E:\FALL20~1\Hartnell_Private International Law

PRIVATE INTERNATIONAL LAW

FINAL EXAMINATION

GOLDEN GATE UNIVERSITY SCHOOL OF LAW

PROFESSOR HELEN E. HARTNELL

DECEMBER 14, 2001

INSTRUCTIONS

1. This is an open-book examination. You are permitted to refer to the casebook, course reader, class handouts, class notes, and an outline prepared by you or your study group. Students whose native language is not English may also use an English-foreign language dictionary. USE DURING THE EXAMINATION OF ANY OTHER MATERIALS IS PROHIBITED.

2. WRITE YOUR EXAMINATION NUMBER ON THE TOP OF THIS PAGE, AS WELL AS ON EACH BLUE BOOK YOU USE. PLEASE NUMBER YOUR BLUE BOOKS IF YOU USE MORE THAN ONE (E.G. "1 OF 2, 2 OF 2").

3. Your answers should be written in ink or typed. DO NOT USE PENCIL. Write your answers in the blue books provided. No credit will be given for arguments that may appear on this examination sheet but not in your blue book(s).

4. WRITE ON ONLY ONE SIDE OF EACH BLUE BOOK PAGE.

5. PLEASE DO NOT SKIP LINES.

6. Questions may be answered in any order, but be sure to start the answer to each question at the top of a new page, and to label your answers clearly.

7. You have three hours to complete this examination, which consists of one fact pattern and a total of five (5) questions. The suggested times correspond to the importance (and point value) of each question or part. Thus, a question where I suggest 60 minutes is twice as important (and worth twice as many points) as a question where I suggest only 30 minutes. There is also one BONUS question, which is optional but worth extra points for those who have time to answer it. WATCH YOUR TIME CAREFULLY! Take the first 15 minutes to read over the entire exam quickly.

8. At the end of the exam, you must turn in this exam, your blue book(s), and all scratch paper.

TAKE 15 MINUTES TO READ OVER ENTIRE EXAM!

FACT PATTERN

Kaas BV is a manufacturer of cheese-making equipment. Kaas is incorporated in The Netherlands and has its main office in the city of Gouda. 50% of the shares in Kaas are privately owned. Kaas' remaining shares are owned by the Dutch Milk Council (DMC). Kaas has a Dutch patent on its cheese-making equipment.

In order to increase its export sales, Kaas decided to appoint a distributor in the U.S. In January 1999, Kaas entered into a written contract with Fred Frye (FF), an individual resident of the State of Wisconsin, U.S.A. The contract appointed FF as the exclusive U. S. distributor of Kaas' cheese-making equipment (hereinafter EQUIPMENT) for a term of ten years. The intention of such a distribution agreement (DISTRIBUTION AGREEMENT) is that the distributor (FF) will purchase goods from the manufacturer (Kaas), then resell them to customers located in his contractual territory (i.e., the U.S.). The DISTRIBUTION AGREEMENT requires that FF purchase from Kaas, and that Kaas sell to FF, as much EQUIPMENT as FF needs to supply his customers in the contractual territory. Kaas agrees to sell the EQUIPMENT to FF at a discounted wholesale price, while FF agrees to use his best efforts to sell Kaas' EQUIPMENT throughout the U.S. FF also agrees to provide training to its customers who purchased Kaas' EQUIPMENT, and to provide aftersale warranty service. Kees agrees not to sell its EQUIPMENT to any other person in, or for the purpose of export to, the U.S. market.

Curd Inc. is a U.S. company that is incorporated in Illinois. Curd manufactures and sells cheesemaking equipment under its own U.S. patent. Curd believes that Kees' EQUIPMENT, which is covered by a Dutch (but not by an American) patent, infringes on Curd's U.S. patent, and has filed suit against FF in U.S. federal court in Chicago, Illinois for patent infringement. In the lawsuit, Curd claims treble damages for FF's (allegedly) willful infringement of Curd's patents. (Even though FF does not manufacture EQUIPMENT in the U.S. under Kaas' Dutch patent, FF can still be held liable for selling foreign goods in the U.S. that infringe a valid U.S. patent.)

Immediately after it was served by Curd in the patent infringement suit, FF demanded that Kaas come to the U.S. to defend the patent infringement suit brought by Curd. Kaas refused, and reminded FF that their DISTRIBUTION AGREEMENT contains no provision that obligates Kaas to defend such a suit or to reimburse FF in case he is held liable for patent infringement. FF replied that he would ask Curd to amend its complaint to name Kaas as an additional defendant in the infringement suit, or that he (FF) would cross-claim against Kaas for indemnification (i.e. seek reimbursement from Kaas for any damages FF might have to pay to Curd)

QUESTION 1 (40 MINUTES):

Kaas' general counsel, Joost van den Brekel, contacts you for legal advice. Kaas does not want to come to the U.S. to defend either the patent infringement suit brought by Curd or FF's claim for indemnification, and asks you whether Kaas would be subject to jurisdiction in the federal District Court in Chicago. None of Kaas' officers have ever set foot in Illinois, although some of them have spent holidays in Florida. The only Kaas employee ever to have been in Wisconsin is Willem Bakker, who visited FF in 1999, during the first year after the DISTRIBUTION AGREEMENT entered into effect, in order to train FF in the installation and repair of Kaas' EQUIPMENT.

Prepare a memorandum for Kaas' general counsel, in which you analyze the jurisdiction of the federal District Court in Chicago, Illinois over Kaas BV. Your memorandum should also address the possibility that a Wisconsin state court might have jurisdiction over Kaas, since you anticipate that FF might try to pursue his rights against Kaas in his home state. Be sure to request from your client any further information that you might need to complete your analysis. Conclude your memorandum by offering Kaas practical, strategic advice regarding how it should proceed to protect its interests in regard to the patent infringement litigation in Chicago.

QUESTION 2 (30 MINUTES):

Regardless of how you answered Question 1, assume for purposes of this question that Curd subsequently amended its complaint and added Kaas as a defendant in the patent infringement suit. Assume further that the federal District Court in Chicago has rejected your arguments challenging its jurisdiction over Kaas BV.

Make the argument that the case against Kaas should be dismissed under the forum non conveniens doctrine. How do you assess your chances of success on this argument?

QUESTION 3 (20 MINUTES):

Regardless of how you answered Question 2, assume for purposes of this question that the federal District Court in Chicago refused to dismiss the patent infringement case under the forum non conveniens doctrine. You receive a phone call in the middle of the night (Pacific Standard Time) from Kaas' general counsel (Joost van den Brake[), who has just arrived in his office in Gouda, opened his mail, and found a subpoena that was mailed to Kaas from the federal District Court in Chicago. The subpoena orders Kaas to produce a wide variety of documentary evidence in connection with the pending infringement lawsuit, including "all documents pertaining to the design and development" of Kaas' patented EQUIPMENT, as well as records pertaining to the employees engaged in the design and manufacture thereof.

Joost is very upset. He tells you that the demand for production of documents would be time-consuming and costly, that the discovery order covers documents that include trade secrets, and that Dutch privacy laws protect information about Kaas' employees. Joost considers this "fishing expedition" to be a violation of international law, and strongly objects to the federal District Court's attempt to apply U.S. laws extraterritorial extraterritorially. Joost wants you to challenge the subpoena issued by the Chicago court, on the basis that the U.S. court failed to follow the procedures established in the Hague Evidence Convention. How would you advise Kaas in connection with the subpoena to produce documents to the court conducting the patent infringement litigation? What action would you take on behalf of your client?

QUESTION 4 (45 MINUTES)

Meanwhile, back in Wisconsin, the disagreement between FF and Kaas that arose out of the patent infringement litigation has led to rapid deterioration of their relationship under the DISTRIBUTION AGREEMENT. Kaas has stopped filling FF's orders for EQUIPMENT in a timely manner. In response, FF has refused to pay Kaas the money he owes for EQUIPMENT delivered by the manufacturer in the past. Kaas has sent FF written notice of its intent to terminate the DISTRIBUTION AGREEMENT. FF, on the other hand, insists that Kaas resolve the infringement dispute with Curd, and continue to supply FF with Kaas' EQUIPMENT during the remaining years under their ten-year DISTRIBUTION AGREEMENT. FF claims that he is ready, willing and able to continue to perform his obligations under the DISTRIBUTION AGREEMENT.

As you expected, FF has filed a lawsuit against Kaas in Wisconsin state court. FF has included two sets of claims against Kaas in this action. First, FF wants to assert monetary claims against Kaas that arise from Kaas' (alleged) breach of the DISTRIBUTION AGREEMENT. In this regard, FF asks the court to compensate him for damages already suffered as a result of Kaas' failure to supply EQUIPMENT, and to reimburse FF for any damages he might be ordered to pay to Curd for patent infringement in connection with the lawsuit pending in Chicago. (FF's claim for reimbursement would probably be based on a theory that, even though the DISTRIBUTION AGREEMENT is silent on this issue, the contract contains an implied warranty that the EQUIPMENT would not infringe the patent or other industrial property rights of third persons in FF's contractual territory.) Second, FF asks the Wisconsin state court to declare that the DISTRIBUTION AGREEMENT cannot be terminated, and to order Kaas to perform its obligations under the contract. To support these claims, FF argues that the DISTRIBUTION AGREEMENT is subject to the Wisconsin Fair Dealership Act ("WFD Act"), which prohibits termination of such contracts, except where the distributor has engaged in wrongful conduct. (Kaas has not made any such allegation in this case, and cannot do so, since there is absolutely no evidence of wrongful conduct by FF.) The WFD Act is a Wisconsin state statute that automatically applies to all contracts-such as the DISTRIBUTION AGREEMENT that are concluded with a Wisconsin-based distributor.

Since the WFD Act is designed to protect local parties - such as FF --from unfair conduct by manufacturers, it expressly states that the parties cannot "opt out" or otherwise alter its provisions by agreement. The DISTRIBUTION AGREEMENT contains a choice of law clause stating that the U.N. Convention on Contracts for the International Sale of Goods (CISG) shall govern all issues relating to the sale of EQUIPMENT, and that Dutch law shall govern all other issues that arise under the DISTRIBUTION AGREEMENT. The DISTRIBUTION AGREEMENT also contains a choice of forum clause, which provides that "All disputes arising from this contract shall be litigated before the courts of Gouda, The Netherlands."

Kaas wants to rely on the choice of forum clause in the DISTRIBUTION AGREEMENT. Describe what steps you would take, and what arguments you would make, to convince the Wisconsin state court to enforce the choice of forum clause and dismiss (or stay) the lawsuit filed by FF. Be sure to anticipate the arguments you expect FF to make in his attempt to defeat your motion.

QUESTION 5 (30 MINUTES)

Despite all your efforts under Questions 1 through 4 above, assume that:

The federal District Court in Chicago decided in favor of Curd in the patent infringement lawsuit, and found that Curd had suffered actual damages in the amount of $500,000. The court held Kaas and FF "jointly and severally liable" for these compensatory damages. However, the court additionally found FF (but not Kaas) liable for willful (i.e. intentional) infringement of Curd's patent, and thus trebled the damages. (Kaas was not held liable for willful infringement, but this may be because Curd did not bother to assert this claim against Kaas.) In all, Curd received judgment for a total of $1,500,000. FF was held liable for the full amount, while Kaas was held liable for only a portion of that amount (i.e., $500,000).

FF was a student in Berkeley in the 1960s. At that time, his parents bought him a small house in the Haight-Ashbury neighborhood of San Francisco, which he has kept as an investment. The value of FF's house in mid-2001 was $1,500,000. Curd enforced its $1,500,000 judgment by seizing FF's asset in California.

Happily for FF, the Wisconsin state court decided in his favor on the issue of indemnification, and ordered Kaas to reimburse FF for any amounts he had to pay in connection with Curd's successful patent infringement suit. The legal basis for FF's victory on this issue was his argument that the DISTRIBUTION AGREEMENT contained an implied warranty, as noted above in Question 4 (paragraph 2).

Kaas' general counsel, Joost van den Brekel, calls again, and informs you that FF has taken preliminary steps in the Dutch courts to seek reimbursement from Kaas in the amount of $1,500,000. Joost is more knowledgeable than you are about the particular rules governing recognition and enforcement of foreign judgments in his country, but he wants to collaborate with you, since are so skilled in dealing with transnational litigation. Joost wants you to help him to construct the best possible strategy to protect Kees against the effects of FF's judgment from the Wisconsin state court. Outline your suggestions for helping Kaas in this regard. Your answer should incorporate what you know about the Brussels Regulation and about the recognition and enforcement rules contained in the proposed Hague Judgments Convention, but may also include more general arguments that might be worth considering.

BONUS QUESTION:

Taking the preceding case as your example, explain why we need a multilateral convention -- such as the one being drafted in the Hague Conference on Private International Law-on jurisdiction and recognition and enforcement of foreign judgments.