Introduction
In the context of turbulence increase in a global geopolitical situation, Russia is striving for technical and technological independence. One of the factors in gaining such an independence is ensuring the accelerated transfer of technologies from their developers (usually, R&D organizations, or institutions, or universities) to industry. This process is based on conveyance or commercialization of intellectual property rights (IPR).
Technology transfer is a dual process. First, it involves the transfer of information, experience, knowledge and, which is very important, the right to use such 'things' from one person (innovator) to another (user), and with a maximum benefit for both parties and the society. Second, it includes the process of adapting the innovative solutions for the applied use.
There are quite many models of technology transfers in the world. They inter alia include: (a) through global information resources for intellectual property (IP) management and technology demonstration events or fairs, (b) through technology parks, (c) through special commercialization centers at R&D organizations or universities.
In Russia, all of the above models are used in practice. Transfer of technologies from developers to industrial enterprises can be implemented by way of:
• transfer of IPRs (assignment);
• granting the right to use IPRs under license agreements (licensing);
• cooperation innovation deals and tech-exchange contracts (partnerships);
• implementation of joint tech-projects and creation of joint ventures (JVs).
In this article, we would like to focus more specifically on IP licensing. This contractual form of technology transfer is one of the most popular nowadays.
Concept of license
IP license confers a rights holder's valid and limited permission for an authorized person to use its IP, subject to particular terms and conditions. Such terms and conditions are written and defined by license agreement signed by both parties.
In practice, different types of licenses are legally recognized and generally used in Russia. Patent licenses are one of the most pertinent and applicable licensing models in the context of technology transfers, allowing industrial enterprises to manufacture patented products and distribute them in a specific (contracted) territory. Industrial, pharmaceutical, retail and IT sectors are the ones in which IP licensing is applied more often in Russia.
Patent licensing and related issues (e.g., recordal) are specifically regulated by Articles 1232, 1233(1) to (3), 1235 to 1238 and other provisions of Part IV of the Russian Civil Code (RCC). General provisions of the RCC – especially those that govern general aspects of contract law and obligations (Part I) – may also apply to patent licensing. Further, patent licensing relations may be affected by other laws and local regulations, including those governing competition, tax and currency control.
Speaking about a foreign element, there are no statutory bars or legal restrictions for foreign companies to license patent in Russia. Indeed, foreign patent owners are free to license directly or indirectly to Russian entities. In other words, a foreign company (licensor) may enter into a patent license agreement with a Russian company (licensee) or engage another foreign party (sub-licensor) to sub-license in favor of a Russian company (sub-licensee). There is no requirement to establish a local company as a pre-condition to licensing in Russia; however, the licensed patent must be granted in Russia before the deal is done.
Patent registration, validity and ownership
Russia is a 'first-to-file' jurisdiction. Patent registration will be granted on a 'first come, first served' basis.
Again, if there is no patent registration in Russia, its owner will not be able to license the use of its invention in favor of a third party in Russia. Only Russia-registered and Russia-granted patents may be licensed in this jurisdiction.
To be granted, an invention must be new, inventive and industrially applicable. Once granted, the patented invention will be protected for 20 years (subject to extension in certain areas).
As a general rule, the law provides that the right to obtain a patent for an invention shall belong to the inventor. In case of an employee invention that is created in the course of labour duty or employer’s specific task the right to the same shall belong to the employer, unless the contract between the employee and employer (e.g., labour contract) provides otherwise. The law also stipulates that in the case of an invention that is created by an independent contractor the right to a patent shall belong to the contractor (developer), unless the contract between the customer and developer provides otherwise.
Patent can be owned by one or more persons. If several persons have the right to obtain a patent for the invention, they can dispose of their rights jointly, including by ways of licensing. However, co-owners can agree that one person will have the right to grant patent licenses on its own and on behalf of other co-owners.
License form, translation and recordal
Patent license agreements must be made in writing and prepared or translated into Russian, if a foreign element is involved. In practice, bilingual versions are drafted for cross-border patent-deals. If the patent license agreement is made and executed in a foreign language (e.g., English), a certified Russian translation may be prepared and attached to the original contract.
Further, the grant of a patent license targeted at Russia, including the one that is governed by the applicable foreign law, must be registered with Rospatent. A grant of a patent license that is not registered with Rospatent will be considered invalid against third parties.
The types of documentation that may be submitted to Rospatent for recordal purposes are:
• original patent license agreement; or
• notarized excerpt from the original patent license agreement; or
• notification of patent license (i.e., a 'statement of license').
If the contractual parties may want to refuse to disclose the original contract along with the agreed financial terms or other sensitive data, the best option is to make, sign and file an excerpt from the patent license agreement. Otherwise, they can submit a statement of license (i.e. short document) for the purposes of registration.
In any event, the document to be filed with Rospatent (i.e., the original contract, notarized excerpt or statement of license) must contain all the essential elements and mandatory clauses, as required by Russian law.
Essential elements and mandatory clauses
Depending on the transaction structure and parties' negotiations, the underlying patent license agreement may contain various terms and conditions.
From a general IP/patent perspective, the license contract should outline and contain:
• the parties (i.e., corporate names and addresses of the parties);
• the subject matter (i.e., patent number of the licensed invention);
• the type of license (i.e., sole, exclusive or non-exclusive);
• the scope of rights (i.e., permitted use of the patented invention);
• the compensation clause (i.e., entrance fee, lump-sum and/or royalty-fee);
• the term of license (i.e., patent validity period, or other specific duration – e.g. 5 years);
• the territory (i.e., Russia, or a specific region/city of Russia);
• the sub-licensing clause (i.e., whether this is permitted or not);
• the termination clause (i.e., mutual or unilateral, for cause and/or convenience); and
• the signatures of parties (i.e., names, titles and signatures of authorized signees).
Russian contract law is based on the fundamental principle of ‘freedom of contract’, meaning that the parties are free to agree on the additional applicable terms and conditions of a contract.
Governing law and dispute resolution
There is no legal imperative for a patent license agreement to be governed by the Russian law. Under the basic principle of the international private law, the contracting parties are free to choose the relevant governing law when or after entering into a deal. Therefore, the patent license agreement may be governed by the applicable foreign law, as agreed by the parties.
In the absence of a contracted law, the law of the jurisdiction in which the licensee is authorized to use the patented invention applies (Article 1211(8) of the RCC). In any event, the law of a jurisdiction that is more bound up with the contract may apply – especially where the nature, terms and conditions of the contract clearly evidence such a fact (Article 1211(9) of the RCC).
In terms of a dispute resolution, the contracting parties reserve the right to choose between: (a) local courts, (b) arbitration tribunals and/or (c) mediation. A local forum (court) is usually the preferred option with regard to cross-border licensing deals considering the timing, cost and enforcement factors. Arbitration is a good alternative tool (ADR) and may be conducted in any jurisdiction and by any tribunal, as chosen by the contracting parties, subject to further Russia-enforcement consequences. If the contract contains no arbitration clause, it may not be submitted for arbitration, as confirmed by local case law. Mediation is also available and legal as ADR, however, it is rarely applied in patent licensing context.
A court judgment on a patent licensing dispute obtained from another jurisdiction may be enforceable in Russia, provided that recognition and enforcement of the foreign court judgment is stipulated by the relevant international treaty to which Russia is a party and the relevant federal law. In addition, Russia is a signatory to many multilateral and bilateral international treaties for recognition and enforcement of foreign judgments, including the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). Therefore, an arbitral award on a patent licensing conflict issued from another jurisdiction that is a signatory to the New York Convention may be enforceable in Russia.
Good faith and fair dealing
The concepts of 'good faith' and 'fair dealing' are the key principles of the Russian civil-law system. These concepts are strongly enforced by Russian courts in all disputes involving domestic or international contracts. Patent license agreements are no exception in this regard.
