Academic journal article Harvard Journal of Law & Technology

Can Exclusive Licensees Sue for Infringement of Licensed IP Rights? a Case Study Confirming the Need to Create Global IP Licensing Rules

Academic journal article Harvard Journal of Law & Technology

Can Exclusive Licensees Sue for Infringement of Licensed IP Rights? a Case Study Confirming the Need to Create Global IP Licensing Rules

Article excerpt

TABLE OF CONTENTS    I. INTRODUCTION                                                 189  II. THE ABSENCE OF A GLOBAL UNIFORM SOLUTION                     191      A. When Is a License Sufficiently Exclusive to Grant the         Licensee the Right to Sue?                                192      B. Conflict of Law Rules Create Fragmentation                196      C. The Diversity of Solutions Within the European Union      197 III. TOWARD A UNIFIED FRAMEWORK                                   200      A. Private Autonomy                                          201      B. Global Default Rules in the Absence of a Contractual         Solution                                                  203         1. Right of Exclusive Licensees to Sue for Infringement   204         2. Right to Sue for Infringement After Notification of            the Licensor                                           205         3. Right of the Licensor to Prevent the Initiation of an            Infringement Suit                                      207         4. Obligation to Keep the Licensor Informed About the            Proceedings                                            207         5. Financial Consequences of Proceedings Initiated by            the Exclusive Licensee                                 208  IV. CONCLUSION                                                   208 

I. INTRODUCTION

It is no secret that global intellectual property ("IP") licensing transactions are pervasive in today's interconnected business environment. (1) These transactions represent perhaps the most evanescent form of all international business transactions given that they frequently do not materialize in any tangible manner. (2) This may create the impression that such transactions evolve in a global legal environment that is uniform and totally independent from any geographic constraints and local regulations. This is, however, not the case as local laws significantly affect IP licensing transactions. Local laws greatly affect how licensed IP rights can be enforced against third-party infringers, which is of key interest to the parties, particularly to an exclusive licensee who will legitimately expect to enjoy a monopoly-like ability to use the licensed IP right within the scope of the exclusive use covered by the license agreement. This Article will focus on the right of exclusive licensees to sue third-party infringers (3) and will use this question as a case study to confirm the need for a global framework governing IP licensing transactions. (4) The issue of the exclusive licensee's right to sue can be illustrated by the following scenario: (5) a U.S. company, the licensor ("USLOR") enters into a worldwide exclusive trademark license agreement governed by Swiss law with a Japanese company, the exclusive licensee ("JLEE"). (6) JLEE is facing large scale infringing activities, which are committed by various third parties in several countries, and the license agreement does not specify whether, and under what conditions, JLEE has the right to sue for the infringement of the licensed trademarks. (7) The question, therefore, is whether JLEE has the right to sue third parties who infringe on the licensed trademark in different countries. To date, there is surprisingly no single answer to this question. JLEE may have the right to sue infringers in certain countries but not in others as a result of the application of local laws and of potentially conflicting decisions delivered by different local courts (which will have to decide whether an exclusive licensee shall have the right to sue infringers). Even if one would expect local laws and decisions to present a high degree of harmonization given that the issue at stake originates from a single legal document, this is regrettably not the case, as will be shown in Part II.

The application of potentially conflicting local rules can lead to an undesired fragmentation, which sharply conflicts with the inherently global nature of international IP licensing transactions as well as with the contracting parties' legitimate expectations. …

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