Intellectual Property Issues Continue to Roil Treaty Talks

Though the draft treaty has been narrowed to cover only business-to-business choice-of-law contracts, IP issues remain “pretty complex,” a source close to the negotiations said last week. The latest version covers copyright and related rights as well as infringement proceedings. A controversial passage addresses otherwise- excluded IP rights if raised incidentally. An example would be when, in litigation over royalty payments under a license, a defendant claims the licensed IP right was invalid, the source said. “Getting everyone to agree in principle and to accept the drafting is hard in the extreme,” the source said.

A key issue still unresolved for consumer groups is the draft’s treatment of the “first sale doctrine,” said Manon Ress of the Consumer Project on Technology (CPT). The first sale doctrine is essential for library lending rights, rental rights in video stores and 2nd-hand sale of books, she said. Large corporations often try to use contracts to curb resale of goods; over time, national policies vary on such provisions’ enforceability. The Hague proposal generally would make exclusive choice-of- court provisions mandatory; consumers want to ensure that it doesn’t change global policy on the first sale doctrine, Ress said.

The treaty would be “a big help for forum shopping,” Ress said. By separating some aspects of IP disputes, the treaty would make sure litigation over the validity of all noncopyright-registered rights -- such as patents -- would always take place in the country in which those rights are registered, unless they were “incidental” to the main litigation. But lawsuits over infringements, the scope of a particular claim or the fairness of a contract would be in foreign courts, with stiff enforcement measures for foreign judgments.

E-commerce issues “are not on the front burner anymore” since negotiators limited the treaty’s scope, but there remains some sensitivity about take-it-or-leave it contracts -- such as shrinkwrap agreements for software, an issue that heightens interest in the grounds under which a choice of court clause can be enforced or not -- said a source close to the negotiations.

In Europe, there’s enthusiasm for keeping online click-through and shrink-wrap contracts in the treaty, a European Commission (EC) official responsible for the treaty file told us. A larger question is how to guarantee that such contracts treat both parties fairly, an outcome negotiators have tried to assure via provisions dealing with whether an agreement is legally valid, the official said.

European consumer groups smart at including shrinkwrap and other agreements in the treaty but can live with it, since the revamped treaty specifically excludes business-to-consumer contracts, the official said. However, he said, problems remain with the convention’s definition of “consumer.” Consumer groups want the same definition as European instruments use, to ensure that a definitional gap doesn’t set up agreements made by consumers to come under the treaty, the official said.

Following a Jan. 31 public hearing on the proposed convention, the EC began “coordination meetings” with member states. One took place March 3; another set for the 17th will be the final formal powwow before the diplomatic conference. The EC is “gauging the views of member states” as it crafts a position on the treaty, the official said, but has its own mandate on how to proceed as well. Another U.S. public meeting, not restricted to IP issues, is slated for May 9.