Contracts

General Info

Objects of intellectual property (further - objects of IP) – such as trademarks, computer programs, maps, photos, paintings, advertisement - are everywhere. The list of objects of IP (The Russian Civil Code divides them into results of intellectual activity and means of individualization) is quite extensive and provided in article 1225 of the Russian Civil code. The need of using results of intellectual activity or means of an individualization arises quite often. For example, one may need to place someone else's photo on the site, to produce a disk with a set of certain melodies, to mark a product with a trademark, to use someone's drawing as a book cover , etc. However, there is a right-holder of any object of IP and only to him an exclusive right belongs (this right gives an authority to supervise use of object of IP and to gain income from its use).

Before start enjoying any object of IP it is necessary to find out a right-holder and make a contract. Quite often a right-holder is an author himself, but sometimes it is another person (for example, an author employer).

The possibility to use a result of intellectual activity without permission may be tempting but it can entail administrative, civil and criminal liability.
By concluding a contract one can receive either all powers or a part of them. A territory and terms of use of rights may be limited in a contract. A contractual form of transmission of exclusive rights protect both assignor and assignee. A contract provides and guarantees realization and protection of property rights of a right-holder (sometimes it protects personal non-property rights of the author too).

A contract on alienation of an exclusive right and license are the most widespread ways of disposition of an exclusive right. However, there are also other contracts providing a transition of an exclusive right. For example, a contract of mortgage of exclusive rights, a contract signed on the basis of the open license, a contract of commercial concession.

The Card Patent renders services in registration of contracts.

License Contract

Article 1235 of the Russian Civil Code states general rules of conclusion of a license contact. Parties to this contract are called licensor (right-holder) and licensee. By means of license contract licensor concedes or engage himself to concede to licensee the right of use of object of intellectual property (further – IP).

After concluding a contract licensee is authorized to use an object of IP within the rights and the ways provided by the contract only. Moreover, it is not necessarily to transfer the full right of use. It is possible to concede a right of use of object of IP in the certain way (for example, to print photos belonging to a licensor in a fair brochure of the licensee), to limit period of validity of an exclusive right and (or) to limit the territory of use of exclusive rights.

It is very important to mention that a right is considered transferred only provided it has been directly specified in a contract. A right-holder reserves all authorities that have not been specified in a contract. In case of a dispute arguments concerning implied conditions that have neither been signed nor business intercourse between parties will not be considered by court.

In other words, it is forbidden for licensee to do anything that has not been specified in a contract. A license contract has to be in writing and is subject to state registration. Non-compliance with written form or requirements of state registration invalid a contract.

A license contract can provide a capability to grant licenses to the third parties (or a prohibition to grant licenses). In that case a sublicense contract is made. Concluding of a sublicense contract is possible only from a written consent of a right-holder (licensor). It is important that a sublicensee can obtain only the rights that are provided by a license contract for a licensee.

Contract of Alienation

Article 1234 of the Russian Civil Code states the general rules for the contract of alienation of an exclusive right. Under the contract on alienation of an exclusive right one party (right-holder) transfers or undertakes to transfer an exclusive right belonging to him in full (partial) extent to other party (purchaser).

According to the definition, the parties of the contract are called as right-holder and purchaser. A contract on alienation of an exclusive right has to be in writing. State registration is obligatory if object of intellectual property (further – IP), is also subject to the state registration. Hence, inventions, useful models, industrial samples, selection achievements, trademarks are subject to obligatory state registration. Computer programs and databases can be registered at the request of the owner. However, if in case of such registration the contract concerning the computer programs and databases becomes a subject to state registration.

Non-compliance with written form or requirements concerning state registration invalid the contract.

According to point 1 of article 432 of the Russian Civil Code essential conditions of any contract are:

subject of the contract;
action territory;
amount of remuneration and/or order of its payment.

Contract of Commercial Concession

A contract of commercial concession is a contract according to which one party (right-holder) undertakes to provide to other party (user) for remuneration the right to use a complex of exclusive rights belonging to the right-holder (Art. 1027 of the Russian Civil Code) in business activity of the user.

A contract of commercial concession is:

Consensual;
Paid;
Bilateral.

According to point 1 of article 432 of the Russian Civil Code essential conditions of any contract are:

subject of the contract;
action territory;
amount of remuneration and/or order of its payment.

In fact, the contract of commercial concession is a result of an era of large transnational networks and recognizable trademarks. Right-holder is usually a large well-known company that provides independent small firms or merchants (users) with right to work using its trademark for remuneration. It is an opportunity for small entities not to spend money on advertising as they enter business at once under widely famous brand. It is possibility for right-holders to promote their goods or services on new territories with the minimum expenses and risks (besides, they get remuneration).

Регистрация

Для государственной регистрации договора, изменения или расторжения договора по соглашению сторон в федеральный орган исполнительной власти по интеллектуальной собственности представляются следующие документы:

заявление о регистрации в одном экземпляре;
договор или выписка из договора, содержащая его существенные условия в двух экземплярах;
документ, подтверждающий уплату пошлины (http://www.rupto.ru/norm_doc/sod/post_prav/pril_pol_poshl_941.html) в установленном размере;
доверенность, удостоверяющая полномочия представителя.

Interesting Facts

The term 'concession’ has Latin origins (concession means a permission, a concession). Traditionally this word meant a permission of the state to the individual (to a person or a firm, usually foreign) to exercise economic and commercial activity on its territory. Quite often it gave him a monopoly (concession on deforestation, construction of the railroads, mining, etc.). It is possible that a term ‘commercial concession’ is used in the Russian Civil Code to distinguish its meaning because in civil law it is an entity, not a state that gives a permission.

The USA is considered to be a ‘homeland’ of this contract, though its western variant is called franchising contract (from English franchise, which stands for a privilege) and the contract parties are called franchiser (right-holder) and franchisee (user).

In some cases a transfer of a right can occur without any contract. This happens automatically and a right-holder does not get any remuneration.

In particular, article 1241 of the Russian Civil Code permits such transfers:

In case of an universal succession. An universal succession can take place in the following cases: a) succession after death of a right-holder; b) reorganization of a legal entity.
In case of imposing a penalty on right-holder’s property.

In case of imposing a penalty on right-holder’s property a transfer of an exclusive right without a contract is possible because an exclusive right (being at the same time an interest) is a part of his property.

There are some special regulations of concluding license contracts on several objects of IP. For example, concluding a trademark license contract it is essential to know that the Russian Civil Code provides two essential conditions. Firstly, it is necessary to fix in the contract that quality of goods of the licensee won't be lower than quality of the licensor goods, and, secondly, it is obligatory to provide a possibility (order) for the licensor to control observance of the first condition.

A license contract can be one of the main ways to derive benefit from owning exclusive rights on objects of IP, and in some cases such a contract is the only possibility of benefiting. For example, a right-holder cannot or does not want to use a registered trademark himself and transfers him under a license. License is also profitable for a purchaser because he does not need to spend his own funds on creation of the necessary object of IP or on ordering such a creation. Moreover, a license costs less than a full transfer of rights to an object of IP.

A license is presumed to be an ordinary one unless a contract states the opposite. Though it is not necessary to use such definitions as an ordinary license’, ‘a nonexclusive license’ or their combination ‘an ordinary (nonexclusive) license)’. The essential part is a sense of a contract, namely a condition that a right-holder has or has not a right to allow any use an object of IP to the third persons in the same ways. In the first case a license is an ordinary (nonexclusive) one, on the second case it is exclusive.

The Russian Civil Code provides directly some cases when an interested person can receive a right of use an object of IP the exclusive right on which belongs to other person in a judicial order (the compulsory license). The right of use is provided on conditions which have to be specified in a judgment (Art. 1239 of the Russian Civil Code).A compulsory license can be granted on certain results of intellectual activity only, but not on means of an individualization. It is also presumed that a license in this case is ordinary (nonexclusive), i.e. the owner has a right to provide the right of use and to sign contracts with other persons.

Questions and answers:

Whether it is possible to make a contract on alienation of an exclusive right if there is a signed license contract?

Even if there is a signed license contract, an owner has a right to make a contract on alienation of an exclusive right with the third party, i.e. to concede this right to other person. The licensee consent isn't required. In this case there will be a replacement of an owner (licensor), but all conditions of signed earlier license contract will remain. Thus the owner has to notify the licensee of a conclusion of such a contract because if the licensee wasn't notified in writing of the transition of the rights to other person, the new owner bears a risk of the caused adverse effects. For example, the licensee didn't know about change of the right-holder and didn't provide the report to the new right-holder. In this situation actions of the licensee will be declared lawful.

Suppose, that a license contract has been made. Whether a licensee can make one more license contract and provide the right of use of object of IP to the third party?

Article 1238 of the Russian Civil Code confirms that it is possible and calls it a sublicense contract (the third party will be called a sublicensee).

Since what moment the purchaser becomes right-holder of an exclusive right?

The exclusive right from a right-holder passes to a purchaser:
a) at the moment of the conclusion of the contract on alienation of an exclusive right if the agreement of the parties has not provide differently (for example, there can be a concrete specified term in a contract;
b) at the moment of state registration of the contract if the contract is subject to such registration.

Suppose, there is an exclusive license under which a licensee started using object of IP. Whether a right-holder keeps the right to use the same object and in the same ways?
- Experts in the IS domain divided on this matter into two parts. One considered that the owner could do it, others that he could not. The resolution of Plenum of the Supreme Court of the Russian Federation and Plenum of the Supreme Arbitration Court of the Russian Federation of 26.03.2009 N 5/29 "About some questions arisen in connection with introduction in action of part of the fourth Civil code of the Russian Federation" put an end to this dispute. In particular, item 14 of the resolution noted that the license contract (irrespective of a type of such contract) presumed that a right-holder preservated the right to use the object of IS. At the same time,it can be specially provided in an exclusive license contract that the owner did not keep the right.