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Disposal of exclusive rights by an unauthorized person

May 22, 2020

A common truth is that only the owner can dispose of an item of property. The same principle applies to the exclusive right, only the right holder can dispose of this right.

In accordance with paragraph 1 of Article 1229  of the Civil Code of the Russian Federation

“The person or legal entity with the exclusive right to the result of intellectual activity or means of individualization (right owner) may use that result or those means at his discretion in any manner not inconsistent with law. The right owner may dispose of his exclusive right to a result of intellectual activity or means of individualization (Article 1233), unless it is otherwise provided by this Code.

At his discretion, the right owner may permit or prohibit other persons to use his result of intellectual activity or means of individualization. The absence of a prohibition is not considered consent (permission).

Other persons may not make use of that corresponding result of intellectual activity or means of individualization without the consent of the right owner, with the exception of cases provided in this Code.”

The copyright holder may, at its discretion, authorize or prohibit other persons from using the result of intellectual activity or means of individualization. The absence of a ban is not considered consent.

Other persons may not use the corresponding result of intellectual activity or means of individualization without the consent of the copyright holder, with the exception of cases provided for by this Code. ”

Legislation allows various ways of disposal of exclusive rights. The right holder may dispose of his exclusive right to the result of intellectual activity or means of individualization in various ways, including, but not limited to, on the basis of the following:

  • an agreement for the alienation of the exclusive right, under which the exclusive right is transferred to another party in full (article 1234 of the Civil Code of the Russian Federation).
  • a licensing agreement, under which another party is granted the right to use the corresponding result of intellectual activity or means of individualization, while the exclusive right is reserved for the copyright holder (article 1235 of the Civil Code of the Russian Federation).
  • an agreement on pledge of the exclusive right (article 358.18 of the Civil Code of the Russian Federation).
  • an agreement of commercial concession, under which the right to use in entrepreneurial activity a complex of exclusive rights belonging to the right holder is granted, including the right to a trademark (chapter 54 of the Civil Code of the Russian Federation).
  • an agreement on the fiduciary management of assets (Chapter 53 of the Civil Code of the Russian Federation).
  • a notice given by the right owner to any person by publicizing an opportunity to apply to use free-of-charge a work of science, literature, or arts or the object of neighboring rights possessed by him under conditions defined by the right owner and within the term of effectiveness of the contract (paragraph 5 of Article 1233 of the Civil Code of the Russian Federation).

In some cases, the exclusive right may be controlled by another party, not by the right holder. So, for example, with the written consent of the licensor (copyright holder), the licensee can, under the sublicense agreement, grant the right to use the result of intellectual activity or means of individualization to another party.

In this case, the licensee has only those rights that are directly indicated in the license agreement. In this regard, under the sublicense agreement, the sublicensee may be granted the right to use the result of intellectual activity or means of individualization only within the limits of those rights and methods of use that are provided for by the license agreement for the licensee.

The intellectual property rights may belong to individuals and legal entities. Regarding each object, the legislator can make a restriction. For example, the owner of the exclusive right to a trademark can only be an individual with the status of an individual entrepreneur, or a legal entity. A legal owner of a company name can only be a legal entity, and anyone can dispose of the exclusive right to a copyright object or invention, utility model or industrial design.

If the holder of the exclusive right is an individual, then when concluding an agreement on disposal of the exclusive right, there is a chance to encounter a falsification of the signature, if another person claims to be a right holder, however he is not.

As for concluding a contract with a legal entity, the main risk is not only falsification of the signature of the sole body of the legal entity, but also when on behalf of the legal entity either a person with limited powers or someone who is not authorized to act on behalf of the legal entity without a power of attorney.

So, in accordance with paragraph 2 of Article 69 of the Federal Law dated 26.12.1995 No. 208-FZ (as amended on 04.11.2019) “On Joint-Stock Companies”, “a single executive body of a company (director, general director) acts without a power of attorney on behalf of the company, as well as represents his interests, makes transactions on behalf of the company, approves the staff, issues orders and gives instructions binding for all employees of the company.”

In accordance with paragraph 3 of Article 40 of the Federal Law dated 08.02.1998 No. 14-FZ (as amended on 04.11.2019) “On Limited Liability Companies”, the “a single executive body of a company: acts without a power of attorney on behalf of the company, as well as represents its interests and makes transactions. ”

When concluding an agreement on disposal of the exclusive right to the result of intellectual activity or means of individualization, one should be especially careful, since the transaction can be completed, in particular, by an unauthorized person. As an example, a situation may be given in which the exclusive right was alienated by an unauthorized person. Such disputes are subject to consideration in court, claims may be brought against the person who completed the transaction in the absence of authority, as well as against the person who is the beneficiary of such a transaction.

In accordance with the law, a transaction can be concluded by a legal entity, on behalf of which a person can act under the Charter or a power of attorney. A transaction made in the absence of the authority does not comply with the law; accordingly, such a transaction is void. Disputes regarding the claims for invalidating a void transaction shall be resolved by the court on general terms at the request of any interested person, since the Civil Code of the Russian Federation does not exclude the possibility of filing such claims.

From the paragraph 2.1 of the determination of the Constitutional Court of the Russian Federation dated April 15, 2008 No. 289-О-О, it follows that “An entity having a substantive interest in declaring a transaction to be null and void in the legal sphere may be recognized as interested according to the paragraph 2 of Article 166 of the Civil Code of the Russian Federation this transaction introduces uncertainty and whose legal position it may affect."

In the event that the contract is signed by a person without authority, it may be recognized that the alienation of the exclusive right violates the legal rights and interests of the copyright holder. The above circumstance is an obvious and fundamental reason for considering a dispute in court and for recognizing an agreement on alienation as an invalid transaction.

The position on the possibility of using such a method of protection as invalidating void transactions without claiming a request on using of consequences of their invalidity has been repeatedly expressed by the Presidium of the Supreme Arbitration Court of the Russian Federation (Decisions dated 27.05.2008 No. 4267/08, dated 05.04.2011 No. 15278/10). At the same time, the Presidium pointed out that the purpose of a person's appeal to the court may be a court’s confirmation of the fact of the existence or absence of legal relations (lawsuit for recognition), which include a claim for invalidating a transaction.

In addition, paragraph 84 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated June 23, 2015 No. 25 “On the application by the courts of certain provisions of Section I of the first part of the Civil Code of the Russian Federation” establishes that, pursuant to paragraph two of paragraph 3 of Article 166 of the Civil Code of the Russian Federation, claims for recognition an invalid void transaction without stating that the consequences of its invalidity are applied if a plaintiff has a legitimate interest in invalidating such a transaction.

In accordance with the rules of Article 71 of the Arbitration Procedure Code of the Russian Federation, the arbitration court evaluates the evidences under its internal conviction, based on a comprehensive, complete, objective and direct study of the evidences in the case. Each person participating in the case must prove the circumstances to which he refers as the basis of his claims and objections, bears the risk of the consequences of the commission or non-fulfillment of procedural actions by him (Articles 9, 65 of the Arbitration Procedure Code, a decision of the Presidium of the Supreme Arbitration Court of the Russian Federation of March 6, 2012 No. 12505/11).

When considering a case on invalidating a void transaction for the alienation of an exclusive right by a person who does not have a legal authority, the court may apply to a person who has concluded such a transaction paragraph 1 of Article 401 of the Civil Code of the Russian Federation, which establishes that a person who has not fulfilled the obligation or who has performed it improperly, is liable in the presence of guilt (intent or negligence), unless other grounds for liability are provided by the law or a contract. A person is recognized as innocent if, with a degree of care and discretion required by the nature of the obligation and the terms of the turnover, he took all measures for the proper fulfillment of the obligation, and by virtue of paragraph 3 of Article 401 of the Civil Code of the Russian Federation, this rule does not apply to persons who have violated obligation in carrying out business activities.

Guided by this statute, in relation to the party of the transaction, it may be recognized that it did not possess due diligence and did not show attention when carrying out such kind of business operations during document circulation. The receiving party could know that the person who signed the contract is not the single executive body of the legal entity.

 The receiving party could check the powers of the person who signed the contract and thereby show their good faith by receiving an extract from the unified state register of legal entities (EGRUL). The relevance of the extract from the registry can be checked on the website of the Federal Tax Service of Russia (egrul.nalog.ru), the information from which is open and public.

Due to the fact that the contract on the alienation of the exclusive right as a transaction is void, because in violation of paragraph 1 of Article 53 of the Civil Code of the Russian Federation was signed by a non-single executive body of a legal entity and does not express its will to complete the transaction.

In this regard, when concluding an agreement on the disposal of the exclusive right to the result of intellectual activity or means of individualization, it is necessary to be careful and check the authority of the person alienating the right.

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Author of article

Aleksandra Pelikh

Aleksandra Pelikh

Head of Department / Senior Lawyer