State registration of disposal of exclusive rights under a contract

The turnover of exclusive rights becomes almost commensurate with the turnover of material things, which inevitably gives rise to controversial issues. Thus, by virtue of Paragraph 1 of Article 1233 of the Civil Code of the Russian Federation, “the copyright holder may dispose of his exclusive right to the result of intellectual activity or to a means of individualization in any way that does not contradict the law and the essence of such an exclusive right, including by alienation under an agreement to another person or granting another person the right to use the corresponding result of intellectual activity within the limits (licensing agreement).”

At the same time, when concluding an agreement on the disposal of exclusive rights, the parties sometimes do not realize that such an agreement may be subject to state registration with the Federal Service for Intellectual Property (Rospatent). Having discovered this fact, the parties to the contract begin to ask questions: whether the disposal of the exclusive right was carried out, what consequences the absence of state registration of such a disposition entails, whether the contract is valid, etc. Let’s see what the Russian law tells us.

According to Paragraph 2 of Article 1232 of the Civil Code, “in cases where the result of intellectual activity or a means of individualization is subject to state registration in accordance with this Code, the alienation of the exclusive right to such a result under an agreement, the pledge of this right and the granting of the right to use it under a contract, as well as the transfer of the exclusive right to a result without a contract, are also subject to state registration, the procedure and conditions of which are established by the Government of the Russian Federation.”

At the same time, in accordance with paragraph 6 of the above article, “if the requirement for state registration of the transfer of the exclusive right to a result of intellectual activity is not metunder an agreement on the alienation of an exclusive right or without an agreement, pledge of an exclusive right or granting another person the right to use such a result under the contract, the transfer of an exclusive right, its pledge or the granting of the right to use is considered failed.”

It seems that this could be the end of our reasoning, but let us delve a little deeper into this topic.

By virtue of Article 153 of the Civil Code, “transactions are the actions of citizens and legal entities aimed at establishing, changing or terminating civil rights and obligations.” Paragraph 3 of Article 154 of the Civil Code of the Russian Federation states that “to conclude an agreement, it is necessary to express the agreed will of two parties (bilateral transaction) or three or more parties (multilateral transaction).” Paragraph 1 of Article 425 of the Civil Code indicates that “the agreement comes into force and becomes binding on the parties from the moment of its conclusion.” Consequently, the conclusion of an agreement occurs at the moment of expression of the agreed will of all parties; for example, its signing, and entry into force occurs from the moment of its conclusion.

Based on the interpretation of Article 433 of the Civil Code, the conclusion of an agreement is the achievement by the parties of an agreement on all essential conditions. Accordingly, the conclusion of a contract is an event characterized by a specific date and time, which in itself, by force of law, has legal significance (legal fact). The validity of the contract is the period during which the parties agreed to consider the agreement reached to be binding on themselves.

In this case, the moment of conclusion of the contract may not coincide with the moment of commencement of the contract. When determining the moment of concluding an agreement, the current legislation does not limit the right of the parties to extend the terms of its validity, including for the period before the conclusion of such an agreement, since the application of the provisions of Paragraph 2 of Article 425 of the Civil Code does not depend on what event determines the moment of concluding the agreement: the achievement of simple consent or state registration (resolution of the 11th Arbitration Court of Appeal dated January 27, 2022, in case No. A65-16077/2019; resolution of the 9th Arbitration Court of Appeal dated November 29, 2021, in case No. A40-182098/2020; resolution of the Intellectual Rights Court dated July 13, 2020, in case No. A56-132470/2018, etc.).

If we analyze the provisions of the law that establish the invalidity of the main types of agreements on the disposal of exclusive rights, it would be Article 1234 of the Civil Code (relating to an agreement on the alienation of an exclusive right), Article 1235 (relating to a license agreement) and Article 1028 of the Civil Code (relating to a commercial concession agreement). All of them indicate the invalidity of the contract precisely if the written form of the contract is not observed. In this regard, the Plenum of the Supreme Court of the Russian Federation, in Paragraph 37 of Resolution No. 10 of April 23, 2019, “On the application of part four of the Civil Code of the Russian Federation”, indicated that “obligatory relations from contracts, transfer or grant of rights for which are subject to state registration, arise regardless of state registration (Clauses 1 and 2 of Article 433 of the Civil Code of the Russian Federation).

Adding,the IP Court points out that “state registration of a transaction is not part of the process of will formation and expression of the will of the subject, does not relate to the form of the transaction (the way of expressing the will), but represents an additional legal fact necessary by force of law to give the transaction the properties of an act entailing the parties have the corresponding consequences.” (decisions of the IP Court dated July 20, 2022, in case No. SIP-182/2022; dated June 23, 2022, in case No. SIP-48/2022; dated December 29, 2020, in case No. SIP-610/2020, etc.).

Thus, the absence of state registration of an agreement on the disposal of an exclusive right is not in itself a basis for failure to fulfill the contractual obligations assumed by the parties.

Meanwhile, it should be taken into account that Paragraph 3 of Article 433 of the Civil Code establishes that “an agreement subject to state registration is considered concluded for third parties from the moment of its registration, unless otherwise provided by law.”

According to the clarifications of the Supreme Court of the Russian Federation (presented in rulings dated May 28, 2018, No. 305-ES17-14583 and dated December 24, 2018, No. 305-ES18-15666), the purpose of state registration of an agreement is to create an opportunity for an unlimited number of persons who are not parties to the transaction to find out about the existence of such an agreement in order to eliminate uncertainty in the rights of such a participant.

In addition, in Paragraph 5 of the resolution of the Plenum of the Supreme Court dated December 25, 2018, No. 49 it is explained that “within the meaning of Paragraph 3 of Article 433 of the Civil Code of the Russian Federation in relation to third parties, an agreement (subject to state registration) is considered concluded from the moment of its registration, unless otherwise provided by law. In the absence of state registration, such an agreement does not entail legal consequences for third partieswho did not know and should not have known about its conclusion.”Consequently, the lack of state registration of an agreement does not give rise to consequences that may affect the rights and interests of third parties who were not aware of the fact of concluding the agreement and the content of its terms (Resolution of the Intellectual Property Rights Court dated July 24, 2023, in case No. A40-184344/2022).

For example, the IP Court, within the framework of the resolution dated March 18, 2022, in case No. A83-1148/2021, questioned the existence of the plaintiff’s right to file a claim in court due to the lack of state registration of the agreement on the assignment of the right to claim damages or payment of compensation, which is subject to mandatory state registration. As a result, the court of first instance indicated that the plaintiff did not have the right to go to court with part of the claims based on an unregistered agreement (decision of the Arbitration Court of the Republic of Crimea dated September 19, 2022, in case No. A83-1148/2021, enforced by the resolution Twenty-first Arbitration Court of Appeal dated February 6, 2023, and the decision of the IP Court dated May 25, 2023, on the same case).

To summarize, the consequences of failure to comply with the statutory requirement for state registration when disposing of an exclusive right are that the corresponding agreement does not entail legal consequences for third parties, and the legal consequences provided for by such an agreement are recognized as not having occurred before state registration.