1. DECIDING WHO DECIDES
IN CONFLICT-OF-LAWS:
An Institutional Perspective
!
Asian Law and Economics Society Congress
July 20-21, 2014 ・National Taiwan University
Toshiyuki Kono
!
Paulius Jurcys

2. Law and Economics of PIL:
status quo of the academic debate
Added-value of
comparative institutional approach
(O.Williamson, E. Ostrom, N. Komesar)
Case-study
Institutional perspective to international IP law
2

3. (1) CURRENT
PRIVATE INTERNATIONAL LAW
DEBATE
3

4. BORDER EFFECT, (UN)CERTAINTY & PIL
4
Dispute
Settlement
Taiwanese
Buyer
Rights &
Obligations
Enforcement
of awards
Taiwanese
Seller
Code of Civil
Procedure
ofTaiwan
Civil Code
ofTaiwan
Code of Civil
Procedure
ofTaiwan

5. BORDER EFFECT, (UN)CERTAINTY & PIL
5
Dispute
Settlement
Taiwanese
Buyer
Rights &
Obligations
Enforcement
of awards
Japanese
Seller

6. BORDER EFFECT, (UN)CERTAINTY & PIL
6
Dispute
Settlement
Taiwanese
Buyer
Rights &
Obligations
Enforcement
of awards
Japanese
Seller
JurisdictionChoice of Law
Recognition &
enforcementPIL
Reduction of
transaction
costs & border
effect

7. CURRENT L&E DEBATE IN PIL (1)
EFFICIENCY
(Stakeholders)
LEGAL
FRAMEWORK
POLICY
OBJECTIVES
PIL THEORY
PUBLIC MODEL
(State)
PRIVATE MODEL
(Private Parties)
MIXED MODEL
(States &
Private Parties)
7

8. CURRENT L&E DEBATE IN PIL (2)
EFFICIENCY
(Stakeholders)
LEGAL
FRAMEWORK
POLICY
OBJECTIVES
PIL THEORY
PUBLIC MODEL
(State)
Rules
(ex ante)
Legal certainty
Vested rights
doctrine
(cf. governmental
interest analysis)
PRIVATE MODEL
(Private Parties)
Standards
(ex post)
Flexibility
Private ordering
(party autonomy)
MIXED MODEL
(States &
Private Parties)
Rules & Standards
(e.g., 2nd Restatement)
Legal certainty
& flexibility
Pragmatic
approaches
(e.g., Leflar’s Choice
influencing considerations )
8

9. CURRENT DEBATE IN PIL (2)
9
L&E HAS MUCH POTENTIAL
FOR FURTHER STUDY OF PIL
!
General methodology of PIL
(choice of law mechanism)
!
Specific PIL tools
(e.g., public policy, mandatory rules,
comity, party autonomy)
!
Further directions of PIL:
facilitating interface between
socio-economic traditions
CRITICISM OF L&E
ANALYSIS PIL
!
Abstract economic models do not
help solve specific PIL problems
!
Ambiguity of the notion of
“efficiency”
!
“Efficiency” perspective offers
little guidance in making
tough policy decisions

10. (2) COMPARATIVE INSTITUTIONAL
APPROACH
10

11. 11
ELINOR
OSTROM
OLIVER
WILLIAMSON
RONALD
COASE
Transaction costs &
institutional choice
Markets & Hierarchies
Organizational Complexity
Bounded Rationality
Governance Structures
“Positive research agenda”
Institutional analysis in economic and political sciences

12. INSTITUTIONAL APPROACH
IN LEGAL SCHOLARSHIP
Richard Posner:
Economic analysis of Law
Subsequently, many law and
economics scholars applied
costs & benefits analysis
Neil Komesar: leading scholar who
tried to embrace institutional
approach to law problems
12

13. – Neil Komesar –
“The correct question is not whether, following
Posner, the market works better in one setting …
than in another … but whether the market is better
or worse than its available alternatives or the
political process is better or worse than its available
alternatives”
13

14. 14
“rules of the game in a society”
(D. North)
“Institutional choice: deciding who decides”
(N. Komesar)
“institutions are the prescriptions that humans
use to organize all forms of repetitive and
structured interactions” (E. Ostrom)
definition of
“INSTITUTION”
“ex ante agreements about a structure of cooperation …
that economize on transaction costs, reduce opportunism …
and enhance the prospects of gains through cooperation” (Shepsle)

15. 15
KOMESAR’S
MAIN
FINDINGS
Complexity and number of participants
Limited capacities of institutions &
bounded rationality
Market, courts, and
political process
Deciding who decides:
imperfect alternatives
Institutions move together: “cycling”
(dynamic approach)

16. 16
Political
Process
Market
Courts
• Market functions in a relatively
simple environment where the
transaction costs are low and
the number of participants is small
• However, when the complexity and the
number of participants increases, market
process is replaced by the adjudicative process
• Courts are entrusted with the task of
adjusting complex relations between
private actors
• Courts can solve simple cases;
but their limited capacities often leads
to a rather unsatisfactory decisions

17. 17
Political
Process
Market
Courts
• Limited capacities of courts often
prevent them from judicial activism
• Although courts are independent,
they often fail to solve complex cases
and defer the decision-making to the
political process
• Courts defer to the political process
despite the fear of “agency capture”
(minoritarian/majoritarian bias)
• Courts defer by refusing to grant strong
property rights or review administrative decisions
• The Political process has then to decide how to react

18. 18
Political
Process
Market
Courts
• The political process may have
multiple implications to the
functioning of the market & courts
• Allocation of strong property rights facilitates
market transactions: lowerTC & easier bargaining
• Yet, if property rights are not clearly defined,
market process is likely to come up with alternative
solutions that would off-set malfunctioning
political process

19. (3) INSTITUTIONAL APPROACH:
!
CASE-STUDIES FROM
INTERNATIONAL IP LAW
19

20. GLOBAL INNOVATION MARKETPLACE
• Domestic regulations,
world-wide markets
• Two case-studies:
• Exploitation of
employee inventions
• Multi-state litigation
(Apple vs. Samsung)
20
Country A
Country B
Country C
Country D

21. 21
Nakamura
Nakamura case
$189M Compensation and $8M settlement
!
the “institutional choice” dilemma

22. 22
EMPLOYEE INVENTIONS
Hitachi case

23. 23
EMPLOYEE INVENTIONS
Hitachi case

24. 24
EMPLOYEE INVENTIONS
Hitachi case
Japanese Patent Act Art 35:
> Right to obtain patent belongs to the
inventor (employee);
> This right to obtain patent can be
transferred to the employer
> Reasonable Compensation to the Inventor

25. 25
EMPLOYEE INVENTIONS
Hitachi case
Japanese Patent Act Art 35:
> Right to obtain patent belongs to the
inventor (employee);
> This right to obtain patent can be
transferred to the employer
> Reasonable Compensation to the Inventor
Market failure → courts
(ownership & reasonable compensation)
> Reasoning by analogy did not provide
any guidance for future court practice
> Ongoing discussion about patent law
reform in Japan

26. WHERE TO SUE?
JURISDICTION CONFLICTS
• Global market & multi-state IP infringements
(Samsung vs.Apple litigation)
• Domestics regulations
Absence of rules on jurisdiction
• Cycling between institutions:
Market → courts → political process
26

27. 27
APPLE - SAMSUNG (1)!
4!
Apple s !
iPhone!
Samsung s !
Galaxy Phone!
Apple s !
iPad!
Samsung s !
Galaxy
Tablet!
• Apple, an American company, and Samsung, a South Korean company, are
both cutting-edge technology producers.!
• Samsung provides component parts for many of Apple s products, including
the iPhone and iPad, allegedly selling $5.9 billion in component parts to Apple
in 2010.!
• However, Samsung is also Apple s competitor, with its Galaxy line of products
including smart phones and tables that compete with the iPhone and iPad.!
• In 2011, Apple accused Samsung s Galaxy line of products of infringing upon
its IPRs.!
• In 2012, a number of suits and countersuits between Apple and Samsung have
been made.!

28. APPLE – SAMSUNG!
Samsung responded by filing patent infringement lawsuits !
against Apple in South Korea, Japan, and Germany. !
APPLE - SAMSUNG (2)

29. APPLE – SAMSUNG!

30. 30
market process:
!
Apple and samsung were unable to
resolve their disagreement
adjudicative process:
!
institutional limitations
!
irreconcilable judgments
(e.g., Apple won in the US,
in Korea - both infringing)
market response:
!
Alternative dispute resolution
!
legislative proposals
administrative process:
!
no political consensus re. international
enforcement of IPRs
!
Hague Conference negotiations
!
WIPO taking a very careful approach

31. CONCLUDING REMARKS
• “Efficiency” is still a helpful normative criterion:
especially in order reconsider the “core problems” of PIL
• Both efficiency and comparative institutional approach offer new -
sometimes counter-intuitive - insights for PIL
• Institutional approach offers a powerful tool to think about future directions of PIL
and the facilitation of interface among different legal and socio-economic systems:
• Next task: to identify under which conditions those institutions function
better
• EU could be a possible source for a case-study
(interaction among EU institutions)
31

32. Thank you!
32