"An underlying premise in pure intellectual property issues is that the law should encourage and reward innovation," wrote Raymond T. Nimmer in his book, "The Law of Computer Technology: Rights, Licenses, Liabilities." In the modern digital world, traditional trade borders are collapsing and competitors can steal valuable intellectual property and send it around the world at the speed of light.
How can the general counsel of a Texas company obtain justice when the company is the target of theft, infringement, fraud or other unfair business practices? How can he navigate jurisdictional issues when protecting the company’s intellectual property from foreign corporations? What are alternatives to financing multiple lawsuits throughout the world?
Determining where to fight the battle to protect these rights is a crucial decision. To date, there is no clear law on how the global community will handle international intellectual property jurisdictional issues. Here are some steps general counsel can take when thinking through these issues.
• Unearth electronic evidence: Gathering evidence of theft, infringement and other unfair business practices often will include using computer forensics. Investigating electronic evidence can include looking at email messages, evidence of hacking, telephone communications, bank transactions, web sites, browser histories, press releases, file transfers, etc. Such electronic evidence, including the money trail, will help determine the identity of the potential defendants.
• Identify defendants: Using the gathered evidence to identify responsible parties can be difficult, so the legal department may need to dig deeply to figure out the corporate shell game. Separating various corporate subsidiaries and independent contractors that may be responsible for the theft and fraud will take time. Evidence trails can lead to employees, partners and officers, as well as other businesses.
• Review jurisdictional issues: Determining potential jurisdictions and venues for a lawsuit can be difficult when the offending party is not a Texas or even a U.S. business. Unfortunately, there is no true global intellectual property law. International intellectual property disputes often can involve simultaneous lawsuits in multiple countries throughout the world.
There are currently four main legislative proposals to establish rules on international jurisdiction, choice of law and enforcement of foreign judgments in intellectual property lawsuits. The American Law Institute (ALI) principles are based on the laws of the United States. But businesses considering global litigation should be aware that other principles exist, including the European Principles on Conflict of Laws in Intellectual Property (CLIP), the Japanese transparency principles and Korean Waseda principles, as well as private international law.
When the potential defendant is not a Texas or U.S. business, the legal department may need to establish specific jurisdiction by proving that the defendant purposely availed itself of the privilege of acting in the forum state, the cause of action arises from such acts, and exercise of jurisdiction is not unreasonable. Specific jurisdiction can stem from the stream of commerce, hacking trails, a website sliding-scale test (in which courts are more likely to find jurisdiction as the website’s interactivity and the business’ electronic contacts increase), licensing and franchise agreements, posted defamatory comments, commercial activities, agency and civil conspiracy with other defendants, patent and trademark infringement, securities fraud, etc.
Overall, in determining whether a court has specific jurisdiction over a defendant, the court will look to see if the defendant was doing business in the forum state. This case-by-case determination often hinges on the foreign business’ use of intellectual property or wrongful actions in Texas or the United States.
• Anchoring jurisdiction: Selecting a favorable court, jurisdiction and remedy can be essential in protecting a company’s intellectual property. General counsel can improve the company’s ability to select a favorable jurisdiction by including anchor-jurisdiction clauses in all contracts, including letters of intent, license agreements and employment contracts. Such language also should exist on all company websites and its other marketing materials. Registering the company’s intellectual property in all places where it needs to be protected is key, as is identifying the most crucial markets in which to seek protection.
• Limiting costs and risk: It’s worth exploring whether law firms will handle large infringement cases on a contingent or hybrid contract. That can prevent the company from paying large retainers to investigate and litigate expensive lawsuits that may last years.
• Governmental resources: When evaluating any significant commercial litigation case against a large international corporation registered to do business in the United States, general counsel should be aware of potential governmental resources. Corporations that commit fraud, violations of the Foreign Corrupt Practices Act or other significant illegal acts may have violated U.S. Securities and Exchange Act regulations, and they may be held accountable in whistle-blower recovery lawsuits. Exposing the illegal actions of the opposing corporation can result in a whistle-blower recovery, as well as a finding against the corporation that can be used in a civil action.
In the modern digital world, technology is breaking down many traditional borders. International trade and competition is more common than ever before. Many Texas and other U.S. businesses will find themselves in a highly competitive business environment where they are the target of intellectual property infringement and corporate espionage. It pays to prepare now.