7

Problems Surrounding Intellectual Property Rights
under Private International Law

Despite the prospected increase in intellectual property (IP) disputes beyond national borders, there are no
established global rules on international jurisdiction, applicable law, and recognition and enforcement of foreign
judgments. Therefore, it has been pointed out that transactions related to intellectual property rights (IPRs) lack
foreseeability. This is also mentioned as a problem to be addressed in the Intellectual Property Policy Outline ofJapan. In Japan, the Supreme Court indicated a certain decision in the so-called card reader case as to whether
a Japanese court may carry out proceedings on foreign patent infringement and the law to be applied. However, ageneral rule has yet to be established. In the international arena, discussions are under progress to formulateinternational rules on civil litigation including IP-related lawsuits in the negotiation process for the Convention
on Jurisdiction and Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters at
the Hague Conference on Private International Law.
This study report examines the latest court judgments and academic theories on international jurisdiction
and applicable law in Japan, the United States, and major European countries, as well as reviews how Japaneseorganizations have responded to the draft Hague Convention. In addition, it studies the problem of applicablelaw for foreign patents on employees’ inventions and the trend of rule-making in Asian countries, which areareas that have not been sufficiently studied in the past from a private international law perspective.

Ⅰ Introduction
This report examines the trends in theformation of international rules represented by thedraft Hague Convention, the current status of rules
in Japan and other countries, and the handling of
foreign patents on employees’ inventions withregard to various IPR-related problems under
private international law.

Ⅱ Progress in Drafting the Hague
Convention and Movements of
Various
Organizations
Concerning the Rule-Making of
IPR-Related
Problems
underPrivate International Law
1

Course of development of and progressin the draft Hague Convention(1) Courseofdevelopmentofthediscussions
Formulation of the draft “Convention on
Jurisdiction and Recognition and Enforcement of
Foreign Judgments in Civil and Commercial
Matters” has been discussed at the Hague

Conference on Private International Law since 1992.
The Preliminary Draft of the Convention on
Jurisdiction and Foreign Judgments in Civil andCommercial Matters was adopted in 1999 and a newversion of the interim text was drawn up at the
Diplomatic Session in 2001. At present, discussions
are being made on a more focused draft convention
on exclusive choice of court agreements.
(2) Examination of the draft “Convention on
Exclusive Choice of Court Agreements”
drawn up by the Hague Conference on
Private International Law in December
2003(*1)
As of March 2004, the draft Convention is very
likely to exclude from its scope the validity ofpatents, trademarks, protected industrial designs,
and layout-designs of integrated circuits, as well as
the validity of other IPRs whose validity depends on,or arises from, their registration (except copyright).
Nevertheless, the scope of IPRs that will be
excluded from the scope of the Convention is still
under discussion. On the other hand, theConvention is expected to be applied to proceedings
related to IPR infringement or IPR licensing.
Furthermore, the Convention is likely to apply tothe determination of the validity of an IPR as an(*1) From the time this study was finished and until this report was completed in May 2004, the draft “Convention on Exclusive
Choice of Court Agreements” was reviewed in March 2004 at an unofficial meeting on intellectual property held in the
United States and in April 2004 at the Special Commission meeting in Hague. IPRs other than copyright and related rights
are excluded from the scope of the Convention. However, the Convention applies to proceedings on contracts related tolicensing or transfer of such IPRs, including litigation on infringement of the IPRs involved in these contracts. The
Convention also applies to determination of the validity of an IPR as a pure incidental matter for proceedings. It should be
noted that this draft Convention is aimed to be adopted at the Diplomatic Session in the beginning of 2005, and that theprovisions may be further altered during that course.

IIP Bulletin 2004

● 50 ●

incidental matter for infringement proceedings or
the like. However, Japan and the EC have madeproposals on how to deal with a case where there isa conflict between a foreign judgment that hasdetermined the validity of an IPR as an incidental
matter for proceedings and a ruling or judgment thathas squarely determined the validity of the same
IPR and is effective against third parties (erga omnes
decision). The deliberations on these proposals have
yet to be completed. It should be noted that thisdraft Convention only presents rules on theinternational
jurisdiction
andrecognition/enforcement of foreign judgments forcases where the parties have concluded anagreement on jurisdiction. The formulation ofgeneral rules still remains as a future task.
(3) Domestic organizations’ view on the“Draft on Exclusive Choice of Court
Agreements”
The Japan Business Federation (“Nippon
Keidanren”), the Japan Intellectual Property
Association, and the Japan Electronics andInformation Technology Industries Association
opine that it is significant to establish unified
international rules on agreements on jurisdiction in
the form of a convention. They regard, however,that because IPRs are closely related to theindustrial policies of the respective countries andthe IPR systems have been established andoperated under the principle of territoriality for along time, the scope of protection and interpretationof infringement, as well as the procedures, differ
considerably by country. In addition, they consider
that the current draft, which excludes the validity ofpatents, etc. from the scope of the Convention, but
includes it when the validity is determined as anincidental matter for an infringement lawsuit or the
like, does not conform to the reality of patent
lawsuits where the issue of validity is always
inextricably linked with discussions on infringement.
In conclusion, they find it desirable to consider rules
on IPR-related international jurisdiction separately
by also eyeing establishment of rules on applicablelaw and harmonization of substantive law.
(4) Overseas organizations’ view on the“Draft on Exclusive Choice of Court
Agreements”
In the United States, opinions are divided into
two. One is the same view as that of Japaneseindustry. The other is a view to totally include IPRs
in the scope of the Convention, including
determination of their validity, only with respect tothe jurisdiction by agreement, which reflects thevoluntary intention of the parties. The basis for thisview is that it is admissible for a court of a country
other than the country of registration of the IPR tohave jurisdiction on the premise of rendering a
judgment on the specific case, which is only
effective between those specific parties.

2

Movements of various organizations on
the matters(1) Discussions at the AIPPI
Recently, the International Association for theProtection of Intellectual Property (AIPPI) has
started to review afresh whether a court outside thecountry of registration can have jurisdiction over an
IPR infringement lawsuit irrespective of thepresence of an agreement on jurisdiction between
the parties, or whether the lawsuit should be under
exclusive jurisdiction of the country of registration,
in response to the fact that the draft Hague
Convention only applies to exclusive choice of court
agreements. The resolution for Question 174 that
was adopted in October 2003 under the initiative of
Holland and other European countries stated thatproceedings outside the country of registration
should be allowed in order to meet the globalizationof business. As a requirement for such proceedings,
it mentioned the presence of an objective
connection between the territory of the court andthe infringing act, such as that the defendant isdomiciled in that territory. However, few countries
have such court precedents except for Japan andEurope, and the opinions are divided among
countries. Though not included in the resolution,
discussions were also made on an idea to require aconnection between the territory of the court andthe place where the infringing act was committed
for granting jurisdiction, and the spider in the web
doctrine, which affirms concentrated jurisdiction to
the country where the principal defendant isdomiciled in a lawsuit involving multiple infringers.
The resolution also stated that the applicable law for
the substance of the litigation should be the law
applicable to the allegedly infringed IPR, and theapplicable law for the procedure should be the law of
the territory of the court. The AIPPI intends tocontinue discussions mainly focusing on theinternational jurisdiction, applicable law, and rules ofevidence regarding litigation on the validity of an
IPR, as well as on pendency of litigation in multiple
countries.
(2) The projects of the American Law
Institute (ALI) and the Max Planck
Institute(MPI)
oninternational
jurisdiction and conflict of laws in
IPR-related disputes
Attempts to draft IPR-specific internationalrules on international jurisdiction include theprojects conducted by the American Law Institute(ALI) and the Max Planck Institute (MPI). Both ofthese projects are still in progress. With regard tointernational jurisdiction, both projects grant thegeneral jurisdiction to the habitual residence of the
defendant. Based on this, the ALI scheme gives thebasic jurisdiction over IPR infringement litigation to
the place of tort, and additionally gives jurisdiction● 51 ●IIP Bulletin 2004

to the place to which the infringing act is directed,
considering the Internet environment. In contrast,
the MPI scheme gives jurisdiction to the country ofregistration while denying jurisdiction of the placeof tort. However, for jurisdiction that is solely
grounded on registration of the IPR, it imposescertain requirements and if the place does not meetthose requirements, it also allows other countries tohave jurisdiction. Neither scheme gives exclusive
jurisdiction for infringement litigation to the countryof registration. As for litigation on the validity of an
IPR, the ALI scheme affirms the jurisdiction over a
declaratory judgment based on the same rules as
those for determining jurisdiction over infringement
litigation, while exceptionally giving exclusive
jurisdiction to the country of registration for alawsuit solely intended for confirming the validity of
an IPR that takes effect by registration. On theother hand, the MPI scheme gives jurisdiction for
litigation on the validity of an IPR also to countries
other than the country of registration, but the
judgment by a court in those countries is not to beeffective against third parties. A judgment that is
effective against third parties (erga omnes decision)is to be under the exclusive jurisdiction of thecountry of registration.
The ALI scheme also includes comprehensive
rules on the choice of applicable law andrecognition/enforcement of foreign judgments. In
terms of applicable law, it takes an approach to apply
the law of the country of registration if the IPR
takes effect by registration, and apply the law of thecountry having the main market that is affected byinfringement if the IPR takes effect without
registration.

Ⅲ ExaminationofInternational
Jurisdiction, Applicable Law andRules
on
Recognition
andEnforcementofForeign
Judgments for IP Litigation

effects of inventions based on the country’s
industrial policy by its national law. Third is theterritorial scope of effects in that a patent rightregistered in a country is only effective within the
territory of that country.
When applying this categorization to the court
judgments that have referred to the principle ofterritoriality in association with patent law, the firstcategory applies to two court judgments related tothe issue of requirements for amendment in theJapanese patent filing procedure. The second
category applies to three court judgments related toexport to a foreign country and establishment of
infringement deemed (patents registered in Japan),
one court judgment related to a case of working partof the constituent features of a process invention
and establishment of direct infringement (a patentright registered in Japan), and the three court
judgments in the card reader case related to thepossibility of demanding an injunction of an act
committed in Japan based on a foreign patent right(a patent right registered in the United States).
Among these, the three judgments related to export
to a foreign country and establishment of
infringement deemed (patents registered in Japan)
and one judgment related to a case of working partof the constituent features of a process invention
and establishment of direct infringement (a patentright registered in Japan) fall within the third
category as well. In contrast, different
determinations are made on the principle ofterritoriality in four court judgments including the
judgment in the BBS case related to parallel importof patented products and three court judgments
related to employees’ inventions and foreign patentapplications. Among the latter court judgments arethose that have interpreted the principle ofterritoriality indicated in the Supreme Court
judgment in the card reader case to be limited inscope. This view also coincides with the above
categorization.

1

2

Applicable law and the principle ofterritoriality: The principle of territoriality
in Japanese court judgments

In the card reader case, the Supreme Court ofJapan indicated a concrete interpretation of theprinciple of territoriality, following the Supreme
Court judgment in the BBS case in which the court
abstractly defined the principle. The principle ofterritoriality can be defined by the following three
aspects. First is the autonomy of procedures in thateach country regulates the procedures for approving
certain effects for inventions based on the country’s
industrial policy by its national law. Second is theautonomy of effects in that each country regulates the

IIP Bulletin 2004

Examination of the determination ofjurisdiction and applicable law in recent
Japanese court judgments(1) Applicable law for a demand for an
injunction based on a patent right and a
claim
for
damagesforpatentinfringement: Decision of the Supreme
Court First Petty Bench judgment on
September 26, 2002 [Card reader case]
Theories have traditionally been divided on
deciding the applicable law for a demand for an
injunction or destruction based on a patent right,
depending on the interpretation of whether or notdecision of an applicable law is necessary in the firstplace, and if it is, whether the act in question is● 52 ●

qualified as the effect of a tort, a real right, or apatent right. In addition, in deciding the applicablelaw for a claim for damages for patent infringement,
there was a theory that denied the need for deciding
the applicable law and a theory that qualified the actof patent infringement to be a tort and applied
Article 11(1) of the Japanese Law on the Applicationof Laws. Even in the latter theory, theinterpretations were further divided in terms of how
the place where the events causing claims occurred asin Article 11(1) of the Law on the Application ofLaws should be interpreted when the place of tort
and the place of outcome differed, in other words,
when the tort was committed in a remote place. Theinterpretations included those that supported
application of the law of the place of act or the law of
the place of outcome, those that adopted a dualistic
theory, a theory that gave comprehensive
consideration, and a theory that let the injured party
choose the applicable law. The Supreme Court
judgment in the card reader case held that a demand
for an injunction and destruction based on a U.S.
patent right and a claim for damages forinfringement of a U.S. patent right were both claims
under private law that were based on a property
right of a private individual. The court, first of all,adopted a theory that focused on the effects of thepatent regarding the demand for an injunction anddestruction based on a U.S. patent right, and applied
the U.S. patent law on the basis that the applicablelaw for effects of a patent right were the law of thecountry of registration of said patent right.
Meanwhile, the court held that the applicable law
for a claim for damages was to be decided pursuant
to Article 11(1) of the Law on the Application ofLaws by qualifying the act to be a tort. The court
found the defendant’s act to be a joint tort
committed in a remote place, which actively induced
acts of direct infringement of the U.S. patent right.
Then, based on the theory of applying the law of theplace of outcome, the court applied the law of theUnited States where the outcome—patent
infringement—occurred.
As a consequence, when international
jurisdiction is affirmed in a case where an action is
filed against a person who directly or indirectly
infringes a patent right registered in Country A,
which is a foreign country, and the place theinfringement takes place is also Country A, theapplicable law for a demand for an injunction would
be the law of Country A, which is the country ofregistration, and the applicable law for a claim fordamages would also be the law of Country A, whichis the place of tort; in this case, there would be
scope for both claims to be affirmed. However, if
one demands an injunction against a person who,from outside Japan, instigates or assists an act ofpatent infringement to take place in Japan, theapplicable law would be the law of Japan, which isthe country of registration; in this case, an
injunction cannot be ordered under the current
Japanese patent law by deeming the act of
instigating or assisting infringement from outside
the territory of Japan as an act of infringement.
Nevertheless, if this case is brought before a U.S.
court, there is scope for the claim to be affirmed.
The Supreme Court judgment in the BBS casedefined the principle of territoriality as follows: apatent right of a country is stipulated under the lawof the country as to its establishment, transfer,effects, and other aspects, and the patent right isonly effective within the territory of the country.
This definition can be divided into the former partand the latter part. The former part is that a patentright of a country is stipulated under the law of thecountry as to its establishment, transfer, effects, andother aspects (a principle in terms of conflict oflaws). The latter part is that the patent right is only
effective within the territory of the country (aprinciple on the effects of a patent right undersubstantive law; a principle that the patent law of acountry does not bind another country, which is aprinciple of public law). It is necessary to strictlyinterpret and distinguish the meanings of theprinciple of territoriality in this manner in the future.
Although there are some criticisms against the
principle of territoriality, it is possible to apply theprinciple also to IPR infringement litigation related
to a tort committed in a remote place by normative
identification of the infringer and applying the law of
the place of outcome to the claim for damages.
(2) Examination from a practical perspective
and problems to be addressed: The court
judgment in a declaratory judgment
actionseeking
confirmationof
non-existence of a right to demand an
injunction based on a U.S. patent rightThe court judgment in a declaratory judgment
action seeking confirmation of non-existence of aright to demand an injunction based on a U.S. patentright (Tokyo District Court judgment on October 16,2003) adopted an idea similar to the conventional
prevalent theory and the former draft convention of
the Hague Conference on Private International Law.
The idea was that only the country of registration
has the authority to examine the existence orvalidity of a patent right. At the same time, however,the court rendered a reasonable judgment that, if a
defense of non-existence or invalidity of the patentright is made against a demand for an injunction andif the demand is dismissed on the ground of the
defense, that determination on the invalidity of thepatent is merely part of the reasons for the
judgment on the lawsuit demanding an injunction,and is not effective against third parties; therefore,
there is no need to grant exclusive jurisdiction to
the country of registration, and courts of othercountries should also be allowed to carry out the● 53 ●IIP Bulletin 2004

proceedings.
In terms of applicable law, the court followed
the Supreme Court judgment in the card reader case,which qualified the right to demand an injunction
based on a patent right to be the effect of the patentright. The court denied literal infringement andinfringement under the doctrine of equivalents
based on the U.S. patent law. As for the defendant’s
slanderous act of injuring the plaintiff’s business
reputation by informing and disseminating false
facts to U.S. clients from Japan, in other words, theact of tort committed in a remote place, the court
applied the law of Japan, which was the place of act,and determined whether or not the defendant’s act
corresponded to the act of unfair competitionprescribed in Article 2(1)(xiv) of the Unfair
Competition Prevention Law. However, there is no
reason to distinguish between violation of the Unfair
Competition
Prevention
Lawandpatentinfringement, so it would be reasonable to findinfringement by applying the law of the place ofoutcome, that is, applying the U.S. law, on the basisthat the act of injuring the plaintiff’s business
reputation was committed in the United States.
(3) Copyright-related
litigation
andinternational jurisdiction: Supreme Court
Second Petty Bench judgment on June 8,
2001 [Tsuburaya Production case]In the Tsuburaya Production case, the appellant
sought a declaration that the appellee did not own
copyright in Japan and claimed damages for a tort
based on the appellee’s obstruction of theappellant’s business that took place over thequestion of whether the appellee had an exclusive
right to use the work. At the same time, a demand
for an injunction of copyright infringement wasmade in Thailand.
In the lawsuit in Japan, the Supreme Court
affirmed Japan’s international jurisdiction for theclaim for a declaration of non-existence of copyright,
based on the place of property, since the copyrightsubject to the claim existed in Japan. The court also
recognized the benefit of declaration. Althoughvarious arguments have been made over this issue,
there still seems to be some scope for further
examination in terms of the distinction between
co-ownership of a copyright and co-authoring of awork, among other aspects.
With regard to the claim for damages for a tort
against the defendant who was not domiciled inJapan, the court indicated a general view that there
was a need to prove the objective fact relevance thatthe plaintiff’s legal interests were injured by the
defendant’s act conducted in Japan, based on theforum of the place of tort. Then, it affirmed
international jurisdiction of Japanese courts on thebasis that the appellee had sent a written warning to
the appellant’s clients in Japan. Therefore, the scopeof the idea adopted in this judgment needs to befurther studied in the future, such as whether or not

IIP Bulletin 2004

international jurisdiction will be affirmed for a place
where the information can be viewed when
information that injures one’s reputation or
infringes one’s copyright is uploaded on theInternet.
3

Examination of issues related to IP
infringement in cyberspace(1) Examination of cyberspace cases in
EuropeOne of the recent judgments related tocyberspace in Europe is the judgment by theHamburg District Court of Germany on a demand
for an injunction against use of a German trademark
and a community trademark. In this judgment, thecourt affirmed international jurisdiction for German
courts on the basis that the place where the harmful
event occurred under Article 5.3 of the Brussels
Convention was, in the case of infringement of amark via the Internet, any place from which one canaccess the website in question. Next, the court
applied the German law based on a decision to apply
the law of the country in which protection wassought with respect to said domain, which wasdecisive in the IPR infringement. Then, the court
held that, if the person were found to infringe amark merely by uploading that mark to a website
and making it accessible to anyone, and if the act
would establish the domestic linkage to all theplaces that are accessible to the website, it could
give unlimited protection for the mark on theInternet; thus, determination should be made with
an effort to comprehensively weigh the overall
interests in individual cases. After examining
whether or not the website was intended forreaching consumers in Germany from theperspectives of the accessibility of products orservices in Germany, the intention of the infringer,
the language used, the content of advertisements,
and the top-level domain, the court denied thedomestic linkage of the act.
Another judgment is one related to an act of
tort committed in a remote place. The patent
relating to this case was a U.K. patent on aninteractive system of authorized gambling
controlled by a computer. The court judged whether
an act of a third party setting up a host computer in
Netherlands Antilles and operating said system toprovide a program to customers in the United
Kingdom constituted indirect infringement under
the U.K. patent law. The court comprehended thesystem as a whole by focusing on the fact that U.K.
customers, who were the actual users of theclaimed system, were using the host computer
through their terminals in the United Kingdom,
instead of focusing on the location of the hostcomputer. In this case, no discussions were made as
to international jurisdiction or applicable law, but the
dispute solely focused on the interpretation of● 54 ●

Section 60(2) of the U.K. Patents Act, which
provided for indirect infringement. Nevertheless,the above interpretation is also likely to affect theinterpretation of Section 60(1) of the Act, which
provides for direct infringement, and, in this case,the act of those who enjoyed gambling would be
deemed as direct infringement.
(2) Examination of cyberspace cases in the
United States
One of the new problems related to cyberspaceis the risk of litigation concerning a license stylecalled general public license (GPL), which obligates
the licensee to allow third parties who are his
subsequent licensees to subsequent licensees toreproduce, alter, and distribute the product derivingfrom the licensee’s reproduction, alteration, anddistribution of the licensed open source software,
while the developer of the software still retains the
copyright for the software. Such litigation has
actually occurred in reality. The question of whether
a company that has altered open source software
based on a GPL by exerting labor and costs so as tocustomize it in accordance with the specifications of
its own products would be liable to license thealtered software to third parties under the GPL andbe liable to make its source code public would
depend on whether the altered software
corresponds to a derivative of the unalteredsoftware. However, the standards for determining a
product to be a derivative are not technically clear.
Also from a legal perspective, indication has been
made that it is difficult to decide the law applicableto the copyright that arises from a GPL or to acontract in the form of a GPL. Accordingly, further
study would be necessary in the future.

the law of the country of that court, which complies
with the due process standards. In addition, theUnited States definitely does not recognize a foreign
judgment on a title to land within the United States
or on the validity of a U.S. patent if the court that
rendered the judgment does not have subject matter
jurisdiction. Also in the United Kingdom, a foreign
judgment is not recognized when the court that
rendered the judgment does not have jurisdiction
over the judgment debtor in light of the U.K. law. In
Germany, a foreign judgment is recognized when
the court that rendered the judgment is found tohave jurisdiction under the jurisdiction rules of theGerman law (mirror-image rule). A foreign
judgment on a matter for which a German court has
exclusive jurisdiction is not recognized in Germany.
In France, the foreign court needs to havejurisdiction both under the law of the country of thecourt (domestic jurisdiction) and French privateinternational law (international jurisdiction).
In general, the United Kingdom and the UnitedStates determine the recognition based on theirown standards, while Japan and Germany determine
it based on the standards of the country that
rendered the judgment, and the latter countries
seem to be more generous to foreign judgments.
However, when there is a conflict in judgments,
Germany and France clearly give priority to theirdomestic judgment, while the United States and theUnited Kingdom have no prioritization rule inparticular. Therefore, further study is also
anticipated for the rules on recognition andenforcement of foreign judgments in the IPR field.

Rules on recognition and enforcement offoreign judgments in Japan, the UnitedStates, and Europe (comparative study)

Results of an overseas survey on therulesofinternational
jurisdiction,
applicable law and recognition andenforcement of foreign judgments for IP
litigation

Some of the distinctive differences between the
United States, the United Kingdom, Germany,
France and Japan are as follows. An injunction
ordered by a foreign court is never directly enforcedin the United States. Moreover, a judgment orderinga specific performance or an injunction are notrecognized in the United Kingdom, so a foreign
court’s judgment ordering an injunction against IPR
infringement is not recognized or enforced in the
United Kingdom. The plaintiff would have to file anaction demanding an injunction once again with aU.K. court. On the other hand, Japan and Germany
recognize and enforce a foreign courts’ order on a
specific performance or an injunction. Thus, study
should be made on this situation including whether
or not the seemingly generous treatment by Japan
and Germany is appropriate.
The United States does not recognize a
judgment by a foreign court that does not havepersonal jurisdiction over the defendant according to

In Europe, which has established regional rules,
there have been an accumulating number of court
judgments that affirmed jurisdiction over litigation
on IPR infringement arising on the Internet basedon the accessibility to the website in question, withregard to the jurisdiction of the place of tort in
Article 5.3 of the Brussels Convention. In addition,
the spider in the web doctrine on jurisdiction overlitigation involving multiple defendants could beapplied throughout Europe if the European Court ofJustice renders an affirmative decision.
As for Asian countries, China has its own rules.
For instance, generally, jurisdiction is in the people’s
court of the domicile or habitual residence of the
defendant, and if the defendant does not residewithin China, the domicile or habitual residence ofthe plaintiff. Meanwhile, a people’s court of China
has jurisdiction over litigation concerning a contractof a joint venture between a Chinese and a foreigncompany, irrespective of the jurisdiction by

4

5● 55 ●IIP Bulletin 2004

agreement. In South Korea, there was a case where
the court only affirmed part of the damages for aclaim to enforce a foreign judgment that had
affirmed a claim for damages related to an IPR.
Furthermore, the Supreme People’s Court of China
has indicated a public view that it will not recognize
or enforce judgments of Japanese courts because
the two countries have not joined any convention,
nor do they have a reciprocal agreement regarding
mutual recognition and enforcement of judgments.
Asian countries have been legislating laws one after
another, particularly in this field, in recent years.

Ⅳ Handling of Foreign Patents for
Employees’ Inventions
1

Problems
concerning
employees’
inventions under private international law

There was a clear difference between the
judgment in the first instance of the Hitachi caseand the judgments in the second instance of thesame case and in the Ajinomoto case. While theformer held that the issue of the transfer of therights for an employee’s invention and the
remuneration for such transfer should be regulatedby the law of the respective countries based on theprinciple of territoriality, the latter held that itshould be regulated by the law applicable to thetransfer agreement or the employment agreement
between the employer and the employee, instead of
adopting the principle of territoriality.
According to the Supreme Court judgments in
the BBS case and the card reader case, the principleof territoriality can be defined as follows: (i) a patentright of a country is stipulated under the law of thecountry as to its establishment, transfer, effects, andother aspects; and (ii) the patent right is only
effective within the territory of the country. The
attribution of the right to obtain a patent for an
employee’s invention, the question of whether therights can be transferred, and if they can betransferred, the requirements for the transfer, areincluded in (i) above. A country’s industrial policythat is involved in the legal relations of an
employee’s invention is not relevant to all of theemployees’ inventions filed or patented in thatcountry, but only to those that are invented withinthat country. In other words, an employee’s
invention has small relevance in such terms withthose countries with which the invention was filed
other than the country in which the invention was
made. Therefore, it would be desirable to interpret
such a case to be outside the scope of the principleof territoriality and to decide the applicable law insuch a way that applications in multiple countries
can be regulated in a uniform manner. In thisrespect, the judgment in the second instance of the

IIP Bulletin 2004

Hitachi case and that in the Ajinomoto case aresupported.
The legal relations of an employee’s invention
can be divided into several issues, such as
attribution and transfer of rights including the rightto obtain a patent, a license for the invention, andremuneration for the transfer of the rights. Since
these issues are adjusting the interests between theemployer and the employee by being closely relatedwith each other, it would be appropriate to adopt thesame applicable law for all of these issues. In
addition, there is a possibility that a foreign law will
be applied to the legal relations of an employee’s
invention by the parties’ choice under Article 7(1) of
the Law on the Application of Laws. However, if theoutcome of applying the foreign law of the parties’
choice to an employee’s invention that was made inJapan unreasonably harms the interest of theemployee as compared to the outcome of applying
Section 35 of the Japanese Patent Law, the foreign
law will not be applied to the invention as being
against the public order and morality under Article
33 of the Law on the Application of Laws. The
autonomy of the parties is not likely to be allowed
when the applicable law is decided by logical reason,or when Section 35 of the Patent Law is construed
as an absolutely mandatory provision, instead of by
Article 7 of the Law on the Application of Laws.
Thus, the appropriateness of always not allowing
the autonomy of the parties in such cases needs tobe examined further.
2

International application of Section 35 of
the Japanese Patent Law

The distinction between private law and publiclaw, which is relevant to deciding the quality of legal
relations under private international law, isindependently determined based on the extent ofinterest of the country, extent of the nature of publicauthority, and extent of the mandatory nature of thelaw, solely from the viewpoint of deciding
international application of the law. Accordingly, thedetermination is relative and ambiguous, leading toa different outcome depending on the country andthe time.
The quality of legal relations concerning IPRs,
particularly patents, is construed in various
manners. For instance, Section 35(3) of the Japanese
Patent Law is construed in the following three
ways: (i) a provision stipulating special rules on thelaw of contract when an employee’s invention istransferred between the employer and theemployee (private law); (ii) an understanding that it
is an issue of high interest to the country, which
could affect the industrial policy of the country(public law); and (iii) a provision for protecting● 56 ●

workers, which protects the rights of employees
who are inevitably placed in a weaker position
compared to the employer (public law).
In light of the above interpretations, thejudgment in the first instance of the Hitachi casecorresponds to type (ii), concluding that the
principle of territoriality is reasonable, byunderstanding the issue to be purely related to theindustrial policy, similar to such issues asestablishment, transfer, and effects of a patent. In
contrast, the judgment in the second instance of the
Hitachi case and the one in the Ajinomoto casecorrespond to type (i) or (iii), concluding that theapplicable law can be agreed upon between theemployer and the employee based on Article 7(1) of
the Law on the Application of Laws, byunderstanding the provision to be one that
stipulates special rules on the law of contract whenan employee’s invention is transferred between theemployer and the employee. Nevertheless, possibly
due to the problem involved the idea of (i) that theemployer can easily avoid application of theJapanese law by contract, the judgment in thesecond instance of the Hitachi case added asfollows: if Article 7 of the Law on the Application ofLaws is not applied, the applicable law should be
decided by logical reason; the reasonable decision
would be to apply the law of the country that is mostclosely related to the employment relationshipbetween the employer and the employee. This
aspect of eliminating the autonomy of the parties is
actually closer to (iii). In this manner, the confusionthat still exists in understanding the nature ofSection 35(3) of the Patent Law clearly has an
influence on the difference in the rules ofinternational application of the provision. If thisprovision is public law or an absolute mandatory
provision, the portion on selecting an applicable law
would hardly have any meaning; therefore, it would
also be necessary to make clear the real ground forselecting an applicable law.

Appendix
In the report, Appendix I contains the latest
draft Hague Convention and various organizations’comments on it, as well as the latest texts of
IPR-specific rules of the AIPPI, the ALI, and theMPI. Appendix II contains the laws and regulationsof the respective countries, a list of court judgments,
and a list of references, mainly on those that are
mentioned in the report.
(Senior Researcher: Masahiko Matsunaka,
Researcher: Akiko Kato)

Ⅴ Conclusion
The importance of formulating rules forregulating various problems surrounding IPRs
under private international law is widely recognized,
whether they are international, regional, or nationalrules. At the same time, views are diverse as to thecategories and the qualification of legal relations
involved in these rules. It is also hoped that Japan
will actively participate in rule-making attempts bycomprehending the new approaches and ideas inJapan and abroad that are examined in this report.

● 57 ●IIP Bulletin 2004