The concept of the territoriality of copyright plays out in a number of complex, interesting ways. By territoriality, people usually mean a legal connection of a copyright interest to one territory, i.e., country. That country's laws will then govern a particular (or all) legal issues involving the copyright.
Professor Willem Grosheide has written effusively that “the intellectual property law community over the whole range has cherished for many decades and still favours the territoriality” principle. The term “territoriality” though, is susceptible of different meanings. For purposes of the first sale doctrine (or “exhaustion” as it is called in other countries), copyright is quite “territorial” since an authorized sale or other distribution of a copy ends the copyright owner’s control in that territory (but not others) over further distribution or public display of that copy. Territoriality is also used as a device to determine certain points of attachment for national eligibility status of foreign works, i.e., one determines whether foreign works are eligible for protection in a different forum by reference to the work’s territorial paternity, such as the country of first publication.
If by territorial one means the copyright right is created by each sovereign, this is true of most, if not all, other laws, so to say copyright is territorial does not distinguish copyright from other laws that are subject to choice of law. Even assuming copyright is territorial (in any agreed meaning of that term), this characteristic is not determinative nor even helpful to the choice of law analysis: choice of law exists territorially too; that is, whether to apply choice of law is determined by the national (territorial) law of the forum. The territorial characterization, taken to its logical conclusion, eliminates entirely choice of law in favor of exclusive application of the law of the forum, and under circumstances where there is nothing inherent in forum law justifying the exclusion of foreign law. Indeed, one can argue that dogged insistence on applying the law of the forum deprives the forum of the exercise of its own sovereignty to utilize choice of law procedures, a result obviously at odds with the very nature of sovereignty.
Another area in which the concept of territoriality is tested is droit de suite, the resale royalty right mandated within the European Union by Directive 2001/84, and to date implemented in few countries within the Community, despite a January 1, 2006 deadline. In a fascinating article by Pierre Valentin, Droit de Suite, 28 E.I.P.R. 268 (2006), the nature of territoriality is explored in efforts to assign a country of origin to the sale that triggers the resale royalty obligation. Assigning such a country is important for at least two reasons: first, the sale may have occurred outside the Community, thereby resulting in no obligation; or, two, the resale could have occurred in one or more countries within the Community but which have different coverage or royalty rates. One approach to assigning a territorial location for the obligation is the place of sale test, according to which the resale royalty obligation is assigned to the country where the sale takes place. This approach, however, requires further agreement about where a sale can be said to take place. Outside of cases where the seller, buyer, and the work of art are all in the same country, there are many permutations: the seller is in Country A, the buyer in Country B. The parties communicate by telephone, fax, or email and agreement is reached. Is the place of sale the place where the seller is located or where the buyer is located? What if the work or art is in one of the two countries, or, in a third country, C? Under English choice of law rules, the country assigned is the generally the country where the art work is located, but this gives an unusual emphasis to a material object that may be owned by even a different person , say, someone who purchased the work of art from the artist, and who lives in country D. In the case of Joseph Beuys, BGH Judgment of June 16, 1991; I ZR 24/92  GRUR 798, comment  E.I.P.R. D-94, a German court held that the place of sale governed (London), resulting in no royalty obligation. Since as M. Valentin notes, the droit de suite, like all copyright rights, are governed by domestic laws, these issues will not be resolved for a long time if ever.