Abstract
This article aims at contributing to academic debates on PIL rules on security interest in IP using functional analysis . Functional analysis here means a method to take a legal rule as a mechanism which brings about certain effects, to analyze conditions under which the effects would be produced, and to seek possible directions to improve the legal rule. Security interests in IP represent a convergence of three fields of law, i.e. IP, PIL and security interest law. Therefore, an integral platform where these three fields could be analyzed on an equal level would be needed. Functional analysis provides such a platform. For this purpose, this article first clarified the functions of security interest and its conditions, then identified which option as a PIL rule would be appropriate for each condition of the individual function of security interest in IP. Perspectives from both states’ and parties’ interests should be properly integrated in the analytical process. Lastly, the scope and conditions of party autonomy as well as objective connecting factors were identified. The outcome of this analysis provides tools to clarify not fully conceived parts of previous discussions. The CLIP Principles were compared with our proposals from this perspective.
This article is a part of outcomes of Kakenhi Grant Type S, “Research on International Security Interest in IP by the method of Law and Economic” (2012–2016) (Principal investigater: Toshiyuki Kono).
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Notes
- 1.
For example, UCC (Uniform Commercial Code) provides a similar definition: “‘Security interest’ means an interest in personal property or fixtures which secures payment or performance of an obligation.” See U.C.C § 1–201(2001).
- 2.
For example, see Baird (2004), pp. 1789–1800.
- 3.
In this context, see Baird et al. (1994), p. 314.
- 4.
This definition does not depend upon legal system in a specific State, so that it would be easier to link with discussions on PIL rule.
- 5.
On varieties of security interest, see Mann (1997), pp. 625–683.
- 6.
Legal rules on security interest in a broader sense, includes not only functions to promote, but also to restrict collateral. Thus an approach to integrating the mechanism of security interest can be found other fields of law, such as contract law, trust law, and corporate law.
- 7.
See Kagami (2006).
- 8.
By introducing a uniform law, the costs to understand various national laws could be reduced. However the introduction of a uniform law itself is costly. Also fitness of rules would be lowered. See Kono and Kagami (2013), pp. 314–337.
- 9.
Naming of three functions to be analyzed in this chapter is inspired by Baird (2004).
- 10.
If all stakeholders’ judgments and actions are doable without costs, and if market mechanism functions effectively, introducing collateral does not affect efficiency. Hence significance of collateral presumes imperfect market mechanism. See Schwartz (1981).
- 11.
On diversification of collateral and security interest right, see U.C.C. § 9 (2001); UNCITRAL (2011), https://www.uncitral.org/pdf/english/texts/security-lg/e/09-82670_Ebook-Guide_09-04-10English.pdf; Castellano (2015), pp. 611–640. Overviews of recent developments of security interest and amendments of relevant laws. Armour (2008), pp. 3–29 discusses on policy designs based on preceding theoretical works and empirical analysis.
- 12.
- 13.
For example, see Harris and Mooney (1994), pp. 2021–2072.
- 14.
Costs in this context occur exogenously.
- 15.
“‘Insulation’ is a word to describe the ways in which a secured creditor can minimize the indirect costs associated with bankruptcy.” See Baird (2004), p. 1789. But we avoid using the terms “insolvency” or “bankruptcy” and defining in a more general form in order to connect this function with analysis on the level of PIL at a later stage.
- 16.
As an empirical analysis on insulation and its conditions: Feng et al. (2009), pp. 1833–1876.
- 17.
Using the building as debtor’s principal place of business as collateral could mean more than collateral.
- 18.
- 19.
- 20.
- 21.
Similar view is stressed in O’Hara and Ribstein (2000), pp. 1151–1232.
- 22.
Some authors analyze whether territoriality should be followed to choose applicable law on IP issues even in the era of globalization and IT. See, for example: Bradley (1997), pp. 505–586; Buxbaum (2009), pp. 631–676; Dinwoodie (2009), pp. 711–800, Metzger (2010), Cook (2014) pp. 293–297, Treppoz (2014), pp. 557–571, Torremans (2013).
- 23.
In this context, see Borchers (2008), pp. 1645–1661, Lehmann (2008), pp. 381–434, Rühl (2009), pp. 153–183, Kramer and Themeli (2016), pp. 27–49, and Maultzsch (2016), pp. 466–491, Bebchuk and Guzman (1999), pp. 775–808 identified that, applying economic analysis, party autonomy enhances global welfare much more than territoriality.
- 24.
Applicable law chosen ex post by other creditors may not satisfy effectiveness and fitness for state. If the debtor received benefits through a special deal with a specific creditor, and such benefits are much larger than damages caused to other creditors, the state of the debtor’s domicile may accept the result and justify the outcome of the debtor’s behaviour. This could be legitimate, since the world’s welfare would be raised as a whole. As this example suggests, a decision based on weighing parties’ interests and states’ interests is crucial.
- 25.
This applies at least to situations where the collateral agreement was concluded first, then parties may switch to an alternative scheme. This however needs more elaboration. For example, cases where parties chose an alternative scheme first, then they decided to switch to security interest, or cases where an alternative scheme becomes desirable ex post, should be examined.
- 26.
For example, a registration system for these kinds of collateral is not well developed.
- 27.
European Max-Planck Group on Conflict of Laws in Intellectual Property (CLIP) (2013), pp. 354–369, p. 507.
- 28.
CLIP (2013), p. 355.
- 29.
CLIP (2013), pp. 355–356.
- 30.
CLIP (2013), p. 356.
- 31.
CLIP (2013), p. 356.
- 32.
But if the enforcement involves the transfer of ownership in an IP right, the law of the state of protection applies to the question whether and under which conditions ownership in the IP right may be transferred. Art. 3:802 (1) (2) of CLIP. See CLIP (2013), p. 354.
- 33.
The law of the state for which protection is sought shall apply to (a) the existence, validity, scope and all other issues concerning the IP right as such which is used as security, including the question whether a particular IP right may be transferred or encumbered to create a security right.
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Kono, T., Kagami, K. (2017). Functional Analysis of Private International Law Rules for Security Interests in Intellectual Property. In: Kono, T. (eds) Security Interests in Intellectual Property. Perspectives in Law, Business and Innovation. Springer, Singapore. https://doi.org/10.1007/978-981-10-5415-0_5
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