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License contracts and assignment contracts – what should one know?

17 Jan 2012 (updated at 07 Mar 2023)
Managing Partner / Patent Attorney of the Russian Federation / Eurasian Patent Attorney

One of the most frequently arising questions in the business in the field of the copyright law - ­ are the ways of the rights transfer for items of intellectual property (trademarks, inventions, utility models, design inventions and other things). In the modern business community the cases of assignment or transfer for the trademarks use from a right holder to another organization or to another person – are not not uncommon. Nevertheless, to register such relations according to the intellectual property legislation, the special contracts signing is needed: license contracts or alienation (assignment) contracts.

Rights assignment contract for an item of intellectual property (or "Alienation contract") transfers the exclusive right for this item to another person, and a license contract permits some person to use temporarily an item of the intellectual property on certain conditions and for a certain term. Both these documents are subject to compulsory registration at the Patent Office of the Russian Federation, otherwise they become null and void.

The requirements to contents and drawing up an assignment contract are contained in articles 1232 and 1488 of the Civil Code of RF. Nevertheless, when drawing up such documents, certain issues may arise. These issues don't represent any difficulty for an experienced lawyer who specializes in the intellectual property issues, thus they can entirely baffle an unprepared person. For example, an alienation contract won't be registered at Rospatent in case if a right holder has several similar trademarks, and the exclusive right, for all that, is transferred only for some of them. According to the Civil Code of RF, the rights for the similar and identical trademarks registered for homogeneous goods may not belong to different legal entities.

There are two ways out of this situation: to transfer to a new right holder the rights for the entire series of the trademarks for all the goods or to transfer the rights for the entire series of the trademarks but only for a certain class of the goods - so, two companies will own the rights for the trademarks but in relation to different goods.

Also the questions may arise in case when a company name of a trademark holder coincides with a registered designation of a trademark. In this case Rospatent will demand from you to specify the grounds by virtue thereof the cession of rights for a trademark won't mislead the consumer in relation to a person manufacturing goods or rendering services. Such grounds are determined individually in each concrete case.

A non-gratuitous assignment contract shall have a price specification that has been paid by a new right holder. Naturally, a gratuitous contract can be also registered, but it is worth noting that the Russian legislation does not stipulate a donation agreement between legal entities, and it means that a transaction can be contested subsequently.

The conditions that are necessary for entering into a license contract or a franchise agreement are outlined in article 1235, 1236,1237,1238, 1489 of the Civil Code of RF. In this case the difficulties arise most often when preparing and registering license contracts and concern the issues of exclusivity and non-exclusivity of a license. And similarity and identity of the trademarks that are included into a license contract don't matter unlike an alienation contract.

Validity term of a license contract can be any, but it is logically that it shall not exceed a validity term of a trademark registration. When an holder extends a validity term of a trademark, a contract term is also extended.

Determination of a cost and periodicity of license payments contribution is mandatory in non-gratuitous license contract, for all that, unlike an assignment contract, when entering into a gratuitous license contract there will be no problems. Moreover in case of entering into a gratuitous license contract and an agreement on a trademark used under the control of a right holder, no agreement is required to be registered. It is a substantial advantage for many trademark holders because they try for different reasons to avoid a contract registration and difficulties and costs associated therewith. Nevertheless, it is worth noting that a registered contract is more reliable from the point of view of a trademark subsequent use, an interaction with the tax authorities and possible judicial disputes in relation to the rights to use an item of intellectual property.

Let us also note that the registration is needed for any changes to license contracts. Changes of the contract clauses are drawn up as additional agreements. If a name or address of a trademark holder changes, then the data on changes, in their turn, are to be submitted to the materials of a certificate for a trademark. And if a name or address of a user changes, the changes are to be submitted to the materials of a contract. In exactly the same way an additional agreement is drawn up, which has a specification that for example, the parties have agreed to regard the following address "N" to be a new address of a user. Documents confirming the changes are attached to an agreement and this agreement is also filed to registration. Contract termination as agreed by the parties is also subject to registration.

When drawing up assignment contracts or license contracts there exists a plenty of nuances to gain an insight into which is easier for a person who already possesses of sufficient experience in the work with the items of intellectual property. For all that, mistakes in a contract or its wrong registration can cause subsequently far more trouble to the parties and demand from them more considerable costs than a specialist's consultation payment on the stage of the documents drawing up.

Managing Partner / Patent Attorney of the Russian Federation / Eurasian Patent Attorney