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Exclusive rights to intellectual property caught in the Russian Civil Code reform

05/05/2014

The sixth set of amendments (the “Amendments”) to the Civil Code of the Russian Federation (the “Civil Code”) was signed by the President on 12 March 2014. It brings significant changes to almost all of the Civil Code chapters regulating the rights deriving from intellectual activity and means of individualisation. Most Amendments will come into force on 1 October 2014.

 The Amendments are not only of a technical nature, but also fill in gaps in legislation that had been revealed in recent practice. In this Alert we will focus on key changes for companies and legal/IP practitioners.

Contracts on alienation of exclusive rights

 Although the Russian PTO has previously been consistent in their reluctance to register gratuitous assignment deeds between Russian legal entities, this has been allowed in practice between foreign legal entities, especially for foreign-law governed deeds. However, from 1 October 2014, commercial organisations will be expressly prohibited from concluding licence agreements and contracts which gratuitously alienate any rights to the results of intellectual activity. One may anticipate that, in practice, the Russian PTO will construe this provision as a mandatory rule of Russian law and apply it to both foreign and domestic assignment deeds and licences.

 The Civil Code will incorporate practice that has been emerging for some time to provide a simple (non-exclusive) licence in respect of computer programmes and databases in the form of so-called "shrink-wrap licences". For this licence, the terms of the contract can be stated on the product’s packaging or in electronic form, and consent to the conclusion of the contract is deemed to have been given when use of the product begins.

 The Amendments introduce the legal concept of an open licence to use works of science, literature or art. In essence, this type of licence is deemed to be a contract of adhesion and the law therefore requires the terms and conditions to be freely accessible to anyone who wishes to review them. Licence conditions must contain the scope of the use of the work. Unless otherwise stated in the licence conditions, licences will be granted free-of-charge and be valid throughout the world for five years (if the open licence is for computer programmes and databases, this will be for the duration of the exclusive rights).

 The scope of the rights granted under an exclusive licence has been clarified. By granting this type of licence, the licensor will no longer be able to issue subsequent licences to others and will also be prohibited from itself using the rights transferred under such licence, unless otherwise provided for by the parties.

 Pledges of rights over the results of intellectual activity, the means of individualisation and the rules on their registration are now more specifically regulated in the Civil Code. As a general rule, the pledgor will be able to use the pledged rights during the term of the contract. However, the consent of the pledgee will be required for the sale or transfer of the pledged rights.

 The procedure for the termination of licence agreements and agreements for the alienation of exclusive right has been simplified in certain cases. This procedure will apply if (i) the exclusive right was not actually transferred to the licensee or the assignee; and (ii) the licensee or the assignee has failed to pay the required remuneration. The right holder will no longer need to go to court to terminate the contract and claim damages for loss. It will be sufficient for them to send a termination notice to the licensee or to the assignee of the exclusive rights. If the licensee or assignee does not pay the remuneration within 30 days following receipt of the notice, the contract will be terminated.

Protection of exclusive rights – General provisions

The infringer of exclusive rights is presumed guilty of the infringement unless they can prove otherwise. The introduction of such a provision is certainly favourable to the right owners. If the infringement is committed by several persons, they will be jointly liable.

 The measures that can be applied against an infringer have been expressly extended to cases of strict liability (i.e. in the absence of guilt) and now include the legal possibility of seizure and destruction of fake products.

 The powers of the public prosecutor against the infringers of exclusive rights have been extended. The prosecutor will now be able to require the liquidation of an infringing legal entity or the cessation of activities where an infringer is an individual entrepreneur.

 The issue of compensation for multiple infringements of different exclusive rights by the same infringing activity is regulated in greater detail. The compensation amount is calculated for each infringing event separately by reference to the range of amounts provided by law. The total compensation amount cannot be less than 50% of the sum of all the minimum individual statutory compensations for each infringement made.

 If several persons possess the exclusive right, each of them can take individual measures to protect it.

Protection of exclusive rights on the Internet

 The legislator has enhanced the protection of exclusive rights on the Internet, and this change is, in particular, linked to the procedural rules which introduced the possibility of interim injunctive measures against copyright infringements on the Internet in 2013.

 In particular, the list of persons who may be contacted with a request to put an end to the acts that actually or potentially infringe a right has been extended. This means it will be possible to turn to Internet service providers with a request to stop the infringement. Under the current (pre-Amendments) Civil Code, this type of request can only be addressed to the actual infringement perpetrators or persons who took preparatory steps to allow the perpetration of such an infringement.

Regulation of certain types of exclusive rights

Copyright and neighbouring rights

An author may only refuse to make their work public if the work has not entered the public domain. Once the work is in the public domain, it will not be possible to withdraw the work itself as well as any copies.

 Upon the death of one of several co-authors, the exclusive right to their portion of the work ceases. If the work forms an integrated whole, the rights will be transferred to surviving co-authors.

 In respect of copyright regulated under a contract with an employer, any income that the author has not received will pass to their heirs.

Patents

The concepts of the dependent invention, dependent utility model and dependent industrial designs have been defined. To use them, it will be necessary to be authorised by the patent holder of the inventions, utility models or industrial designs. Without such authorisation the dependent objects of intellectual property cannot be used. Thus, the patent owner of the initial, or independent, invention, design or utility model will be able to block the use of the dependent invention, design or utility model.

 The maximum duration for patent protection in respect of an industrial design will be reduced from 15 to 5 years (from 1 January 2015). However, this five-year period may be renewed, so that the entire period of life of a design patent may be up to 25 years.

 Industrial design applicants will no longer need to file a list of essential features of the design, which now serves as the basis for determining the scope of protection of the design. This means that designs will be protected within the scope of the image of the design and its description. This change will narrow the scope of protection of industrial designs.

Means of individualisation

Information on applications for trademarks and appellations of origin will be published in the official gazette of the Russian PTO as well as in the PTO on-line database. Any person will able to object to a particular trademark or appellation of origin as soon as this information has been published.

 The so-called principle of national exhaustion of trademark rights has not been affected by the changes to the Civil Code. Therefore, parallel imports will continue to qualify as the illegal use of trademarks.

Conclusion

The rules introduced by the Amendments will have a practical impact for business as they broaden legal possibilities for right holders and other market players. This holds particularly true in the sphere of pledges of intellectual property, and the granting of open licences and free licences, which may be particularly important for software developers. We may also reasonably foresee that the lowering of the level of protection for industrial designs could make 3D trademarks more attractive for right holders and result in a greater interest for them to use this type of trademark than is currently the case.

Source
CMS Client Alert | April 2014 | Intellectual Property
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Authors

Bankovskiy Anton
Anton Bankovskiy
Partner
Moscow