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In the process of negotiating intellectual property (IP) agreements, such as licenses, joint development agreements, and nondisclosure agreements, the choice of law and venue provisions are often considered as subordinate terms. The inattention given these provisions belies their true significance. Choice of law and venue provisions can profoundly impact the rights afforded your client and, importantly, the cost and complexity of resolving disputes.
This article explores alternative approaches to such provisions, highlights the pros and cons of the various approaches, and provides practical recommendations for drafters of IP agreements concerning these provisions. In the context of these discussions, we will consider a hypothetical agreement between one party domiciled in Michigan and a second party domiciled in Colorado.
With respect to their choice of a particular venue or governing law, our hypothetical parties may choose one of at least four different approaches. First, the parties may agree that Michigan law will apply and that disputes will be resolved in Michigan state courts. Second, the parties may agree that Michigan law will apply, but that disputes will be resolved in the Colorado courts, or vice versa. Third, the parties may agree that disputes will be resolved in a neutral forum, such as Illinois. Fourth, the parties may agree that the proper venue for dispute resolution will depend on the identity of the party bringing a lawsuit.
In the first scenario, our Michigan and Colorado domi ciliari es agree that their contract will be governed by Michigan law and that disputes will be resolved in Michigan state courts. Most courts respect parties' freedom to structure their relationship in this manner. If one of the parties sought to enforce the agreement in a Michigan state court, the Michigan court would almost certainly find that it had personal jurisdiction over the defendant. Indeed, most courts find that a venue provision confers personai jurisdiction on the chosen courts. Conversely, if one of the parties brought suit in a Colorado court, the Colorado court would enforce the venue provision of the contract by dismissing the lawsuit.
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