Egypt Égypte Ägypten. Report Q194. in the name of the Egyptian Group by Samir HAMZA, Ahmed Abou ALI, Tamer EL HENNAWY and Heba EL TOUKHY

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1 Egypt Égypte Ägypten Report Q194 in the name of the Egyptian Group by Samir HAMZA, Ahmed Abou ALI, Tamer EL HENNAWY and Heba EL TOUKHY The Impact of Co Ownership of Intellectual Property Rights on their Exploitation Introduction IPR did not enjoy sufficient legislative consideration in Egypt until recently, as there have not been a single legal regulation encompassing all aspects of intellectual property and ensuring their protection until Law No. 82/2002 for The Protection of Intellectual Property Rights ( the IPR Law ) was issued. Prior to this Law, there had been some distinct Laws governing some aspects of intellectual property independently, and not in depth. Because of its novelty in Egypt, IPR Law did not regulate some aspects which require more practice in order to be well conceived by the legislator. One of these aspects, is the case of co ownership of an IP right. Although current IP regulation included some articles governing the case of co ownership of IPR, nevertheless, they are insufficient to solve all problems emanating from practice. In such a case, we shall resort to joint property articles in Civil Law (N.B. Civil Law is considered the law of general application in Civil Law countries including Egypt), although some law jurists and practitioners may reserve on this trend, on the basis that property right as organized in Egyptian Civil Law, is mainly concerned with corporal ( tangible) things. Nevertheless, we can argue that both Art. 802 of Civil Law, defining the limits of property right, and Art. 825 defining joint property did not limit it to corporal things, but mentioned things generally, which includes both corporal (tangible) and moral (intangible) things. In addition to this, Art. 81 of Civil Law provided that all things which by nature or by power of law are not considered to be outside normal dealing, may become subject to financial rights. In this sense, Explanatory Note of Civil Law mentioned that financial right is the right that has financial value whatever its nature is: corporal, personal or intellectual. Questions I) The current substantive law 1) Groups are invited to indicate whether, in their countries, the statute of co ownership of IP rights is uniformly organised or if each IP right has its own regulation concerning co ownership, particularly as far as their exploitation is concerned. What options are left for co owners to regulate their co ownership relationship: are the statutory rules mandatory, or do they apply only in case of the absence of a contractual regulation of co ownership between the parties? 1

2 The IPR Law regulates co ownership of patents and copyrights to some extent. However with respect to Trademarks, Industrial designs, Plant varieties, and other Intellectual property rights we refer to the general principles of the Egyptian Civil Law. Under Article 825 of the Civil Law when two or more persons are owners of the same thing, but their respective shares are not divided, they are co owners and, in the absence of proof to the contrary, their shares are deemed to be equal. However, in case of patents and copyright, it shall be noted that articles regulating co ownership in IPR Law are not mandatory. For example: a) With respect to Patents and as per Article 6 of the IPR law if a patent is a result of joint work the inventors thereof shall have equal rights over the patent unless they agree otherwise. However if the same patent has been discovered by more than one person independently ownership shall be for the one who files the application first. b) With respect to copyright protection, as per Article 161 of the IPR Law co authors financial rights over a copyright are protected through out their life time of co authors and up to 50 years from the date the last co author passes away. Further it should be noted that, in the event the work has been composed by more than one person and that the share of each co author in the work cannot be segregated in that case all co authors shall be deemed authors with an equal share unless it is agreed between them otherwise in writing pursuant to Article 174 of the IPR law. c) With respect to Trademarks, Industrial Designs, and Plant Varieties, the same principle outlined in Article 825 of the Civil Law above applies. 2) Groups are invited to explain who has the right to exploit an IP right which is co owned by two or more persons: may each co owner exploit the right freely and without any consent from the other co owners or is this exploitation subject to conditions? Even if this exploitation by only one co owner is permitted by the national law, shall the co owner who exploits a right pay any compensation to the other co owners. Finally, in case compensation is required by the legal rule, how is the amount of compensation determined? Starting with copyright. It is worth mentioning that current IPR Law differentiated between collective and joint compilations. Collective compilation: It is a compilation set by more than one author, directed from a natural or juridical person, who undertakes to publish it in his name and under his management. The work of authors in it is merged in the general aim targeted by that person, so that it becomes impossible to detach the work of each author and distinguish it separately(art. 138 & 175 of IPR Law). This type of compilation is not of concern in our study, because the directing person (natural or juridical) shall exclusively enjoy the copyright on that compilation. Joint compilation: It is a compilation that does not fall within the collective compilations, and is set by more than one person, whether the share of each one of them could or could not be separated. (Art. 138&174 of IPR Law). Concerning joint compilation, Art. 174 of IPR Law made distinction between two cases: First: More than one person join in forming a compilation, so that the share of each one of them cannot be separated. In such case, they are considered co owners of the com pilation, and none of them shall unilaterally exercise the copyright except pursuant to a written agreement between them. 2

3 Second: If each author participation is categorized under a different kind of art (i.e. can be easily separated from other participations, like audio visual works) then each of them shall have the right to exploit the portion he has contributed separately, provided that this shall not prejudice the exploitation of the co owned compilation, unless otherwise agreed in writing. In this sense, Art. 177 of IPR Law concerning audio visual, audio & visual works states that: Second: The scenarist, the editor of the literary compilation, the dialogue writer, and the director, together shall have the right to present the audio, visual, or audio visual compilation despite the objection of the original literary compilation author, or the music composer, without prejudicing the opposer s rights ensuing from his contribution in setting the compilation. Third: The author of the literary section or musical section shall have the right to publish his composition in another manner than the method in which the joint compilation is published, unless otherwise agreed in writing. Fourth: If a partner joining in setting an audio visual, audio or visual compilation refrains from completing his particular section, this shall not prevent the rest of contributors from using the sections accomplished by each of them, without prejudicing the refraining participant rights ensuing from his contribution. Concerning other IP rights, in case of absence of agreement between parties, articles of joint property in Civil Law should govern the presumption of their co ownership, because IPR Law did not regulate this case, and even in its regulation to co ownership of patents, current law did not regulate unilateral exploitation of it. In this sense, Article 825 of Civil Law provides that: If two or more persons own something in which the share of each is not sorted out, they shall be co owners of this thing. Shares shall be computed equally between them if no evidence provides otherwise. This means that co owners are deemed to have equal shares, unless otherwise provided, whether in contract or in any other evidence. In such case, each co owner owns his share fully, and therefore can dispose of it, exploit it, without prejudicing other co owners rights. (Art. 826 of Civil Law). Logically, contributions to co owned IP rights, other than copyright, are not presumed to be separated and exploited independently. And so, unilateral exploitation of them is not assumed. Otherwise, this will prejudice other co owners rights. For example, if one co owner decides to exploit the co owned IP right in a way that contradicts other co owners perception of proper exploitation, will inevitably prejudice their rights. Exploitation of joint property is considered, either ordinary or extraordinary administration of a joint property (N.B. extraordinary administration means introducing basic changes to the joint property in order to change the target it was made for, to maximize the benefit thereof). (Art. 827, 828 & 829 of Civil Law). Ordinary administration of joint property (i.e. co owned IP right) requires at least the acceptance of the simple majority of co owners. (Art. 828 of Civil Law). Extraordinary administration of co owned IP right, requires the acceptance of at least three fourths of the co owners. However, the majority s decision shall not take effect unless after two months from notifying the other co owners, and their acceptance thereof. In case one or more of the minority refuses the decision within the period of the two months, he shall have the option to refer the subject to the court. 3

4 Concerning compensation issue, neither IPR Law nor Civil Law stipulate any compensation for unilateral exploitation of co owned IP right, it is left to the agreement of the co owners and in the event of their failure to agree to the court to decide upon. 3) The Groups are also invited to give an overview of their national Law in relation to the benefits which may result from the exploitation of an IP right which is co owned. In particular, the Groups are invited to indicate if their national Law provides any kind of obligation for a co owner who exploits personally its share of an IP right to pay any benefits to the other co owner wherever the second exploits or no the same IP right. If there is such an obligation, how the amount of money that should be paid to another co owner is determined? With respect to copy rights and as per article 174 of the IPR law in the event of a co ownership that cannot be divided proportionality between the authors, each shall have an equal share, no owner may practice any exploitation of the co ownership independently, unless a written agreement states otherwise. However, if the participation of co authors is by a different kind of art each of them shall have the right to exploit the portion he has contributed separately with no need to pay any benefits to the other co owners. Also, with respect to visual or audio visual compilations, scenarists, lyrics, editors, authors, producers and composers are also considered partners in the co owned product. Accordingly, they have the right to exploit to the extent that if the co owners production is funded by a producer he shall have the right of exploitation of the product throughout its term unless otherwise agreed in writing. With respect to Trademarks, Industrial Designs, Plant Varieties, and Patents the same principle apply as per Article 827 of the Civil Law ( please see answer to Q2 above) It is worth mentioning that in the event the co owner exploits an IP right which is co owned without obtaining the consent of the majority of co owners then the other co owners are entitled to request compensation from the exploiter co owner. The court will, in the event of dispute determine the amount of compensation due. 4) The Groups are also invited to indicate if the co owner may grant a licence to third parties without any authorisation from other co owners, or if the granting of such a licence is subject to certain conditions? If such conditions exist, the Groups will have to specify their content. With respect to Copy rights and as per Article 174 of the IPR Law in the event of a co ownership that cannot be divided proportionality between the authors, thus each having an equal share, no owner may practice any exploitation of the co ownership independently unless a written agreement states otherwise. Therefore since the right to license is exclusively granted to authors then by analogy a co owner may not license a copyright individually without the consent of the other co owners. Contributions to co owned IP rights, other than copyright, are not presumed to be separated and exploited independently. And the co owner who can not exploit the co owned IP right unilaterally, can not also license to third parties to exploit it. In the case of ordinary administration (i.e. exploitation), Art. 828/2 of Civil Law provides that the majority (i.e. simple majority) of co owners may appoint a director who shall be responsible for the exploitation of the joint property. 4

5 In the case of audio visual, audio or visual works, Art. 177 of IPR Law states: Fifth: Throughout the exploitation of the audio visual, audio or visual compilation agreed upon, the producer shall deputize for the authors of that compilation and their successors in agreeing on its exploitation, without prejudicing the rights of authors of extracted or edited literary or musical compilations, unless otherwise agreed in writing. The producer shall be considered a publisher of that compilation and shall have the publisher s rights on it and on its copying within the limits of its commercial exploitation purposes. 5) The question of the exploitation of an IP right interferes with the possibility of transferring such an IP right to third parties. The Groups should indicate the solution in theirs countries relating to the possibility of transferring a share of co ownership of an IP right to third parties: may such a transfer (by assignment) be carried out freely without any conditions or must it be offered firstly to the other co owners or is it specifically subject to the agreement of the other co owners? The Groups are invited to indicate the conditions to which such a transfer is subject. With respect to Copy rights and as per Article 174 of the IPR Law in the event of a co ownership that cannot be divided proportionality between the authors, thus each having an equal share, no owner may practice any exploitation of the co ownership independently unless a written agreement states otherwise. Therefore since the right of assignment is exclusively granted to authors then by analogy a co owner may not license a copyright individually without the consent of the other co owners. As to IP rights other than copyright, since the issue of co ownership is not clearly regulated under the IPR law we refer to the general rules of Co ownership under the Civil Law. And since they are of indivisible nature, which means that the co owner who intends to dispose of his share, is not only disposing his share, but is actually disposing the whole IP right, which will inevitably prejudice other co owners rights. Article 832 of the Civil Law Co owners who possess three quarters at least of the property held in common may decide to alienate (dispose) the property, provided that their decision is founded on serious grounds and that the decision is notified to the other co owners. A dissenting co owner has a right of action before the court within a period of two months from the date of notification. The court will decide, in accordance with the circumstances, in a case where the partition of the property held in common is contrary to the interests of the co owners, whether the alienation of the property should be carried out. The assumption of transferring financial rights only is also refused because, the transferor can not exploit his share individually, so transferring his financial rights to a third party who in order to benefit from the transferred right will necessarily exploit the transferred share does not make sense, because he can not enjoy a right not enjoyed by the transferor himself, also this will prejudice other co owners rights, because the assigned to party may chose to exploit his share, which is indivisible from the whole IP right as above mentioned, in a way that other co owners refuse. However, if the transfer of the financial right is confined only to the revenues and not exploitation, then we trust that there is no legal restriction in this sense. 6) IP rights may also serve as a guarantee for the investment which is necessary for their exploitation. The question then arises of whether a share in co ownership of an IP right can be used as such a guarantee and under what conditions. 5

6 Is it necessary to obtain agreement from all the co owners in order to secure an IP right or can each co owner freely secure his own share of an IP right without seeking the consent of the other co owners? The Groups are invited to describe their legal systems on this question. With respect to copyrights if more than one co owner has an equal share no one may practice an owner s right independently unless a written agreement states otherwise pursuant to article 174 of the IPR Law. Accordingly, it will be necessary to obtain agreement from all the co owners in order to pledge or render an IP right as guarantee. However; if the co ownership can be divided in to separate portions then each co owner may secure his own share of the IP right without seeking the consent of the other co owners. However, we trust that financial rights may be assigned. As to Industrial designs, trademarks and plant varieties since the issue of co ownership is not clearly regulated under the IPR law we refer to the general rules of Co ownership under the Civil Law. As per Article 832 of the Civil Law (Please see answer to Q5 above). Therefore it will be necessary to obtain agreement from owners who possess three quarters at least of the property held in common in order for a co owner to pledge or render an IP right as guarantee. 7) The enforcement of IP rights plays an important role in their exploitation. Such enforcement is mainly achieved by means of legal proceedings that may be filed by the owner of an IP right in order to penalise the infringement of his right by third parties. The question arises of whether such a legal action must be filed by all of the co owners of an IP right or whether it can be filed by only one of the co owners. The Groups are therefore invited to specify the legal solutions and procedural exigences in their countries in relation to the possibility of one of the co owners of an IP right filing an infringement action. With respect to copy rights As per Article 174 of the IPR law each of the co owners shall have the right to file court actions independently and on behalf of the other co owners incase of any infringement to the co owners rights by third parties. As to Industrial Designs, Trademarks and Plant Varieties since the matter of co ownership is not clearly regulated under the IPR law we refer to the general rules of Co ownership under the Civil Law. As per Article 830 of the Civil Law every co owner may also, even without the consent of the other co owners, take measures necessary for the preservation of the property in common. Therefore, any act of an individual co owner shall be legally binding to all co owners to the extent that any cost of preservation of the co ownership shall be borne by all the co owners each equally, because they all benefit from such actions. 8) The exploitation of the IP rights depends also upon the existence of these rights and, more specifically, upon the capacity of their owner to ensure the continuity of the existence of these rights. Now, the decision on maintaining patents or trademarks by the payment of the renewal fee, may vary according to the legal system of organization of co ownership. The Groups are therefore invited to tell how the question of the decision making process of the maintaining or renunciation of the patents or trademarks is organized in their national law. Basically, patent rights are not renewable. Art. 9 of IPR Law specified the protection period of patents to twenty years effective from the date of submitting the request for patent in the Arab Republic of Egypt, and it did not state any renewal periods. Regarding renunciation of patent rights, IPR Law mentioned that one of the causes of patent termination, is patentee s relinquishment of his rights in it, without prejudicing third parties rights (Art. 26/2 of IPR Law). However, in case the patent right is co owned by more than one 6

7 person, renunciation shall not be pursuant to unilateral decision by one of the co owners, it shall be based on the unanimous decision of co owners, or the decision of at least the co owners who hold three fourths of the joint property, provided that such decision is based on significant reasons. Also, the majority s decision shall not take effect unless after two months from notifying the other co owners, and their acceptance thereof. In case one or more of the minority refuses the decision within the period of the two months, he/they shall have the option to refer the subject to the court (Art. 832 of Civil Law). Concerning trademarks, the protection period is ten years consequent to registration, and can be extended for one or more similar periods pursuant to its owner s request each time during the last year of protection period, against payment of renewal fee equal to the fee due on application for the first time (Art. 90/1 of IPR Law). The trademark owner may, within no more than six months following the lapse of protection period, submit a request for renewal of protection, against payment of determined fee plus an additional fee, up to and not exceeding 500 pounds. Otherwise, the Trademark Authority shall delete the trademark (Art. 90/2 of IPR Law). Renewal of trademark protection is considered as a preservation action of joint property, similar to that mentioned in Art. 830 of Civil Law. Accordingly, each co owner can take such action even without the approval of other co owners. Regarding renunciation of trademark protection, IPR Law did not state on certain actions, by virtue of which the protection comes to an end. Trademark protection terminates by the expiry of its period, without renewal from any of the co owners. 9) The Groups are also invited to describe their national rules of international private law in relation to conflicts of law relating to the co ownership of the IP rights and conflicts of jurisdiction in order to enforce these rights. More specifically, the Groups are requested to indicate if their international private law rules accept that the statute of ownership of an IP right co owned in different countries be regulated by one law. In this case, what law is applicable for determining the statute of co ownership? What is the criteria for seeking the proper jurisdiction in cases of conflict between the co owners concerning their rights? Under Article 10 of the Civil Law, Egyptian law will determine the nature of a legal relationship in order to ascertain the law applicable in the event of a conflict between various laws in any particular suit. Accordingly, if the co ownership relationship is governed by virtue of a written agreement in this case and as per Article 19 of the Civil Law contractual obligations are governed by the law of the domicile when such domicile is common to the contracting parties, and in the absence of a common domicile by the law of the place where the contract was concluded. Unless the parties agree otherwise, or the circumstances indicate that it is intended to apply another law. Or if otherwise stipulated in a special law or in an International Convention that is effective in Egypt. It is worth mentioning that if a foreign law is applicable only the internal provisions of such foreign law shall apply to the exclusion of provisions relating to private international law. Also, the provisions of a foreign law applicable by virtue of the preceding articles shall not be applied if these provisions are contrary to public policy or to morality in Egypt. Egyptian conflict of laws rules as organized in Civil Law did not tackle the case of co ownership of an IP right in more than one territory. However, with respect to property and its aspects, Art. 18 of Civil Law states that: 7

8 Possession, ownership, and other real rights are regulated, as regards immovables, by the law of the place in which the immovable is situated, and as regards movables, by the law of the place where the movable was situated at the time of occurrence of the event that lead to attaining their possession, ownership, or other real rights, or losing thereof. 10) Finally, the Groups are invited to indicate what other specific solutions or problems relating to the question of the exploitation of IP rights co owned by two or more persons are raised in their respective countries. II) We see that a possible solution for the requirement to obtain majority consent of co owners or the consent of three quarters at least of the co owners before a co owner can practice his rights of exploitation licensing or pledging his share of the co owned property may be solved by creating a juristic entity between the co owners or have a written agreement that addresses all possible cases of exploitation of the co owned product in order to facilitate its future usage by any co owner individually. Proposals for future harmonisation The Groups are also invited to formulate theirs suggestions in the framework of an eventual international harmonisation of national/regional intellectual property rights or, at least, an improvement or completion of the existing solutions. 1) In particular, the Groups are requested to indicate if they consider that the principle of freedom of contracts should apply to allow the co owners to determine the statute of the rights and the conditions for their exercising or if the rules governing co ownership of IP rights should be mandatory. Kindly note that the principle of freedom of contracts is recognized under Article 148 of the Civil Law which reads as follows: A contract must be performed in accordance with its contents and in compliance with the requirements of good faith. A contract binds the contracting party not only as regards its expressed conditions, but also as regards everything which, according to law, usage and equity, is deemed, in view of the nature of the obligation, to be a necessary sequel to the contract. It would be better to leave to the co owners the option to determine the conditions of exercising their rights, and to include non mandatory rules in municipal laws to be applied in absence of agreement between parties. 2) The Groups are also requested to indicate if a statutory rule should give equal rights to all co owners to individually exploit the IP rights or, without the authorisation of others co owners, to grant the IP rights to third parties or whether, due to the exclusive character of an IP right, such exploitation can only take place with the agreement of all co owners. Should this requirement of the agreement of all co owners apply to all acts of exploitation and acts in defence of IP rights, or only to the acts of disposal of IP rights for the benefit of third parties, such as licensing or transferring to a third party? We trust that due to the exclusive character of Intellectual property rights, it is very reasonable that according to Egyptian laws any exploitation or acts of disposal of intellectual property rights can only take place with the agreement of all co owners. As to acts in defence of Intellectual property rights we find that it is very wise by the Egyptian legislature to grant it to any co owner without the authorisation of other co owners. Since it is considered an act of preservation that requires immediate action and benefits all co owners. 8

9 3) The Groups are also invited to give their preference as to the possibility of an enforcement action for infringement being initiated by all co owners or only by some of them. Both the IPR law and the Civil Law grant co owners the right to initiate action for infringement without the need of the consent of others. We trust that this is the preferable course of action. Summary The current IPR Law regulates to a certain extent co ownership of some IP rights (i.e. patents and copyrights) thus; it is insufficient to solve most problems arising out of the existence of co authors. Therefore we resort to provisions addressing joint ownership in the Civil Law it is the law generally applicable to transactions in Egypt absent the existence of a specific law. As a general principle under both the IPR Law and the Civil Law when two or more persons are owners of the same item, but their respective shares are not divided they are deemed co owners and in the absence of evidence to the contrary their shares are deemed to be equal therefore none of the co authors may exercise an authors right of exploitation independently unless a written agreement allows him to do so. An exception exists in the event participation of the co authors is by a different kind of art and in that case each of them shall have the right to exploit the portion contributed separately provided that this shall not prejudice the exploitation of the co owned compilation unless agreed otherwise in writing. Pursuant to the Civil Code each co owner owns his share fully and therefore can dispose it and exploit it freely provided it does not prejudice other co owners right. Considering the difficulty of not prejudicing other co owners rights due to the distinctive nature of IP rights, co owners usually resort to administering their ownership either by Ordinary administration or Extraordinary administration as outlined in the answers to the specific inquiries, in fact if majority of co owners fail to reach an agreement on the management of the co ownership the Court may upon the application of any one of the co owners may appoint a manager to manage the property owned in common. As a General principle under both the Civil Law and the IPR Law every co owner may, even without the consent of the other co owners, take measures necessary for the preservation of the property in common. 9

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