DECIDING WHO DECIDES 

IN CONFLICT-OF-LAWS:
An Institutional Perspective
!
Asian Law and Economics Society Congress	

July...
Law and Economics of PIL: 

status quo of the academic debate	

Added-value of 

comparative institutional approach 

(O.W...
(1) CURRENT
PRIVATE INTERNATIONAL LAW
DEBATE
3
BORDER EFFECT, (UN)CERTAINTY & PIL
4
Dispute
Settlement
Taiwanese
Buyer
Rights &
Obligations
Enforcement
of awards
Taiwane...
BORDER EFFECT, (UN)CERTAINTY & PIL
5
Dispute
Settlement
Taiwanese
Buyer
Rights &
Obligations
Enforcement
of awards
Japanes...
BORDER EFFECT, (UN)CERTAINTY & PIL
6
Dispute
Settlement
Taiwanese
Buyer
Rights &
Obligations
Enforcement
of awards
Japanes...
CURRENT L&E DEBATE IN PIL (1)
EFFICIENCY
(Stakeholders)
LEGAL
FRAMEWORK
POLICY
OBJECTIVES
PIL THEORY
PUBLIC MODEL

(State)...
CURRENT L&E DEBATE IN PIL (2)
EFFICIENCY
(Stakeholders)
LEGAL
FRAMEWORK
POLICY
OBJECTIVES
PIL THEORY
PUBLIC MODEL

(State)...
CURRENT DEBATE IN PIL (2)
9
L&E HAS MUCH POTENTIAL
FOR FURTHER STUDY OF PIL
!
General methodology of PIL
(choice of law me...
(2) COMPARATIVE INSTITUTIONAL 

APPROACH
10
11
ELINOR 

OSTROM
OLIVER
WILLIAMSON
RONALD
COASE
Transaction costs &

institutional choice
Markets & Hierarchies

Organiz...
INSTITUTIONAL APPROACH 

IN LEGAL SCHOLARSHIP
Richard Posner: 

Economic analysis of Law 	

Subsequently, many law and
eco...
– Neil Komesar –
“The correct question is not whether, following
Posner, the market works better in one setting …
than in ...
14
“rules of the game in a society”

(D. North)
“Institutional choice: deciding who decides”

(N. Komesar)
“institutions a...
15
KOMESAR’S
MAIN
FINDINGS
Complexity and number of participants
Limited capacities of institutions &
bounded rationality
...
16
Political
Process
Market
Courts
• Market functions in a relatively 

simple environment where the 

transaction costs a...
17
Political
Process
Market
Courts
• Limited capacities of courts often 

prevent them from judicial activism	

• Although...
18
Political
Process
Market
Courts
• The political process may have 

multiple implications to the 

functioning of the ma...
(3) INSTITUTIONAL APPROACH:
!
CASE-STUDIES FROM
INTERNATIONAL IP LAW
19
GLOBAL INNOVATION MARKETPLACE
• Domestic regulations, 

world-wide markets	

• Two case-studies: 	

• Exploitation of 

em...
21
Nakamura
Nakamura case
$189M Compensation and $8M settlement	

!
the “institutional choice” dilemma
22
EMPLOYEE INVENTIONS
Hitachi case
23
EMPLOYEE INVENTIONS
Hitachi case
24
EMPLOYEE INVENTIONS
Hitachi case
Japanese Patent Act Art 35: 

> Right to obtain patent belongs to the
inventor (employ...
25
EMPLOYEE INVENTIONS
Hitachi case
Japanese Patent Act Art 35: 

> Right to obtain patent belongs to the
inventor (employ...
WHERE TO SUE?
JURISDICTION CONFLICTS
• Global market & multi-state IP infringements

(Samsung vs.Apple litigation)	

• Dom...
27
APPLE - SAMSUNG (1)!
4!
Apple s !
iPhone!
Samsung s !
Galaxy Phone!
Apple s !
iPad!
Samsung s !
Galaxy
Tablet!
•  Apple...
APPLE – SAMSUNG!
Samsung responded by filing patent infringement lawsuits !
against Apple in South Korea, Japan, and German...
APPLE – SAMSUNG!
30
market process:
!
Apple and samsung were unable to
resolve their disagreement
adjudicative process:
!
institutional lim...
CONCLUDING REMARKS
• “Efficiency” is still a helpful normative criterion: 

especially in order reconsider the “core proble...
Thank you!
32
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Deciding who decides in conflict of laws: an institutional perspective

  1. 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. 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. 3. (1) CURRENT PRIVATE INTERNATIONAL LAW DEBATE 3
  4. 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. 5. BORDER EFFECT, (UN)CERTAINTY & PIL 5 Dispute Settlement Taiwanese Buyer Rights & Obligations Enforcement of awards Japanese Seller
  6. 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. 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. 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. 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. 10. (2) COMPARATIVE INSTITUTIONAL 
 APPROACH 10
  11. 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. 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. 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. 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. 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. 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. 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. 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. 19. (3) INSTITUTIONAL APPROACH: ! CASE-STUDIES FROM INTERNATIONAL IP LAW 19
  20. 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. 21 Nakamura Nakamura case $189M Compensation and $8M settlement ! the “institutional choice” dilemma
  22. 22. 22 EMPLOYEE INVENTIONS Hitachi case
  23. 23. 23 EMPLOYEE INVENTIONS Hitachi case
  24. 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. 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. 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. 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. 28. APPLE – SAMSUNG! Samsung responded by filing patent infringement lawsuits ! against Apple in South Korea, Japan, and Germany. ! APPLE - SAMSUNG (2)
  29. 29. APPLE – SAMSUNG!
  30. 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. 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. 32. Thank you! 32

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