Please number your answers with the same numbers used for the corresponding questions.

Transcription

1 Question Q241 National Group: Title: Contributors: Reporter within Working Committee: The Latvian National Group IP licensing and insolvency Vadim MANTROV Vadim MANTROV Date: 19 May 2014 Questions I. Current law and practice Groups are invited to answer the following questions under their national laws. If both national and regional laws apply to a set of questions, please answer the questions separately for each set of laws. Please number your answers with the same numbers used for the corresponding questions. 1) Does your country have a registration system for IP licenses? If yes, please describe this system. Generally the regulation (yet fragmentary and incomplete) of a licence contract in respect of IP objects in Latvia is included in special intellectual property legal acts (the Patents Act, the Act On Copyright and Neighbouring Rights, the Designs Act, the Semiconductor Topographies Protection Act, the Act On trade marks and indications of geographical origin, and the Plant Varieties Protection Act). However, the mandatory registration of a concluded licence contract is not envisaged by all these legal acts. In order for a licence contract to enter into force in respect of third parties, a licence contract shall be registered in the case of patents (Art. 52 (4) of the Patents Act) however an unregistered licence contract in respect of patents may be in force between parties to that contract. Different situation exists in respect of such IP objects as plant variety rights and semiconductor topographies in respect of whom a licence contract without its subsequent registration is not in force at all (Art. 28 (2) of the Plant Varieties Protection Act, Art. 11 (6) of the Semiconductor Topographies Protection Act). Therefore, though Latvian law provides registration system for IP licenses, it is purely voluntary system (trade marks, designs, copyright, neighbouring rights) except the case of licensed plant variety rights, patents, and semiconductor topographies. 2) Describe the type or types of bankruptcy and insolvency proceedings that are available in your country. According to the Insolvency Act, two types of insolvency proceedings are provided. First, there is provided an insolvency proceeding (this procedure shall end either with restoration of solvency or bankruptcy of a person declared insolvent) for both legal 1

2 and physical persons. Second, there is provided a legal protection process which applies for a specified list of persons (merchants, partnerships and other) experiencing financial difficulties. 3) Does the law that governs bankruptcy and insolvency proceedings in your country address IP rights or IP licenses as distinct from other types of contracts, assets, and property rights? If yes, is the law statutory, regulatory, or based on precedent? Please identify any relevant statutes or regulations. The Insolvency Act does not provide any special regulation addressing either IP objects or IP licences. Nor any of special intellectual property legal acts (mentioned in the answer to the first question above) provides any comprehensive legal regulation of insolvency matters except the incomplete regulation in the case of trade marks, patents, and semiconductor topographies described below in the answer to the next question. 4) Please answer the following sub-questions based upon the law and jurisprudence in your country that governs bankruptcy and insolvency proceedings: a) Describe the law and its effects on a bankruptcy administrator s ability to adopt, assign, modify, or terminate an IP license. b) Are equitable or public policy considerations relevant to how an IP license is treated? c) Is the law different for different types of bankruptcy and insolvency proceedings in your country? d) Does the law require, or give preference to, IP licenses that have been registered according to a registration scheme? e) Would the existence of a pledge of or security interest in the IP rights for the benefit of the licensee affect application of the law in the case of an insolvent licensor? f) Is the law limited to or applied differently among certain types of IP rights (e.g., patents versus trademarks or copyrights)? If yes, please explain. g) Does the law apply differently to sub-licenses versus main licenses? h) Does the law apply differently to sole or exclusive licenses versus nonexclusive licenses? i) Does the law apply differently if the bankrupt party is the licensee versus the licensor? j) Please explain any other pertinent aspects of this law that have not been addressed in the sub-questions above. The Insolvency Act provides the general regulation for all types of contracts and does not envisage any special regulation in respect of licence contracts. However, certain special intellectual property legal acts (mentioned in the answer to the first question above) provide special regulation of some insolvency aspects. 2

3 The Insolvency Act envisages certain rights of an administrator for disputing validity of contracts (covering, inter alia, licence contracts) concluded by an insolvent company before its declaration as insolvent. Such rights of an administrator are anchored in Arts of the Insolvency Act. Other possibility for an administrator would be to unilaterally withdraw from a contract concluded by an insolvent company before declaration of insolvency by exploiting his/her choice of continuation or unilateral withdrawal from such a contract in accordance with Art. 101 of the Insolvency Act. Likewise, certain special IP legal acts provide the following regulation of insolvency aspects. As regards trade marks, Art (1) of the Act On trade marks and indications of geographical origin is the only one provision which regulates trade marks in insolvency matters by providing as follows: [i[f a registered trade mark is involved in the process of the legal protection of a commercial company, a process of insolvency, or if it is distressed by court decision, the Patent Office, pursuant to the court decision, shall make the respective note in the Register. Information regarding the note made shall be notified in writing to the applicant and published in the Official Gazette of the Patent Office. As regards patents, Art. 50 (1) of the Patents Act provides that rights relating to an invention based on a patent or a patent application may be subject to compulsory execution within insolvency proceedings. The regulation on transactions (therefore covering also Art. 50 (1) of the Patents Act referred to above) on patents applies also in the case of semiconductor topographies by virtue of Art. 11 (4) of the Semiconductor Topographies Protection Act. 5) Would a choice of law provision in an IP license agreement be considered during a bankruptcy or insolvency proceeding in your country? Is this affected by the nationalities of the parties to the IP license or by the physical location of the assets involved? As regards specifically insolvency proceedings, the Insolvency Act does not provide any special regulation on a choice of applicable law in contracts (covering, inter alia, licence contracts) concluded before or after declaration of insolvency. 6) Would a clause providing the solvent party in an IP license agreement the right to terminate or alter an IP license be considered enforceable during a bankruptcy or insolvency proceeding in your country? Would the answer be different if the clause provides for automatic termination as opposed to an optional right to terminate? By providing freedom of contracts the Civil Act of the Republic of Latvia of the year 1937 (hereinafter the Latvian Civil Act) does not prohibit such clauses. Nor the Insolvency Act does. Such a clause may serve as protection of a solvent person which is another party to a licence contract (see the answer to the question 11 below). 7) Would a clause in an IP license agreement that restricts or prohibits transfer or assignment of the IP license be considered enforceable during a bankruptcy or insolvency proceeding in your country? Such a clause will be considered as enforceable during an insolvency proceeding unless an administrator of a particular insolvent company will not apply within a court 3

4 to declare that clause or even the whole contract as invalid (see the answer to the fourth question above). 8) In the event of a transfer or assignment of an IP license resulting from a bankruptcy or insolvency proceeding, what are the rights and obligations between the transferee and the remaining, original party or parties to the IP license? Does it matter if the insolvent party is a licensor, a licensee, or a sub-licensee? In such a case, the rights and obligations between the transferee and the remaining, original party or parties to the IP license contract would be governed by an assignment contract. From that point of view, there is no difference if the insolvent party is a licensor, a licensee, or a sub-licensee. 9) In the event an IP license is terminated during a bankruptcy or insolvency proceeding in your country, would the licensee be able to continue using the underlying IP rights (and if so, are there any limitations on such use)? Does the (former) licensee have a claim to obtaining a new license? If an IP licence contract would be terminated during an insolvency proceeding (see the answer to the fourth question above), a licensee would not be entitled to continue to use rights arising from such a licence contract. The Latvian law does not envisage that the former licensee may have been entitled to any claim for obtaining a new license except if it is provided by a licence contract itself. 10) If IP rights that are jointly owned by two parties have been licensed to a licensee by one or both of the joint owners, and one of the joint owners becomes insolvent, how would the IP license be treated in a bankruptcy or insolvency proceeding in your country? Could the IP license be terminated even if this would result in termination of an agreement between the solvent, joint rights owner and the solvent licensee? Such a jointly owned IP object will be treated in an insolvency proceeding as jointly owned thing. As there is no special regulation how this situation should be treated, the other co-right holder (co-right holders) usually would acquire that part of an IP right which is owned by an insolvent person. A licence contract may be terminated both by a solvent party if it is provided by a contract or by an administrator of an insolvent person (see the answer to the fourth question above). 11) Are there non-statutory based steps that licensors and licensees should consider in your country to protect themselves in insolvency scenarios, e.g., the creation of a dedicated IP holding company, creation of a pledge or security interest in the licensed IP for the benefit of the licensee, registration of the license, and/or inclusion of certain transfer or license clauses? As mentioned in the answer to the fourth question above, an administrator of an insolvent company may either request declaring invalid or unilaterally withdraw from a contract concluded by an insolvent company before declaration of insolvency. Still, the contractual clause which provides a right for withdrawal from a licence contract if an opposite party is declared insolvent or subject to a legal protection process may be solution in this case. II. Policy considerations and proposals for improvements to your current system 12) If your country has a registration system for IP licenses, is it considered useful? Is it considered burdensome? Are there aspects of the system that could be improved? 4

5 As a registration system for IP licenses in Latvia is mandatory in respect of several IP objects only (see the answer to the first question above), it would be useful to improve that system by providing mandatory registration of IP licence contracts in respect of all types of licensed IP objects for the sake of legal certainty. 13) If the law that governs bankruptcy and insolvency proceedings in your country does not address IP rights or IP licenses as distinct from other types of contracts, assets, and property rights, should it do so? If yes, should the law be statutory? Yes, both IP assignments and IP licences should be dealt by a special statutory regulation in the Insolvency Act in order to address specific issues of these transactions during insolvency proceedings. 14) With regard to a bankruptcy administrator s ability to adopt, assign, modify, or terminate an IP license under the current law of your country, are there aspects of this law that could or should be improved to limit this ability? Should equitable or public policy considerations be taken into account? As the Insolvency Act stands now, an administrator has a choice either to continue existing contracts or unilaterally withdraw from them; therefore that choice should be neither abandoned nor restricted. Also, no other considerations except that administrator s choice should be taken into account. 15) Are there other changes to the law in your country that you believe would be advisable to protect IP licenses in bankruptcy? If yes, please explain. In addition to necessity to introduce a mandatory registration system for all IP licence contracts (see the answer to the question 12 above) and a special statutory regulation in the Insolvency Act (see the answer to the question 13 above), there should be adopted also a specific regulation of other insolvency aspects of IP licences as well. First, it should be provided a right of a solvent party to a licence contract unilaterally withdraw from that contract if other party is declared insolvent (which usually ends with bankruptcy and liquidation in Latvia). Second, it should be provided a regulation for protection of rights of other parties to a licence contract if a licence contract is continued by an administrator during insolvency proceedings. III. Proposals for substantive harmonisation The Groups are invited to put forward proposals for the adoption of harmonised laws in relation to treatment of IP licenses in bankruptcy and insolvency proceedings. More specifically, the Groups are invited to answer the following questions without regard to their existing national laws. 16) Is harmonization of laws relating to treatment of IP licensing in bankruptcy and insolvency proceedings desirable? Yes, there should be provided such a regulation covering all IP objects that could be licensed and addressing specific questions for separate IP licences, especially in the case of patents and plant variety rights. 17) Please provide a standard that you consider to be best in each of the following areas: a) What restrictions, if any, should be placed on a bankruptcy administrator s ability to adopt, assign, modify, or terminate an IP license in the event of bankruptcy of a party to that license? Should these restrictions be statutory? 5

6 The choice of an administrator either to continue or withdraw from a licence contract as it is currently provided by the Insolvency Act should be left without amendments or any restrictions as an administrator itself is fully aware of the existing financial situation of a particular insolvent person. Due to that position, it is not necessary to answer questions to points b) till i) below. b) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon pre-bankruptcy registration of the IP license? c) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon whether the bankrupt party is the licensor or a licensee? d) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon whether the licensee has a security interest in the underlying IP rights? e) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon whether the license is a sub-license or a main license? f) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon whether the license is sole, exclusive or nonexclusive? g) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon the type or types of IP rights that are licensed in the IP license? h) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon equitable or public policy considerations? i) With regard to sub-paragraph 17(a) above, to what degree, if at all, should such restrictions depend upon the language of the license itself, e.g., a right to terminate upon insolvency or a prohibition against assignment? j) In the event a bankruptcy or insolvency proceeding in your country involves treatment of an IP license between a domestic entity and a foreign entity, which national bankruptcy laws should be applied? Should this depend on the choice of law clause in the IP license? Should this depend on the physical location of the entities or the assets involved? The Insolvency Act applies in respect of any licence contract which is concluded either by an insolvent Latvian legal or physical person. Therefore, irrespective of the location of assets or choice of applicable law provided in that contract, the Insolvency Act would allow for an administrator to exploit rights provided to him / her by the Insolvency Act in relation to disputing validity or continuance of a particular licence contract (see the answer to fourth question above). 18) To the extent not already stated above, please propose any other standards that you believe would be appropriate for harmonization of laws relating to treatment of IP licenses in bankruptcy and insolvency proceedings. There are no other proposals in addition to those expressed above. 6

7 SUMMARY The Latvian law provides the regulation of a licence contract in special IP legal acts but the registration system of a licence contract is voluntary except certain IP objects (plant variety rights, patents, and semiconductor topographies). This report proposes that this registration system should be re-considered by providing mandatory registration of all types of licence contracts in respect of all licensed IP objects. Likewise, some of these special IP legal acts provide the regulation of insolvency matters yet this regulation is incomplete. The Insolvency Act does not provide any special regulation on licence contracts treating them similarly like contracts in general. An administrator has a choice either to continue or unilaterally withdraw from a licence contract concluded before declaration of insolvency by an insolvent person or to dispute validity of such a contract. Though this regulation in the Insolvency Act should be admitted as reasonable yet the Insolvency Act should be improved in order to address specific issues of licence contracts. 7