Desired result

In the Governing Law chapter, we explained how parties can select which jurisdiction’s substantive law should be applied to interpretation and performance of the licensing agreement. In this chapter, we explore how parties can also select where any cases arising out of the agreement should be filed—and they need not choose the same jurisdiction as they did for governing law.

Essentially, what parties are doing with the Choice of Venue (also called a “Choice of Forum” or “Forum Selection”) clause is deciding which state or federal courts, or which courts within a foreign country, should adjudicate contractual disputes. The parties can make that venue mandatory (i.e. claims about the contract must be brought in that forum), or permissive (i.e. claims about the contract may be filed in that forum).

Generally speaking, you’ll want to choose a venue that is convenient for you and in which the court opinions have relatively predictable outcomes. If you’re a California institution, having to go to Japan or even Utah to defend against or pursue a contract claim is going to be costly: You may need to retain outside counsel, and your institutional counsel may have less certainty over the result you’ll obtain. So in most cases, you’ll settle on a forum in which you or the publisher does most of its business.

As with the Governing Law clause, you may not be able to reach consensus with the publisher on what that venue should be. Once again, it remains an option to leave the contract silent on the matter (with consequences of uncertainty we discuss below). However, this may create risk exposure to foreign lawsuits.

While the parties can exercise a good amount of discretion in choosing a venue, there are some limits. One such limit is that the selected forum must also have subject matter jurisdiction over the contract dispute. Whereas venue regulates where the parties may file a claim, subject matter jurisdiction regulates what kinds of claims particular courts can adjudicate in that venue. For instance, parties to an e-resources agreement cannot choose a Federal Bankruptcy court to oversee a contract claim because bankruptcy courts lack the subject matter jurisdiction to hear state contract law claims.^[1]

Finally, if the parties have decided that all disputes arising from the agreement should be arbitrated rather than litigated (see the Dispute Resolution chapter), they cannot give effect to a Choice of Venue clause.

What it means

“Personal jurisdiction”

Through a Choice of Venue clause, the parties also agree that the court selected should have what’s called “personal jurisdiction” over the parties. Personal jurisdiction means that the court has power or authority over a party to hear cases about that party. It arises “naturally” (by statute and case law precedent) when a party has certain minimum contacts within the forum in which the court sits.^[2] For instance, perhaps the party transacts business in that state, is headquartered there, etc. But a party can also waive or consent to personal jurisdiction even if they do not transact business or are not domiciled in a particular forum. Thus, a business operating in California can consent to New York courts having power to hear cases involving that party.

Contracting parties can choose an adjudicating forum as mandatory (i.e. cases pertaining to the contract must be heard in that forum), or permissive (i.e. parties may but are not obligated to file suit in that forum).

Enforceability

In most cases (and with the exclusion of some consumer contracts), a court will honor the parties’ agreed-upon venue selection, considering it to be “presumptively enforceable”. ^[3] There are grounds upon which Choice of Venue clauses can be challenged, such as unreasonability—particularly if enforcing the clause would contravene a fundamental public policy in the state or jurisdiction where the claim is brought—but it is a steep mountain to climb to have a freely bargained-for clause rendered unenforceable. ^[4]

Failure to specify a venue

If the parties do not specify a venue, then parties may bring a suit in any state or federal court where venue, subject matter jurisdiction, and personal jurisdiction are proper under statutory law and precedent. ^[5]  Venue and subject-matter requirements are relaxed in state courts (which are said to have “general jurisdiction”) and more limited in Federal ones.

The practical effect of failing to specify a venue, as Nimmer and Dodd recognize in Modern Licensing Law^[6] is that a claim might be filed practically anywhere. Traditionally, determination of personal jurisdiction has “been dependent on actual physical presence in a jurisdiction or ‘doing business or having an effect in that jurisdiction.’ Something must have happened within a state or country to which the court could point to as justifying its exercise of power over the person. Now, especially in digital transaction environments, it is often not so clear where or when this ‘something’ occurs.”^[7] And the result is that personal jurisdiction may be appropriate in places around the country or world.

Desired Language

The exclusive jurisdiction and venue for any and all actions arising out of or brought under the Agreement is in a state court of competent jurisdiction, situated in [COUNTY, STATE] (or, if applicable, the federal court located in the [FEDERAL DISTRICT OR CIRCUIT]).  Licensor agrees to submit to the personal jurisdiction of the state courts in the State of [STATE] (or, if applicable, the federal courts in [STATE]) with respect to any legal proceedings that may arise in connection with this Agreement or from a dispute as to the interpretation or breach of this Agreement.  During such court action, the parties shall continue to perform their respective obligations under this Agreement that are not affected by the dispute.

Tricks & Traps

As we noted with Governing Law, vendor-provided clauses often pair choice of law and choice of venue in the same clause, and it’s surprising how often contractual language, or the people negotiating that language, will muddle up the two. Keep in mind that they are distinct issues, and avoid accidentally agreeing to an unfavorable choice for one when negotiating the other. As we said, you may, for example, be willing to agree to New York as governing law, but not want to have to travel to New York in order to litigate.

Also as with Governing Law, one thing to consider is whether you want the Choice of Venue clause to clearly extend to all kinds of claims that might arise between the parties related to the agreement—including claims under tort or other non-contract theories. The use of the phrase “arising under the Agreement” in the clause could potentially be interpreted by a court as applying only to contract claims, so you may wish to expressly add that the Choice of Venue clause also applies to any tort, fraud, statutory, and equitable claims between the parties related to the agreement.

In addition, if you are selecting a venue for which the connection to the parties is not immediately apparent, it might be a good idea to identify in the Choice of Venue clause why that venue is convenient and appropriate for the parties’ claims.

Finally, as noted in the Desired Result section, you want a forum that will be convenient for you and offer predictable outcomes based on case law precedent. One way to achieve this could be negotiating for venue in the jurisdiction of the defendant’s primary place of business. This is predominantly favorable to you since it is more likely that your institution would be a defendant than a plaintiff (given that licensees like universities tend to have more performance obligations under an agreement that could be breached). This could also have the effect of discouraging suits by the licensor, and of giving you more certainty in the event of one.

Importance and risk

Choice of Venue clauses offer a measure of certainty regarding litigation about the license agreements. They are of elevated importance due to the intangible nature of the goods at issue in e-resource licenses and the remote and networked way in which those goods and services are accessed and transacted across borders. Venue selection can affect both the process and the ultimate outcome of any dispute, and failure to agree upon a venue can expose your institution to being hauled into court in an inconvenient (and costly) jurisdiction.