Types of remuneration when concluding a license agreement

When concluding a license agreement, the conditions for the transfer of rights to use an object of intellectual property (IP) are stipulated, taking into account their scope. The agreement can be concluded on the basis of a simple or non-exclusive license (clause 1 of Article 1236 of the Civil Code of the Russian Federation), according to which the licensee receives the right to use the IP object while preserving the licensor’s right to issue licenses to other persons or without retaining this right (exclusive license)

The exclusive right to use an IP object transferred to the licensee under an exclusive license (clause 1 of Article 1236 of the Civil Code of the Russian Federation) means that he not only has the right to use the protected object, but also has the right to prohibit the use of this object by any other persons, including the licensor. The peculiarity of an exclusive license is that it implies granting the right to use an IP object to only one person, in contrast to the provision of a simple license, when the licensor can simultaneously enter into several agreements on one IP object.

It may also be an agreement on alienation of exclusive rights has been concluded to the IP object. In this case, the exclusive right is alienated in full (Article 1234 of the Civil Code of the Russian Federation) without any restrictions and for the entire period of its validity. After concluding such an agreement, the author retains only personal non-property rights (such as the right to a name, the right of authorship, etc.).

License agreementis usually concluded in writing (regular email correspondence in which all terms are agreed upon can also be considered a written contract). The term of the license agreement must not exceed the period of validity of the exclusive right to the IP object. If its validity period is not determined, then the agreement is considered to be concluded for five years (clause 4 of Article 1235 of the Civil Code of the Russian Federation). Extension of the contract term is possible if the right itself is still in effect. To do this, the parties must draw up an additional agreement in writing.

The license agreement must specify three conditions: the subject of the agreement (detailed description of the IP object), methods of its use and the amount and procedure for payment of remuneration.

In accordance with clause 5 of Article 1235 of the Civil Code of the Russian Federation, the licensee undertakes to pay the licensor the remuneration stipulated by the contract, unless otherwise provided by the contract. If there is no provision in the paid license agreement regarding the amount of remuneration or the procedure for its payment, the agreement is considered not concluded.

Since the law does not provide for a uniform requirement for the form of payment of remuneration, payments under the license agreement are made by the licensee in the form of:

- a fixed one-time payment (the contract must indicate the amount of payment and stipulate the timing of the transfer of funds);

- fixed periodic payments (the licensee is obliged to pay the amount established by the contract with a certain frequency, while payments do not depend on the actual use of the subject of the contract, even if the RIA were not used, the licensee is still obliged to transfer the amount specified in the contract);

- percent of income;

- other methods.

In accordance with clause 5.1. Article 1235 of the Civil Code of the Russian Federation: the gratuitous provision of the right to use RIA or a means of individualization in relations between commercial organizations throughout the world and for the entire period of validity of the exclusive right under the terms of an exclusive license is not allowed.

Despite the fact that relations between commercial organizations are based on the principles of remuneration, it is still possible to conclude gratuitous licensing agreements between commercial organizations on the terms of non-exclusive and exclusive licenses, if they are limited to a certain territory and (or) validity period. In this case, a gratuitous license agreement or a license agreement on the terms of payment of remuneration in kind (not cash), for example, in the form of goods, works, services, can be concluded with the owner of exclusive rights to an IP object. Since clause 5 of Article 1235 of the Civil Code of the Russian Federation states that payment of remuneration under a license agreement can be provided not only in the form of cash payments, but also in another form, we can conclude that the legislator does not exclude the possibility of providing for remuneration in a license agreement in a non-monetary form, for example, in the form of goods or services.

As an example, we can cite the case of concluding a license agreement between ANO "ORGING COMMITTEE "SOCHI 2014" and an insurance company, according to which ANO "ORGING COMMITTEE "SOCHI 2014" granted the insurance company for a fee the right to use (a simple non-exclusive license) in the territory of the Russian Federation a trademark under Russian Federation Certificate No. 139795 dated March 29, 1996. At the same time, the insurance company was obliged to pay compensation in the amount of 36,250,000 US dollars. According to the agreement, the procedure for paying remuneration in cash corresponded to 11,250,000 US dollars, and in kind through the provision of insurance services at the request of the organization in the amount of 25,000,000 US dollars

In conclusion, I would like to note that when drawing up a gratuitous license agreement, it is necessary to indicate the condition that it is gratuitous, and when concluding a paid license agreement, agree on a condition on the amount of remuneration and the procedure for its payment, otherwise the corresponding agreement, by virtue of paragraph two of paragraph 5 of Article 1235 of the Civil Code of the Russian Federation, will be considered unconcluded.