Agreement on Transfer of Right to Use Industrial Property Rights

under the Vietnamese Law on Intellectual Property

Email: vinh@bross.vn

In view of the formality, all agreements on licence of industrial property rights shall be made into written contract and their validity are established based on the agreements between the parties without having to register with the state authority in charge of industrial property rights[1].

In term of the content, contract of licensing industrial property rights normally contains the fundamental provisions such as the name and address of the licensor and licensee, the conditions for transfering (a specific right of industrial property right, namely patent forinvention, patent for design, registered trademark,etc.), transfer scope (limitation in the time and space of the transfer) , the transfer price and payment conditions, the rights and obligations of the licensor and licensee. The information bellow is fundamental provisions of the commercialization form of industrial property rights in the form of licence agreements.

Agreement on Licensing Industrial Property Rights

With respect to the licence agreement on industrial property rights (mainly applicable for registered industrial property rights, namely patent for invention, patent for utility model, industrial designs, layout design, trademark):

1. The name and address of the parties;
2. The conditions for licensing;
3. Form of contract(exclusive licence; non-exclusive licence; sub-licence);
4. The scope of contract, including the limitations in the right to use and territory limitations;
5. Term of contract;
6. Price of licensing;
7. Rights and obligations of the parties.

The contracting parties should pay attention to the legal differences amongst 3 types of licence agreements, including: exclusive license, non-exclusive license, and sub-licence that are widely accepted in the international trade, which are also included into the law on intellectual property.

For example, exclusive contract is one type under which, in scope and term of contract, only licensee has the right to use exclusively the licensed subject matter; simultaneously, the licensor is not allowed to sign this contract with any third party and may only use the licensed industrial property rights with the licensee’s permission. For the non-exclusive contract, within the scope and term, the licensor still has the right to use the industrial property object, the right to enter into non-exclusive industrial property object licence contract with others. For the last one – sub-license contract, sub-licensor is the party that is granted license by licensor under another contract on the condition that the licensee in the original license contract is allowed to transfer the intellectual property rights to the third party.[2]

The contracting parties should also note that the law prohibits them from introducing unreasonably restrictive provisions toward the licensee's rights. The purpose of this prohibition is to protect the licensee, who is inherently in a weaker position, specifically, these prohibitions include:

1. Prohibiting the parties from transferring the right to improve the industrial property object, except for trademarks; from obliging the licensee to assign the licensee with improvements of its industrial property object at no cost to the licensee, or the right to register industrial property rights for such improvements.
2. Directly or indirectly restricting the licensee or sub-licensee from exporting goods or services manufactured or provided under the license contract into other territories where the licensor holds no registered rights there
3. Forcing the licensee to buy all or a certain percentage of materials, components or equipment of the licensor or the third party designated by the licensor without the purpose of ensuring the quality of goods or services manufactured or supplied by the licensor;
4. Prohibiting the licensee from filing a lawsuit or complaint about the validity of industrial property rights

Where the parties have signed a license contract which contains unreasonably restrictive provisions toward the licensee or sub-licensee, these provisions shall automatically be invalid.[3]

Regarding the validity of license contract, the law stipulates that the parties can freely agree on the validity of the licensing contract of industrial property rights without registering with the Vietnam Intellectual Property Office (IPVN) but the law provides for that without registering the signed license contract (except for the trademark), the contract has no effect on the third party[4].

Trademark license agreement and the question whether is it required to record?

Trademark license agreement recordation still holds the first place from 2006-2018 in terms of number of licensing contracts with the IPVN compared with the number of licensing of other industrial property rights. For example, the number of licensing contracts registered in 2016, 2017 and 2018 were 201, 175 and 186, respectively, overwhelmingly more than the number of contracts for licensing other industrial property objects being 24, 3 and 7 respectively.[5]

Prior to 14/01/2019 - the day that the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) became effect to Vietnam[6], there was a lot of trouble arising out of the provision stating that where a signed licensing contract was not recorded, it has no effect on the third party. More specifically, other entities such as tax authorities, the customs authority or even the remitting bank authorized to transfer royalty may claim itself as a third party to make it difficulties for both licensor and licensee to perform the signed contract, ie. the party effecting payment is regularly asked to explain the reason, or worse than being refused to transfer money, or rejected from entering in the accounts of royalty payment as reasonable cost from the tax-exempt, or may even be suspected that the licensing agreement and payment thereof constitute transfer pricing.

As a result of the CPTPP from 14 January 2019, Vietnamese provisions stating that “licensing contract of industrial property rights is valid based on the agreement between the parties, but only legally valid for a third party when having recorded with the state authority on industrial property rights” is automatically suspended because the CPTPP is legally effective higher than the Vietnam Law on intellectual property.[7]

Later, the second revision of the IP Law in 2019 was passed by the National Assembly, which confirmed that the trademark license contract takes effect according to the agreement between the parties and is also valid for third parties even if it is not recorded[8].

In principle, the above new change must be followed by all stakeholders including other entities such as tax authorities, customs authorities, and commercial banks that always proclaim themselves as the third parties, meaning that as from January 14, 2019, these entities are not allowed to request the licensor or licensee to provide evidence of recordation of license contract.

May the licensed trademark be vulnerable to invalidation due to non-use?

The new rule stating that the license agreement is in effect based on the agreement by the parties and remains in force for the third party even if the licence contract is not registered with the State authorities also brings a fundamental change legally related to the petition to terminate validity of the licensed trademark subject to the licensing contract filed by third party due to 5 consecutive-years of non-use in commerce. Specifically, before January 14 2019, if the licence agreement was not registered at the IPVN, the evidence of use of licensed trademark submitted by the licensee would not considered as proof of use of trademark by the trademark owner (the licensor). It would result in a legal consequence that this mark may be terminated in accordance with point d clause 1 Article 95 of the Law on intellectual property.

However, after day 14/01/2019, the licensed trademark is used by the licensee and even if the contract is not registered, the evidence used by the licensee is also obviously deemed as admissible evidence, making the request for non-use invalidation by the third party shall be rejected.[9]

Bross & Partners has experience in drafting, negotiating and registering license agreement of trademark, design, invention. If you have specific needs, please contact: vinh@bross.vn; phone 0903 287 057, 84-4-3555 3466; Wechat: wxid_56evtn82p2vf22; Skype: vinh.bross.

Bross & Partners, a renowned and qualified Patent, Design, Trademark and Copyright agent of Vietnam, constantly ranked and recommended by the Managing Intellectual Property (MIP), World Trademark Review (WTR), Legal 500 Asia Pacific, AsiaLaw Profiles, Asia IP and Asian Legal Business, is providing clients all over the world with the reliable, affordable contentious and non-contentious IP services including enforcement, anti-counterfeiting,  litigation regarding trademark, trade name, industrial design, patent, copyright and domain name.