on this matter.

Pursuant to Article 42 CISG, these are the seller obligations:

The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware, provided that the right or claim is based on industrial property or other intellectual property.[10]

Basically, this provision compels the seller to ensure that the goods delivered are free from third parties rights or claims, to avoid future conflicts. Thus, the awareness and its possibility are the most important aspects to judge the responsibility of the seller under these conflicts.

Moreover, the “goods” arising from contractual obligations must be in conformity with some standards, as the instrument of an agreement assigns duties, risks, liabilities, and remedies between two contracting parties. [11]

In addition, it is important to mention that every business enterprise acquires rights through establishing contractual agreements, either with other businesses enterprises, individuals, or even governmental bodies.[12]

These considerations made, the binding force of contractual agreements’ provisions must be respected, and these contracts cannot be affected by any ground of invalidity, nor third party rights that could jeopardize the object concession or license.[13]

  1. THE USE OF ALTERNATIVE DISPUTE RESOLUTION TO SOLVE INTERNATIONAL COMMERCIAL AGREEMENTS’ CONFLICTS

The use of ADR, such as arbitration and mediation, to solve international commercial agreements’ conflicts grows every year in many different countries. Arbitration agreements almost always arise from an arbitration clause existent in the main contract, which means that the use of this manner to solve disputes depends on the consent of both parties, either implicit or explicit. Regarding the procedural measures, the powers, rights, and duties of arbitrators depend on the circumstance and their legal obligations.

Concerning the enforcement of foreign arbitral awards, the New York Convention and the UNCITRAL Model Law on international commercial arbitration are the most influential instruments in this field. Likewise, the WIPO Arbitration and Mediation Center also contributes by offering clauses, rules, and neutrals for some alternative dispute resolution procedures.

The arbitration awards must be reasonable and deal with all the issues which have been raised by the Arbitral Tribunal, otherwise its enforcement could be affected.[18]

  1. CONCLUSION

Intellectual property rights are not protected by international laws the same way as transferred goods, once the contract is usually a license agreement. Nonetheless, this kind of asset has its own rights and obligations involved, depending on the laws applicable, the proceeding chosen between the parties to solve the dispute and the terms of the respective agreement.

In this context, alternative dispute resolution systems can be a wise choice to replace traditional lawsuits, although it is necessary to have a consent to submit a case for an Arbitral Tribunal. Likewise, arbitration proceedings have demonstrated more celerity and cost-efficiency to solve international commercial disputes. Not for a different reason, it is growing around diverse countries, especially the developed ones.

 

By Rafaela Sanchez Vissoky (Law Trainee of Leão IP Judicial Department. Law graduate from Pontifical Catholic University from Rio Grande do Sul – PUCRS. Email: judicial1@leao.adv.br)

 

 

[1]  PARR, Russell L. Intellectual Property: Valuation, Exploitation, and Infringement Damages, Fifth Edition. John Wiley & Sons, 2018.

[2] LEUTE, Kirsten. Association of University Technology Managers. Technology Transfer Manual. Anatomy of a License Agreement. 3rd Edition, v. 4, Part. 1, 2010.

[3] CISG-AC Opinion No. 19, Standards and Conformity of the Goods under

Article 35 CISG, Rapporteur: Professor Djakhongir Saidov, King’s College London, United

Kingdom. Adopted by the CISG Advisory Council following its 25th meeting, in Aalborg

Denmark, on 25 November 2018.

[4] NOTTAGE, Luke. “Symposium paper: afterthoughts: international commercial contracts and arbitration.” Australian International Law Journal, vol. 17, 2010, p. 197+. Gale Academic OneFile, link.gale.com/apps/doc/A257859905/AONE?u=capes&sid=bookmark-AONE&xid=0b9d24fa. Accessed 10 Aug. 2021.

[5] ROSENBERG, Arnold S., et al. “International commercial transactions, franchising, and distribution.” International Lawyer, vol. 44, no. 1, 2010, p. 229+. Gale Academic OneFile, link.gale.com/apps/doc/A228121061/AONE?u=capes&sid=bookmark-AONE&xid=3a2e1e37. Accessed 12 Aug. 2021.

[6] KARTON, Joshua D.H. “Party autonomy and choice of law: is international arbitration leading the way or marching to the beat of its own drummer?” University of New Brunswick Law Journal, vol. 60, 2010, p. 32+. Gale Academic OneFile, link.gale.com/apps/doc/A237838571/AONE?u=capes&sid=bookmark-AONE&xid=77ec610a. Accessed 12 Aug. 2021.

[7] Raphael F. Meier, ‘Chapter 16, Part II: Commentary on the WIPO Arbitration and WIPO Expedited Arbitration Rules, WIPO Arbitration Rules, Article 61 / WIPO Expedited Arbitration Rules, Article 55 [Laws Applicable to the Substance of the Dispute, the Arbitration and the Arbitration Agreement]’, in Manuel Arroyo (ed), Arbitration in Switzerland: The Practitioner’s Guide (Second Edition), 2nd edition (Kluwer Law International; Kluwer Law International 2018) pp. 2019 – 2031.

[8] KYLKJÆR, Kristina Fausing. The Applicability of CISG on transactions of software. RETTID, 2019.

[9] SCHWENZER, Ingeborg. The CISG Advisory Council. Handelskoop, 2012.

[10] United Nations Convention on Contracts for the International Sale of Goods. United Nations Publication Sales No. E.10. V. 14. https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-09951_e_ebook.pdf Accessed 14 August 2021.

[11] CISG-AC Opinion No. 19, Standards and Conformity of the Goods under

Article 35 CISG, Rapporteur: Professor Djakhongir Saidov, King’s College London, United

Kingdom. Adopted by the CISG Advisory Council following its 25th meeting, in Aalborg

Denmark, on 25 November 2018.

[12] PARR, Russell L. Intellectual Property: Valuation, Exploitation, and Infringement Damages, Fifth Edition.

John Wiley & Sons, 2018.

[13] UNIDROIT Principles of International Commercial Contracts. Published by the International Institute for the Unification of Private Law (UNIDROIT), Rome, 2016.

[14] Chapter 6 Arbitration Agreements- Autonomy and Applicable law’, in Julian D. M. Lew , Loukas A. Mistelis, et al Comparative International Commercial Arbitration, (Kluwer Law International; Kluwer Law International 2003) pp. 99 -127.

[15] Part I: Policy and Principles, Chapter 2: Powers, Rights and Duties of Arbitrators’, in Jeffrey Maurice Waincymer, Procedure and Evidence in International Arbitration, (Kluwer Law International; Kluwer Law International 2012) pp. 47 – 126.

[16] KAUFMANN-KOHLER, Gabrielle. Soft Law in International Arbitration: Codification and Normativity. Journal of International Dispute Settlement, (2010), pp. 1–17.

[17] WIPO Arbitration, Mediation and Expert Determination Rules and Clauses. WIPO Arbitration and Mediation Center. WIPO Publication Nº 446(E), 2009. https://www.wipo.int/amc/en/. Access: 15 August 2021.

[18] RUBINO-SAMMARITANO, Mauro. International Arbitration: Law and Practice. 2nd Edition, Kluwer Law International, 2001.

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