License contracts in Russia

One of the legal options for disposing of intellectual property rights is the execution of licensing agreements. This document allows you to define the procedure for transferring rights to third parties on a temporary basis. Specialists at Prof-Patent, a firm of patent attorneys, can help you draw up a license agreement correctly and protect the interests of the right holder.

What is a license agreement

License agreement - ( Art. 1235 Civil Code) a contract under which one party - the owner of the exclusive rights to results of intellectual activity or means of individualization (licensor) grants or agrees to grant to the other party (the licensee) the right to use such a result of such funds provided contractual limits.

The exclusive right to the results of intellectual labor is confirmed in the process of filing and consideration of the application in FIPS, as well as registration at the national or international level. Registration is confirmed by the issuance of a patent or certificate, after which the owner of the object can exercise his rights in the following areas:

• independently use the invention, design, trademark, database or other intellectual object - in their own production, when producing products, providing services, etc;
• to transfer the exclusive rights to third parties under a contract of alienation, in which case the acquirer acquires the full set of rights to use and dispose of the object, while the original owner will receive a monetary remuneration and the preservation of authorship;
• to transfer the rights of use on a temporary basis under a license agreement - under this form of contractual relationship the parties may agree on any terms of use of the rights, including the possibility of their transfer to several persons at once.

A license grants the right to legally use someone else's rights to the extent specified in the contract. In particular, the parties may determine the territory in which the license is valid, the term of the contract, limitations on the release of certain products and other essential conditions.

The key advantages of transferring rights under a license include:

• retention of the exclusive right for the original owner of the object;
• the ability to establish a one-time cash payment or regular payments in various forms;
• It is allowed to transfer a license to several persons at once;
• Significant violations of the terms of the license allow for early termination of the contract, to recover damages or compensation.

The rules for executing license agreements are set forth in the Civil Code of the Russian Federation. Patent attorneys and lawyers at Prof-Patent will provide a full range of services for registration of rights to any intellectual property objects, as well as the execution of license agreements in the interests of the right holder. We guarantee the shortest possible deadlines for the preparation and registration of the transaction, strict compliance with Russian legislation and international acts, and protection of the rights holder's interests during the term of the agreement.

Rules of the contract

You can only transfer rights under a license agreement if you have a patent or a certificate.

The following requirements should be taken into account when drawing up the contract:

• the agreement shall be in the form of a written document;
• the agreement comes into force from the moment of registration - this procedure is carried out through the service of Rospatent according to the rules of Article 1232 of the Civil Code of the Russian Federation;
• one of the parties to the contract or both parties may apply for registration actions.

The procedure of registration actions is regulated by the Decree of the Government of the Russian Federation from 24.12.2015 № 1416. Not only a party to the agreement, but also a representative under a power of attorney may submit an application. The best option would be to perform all actions through Prof-Patent's patent attorneys - in this case, any risks of refusal to register, or the return of documents without consideration would be eliminated.

The documents for the registration procedure include an application, as well as one of the following forms (at the applicant's choice):

• written notice of the execution of the contract - this document must be signed by both parties to the transaction;
• an excerpt from the contract, certified at a notary's office;
• the license agreement itself.

There are special requirements for the content of the application.

The text of this document specifies the following amount of information:

• reference to the type of contract (license agreement);
• information about the parties to the transaction;
• the subject matter of the contract (the object of intellectual property), as well as details of the patent or certificate;
• the term of the agreement (if specified in the text of the agreement);
• the territory in which the temporary use of the rights is allowed (if this condition is specified in the contract);
• consent or prohibition on subsequent transfer of rights under sublicense agreements;
• the possibility of early termination of the license.

Also the basis for registration of the transfer of the right to use the object can be a judicial act.

How to properly draw up an agreement

The parties to the transaction can independently determine all the terms of the contract. Depending on the agreement of the parties, the text of the document specifies the following points:

• date and place of execution of the document:
• details of the parties to the agreement;
• the subject of the agreement (a specific object of intellectual property) - trade mark (trademark), invention, utility model, rights to the topology of an integrated circuit, etc;
• the term of the agreement;
• territorial restrictions on the use of the transferred rights (e.g., certain regions of the country);
• conditions and procedure for payment of remuneration for the use of the right - a fixed monetary payment, regular payments, deductions for each copy of the product, etc;
• prohibition or special conditions on the release of certain types of products using exclusive rights (for example, the license to use an invention may establish a prohibition for certain areas of production);
• liability of the parties for violation of the license terms;
• the procedure for early termination of the agreement.

A special object of intellectual rights - the place of origin of products - may not be the subject of licensing agreements. Such a rule is fixed in Art. 1519 of the Civil Code of the Russian Federation.

When drawing up an agreement, it is necessary to carefully record all the terms of use of the intellectual property object. If violations of the license terms are identified, the content of the agreement will determine the possibility to prematurely terminate the use of rights, to recover compensation or losses from the guilty party. Therefore, it is advisable to entrust the support of these transactions to professional specialists - patent attorneys and lawyers.

The parties independently determine the terms of remuneration to the right holder. This may require the evaluation of rights, including through independent appraisers. Prof-Patent specialists will help to determine the procedure and terms of payment in favor of the right holder, as well as the evaluation of exclusive rights.

Violations in the use of the license may include the following:

• failure to comply with the procedure and terms of payment;
• use of rights outside the territory specified in the agreement;
• violation of restrictions on the release of products or other forms of use of rights fixed in the agreement (for example, placement of trademarks on products not specified in the agreement);
• Unauthorized disclosure of confidential information to third parties;
• other types of violations.

Liability for the listed violations will occur in accordance with the terms of the contract and the provisions of the Civil Code of the Russian Federation. In addition to damages or monetary compensation, a material breach may lead to early termination of the license at the request of the right holder.

Is your intellectual property realising its true value?

As the owner of any intellectual property right, be it patent, trademark, copyright, software or even plant variety, you can exploit that right for gain in any legal way you see fit. One simple method of doing so, which allows you to generate a revenue stream from the right, whilst someone else puts in the hard work to realise earnings from the right is to license this it to a third party. This allows them to utilise the right, under strict conditions specified and agreed upon by both parties. This differs slightly from a Franchise agreement in that it is regarding only one specific intellectual property and provision for how this is used is stipulated exclusively in the agreement. Any ancillary use not specified is not allowed and in breach of the said agreement.

Be sure what you want to allow, and what you do not

As you would expect when dealing with such an agreement, the terms are intended to be strict and specific. If they are not it is likely that this agreement can be exploited by those you have granted the license to. If you want to ensure that your agreement covers the rights you wish to grant and no more, you must have the agreement drawn up by experienced legal professionals. License agreements must be made in written format and as they are regarding intellectual property, must also be submitted to Rospatent for registration. Agreements licensing rights which have not already been correctly registered with Rospatent will not be valid.

License agreements can be as simple or as complicated as one needs or wants, but it becomes more challenging when considering the intention of the licensor and licensee. You must consider the length of the agreement, the territory under which it is applicable. Is the right to be used exclusively or not. If exclusive this may preclude the licensor themselves for using the right in the territory stipulated in the agreement.

Don’t let country borders be barriers to business

Foreign licensors can license their rights to third parties in the Russian Federation, directly or through a joint venture or by establishing a subsidiary. This makes it a very flexible model for expanding and operating in the Russian Federation with a sliding scale of risk and reward. However, these business entities must conform to Russian law by passing general tests on areas such as taxation, investment and antimonopoly. Consideration for these tests may require special filings or licence, registration and or a regulatory review.

Whilst there is nothing inherently complex about this area of intellectual property law, there is a multitude of considerations which could potentially trip you up as the licensor or licensee. Especially if you are operating from outside the Russian Federation. Consult us regarding any aspect of your licensing requirements and we can draft that agreement according to your wishes. We are also able to prepare and file any necessary documents to support registration of the agreement.

Our services:

• consulting on all issues related to the licensing;
• drafting of the license agreement, with its further approval by the client and a Russian Patent Office expert;
• preparing and filing of the necessary documents for registering the license agreement.